COURT FILE NO.: 35516-03
DATE: 2014-09-15
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Thomas Frederick Smith - Applicant
AND:
Janice Mary Werstine - Respondent
BEFORE: The Honourable James W. Sloan
COUNSEL: Counsel, for the Applicant – Michael B. Wannop
Counsel, for the Respondent – Filomena M. Andrade
HEARD: September 8, 2014
ENDORSEMENT
[1] The parties were married for over 26 years and separated on July 6, 2002.
[2] The parties both retained lawyers and entered into Minutes of Settlement, which culminated in the Order of Justice Riley dated February 22, 2005.
[3] In general terms, the respondent got most of the assets and in addition the applicant paid to the respondent $53,203.76 and he kept his OMERS pension.
[4] The parties had two children and for approximately 8 years when they were young the respondent left her employment to become a stay-at-home mother.
[5] At the time she left her employment, the respondent, who has a grade 12 education, was a full-time assistant, to the Comptroller for a company known as Electrohome, which was a manufacturing company.
[6] When the respondent returned to the workforce in 1989 she became a teacher's aide. She continued in this employment until approximately 3 years ago when her depression became debilitating and she began receiving and is currently receiving long-term disability benefits.
[7] From 2009 on-word, the applicant was earning from employment $129,000 in 2009. $132,000 in 2010, $135,000 in 2011, $148,000 in 2012 and $62,000 in 2013. In addition he was receiving his OMERS pension in excess of $82,000 per year such that his annual income for 2009 was $215,000, for 2010 was $215,000, for 2011 was $220,000, for 2012 was $234,000 and for 2013 $155,000.
[8] In total, the applicant received approximately $410,000 in payments from his OMERS pension between 2009 and 2013 which amount is in excess of the total value of the pension on the date of separation.
[9] The respondent by comparison, in addition to her $36,000 annual spousal support payments, earned, commencing in 2009 $35,000, in 2010 $34,000 and in 2011 $37,000. This translated to taxable income in 2009 of $71,000, in 2010 $71,000, in 2011 $64,000 and in 2012 the $37,000.
[10] In round figures the applicant's current income is approximately $105,000 and his second wife who is approximately 46 years of age earns approximately $107,000. In addition to whatever contribution the second wife makes to the applicant's home expenses, she is supporting one university aged child and her destitute father in separate residences. She of course has no obligation to pay support to the respondent.
[11] The applicant is currently 63 years of age having retired at 62 and the respondent is 59 years of age.
[12] The issues raised appear to be as follows:
A. Is there a material change in circumstances?
B. Can the applicant make a decision to retire at 62 or should the court impute income to him for spousal support purposes?
C. The OMERS pension was divided in the property settlement in 2005 and therefore should that portion of the OMERS pension which was equalized be excluded from applicant's income for spousal support purposes?
D. If so, what percentage of the OMERS pension should be excluded and how should that be calculated?
E. Since the applicant received from his OMERS pension while he was employed making in excess of $120,000 per year and amount ($410,000) which is larger than the value of the pension at the date of separation, has he been reimbursed for that portion of the pension that he equalized because he did not share those payments with the respondent?
F. Is double dipping an issue, and if it is, under the circumstances of this case should the court allow double dipping.
G. If the court orders the applicant to continue to pay spousal support, should it also order the applicant to purchase life insurance as security for the payment of spousal support
MATERIAL CHANGE OF CIRCUMSTANCE
[13] The applicant at 62 years of age and decided to retire and live off his pension income. At the time of this decision he was working in British Columbia earning in excess of $100,000 per year.
[14] He subsequently moved to Ontario which on the facts of this case was likely motivated by his new wife’s very ill and destitute father.
[15] I find that his resigning from his six-figure employment is a material change in circumstance which would allow him to bring this application for review. In addition the parties agreed at paragraph 7 of their consent divorce order “… The retirement of the applicant on or after his reaching the age of 58 will constitute a material change of circumstances, entitling the applicant to a review of spousal support."
RECEIPT OF OMERS BENEFITS WHILE EMPLOYED
[16] The respondent argues, that because the applicant received in excess of $410,000 in OMERS pension payments while he was still employed and did not share any of these payments with the respondent, that he has been totally reimbursed for his share of the pension that he bought from the respondent in 2005.
[17] The respondent therefore argues that all of the applicant’s pension should be taken into account when calculating what spousal support payments should be made after April of 2013 and based on her logic in the preceding paragraph she argues it would not be double dipping.
[18] The applicant argues that on a pro rata basis 80% of his OMERS pension was included in the property equalization and that therefore only 20% of his current OMERS pension should be used when calculating, what if any spousal support is appropriate.
[19] In addition the applicant argues that his pension became much more valuable after separation because he kept working and his pension is based on his best five years earnings. In addition, his income increased significantly after the separation.
[20] He submits there is no automatic entitlement to the increased spousal support where a spouse’s post separation income increases.
[21] The applicant argues there must be some economic advantage/disadvantage conferred and suffered in order for the respondent to be entitled to share in any increase in his income.
PENSION VALUATION
[22] Prior to the parties entering into Minutes of Settlement, they obtained a pension valuation using a retirement age for the applicant of 58 years. The actuary then calculated the value of the pension accrued during the marriage at $361,030 and after deducting income tax at 25% he calculated the separation date net present value of the pension at $270,773.
[23] It is this $270,773, which the parties used in their net family property statement when negotiating their Minutes of Settlement dated December 22, 2004.
[24] When the applicant actually retired he was 55/56 years old and based on that age, the value of his pension accumulated during the marriage at the time of negotiating the settlement would have been $449,012. The net after deduction of 25% for income tax, value would have been $336,759.
[25] Based on these numbers only 80.4% of the value of the pension was actually equalized. Therefore, it is arguable that 19.6% of the payment attributable to the OMERS pension accumulated during the marriage has not been equalized.
[26] In preparation for this hearing the respondent retained a different actuary Mr. Lawrence.
[27] Mr. Lawrence calculated that $3,574/month of the applicant's current pension and bridge as of April 30, 2013 was not equalized in the parties’ net family property calculations.
[28] Mr. Lawrence also calculated that as of April 30, 2013, $3,735/month had been included in the parties’ net family property calculations.
[29] However by my calculations 19.6% of $3,735 per month had not been included in the parties net family property calculations because they used the age 58 rather than 55 for the applicant's retirement. This amounts to $732 per month.
[30] Therefore it appears that $4,306 per month (732 + 3735) or $51,672 per year would not be considered double dipping.
[31] Using annual income of $51,672 per year for the applicant and $19,328 of non-taxable disability benefits for the respondent the Divorcemate software calculates spousal support at $962 per month.
[32] This would give the respondent net disposable income of $2,623 per month or $31,476 per year.
NEED
[33] The respondent has filed a financial statement dated June 26, 2014 in which she shows yearly expenses of $58,009.20.
[34] She chooses to remain living in the matrimonial home with a mortgage, property taxes, insurance, maintenance and pool expenses, which could be considerably curtailed if she sold the home, paid off the mortgage and moved into smaller accommodation such as a condominium. She has a line of credit for her son and car loan in the total amount of approximately $20,000 while at the same time having a TSFA, some bank accounts and CSV for a life insurance policy with an approximate liquid value of $27,000.
COMPENSATORY SUPPORT
[35] In today's world, this was a very long marriage having lasted in excess of 26 years. Two children were born and for at least eight years the respondent left her employment to be a full-time wife and mother.
[36] This joint decision by the parties, allowed for their family life to proceed in what they thought was in the best interest of the children and themselves. As a natural consequence of the respondent taking on most, if not all of the child care and house care duties the applicant's time was freed up to allow him to concentrate on developing his skills and business contacts which allowed him to earn upwards of $147,000 per year plus benefits.
[37] By contrast, the respondent with a grade 12 education and being out of the workforce for eight years returned to work as a teacher's aide. There is no evidence before me about what other choices she may have had, however, it was obvious at the time she returned to work, that the applicant was making good money and her working as a teacher's aide would assist with the family finances, while also allowing her significant time to deal with child and home related matters which benefited both parties and their children.
[38] In addition, in this case it appears that the parties personal and financial affairs became completely integrated during the course of their marriage.
JUDGMENT
[39] There have certainly been sufficient changes in the parties lives to allow the court consider a variation of the current support order.
[40] The applicant has retired and the respondent is unable to work and aside from spousal support her only income is long-term disability in the amount of $19,328 per year.
[41] On the facts of this case I find that the applicant’s decision to retire is not unreasonable and since he earns $105,000 per year I am not prepared to impute further income to him for spousal support purposes.
[42] I do not find that all of the applicant's OMERS pension should automatically be taken into account for purposes of spousal support because he obtained payments from the pension plan in excess of the total value of the pension on the date of separation, while he was still employed making in excess of $100,000 a year.
[43] Based on the two stage test set out and Miglin v. Miglin [2003] 1 S.C.R. 303, 2003 SCC 24 I do not find that there were any vitiating circumstances that existed at the time that the Minutes of Settlement were entered into. However that does not end the matter.
[44] In the case of Thompson v. Thompson 2013 ONSC 5500, 2013 CarswellOnt 12392 at paragraph 103 the court set out several factors to consider when dealing with spousal support and post separation increases in income.
[45] These factors include whether or not the spousal support is compensatory in nature, whether the respondent made any contribution to the applicant’s post separation success and the length of the relationship if it was long-term in addition to other factors.
[46] On the evidence before me, the respondent was primarily responsible for child care and household duties. While there is no specific evidence that the respondent sacrificed personal education or career plans there is certainly general evidence of this.
[47] When the parties decided that she should become a stay-at-home wife and mother she gave up a decent employment position. Therefore for at least eight years, she had no opportunity to advance her career or make employment contacts while the applicant who did not have child care and household responsibilities was able to do so.
[48] It does not appear that the respondent's job existed when the parties decided she should return to outside employment.
[49] She therefore decided to train as a teacher's aide.
[50] Based on the applicant's earning at the time and the families need for ongoing child care and household responsibilities this seems like a very reasonable decision. It allowed the respondent to bring in a reasonable amount of money for the family coffers while at the same time allowing her a reasonable amount of time to continue in her other career of wife and mother.
[51] Based on the reasoning enunciated in Boston v. Boston 2001 SCC 43, this is not a case where I would impute income to the respondent based on the assets she received in their equalization of net family property. She did not receive significant assets in the sense that they might generate a reasonable income stream.
[52] Notwithstanding the applicant's submission that the respondent acted financially irresponsibly because she continues to live in the matrimonial home, on the evidence before me, even if she had sold the home and moved to cheaper accommodation that would not free up much if any capital to earn income.
[53] Upon review of the respondents financial statement however, I find her expenses in part overstated and in part higher than is reasonable.
[54] She shows an annual budget of $58,009.20. In her budget, she shows a car loan of $473.85 per month, pool expenses of $150 per month, income tax of $450 per month and relatively high household expenses for mortgage, utilities and taxes.
[55] As set out earlier in this judgment there does not appear to be any need for the expense of the car loan based on her liquid assets. If she moves to less expensive, yet appropriate accommodation, she will not have pool expenses of $150 per month and will save by my estimate, housing expenses of approximately $419.92 per month, $100 per month in utilities and by my Divorcemate calculations $284 per month in income tax.
[56] Those savings per month total $1,276.77 or $15,321.24 per year. When this amount is deducted from her budget of $58,009.20, it reduces the respondent’s budget to $42,687.96.
[57] On the facts of this case I would double dip if necessary, based on the reasoning previously set out in this endorsement about how the parties divided up their family obligations for the benefit of the two of them and their family.
[58] The applicant shall therefore pay to the respondent spousal support in the amount of $2,250 per month commencing May 1, 2013.
[59] I have arrived at this figure using a Divorcemate software calculation which I am attaching to this judgment. Based on spousal support of $2,250 it will leave the applicant with $4,771 of net disposable income per month, and the respondent with $3,735 of net disposable income per month.
[60] This will give the respondent an annual net disposable income of $44,820 ($3,735 x 12) which is approximately $2,000 more than I calculate her budget should/could be.
[61] This support shall be indexed annually, in the amount that the applicant's OMERS pension is indexed.
[62] As security for such support payments, the applicant shall maintain a life insurance policy in the amount of $100,000 of which the respondent shall be the irrevocable beneficiary.
[63] The applicant shall furnish proof of the existence of this policy within 30 days of the date of this order and on an annual basis thereafter.
[64] If the parties are unable to agree on costs, Ms. Andrade shall forward her brief submissions on costs to me by September 17, 2014. Mr. Wannop shall forward his brief response to me by September 23, 2014. Ms. Andrade shall then forward her reply, if any, to me by September 26, 2014. Cost submissions may be sent to my attention by email, care of Kitchener.Superior.Court@ontario.ca
James W. Sloan
Date: September 15, 2014