Lashko v. Lashko, 2015 ONSC 1456

COURT FILE NO.: FS-09-00346572-0001

DATE: 20150309

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Peter Lashko

Applicant

– and –

Catherine Lashko

Respondent

Rebecca Grosz, for the applicant

Catherine Lashko, acting in person

HEARD at Toronto: February 26 2015

C. Horkins J.

introduction

1The parties married on September 9, 1988, and separated on June 1, 2006. They have two children who are now 25 and 24 years old.

2Pursuant to the final consent order of Mesbur J. dated April 28, 2010 (“final order”), the parties were divorced and all of their outstanding claims were settled.

3The respondent mother brings a motion to change the final order. She seeks the following relief:

(i) An order that all child support that she owes be terminated and arrears rescinded.

(ii) An order for “repayment of overpaid child support”.

(iii) An order that the applicant pay the respondent spousal support retroactive to April 28, 2010. She asks for monthly spousal support of $3,675.

4The applicant father brings a cross-motion. During the hearing of the motion, he limited the relief he is requesting in his notice of motion. He is only seeking an order fixing the arrears of child support. All other relief in the notice of motion is withdrawn.

5I will deal with the cross-motion first. The applicant’s evidence is not disputed. The arrears total $8,791.47. This amount is confirmed in a letter from the Family Responsibility Office (“FRO”) dated January 5, 2015.

6I issue an order fixing the arrears of child support payable by the applicant to the respondent at $8,791.47. As explained below, the respondent’s motion is dismissed.

7The applicant and respondent filed affidavits which provide the facts set out below.

The final order

8Following separation, the applicant commenced an application. The parties settled all issues at a settlement conference held before Mesbur J. on April 28, 2010. During the settlement conference, Mesbur J. heard oral evidence for the purpose of the divorce. Minutes of Settlement were signed and witnessed. In summary, the final order states as follows:

(i) A divorce is granted.

(ii) Respondent mother shall pay the applicant $350 a month for child support.

(iii) The table child support “shall be varied upon demonstrating a material change in circumstances”.

(iv) Respondent mother shall pay 50% of 75% of children’s post-secondary education tuition, fees and books.

(v) Monies held in trust shall be released to parties ($5,000 to the respondent and the rest to the applicant).

(vi) The respondent mother “agrees to indemnify the Applicant and to execute an indemnification agreement” with respect to the guarantee made by the applicant for the respondent’s loan with BMO

(vii) The parties shall execute a “mutual full and final release with respect to any claims for equalization, interest in property and for spousal support in a form mutually agreed upon by the parties”.

(viii) A support deduction order shall be issued.

9As required by the Minutes of Settlement and the final order, the parties signed a “Full and Final Mutual Release” (“the release”) on May 19, 2010. The release was witnessed by counsel for each party. The following parts of the release are relevant to this motion:

And whereas Peter and Catherine do not want the courts to undermine their autonomy as reflected in the terms of the Minutes and this Full and Final Mutual Release, which they intend to be a final and certain settling of all issues between them. They wish to be allowed to get on with their separate and independent lives, no matter what changes may occur. Peter and Catherine specifically anticipate that one or both of them may lose their jobs, become ill and be unable to work, have additional child care responsibilities that will interfere with their ability to work, find their financial resources diminished or exhausted whether through their own fault or not, or be affected by general economic and family conditions changing over time. Changes in their circumstances may be catastrophic, unanticipated or beyond imagining. Nevertheless, no change, no matter how extreme will alter the Minutes and this Full and Final Mutual Release, and their view that the terms of the Minutes and this Full and Final Mutual Release reflect their intention to always be separate financially. Peter and Catherine fully accept that no change whatsoever in their circumstances will entitle either of them to spousal support from the other;

10The release further stated that if either party advanced a claim, complaint or demand in the future that the release “was a complete bar to any such claim”. The parties acknowledged that the release fully represented their “intentions and expectations” and that they had received legal advice as follows:

…the Parties have received legal advice with respect to [the release] in accordance with the attached Certificates of Independent Legal Advice, and understand that all claims and potential claims by the Parties against any one of them, as described herein are fully and finally settled.

The Legal Framework

11Section 17 of the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.) governs. Subsection 17(1) states as follows:

17. (1) A court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively,

(a) a support order or any provision thereof on application by either or both former spouses; …

12Subsection 17(4) sets out the factors for the court to consider on a motion to vary a support order:

17 (4) Before the court makes a variation order in respect of a child support order, the court shall satisfy itself that a change of circumstances as provided for in the applicable guidelines has occurred since the making of the child support order or the last variation order made in respect of that order.

(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 of that order, and, in making the variation order, the court shall take that change into consideration.

[Emphasis added.]

13In L.M.P. v L.S., 2011 SCC 64 at paras. 30-34 the court set out the proper analysis under s. 17 as follows:

30 In our view, the proper approach under s. 17 to the variation of existing orders is found in Willick v. Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670, and G. (L.) v. B. (G.), 1995 CanLII 65 (SCC), [1995] 3 S.C.R. 370. Like the order at issue in this case, Willick (dealing with child support) and G. (L.) (dealing with spousal support) involved court orders which had incorporated provisions of separation agreements. Both cases were decided under s. 17(4) of the Divorce Act, the predecessor provision to s. 17(4.1).

31 Willick described the proper analysis as requiring a court to "determine first, whether the conditions for variation exist and if they do exist what variation of the existing order ought to be made in light of the change in circumstances" (p. 688). In determining whether the conditions for variation exist, the court must be satisfied that there has been a change of circumstance since the making of the prior order or variation. The onus is on the party seeking a variation to establish such a change.

32 That "change of circumstances", the majority of the Court concluded in Willick, had to be a "material" one, meaning a change that, "if known at the time, would likely have resulted in different terms" (p. 688). G. (L.) confirmed that this threshold also applied to spousal support variations.

33 The focus of the analysis is on the prior order and the circumstances in which it was made. Willick clarifies that a court ought not to consider the correctness of that order, nor is it to be departed from lightly (p. 687). The test is whether any given change "would likely have resulted in different terms" to the order. It is presumed that the judge who granted the initial order knew and applied the law, and that, accordingly, the prior support order met the objectives set out in s. 15.2(6). In this way, the Willick approach to variation applications requires appropriate deference to the terms of the prior order, whether or not that order incorporates an agreement.

34 The decisions in Willick and G. (L.) also make it clear that what amounts to a material change will depend on the actual circumstances of the parties at the time of the order.

14As explained in Willick at para. 21 “a material change of circumstances … 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”.

15In summary, a two-step test applies:

(1) Has a material change in circumstances occurred since the order in question?

(2) If the moving party has proven a material change in circumstances, then what variation of the order ought to be made?

16As the following analysis explains, the respondent mother has failed to prove a material change in circumstances. As a result, it is not necessary to consider step two of the test. The respondent’s motion is dismissed.

Child Support and s. 7 expenses

17The final order requires the respondent mother to pay child support of $350 a month for Sydney commencing May 15, 2010, for as long as she is a child of the marriage and not later than the age of 23 or the obtaining of a first post-secondary degree. It is agreed that child support for Sydney terminated on May 15, 2012.

18Child support for Loretta, the older child, was subject to the child being enrolled as a full time student. This never occurred and therefore the respondent was not required to pay guideline child support for the older child.

19The order further states that the respondent shall pay 50% of 75% of the children’s post-secondary education, tuition fees and books.

20The respondent mother relies on para. 4 of the consent order that states table child support "shall be varied upon demonstrating a material change in circumstances". She says that a material change in circumstances has occurred. As a result, the court should rescind all child support arrears that she owes and order the applicant to pay back the child support that she did pay. The respondent mother alleges a material change because of the following events:

(1) She declared bankruptcy in 2012

(2) Her income tax returns and Notices of Assessment that were previously unavailable, show that she had no income in the years when child support was owed

(3) FRO suspended her driver’s license for non-payment of child support.

(4) She has been offered jobs, but can’t “pursue” them because her driver’s license is suspended

(5) She fell on the ice in January 2012 and broke her wrist

21I will consider the first four events together as they all deal with respondent’s financial circumstances.

No Material Change has Occurred

22The burden rests on the respondent to prove that a material change has occurred since the final order was made. In essence, she argues that there has been a material change in her financial circumstances and for this reason the child support order should be varied. However, it is clear that the respondent’s financial difficulties existed when she agreed to the final order. As explained below, I find that there has been no material change in circumstances.

23As of May 2007, the children lived with their father. In 2008 and 2009, the respondent made some contributions to her daughters’ tuition fees. For child support, the respondent made three payments: $420 on October 15, 2009, and $350 on February 15 and March 16, 2010.

24In early 2010, the parties commenced negotiations to settle the child support issue. Various emails and letters show that it was the respondent’s proposal to pay $350 in guideline child support.

25On February 2, 2010, the respondent sent applicant’s counsel an email offering to pay the applicant $350 a month for child support commencing February 10, 2010. The respondent sent another email on February 7, 2010 confirming that she would start to pay $350 a month. Correspondence between the respondent and applicant’s counsel also shows that they discussed that the respondent would contribute 50% of 75% of the post-secondary expenses. This is the percentage sharing that was included in the final order. On April 26, 2010, the respondent sent the applicant a written offer to settle that she signed and dated. The offer dealt with all of the parties’ claims. Dealing with child support, she offered to pay monthly guideline child support of $350 plus the percentage of the post-secondary expenses.

26The parties agree that an income of $38,000 was used to fix guideline child support at $350 a month. The respondent relied on a letter dated December 31, 2009 stating that her salary as General Manager of a tea store would be $32,400 a year with a $500 monthly allowance for car and gas.

27The base salary of $38,000 is less than what the applicant says his ex-wife earned throughout the marriage. The respondent mother worked in the hospitality industry and earned base salaries in the range of $50,000 plus gratuities in the range of $25,000 to $30,000 (the respondent did not dispute this evidence).

28The respondent incorrectly states that Justice Mesbur imputed an income to her of $38,000 for the purpose of setting guideline child support of $350 a month. The respondent also says that this amount for child support was included in the order until her income tax returns were available from Revenue Canada. The respondent states that once her income tax returns were available it was agreed that she could return to court and a “true calculation” of child support would be done. This is not what the consent order states.

29The amount of child support was set using the income information that the respondent provided. She offered to pay $350 a month and then consented to the order even though she stated she was earning no income and her business was suffering financially.

30The respondent’s emails and letters confirm that it was her idea to pay $350 in monthly child support. This proposal was made as early as February 2010 more than two months before the final order was made.

31I reject the respondent’s attempt to argue that she was entitled to return to court once her income tax returns were available. There is nothing in her various offers to settle, the Minutes of Settlement, final order or release to support this argument. Furthermore, the respondent received various Notices of Assessment in July 2012 and July 2013 and yet took no steps to have child support adjusted.

32In the respondent’s first affidavit, she states that she started a small business called The Tea Leaf in 2002. The business closed its operations in 2011 and since then she says that she has relied on her “elderly parents” for financial support. She states that she had “no choice but to declare personal bankruptcy in 2012”. This is the extent of the financial information that is set out in the respondent’s first affidavit.

33She blames Revenue Canada for not being able to produce income tax returns and Notices of Assessment at the time of the final order. She states that she encountered difficulties “confirming her financial information for the court”. No particulars of her difficulties were provided.

34According to the respondent Revenue Canada was “in the process of having [her] Notices of Assessment prepared”. A taxpayer must file an income tax return to generate a Notice of Assessment. However, the respondent did not provide copies of her income tax returns that were apparently under review at Revenue Canada and did not specify what year(s) were in the process of being assessed.

35The respondent states that Revenue Canada has now finalized her Notices of Assessment after a four year delay. As a result, she says she is now able to “proceed with the verification that [her] earnings would have made the support payments unaffordable and to reiterate [her] request for the payment of spousal support.”

36This first affidavit does not attach any income tax returns, Notices of Assessment or financial statements for the respondent’s businesses.

37One of the exhibits to the respondent’s affidavit is an affidavit that the applicant swore on March 18 2010. The applicant swore this affidavit to support his pending motion for child support. It appears that the motion did not proceed since the matter was settled. This affidavit offers further insight into the applicant’s employment’s history and tea business. The respondent’s first tea store was located on Queen Street East. At some point it was closed. Shortly after the parties separated, the respondent opened a second store in the Bayview Village Shopping Center. In addition to operating the Tea Leaf, the applicant discovered after separation that the respondent is a joint partner in two businesses with her boyfriend, Timothy Knowles. There is a business called Tealogics that is a wholesale tea business and the other is called The City Kitchen, a catering and cooking class business.

38The applicant denies that the respondent is unable to pay the child support. He states that the respondent has lived with her boyfriend Timothy Knowles since May 2007 and is fully supported by him. This is consistent with the respondent’s November 2014 financial statement that lists no expenses at all. Further, the applicant says that the respondent works for Mr. Knowles delivering tea and tea supplies and operates tea kiosks in various Longo’s locations.

39The respondent mother did not comply with the final order. She paid child support sporadically. In 2010, she made two payments totaling $525. In 2011, she paid no child support. In 2012, she paid $1,371.75; in 2013, $655.50; and in 2014, $1,267.

40The respondent’s tea business was suffering financially when she offered to pay $350 in guideline child support and then consented to the order. This evidence is set out in the applicant’s March 18, 2010 affidavit. The applicant states that in January 2010, the respondent gave him letters from her bank and commercial landlord to show that her various businesses were suffering financially. The respondent told the applicant that she had reached arrangements with her creditors. The respondent ignored the applicant’s requests to supply proof of income together with proof of business earnings. Instead, she told the applicant that she was not earning any income. It is important to note that the respondent filed the applicant’s March 18, 2010 affidavit in support of her motion. The applicant’s affidavit clearly shows that the respondent’s financial difficulties were entrenched when the final order was made.

41The respondent filed a second affidavit in reply to the applicant’s cross-motion and affidavit. Various income tax returns and Notices of Assessment are attached to the second affidavit. Complete copies of income tax returns are not included and there are no financial statements from her tea business.

42In the respondent’s reply affidavit she attaches a letter dated December 14, 2010 from BMO’s counsel. This letter acknowledges that the respondent paid BMO $10,000 on January 8, 2010 and had paid nothing further. She owed BMO $19,788.09 in arrears under her business loan agreement. When the bank demanded payment in 2011, the respondent was unable to pay and the applicant had to pay the bank $17,500 because he had signed a guarantee on the loan during marriage.

43After the final order was issued, there was no material change in circumstances. The respondent’s financial difficulties simply continued and because they did not improve she filed for personal bankruptcy in June 2012. The bankruptcy was inevitable.

44When the respondent consented to the final order she was attending school. In September 2009, the respondent enrolled in a full time diploma program at Humber College in Tourism Management. She explains that she did this to improve her “employment prospects”.

45The respondent states that she has been actively seeking employment since graduation in 2014 and has been offered jobs, but has been unable to work because her driver’s licence was suspended by FRO. She does not reveal who offered her a job and does not explain why she is unable to use public transit to travel to work. She was able to travel to Humber school without a driver’s license.

46The fact FRO suspended the respondent’s licence is not a material change in circumstances. The suspension arises from her non-payment of child support that flows directly from her financial difficulties that were well entrenched and known when the consent order was issued.

47The income tax returns and Notices of Assessment that the respondent filed after the final order are not evidence of a material change in circumstances. The respondent says that she did not have income tax returns and Notices of Assessment when the final order was issued. It is unclear what income tax returns the respondent had filed at the time of the consent order. If as she says she was waiting for her Notice of Assessment, she must have filed an income tax return.

48It is clear that she did not file her income tax returns on time. Whatever she did file caused Revenue Canada to ask for further information and it appears that the respondent did not respond in a timely manner. She cannot rely on her failure to comply with deadlines for filing tax returns to say that a material change in circumstances has occurred. Whatever was going on between the respondent and Revenue Canada was known to the respondent when she agreed to the final order.

49The various income tax returns and Notices of Assessment are further evidence of the financial difficulties that the respondent was experiencing at the time of the final consent order. The fact that her difficulties ultimately resulted in new Notices of Assessment is not a material change in circumstances, but rather an expected outcome.

50The respondent’s evidence about the income tax returns is not straightforward. In her first affidavit she states that there was a miscalculation in her 2007 income tax return and because Revenue Canada was “still working on [her] file”, she could not clarify her financial information for the court. Copies of her income tax returns and Notice of Assessment are not attached to her first affidavit and she offers no evidence to explain the “miscalculation”.

51The respondent incorrectly assumes that because she now has income tax returns and Notices of Assessment from Revenue Canada that her obligation to pay child support must be reassessed. The final consent order is clear. Child support “shall be varied upon demonstrating a material change in circumstances".

52Some of the respondent’s Notices of Assessment are attached to the applicant’s affidavit. Additional Notices of Assessment are attached to the respondent’s reply affidavit. Some “summary” income tax returns are also included.

53Her Notices of Assessment for 2007 and 2008 are dated June 29, 2010. The respondent did not produce the income tax returns that would have been filed to generate these Notices of Assessment. The 2007 Notice of Assessment shows line 150 income of $298,682 and tax owing of $164,406.02. The 2008 Notice of Assessment shows line 150 income of $339,135 and tax owing of $338,055.84.

54The 2009 Notice of Assessment is dated June 29, 2012 and it shows line 150 income of $3,816 and tax owing of $373,673.57.

55The 2010 income tax return shows line 150 income of $1,693. In 2011, she had line 150 income of $301. Line 150 income for 2012 was $0.

56The fact that the respondent fell and broke her wrist in 2012 is unfortunate, but does not constitute a material change in circumstances. She continued to attend Humber despite this injury and was offered jobs. She does not state that her inability to work is connected to this injury.

57In summary, the facts clearly show that the respondent had significant and obvious financial difficulties when she offered to pay the child support and when the final order was agreed upon. The events that transpired after the final order were the natural expected consequences of what existed in 2010, when the order was made. The respondent has failed to prove a material change to justify the change in the final child support order.

spousal support

58The parties agreed to execute a full and final release of all spousal support claims. Neither would pay the other spousal support. This agreement is clearly set out in para. 7 of the Minutes of Settlement and para. 7 of the consent final order. The parties signed the release less than a month after the order was made. The wording of the release is detailed and set out in part above. The parties agreed that no change whatsoever (“catastrophic unanticipated or beyond imagining”) entitled either party to seek spousal support from the other.

59An agreement that is incorporated into a consent order is a relevant consideration when examining whether a material change has occurred. The parties signed Minutes of Settlement and agreed to execute a full and final release of all property and spousal support claims. This was incorporated into the final order and a release was signed.

60As the court stated in L.M.P. v. L.S. at paras 38-39, an agreement may provide the answer to the whether an event is a material change. Where, as in this case, the parties agreed with great specificity that no change would be material, this provides the answer. The court stated as follows:

38 The agreement may address future circumstances and predetermine who will bear the risk of any changes that might occur. And it may well specifically provide that a contemplated future event will or will not amount to a material change.

39 Parties may either contemplate that a specific type of change will or will not give rise to variation. When a given change is specified in the agreement incorporated into the order as giving rise to, or not giving rise to, variation (either expressly or by necessary implication), the answer to the Willick question may well be found in the terms of the order itself. That is, the parties, through their agreement, which has already received prior judicial approval, have provided the answer to the Willick inquiry required to determine if a material change has occurred under s. 17(4.1). Even significant changes may not be material for the purposes of s. 17(4.1) if they were actually contemplated by the parties by the terms of the order at the time of the order. The degree of specificity with which the terms of the order provide for a particular change is evidence of whether the parties or court contemplated the situation raised on an application for variation, and whether the order was intended to capture the particular changed circumstances. Courts should give effect to these intentions, bearing in mind that the agreement was incorporated into a court order, and that the terms can therefore be presumed, as of that time, to have been in compliance with the objectives of the Divorce Act when the order was made.

61The final order allowed for a change in child support in the event of a material change in circumstances. The final order did not provide for such a possible change to the spousal support agreement. The parties made it abundantly clear that the release of spousal support was final and no change in the future would ever justify revisiting this agreement.

62Even if it was open to the respondent to seek a change of the final order, she has failed to prove a material change in circumstances.

63The respondent’s motion to change the final order is dismissed.

64At the conclusion of the motions, applicant’s counsel provided the court with a Bill of Costs. If successful, counsel stated that she was seeking costs of $8573.31. The court heard submissions on costs. The respondent states that there should be no order for costs against her as she cannot afford to pay costs.

65Before deciding costs, the parties shall provide the court with copies of any offers to settle that should be taken into consideration. Copies of offers to settle, if any, must be delivered to the court no later than March 11, 2015. Costs will be decided immediately after this deadline.

conclusion

66I make the following orders:

(1) I issue an order fixing the arrears of child support at $8,791.47 payable by the respondent to the applicant.

(2) The respondent’s motion to change the final order is dismissed.

___________________________ C. Horkins J.