COURT FILE NO.: 8692/08
DATE: 2015/08/ 06
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Kelly Ann Fewster (Applicant)
AND:
Clare Fewster (Respondent)
BEFORE: Justice B.W. Miller
COUNSEL: Applicant, self-represented
R. Sandy Bruce, for the Respondent
HEARD: June15-17, 2015
ENDORSEMENT
[1] The Respondent, Clare Fewster, brings this motion to vary the spousal support that he pays to his former spouse, the Applicant Kelly Fewster. The parties had agreed on a quantum of spousal support (and other corollary relief) in Minutes of Settlement that were incorporated into a Divorce Order made by the Honourable Justice Desotti on May 19, 2010 (the ‘Divorce Order’). Approximately one year later, on June 23, 2011, Mr. Fewster filed the present motion to vary his support obligations.
[2] The Divorce Order imputes income to both Mr. Fewster and Ms. Fewster without specifying the bases for the imputation. Mr. Fewster’s imputed income of $50,000 per year was higher than the $39,147 in income that he declared on his tax return the previous year.
[3] Mr. Fewster argued that spousal support ought to be terminated, or at least reduced, because the revenue of his businesses has declined by more than 50% since the year preceding the Divorce Order. Be that as it may, his net income has decreased by only 25%, and that is in part due to operational decisions that he made to cease a profitable line of business, largely for lifestyle reasons. He also has the benefit of a contribution to his household expenses made by his new spouse, which compensates for the decrease in income.
[4] Accordingly, the Respondent’s motion to vary is dismissed.
[5] Ms. Fewster, took the position at trial that spousal support ought to be based on Mr. Fewster’s gross profit rather than his net income, and that spousal support should be increased. This is unreasonable and I reject this argument.
I. Background and overview
[6] The parties were married on September 10, 1988, separated on April 1, 2008, and were divorced May 19, 2010. This was a marriage of almost 20 years. The applicant is currently 47 years old and the respondent is 55 years old. There were two children of the marriage, both of whom are now independent.
[7] Over the course of the 20 year marriage, both parties operated a family business known as Fewster Appliances. Fewster Appliances is a sole proprietorship and continues to be operated by Mr. Fewster, who owns all of its assets. As part of the Divorce Order, Ms. Fewster renounced the interest she had in the business and Mr. Fewster assumed all of the personal debts of Ms. Fewster and all of the business debts. Fewster Appliances remains the main source of income for Mr. Fewster, and its decline is a basis for Mr. Fewster’s motion. Additionally, at the time of the Divorce Order, Mr. Fewster operated a small trucking business, Fewster Expediting, which also generated income. In 2012 he discontinued this aspect of his business and sold his only transport truck. The loss of income from that line of business is another ground of his motion to vary.
[8] Mr. Fewster also argued that Ms. Fewster is in a much better position than she was at the time of divorce, in terms of her health, education, and earning power, and that she is capable of earning more now than she was at the date of divorce.
[9] Ms. Fewster denied that her prospects have improved and also questioned the veracity of Mr. Fewster’s financial disclosure. She asked that Mr. Fewster be imputed with an income much higher than the income imputed to him in the Divorce Order.
II. Facts
1. Mr. Fewster’s income
[10] Mr. Fewster has, or had, three sources of income: Fewster Appliances, Fewster Expediting, and a stipend from a volunteer fire department.
[11] Fewster Appliances has seen a steady decline in gross sales since 2009, which was the first year for which sales records were produced in this litigation.
[12] Nevertheless, Mr. Fewster testified that although gross sales had declined nearly 50% between 2009 and 2014, his profit margin from Fewster Appliances increased from 2012 as he refocused sales on more profitable lines of appliances.
[13] He discontinued the operations of Fewster Expediting in 2012 because of problems stemming from the reliability of his sole transport truck. The truck would break down frequently, necessitating expensive repairs that would place the truck out of commission for many weeks at a time. These frequent breakdowns made it difficult for Mr. Fewster to continue to employ a driver, and he had to take over the long-haul driving responsibilities himself. Eventually, he decided to discontinue operations entirely and sell the truck for $25,000, which was the amount remaining on the vehicle loan. Notwithstanding the frequent repairs to the truck, and the frequent downtime, the trucking operation was in most years more profitable than Fewster Appliances.
[14] He also received pay as a volunteer firefighter ranging from a low of $1,383.95 in 2013 to a high of $5,900 in 2010. He is also assessed by Revenue Canada on an annual basis with a taxable benefit in the amount of $2400 for living rent free in a residence owned by his mother.
[15] His gross business income, and his net income from all sources before taxes, are:
Clare Fewster: Gross business income
Clare Fewster: Total Income from all sources (after expenses)
2008
$370,716.76
$7,106.25
2009
$542,470.41
$39, 147.19
2010
$415,159.31
$29,517.03
2011
$298,711.87
$22,061.48
2012
$353,151.16
$31,801.45
2013
$285,885.38
$16,315.26
2014
$257,676.16
$29,073.67
[16] Ms. Fewster testified that while she was involved with the operations of Fewster Appliances, it was their practice to underreport cash sales to Revenue Canada to avoid paying income tax. Ms. Fewster testified that Mr. Fewster’s tax returns are not a reliable guide to his income, although she did not advance any evidence in support of this allegation other than her testimony about their historical business practice.
[17] It does seem strange that Mr. Fewster would continue to operate a business year in and year out that provided him with an income that was little more than minimum wage, and that some years was substantially less. He does not draw a salary from Fewster Appliances, and his income is whatever is left after all of the expenses are paid. Several of the businesses expenses are also of personal benefit to him. His sole employee, his stepdaughter, earns a salary in excess of the income that he himself derives from the business.
[18] Mr. Fewster’s bookkeeper, Alie Johnson, testified that she had no concern as to how income or expenses were reported in Mr. Fewster’s tax returns. She has acted as his bookkeeper since 2009. She was a credible witness and I accept her evidence in all respects. Her evidence could not address the allegations raised by Ms. Fewster, in that she had no knowledge of the business operations of Fewster Appliances and had never conducted an audit of the business. In preparing income tax returns, she relied entirely on paper records prepared by Mr. Fewster, and which she did not audit. Accordingly, Ms. Johnson was not in a position to give evidence as to whether Mr. Fewster underreported his income.
2. Mr. Fewster’s expenses
[19] In 2013, Mr. Fewster remarried and his wife Jeannie Bourgon earns a salary of approximately $39,000 per year and also receives rental income from a house she owns. According to the disclosure provided by Mr. Fewster, his wife contributes $650 per month to household expenses. According to Mr. Fewster, they share household expenses evenly.
[20] Mr. Fewster has very few personal expenses. He does not pay rent. In fact he argued that because his expenses are so low, Ms. Bourgon’s contribution to household expenses does not benefit him. This is an implausible proposition and I reject it. Mr. Fewster enjoys a comfortable living, lives rent free, owns several vehicles, and is able to contribute $5,000 per year to RRSPs. Ms. Bourgon’s contribution must assist him in some respect.
3. Ms. Fewster’s income
[21] Ms. Fewster, both now at the time of the Divorce Order, suffers from epilepsy. In 2009, the year prior to the divorce order, she underwent significant brain surgery. It was successful in that it reduced the incidence of grand mal seizures. She still suffers from epileptic seizures brought on by stress. In fact, proceedings were adjourned early on the second day of trial after she had a seizure. She testified, and I accept, that her susceptibility to seizures negatively affects her employability.
[22] The Respondent argued that she is in fact in much better health than she was at the time of the Divorce Order, when she was still recovering from surgery. The Respondent argued that Ms. Fewster’s improved health constitutes a material change in her circumstances, in that with better health she should be able to earn more than the $18,000 per annum imputed to her in the Divorce Order.
[23] Ms. Fewster’s health is indeed improved over what it was at the time of the Divorce Order. But the parties expected that Ms. Fewster’s health would continue to improve as a result of the surgery at the time the Minutes of Settlement were entered into. I find that her state of health, such as it is, is not a change, let alone a material change.
[24] Shortly after the Divorce Order, in June of 2010, Ms. Fewster obtained her personal support worker qualification through the Thames Valley District School Board. She has worked intermittently as a personal support worker, although she has not maintained anything close to full employment. Some of her work has been on short-term contracts. On one occasion she was fired after complaints from a patient. She is not currently employed as a personal support worker.
[25] Ms. Fewster’s employment since the date of separation has been erratic. That has not changed since the Divorce Order. She is not highly skilled and has worked for as many as 15 employers, usually at minimum wage or slightly above minimum wage. She has attributed her high turnover in employment to several factors including: having seizures on the job, the seasonality of the work, taking short-term contracts, as well as dismissal for cause as noted above. She has most frequently worked at short term positions secured for her by employment agencies. Most recently, she worked at Toyota through casual employment secured through an employment agency in Woodstock. She testified that there is currently no work for her there.
[26] Despite her frequent bouts of unemployment, I find that she has made best efforts to stay employed.
[27] Her income is set out below:
Kelly Fewster – total income (including spousal support)
Kelly Fewster – employment income
2010
$12,208
$7,570
2011
$25,236
$14,141
2012
$19,887
$9,455
2013
$18,960
$7,710
4. Ms. Fewster’s expenses
[28] Ms. Fewster lives in a room that she rents for $500 per month. With some interruptions, this has been the situation since the Divorce Order.
[29] The Respondent argued that Ms. Fewster was involved in a significant relationship that she did not disclose prior to trial, and this should factor into the analysis. Ms. Fewster freely acknowledged at trial that she was dating Brian Langille for a brief period in 2012 to 2013, and that she and Mr. Langille had purchased a house together in which they cohabited for four months. Mr. Langille appeared as a witness for the Respondent and testified that although he and Ms. Fewster are both on the title of the property, Ms. Fewster has no beneficial interest in it, did not provide any of the purchase monies, and did not contribute to the mortgage. The explanation was that Ms. Fewster was on title to the property to facilitate Mr. Langille’s purchase of it. He had funds, but did not have a credit history that would enable him to obtain a mortgage. The lender was prepared, however, to lend funds if Ms. Fewster was also on title. I accept this evidence of Mr. Langille and Ms. Fewster that, on their understanding, Ms. Fewster was simply facilitating Mr. Langille’s transaction. Neither party understood what it means for Ms. Fewster to be on title as a joint tenant.
[30] Ms. Fewster’s short-lived relationship with Mr. Langille, including his house purchase, does not constitute a material change in circumstance.
III. Issues
[31] The sole issue before me on this motion is whether there has been a change in the ‘condition, means, needs or other circumstances’ of either of the parties that would justify the variation in the spousal support order.
IV. The Law
[32] This motion is governed by s.17 of the Divorce Act. The relevant subsections provide:
Factors for spousal support 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.
Objectives of variation order varying spousal support order
(7) A variation order varying a spousal support order should
(a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown;
(b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time.
[33] In order to make a variation order, it is not sufficient that there has been some change in the ‘condition, means, needs, or other circumstances of either former spouse’. The change must have been unforeseen, and the change must be material.
[34] ‘Material change’ means a circumstance that, if it had obtained at the time, would likely have resulted in different terms ordered (or, as in this case, different minutes of settlement). The onus of proof is on the party alleging the change, and the standard of proof is on the balance of probabilities (Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670, para. 20).
[35] The Divorce Order incorporates the terms of a negotiated settlement, where both parties were represented by counsel. It has many hallmarks of a final settlement, such that a party seeking to vary it bears a heavy burden. Property division and spousal support in this case are intertwined. Ms. Fewster transferred her interest in all of the businesses that the parties had run together. Mr. Fewster would thereafter have the sole benefit of the income that could be generated from those assets, from which he was to pay spousal support. Mr. Fewster also assumed all of the debts of the parties, both business and personal.
[36] Significantly, the sole occasion for variation of support specifically contemplated by the Divorce Order was if Mr. Fewster defaulted on those debts and Ms. Fewster thereafter became liable to third parties. In such a circumstance, spousal support was to be immediately reviewable.
[37] Additionally, the spousal support provision provides for an automatic, annual increase in accordance with the Consumer Price Index. All of these factors suggest that the Minutes of Settlement that were incorporated into the Divorce Order were meant to be final, and that a trial judge asked to review under s.17 should not lightly interfere with the settlement reached.
[38] The Respondent submits that I should be guided in exercising my discretion by the decrease in the gross sales revenues of the businesses (including the revenues of the trucking operation that he discontinued in 2012). There is no obvious reason why this should be. Revenue is not a proxy for income. It is true that revenues decreased from a high of $542,470 in 2009 to a low of $257,676 in 2014. But the relationship between the drop in gross sales revenues and the drop in total income is not linear. While gross revenues dropped more than 50%, the decrease in Mr. Fewser’s total income was less than 25% from 2009 to 2014. This is not, in itself, a material change.
[39] The Minutes of Settlement and Divorce Order attribute income to Mr. Fewster. They do not explain the relationship between the attribution of the income and Mr. Fewster’s actual income at the time. The attribution may be based on other factors such as the fact that some of Mr. Fewster’s personal expenses are also expenses of the business, or the possibility that Mr. Fewster’s actual income is greater than his declared income, or that Mr. Fewster is capable of earning a much higher income than he earns and is intentionally underemployed. Regardless, I find that Mr. Fewster’s change in income is not material and cannot support a variation in spousal support.
[40] Additionally, Mr. Fewster’s expenses are lower now than they were at the time of the Divorce Order as he has the benefit of a contribution from his new spouse. The amount of her contribution was stated in his financial disclosure as $650 per month, although this may be a conservative estimate given his evidence that he and Ms. Bourgon split household expenses evenly.
[41] Mr. Fewster is not in significantly different financial circumstances than he was in 2010. Such changes as there are, are not sufficient in themselves to warrant a variation.
[42] That is not the end of the analysis, however, as I must also consider any changes to Ms. Fewster’s circumstances. Mr. Fewster argued that the court ought to impute a higher income to Ms. Fewster because she obtained her personal support worker qualification subsequent to the Divorce Order, and this qualification should enable her to earn a higher income than what she was earning at the time of the Divorce Order.
[43] I reject this argument because Ms. Fewster was working towards her personal support worker qualification at the time of the Divorce Order, had nearly completed it, and the parties contemplated at the time of the Divorce Order that she would be obtaining it. The income attributed to her must have contemplated this qualification. Obtaining this qualification therefore does not constitute a material change in circumstances.
[44] The Respondent also argued that it is unreasonable for Ms. Fewster to continue to accept short to midterm contracts of employment arranged through employment agencies that pay minimum wage, instead of obtaining longer-term, higher paying positions with an employer such as Toyota. But there was no evidence before me that employment on such terms is available to her or has ever been available to her. The submission is ironic given that Mr. Fewster himself would better off financially if he wound up his own business operations and took the employment that he argues is available to Ms. Fewster.
[45] There has been no change to Ms. Fewster’s circusmtances that would warrant a higher attribution of income than what was imputed in 2010.
[46] Given that Mr. Fewster brought his motion a year after the Divorce Order, and that the parties have been fighting over the motion and responding motion ever since, the Respondent asks that I make an order for the automatic review of spousal support in, say, five years. This would, I was told, serve the good of predictability as the parties would not be left wondering when the next motion to vary would be brought.
[47] I do not see that this would be any great advance over the arrangement that the parties negotiated for themselves in 2010. The spousal support provision was to remain in place indefinitely, with an annual increase. The purpose of the annual increase was to avoid the time-consuming and expensive resort to a variation proceeding. The Divorce Order is subject to review only if Ms. Fewster becomes liable for the debts specified in the Divorce Order, or if there is a material change in circumstances contemplated by section 17 of the Divorce Act. Should there be a material change, a motion can be brought, whether there is a review scheduled or not. On the facts before me, there is no justification to change that arrangement.
[48] It bears mentioning that each of the parties brought their motions while self-represented. They would be wise not to commence future proceedings without first seeking legal counsel.
[49] I will make an order that each party is to deliver to the other their tax returns and notices of assessment not later than July 1 of each year while spousal support is payable.
[50] The Respondent’s motion is dismissed. Ms. Fewster, although self-represented, is entitled to costs for the trial, which I fix at $1,500 inclusive of disbursements, payable forthwith.
“Justice B.W. Miller”
Justice B.W. Miller
Date: August 6, 2015