Baker v Baker, 2017 ONSC 3266

COURT FILE NO.: 04-FL-1598-5 DATE: 2017/05/26 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

William Victor Baker Applicant – and – Lori Kathleen Baker Respondent

H. Hunter Phillips, for the Applicant Peter S. Mirsky, for the Respondent

HEARD: April 13, 2017 at Ottawa

REASONS FOR DECISION

ENGELKING J.

[1] This is a Motion to Change the order of Justice P. Annis dated October 23, 2012, brought by the Respondent, Ms. Baker, in October of 2016 in which she is seeking increased retroactive and ongoing spousal support on the basis that there has been a material change of circumstances relating to the income of the Applicant, Mr. Baker. Mr. Baker, for his part, disputes Ms. Baker’s claim and counterclaims that there has been a material change of circumstances relating to the marital status of Ms. Baker, and he seeks a reduction in the spousal support payable by him.

Issues

[2] The issues to be determined on the motion to change are:

1. Did Mr. Baker fail to comply with the order of Justice Annis of October 23, 2012, by not providing Ms. Baker with his Notices of Assessment for 2012, 2013, and 2014 prior to August of 2015?
2. If so, does this failure result in a material change in circumstances?
3. Does Mr. Baker’s 2012 severance payment constitute income for the purposes calculating spousal support?
4. How is the release contained in paragraph 63 of the parties’ April 30, 2002, Separation Agreement to be interpreted?
5. Does Mr. Baker’s post-order employment income constitute a material change such that spousal support should be retroactively and proactively increased?
6. Does Ms. Baker’s 2014 marriage constitute a material change such that spousal support should be proactively decreased?

Facts Relevant to the Issues

[3] The facts that give rise to this motion are as follows:

1. The parties were married on August 26, 1978, and separated on August 22, 2001. They were divorced in 2005. There were three children of the marriage, all of whom are now independent.
2. The parties entered into a comprehensive Separation Agreement which is dated April 30, 2002.
3. In 2004, Mr. Baker brought a Motion to Change the separation agreement, the result of which was an order by Justice Sheffield dated December 1, 2004.
4. In 2010, Ms. Baker brought a Motion to Change the order of Justice Sheffield, which was resolved by Minutes of Settlement and a consent order by Justice Kershman dated February 15, 2011.
5. In 2012, Mr. Baker brought a Motion to Change the order of Justice Kershman on the basis that he would be retiring in 2012. That motion was resolved by Minutes of Settlement and a consent order of Justice Annis dated October 23, 2012.
6. This Motion to Change is brought by Ms. Baker seeking to vary the order of Justice Annis on the basis that Mr. Baker received a severance payment and unused vacation payout in 2012, which should have been included in his income for the purpose of calculating spousal support for 2012, and on the basis that Mr. Baker has employment income from 2014, 2015, 2016 and 2017, which should have and should still be included in his income for the purpose of calculating spousal support.
7. The result of the 2012 negotiations was that the parties agreed that the spousal support to be paid by Mr. Baker was reduced from $7,460 per month to $5,748 per month based on the portion of his pension income that had not been equalized at the time of the separation agreement, or $179,172 per year, with the amount of these payments to be increased May 1st of every year by the percentage increase in Mr. Baker’s pension.
8. The order of Justice Annis included the following provision at paragraph 4: “Each year, on May 1st commencing May 1, 2013, the applicant shall provide the Respondent with written evidence of any increase in his pension and a copy of his notice of Assessment.”
9. Mr. Baker has paid said spousal support, has consistently provided information to Ms. Baker regarding the indexation of his pension, and did increase said support from 2012 such that his current spousal support payments are $6,050 per month.
10. Mr. Baker did not provide Ms. Baker with copies of his Notices of Assessment post-2012, until he was asked for them in the early summer of 2015, at which time he produced them. When asked in questioning about that, Mr. Baker indicated that he had simply overlooked that requirement. His precise answer to the question of whether he had provided them was: “When your request came to me, I obviously checked and I had not noticed that. This is the first time since our separation going back to the original separation agreement and all of the amendments that have been made since, that that requirement was there. I [sic] was just something I had overlooked. I was always focused on making sure the correct payment were made.” (Lines 12 to 19, page 16, Questioning of the Witness William Victor Baker on January 11, 2017).
11. Mr. Baker received payments for severance on February 28, 2012 and March 1, 2012 and for vacation pay on April 10, 2012.
12. Mr. Baker’s line 150 income for 2012 was thus $476,342, which included his income from January to April, his severance/vacation pay and his unequalized pension income post-April.
13. Additionally, Mr. Baker was approached by the Government of Canada in 2014 to chair two committees, for which work he was remunerated. Mr. Baker indicated that he also had a couple of small “consulting” contracts for which he received remuneration. The end result was that his line 150 income was: a) for 2013 - $217,183; b) for 2014 - $289,015; and, c) for 2015 - $297,532;
14. For 2016, Mr. Baker indicates that he chaired the two committees only, and his employment income is estimated at $42,000, which is made up of $32,080 from his T4 for 2016, and another approximately $10,000 which was invoiced in 2016, but not paid out before 2017.

The Positions of the Parties

[4] Ms. Baker’s position is that Mr. Baker failed to comply with the order of Justice Annis, intentionally or otherwise, with respect to providing his Notices of Assessments annually, and that had she known of the severance payment and the unused vacation pay-out that occurred immediately pre-retirement, she would not have settled for the reduction in spousal support that she did. Mr. Baker’s failure to disclose, Ms. Baker argues, constitutes a material change of circumstances in relation to spousal support payable to her in 2012.

[5] Additionally, it is Ms. Baker’s position that Mr. Baker’s post-retirement income constitutes a material change of circumstances, and again, had she known of it prior to 2015; she would have sought adjustments to her spousal support accordingly. Ms. Baker seeks retroactive spousal support from May to December of 2012, calculated on the basis of Mr. Baker’s 2012 income, including his severance package, at the mid-range of the SSAG’s. Additionally, she seeks retroactive and on-going support calculated based on the additional income of Mr. Baker for the years 2014, 2015, 2016 and on-going. She does not seek an adjustment for 2013 based on the fact that Mr. Baker’s additional income for that year was minimal (approximately $6,000).

[6] Mr. Baker’s position is that his severance payment and unused vacation pay-out were exempted pursuant to the parties Separation Agreement dated April 30, 2002, and that because he retired effective April 27, 2012, his only employment income for 2012 was earned between January and April. His position, further, is that his severance package and vacation pay-out were disclosed and considered at the time of the October 2012 Minutes of Settlement and Consent Order.

[7] Mr. Baker’s position with respect to his post retirement income is that there has been a material change in circumstances, namely Ms. Baker’s marriage to Mr. Fulford in 2014, which should reduce his obligation, and that, additionally, Ms. Baker’s choice not to work should be taken into consideration in determining whether his post retirement income, that he did not seek out, should be shared with her. Mr. Baker is not of the view that Ms. Baker should be required to work, or that an income should be imputed to her, only that her decision not to work at all, and her current financial security with Mr. Fulford, should be taken into consideration in all of the circumstances.

Analysis

Issue #1: Did Mr. Baker fail to comply with the order of Justice Annis of October 23, 2012, by not providing Ms. Baker with his Notices of Assessment for 2012, 2013, and 2014 prior to July of 2015?

Issue #2: If so, does this failure constitute a material change in circumstances?

[8] Mr. Baker readily admits that he did not send his Notices of Assessments post the 2012 order to Ms. Baker every May, as he did the information on the percentage adjustment of his pension. According to his evidence, this was an oversight and not intentional, as he had not been required to provide it before pursuant to the parties’ original agreement and various amendments. While I cannot find that Mr. Baker intentionally failed to disclose, he did, nevertheless, fail to adhere to the order of Justice Annis in this regard.

[9] The parties entered into a separation agreement in 2002 whereby they resolved all issues relating to custody, access and child support in relation to the then three children of the marriage, equalization of family property, and spousal support. Mr. Baker’s pension was equalized as a result of that agreement, and additional monies were paid to Ms. Baker as an equalization payment. Because Mr. Baker’s pension had been equalized, at the time that the Minutes of Settlement were entered into in October of 2012, spousal support was being calculated on the unequalized portion of his pension only effective May 1, 2012. Mr. Baker did not include his severance pay or his unused vacation payout in coming to that calculation, although he has indicated that both were disclosed and considered at the time of the negotiations.

[10] Although counsel for Ms. Baker submitted that she had no idea about Mr. Baker’s severance pay in 2012, Ms. Baker says only at paragraph 11 of her affidavit sworn on November 3, 2016: “I repeat that when I settled in 2012 on the basis of the Applicant’s representation that he was retiring in April of 2012 and would not have additional income from employment, I accepted his advice as truth and had I known that he would continue to earn income from employment, I would not have settled to significantly reduce my income.” Ms. Baker does not state in her affidavit that she was specifically not aware of Mr. Baker’s severance and accrued vacation pay prior to his retirement in April of 2012. However, in support of the contention that she was not, Ms. Baker’s counsel relied upon a Financial Statement sworn by Mr. Baker on June 21, 2012, which did not include any information with respect to the money Mr. Baker received for severance and accrued vacation pay.

[11] Mr. Baker, on the other hand, stated at paragraph 14 of his affidavit sworn on December 5, 2016; “My only employment income in 2012 was earned during the months of January to April, plus severance pay, all of which had been disclosed and considered in the October, 2012 Minutes of Settlement. I did not earn any employment income in 2012 after the Minutes of Settlement.” (Emphasis is original). Mr. Baker’s counsel submitted, moreover, that this statement of Mr. Baker’s was not refuted in the affidavit of Ms. Baker in response sworn on January 3, 2017. Nor was Mr. Baker questioned on it when he attended for questioning.

[12] Based on the evidence before me, I cannot make a definitive finding of fact that Ms. Baker knew about Mr. Baker’s severance payments in 2012. Certainly, had Mr. Baker complied with the order of Justice Annis, Ms. Baker would have known about them in May of 2013, as opposed to August of 2015, as she states. Additionally, had Mr. Baker included the information in his June 21, 2012 Financial Statement, the parties and the court would have been clear on the fact that it existed and was disclosed prior to the consent order. Mr. Baker’s statement in his affidavit that it was disclosed prior to the October 2012 settlement is nothing more than a bold assertion with no documentation to corroborate it, such as copies of correspondence or email exchanges between counsel. It is, thus, likely that Ms. Baker was not aware of the exact payments Mr. Baker received in severance and accrued vacation pay in 2012. Had I clear evidence that Mr. Baker disclosed the information at the time of the negotiations, it would not constitute a material change. However, based on the lack of same, and the absence of any information of the funds having been received in the Financial Statement of Mr. Baker sworn on June 21, 2012, I must find that the existence of the actual severance payments in February and March of 2012 were unknown to Ms. Baker at the time of the negotiations and constitute a material change of circumstances.

Issue #3: Do Mr. Baker’s 2012 severance payment and unused vacation pay-out constitute income for the purposes calculating spousal support?

Issue #4: How is the release contained in paragraph 63 of the parties’ April 30, 2002, Separation Agreement to be interpreted?

[13] Regardless of whether Ms. Baker knew or didn’t know, Mr. Baker states that based on paragraph 63 of the parties’ April 30, 2002 Separation Agreement, his severance pay and accrued vacation pay were exempted from inclusion in any event. Firstly, the definition of Mr. Baker’s salary for the purposes of calculating support as contained in paragraph 1.(j) of the agreement provides as follows:

(j) “husband’s salary” shall, for the purposes of child and spousal support, mean the husband’s base salary, exclusive of cashed-in leave and any employment bonus in a year provided the employment bonus does not exceed 20% of his bas income. If the husband’s bonus does exceed 20% then the excess amount shall be included in the calculation of his income for purposes of determining the amount of child support payable and may constitute a material change in circumstances for variation proceedings.

[14] Secondly, paragraph 63 of the Separation Agreement provides as follows under the heading “Pension Release”:

63. Except as provided in this Agreement and notwithstanding any designation to the contrary which may predate this agreement, neither the husband nor the wife shall be entitled to share or to receive any benefits of any kind from any pension of the other, including but not limited to any company or employment pension plans, deferred profit sharing plans, registered retirement savings plans, registered home ownership plans, vacation pay and severance pay. (Emphasis added).

[15] Clearly, pursuant to paragraph 1.(j) of the Separation Agreement, the parties agreed that payment for Mr. Baker’s accrued vacation would not form part of his income for the purposes of the spousal support calculation.

[16] The agreement is less clear as it relates to Mr. Baker’s severance pay. While all of the items listed in paragraph 63 of the agreement constitute property, they are all also potentially income generating. While it is clear that the spouses are releasing each other from any pension-like property claims, the specific inclusion in that paragraph of “vacation pay and severance pay”, coupled with the prohibition from either the husband or the wife being entitled “to share or to receive any benefits of any kind”, does raise the question of whether they were waiving any right to those as income as well.

[17] Ms. Baker relies upon two things in support of her position that Mr. Baker’s severance pay should form part of his 2012 income:

1. It was included in Mr. Baker’s line 150 income in his Notice of Assessment for 2012; and,
2. The case of Miller v. Volk wherein Justice Blishen found in paragraphs 13: “Severance pay is considered income from employment and is included in the calculation of line 150 of the parties’ income tax return. Further, a severance package is not considered property but an acceleration of income and a direct income replacement: see MacDonald v. MacDonald, 1997 ABCA 409, [1997] A.J. No.1262 (Alta. C.A.)

[18] Mr. Baker relies upon two things to suggest it should not:

1. Both Miller, supra and the case to which it referred, MacDonald, supra, were child support cases, and there was no evidence in either of waiver (as between spouses) equivalent to paragraph 63 of the parties’ separation agreement, and;
2. Ms. Baker, in paragraph 63, specifically waived any benefit she might receive from Mr. Baker’s severance or accrued vacation pay.

[19] Having carefully reviewed the Separation Agreement, I conclude that the parties were waiving their rights to make future property claims regarding those items listed in paragraph 63. Firstly, they are in a section entitled “Pension Release”, which is immediately preceded by one entitled “Release Against Property”, and followed by one entitled “Release Against the Estate of the Other”. They are in a part of the agreement that is dealing with property releases.

[20] Second, the agreement did not include any provision in either the definition section or the spousal support section that would make it clear that it was the anticipation of the parties that Mr. Baker’s severance pay would be specifically excluded from his income for the purposes of calculating support. Had they intended that to be the case, a provision to that effect could have been included (as it was for “cashed-in leave”). It was not.

[21] Thus, based on Miller, supra, Mr. Baker’s severance pay does form part of his income for the purposes of calculating spousal support.

[22] While Mr. Baker’s Notice of Assessment for 2012 which showed a line 150 income of $476,342 was filed with the court, neither party provided specifics with respect to the actual sum Mr. Baker received as severance pay in their evidentiary materials. On May 9, 2017, I thus released an endorsement which required the parties to provide in a joint submission the following information:

a) The exact sum paid to Mr. Baker as severance pay in 2012; b) What portion of that sum was or may have been equalized at the time of the parties’ separation; c) The exact sum of vacation pay Mr. Baker received in 2012; and, d) What Mr. Baker’s taxation rate was in 2012?

[23] On May 15, 2017, I received a joint submission from the parties indicating:

a) The exact sum paid to Mr. Baker as severance in 2012 was $132,890.00; b) The portion of that sum equalized was $41,739.00; c) The exact sum of vacation pay Mr. Baker received in 2012 was $41,664.00; and, d) The taxation rate for Mr. Baker in 2012 was 40.9%.

[24] Based on the above, the amount of Mr. Baker’s unequalized severance pay was $91,151. That sum divided by the twelve months of 2012 equals $7,595.92, multiplied by eight for the months of May through December equals $60,767.36. Thus, the sum of $60,767 should be added to Mr. Baker’s annual income of $179,172 for a sum of $239,939 for May through December 2012.

[25] Based on the parties’ 2002 Separation Agreement and subsequent amendments/orders, I find that support should continue at the mid-range of the Spousal Support Advisory Guidelines. On an annual income of $239,939 for Mr. Baker and $0 for Ms. Baker, spousal support would be payable in the mid-range of $8,048 per month. Pursuant to the order of Annis, J., Mr. Baker was to pay Ms. Baker $5,748 per month from May to December of 2012. The deficit is $2,300 per month, for a total of $18,400. However, Mr. Baker was subject to a taxation rate of 40.9% in 2012. Taking his tax liability into account, the total amount now owing would be $10,875.

Issue #5: Does Mr. Baker’s post-order employment income constitute a material change such that spousal support should be retroactively and proactively increased?

[26] As was indicated above, Mr. Baker was approached by the Government of Canada in 2014 to chair two audit committees. His appointments to same were done by the Treasury Board, and were for a four year terms, namely 2014, 2015, 2016 and 2017. In 2014 and 2015, Mr. Baker also had some brief contracts that generated some income. At the time of his retirement, and during the ensuing negotiations, it was clear that Mr. Baker had no intention to seek employment post-retirement. Indeed, he did not seek it; it sought him. However, again based on the non-disclosure of his Notices of Assessment, the fact that Mr. Baker was making post-retirement income would have come as a surprize to Ms. Baker in 2015, and does constitute a material change of circumstances from the time at which she was negotiating the 2012 order.

[27] This case can be distinguished somewhat from that of Slongo v. Slongo, 2017 ONCA 272, in that Mr. Slongo immediately starting working by contract doing the essentially same job post-retirement as he did pre-retirement. While Mr. Baker did a very small contract in 2013, he did not begin to chair the audit committees until 2014, and the work was not the same as he had been engaged in pre-retirement. Nevertheless, he was undoubtedly approached to fulfill those roles as a result of the experience and reputation he gained during his working life, to which Ms. Baker substantially contributed. That she should share in those gains, to the degree that they form part of his line 150 income, is only logical.

[28] I find that Mr. Baker’s employment income for 2014, 2015, 2016 and 2017 was $41,580, $64,717.29, $42,000 and $42,000 respectively.

Issue #6: Does Ms. Baker’s 2014 marriage constitute a material change such that spousal support should be proactively decreased?

[29] Mr. Baker was clearly aware by the time of the 2012 negotiations that Ms. Baker was cohabiting with Mr. Fulford, and had been doing so since June of that year. I do not find that Ms. Baker marrying Mr. Fulford in 2014 constitutes a material change of circumstances.

Order

[30] My order on the Motion to Change is as follows:

1. Paragraphs 1 and 4 of the order of Justice P. Annis dated October 23, 2012 shall be varied as follows with respect to spousal support payable by the Applicant, William Victor Baker, to the Respondent, Lori Kathleen Baker.
2. For the period of May through December of 2012, spousal support is payable by Mr. Baker to Ms. Baker at $8,048 per month, representing the mid-range of the SSAG on an annual income of $239,939 for Mr. Baker, being his unequalized pension and employment income of $60,767 (over 8 months) and $0 for Ms. Baker. Arrears for 2012 are fixed at $10,875;
3. For the period of January to December of 2014, spousal support is payable by Mr. Baker to Ms. Baker at $7,535 per month, representing the mid-range of the SSAG on an annual income of $224,655, being Mr. Baker’s indexed unequalized pension and employment income of $41,580, and $0 for Ms. Baker. Arrears for 2014 are fixed at $19,944;
4. For the period of January to December of 2015, spousal support is payable by Mr. Baker to Ms. Baker at $8,416 per month, representing the mid-range of SSAG on an annual income of $250,904, being Mr. Baker’s indexed unequalized pension and employment income of $64,717, and $0 for Ms. Baker. Arrears for 2015 are fixed at $29,316;
5. For the period of January to December of 2016, spousal support is payable by Mr. Baker to Ms. Baker at $7,735 per month, representing the mid-range of SSAG on an annual income of $230,607, being Mr. Baker’s indexed unequalized pension and employment income of $42,000, and $0 for Ms. Baker. Arrears for 2016 are fixed at $20,220;
6. For the period of January to December of 2017, spousal support is payable by Mr. Baker to Ms. Baker at $7,817 per month, representing the mid-range of SSAG on an annual income of $233,058, being Mr. Baker’s indexed unequalized pension and an expected employment income of $42,000, and $0 for Ms. Baker. Arrears for the months of January through May 2017 are fixed at $8,757; and
7. Commencing January 1, 2018, spousal support shall be $6,408 per month representing the mid-range of SSAG on an annual income of $191,058, being Mr. Baker’s indexed unequalized pension;
8. Spousal support for the years 2017 and 2018, and each year thereafter shall be subject to adjustment on or before May 1st to account for Mr. Baker’s unequalized pension and any employment income earned. The parties shall exchange their income tax returns and notice of assessment on May 1st of every year and Mr. Baker shall provide written confirmation of the indexation of his pension annually. Spousal support shall be adjusted retroactively and paid promptly for the previous year to reflect Mr. Baker’s indexed unequalized pension income and any employment income.
9. Mr. Baker shall continue to pay to Ms. Baker spousal support in accordance with the mid-range of the SSAG based upon his unequalized pension as indexed and any employment income until further order of this court and this may be varied upon a material change of circumstances, whether foreseeable or unforeseeable pursuant to paragraph 41 of the Separation Agreement dated April 30, 2002.
10. The amount of spousal support payable from the calendar year of 2014 and forwards shall be tax deductible to Mr. Baker and included in the taxable income for Ms. Baker;
11. Mr. Baker’s Response to Change is dismissed.
12. Failing agreement by counsel by June 15, 2017 as to the liability for costs of this Motion to Change, counsel will make written submissions to me at intervals of 10 days and I will make an order.

Madam Justice Tracy Engelking

Released: May 26, 2017