Court File and Parties

COURT FILE NO.: FS-15-179-00 DATE: 2017-06-05 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

BEVERLEY HATHWAY Applicant

- and -

RICHARD HATHWAY Respondent

BEFORE: Price J.

COUNSEL: Faryal Rashid, for the Applicant No one appearing for the Respondent

HEARD: September 26, 2016, at Brampton, Ontario

Reasons For Order

NATURE OF PROCEEDING

[1] On September 26, 2016, the court tried Beverly Hathway’s Application dated August 25, 2015, for spousal support. The trial was undefended, pursuant to the Order of Lemon J. dated November 19, 2015, because Ms. Hathway’s spouse, Richard Hathway, had failed to deliver an Answer or file a Financial Statement.

[2] The applicant claims:

a) Spousal support pursuant to the Family Law Act;

b) An order that Richard Hathway maintain her as a beneficiary of his medical and dental coverage through his retirement benefits package;

c) An order that Mr. Hathway irrevocably designate her as beneficiary of his life insurance coverage through his retirement benefits package until his spousal support obligation is satisfied;

d) Costs.

BACKGROUND FACTS

[3] Mr. and Ms. Hathway met in 1994 when they were both employed with the Canadian Security and Intelligence Service (CSIS). Mr. Hathway was a 52-year-old R.C.M.P. officer; Ms. Hathway was a 25-year-old employee of the Agency, working in surveillance.

[4] Mr. Hathway retired in 1994, and the parties began cohabiting in 1995 at an apartment in Mississauga. They married on September 20, 1999. Mr. Hathway had been married and divorced three times before. There were no children of the parties’ marriage.

[5] Mr. Hathway wanted to live in Florida during the winter, so Ms. Hathway took a 5 year leave of absence from her employment in 2003. Mr. Hathway bought a condominium in South Daytona Beach, which he registered in his own name, and which became the parties’ matrimonial home.

[6] When Ms. Hathway’s leave of absence ended in 2008, she notified CSIS that she was resigning, so that she and Mr. Hathway could continue residing together in Florida. Her retirement took effect in 2009. The parties continued residing in Florida from October to April and returning to Coboconk, Ontario, in April, where they resided from late spring until the fall.

[7] The parties separated on December 24, 2011, as a result of Mr. Hathway’s repeated infidelity. There is no reasonable prospect that they will resume cohabitation. They were together for 17 years, including the 12 years when they were married.

[8] Ms. Hathway returned permanently to Ontario in 2012. She has since resided in Coboconk, Ontario, where she operates a small spa out of the four-bedroom home that she rents in that Town. Her spa operates from April to October each year, with some regular customers continuing to patronize it until December. Ms. Hathway supplements her income by working as a waitress at a local restaurant. Her income from that employment has declined as a result of a declining clientele at the restaurant. Ms. Hathway is taking courses from her cosmetics distributor, and hopes to teach courses locally in how to apply cosmetics.

[9] Mr. Hathway has resided full-time in Florida since the parties separated. He derives his income from his RCMP pension and from Canada Pension and Old Age Security. Ms. Hathway last spoke with him three months before the trial, when her dog died. Ms. Hathway is currently covered by Mr. Hathway’s medical-dental insurance, and is the beneficiary of his group life insurance policy. As Mr. Hathway’s spouse, she may also be the beneficiary of a survivor annuity or death benefit under his pension.

[10] Ms. Hathway tried, through her lawyer, to negotiate a settlement of her claim for spousal support with Mr. Hathway. Mr. Hathway advised her that he did not intend to participate in a court proceeding in Ontario, and invited her to have her lawyer, Cynthia Waite, send him a proposal. Ms. Waite sent Mr. Hathway a draft separation agreement on May 16, 2014, which included a term for spousal support. Mr. Hathway did not respond to her letter or Agreement.

[11] Ms. Hathway therefore began the present proceeding on August 25, 2015. Her Application was served on Mr. Hathway on August 26, 2015. He did not respond, and Justice Lemon made an order dated November 19, 2015, noting him in default, and granting Ms. Hathaway leave to proceed to an undefended trial pursuant to rule 10(5) (c) and (d) of the Family Law Rules, O. Reg 114/99.

ISSUES

[12] The court must decide:

a) Whether Ms. Hathway is entitled to be paid spousal support by Mr. Hathway and, if so, in what form (that is, periodic or lump-sum), and in what amount;

b) Whether Ms. Hathway is entitled to medical-dental coverage and life insurance coverage under Mr. Hathway’s retirement benefits; and

c) Whether Mr. Hathway should pay Ms. Hathway’s costs of the proceeding and, if so, in what amount.

PARTIES’ POSITIONS

[13] Ms. Hathway claims lump sum or periodic spousal support, and medical-dental and life insurance coverage under Mr. Hathway’s retirement benefits, based on their 17 year relationship or 12 year marriage. She is not seeking a divorce or a division of property or equalization of net family property.

ANALYSIS AND EVIDENCE

a) Is Ms. Hathway entitled to spousal support and, if so, should it be periodic support or a lump sum, and in what amount?

Legislative framework

(i) Jurisdiction to award spousal support

[14] The Family Law Act, R.S.O. 1990, c. F.3 gives the court a broad discretion to make awards of periodic or lump sum spousal support, or both. Sections 34(1) (a) and (b) of the Family Law Act provides:

34(1) In an application under section 33, the court may make an interim or final order,

(a) requiring that an amount be paid periodically, whether annually or otherwise and whether for an indefinite or limited period, or until the happening of a specified event; [and]

(b) requiring that a lump sum be paid or held in trust.

[Emphasis added.]

(ii) Purposes of spousal support order

[15] Section 33(8) of the Family Law Act sets out the purposes of a spousal support order, as follows:

33(8) An order for the support of a spouse should,

(a) recognize the spouse's contribution to the relationship and the economic consequences of the relationship for the spouse;

(b) share the economic burden of child support equitably;

(c) make fair provision to assist the spouse to become able to contribute to his or her own support; and

(d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home).

[Emphasis added]

(iii) Factors to be considered

[16] Section 33(9) of the Family Law Act sets out the factors which the court should consider when asked to make an order for spousal support. The following factors are relevant to Ms. Hathway’s Application:

33(9) In determining the amount and duration, if any, of support for a spouse or parent in relation to need, the court shall consider all the circumstances of the parties, including,

(a) the dependant's and respondent's current assets and means;

(b) the assets and means that the dependant and respondent are likely to have in the future;

(c) the dependant's capacity to contribute to his or her own support;

(d) the respondent's capacity to provide support;

(e) the dependant's and respondent's age and physical and mental health;

(f) the dependant's needs, in determining which the court shall have regard to the accustomed standard of living while the parties resided together;

(g) the measures available for the dependant to become able to provide for his or her own support and the length of time and cost involved to enable the dependant to take those measures;

(h) any legal obligation of the respondent or dependant to provide support for another person;

(i) the desirability of the dependant or respondent remaining at home to care for a child;

(j) a contribution by the dependant to the realization of the respondent's career potential;

(k) Repealed.

(l) if the dependant is a spouse,

(i) the length of time the dependant and respondent cohabited,

(ii) the effect on the spouse's earning capacity of the responsibilities assumed during cohabitation,

(iii) whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness, disability or other cause to withdraw from the charge of his or her parents,

(iv) whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or over who is unable for that reason to withdraw from the charge of his or her parents,

(v) any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse were devoting the time spent in performing that service in remunerative employment and were contributing the earnings to the family's support,

(v.1) Repealed.

(vi) the effect on the spouse's earnings and career development of the responsibility of caring for a child; and

(m) any other legal right of the dependant to support, other than out of public money.

Conduct

(10) The obligation to provide support for a spouse exists without regard to the conduct of either spouse, but the court may in determining the amount of support have regard to a course of conduct that is so unconscionable as to constitute an obvious and gross repudiation of the relationship.

[Emphasis added.]

Jurisprudence

Basis for entitlement to spousal support

[17] The Supreme Court of Canada in Bracklow v. Bracklow (1999) set out three conceptual bases for entitlement to spousal support, namely, compensatory, contractual, and non-compensatory. [1] The Court distinguished the compensatory from the non-compensatory basis as follows:

39 ...Under the Divorce Act, compensation arguments can be grounded in the need to consider the "condition" of the spouse; the "means, needs and other circumstances" of the spouse, which may encompass lack of ability to support oneself due to foregoing career opportunities during the marriage; and "the functions performed by each spouse during cohabitation", which may support the same argument. ...

40 ...To be sure, these factors may support arguments based on compensation for what happened during the marriage and its breakdown. But they invite an inquiry that goes beyond compensation to the actual situation of the parties at the time of the application. Thus, the basic social obligation model may equally be seen to occupy the statutory provisions.

41 Section 15.2(6) of the Divorce Act, which sets out the objectives of support orders, also speaks to these non-compensatory factors. The first two objectives -- to recognize the economic consequences of the marriage or its breakdown and to apportion between the spouses financial consequences of child care over and above child support payments -- are primarily related to compensation. But the third and fourth objectives are difficult to confine to that goal. "[E]conomic hardship . . . arising from the breakdown of the marriage" is capable of encompassing not only health or career disadvantages arising from the marriage breakdown properly the subject of compensation (perhaps more directly covered in s. 15.2(6) (a): see Payne on Divorce, supra, at pp. 251-53), but the mere fact that a person who formerly enjoyed intra-spousal entitlement to support now finds herself or himself without it. Looking only at compensation, one merely asks what loss the marriage or marriage breakup caused that would not have been suffered but for the marriage. But even where loss in this sense cannot be established, the breakup may cause economic hardship in a larger, non-compensatory sense. Such an interpretation supports the independent inclusion of s. 15.2(6) (c) as a separate consideration from s. 15.2(6) (a). Thus, Rogerson sees s. 15.2(6) (c), "the principle of compensation for the economic disadvantages of the marriage breakdown as distinct from the disadvantages of the marriage", as an explicit recognition of "non-compensatory" support ("Spousal Support After Moge", supra, at pp. 371-72).

42 Similarly, the fourth objective of s. 15.2(6) of the Divorce Act -- to promote economic self-sufficiency -- may or may not be tied to compensation for disadvantages caused by the marriage or its breakup. A spouse's lack of self-sufficiency may be related to foregoing career and educational opportunities because of the marriage. But it may also arise from completely different sources, like the disappearance of the kind of work the spouse was trained to do (a career shift having nothing to do with the marriage or its breakdown) or, as in this case, ill-health.

[Emphasis added.]

Commencement of spousal support

[18] The Court of Appeal, in MacKinnon v. MacKinnon (2005), held that a person applying for support is presumptively entitled to support from the date of notice that a support claim is being pursued, absent an unusual reason arising from the factors and objectives set out in the legislation. [2]

[19] The Divisional Court, in Reddy v. Reddy (2016), confirmed that this court may award retroactive spousal support. [3] The cases referred to in Reddy were ones in which there was no serious question regarding entitlement, little or no delay in seeking support, and/or no prejudice to the payor spouse in awarding retroactive support.

[20] The Supreme Court of Canada, in Kerr v. Baranow (2011), set out the factors to be considered when deciding whether to grant retroactive spousal support. [4] Justice Cromwell stated:

While D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231, was concerned with child as opposed to spousal support, I agree with the Court of Appeal that similar considerations to those set out in the context of child support are also relevant to deciding the suitability of a “retroactive” award of spousal support. Specifically, these factors are the needs of the recipient, the conduct of the payor, the reason for the delay in seeking support and any hardship the retroactive award may occasion on the payor spouse. However, in spousal support cases, these factors must be considered and weighed in light of the different legal principles and objectives that underpin spousal as compared with child support. [5]

Lump sum spousal support

[21] If the court exercises its discretion to order that a lump sum payment of spousal support be made, it must state its reasons for doing so, as well as its rationale for arriving at the particular amount of lump sum support to be paid.

(i) Not restricted to unusual circumstances

[22] The Court of Appeal for Ontario considered the procedure for determining lump sum spousal support in Davis v. Crawford (2011). [6] The Court rejected the argument that the Court’s earlier decision in Mannarino v. Mannarino restricts the court’s ability to award lump sum spousal support to situations “where there is a real risk that periodic payments would not be made,” or to other limited and “very unusual circumstances.” [7]

[23] While lump sum spousal support awards are not, as a matter of principle, limited to "very unusual circumstances," most spousal support orders are in the form of periodic payments for the following four practical reasons:

a) In many instances, moneys will not be available to fund a lump sum support award, either to take the place of, or to supplement, an award of periodic support. Instead, support will be paid from one spouse's income, the only available source for support payments, and it will be paid to finance the ongoing needs of the other spouse, which will generally be of a periodic rather than lump sum character.

b) For married couples, the court will have determined already the amount to be paid to equalize the value of the spouses' net family properties. [8] In many circumstances, this payment will obviate any requirements a dependent spouse may have for transitional capital.

c) In many cases, there will be no considerations favouring a lump sum award from the perspective of either spouse.

d) In at least some cases where there are considerations favouring a lump sum award, the general exigencies of life, including the possibility that the parties' means and needs may change, will outweigh the considerations favouring a lump sum award.

(ii) The purpose of a lump-sum award is not to redistribute assets

[24] The spousal support provisions of the Family Law Act and the jurisprudence interpreting them, including Mannarino v. Mannarino, provide guidance as to the factors which the court should consider when determining whether lump sum spousal support is appropriate in a particular case. They include the following:

[25] A lump sum should not be made in the guise of support for the purpose of redistributing assets. [9] The legislation does not recognize redistribution of assets as one of the purposes of a spousal support award. That being said, a lump sum order can be made to "relieve [against] financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home)." [10]

[26] The Court, in Willemze-Davidson v. Davidson (1997), noted that the purpose of an award of spousal support must be distinguished from its effect, as any lump sum award will have the effect of transferring assets from one spouse to another. However, that should not be the underlying purpose. [11]

(iii) Means and circumstances, and the payor’s ability to pay

[27] An important consideration in determining whether to make a lump sum spousal support award is whether the payor has the ability to pay without undermining his self-sufficiency. As noted above, under s. 33(9) of the Family Law Act, "[i]n determining the amount and duration, if any, of support for a spouse . . . in relation to need, the court shall consider," among other things:

(a) the dependant's and respondent's current assets and means;

(b) the assets and means that the dependant and respondent are likely to have in the future; . . . . .

(d) the respondent's capacity to provide support.

[Emphasis added.]

(iv) Weighing advantages against disadvantages of lump sum

[28] In Davis v. Crawford, the trial judge’s reasons made it clear that she awarded lump sum spousal support because of a real concern that the husband would not pay periodic support, and to effect a clean break between these parties. It was apparent that those factors outweighed the considerations militating against a lump sum spousal support.

[29] The advantages of a lump sum spousal support award can include, but are not limited to, the following:

a) terminating ongoing contact or ties between the spouses for any number of reasons (for example: short-term marriage; domestic violence; second marriage with no children, etc.);

b) providing capital to meet an immediate need on the part of a dependant spouse;

c) ensuring adequate support will be paid in circumstances where there is a real risk of non-payment of periodic support,

d) a lack of proper financial disclosure; or

e) where the payor has the ability to pay lump sum but not periodic support; and

f) satisfying immediately an award of retroactive spousal support.

[30] The disadvantages of such an award can include the following:

a) The real possibility that the means and needs of the parties will change over time, leading to the need for a variation;

b) the fact that the parties will be effectively deprived of the right to apply for a variation of the lump sum award; and

c) the difficulties inherent in calculating an appropriate award of lump sum spousal support where lump sum support is awarded in place of ongoing indefinite periodic support.

[31] In Davis v. Crawford, the trial judge found that the husband had greater assets and income than he acknowledged, and that he was trying to shelter them from the wife’s reach. Based on these factors, the trial judge concluded that there was a real risk the husband would not pay periodic support, and that this alone mandated an award of lump sum support, even though the wife would be deprived of the ability to seek a variation in the future. Further, the husband’s failure to make proper disclosure made a clean break desirable. In the absence of a clean break, the wife likely faced unending litigation to maintain her entitlement to spousal support.

[32] In Davis v. Crawford, the trial judge awarded an amount of lump sum support that would generate an income stream of $1,000 per month for 15 years using a 4 per cent interest rate. The Court of Appeal found that the judge should have given additional details as to how she arrived at the $1,000 per month amount and the 15 year duration. However, the wife’s financial statement disclosed that she had a monthly deficit of more than $1,000 per month based on relatively modest expenses. The trial judge found that the husband had the means to maintain a much higher standard of living than the wife and that, without a significant payment, the wife would be relegated to a significantly lower standard of living than the parties had enjoyed for 23 years.

The amount of spousal support

[33] The Family Law Act directs the court to base the amount of spousal support on the spouses’ incomes. [12] The Spousal Support Advisory Guidelines (SSAG) provide, in this regard:

The starting point for the determination of income under both formulas is the definition of income under the Federal Child Support Guidelines, including the Schedule III adjustments ...

The Advisory Guidelines do not solve the complex issues of income determination that arise in cases involving self-employment income and other forms of non-employment income. In determining income it may be necessary, as under the Federal Child Support Guidelines, to impute income in situations where a spouse’s actual income does not appropriately reflect his or her earning capacity. [13]

[34] The SSAG, though advisory, are a useful starting point when determining the appropriate amount of spousal support. [14] Once the court establishes entitlement to spousal support, it must take the SSAG into account when determining the amount. [15]

[35] Like the Child Support Guidelines, the SSAG permit the court to impute income to a spouse. They do not expressly provide for how this should be done. The courts, in applying the SSAG, apply the methodology set out in sections 15 to 19 of the Child Support Guidelines [16] for determining a payor spouse’s income. Justice Olah, in Rilli v. Rilli (2006), [17] noted that the test for imputing income for child support purposes applies equally to claims for interim spousal support. [18] In Pagnotta v. Malozewski (2008), [19] the Divisional Court, after setting aside a final order of spousal support on the ground that a motions judge has no jurisdiction to make such a final order on a motion for interim spousal support, continued the order appealed from as one for interim spousal support, based on the income imputed to the payor spouse by using the methodology in the Child Support Guidelines.

[36] In determining a party’s capacity to earn income, the court applies the following principles, among others:

a) There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their children. [20]

b) Under-employment must be measured against what is reasonable to expect of the payor having regard for their background, education, training and experience. [21]

c) When a parent experiences a sudden change in their income, they may be given a “grace period” to adjust to the change and seek out employment in their field at a comparable remuneration before income will be imputed to them. However, if they have been unable to secure comparable employment within a reasonable time frame, they will be required to accept other less remunerative opportunities in order to satisfy their obligation to contribute to the support of their children. [22]

d) The fact that a parent is receiving social assistance benefits is not determinative of the parent’s income. The court is not bound by the decision of social assistance professionals respecting the parent’s ability to earn income, but rather must consider all of the relevant evidence to determine whether an imputation of income to the parent is appropriate. [23]

e) The amount of income that the court imputes to a parent is a matter of discretion. The only limitation on the court’s discretion is that there must be some basis in the evidence for the amount that the court chooses to impute. [24]

[37] Where an award of lump sum spousal support is made as a substitute for an award of periodic support, the court must consider whether the amount conforms to the SSAG. [25] If does not, I must provide reasons for why the Guidelines do not provide an appropriate result. [26]

Applying the principles to the present case

(i) Is Ms. Hathway entitled to spousal support?

[38] Ms. Hathway suffered a disadvantage as a result of the marriage when, with Mr. Hathway’s encouragement or concurrence, she resigned from her employment with CSIS so that she Mr. Hathway could continue living together in Florida, which Mr. Hathway wished to do. Her accompaniment of Mr. Hathway to Florida was an advantage to him but diminished her own economic self-sufficiency by depriving her of her secure employment and source of income. She is entitled to compensation for this loss.

[39] Ms. Hathway suffered a disadvantage as a result of the marriage breakdown by being deprived of Mr. Hathway’s income, which he had made available for their collective support following Ms. Hathway’s resignation. Ms. Hathway, who enjoyed Mr. Hathway’s financial support during the marriage, now finds herself without it. The break-up thereby caused economic hardship to her, which entitles her to spousal support on a non-compensatory basis.

[40] Ms. Hathway has been unable to recover for herself the level of income she enjoyed before her resignation from CSIS, or the level of income she enjoyed after her resignation while married to Mr. Hathway. According to her Financial Statement sworn June 4, 2016, her gross income in 2014 was $8,845. Her Line 150 income in 2015 was $5,984.60, according to her Tax Return (T1 form) for that year.

[41] Ms. Hathway contributed to the parties’ relationship by resigning from her position with CSIS so that the parties could continue residing together in Florida. She suffered adverse economic consequences from the marriage by becoming financially dependent on Mr. Hathway, and suffered economic loss as a result of the breakdown of the marriage by losing the benefit of Mr. Hathway’s financial support when she returned to Canada with a lower income than when she began the relationship.

[42] A spousal support order should make fair provision for Ms. Hathway’s support and relieve her of the financial hardship that resulted from the parties’ separation, especially having regard to the fact that she is deriving no benefit from the matrimonial home or a division of family property.

(ii) When should spousal support begin?

[43] Ms. Hathway first notified Mr. Hathway in May 2014 that she intended to claim spousal support from him. This is the presumptive date for the commencement of her entitlement to spousal support.

[44] Ms. Hathway gave a reasonable explanation for her delay from May 16, 2014, when her lawyer sent the draft separation agreement to Mr. Hathway, to August 26, 2015, when she caused her application to be served on him. Her lawyer properly tried to resolve her claim for spousal support informally with Mr. Hathway before incurring the cost of litigation. Mr. Hathway invited Ms. Hathway to have her lawyer send him her proposal, so she did. He did not respond to the draft agreement. He also did not provide the financial disclosure that would have better equipped Ms. Hathway to begin her proceeding.

[45] For these reasons, I find that Ms. Hathway’s entitlement to spousal support began on May 15, 2014, when she first notified Mr. Hathway that she intended to claim spousal support from him.

(iii) What is the appropriate amount of spousal support?

Mr. Hathway’s income

[46] In 2011, when the parties separated, Mr. Hathway had a total (Line 150) income of $48,864.34. According to Mr. Hathway’s personal Income Tax Return (T1 General) for that year, his income consisted of $9,926.53 employment income, $24,749.04 from his R.C.M.P. pension, $7,820.52 from Canada Pension, and $6,368 from Old Age Security.

[47] Mr. Hathway’s income tax summary from 2007 to 2011 discloses that his total income did not vary significantly from 2008 to 2010 ($46,297 in 2009, $47,594 in 2010). His net income also did not vary significantly from 2008 to 2010 ($33,005 in 2008, $34,397 in 2009, and $35,390 in 2010). It increased in 2011 (to $48,864) only because he did not make any deduction that year for an elected split-pension amount which, in the previous three years, had ranged from $11,900 to $13,208.

[48] Ms. Hathway does not ask the court to include Mr. Hathway’s employment income of $9,926.53 that he reported in 2011, as she does not know its source and infers, based on Mr. Hathway’s age (74 years of age), that it has not continued to the present. Ms. Hathway asks the court to impute to Mr. Hathway an income in the amount of $38,937.56, ($48,864.34 minus $9,926.53). The $38,937.56 consists of his R.C.M.P. pension ($24,749 in 2011), his Canada Pension ($7,820.52), and his Old Age Security ($6,368).

[49] As additional proof of Mr. Hathway’s income, Ms. Hathway relies on a “RCMP Pensioner Benefit Statement” for Mr. Hathway dated January 16, 2009. The Statement discloses that as of January 1, 2009, Mr. Hathway received $2,023.83 in gross monthly pension, an increase of 2.5% over the previous year as a result of indexation. This increased his annual pension to $24,285.96.

[50] Based on Mr. Hathway’s total pension income of $24,285.96 in 2009, and his pension income of $24,749.00 for 2011, as he reported in his Income Tax Return for that year, Mr. Hathway’s pension increased a further total of 1.9%, or an average of .95% in each of 2010 and 2011. His total pension income, including RCMP pension, Canada Pension, and Old Age Security, increased from $38,149.00 in 2009 to $38,938.00 in 2011, an increase of 2.07%, or an average of 1.04% per year. I take judicial notice that the average annual inflation rate over the same period, as reported by the Bank of Canada, was 2.56%.

[51] According to Mr. Hathway’s 2011 Comparative Tax Summary, entered as exhibit “H” to Ms. Hathway’s affidavit sworn June 4, 2016, Mr. Hathway’s total pension income increased from $37,999 in 2008 to $38,938 in 2011, representing an increase of 2.47%, or an average of approximately .82% per year. I take judicial notice that the average rate of inflation over the same period was 5.55%, or an average of 1.85%.

[52] Based on the foregoing, I find that Mr. Hathway’s total pension increases by less than the rate of inflation. It is reasonable to impute income to him from 2011 to 2016 by continuing the same 1.04% per year by which his total pension income increased from 2009 to 2011. I therefore impute the following income to him for the years from 2011 to 2016, for the purpose of determining his spousal support obligation:

a) 2012: $39,342.96 ($38,938, being his 2011 pension income, plus 1.04% increase from 2011 to 2012)

b) 2013: $39,752.13 ($39,342.96, being his imputed 2012 pension income, plus 1.04% increase from 2012 to 2013)

c) 2014: $40,166.39 ($39,752.96, being his imputed 2013 pension income, plus 1.04% increase from 2013 to 2014)

d) 2015: $40,584.12 ($40,166.39, being his imputed 2014 pension income, plus 1.04% increase from 2014 to 2015)

a) 2016: $41,006.19 ($40,584.12, being his imputed 2015 pension income, plus 1.04% increase from 2015 to 2016)

[53] I note that based on Mr. Hathway’s total pension income of $38,938 in 2011, and the inflation that has occurred from 2011 to 2016, according to the Bank of Canada’s on line Inflation Calculator, his current inflation-adjusted pension amount would be $41,700.71. This supports my conclusion that $41,006.19 is a reasonable amount of income to impute to him for 2016.

Ms. Hathway’s income

[54] Imputing income, as a method for calculating a spouse’s income for support purposes, is prescribed by s. 19 of the Federal Child Support Guidelines. [27] Section 19 applies where the methods set out in sections 15 to 18 of the FCSG do not produce a fair result; that is, where the parties do not agree on the amounts of their respective incomes, and where basing a determination of their incomes on total taxable income does not produce a fair result. Section 19, which concerns imputing income, provides, in part:

19 (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:

(g) the spouse unreasonably deducts expenses from income;

(2) For the purpose of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act.

[55] As noted above, Ms. Hathway owns a small day-spa business which she operates from her home. She works there from 10 a.m. to 7 p.m. each weekday from the end of April to Thanksgiving. Her regular clientele continue to patronize the business until December, when business drops off.

[56] During the winter, Ms. Hathway tries to close her spa on Mondays and Tuesdays. During the winter, she seeks part-time or seasonal employment as a waitress. At the time of trial, she was receiving courses in aesthetics from her cosmetics supplier and hoped to give courses locally about how to apply cosmetics.

[57] Ms. Hathway proposes that income in the amount of $15,000 be imputed to her. Her Notice of Assessment for 2013 discloses that her total (Line 150) income that year was $12,767. That amount consisted of employment income of $3,362.06 and net business income of $9,405.13. Her net business income was derived from gross revenue of $29,219, less expenses in the amount of $12,925.14. Her business expenses consisted principally of the following:

Rent: (from her total rent of $10,800) $7,200.00 Telephone and utilities: $1,620.00 Motor vehicle expenses: $1,402.10 Towel/cleaning service: $1,402.12

[58] Canada Revenue Agency allowed Ms. Hathway to deduct $7,200 of her rent as a business expense in 2013. That amount represented 2/3 of her total rent of $10,800. Ms. Hathway uses three of the four bedrooms of her home and a bathroom for her spa business. I therefore find that her deduction of 2/3 of her rent as a business expense is reasonable in calculating her income for purposes of spousal support.

[59] Ms. Hathway’s 2014 Tax Summary discloses that her total (Line 150) income that year was $28,434. This consisted of employment income ($1,684), net business income ($7,160.46), and a one-time withdrawal of $19,590 from her RRSP. I do not include the amount of the latter withdrawal in income, based on the analysis I gave in McConnell v. McConnell (2015), which I adopt for purposes of these reasons. [28]

[60] Ms. Hathway’s 2015 tax return. (2015 T1 Summary) discloses that her total income that year was $5,984.66, consisting entirely of net business income, derived from gross revenues of $29,942.00. Her purchases of inventory for her business that year amounted to $7,792.83. She deducted her entire rent of $10,800 as a business expense.

[61] Ms. Hathway’s financial statement sworn June 4, 2016 discloses expenses of $42,480 for that year. She claimed many of those expenses, including her rent and a majority of her transportation expense, as business expenses. This, and her withdrawal of $19,590 from her RRSP in 2014, helps explain how she sustained herself with such a modest amount of income without incurring substantial debt. While Ms. Hathway shows debts of $13,000 in her financial statement, the majority ($12,500) consists of a notional tax of 10% which she attributes to her $125,450 LIRA.

[62] The imputation of income pursuant to s. 19 of the Federal Child Support Guidelines is intended to ensure that separated spouses comply with their obligation to support each other financially, where appropriate, and do not exaggerate their need, or avoid their obligations, by a self-induced increase or reduction of their income. [29]

[63] The Supreme Court in Drygala v. Pauli set out a three-part test to determine whether income should be imputed to a payor spouse:

[64] The first part of the test is to ask whether the spouse is intentionally under-employed or unemployed. The onus is on the party alleging intentional unemployment or under-employment to prove that fact. He/she must provide an evidentiary basis for this finding. [30]

[65] If a spouse has made an unreasonable choice to earn less than he/she is capable of earning, the spouse is deemed to be intentionally under-employed. The issue then becomes whether the fact that the spouse is earning less income than he/she is theoretically able to earn resulted from actions that were both voluntary and reasonable.

[66] When an employment decision results in a significant reduction of support by the payor, or a significant increase in need for spousal support by the recipient, it needs to be justified by compelling evidence. [31] It must be reasoned, thoughtful, and highly practical. [32]

[67] I do not doubt that Ms. Hathway is living frugally. I find, however, that she has not accounted for the tips she earns, either as a waitress or in her spa, and that in 2015, she deducted a greater proportion of her rent and motor vehicle expenses than she previously did. By these means, she has been able to live on her own for the past six years without accumulating significant debt.

[68] In assessing how much income to impute to a spouse, the court must have regard to the payor’s, or payee’s, capacity to earn income in light of such factors as employment history, age, education, skills, health, available employment opportunities, and the standard of living earned during the parties’ relationship. The court looks at the amount of income the party could earn if he or she worked to capacity. [33]

[69] I infer from the fact that Ms. Hathway has remained self-employed in Coboconk for the past five years that the income she earns from the combination of employment and self-employment is at least equal to what she could earn elsewhere at minimum wage employment. In Ontario, the minimum wage, which was $11.00 per hour on June 1, 2014, was $11.25 per hour effective October 1, 2015, and will be $11.40 effective October 1, 2016. Based on a 36.4 hour week, the annual income from minimum wage employment was $18,870.50 as of June 1, 2014, $19,299.38 as of October 1, 2015, and will be $19,556.70 as of October 1, 2016. [34] Based on these considerations, I impute a minimum wage income in the foregoing amounts to Ms. Hathway.

[70] Ms. Hathway seeks lump sum support in the amount of $52,441.00. This is based on periodic spousal support of $592 per month, being the mid-point of the range of support derived by applying the SSAG to Mr. Hathway’s income, imputed at $38,938, and to Ms. Hathway’s income, imputed at $15,000, for a period of 8.5 years, being half the duration of the parties’ relationship.

[71] I find that the appropriate amounts of spousal support were as follows:

Year	His Income	Her Income	Mid-range SSAG support
2014	$40,166.39	$18,870.50	$528
2015	$40,584.12	$19,299.38	$528
2016	$41,006.19	$19,556.70	$532

Lump sum support

[72] I have weighed the advantages against the disadvantages of making a lump sum award in the present case in determining whether a lump sum award is appropriate and, if so, the appropriate amount of such an award.

[73] Mr. Hathway is 74 years old and lives in Florida full-time. He owns his condominium at 1600 South Town Meadow Blvd. in Daytona Beach, Florida. He did not respond to the draft Separation Agreement that Ms. Hathway’s lawyer sent him, did not deliver an Answer to Ms. Hathway’s Application, and provided no financial disclosure. I draw an adverse inference that had he provided such disclosure, it would have demonstrated that he has the capacity to provide either periodic or lump-sum spousal support to Ms. Hathway.

[74] Ms. Hathway rents a 4 bedroom house where she pays rent in the amount of $10,800 annually. She uses three bedrooms and a bathroom for her day spa. While her income from the combination of her employment and self-employment is, as I find, equivalent to what she could earn elsewhere at minimum-wage, it is significantly less than the income she received at CSIS or the support she enjoyed while married to Mr. Hathway. She had to withdraw $19,590.00 from her R.R.S.P. to make ends meet and she requires support from Mr. Hathway, which I find he is capable of providing, even on his retirement income.

[75] I have considered the tax implications of a spousal support order. In Canada, lump sum spousal support is not taxable in the hands of the recipient nor deductible by the payor. There was no evidence provided, however, nor submissions made, on the income tax implications for Mr. Hathway, in the United States, of characterizing the spousal support he pays as lump sum support.

[76] Taking into consideration that three years have passed since 2014, when Ms. Hathway notified Mr. Hathway of her intention to claim spousal support, a refiling by Mr. Hathway of his tax returns for those years may not result in a deduction to him, even in Canada.

[77] The parties have no contact, and have no children together. Mr. Hathway has demonstrated he has no interest in responding to Ms. Hathway’s proceeding. His last meaningful conversation with her regarding support was in May 2014, when he invited her to have her lawyer send him her proposal, which she did. The fact that he did not respond, or deliver an Answer in the proceeding, or make financial disclosure, suggests that if an order for lump sum support is not made, Ms. Hathway will face significant difficulties in the future pursuing him for payment of periodic support.

[78] The amount of Ms. Hathaway’s entitlement to spousal support is modest, and the cost of enforcing an order for periodic spousal support on an ongoing basis would be disproportional. Additionally, Mr. Hathway is 74 years old and the 8.5 years over which Ms. Hathway seeks support will terminate when he is 79. It is in the interest of both parties that Ms. Hathway’s spousal support entitlement be capitalized now, so that the parties can move on with their lives without continued entanglement in conflict over ongoing support.

[79] Based on the analysis above, it is likely that neither of the parties’ incomes has varied significantly since 2011, and their incomes are unlikely to vary significantly in the future. As a result, Ms. Hathway will suffer no disadvantage from a lump-sum spousal support award in not being able to apply for a variation of her support in the future.

[80] I find that Mr. Hathway is capable of paying lump sum spousal support. If he acted prudently, he has saved a sufficient amount from his income and investments, if any, to meet his potential obligation to pay spousal support to Ms. Hathway. He owns his condominium in Florida and I am mindful of the fact that Ms. Hathway made no claim against that property through an equalization of net family property.

[81] For the foregoing reasons, I find that the advantages of a lump-sum spousal support award outweigh the disadvantages.

[82] Based on income in the amount of $41,006.19, which I have imputed to Mr. Hathway, and income in the amount of $19,556.70, which I have imputed to Ms. Hathway, the mid-range spousal support that results from applying the SSAG is $532 per month. This translates, for 8.5 years, being half the duration of the parties’ relationship, to lump-sum spousal support in the amount of $60,019.00.

b) Is Ms. Hathway entitled to insurance coverage under Mr. Hathway’s retirement benefits?

[83] Ms. Hathway claims, in addition to spousal support, survivor benefits under Mr. Hathway’s pension, as well as medical benefits and life insurance under his retirement package.

[84] The Family Law Act provides, in part:

34.(1) In an application under section 33 [Order for support], the court may make an interim or final order,

(i) requiring that a spouse who has a policy of life insurance as defined under the Insurance Act designate the other spouse or a child as the beneficiary irrevocably;

(j) requiring that a spouse who has an interest in a pension plan or other benefit plan designate the other spouse or child as beneficiary under the plan and not change that designation; and

(k) requiring the securing of payment under the order, by a charge on property or otherwise.

[85] In Singh v. Singh (1999), Maza J., based on the existing jurisprudence, held that the following criteria apply when the court determines the need to implement a provision of security for a support order:

[86] Where a party has a history of dissipation of assets, that is, the party is unable to handle money;

[87] Where the party lives outside the jurisdiction or is likely to leave the jurisdiction and become an absconding debtor;

[88] Where the party has previously refused to honour a support obligation, whether by court order or contract, or has refused to provide support at all; or

[89] Where the party has a poor employment history, or has indicated that he or she will leave their employment.

[90] Where the party is out of the jurisdiction at the time of hearing but has assets in Ontario capable of forming the basis of a security order; or

[91] Where the party has declared that he will not pay an eventual support order. [35]

[92] While Ms. Hathway’s entitlement to ongoing coverage will be determined, in part, by the terms of Mr. Hathway’s group insurance, it is reasonable to require Mr. Hathway to maintain her coverage for so long as his employment benefits permit him to do so. Had there been significant cost or prejudice to his maintaining her coverage, or to secure her support by a charge on his pension, he had the opportunity to advance evidence in this regard in an Answer to her Application, and chose not to do so.

c) Is Ms. Hathway entitled to her costs and, if so, in what amount?

[93] Ms. Hathway has been successful in the outcome and is presumptively entitled to her costs. Mr. Hathway acted unreasonably in failing to respond to the draft Separation Agreement that Ms. Hathway’s lawyer sent to him and in failing to make the financial disclosure required by Rule 13 of the Family Law Rules.

[94] In Berta v. Berta (2015), the Court of Appeal stated:

In Biant v. Sagoo (2001), 20 R.F.L. (5th) 284 (Ont. S.C.), the court considered the costs award scheme under the rules and commented, at para. 20:

[T]he preferable approach in family law cases is to have costs recovery generally approach full recovery, so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the result. There remains, I believe a discretion under Rule 24(1) to award the amount of costs that appears just in all the circumstances, while giving effect to the rules’ preeminent presumption, and subject always to the rules that require full recovery or that require or suggest a reduction or an apportionment.

This court has repeatedly endorsed the Biant court’s approach to the determination of costs in family law disputes: see for example, Ruffudeen-Coutts v. Coutts, 2012 ONCA 263, 15 R.F.L. (7th) 35, at para. 4; Sordi v Sordi, 2011 ONCA 665, 134 R.F.L. (7th) 197, at para. 21; M. (A.C.) v. M. (D.), 2003 ONCA 18880, 67 O.R. (3d) 181 (C.A.), at para. 40. [36]

[95] Based on her success in the outcome and Mr. Hathway’s unreasonable conduct, Ms. Hathway is therefore entitled to her costs on a full recovery basis. She claims her lawyers’ fees in the amount of $6,300 plus H.S.T., and $200 for disbursements.

[96] According to the Costs Bulletin of 2005, Ms. Hathway’s trial lawyer, Faryal Rashid, who was called to the Bar in 1998, was entitled to claim a maximum hourly rate of $300 in 2005. Adjusted for inflation, in accordance with the analysis set out in Ganie v. Ganie (2015), she is entitled to claim $365 per hour today, on a partial indemnity scale. [37] Cynthia Waite, Ms. Hathway’s instructing solicitor, was called to the Bar in 1978. She was entitled to claim a maximum hourly rate of $350 in 2005 which, adjusted for inflation, translates to $425 today. Ms. Rashid and Ms. Waite have claimed $350 and $375, respectively, which is conservative, especially having regard to the fact that costs are being awarded on a full recovery basis.

[97] Collectively, Ms. Rashid and Ms. Waite spent 18 hours on the file. That amount of time is reasonable, having regard to the facts of the case and the difficulty of prosecuting it on an undefended basis, without financial disclosure from Mr. Hathway. Mr. Hathway should reasonably have expected to face costs in the amount claimed if unsuccessful.

CONCLUSION AND ORDER

[98] Based on the foregoing, it is ordered that:

1. The Respondent, Richard Hathway, shall pay spousal support to the Applicant, Beverley Hathway, in a lump sum in the amount of $60,019.00.

2. The Respondent shall maintain the Applicant as beneficiary of the medical and dental coverage he has available to him through his retirement benefits.

3. The Respondent shall designate the Applicant as an irrevocable beneficiary of his life insurance, to the extent of his spousal support obligation under this Order, and shall forthwith produce proof to the Applicant that he has done so.

4. This Order shall be a first charge on the Respondents’ survivor benefits of his RCMP pension (pension number P88016). In the event a death benefit becomes payable under the Respondent’s pension, the Applicant shall be entitled to same, including the interest thereon, to the extent of the lump sum spousal support provided for herein.

5. The Commissioner of the R.C.M.P., and the administrator of the Respondent’s retirement benefits, including his pension and group insurance, shall produce to the Applicant any information or documents she requires in connection with his pension, including survivor annuity and death benefit, and his medical-dental and life insurance;

6. The Applicant shall be the irrevocable beneficiary of the Respondent’s life insurance policy, as available to him through his retirement benefit package, to the extent of the spousal support provided for by this Order.

7. The Respondent shall forthwith pay to the Applicant her costs in the following amounts:

   (a) $6,300 for fees; (b) $819 for H.S.T.; (c) $200 for disbursements, inclusive of H.S.T.

Price J. Released: June 5, 2017

Footnotes

[1] Bracklow v. Bracklow, 1999 SCC 715, [1999] 1 S.C.R. 420, at 442.

[2] MacKinnon v. MacKinnon, 2005 ONCA 13191, at para. 22.

[3] Reddy v. Reddy, 2016 ONSC 807, at para. 9 (Div. Ct.); see Family Law Act, s. 34(1) (f).

[4] Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269.

[5] Kerr v. Baranow, 2011 SCC 10, supra, at para. 207.

[6] Davis v. Crawford, 2011 ONCA 294, 106 O.R. (3d) 221.

[7] Mannarino v. Mannarino, 1992 ONCA 14022, [1992] O.J. No. 2730 (Q.L. Can.) (C.A.).

[8] Family Law Act, s. 5.

[9] Mannarino v. Mannarino, 1992 ONCA 14022; Willemze-Davidson v. Davidson, 1997 ONCA 1440, 1997 O.J. No. 856, at para. 32, cited in Davis v. Crawford, 2011 ONCA 294, supra, at para. 51.

[10] Family Law Act, s. 33(8) (d).

[11] Willemze-Davidson v. Davidson, 1997 ONCA 1440, above, at para. 32.

[12] Family Law Act, s. 31(1).

[13] Spousal Support Advisory Guidelines, (Ottawa: Department of Justice, 2008), by Carol J. Rogerson and D.A. Rollie Thompson, online at: http://www.justice.gc.ca/eng/pi/fcy-fea/spo-epo/g-ld/spag/p3.html#a332.

[14] Fisher v. Fisher, 2008 ONCA 11, 88 O.R. (3d) 241.

[15] Gagne v. Gagne, 2011 ONCA 188, at para. 9.

[16] See, for example, Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, at para. 66.

[17] Rilli v. Rilli. See also: Pellerin v. Pellerin.

[18] Drygala v. Pauli, 2002 ONCA 41868, 61 O.R. (3d) 711.

[19] Pagnotta v. Malozewski, 2008 ON SCDC 14800.

[20] Drygala v. Pauli, 2002 ONCA 41868, supra; L.(N). V. P. (B.).

[21] West v. West.

[22] Barta v. Barta; M. (S.D.) v. M. (K.F.), 2004 BCSC 70; Quintel v. Quintel.

[23] Pontius v. Murray, 2011 SKCA 120; Poursadeghian v. Hashemi-Dahaj, 2010 BCCA 490.

[24] Korwin v. Potworowski, 2007 ONCA 701.

[25] Ottawa: Department of Justice Canada, 2008.

[26] Fisher v. Fisher, 2008 ONCA 11, at para. 103.

[27] Federal Child Support Guidelines, SOR/97-175, s. 19.

[28] McConnell v. McConnell, 2015 ONSC 2243, at paras. 92-103.

[29] Thompson v. Gilchrist, 2012 ONSC 4137; DePace v. Michienzi.

[30] Homsi v. Zaya, 2009 ONCA 322.

[31] Riel v. Holland, 2003 ONCA 3433, at para. 23.

[32] Hagner v. Hawkins, at para. 19.

[33] Lawson v. Lawson, 2006 ONCA 26573.

[34] Employment Standards Act, 2000, S.O. 2000, c. 41.

[35] Singh v. Singh, at para. 13; See also: Nicholas v. Nicholas; Kumar v. Kumar (1988), 63 O.R. (2d) 572 (S.C.); La Fond v. La Fond (March 14, 1979), Clements Co. Ct. J. (Ont. Co. Ct.).

[36] Berta v. Berta, 2015 ONCA 918, at paras. 92-93.

[37] Ganie v. Ganie, 2015 ONSC 2997, at paras. 34-39.