CITATION: Melis v. Zwanenburg, 2017 ONSC 613
COURT FILE NO.: FC-04-1974-1
DATE: 20170127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CAROLINE MELIS
Applicant
– and –
CORNELIS JOHANNES ZWANENBURG
Respondent
John E. Merner, for the Applicant
Jennifer Johnston, for the Respondent
HEARD: December 1, 2016 and January 12, 2017
REASONS FOR decision
Beaudoin J.
[1] This is a Motion to Change brought by the Applicant, Caroline Melis (“Melis”). In her Motion to Change, Melis seeks to terminate spousal support as of January 15, 2016. If support is not terminated in its entirety, she asks that spousal support payments made to the date of the effective order above the amount of spousal support so determined will be credited to her.
Background
[2] Melis and the Respondent, Cornelis Johannes Zwanenburg (“Zwanenburg”), commenced cohabitation in November 1983, were married on November 21, 1986 and separated on February 28, 2004. Minutes of Settlement were executed on November 20, 2006 and were incorporated into a Divorce Order of Justice Cosgrove dated May 25, 2007.
[3] There was one child of the marriage, Natalie Jean Zwanenberg, born October 8, 1991. Natalie is now independent.
[4] At the time of the Divorce Order, Melis was earning $141,238 per annum with her employment with the federal government where she worked in various departments including Citizenship and Immigration and the Canada Border Services Agency.
[5] At the start of the relationship, Zwanenburg, who is Dutch, quit his job with the Dutch Merchant Marine and moved to Buffalo, where Melis was working. Melis was subsequently transferred internationally seven times and Zwanenburg moved with her each time. Zwanenburg had various small jobs with embassies. His Dutch engineering qualifications were not recognized in Canada. According to Zwanenburg, the moves for Melis’ career made it impossible for him to pursue a career of his own. He was the main caregiver for the parties’ child.
[6] In 1998, Zwanenburg developed a chronic neurological disorder, Transverse Myelitis. He was able to care for the parties’ child after diagnosis, but did not work from that point onward.
[7] Pursuant to the Divorce Order, Melis was to pay spousal support in the amount of $3200 per month. There was an order for joint custody of Natalie, and Melis was to pay child support in the amount of $800 per month. The parties agreed to child support, below the table amount, on the basis that Melis would contribute one hundred percent of the cost of special and extraordinary expenses for the child. With respect to the contribution to extra ordinary expenses, Zwanenburg’s income was deemed to be $38,400 per annum. Child support and spousal support were never adjusted.
[8] The Minutes of Settlement required Melis to maintain security for support “so long as either party is required to pay child or spousal support, and for so long as such policy is available to her through her employment.” Apparently, this policy is no longer in place.
[9] The parties’ Minutes of Settlement state that “a voluntary reduction in income shall not be deemed a material change in circumstances. The retirement of the wife after the age of 59.92 shall be deemed not to be a voluntary reduction of income.”
[10] With respect to the equalization payment, the matrimonial residence was sold with each party receiving $115,351.97. Melis made an equalization payment of $15,600 and transferred to Zwanenburg the sum of $217,244, plus interest, from her federal pension. Zwanenburg received a total sum of $348,495.17.
[11] The obligation to pay child support terminated at October 8, 2013, but Melis continued to support the child until July 2014. Melis paid all of Natalie’s education and extraordinary expenses without contribution from Zwanenburg.
[12] Following the termination of the child support, the parties attended a mediation where it was agreed that spousal support would be paid in the amount of $4200 per month until a material change in circumstances occurred which included, but was not limited to, Melis’ retirement. The amount of spousal support was below the low end of the range determined by the spousal support advisory guidelines [SSAG]. There was no agreement to vary the duration.
[13] The parties agree that there is a material change in circumstances as a result of Melis’ retirement, but Zwanenburg argues that this did not take effect until Melis attained age of 59.92.
The Issues on this Motion
• What is the effective date of the material change in circumstances?
• Should spousal support be terminated or reduced? If reduced, what is the appropriate amount of support?
• Should the court order the Applicant to provide security for any support ordered?
The Effective Date
[14] The parties originally agreed that the retirement of the wife after the age of 59.92 would not be deemed to be a voluntary reduction of income. When the parties came to their subsequent agreement in 2014, there was no agreement to vary the duration. I conclude that the material change did not occur until such time as Melis had attained the age of 59.92.
[15] The remaining issues require a consideration of the law with respect to double recovery, and whether Zwanenburg is maximizing his own assets for his own support.
The Parties’ Current Financial Circumstances
[16] Effective January 15, 2016, Melis retired from the federal government at 59.29 years of age. She receives pension income in the amount of $8,236.01 per month with an interest income of $55.38 for total monthly income of $8,291.39 per month or $99,496.48 per year.
[17] Melis retained an actuary, Guy Martel, to determine the amount available for support. He prepared a revised report dated April 7, 2016 would be $74,948.57 a year reduced by $5464 per year to $69,484.18 per year after age 65.
[18] He was also asked to calculate the annual income that could be generated by the investments of both parties. Melis has a RRSP worth $70,940.36, bank accounts worth $68,222.98 in the share of a house worth $89,371 after deducting her mortgage. Mr. Martel calculated that her RRSP could generate an in all income of $2940 fully indexed to cost-of-living increases. The income would be fully taxable. Her bank accounts could generate an annual income of $2827. If she were to sell the house and invest the proceeds, it could generate an annual income of $3704.
[19] Zwanenburg has a RRSP worth $410,876.55, bank accounts worth $23,143.24 and a house worth $216,903 after deducting his mortgage. He will receive Canada Pension Plan retirement benefits and O.A.S. benefits at age 65, a monthly Dutch State pension of $343 and another Dutch pension in the amount of $2,920.23 annually at age 67. Mr. Martel determined that Zwanenburg’s RRSP could generate annual income of $18,276 fully indexed for cost-of-living increases. Zwanenburg’s bank accounts could generate an annual income of $1029 partially taxable. If he sold his house and invest the proceeds, he could generate an annual income of $9648.
[20] In response to a question from Zwanenburg’s counsel, he calculated that 52.87% of the funds invested in the RRSP came from the $217,244 transferred from Melis’s pension and that $9663 monthly would be generated from that amount.
[21] With respect to the parties’ relative net worth, Melis’ net worth is $273,099.53. This does not include the value of her pension. Melis owns her house jointly with her sister; although her sister lives in Saskatoon and has never lived in the Ottawa house. Melis’ materials disclose an annual budget surplus of approximately of no less than $20,000.
[22] Zwanenburg’s net worth is $596,655.17. He accepts the Guy Martel figure of $18,276 as a reasonable rate of withdrawal for the purposes of this motion. Zwanenburg’s most recent financial statement discloses annual expenses of $40,998. As noted in Guy Martel’s report, both parties’ incomes will increase over time.
[23] The motion of December 1, 2017 was adjourned in order to obtain the correct interpretation of Guy Martel’s report. Counsel for the parties met with Guy Martel and he confirmed that his report calculates the potential RRSP income available for Zwanenburg on the basis that his RRSP will be completely exhausted over the course of his natural life. The report assumes that there will be no residue for Zwanenburg’s estate.
The Law
[24] Pursuant to the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) as am, entitlement to support is governed by section 15.2. The objectives of spousal support include recognizing economic disadvantages arising from the marriage or its breakdown, and related economic hardship of the spouses arising from the breakdown. The same objectives supplied variation orders pursuant to section 17(7) of the Act.
[25] In this case, Zwanenburg left his career as an engineer to live with Melis. The parties moved internationally several times during the relationship, each time support Melis’ career. On these facts, I am satisfied that Zwanenburg is entitled to support on a compensatory basis as it is clear he sacrificed his career to take care of the their child and allow Melis to further her own career.
[26] While Zwanenburg’s disability does not create an entitlement, it may form the basis for entitlement where the disability creates a situation of financial dependence. As the Court of Appeal held in Gray v. Gray, 2014 ONCA 659, 122 O.R. (3d) 337:
One of the objectives of the Divorce Act is to relieve economic hardship. Need is not measured solely to ensure a subsistence existence, but rather should be assessed through the lens of viewing marriage as an economic partnership. As stated by this court in Marinangeli v. Marinangeli (2003), 2003 CanLII 27673 (ON CA), 66 O.R. (3d) 40 at para. 74, in determining need, courts ought to be guided in part by the principle that the spouse receiving support is entitled to maintain the standard of living to which she was accustomed at the time cohabitation ceased. The analysis must consider the recipient’s ability to support herself, in light of her income and reasonable expenses.
In the case before us, Ms. Gray’s health prevents her from working. This is relevant to the assessment of her needs. As stated by the Supreme Court in Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420, “in some circumstances the law may require that a healthy party continue to support a disabled party, contractual or compensatory entitlement. Justice and consideration of fairness may demand no less.” (at para. 48).
[27] On my review of the parties’ respective financial statement, I am satisfied that Zwanenburg is also entitled to spousal support on a needs basis. Each of them have modest budgets but the payor has a surplus whereas Zwanenburg has a continuing shortfall to meet his basic needs and maintain a comparable standard of living without spousal support.
[28] The central issue on this motion is whether the unequalized portion of Melis’ pension should be included as income in calculating the quantum of support.
[29] In Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43, the Supreme Court of Canada defined the issue of double recovery at para. 34:
34 The term “double recovery” is used to describe the situation where a pension, once equalized as property, is also treated as income from which the pension-holding spouse (here the husband) must make spousal support payments. Expressed another way, upon marriage dissolution the payee spouse (here the wife) receives assets and an equalization payment that take into account the capital value of the husband’s future pension income. If she later shares in the pension income as spousal support when the pension is in pay after the husband has retired, the wife can be said to be recovering twice from the pension: first at the time of the equalization of assets and again as support from the pension income.
[30] In Boston, the Supreme Court addressed the question of the obligation of the support recipient to use their own assets to generate income after the retirement of the support payor. In this case, it is important to bear in mind that Melis’ retirement at age 59.92 has been conceded to be a material change in circumstance. At paras. 54 and 56, the Supreme Court discussed this issue:[^1]
54 I agree with Czutrin J.’s reasons in Shadbolt and Professor McLeod’s comments in annotation to that case. When a pension is dealt with by the lump-sum method, the pension-holding spouse (here the husband) must transfer real assets to the payee spouse (here the wife) in order to equalize matrimonial property. The wife can use these real assets immediately. Under a compensatory spousal support order or agreement, the wife has an obligation to use these assets in an income-producing way. She need not dedicate the equalization assets to investment immediately on receiving them; however, she must use them to generate income when the pension-holding spouse retires. The ideal would be if the payee spouse generated sufficient income or savings from her capital assets to equal the payor spouse’s pension income. In any event, the payee spouse must use the assets received on equalization to create a “pension” to provide for her future support.
56 However, where the payee spouse receives assets on equalization in exchange for a part of her former spouse’s pension entitlement, she must use those assets in a reasonable attempt to generate income at least by the time the pension starts to pay out. The reason for this requirement is clear. The payee spouse cannot save the assets that she receives upon equalization and choose instead to live on the liquidation of the payor spouse’s pension when he retires. If she were permitted to do so, the payee spouse would accumulate an estate while the payor spouse’s estate is liquidating.
[31] The Court established as a general rule that double recovery should be avoided where possible but the test to determine whether not double recovery is available was laid out by Justice Major at paras. 63 to 65:
63 How is double recovery fairly avoided? (See Shadbolt, supra, per Czutrin J., at para. 46.) It is generally unfair to allow the payee spouse to reap the benefit of the pension both as an asset and, then again, as a source of income. This is particularly true where the payee spouse receives capital assets which she then retains to grow her estate. …
64 To avoid double recovery, the court should, where practicable, focus on that portion of the payor’s income and assets that have not been part of the equalization or division of matrimonial assets when the payee spouse’s continuing need for support is shown (see Hutchison, supra, at para. 9). In this appeal, that would include the portion of the pension that was earned following the date of separation and not included in the equalization of net family property.
65 Despite these general rules, double recovery cannot always be avoided. In certain circumstances, a pension which has previously been equalized can also be viewed as a maintenance asset. Double recovery may be permitted where the payor spouse has the ability to pay, where the payee spouse has made a reasonable effort to use the equalized assets in an income-producing way and, despite this, an economic hardship from the marriage or its breakdown persists. Double recovery may also be permitted in spousal support orders/agreements based mainly on need as opposed to compensation, which is not the case in this appeal.
[32] Since Boston, there are a number of decisions that have allowed double recovery in cases where a pension has been divided and where a significant portion of the payor spouse’s pension was earned after equalization.
[33] On the evidence before me, I am satisfied that Zwanenburg has made a reasonable effort to use his equalized assets in an income producing way. His RRSP will generate $18,276 in annual income. The updated information from Guy Martel confirms that he will completely exhaust his RRSP account over his lifetime. In contrast, we do not have an updated valuation of Melis’ pension.
[34] Melis suggests that Zwanenburg could sell the matrimonial home and generate another $9,648 in annual income (roughly $800 per month). According to his financial statement, his housing costs are approximately $1,500 and these are reasonable and compare with the costs claimed by Melis. There is no evidence that he could obtain cheaper accommodation if he were to rent elsewhere. He is entitled to maintain the standard of living to which he was accustomed at the time cohabitation ceased. Melis also owns a home with her sister, although the sister does not live there.
[35] In Hickey v. Princ, 2015 ONSC 5596, 127 O.R, (3d) 356 (Div. Ct.); the Court considered the issue of whether a matrimonial home should be sold, at paras. 90 to 92:
90 Where the motion judge erred was in failing to recognize that if the Appellant were to sell her house and liquidate the rest of her assets, she would have to rent other accommodation, at considerable additional expense. We were not provided with prevailing rental rates in Gananoque, but it is a reasonable assumption that $994.04 per month would not go very far. The motion judge failed to recognize that retaining the matrimonial home as her principal residence was a form of investment itself, which relieved the Appellant from having to rent other accommodation, and which provided the additional benefit of long term capital appreciation.
91 Justice Major indicated at para. 60 of Boston that the matrimonial home might, in some circumstances, have to be sold and replaced appropriately:
Each case depends on its own facts. Generally, the payee spouse would not be expected to sell or leave the matrimonial home, particularly if there are dependent children. However, in cases where the support order is based mostly on need as opposed to compensation, different considerations apply. It is not impossible to envisage circumstances where the value of the family home has become disproportionate to the means of the parties so that equity requires that it be sold and replaced appropriately. Such considerations do not arise in this appeal as the support agreement was mainly compensatory.
92 Spousal support here is, indeed, based on need as opposed to compensation, and there are no children. However, in today’s housing market, a house worth $195,000 is a modest home, and cannot be said to be disproportionate to the means of the parties, particularly considering the Respondent’s net worth as discussed above. It is difficult to imagine that the Appellant would be able to sell and replace it with something even more modest, and in the process recover enough equity to make any meaningful difference in her ability to support herself.
[36] I find that these comments are applicable here. The net value of the matrimonial home is not so disproportionate to the means of the parties as to require its sale. Moreover, the retention of his home is a form of security, especially since his RRSP fund will be exhausted over his lifetime.
[37] While Zwanenburg argues that double recovery has become the rule rather than the exception, Boston is still good law and I am required to focus on that portion of the payor’s income and assets that have not been part of the equalization before going to step or allowing double recovery.
What is the appropriate amount of support?
[38] I have come to the conclusion that an appropriate support order can be achieved without resorting to the unequalised portion of Melis’ pension.
[39] At present (age 60), Melis’ income is $77,889 (Pension $74,949 + RRSP $2,940). In his calculations, Zwanenburg has relied on income of $8613; excluding the $9663 already equalized from the annual amount of $18,276 calculated by Guy Martel. In my view, Zwanenburg cannot shelter that part of his income; he has to make reasonable efforts use all of the equalized assets he received as part of the equalization process in an income-producing way. While I have concluded that Zwanenberg need not sell his home and I have excluded the modest interest income that he could earn on his savings, all of his RRSP income of $18,276 must be brought into play in calculating his income.
[40] With these figures, the Divorce Mate calculations produce support scenarios from $1565 SSAG Low to $2086 SSAG high. In my view, a support order in the amount of $2086, per month would be the appropriate amount and still meet his needs on an ongoing basis without drawing down on his modest savings and forcing him to sell his home.
[41] At age 67, the payor’s income will increase to $86,519 (OAS $985 + CPP $13,110* + Pension $69,484 + RRSP $2,640) and the Recipient’s income will increase to $36,847 (OAS $6,846 + CPP $4,299* + RRSP $18,276 + Dutch State Pension $4,506 + Merchant Marine Pension $2,920.) *According to Melis’ affidavit of June 12, 2016, Zwanenburg has applied for a split on her Canada Pension which has been approved. As a result, she will not be receiving the $13,110 projected and Zwanenburg a slightly higher CPP amount. The reported incomes would generate support scenarios of $1304 SSAG Low to $1739 SSAG High. By this time, given the increase in his other sources of income, I have concluded that the spousal support low-range amount of $1304 per month is the appropriate amount.
Security for Support
[42] In his Response to the Motion to Change, Zwanenburg seeks an order that Melis provide security for her support obligations. There was no evidence before the Court with respect to the existing policy of insurance; although, I was advised that it is no longer in effect and that Melis cannot obtain insurance due to health reasons. The existing Divorce Order contains this provision at para. 34:
If the wife dies without this insurance in effect, her obligation or liability to pay support will survive her death and be a first charge on her estate.
[43] That provision continues to be in effect and, subject to any further submissions from counsel, may be the only practical security available.
[44] Any spousal support payments made from the effective date of this Order will be credited to Melis.
[45] Counsel are encouraged to come to an agreement on costs. In the absence of any such agreement, they are to provide me with brief written submissions not exceeding five pages within 20 days of the release of this decision.
Mr. Justice Robert N. Beaudoin
Released: January 27, 2017
CITATION: Melis v. Zwanenburg, 2017 ONSC 613
COURT FILE NO.: FC-04-1974-1
DATE: 20170127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CAROLINE MELIS
Applicant
CORNELIS JOHANNES ZWANENBURG
Respondent
REASONS FOR decision
Beaudoin J.
Released: January 27, 2017
[^1]: See also Walts v. Walts, 2016 ONSC 4777 at para .17