Hanniman v. Hanniman, 2017 ONSC 7536
CITATION: Hanniman v. Hanniman, 2017 ONSC 7536
OTTAWA COURT FILE NO.: FC-09-2922-2
DATE: 2017/12/18
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sandra Louise Hanniman, Applicant
AND
Wayne Louis Hanniman, Respondent
BEFORE: Madam Justice R. Ryan Bell
COUNSEL:
R. Molot, Counsel for the Applicant
R. Paritzky, Counsel for the Respondent
HEARD at OTTAWA: November 2, 2017
Endorsement
Overview
[1] Wayne Hanniman moves to terminate his spousal support obligation effective December 1, 2013 and his obligation to maintain Sandra Hanniman as beneficiary of his life insurance policy. Mr. Hanniman’s obligations arise under a divorce order and the parties’ separation agreement, both of which provide that spousal support is to be paid by Mr. Hanniman from January 1, 2011 to December 31, 2020. The separation agreement also provides that spousal support may be changed if there is a material change in circumstances, and that change “may include” either party’s retirement. On July 6, 2012, following a long career with the Royal Canadian Mounted Police, Mr. Hanniman retired with full pension benefits, at the age of 56.
[2] The threshold issue is whether Mr. Hanniman’s retirement and reduction in income were a material change in circumstances sufficient to vary his spousal support and life insurance obligations. For the following reasons, I have determined that there has been no material change in circumstances.
Background
[3] Mr. Hanniman is 61 years old and Ms. Hanniman is 56. They began cohabiting in May 1987 and were married in January 1988. Twenty years later, in February 2008, they separated. When they separated, Mr. Hanniman was 52 years old and Ms. Hanniman was 46. In 2011, the year of their separation agreement, their four children were independent adults.
[4] Mr. Hanniman was the primary income earner throughout the marriage. His area of expertise with the RCMP was in security. Effective April 2002, Mr. Hanniman was assessed with a 10 per cent disability as a result of a gunshot wound. Mr. Hanniman retired in July 2012, after more than 35 years of service with the RCMP. He was then 56 years of age.
[5] The application for divorce was scheduled to proceed before McNamara J. on November 28, 2011. The parties reached a settlement and details of the agreement were put on the record. The consent order of McNamara J. requires that Mr. Hanniman pay spousal support of $3,500 per month, based on the Spousal Support Advisory Guidelines “without child support formula”, for the period between January 1, 2011 and December 31, 2020 and indexed as of January 1, 2012, with credit given for payments already made by Mr. Hanniman. Monthly support payments are currently $3,837.82.
[6] On November 30, 2011, the parties executed a separation agreement, filed with the court as a domestic contract and made an integral part of McNamara J.’s order. Paragraph 6(b) of the separation agreement sets out Mr. Hanniman’s spousal support obligation in the same terms as in McNamara J.’s order. The spousal support provisions are stated to be based on Ms. Hanniman earning an annual salary of $20,000 and Mr. Hanniman earning an annual salary of $138,273 (paragraph 6(a)). Paragraph 6(c) of the separation agreement refers to the parties’ intention to divide their net disposable income, with 57.3 per cent to Mr. Hanniman and 42.7 per cent to Ms. Hanniman.
[7] The separation agreement sets out a specific mechanism for varying spousal support. Paragraph 6(g) provides that “[s]pousal support may be changed if there is a material change in circumstances.” The change “may be … iii. either party’s retirement” (emphasis added).
[8] Mr. Hanniman’s obligation to maintain a life insurance policy naming Ms. Hanniman as an irrevocable beneficiary is set out in paragraph 7 of the separation agreement. Either party may request that the required amount of life insurance may be lowered, taking into account the amount of total support obligated to be paid under the agreement, an amending agreement or a court order, and the number of years left of the support obligation.
[9] In addition,
• Mr. Hanniman retained the matrimonial home and paid Ms. Hanniman $150,000 for her share (paragraphs 9(a) and 13(c) of the separation agreement).
• Mr. Hanniman agreed to transfer to Ms. Hanniman half of his pension entitlements accrued for the period May 1, 1987 (the date of cohabitation) to February 7, 2008 (the date of separation). As at February 7, 2008, Mr. Hanniman’s pension was valued at $712,991.06 (paragraphs 13(b) and (d)).
• Ms. Hanniman agreed to transfer half of her accumulated RRSPs to Mr. Hanniman (paragraph 13(e)).
[10] In June 2012, Mr. Hanniman moved to terminate his spousal support and life insurance obligations on the basis of a material change in circumstances as a result of his retirement effective July 6, 2012. Mr. Hanniman’s motion proceeded before McNamara J. in August 2013. McNamara J. was not persuaded that there had been a material change in circumstances that was reasonably unforeseeable at the time of the separation agreement:
I am satisfied that at the time the settlement was reached and the subsequent Agreement entered into, it could not reasonably have been within the contemplation of the parties when they agreed to a ten-year period of spousal support at a figure towards the low end of the range, that that agreement, despite its specific wording, was only in place for six or seven months … There is no doubt from that material that the whole issue of spousal support and the date of his retirement was extensively discussed …
… [I]n all the circumstances of this matter, the intention could not have been that all Mr. Hanniman had to do was retire within the next number of months and that would automatically translate into a material change sufficient to vary what had been agreed to, after extensive negotiations, some six months prior to his motions being filed (Hanniman v. Hanniman, 2013 ONSC 5560, at paras. 11-12).
[11] As at the date of the hearing before McNamara J. there had been no pension transfer to Ms. Hanniman. McNamara J. stated that “[w]hen the pension transfer does in fact take place and income begins to flow to Ms. Hanniman from that, that may change the landscape of this matter” (Hanniman, at para. 15).
[12] The pension transfer to Ms. Hanniman occurred in December 2013. The amount transferred to Ms. Hanniman’s LIRA account was $473,158.
[13] The current motion to change was commenced by Mr. Hanniman in September 2014.
Analytical Framework
[14] Subsection 17(1)(a) of the Divorce Act provides that a court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively, a support order or any provision thereof on application by either or both former spouses (R.S.C. 1985, c. 3 (2nd Supp.)).
[15] Before a variation order in respect of a spousal support order can be made, the court is required to satisfy itself that a change in the condition, means, needs or other circumstances of either former spouse has occurred since the making of the spousal support order or the last variation order made in respect of that order and, in making the variation order, the court shall take that change into consideration (Divorce Act, s. 17(4.1)).
[16] In Willick v. Willick, the Supreme Court of Canada established the analysis to be applied by the court in considering a variation application:
The approach which a court should take is to determine first, whether the conditions for variation exist and if they do exist what variation of the existing order ought to be made in light of the change in circumstances.
In deciding whether the conditions for variation exist, it is common ground that the change must be a material change of circumstances (1994 28 (SCC), [1994] 3 S.C.R. 670, at p. 688).
[17] As summarized by the Divisional Court in Hickey v. Princ at paragraph 50, a motion to change a spousal support order mandates a two-step process. First, the court must consider whether the conditions for variation exist, that is, whether there has been a change in the condition, means, needs or other circumstances of either former spouse since the order was made. The change must be “material” meaning that it must be a change that, if known at the time, would likely have resulted in different terms. The corollary to this is that if the matter which is relied on as constituting a change was known at the relevant time, it cannot be relied on as the basis for variation. The onus of proving a material change is on the party seeking variation (2015 ONSC 5596, citing Willick v. Willick and L.M.P. v. L.S., 2011 SCC 64).
[18] Second, once the court has determined that the threshold for variation has been met, the court must decide on the variation to be made, based on the objectives set out in subsection 17(7) of the Divorce Act.
[19] I agree with Mackinnon J. in Walts v. Walts that rather than asking whether the support payor’s retirement was foreseeable at the time the original order was made, it is more useful to inquire whether the income reduction due to retirement was taken into account or contemplated in the original order (2016 ONSC 4777, at paras. 11-12).
[20] In Boston v. Boston, the Supreme Court of Canada addressed the question of the obligation of the support recipient to use his or her own assets to generate income after the retirement of the support payor: under a compensatory spousal support order or agreement, the support recipient has an obligation to use the equalization assets in an income-producing way. The support recipient need not dedicate the equalization assets to investment immediately on receiving them; however, he or she must use them to generate income when the pension-holding spouse retires and the ideal would be if the recipient spouse generated sufficient income or savings from his or her capital assets to equal the payor spouse’s pension income (2001 SCC 43, at para. 54). There is no reason per se that spousal support cannot continue past the date of retirement of the pension-holding spouse: the decision as to whether to vary support depends on whether the moving party can demonstrate that there has been a material change in circumstances (Boston, at para. 61). It is important to note that in Boston, the income reduction due to retirement was conceded to be a material change in circumstances.
[21] With these general principles in mind, I turn to consider whether there has been a material change in circumstances considering Mr. Hanniman’s retirement effective July 2012 and the parties’ intention in entering into the separation agreement.
Mr. Hanniman’s Retirement
[22] Mr. Hanniman’s position is that his retirement in July 2012 was not an early retirement; rather, he retired from a lifelong career, with full pension benefits, when he was no longer able to meet the physical demands of his job. In his words, “I am long past having the physical and psychological stamina for such demanding, stressful employment, typically available in high conflict areas.” And, “[w]ith a disability fixed at 10% I cannot defend myself or anyone else in a conflict or a violent, use-of-weapon incident. It was a constituent of my employment with the RCMP and anything comparable.”
[23] I am satisfied that Mr. Hanniman’s retirement was a voluntary choice: it was not compelled by a mandatory retirement policy, nor is there evidence that Mr. Hanniman’s disability precluded him from being engaged in other gainful employment with the RCMP or otherwise.
[24] In Bullock v. Bullock, Corbett J. dealt with a situation where the payor had retired voluntarily at age 62, but was still able to work and earn an income ((2004), 2004 16949 (ON SC), 48 R.F.L. (5th) 253 (Ont. S.C.), approved by the Divisional Court in Cossette v. Cossette, 2015 ONSC 2678). Corbett J. in Bullock observed:
Many people dream of retiring “early”, although there is not a set age at which people today expect to cease working. Many successful people find that they can afford to stop work before they reach the age of 65. Others continue on well into their seventies and even longer. The legal question for this case, then, is not whether Ronald should retire at age 62, but whether this personal choice should be viewed as a “material change of circumstances” for the purposes of payment of spousal support.
In my view it should not.
There is no suggestion in Boston that the payor spouse had chosen to retire early. There was no argument that the payor spouse had continued earning capacity and that income ought to be imputed to him. In my view, voluntary retirement at age 62 is not a basis for finding a material change in circumstances. A support payor cannot choose to be voluntarily underemployed, whether by retirement or otherwise, and thereby avoid his or her spousal support payment obligations. [Footnotes omitted.]
[25] Evidence that a payor voluntarily retired in order to frustrate a support order is an important fact militating against a finding of a material change in circumstances (Hickey, at para. 59, citing Teeple v. Teeple (1999), 1999 3127 (ON CA), 124 O.A.C. 294 (C.A.)). Although I do not find that Mr. Hanniman chose to retire to avoid paying spousal support, this does not give rise to an automatic right on the part of Mr. Hanniman to vary spousal support (Hickey, at para. 60). Nor does the inquiry end with the fact that Mr. Hanniman had earned the right to a full pension. Contractual eligibility to retire is not sufficient on its own to establish a material change in circumstances (Walts, at para. 21, referring to Cossette). The court must still consider Mr. Hanniman’s ability to pay support, which includes a consideration of his capacity to earn income either from the job he chose to leave or from other employment, having regard to his circumstances (Hickey, at paras. 60, 74).
[26] There is no evidence that Mr. Hanniman was forced to leave his position with the RCMP for health reasons or any other reason. There is no evidence one way or the other as to other employment options that may have been available to him at the RCMP. His health was clearly a factor Mr. Hanniman considered in choosing to retire; however, I am not persuaded that he did not have the capacity to continue working and earning income. The evidence is to the contrary: for the past several years, Mr. Hanniman has been teaching part-time at the University of Ottawa. While Mr. Hanniman states in his affidavit that he could probably find part-time employment in Ottawa as a security guard (with the caveat that such work is physically demanding, pays minimum wage and “is hardly a reasonable option at this stage of the game”), Mr. Hanniman did not provide the court with evidence of any type of job search for other available, suitable positions.
The Separation Agreement and the Intention of the Parties
[27] Both the order of McNamara J. and the separation agreement provide that Mr. Hanniman is to pay spousal support of $3,500 per month, commencing January 2011, for a period of ten years and indexed after the first year. Paragraph 6(g) of the separation agreement provides a specific mechanism for varying spousal support – either party’s retirement “may” represent a material change in circumstances but it does not automatically amount to such change.
[28] Mr. Hanniman’s position is that the parties specifically contemplated Mr. Hanniman’s retirement when they enumerated retirement as a circumstance that may constitute a material change in circumstances. He argues that the parties did not guarantee that spousal support would be paid for a fixed ten-year period or that Mr. Hanniman’s retirement could not take place before a certain date; Mr. Hanniman understood that he could retire and that his retirement would not be excluded as a ground of variation.
[29] For her part, Ms. Hanniman argues that the reference to retirement in paragraph 6(g) of the separation agreement can only refer to a forced retirement on a mandatory basis. Any other interpretation cannot co-exist with what her counsel submits is a fixed ten-year time frame for the payment of spousal support.
[30] Paragraph 6(b) of the separation agreement provides:
For a period of ten (10) years, commencing January 1, 2011, ending December 31, 2020 and, indexed as of January 1, 2012, Wayne will pay to Sandra spousal support in the amount of $3,500 per month, based on the SSAG “without child support formula”, with credits being given for payments already made by Wayne.
[31] Paragraph 6(b) of the separation agreement does not refer to a “fixed” ten-year time frame for the payment of spousal support. In my view, it does not do so because retirement, pursuant to paragraph 6(g) of the separation agreement, opens the door for either side to apply to vary support on the basis that there has been a material change in circumstances. The change must be one that, if known at the time of the agreement, would likely have resulted in different terms. The court is required to look at all the circumstances in determining what the parties intended in reaching their agreement. On the previous motion to change, McNamara J. concluded that in the circumstances, the parties’ intention could not have been that all Mr. Hanniman had to do was retire within the next number of months and that would automatically translate into a material change sufficient to vary what had been agreed to, after extensive negotiations, some six months prior to Mr. Hanniman’s motions being filed (Hanniman, at para. 12).
[32] In my view, in determining the parties’ intention in entering into the separation agreement, the relevant circumstances are these:
• The parties were married for 20 years and cohabited for 21 years. This was a long marriage in which Mr. Hanniman was the primary income earner.
• The discrepancy in the parties’ respective incomes at the time of separation is reflected in the agreement: at the time of the separation agreement, Mr. Hanniman’s income was $138,273 and Ms. Hanniman’s income was $20,000.
• Mr. Hanniman’s 2016 income tax return discloses employment income of $25,667 (from his teaching position at the University of Ottawa) and pension and superannuation income of $71,516, totaling approximately $96,000. He also received rental income of $19,200 against which he offset $31,687 in expenses, taxes and insurance. I have found, based on the record, that at the time of his retirement in July 2012, Mr. Hanniman had the capacity to continue working and earn income.
• Ms. Hanniman remains heavily dependent on the spousal support payments: 57 per cent of her monthly income is comprised of the spousal support payment. Ms. Hanniman’s annual employment income is approximately $15,500. She earns an additional $1,575 per month by taking in boarders. There is no persuasive evidence before me that Ms. Hanniman is underemployed.
• Ms. Hanniman’s evidence is that she was prepared to forego her claim for indeterminate spousal support in exchange for a fixed term of ten years to permit her to plan her financial affairs.
• The parties agreed to a ten-year period of spousal support at a figure “towards the low end of the range” (Hanniman, at para. 11).
• There were extensive negotiations surrounding the separation agreement (Hanniman, at para. 12).
• There is no provision in the agreement providing for an automatic review of the spousal support obligation at Mr. Hanniman’s retirement. One could infer that the absence of such a provision meant that the parties intended spousal support to continue at the prescribed amount until December 2020, unless a material change in the condition, means, needs or other circumstances of either former spouse is shown.
• The separation agreement provides that after the first year, the spousal support payment is to be indexed. One could infer that by including an indexing provision, the parties intended spousal support to continue for the ten-year period.
• Mr. Hanniman’s retirement was voluntary.
• The pension transfer to Ms. Hanniman occurred in December 2013.
[33] McNamara J. determined that it was not within the parties’ contemplation that the agreement would be in place for only six or seven months until Mr. Hanniman retired in July 2012. Nor, in my view, was it within the parties’ contemplation that the agreement would be in place only until December 2013 when the pension transfer occurred. Considering the relevant circumstances, I find that the parties intended that Ms. Hanniman would receive spousal support for a limited period of ten years, in an amount at the low end of the range, so as to allow her to plan her financial affairs. The parties did not intend for their agreement to come to an end following Mr. Hanniman’s voluntary retirement at the age of 56 and at the time of the pension transfer.
[34] Mr. Hanniman submits that it is unfair to allow double recovery by way of continued spousal support payments to Ms. Hanniman, drawn on his share of his pension income, when she has already received her half of that pension.
[35] In Boston, the Supreme Court of Canada defined double recovery as follows:
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 play 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 (at para. 34).
[36] As a general rule, double recovery should be avoided where possible. As the Court stated in Boston, it is generally unfair to allow the payee spouse to reap the benefit of the pension both as an asset and as a source of income. 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’s continuing need for support is shown (paras. 63-64).
[37] However, the Supreme Court of Canada also acknowledged that double recovery cannot always be avoided and may be permitted in limited circumstances:
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 … (Boston, at para. 65).
[38] In this case, Ms. Hanniman has demonstrated a continued need for support arising from the marriage breakdown. I have found that the parties intended that Ms. Hanniman would receive spousal support for a limited period of ten years, in an amount at the low end of the range so as to allow her to plan her financial affairs. I have also determined that at the time of his voluntary retirement, Mr. Hanniman had the capacity to continue to earn income. In all of these circumstances, I find that this is one of those cases where double recovery is permitted.
[39] The separation agreement is a domestic contract and should be accorded significant weight. The submissions on behalf of Mr. Hanniman emphasized that he was unrepresented before McNamara J. at the time of the divorce order, in the negotiation of the separation agreement, and again on the first motion to change. I note the following: first, the divorce order was on consent and second, Mr. Hanniman confirmed in paragraph 31 of the separation agreement that he was informed of and had the opportunity to seek legal advice, but chose to proceed unrepresented. The parties must take responsibility for the contract they executed. Mr. Hanniman contracted to pay spousal support at a certain amount for a ten-year period. His retirement was not a significant departure from the range of reasonable outcomes anticipated by the parties at the time of the final order and the separation agreement, nor was Ms. Hanniman’s continued need for support.
Disposition
[40] In summary, I am not satisfied on the evidence that there has been a material change in circumstances. In my view, the order of McNamara J. and the separation agreement still reflect the intentions of the parties. Mr. Hanniman’s motion is dismissed.
[41] Costs are awarded to Ms. Hanniman. If the parties are unable to agree on the quantum of costs, written costs submissions of no more than three pages from each party, exclusive of attachments, may be provided to me within 15 days of the release of this endorsement.
Madam Justice R. Ryan Bell
Date: December 18, 2017
CITATION: Hanniman v. Hanniman, 2017 ONSC 7536 OTTAWA COURT FILE NO.: FC-09-2922-2
DATE: 2017/12/18
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Sandra Louise Hanniman, Applicant
AND
Wayne Louis Hanniman, Respondent
BEFORE: Madam Justice R. Ryan Bell
COUNSEL: R. Molot, Counsel for the Applicant
R. Paritzky, Counsel for the Respondent
ENDORSEMENT
Madam Justice Ryan Bell
Released: December 18, 2017