BRACEBRIDGE COURT FILE NO.: FC-18-187-00 DATE: 20190524 SUPERIOR COURT OF JUSTICE – ONTARIO – FAMILY COURT
RE: Paul Bastedo, Applicant -and- Maxine Bastedo, Respondent
BEFORE: The Honourable Madam Justice M.E. Vallee
COUNSEL: David Winnitoy, for the Applicant Maxine Bastedo, Self-Represented
HEARD: May 13, 14, 15, 16 and 17, 2019
Endorsement
Introduction
1The Applicant, Dr. Paul Bastedo, who retired at the end of 2018, brings a Motion to Change the Order of Justice G. Speigel, dated December 3, 1996. He requests an order to terminate spousal support, which is currently $2,197.13, and the related life insurance obligation. The Respondent, Ms. Maxine Bastedo, opposes this motion. She states that she should receive spousal support until she dies. If Dr. Bastedo pre-deceases her, his estate should continue to pay the support 1.
Uncontested Facts
2The parties were married in 1977. At that time, Ms. Bastedo was a teacher. Dr. Bastedo was a family doctor. They had four children between 1978 and 1994. After the first child’s birth, Ms. Bastedo stayed home to look after the family. The parties were married for almost 17 years.
3The parties separated in 1994 when they were both 43 years old. They had counsel to help them resolve their legal issues. A final order was made on consent on December 3, 1996. Among other things, it required Dr. Bastedo to pay monthly spousal support of $1,500 with indexing. The order is silent as to duration. There is no requirement for exchange of financial information. From 1996 to 2018, neither party sought financial information from the other. Neither party brought a Motion to Change the order.
4After separation, Ms. Bastedo resumed her teaching career. She did not advise Dr. Bastedo that she had returned to work. Her earnings increased steadily from $50,000 to $94,000. She retired on August 31, 2015 when she was 65. Dr. Bastedo retired from his practice at the end of 2018 when he was 68.
5Prior to the Order, from October 1994 to December 31, 1996, Dr. Bastedo paid spousal support of $800 per month which totals $21,600. From January 1997 to present, Dr. Bastedo has paid an increasing amount of spousal support in accordance with the order. From January 1997 to present, Dr. Bastedo has paid 269 support payments totalling $403,500, exclusive of indexing. Assuming an indexing factor of 2%, the amount paid approaches $500,000. Ms. Bastedo never had to bring a motion against Dr. Bastedo for failure to comply with the order. Dr. Bastedo has paid spousal support for 25 years.
6The parties’ respective assets are set out accurately in the Net Family Property Statement. Ms. Bastedo’s assets are based on the disclosure that she provided. Dr. Bastedo’s assets total $2,088,810. Hers total $1,643,717 2.
7The value of Ms. Bastedo’s pension increased between 1994 and 2015. Her bank savings, RRSPs and TFSAs increased by $297,882.96.
8According to her valuation, Ms. Bastedo’s residence is worth $1,028,000. There is no mortgage. The home is 3,300 square feet of finished space. She lives there alone. The property is 163 acres which is used strictly for recreational purposes. She has no financial earnings from the land. She has not severed any lots. She has never had any farm or residential tenants 3.
9Ms. Bastedo has no current intention to downsize. She will likely sell the property at some time in the future for health or other reasons.
10Ms. Bastedo’s single largest expense on her February 2019 financial statement is property maintenance of $3,050 per month. This represents 35% of her monthly budget.
11Since her home is worth $1,028,000, when she elects to downsize, if she purchases a home or condo for $400,000, she will have a sizable capital amount that she could invest for the future.
12Ms. Bastedo’s 2017 and 2018 tax returns show that she has not withdrawn or disposed of any capital assets in order to support her lifestyle or expenses.
13Ms. Bastedo stated that if Dr. Bastedo has no source of revenue or income, he will have to be creative to pay any future spousal support obligation. He has fixed retirement savings.
Legal Issue to be Determined
14Has there been a material change in circumstances?
15Should the spousal support payable by Dr. Bastedo be terminated now that he is retired?
Applicable Law
16Ms. Bastedo provided no case law nor did she refer to legislation. Dr. Bastedo relies on the legislation and caselaw set out below.
17Section 17 of the Divorce Act allows the court to make an order varying, rescinding or suspending either retroactively or prospectively, a support order on application by either spouse.
Material Change
18The threshold test for making a variation order is set out in s. 17(4.1) of the Divorce Act. Before making a variation, the court must be satisfied that a change in the condition, means, needs or other circumstances of either spouse has occurred since the making of the order. The focus of the analysis is on the prior order and the circumstances in which it was made.
19A change in circumstances is a change that, if known at the time, would likely have resulted in different terms. The court should not consider the correctness of the prior order. (See L.M.P. v. L.S., 2011 SCC 64, paras 30 to 33, quoting Willick v. Willick, [1994] 3 S.C.R. 670)
20The court must determine whether the change was actually contemplated by the parties when the prior order was made. The question of whether the change was reasonably foreseeable is not relevant. (See Dedes v. Dedes, 2015 BCCA 194, para 25)
21Even where an order stated that support was payable until the wife died, the husband’s lower income and the wife’s lack of self-sufficiency constituted a material change. (See Lemieux v. Lemieux, 2014 ONSC 3590)
22Retirement is a material change in circumstances. Where retirement was not considered in fixing the amount of support in the operative order and the parties’ income and assets were equal on retirement, payment of spousal support may be terminated. (See Schulstad v. Schulstad, 2017 ONCA 95, para 12)
23Retirement from a job that generated more than $1,000,000 of income was a material change sufficient to trigger a reduction or termination in spousal support. (See Derbyshire v. Derbyshire, 2017 ONCA 809, para 5)
Variation
24Once a material change has been established, the court must determine the appropriate amount of support in light of the material change and having regard to the objective set out in s. 17(7) of the Divorce Act:
A variation order varying a spousal support order should:
(a) Recognize any economic advantages or disadvantages to the former spouse arising from the marriage or its breakdown;
(b) Apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage
(c) Relieve any economic hardship of the former spouses arising from the breakdown of the marriage: and
(d) In so far as practicable, promote the economic self-sufficient of each former spouse within a reasonable period of time.
25The recipient’s need, the payor’s ability to pay, and the ability of the recipient to support him/herself in light of employment and/or use of assets to produce income are also factors that should be considered on a variation motion. (See Boudreau v. Boudreau, 2015 ONSC 7956)
26If a pension stream acquired after separation is not enough to provide adequate support, a dependent may be expected to convert capital into income so that her need can be determined fairly. (See Boudreau, para 15)
27A recipient spouse cannot harbour an asset that does not generate income while the payor spouse liquidates his assets to continue to pay support. In these circumstances, the wife had not demonstrated a need for spousal support because she had not sold shares that provided no interest or dividends. At a certain point, there is an onus on a spouse to realize on financial assets. (See Sullivan v. Sullivan, 2012 NBBR 262, para 30)
Duration
28The Spousal Support Advisory Guidelines (SSAGs) state that on a 17-year marriage, the maximum duration for spousal support payment is the length of the marriage.
29In circumstances where the parties separated after 18 years of marriage, the payor’s employment was terminated when he was 58 and he had paid spousal support for 14 years, support was terminated partly on the basis that the SSAGs state that for an 18-year marriage, spousal support may be paid for 9 to 18 years. (See Naglier v. Mussman, 2012 ONSC 912)
30A party may still have an obligation to support the other; however, the other has a duty to become self-sufficient and not treat the spousal support as a perpetual entitlement. (See Lemieux v. Lemieux, 2014 ONSC 3590, para 28)
Credibility Findings
31Dr. Bastedo was a credible witness. The documentary evidence supported his testimony regarding the termination issue.
32On cross-examination, Ms. Bastedo was at times evasive. She confirmed that her investments totalled $281,000. Later a suggestion was put to her that her financial circumstances are much better now than they were on the date of separation. She did not have assets of anywhere near $281,000 in 1996. Ms. Bastedo’s reply was that she was not certain that she has assets of $281,000, despite the fact that her sworn financial statement shows them. A suggestion was put to her that since her retirement in 2015, she has not needed to liquidate any of her savings. Ms. Bastedo stated that this was not correct. Nevertheless, her 2017 and 2018 income tax returns show no taxable guaranteed investment certificates, no dividends nor interest. Her Notices of Assessment for 2016 and 2015 show modest amounts of taxable interest income ($76 in 2016 and $309 in 2015).
33A suggestion was put to Ms. Bastedo that she knew that her income would drop by $60,000 upon retirement. She replied that she knew it would drop but she didn’t know the amount. Nevertheless, the retirement statement that she provided shows that her average salary from her last five working years was $94,093 and her pension entitlement was $33,871.
34Ms. Bastedo alleged that Dr. Bastedo had registered a mortgage on her property without her knowledge in order to finance the purchase of another property with his second wife. This is a very serious fraud allegation which logically extends beyond Dr. Bastedo to the bank that allegedly lent Dr. Bastedo the money and the lawyer who allegedly registered the mortgage on Ms. Bastedo’s property without her consent. She made this allegation in an attempt to undermine Dr. Bastedo’s credibility. Ms. Bastedo did not produce an abstract of title or a mortgage document to support her fraud allegation. As a result, this diminishes her own credibility.
Has there been a material change in circumstances?
Ms. Bastedo’s Position
35Ms. Bastedo does not dispute that Dr. Bastedo was entitled to retire at 68. She retired at 65. She also does not dispute that he will have no income from OHIP going forward. He will have to rely on his investments to pay his own expenses as well as pay support to her.
Analysis
36I find that Dr. Bastedo’s retirement and the corresponding change in his income was not contemplated in 1996 when Speigel J’s order was made. If it had been, the order likely would have resulted in different terms. If the parties had known that Ms. Bastedo would return to work, accumulate assets and both of them would retire with assets of the same value, a different order might have been made. Terms would likely have been included to address financial disclosure and Dr. Bastedo’s spousal support obligation when he retired.
37I am satisfied that Dr. Bastedo’s retirement from his medical practice, where he earned over $300,000 when he was working full time, and his corresponding loss of that income constitutes a material change in circumstances.
Should the spousal support payable by Dr. Bastedo be terminated now that he is retired?
Ms. Bastedo’s Position
38Ms. Bastedo’s position focused almost exclusively on the difficulties that she experienced around the time that the parties separated. Dr. Bastedo arranged an intervention and tried unsuccessfully to have her admitted to a psychiatric facility. Regarding the separation, Ms. Bastedo stated that she “didn’t see it coming”. He left her with four young children between the ages of 9 and 15 and, initially, inadequate income to pay for expenses. She had to scrimp and live frugally. The children had part-time jobs and contributed to expenses.
39Shortly after separation, Dr. Bastedo had a new partner. They bought a house together and lived a nice life. This was very hard for her to comprehend. She suffered from significant emotional pain.
40Ms. Bastedo stated that she returned to work out of financial necessity. She was eventually able to return to full time teaching. Her salary in the last few years was $94,000. She has a teachers’ pension which provides income of $38,121 per year.
41Ms. Bastedo stated that even though Dr. Bastedo is retired now, given all of the difficulties that she and the children went through after separation, he should continue to pay spousal support. If he passes away before she does, his estate should continue to make the payments.
Analysis
42Before making a variation order, I must be satisfied that a change in the condition, means, needs or other circumstances of either spouse has occurred since the making of the order.
43As a result of Dr. Bastedo’s retirement, he now has to live on his savings. He does not have a pension. Ms. Bastedo does have a pension which pays her income of $2,477.60 per month. Dr. Bastedo’s loss of his source of income constitutes a change in his means.
44Mr. J. Jeffery, an actuary, was qualified as an expert to provide opinion evidence as to the current value of Ms. Bastedo’s pension. He explained that the Ontario Teachers’ Pension Plan will provide a valuation only for equalization purposes. It will not provide one for other circumstances. Mr. Jeffery stated that in his calculations, he used the same mortality tables that the pension plan would use – the standard mortality rates of the CPM2014 Mortality Table Scale B. He stated that a 100% indexed interest discount rate is 1.2% in the first 10 years and 1.3% after the tenth year. A non-indexed interest discount rate is 2.4% in the first 10 years and 2.9% after the tenth year. Ms. Bastedo had 17.9989 years of accredited service and average earnings of $94,973. Her pension pays her $2,477 which takes into account that she receives benefits from Canada Pension Plan. Mr. Jeffery stated that as of May 13, 2019, the gross value of Ms. Bastedo’s pension is $570,631.
45Mr. Jeffery noted that Ms. Bastedo is now 68.4 years old. Her remaining life expectancy is 21 years when she will reach 89.4. Over the 21 years, she will receive $659,600 from her pension, a number which does not include indexing. If there is a 2% increase each year, which has been typical in the past, she will receive $809,800 gross.
46Assuming that Dr. Bastedo has registered investments of $1,600,000, Ms. Bastedo’s pension is worth $570,631 and they both live to the same age, Mr. Jeffery stated that Ms. Bastedo will have no risk of running out of money. Her pension is guaranteed. If Dr. Bastedo liquidates his assets at the same percentage rate, he will run out of money in 21 years. Mr. Jeffery agreed that an argument could be made that Ms. Bastedo is in a much better financial position now than she was on the date of separation.
47Ms. Bastedo did not agree with Mr. Jeffery’s calculations; however, she did not provide any opposing expert evidence. I accept Mr. Jeffery’s evidence regarding the value of her pension.
48As noted above, Ms. Bastedo lives alone in a very large house (where she raised the four children) on 163 acres that is worth $1,028,000, according to her appraisal. It is mortgage free. She stated that she does not intend to sell the house because she wants to have a place for her children and grandchildren to visit. Her biggest monthly expense is $3,050 for repairs and maintenance which is approximately 35% of her budget. If she downsized and purchased a condo for $400,000, she would have a sizeable capital amount to invest for the future.
49As noted above in Boudreau, if a pension stream acquired after separation is not enough to provide adequate support, a dependent may be expected to convert capital into income so that her need can be determined fairly. In this matter, the parties were married for 30 years. At separation, they were 51 and 50 years old. They resolved their issues on consent in 2006 which resulted in an order. He was to retire in 2016. He had health issues and had reached the maximum years of pensionable service. She had not used her equalized assets in a reasonable income producing way. She had equity in her residence. Even though it was not readily accessible to her, she was able to accrue it for her future. It would generate an income stream from an asset that had been equalized years earlier.
50Ms. Bastedo agreed that if one considered her income of $48,000 (CPP, OAS, pension but no spousal support), it would be $4,021 per month. If $5,589 (her monthly expenses of $8,369 less repairs and maintenance of $3,050) was subtracted, the shortfall would be $1,568. If her registered savings of $297,892 (a lower amount than indicated on her financial statement) was divided by the shortfall of $1,568, the result would be 189. If 189 months were divided by 12, the result would be 15.75 years. With her current age of 68, she would not run out of savings or investments until she was 83. Only at that point would she have to turn to the value of her house, $1,028,000 presently, for income 4.
51As noted in Lemieux, a support recipient has a duty to become self-sufficient and not treat spousal support as a perpetual entitlement. To Ms. Bastedo’s credit, she returned to teaching full time, continued to work until she qualified for a pension and saved $280,000, most of which is invested. She did become self-sufficient.
52With respect to the factors set out in the Divorce Act, s. 17(4.1), I find that there has been a change in the means and needs of the parties has occurred since the 1996 order was made. Dr. Bastedo’s means and Ms. Bastedo’s needs have changed. She does not require on-going spousal support to meet her financial needs.
53With respect to the objectives of variation set out in s. 17(7) of the Divorce Act, specifically 17(7)(a), there is no doubt that Ms. Bastedo suffered economic disadvantages arising from the marriage breakdown. She was essentially unemployed during the years that she stayed home to raise the children. Had she worked during that time, she would have earned additional accredited service and likely would be receiving a larger pension income.
54The SSAGs state that on a 17-year marriage, the range for duration of support is 17 years. Dr. Bastedo has paid support for 25 years, eight years longer than required. Determining the total amount of spousal support paid for the last eight years is difficult because the Family Responsibility Office statement shows the support paid starting in 2000 as an amount combined with child support. In 2006, the statement shows that Dr. Bastedo was paying $1,800 which appears to be only spousal support. Those payments have increased each year. The current payment is $2,197. Using only $1,500, the original amount of support in the 1996 order, and multiplying that by eight years, Ms. Bastedo received $144,000. The amount that she actually received for the past eight years is considerably more.
55I find that Dr. Bastedo’s payment of spousal support for eight years in addition to the length of the marriage addresses the remaining three objectives of a variation order for support of a former spouse, namely:
(a) It apportioned between them the financial consequences arising from the care of children over and above any obligation for the support of the children;
(b) It relieved any of their economic hardship from the marriage breakdown; and
(c) It promoted Ms. Bastedo’s economic self-sufficiency.
56Given all of the above, I find that Dr. Bastedo’s spousal support obligation should be terminated. The question is when should the support be terminated.
Notice
57Dr. Bastedo testified that he wanted to retire. He was having vision problems. In 2018, he worked reduced hours. His earnings dropped accordingly. He arranged to sell his practice. The transaction was set to close on December 3, 2018. He entered into a locum arrangement with the doctor who was purchasing the practice for that doctor to cover the practice from December 3, 2018 to December 31, 2018.
58Dr. Bastedo advised Ms. Bastedo in August 2018 that he would be retiring in December 2018 – five months’ notice. Dr. Bastedo states that until the locum agreement was signed and he had a deal to sell his practice to a new doctor, he could not say for certain that he was retiring. The court has generally disapproved of support payors’ bringing motions to change for orders to terminate in advance of actual retirement. (See Schulstad) Dr. Bastedo issued his Motion to Change on September 7, 2018, which was appropriate. He requested that spousal support be reduced on a step-down basis from August 1, 2018 to December 31, 2018.
59Agreements often take some time to negotiate. Dr. Bastedo was likely involved in negotiations regarding the locum agreement and the sale of his practice before the documents were executed. At the beginning of 2018, he could have advised Ms. Bastedo of the fact that he was going to work reduced hours in 2018 with a view toward retirement at the end of the year at which point he would request termination of spousal support. He could have then advised her that he was intending to sell his practice and was looking for a purchaser. He could also have subsequently advised her that he was negotiating with a purchaser. He could have given her one years’ notice that he would be asking for an order that the spousal support, which she considered indefinite, rightly or wrongly, terminate. (See Schulstad where the payor provided two years’ notice.) There is an obvious difference between providing notice and actually commencing a Motion to Change.
60Because she had only four months’ notice and taking into account that she has received on-going support for a further five months up to May, 2019, Dr. Bastedo shall pay spousal support to Ms. Bastedo for an additional three months. Dr. Bastedo’s spousal support obligation shall terminate after the August 2019 payment. Similarly, his obligation to maintain life insurance related to the support obligation shall also terminate then.
Costs
61If counsel cannot agree on costs, I will receive written submissions on a 14-day turnaround, commencing with the Applicant within three weeks of the date of release of this endorsement, followed by the Respondent’s responding submissions, within a further two weeks. Cost submissions shall be no more than 4 pages in length (14 pt font size, regular 1 inch margins, 1.5 spacing), exclusive of any costs outline or offers to settle. All costs submissions shall be delivered via email through my assistant at BarrieJudSec@ontario.ca. If no submissions are received within 28 days from the above date, the issue of costs will be deemed to have been settled between the parties.
Vallee J.
Released: May 24, 2019
Footnotes
Footnotes
- At the beginning of this trial, as set out in her Response to Motion to Change, Ms. Bastedo requested an order for additional retroactive spousal support back to 1996 to be satisfied by a lump sum payment of $150,000, payment of spousal support of $10,000 per month commencing on June 1, 2019 and an order that this support continue indefinitely. In her closing submissions, she stated that she had changed her position. She requested only that the 1996 Order be “upheld”, in other words, that spousal support not terminate.
- This includes Ms. Bastedo’s teacher’s pension valued at $570,631. She does not agree with the valuation.
- She states that the property is not suitable for farming.
- Given her life expectancy of 89, she would have $171,333 ($14,277 per month) per year to finance her expenses, assuming that the house does not rise in value or if it is sold for that amount and the money invested earns no interest.