Court File and Parties

COURT FILE NO.: FC-03-FS36260 DATE: 2019-07-24 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Elizabeth Ferguson, Applicant AND: Ronald Ferguson, Respondent

BEFORE: Mr. Justice R. MacLeod

COUNSEL: Applicant, Appearing in Person Matthew Kelly, Counsel for the Respondent

HEARD: July 10, 2019

Endorsement

[1] This is a motion to change the final order of Justice Hambly dated March 20, 2008, brought by the husband on the eve of his full retirement from employment. The husband seeks termination of his spousal support obligation.

[2] Mr. Matthew Kelly represented the husband. The wife appeared in person without counsel.

[3] Argument based on the affidavit evidence was heard on July 10, 2019.

Disposition

[4] For the reasons outlined below, the spousal support payable by the Applicant shall be reduced from $2,700 monthly to $1,200 monthly commencing September 1, 2019.

Facts

[5] The wife, Elizabeth Ferguson, was born on August 17, 1958. She is currently 60 years of age. The husband, Ronald Ferguson, was born on August 14, 1954. He will turn 65 on August 14, 2019.

[6] The parties were married for 22 years. They have been separated for 16 years.

[7] The existing order requires the husband to pay the wife spousal support of $2,700 monthly. In 2007, the husband was earning $80,833 annually while the wife was earning $7,335 annually.

[8] At the trial in 2008, evidence was given by the wife’s doctor to the effect that she could work, at most, 2 to 3 hours per day for 2 to 3 days per week. As a result, it was assumed that the wife could generate an income of $3,429 per year on an ongoing basis.

[9] In actuality, the wife has been unable to work, for medical reasons, since 2011. Her sole source of income, other than spousal support, is CPP disability benefits in the amount of $851 monthly.

[10] The husband acknowledges that the wife is disabled and unemployable.

[11] At separation, the wife received an equal share of the husband’s government pension accrued to that date in the amount of $78,250.

[12] The wife’s financial statement indicates that she has savings and investments of approximately $117,000. These are registered investments which will attract tax consequences upon liquidation. Her debts consist of a TD Canada Trust line of credit of approximately $9,000, a Walmart MasterCard of approximately $2,100 and a car loan of $16,600.

[13] The wife has no other significant assets.

[14] The husband resides in a condominium in Etobicoke that is owned solely by his current wife, Dorothy Ferguson. He has savings of $9,800. He has a Toronto Dominion line of credit for $5,000. He has no other debt.

[15] Dorothy Ferguson, the sole owner of the condominium, is 45 years old. She retired from employment approximately two years ago. No other information concerning her financial circumstances was provided. The husband's financial statement indicates that Dorothy Ferguson earns no income, has no pension, and contributes nothing to the expenses associated with the condominium.

[16] On March 1, 2016, the husband accepted early retirement from his position with the Ontario Ministry of Children and Youth Services. At the time of his retirement, he was earning an annual salary of approximately $82,000 annually.

[17] Since taking early retirement, the husband has been receiving gross monthly pension benefits of $3,234 monthly. This includes an early retirement bridge benefit which will be payable until his 65th birthday.

[18] Appropriately, he has continued to pay the existing spousal support amount of $2,700 monthly since his retirement. His financial statement indicates that he liquidated the entirety of his RRSP portfolio to provide a cash fund out of which to satisfy his support obligation.

[19] As of August 2019, the husband’s 65th birthday, his gross pension income will be $30,642 per annum. He will also receive CPP benefits totalling $7,848 annually.

[20] In total, the husband contributed to his pension for 35 years, 20 years before separation and 15 years after. No evidence was provided regarding the proportion of the total pension income resulting from the 15 years of service post-separation.

Statutes

Section 17 of the Divorce Act (R.S.C., 1985, c. 3 (2nd Supp.))

Order for variation, rescission or suspension

17 (1) A court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively, (a) a support order or any provision thereof on application by either or both former spouses; or (b) a custody order or any provision thereof on application by either or both former spouses or by any other person.

(3) The court may include in a variation order any provision that under this Act could have been included in the order in respect of which the variation order is sought.

Factors for spousal support order

(4.1) Before the court makes a variation order in respect of a spousal support order, the court shall 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.

Objectives of variation order varying spousal support order

(7) A variation order varying a spousal support order should (a) recognize any economic advantages or disadvantages to the former spouses 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-sufficiency of each former spouse within a reasonable period of time.

Position of the Husband

[21] The husband asserts that his pending full retirement at age 65 constitutes a material change in circumstance sufficient to vary the terms of the March 20, 2008, final order.

[22] He seeks termination of his support obligation because: a. Post-retirement he will not have the ability to pay the ongoing spousal support amount; b. $2,700 monthly represents 84% of the husband’s gross income post-retirement; c. not all of his gross income should be included for support calculations given that the wife received a portion of his employment pension at separation. To include his entire pension income would constitute double-dipping; d. the wife has not produced any evidence as to how she has used or intends to use, her savings to generate income to support herself in the future; e. the wife should be required to liquidate her capital to make ends meet, particularly in the years between age 60 and age 65 when she will be eligible for CPP benefits.

Position of the Wife

[23] The wife simply and forthrightly says that she cannot afford to thrive if there is any reduction in her support.

Analysis

Does husband’s retirement constitute a basis for a change in the spousal support?

[24] The case law is clear that retirement, in most instances, results in a reduction in income for the payor sufficient to constitute a material change in circumstances and open the door to a variation. If the payor is found to have unreasonably retired early, the court may find no material change in circumstance or income may be imputed to the payor.

[25] Professors Carol Rogerson and Rollie Thompson, authors of the Spousal Support Advisory Guidelines: The Revised User’s Guide (“RUG”), note that “early” retirement is retirement on a reduced pension or a retirement on a full or unreduced pension before 65 years of age, in the absence of health issues or other special circumstances. (See: Spousal Support Advisory Guidelines: The Revised User’s Guide, ch. 19 (a), p.101).

[26] Here, the husband voluntarily retired earlier than his 65th birthday but continued to pay the ordered support despite his reduced income. Had he applied for a reduction or termination immediately upon his retirement, his decision to retire early would have received heavy scrutiny, and his request would almost certainly have been denied.

[27] However, he seeks a variation based on his normal retirement date at age 65 and with a full, unreduced pension.

[28] The parties have always known that the husband would eventually retire. The parties went through the process of valuing the husband's pension after separation and, inherent in that process, is the notion of estimating a retirement date.

[29] I was not provided with evidence as to what retirement date was used to calculate the wife’s half-share of the pension at separation, but it is highly unlikely that the pension was valued based on retirement later than at age 65. This is not a case, therefore, where the payor has retired earlier than anticipated at separation when equalizing the pension. The wife received fair value for her share of the husband’s pension.

[30] This cannot be described as an “early” retirement case. It is not unreasonable for a career government employee with 35 years of service to retire at age 65 despite the apparent financial need of his former spouse.

[31] Therefore, the reduction in the husband’s income brought about by his full retirement does constitute a change in his condition, means, needs or other circumstances sufficient to allow for a variation of the terms of the order of Justice Hambly, dated March 20, 2008.

The Appropriate Variation

[32] Variation is neither an appeal nor a hearing de novo. The court is limited in its order to whatever variation is justified by the material change in circumstance. This has been made clear by the Supreme Court of Canada in L.M.P. v. L.S., 2011 SCC 17 at paragraphs 47 through 49.

47 If the s. 17 threshold for variation of a spousal support order has been met, a court must determine what variation to the order needs to be made in light of the change in circumstances. The court then takes into account the material change, and should limit itself to making only the variation justified by that change. As Justice L'Heureux-Dubé, concurring in Willick, observed: "A variation under the Act is neither an appeal of the original order nor a de novo hearing" (p. 739). As earlier stated, as Bastarache and Arbour JJ. said in Miglin, "judges making variation orders under s. 17 limit themselves to making the appropriate variation, but do not weigh all the factors to make a fresh order unrelated to the existing one, unless the circumstances require the rescission, rather than a mere variation of the order" (para. 62).

48 Variation involves the application of both s. 17(4.1) and s. 17(7) of the Divorce Act. In Hickey, L'Heureux-Dubé J. described the interplay between them as follows:

On an application for variation of an award of spousal support, the court must first find, under s. 17(4), that there has been a material change in the conditions, means, needs, or circumstances of either spouse (see Moge, supra, at pp. 875-76, and Walker v. Walker, at pp. 141-42) and in making the order, the court must take into consideration that change. As with the variation of child support orders, this change must be material, and cannot be trivial or insignificant. The factors enumerated give the court considerable discretion in determining whether a variation order is justified: see J. Payne, Payne on Divorce (4th ed. 1996), at p. 321. Once this threshold is passed, the court must consider the four objectives of spousal support enumerated in s. 17(7) of the Divorce Act. [para. 20]

49 Julien D. Payne and Marilyn A. Payne observed that "[t]here is nothing in the Divorce Act to suggest that any one of the objectives [in s. 17(7)] has greater weight or importance than any other objective" (Canadian Family Law (3rd ed. 2008), at p. 253). Rather, the objectives "operate in the context of a wide judicial discretion" and "provide opportunities for a more equitable distribution of the economic consequence of divorce between the spouses".

50 In short, once a material change in circumstances has been established, the variation order should "properly reflect the objectives set out in s. 17(7),... [take] account of the material changes in circumstances, [and] consider the existence of the separation agreement and its terms as a relevant factor" (Hickey, at para. 27). A court should limit itself to making the variation which is appropriate in light of the change. The task should not be approached as if it were an initial application for support under s. 15.2 of the Divorce Act. [Citations omitted]

[33] The task at hand, then, is to determine what variation is justified by the husband’s reduction in income from over $80,000 to approximately $40,000 as a result of his retirement.

Double Dipping? Yes, but also Hardship

[34] What income is to be used in calculating the appropriate variation to the husband's support obligation?

[35] The husband correctly notes that part of his retirement income derives from that portion of his pension previously divided at separation. I was not provided with any calculations showing which portion of his retirement income is attributable to post-separation pension accrual. But in this case, because of the wife’s need, it does not matter.

[36] In Boston v. Boston, 2001 SCC 43, the Supreme Court of Canada outlined the general rule against double-dipping. The court should avoid awarding a dependent spouse income from that part of the payor’s pension that has already been transferred as capital.

[37] But the exceptions to this general rule are significant. The hardship/need exception is outlined in paragraph 61:

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.

[38] Here the wife’s financial circumstances are bleak. She received tax-deferred capital of $78,000 at separation which remains intact and which has grown to approximately $115,000. But that is all she has in terms of savings. She is only 60 years old and is unable to work. There is no evidence to suggest that she has been anything other than frugal and efficient in terms of the use of her assets post-separation.

[39] From RUG, p. 105:

In some recent SSAG cases, courts have taken the full income of the payor into account in calculating the range, relying upon the hardship and need exceptions to the “double-dipping” rule: see Scott v. Scott and Jenkins v. Jenkins. [Citations omitted].

[40] This case easily falls within the hardship/needs exception to the rule against double-dipping. The husband’s full retirement income should be used to calculate the appropriate variation.

Termination?

[41] The husband asserts that support should terminate and the wife should be required to use her $117,000 to live on until she qualifies for her full CPP and OAS benefits. I disagree. The wife has not been able to save any money over and above her tax-deferred investment since the last hearing in 2008. Her budget is very lean. If she were required to use her capital to replace the entirety of the spousal support, her savings would perhaps last three to four years. Then she would be living, somehow, on her CPP income alone while the husband’s combined income would approach $40,000 annually. This result would not satisfy the objectives outlined in s.17(7) of the Divorce Act.

[42] The husband cannot be granted a termination when the wife’s need is so great.

What Quantum?

[43] As an alternative position to outright termination, the husband has provided DivorceMate calculations using the wife’s current income and the husband's full pension income. This is appropriate.

[44] The range indicated in these calculations is between $770 monthly at the low-end to $1,037 monthly at the high end with the midpoint of $907 monthly.

[45] If the wife were to receive $1,037 monthly from the husband, she would receive 46.8% of the net disposable income while the husband would receive 53.2% of the net disposable income available to the parties.

[46] In the 2008 variation proceeding which imposed the current $2,700 monthly spousal support award, Hambly J. made clear in his written reasons that his goal in setting the husband’s support obligation was to, as closely as possible, equalize the net disposable income of the husband and wife.

[47] The proper approach in this long-term marriage with a substantial hardship/needs component is to recognize the valid reduction in the husband’s income but to maintain the equal division of the net disposable incomes between the parties. This is consistent with the guidance from L.M.P. above. The income of the husband has changed but nothing has changed which would justify a departure from Hambly J.’s goal of equalization of net disposable incomes in 2008.

[48] Using the same inputs that the husband used in his DivorceMate calculations, I have created a fourth support scenario seeking an exactly equal division of the net disposable income. The level of support which achieves this goal is $1,200 monthly. This calculation is attached as an appendix to these reasons.

[49] An ongoing support obligation of $1,200 monthly acknowledges the reduction in the husband’s income and maintains the underlying structure of the existing support order. It is the variation justified by the specific material change.

The Future

[50] The wife will, no doubt, continue to struggle under this new support regime. If the husband’s ability to pay increases in the future, he should expect to be called upon to provide a greater share of his retirement income to the Respondent, all else being equal.

[51] It will be necessary for the parties to continue to exchange financial information regularly.

Orders

[52] The order for spousal support, dated March 20, 2008, is varied by reducing the spousal support payable by the Applicant husband to the Respondent wife from $2,700 monthly to $1,200 monthly commencing September 1, 2019.

[53] The parties shall exchange complete tax returns and notices of assessment no later than June 1st each year commencing in 2020.

[54] The parties shall also have a positive ongoing duty to forthwith disclose to the other any significant changes in their financial circumstances, including inheritances or windfalls.

Costs

[55] I am not inclined to award costs of this proceeding unless formal offers have been exchanged and the cost consequences under rule 18 have been triggered. If either party wishes to seek costs, they may forward written submissions, no longer than two pages, plus a Bill of Costs, to my chambers in Simcoe. The other party will have 10 days to reply. If no submissions are received by August 31, 2019, costs will be deemed to be settled.

R. MacLeod, J. Date: July 24, 2019