Court File and Parties

COURT FILE NO.: 43-2016D DATE: 20200416 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JOANNE LOUISE OLIVER, Applicant AND: DAVID MICHAEL OLIVER, Respondent

BEFORE: Justice K. Tranquilli

COUNSEL: Monique Rae Bennett, for the Applicant Elli M. Cohen, for the Respondent

HEARD: March 11, 2020

Endorsement

[1] The respondent brings a motion to change his spousal support obligation in the final order of the Honourable Justice A. Mitchell dated February 21, 2019 (Final Order). The applicant brings a cross-motion seeking interim relief pursuant to Rule 1(8) of the Family Law Rules by way of a stay of the respondent’s motion to change until such time as he is in compliance with the Final Order.

[2] These motions are but the latest installment in protracted litigation between the parties following the dissolution of their 27-year marriage. Numerous orders followed the original application issued March 22, 2016 regarding property and financial issues. The continuing record comprises of 11 volumes to date.

[3] The Final Order of February 21, 2019 was obtained on consent pursuant to minutes of settlement. The two material terms of the Final Order, as they relate to the issues on the motions, require the respondent to pay the applicant monthly spousal support of $10,112.00 on the first of each month and to assume two joint lines of credit no later than March 19, 2019. The respondent has been in arrears in spousal support since December 2019 and has failed to assume the joint lines of credit. He admits these defaults.

The Motions & Positions of the Parties

[4] The respondent’s motion to change seeks to suspend monthly spousal support payments retroactive to December 21, 2019 until such time as he secures new employment. At the hearing, the respondent alternatively proposed the quantum of monthly spousal support be reduced from $10,112.00 to $3,160.

[5] The respondent argues he has not wilfully or intentionally breached the terms of the Final Order. He submits there is a material change in circumstances due to a dramatic reduction in his income resulting from his loss of employment as a senior sales executive. There is currently no realistic prospect for him to continue to pursue this career at the same income level. His reduced income has made it impossible for him to pay spousal support at the current level or to assume responsibility for two joint lines of credit he held with the applicant, as was required by the Final Order. He does not dispute the applicant is entitled to spousal support; the issue is his ability to pay. He does not seek to change the terms of the Final Order requiring him to assume the joint lines of credit and will continue to try to find a way to fulfil that obligation.

[6] The applicant contends the respondent is not entitled to such relief as he has not come to the court with “clean hands”. Although her notice of motion sought an order dismissing or striking the respondent’s motion to change due to his breaches of the Final Order, at the hearing, the applicant urged that the respondent’s motion to change be stayed until the respondent complies. The applicant acknowledges the respondent’s job loss may entitle him to relief of his obligations; however, she submits this is not the end of the inquiry in light of his conduct since the Final Order. The circumstances of his job loss require better explanation. Although his severance package paid him his salary to the end of December 2019, he stopped paying spousal support after November 2019 and has not paid any support since then. Even when he was paying support during the first nine months after the Final Order, he would frequently pay it days after the first of the month, contrary to the order’s terms. The applicant questions the respondent’s diligence in a job search, his financial priorities and his efforts to assume the joint lines of credit. She submits there is further evidence of his disregard and lack of respect for the administration of justice through his inaccurate or incomplete Financial Statements filed in support of his motion which required continual amendment up until the hearing. Finally, she argues the motion to change is premature as it was issued before his salary ended and he began to search for a new position. She invites the court to conclude that this pattern of conduct establishes he has not made any effort to comply with the Final Order.

The Hearing

[7] Both motions were argued before the court on special appointment. The record at the hearing consisted of the respondent’s motion to change issued October 15, 2019 and supporting documentation, including the respondent’s affidavit sworn January 23, 2020, his three financial statements dated October 8, 2019, December 10, 2019 and March 1, 2020, the transcripts of oral questioning of both parties held on February 6 and 13, 2020 and documents produced by the respondent in satisfaction of undertakings. The record of the applicant’s cross-motion relies on the motion to change materials, supplemented by her notice of motion initially returnable November 27, 2019, her affidavits sworn November 14, 2019 and February 5, 2020, as well as an affidavit sworn by applicant counsel’s law clerk on February 5, 2020.

[8] There was a considerable overlap of evidence in respect of each motion and the parties’ submissions substantively addressed both issues. Procedurally, the order of submissions began with the applicant’s motion in light of the nature of the interim relief sought, with a right of reply after the respondent’s submissions. So as to avoid any prejudice, the respondent was also provided with the opportunity to reply to any new issues arising in the applicant’s reply as it may relate to either motion.

Decision

[9] For the reasons that follow, the court is not persuaded on the basis of this record that the circumstances of the respondent’s non-compliance should preclude him from having the motion to change justly determined on its merits. The evidence may establish a material change in circumstances, or it may not. While I appreciate the applicant’s frustration, this record on the motion does not establish on a balance of probabilities that the respondent has deliberately, intentionally or wilfully disobeyed the Final Order or that he otherwise has the ability or capacity to comply.

[10] At the same time, notwithstanding the apparent pressing nature of the respondent’s financial circumstances, I conclude that the respondent’s motion to change cannot be properly dealt with on the basis of the documentary record. I raised this question with the parties at the outset of the hearing. The respondent urged that his motion could be properly determined on the affidavits and other evidence filed in support of his motion to change as permitted by the Family Law Rules. The applicant submitted that a trial is necessary, but her primary position was the motion to change cannot procced in any event due to the respondent’s non-compliance.

[11] Having heard the motion to change, I find that oral evidence is needed so that the court may make informed credibility, relevancy and weight findings in determining whether there has been a material change of circumstances that warrants variation pursuant to s. 17(4.1) and (7) of the Divorce Act. Pursuant to Rule 15(26) of the Family Law Rules, I direct that the motion to change proceed to trial, including the completion of any further interim steps as required by the Rules.

[12] Although I have dismissed the applicant’s interim motion, this is without prejudice to her ability to lead similar evidence or argument at trial as it may relate to whether the conditions for variation of the respondent’s spousal support obligations exist.

Overview of the Evidence & Submissions

[13] Although the parties can agree on material events, they dispute either the facts underpinning the respondent’s motion to vary spousal support or the inferences and conclusions to be made from the evidence. The following is a summary of key events, with the parties’ submissions or interpretations where relevant.

[14] The parties separated on March 15, 2015 after a marriage of 27 years. The parties have three adult children.

[15] Throughout their marriage, the respondent was an executive in the medical technology industry and had a record of earning a substantial annual income. The applicant also engaged in various career and business opportunities at periods throughout the marriage; however, her ongoing entitlement to spousal support is not in issue at this time.

[16] In or about 2014, the year before their separation, the parties decided to sell their Burlington home and cash in the respondent’s stock options from a previous employment opportunity in order to purchase shares as a joint venture in a company which operated the Little Inn of Bayfield (“the Little Inn”).

[17] The applicant sold her shares in the Little Inn to a minority shareholder after the separation. That shareholder now holds 55% ownership and the respondent remains with a 45% ownership in the hotel/restaurant. The parties partially resolved issues relating to the valuations of their respective holdings in this venture by Final Partial Order of the Honourable Mr. Justice Heeney dated April 17, 2018. Since separation, the applicant has pursued her own hospitality business ventures in the Bayfield area.

The Final Order

[18] The parties ostensibly resolved the outstanding issues on the matter of spousal support and property on a full and final basis on the eve of a hearing in February 2019. The Final Order of February 21, 2019 was obtained on consent, pursuant to minutes of settlement.

[19] Among other stipulations, the Final Order provides: a. The respondent to pay the applicant a lump sum of $220,000 in satisfaction of retroactive spousal support and equalization, by February 21, 2019; b. The respondent to assume two joint lines of credit held in the names of the parties as well as a credit card debt no later than March 19, 2019. One line of credit was in the approximate amount of $200,000 and the other approximately $20,000; c. The applicant to obtain a discharge of the respondent from a mortgage on a property municipally known as 31 Main Street North, Bayfield, within 60 days of the respondent obtaining a discharge of the applicant from the joint lines of credit; d. Commencing February 1, 2019, the respondent is to pay to the applicant $10,112 in monthly spousal support to the applicant until further order of the court; and e. The monthly spousal support amount shall be reviewed annually.

[20] At the time of settlement in February 2019, the respondent was the Senior Vice President of Global Sales and Marketing for a medical device company based in China. He had been with that company since December 2016. He earned an estimated annual salary of $320,000 CAD, which became the basis for calculating the spousal support payment of $10,112 in accordance with the mid-range calculated in the Spousal Support Advisory Guidelines, the length of marriage, number of adult children and the applicant’s imputed annual income of $30,000.

Events Since the Final Order

[21] Unfortunately, the finality of matters between the parties quickly fell into question within weeks of the Final Order. The day after the deadline for assuming the joint lines of credit the respondent notified the applicant that he was unable to obtain bank approval due to concerns about his debt service ratio. The evidence indicates he continued to negotiate options with the bank over the next few months, including seeking to have his new partner approved for the lines of credit. However, the bank would still not approve a new arrangement. The respondent continued to pay the minimum balance on the lines of credit and told the applicant he would continue to push for refinancing.

[22] Notwithstanding the respondent’s default on the lines of credit, the applicant refinanced the mortgage on the Main Street property as required by the Final Order. The applicant then instructed the banks to close the joint lines of credit. The respondent submits this complicated his refinancing options and further restricted his cashflow, making it more challenging to meet his financial obligations.

[23] On August 21, 2019, the respondent’s employment was terminated on notice, with his duties officially ending in September 2019. His employment contract provided for a severance package that paid out his salary to the end of December 2019, plus benefits and a one-time payment of $5,000 USD.

[24] The respondent’s affidavit evidence and answers on questioning explain his position was eliminated as part of a restructuring in response to global economic performance. The applicant questions whether there are other reasons for the end of his employment, whether for cause or by intention. The transcript of the respondent’s questioning refers to an audio-recording he made of the conference call with senior management where he was advised of his termination; however, this was not in evidence on the motion.

[25] The respondent’s employment contract included a non-compete clause. The respondent submits this meant he could not begin to look for comparable employment until beginning in or about late October 2019. He filed evidence showing he has since made approximately 22 inquiries or applications to date for a comparable position. He stated both in his affidavit and on questioning that comparable positions within the medical technology industry are rarely advertised and usually arise through contacts. Companies usually also try to hire from within. The respondent was not confident he would be able to secure a comparable position and salary in the foreseeable future as this market is contracting and companies are consolidating operations such that senior executive positions, particularly within Canada, are rare. He was not prepared to contemplate another position with duties abroad, as he had done in the past.

[26] In the meantime, he plans to focus on making the Little Inn a profitable venture, where he works between three to four days per week carrying out general manager duties. His new partner also previously took an unpaid leave from her job in order to manage the inn. He has approximately $1.125 million in shareholder loans in the venture and wants to make it profitable so that he can either run it full time or start withdrawing his investment.

[27] The applicant challenges the respondent’s financial priorities since the Final Order. Setting aside the reasons for his loss of employment, the applicant contends the respondent’s conduct implicitly demonstrates his bad faith intention to disregard the order.

[28] The applicant questions the respondent’s efforts at both finding new employment with a comparable level of income and in refinancing the lines of credit, which is overdue by one year since the deadline stipulated in the Final Order. He reportedly only made inquiries of one financial institution about the lines of credit and the applicant believes he should have expanded those efforts. She contends that even if he cannot immediately find comparable employment, he evidently has other means to meet his other financial obligations and living expenses. He lives with his new partner, who earns a substantial income and owns a home in Georgetown. His financial statements and evidence indicate his partner has subsidized his living expenses through apparent loans and that his father has also loaned him significant amounts of money. Even though he currently reports no employment income, he has sizeable expenses which he is apparently able to cover through these supports. I understand the applicant to argue that either the respondent ought to have considered using this capacity to meet his obligations under the Final Order in priority to other demands or that there are questions about his financial arrangements that require greater scrutiny. The respondent’s financial statements have also required continual correction or updating, which calls the reliability of his evidence on his expenses and income sources into question.

[29] Although the respondent’s severance package included the equivalent of his salary to the end of December 2019, the respondent admits he chose not to pay spousal support for December 2019 and has been in arrears since that time.

[30] The respondent used part of his severance to pay off a credit card. The applicant contends this amount should have been used to retire the smaller line of credit. The applicant also points to the respondent’s decision to add a personal vacation in Europe to a business trip in July 2019, when he clearly knew he had other imminent priorities such as the lines of credit. She also questions whether it was reasonable for he and his partner to rent property in Bayfield during this time in addition to maintaining his partner’s home in Georgetown.

[31] The respondent explained there is nothing sinister to the changes or discrepancies in his financial statements and that he has updated the information as required by the Family Law Rules. Some initial discrepancies were attributed to clerical error in carrying over irrelevant information from an earlier financial statement from the initial application that included property issues. Other information as it relates to his expenses and loans changed over time as his circumstances have evolved and the information particularized in response to pointed questions by the applicant. In turn, the respondent claims the applicant has also not provided complete disclosure of her current financial situation, noting that she operates a restaurant, food truck and rental properties in Bayfield, which has some relevance in assessing her need.

[32] The respondent explains he chose to pay down the credit card in order to fund expenses in operating the hotel. As the applicant closed the joint lines of credit, he now has limited cash flow options. In the meantime, the credit card balance increased again due to those ongoing business expenses, but he anticipated he still placed the business to begin to be profitable for the opening of the 2020 season in May.

[33] He acknowledges he is in breach of the Final Order regarding the lines of credit and does not seek to change this obligation. He represented to the court that he knew this was his responsibility and he will continue to work on a way to satisfy this aspect of the Final Order.

[34] The respondent now proposes the monthly amount of $3,160, based upon a notional scenario that he can access some capital in the hotel venture. I was troubled that this amount had not been tendered towards spousal support pending determination of the motion. Again, his explanation was that he used the available cashflow to try and keep the inn operations up to date. He continues to pay the minimum balance owing on the lines of credit and also has to deal with personal and corporate income tax debts.

Applicable Legal Principles

Non-Compliance With a Court Order

[35] I begin with the applicant’s motion to stay the respondent’s motion to change pending compliance with the Final Order pursuant to sub-rule 1(8) of the Family Law Rules.

[36] In the event of a failure to obey an order, the court may deal with the failure by making any order that it considers necessary for a just determination of the matter, including an order for costs, dismissing the claim, striking out a pleading or other document or an order postponing the trial or any other step in the case: sub-rule 1(8).

[37] Case law in this area has evolved to establish a three-part inquiry in considering the application of rule 1(8). See, for example: Ferguson v. Charlton, 2008 ONCJ 1, [2008] O.J. No. 486 (O.C.J.); Hooper v. Fretwell, 2013 ONSC 6586; Pigeault v. Pigeault, 2009 ONSC 12537. These decisions considered the assessment under either or both of sub-rules 1(8) or 14(23) (regarding motions). I refer to the test only as it relates to sub-rule 1(8) given the facts of this matter:

1. The court must ask whether there is a triggering event of non-compliance with a court order that would allow it to consider the wording of sub-rule 1(8).
2. If the triggering event exists, the court should then ask whether it is appropriate to exercise its discretion in favour of the non-complying party by not sanctioning that party under sub-rule 1(8).
3. In the event the court determines it will not exercise its discretion in favour of the non-complying party, it is then left with the very broad discretion as to the appropriate remedy under sub-rule 1(8).

[38] The respondent admits he has not complied with the Final Order as it relates to the joint lines of credit and spousal support. A triggering event or events is established.

[39] Non-compliance with an order should not be taken lightly. The onus is on the non-compliant party to show, on a balance of probabilities, why the sub-rule should not apply: Gordon v. Starr, 2007 ONSC 35527, [2007] O.J. No. 3264 (S.C.J.). Assessing the history of this proceeding as a whole as well as the evidence of the circumstances of the respondent’s non-compliance, I am satisfied, at this juncture, that the respondent has established a basis for the sub-rule not to apply so as to stay his motion to change. He acknowledges his breaches of the Final Order yet does not disavow his obligations. His job loss subsequent to the Final Order and consequent financial pressures, including efforts to keep the hotel operating, provide a prima facie explanation for his apparent inability to comply with the order.

[40] The circumstances of the respondent’s non-compliance are distinguishable from the facts of the decision relied upon by the applicant; Hill v. Gregory, 2018 ONSC 6847. In Hill, supra, and as in cases such as Gordon, supra, Hooper, supra, Price v. Putnam, 2018 ONCJ 86 and Johanns v. Fulford, 2011 ONCJ 781 the non-compliant party faced sanctions including a dismissal or stay of a motion due to what was found on the evidence to be chronic, deliberate, wilful or intentional non-compliance with orders, where the party had no credible explanation for the non-compliance and/or was found to have the ability to otherwise comply.

[41] My findings in this regard should not be interpreted as accepting that the respondent meets the conditions for a variation of the spousal support order. Rather, my conclusion is that the evidence and issues raised on the evidence lead to the conclusion that a just determination of the matter, as is also contemplated by sub-rule 1(8), requires that the motion to change be heard. In my view it is in the interests of both parties that the matter be determined on its merits rather than to set up a procedural hurdle which the respondent apparently cannot meet, and which may risk only further exacerbating the situation for both parties.

Motion to Change

[42] Section 17 of the Divorce Act sets out the authority for the court to vary, rescind or suspend, prospectively or retroactively an order. Subsection 17(4.1) specifically addresses the factors or circumstances in which the court should be satisfied there has been a change before there can be a variation. Subsection 17(7) sets out the objectives of a variation order of spousal support.

[43] In deciding whether the conditions for variation exist, the change must be a material change of circumstances. This means a change, such 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 upon as the basis for variation: Willick v. Willick, 1994 SCC 28, [1994] S.C.J. No. 94 (SCC).

[44] The respondent is correct that the Family Law Rules allow for a motion to change to be dealt with by affidavit evidence. However, there is competing affidavit evidence before the court and as summarized above, substantive issues remain in dispute and factual issues need to be resolved notwithstanding the completion of questioning on those affidavits. Credibility findings need to be made, such as regarding the circumstances of the reduction of the respondent’s income and his ability to replace that income. Variation must consider whether there is a material change in circumstances and all relevant factors, objectives and circumstances must be considered when determining spousal support. In light of these issues, the motion to change can only be properly decided with a trial: Ierullo v. Ierullo, 2006 ONCA 33301 at paras. 16 – 19; see also Wynnyk v. Wynnyk, 2004 ONSC 5093 at para. 17.

[45] As per sub-rule 15(26) of the Family Law Rules, as I am of the opinion the motion to change cannot be properly dealt with because of the matters that remain in dispute, I direct that the matter proceed to a trial.

Concluding Comments

[46] Neither party was successful on their motions; however, entitlement to and quantum of costs is reserved to the trial judge in his or her discretion.

[47] In dismissing the motions, I recognize it would be optimal to lay the groundwork for trial management and the prompt scheduling of a focused trial on the variation of spousal support so that the issues could be determined efficiently and without inordinate delay. However, I heard this motion just days before the Superior Court of Justice suspended regular court operations due to the Coronavirus pandemic.

[48] Since the hearing, I appreciate the parties may already be feeling or anticipating the economic impact resulting from the emergency measures imposed on all residents of the province in the effort to contain the pandemic. This may well bring additional uncertainty to the financial obligations under the Final Order. In any event, I recognize the limited court operations at this time make it difficult for the parties to address their responsibilities under the Final Order, including through the annual review process provided for in the terms of that order. I encourage them to attempt to resolve the issues and bring some certainty between them where possible.

Disposition

[49] The orders are as follows:

1. The applicant’s interim motion for relief pursuant to sub-rule 1(8) of the Family Law Rules is dismissed.
2. The respondent’s motion to change in respect of a suspension or variation of spousal support is directed to proceed to trial.
3. Costs of the motions, including entitlement and quantum, are reserved to the trial judge determining the motion to change.
4. Unless ordered otherwise, this matter shall return to the court after resumption of regular court operations for the scheduling of next steps towards a trial on the respondent’s motion to change.

Justice K. Tranquilli Date: April 16, 2020