Court File and Parties

Court File Nos.: FC-05-2620-2 and FC-05-2620-E001 Date: 2020-09-14 Superior Court of Justice - Ontario

Re: Susan Mary Whelan, Applicant And: The Director, Family Responsibility Office, for the benefit of Susan Mary Whelan And: Patrick Joseph Whelan, Respondent

Before: D. Summers J.

Counsel: Christopher Rutherford, for the Applicant Cecil Lyon, for the Respondent Michael Chun, for the Director, Family Responsibility Office

Heard: May 8, 2020

Endorsement

The Relief Sought

[1] This endorsement arises out of an interim motion brought by the respondent, Mr. Whelan, seeking an order suspending his obligation to maintain life insurance as security for spousal support payable to Ms. Whelan. His 20-year term policy was about to renew at a substantially higher premium. Mr. Whelan also sought an order suspending enforcement of the support order by the Family Responsibility Office (FRO). His request for interim relief is made in the context of his Motion to Change commenced November 2019. There he seeks an order under the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) to reduce support effective July 1, 2018 and to terminate support effective September 1, 2018.

[2] Ms. Whelan opposed the motion.

[3] Due to COVID-19 and the suspension of regular operations in the Superior Court of Justice, the case conference scheduled for April 2, 2020 was adjourned. For the same reason, this motion proceeded by tele-conference.

[4] Immediately after the motion, I released a brief endorsement ordering Mr. Whelan to maintain life insurance with Ms. Whelan as the irrevocable beneficiary of $500,000. I also ordered Ms. Whelan to pay one half of the policy premium without prejudice to adjustment by the judge hearing the Motion to Change. Counsel subsequently confirmed a policy conversion that resulted in monthly premiums of $508.00. Ms. Whelan's one-half share is $254.00. I indicated I would address the remaining relief in reasons to follow. I do so now.

Factual Context

[5] The parties married in 1976 and separated in 2004. They raised three children together. All are now adults.

[6] The order in question was made by Justice Sheffield, on consent, under the Divorce Act and dated June 22, 2007. The order incorporates the spousal support and life insurance provisions of the parties' Separation Agreement dated April 11, 2007.

[7] Sheffield J.'s order requires payment of spousal support in the amount of $7,000 per month. With cost of living increases, the amount has risen to $8,711.88 per month. The order also requires that Mr. Whelan maintain Ms. Whelan as the irrevocable beneficiary of insurance on his life, in the amount of $500,000, as security for support.

[8] The policy maintained by Mr. Whelan over the years had a face value of $750,000. The beneficiary of the additional $250,000 is unknown.

[9] Mr. Whelan is now 67 years old. He re-partnered many years ago. Mr. Whelan's health has deteriorated over the last few years. He retired on December 31, 2018 and has been hospitalized multiple times since then. His prognosis is grim.

[10] Ms. Whelan has also re-partnered. She is now 66 years of age.

Should Mr. Whelan's Obligation to Maintain Life Insurance as Security for Spousal Support Be Suspended

[11] Mr. Whelan says he is in very poor health, unable to work, is without income, and is unable to pay spousal support or the significant premium increase to maintain life insurance. Based on the material change in circumstances alleged, he contends there is every reason to believe that his support obligation will be terminated retroactively, as he asks.

[12] Ms. Whelan does not challenge Mr. Whelan's poor health or inability to work based on his current prognosis, however, she is not satisfied that he is without the means to pay support. She says further disclosure is needed, particularly around the proceeds he received in 2018 from the sale of his interest in an apartment building. She submits that Mr. Whelan's obligation to maintain life insurance as security for support cannot be assessed independent of the underlying support issue and whether her entitlement continues. The issue of an interim support variation was not before the court on this motion.

[13] I consider the following evidence:

• Mr. Whelan advised Ms. Whelan in 2017 that he would be retiring in 2018. She does not dispute receiving notice.
• Mr. Whelan asserts that his declining health prevented him from instructing his lawyer to commence a Motion to Change before 2019. He similarly claims he was unable to deal with the Family Responsibility Office.
• Mr. Whelan's employment continued until the end of 2018. During the last six months, he received only fifty percent of his earnings as he transitioned into retirement. He did not say how much he earned, before or after the reduction.
• In August 2018, he unilaterally reduced his support payments by one half.
• Sometime in 2018, Mr. Whelan sold his minority interest in an apartment building. He received sale proceeds of $1,053,648.00.
• In December 2018, Ms. Whelan filed with FRO.
• In March 2019, FRO registered a writ against Mr. Whelan's home that he owned with his common-law partner.
• On July 19, 2019, Mr. Whelan transferred his mortgage free interest in the property to his partner for $1.00. The mortgage discharge had been registered on December 12, 2018. His partner, Ms. McMahon, is now the sole owner of their home.
• On July 30, 2019, Mr. Whelan's insurance broker wrote to him to confirm their earlier conversation and outlined the renewal options for his life insurance policy. The choices relevant to the issues here were: (a) $750,000 with monthly premiums increasing from $251.54 to an estimated cost of $1,561.17; or (b) $500,000 with monthly premiums increasing to an estimated cost of $603.92.
• Mr. Whelan had not yet filed his 2018 Income Tax Return when he commenced his Motion to Change on November 1, 2019.
• The proceeds from the sale of Mr. Whelan's interest in the apartment building resulted in a capital gain. In 2018, his total income was $570,740 and his additional tax liability was assessed at $272,498. By January 2020, his debt to Canada Revenue Agency had risen to $316,093.24 with interest and penalties. It remains unpaid.
• In February 2020, Mr. Whelan provided Ms. Whelan with a copy of his 2018 Income Tax Return. It was then that she learned how much he had received from the sale.
• In February 2020, the Family Responsibility Office froze Mr. Whelan's bank accounts and seized $123,202. These funds were released to Ms. Whelan.
• In March 2020, Ms. Whelan wrote to FRO and asked that they lift the freeze on Mr. Whelan's accounts. She accepted that, for health reasons, he needed access to funds.
• By April 2020, Mr. Whelan owed support arrears of $34,897.52.
• On April 15, 2020, Ms. Whelan's counsel wrote to Mr. Whelan's lawyer about the upcoming policy renewal date and sought confirmation that coverage would remain in force. Counsel did not receive a response.
• Ms. Whelan's receipt of Mr. Whelan's motion material was the first she saw of the July 30, 2019 letter from Mr. Whelan's insurance broker.
• Mr. Whelan has not disclosed what he did with the proceeds from the 2018 sale of his interest in the apartment building.

[14] Mr. Whelan's request for an order to suspend his life insurance obligation effectively asks the court to leave Ms. Whelan's current support entitlement unsecured, and to do so in the absence of full and proper disclosure on the assumption that the judge deciding the Motion to Change will terminate her entitlement, as he asks. I decline to make that order. My reasons include:

• I am not satisfied that Mr. Whelan is without the financial means to maintain life insurance of $500,000, until the Motion to Change is determined. His financial statement indicates that even after the transfer of his joint interest in his home, he still had significant assets including various bank accounts, RRSP's and property on Lac Superior resulting in net worth of approximately $211,000.
• Mr. Whelan made no effort to explain what had become of the million dollars received in 2018. It appears the money was not used to pay his income tax debt.
• The evidence regarding Mr. Whelan's health suggests it is highly unlikely that he will be insurable in the future. The potential prejudice to Ms. Whelan of allowing coverage to lapse at this stage of the proceedings, is significant.
• Sheffield J.'s order provides that Ms. Whelan is entitled to a first charge against Mr. Whelan's estate for $500,000 in the event he dies without the required life insurance in effect. The evidence indicates insufficient value in his estate to satisfy this charge and underscores the need for further disclosure regarding the sale proceeds and the gratuitous transfer of Mr. Whelan's interest in the house to his partner, Ms. McMahon, for $1.00. Title was already registered to both Mr. Whelan and Ms. McMahon and there was no evidence to indicate that it was held in any manner other than joint tenancy with an automatic right of survivorship. This leads me to conclude, on the balance of probabilities, that the transfer was not done for estate planning purposes, as submitted.
• Mr. Whelan presented his case around the very high cost of continuing his insurance policy of $750,000, however, there was no reason to maintain more than $500,000 to satisfy his obligation to Ms. Whalen. I find the cost of maintaining coverage of $500,000 is reasonably within Mr. Whelan's means, especially when shared with Ms. Whalen pending final resolution. Any prejudice the payment of premiums may cause to either of them may be rectified in the discretion of the judge on the Motion to Change.
• I also consider Mr. Whelan's failure to bring his Motion to Change in a timely way. I accept that his health was failing but note he was well enough to work throughout 2018. His evidence further indicates that he was well enough in July 2019 to communicate with his life insurance broker and arrange for the transfer of his property interest. I am not persuaded that he was also not well enough to attend to his family law obligations sooner than he did.
• Mr. Whelan was obviously aware that his 20-year term policy would expire on May 9, 2020 and was similarly aware of the options available to him to maintain coverage, yet he failed to do anything about it or even share the information with Ms. Whelan until he served his motion. The eleventh-hour circumstances were entirely of his own creation and lacking in bona fides.
• Mr. Whelan did not plead or argue an interim variation of his spousal support obligation. Based on the evidence before me, I find I cannot consider suspending Mr. Whelan's obligation to maintain life insurance independent of a change to the underlying support order.

Mr. Whelan's Request to Suspend Enforcement by the Family Responsibility Office

[15] Mr. Whelan seeks an order suspending enforcement of his obligation to pay spousal support by the Family Responsibility Office until his Motion to Change is determined. He says he has no ability to pay. In oral submissions, his counsel also said Mr. Whalen should not have to endure the mental anguish of enforcement proceedings looming over him in addition to the worry of his poor health.

[16] Ms. Whelan submits that Mr. Whelan's Motion to Change does not include a claim for the relief he now seeks, he did not plead a stay of the underlying support order in this motion nor is she prepared to consider his request to suspend enforcement without further disclosure and the opportunity to assess all the evidence. Ms. Whelan also points out that she has already taken steps to relieve Mr. Whelan's circumstances somewhat by asking FRO to lift the freeze on his bank accounts.

[17] The Family Responsibility Office opposes Mr. Whelan's claim for an interim order suspending enforcement of the support order or, in the alternative, a general stay of enforcement. FRO's first submission was directed to Mr. Whelan's failure to plead this relief in his Motion to Change. Counsel pointed the court to Rule 14(1) of the Family Law Rules, O. Reg. 114/99 that states that a person may make a motion seeking a temporary order for a claim made in an application. [emphasis added]

[18] Second, FRO submits that Mr. Whelan's motion to suspend enforcement should fail because he did not also seek an interim order to stay the support order between the parties. The court was referred to the decision in Garneau v. Director, Family Responsibility Office, 2010 ONSC 2804. There, Quinlan J. dismissed the support payor's motion for an order suspending enforcement by FRO because he did not first seek and obtain an order staying the underlying support order. Justice Quinlan then went on to consider whether the court should nevertheless grant a stay. At paras. 31 to 37, he said,

31. The Director has a duty to enforce support orders filed with her office and the authority to determine by what means her duties are to be carried out [citing ss. 5(1) and 6(1) of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 (FRSAEA)]. An order staying the Director's enforcement power would preclude FRO from exercising its legislative mandate.

32. The Director is required to enforce a support deduction order that is filed in her office until the related support order is terminated and there are no arrears owing or until the support order and support deduction orders are withdrawn [citing s.20(1) of the FRSAEA].

33. A support deduction order is not affected by an order staying the enforcement of the related support order unless the support order is also stayed. Proceedings to stay an ongoing support obligation raise issues of entitlement as the support payor is seeking to vary, albeit temporarily, support payments agreed to between the payor and the recipient. The Director is not a party to such proceedings [citing s. 20(6) of the FRSAEA] [Emphasis added].

34. The Director has the jurisdiction to consent to relief regarding the amount deducted by an income source for arrears under a support deduction order [citing s. 27(1)(c) of the FRSAEA]. Mr. Garneau did not request this relief.

35. Because Mr. Garneau did not plead a request for a stay of his ongoing support obligation, I find that he should not be entitled to that relief. However, I will go on to consider whether this court should grant that relief despite the fact that there was no request for it in the motion before me.

Should the ongoing support obligation be stayed?

36. A motion to stay or suspend a support order is properly brought within a variation application pursuant to section 37 of the Family Law Act. On such an application, the court may discharge, vary or suspend a term of the order and relieve the applicant from the payment of part or all of the arrears. The basis for granting such relief would be a material change in circumstances. [citing s. 37(2) of the FLA].

37. A stay of enforcement should only be granted where a support payor has demonstrated a prima facie case on the merits of the variation application and has come to court with "clean hands" [citing Halstead v. Halstead, [1993] O.J. No. 1781 (Gen.Div.) and Yip v. Yip (1988) 1988 CanLII 4472 (ON SC), 15 R.F.L. (3d) 211]. Even if I were to assume that the motion to suspend enforcement of support included a motion to stay the ongoing support obligation, I find that Mr. Garneau has not established the substantive grounds for relief on the merits of his case.

[19] I adopt the reasoning in Garneau and find Mr. Whelan is not entitled to an order staying enforcement under the FRSAEA or the common law. He did not first plead and obtain a stay of the underlying support order. Nor did he demonstrate a prima facie case on the merits of his Motion to Change or come to court with "clean hands" as required to obtain equitable relief such as a stay of enforcement. Mr. Whelan's financial statement suggests ability to pay the arrears owing. His net worth is over $200,000, there is still a million dollars unaccounted for and questions remain around the gratuitous transfer of property to his common law partner at a time when he owed almost $80,000 in support arrears.

[20] For these reasons, the relief sought by Mr. Whelan is denied. On an interim basis, he is ordered to maintain insurance on his life in the amount of $500,000 as security for his obligation to pay spousal support to Ms. Whelan pending disposition of his Motion to Change. Ms. Whelan is ordered to pay $254.00 monthly towards Mr. Whelan's increased life insurance premiums.

[21] As the successful party, Ms. Whelan is entitled to costs. I encourage the parties to agree on the amount to be paid and when. If they cannot do so, Mr. Whelan shall deliver his cost submissions by September 27, 2020 and Ms. Whelan shall deliver her cost submissions within two weeks after that. Submissions shall be double spaced using 12-point font and not exceed 2 pages, exclusive of Bills of Costs and Offers to Settle, if any. There shall be a 5 day right of reply, if necessary.

Justice D. Summers Date: September 14, 2020