COURT FILE NO.: FC-14-FS000688-1
DATE: November 5, 2020
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Nicole McNutt, Applicant
- and -
Peter Ronald McNutt, Respondent
Counsel: Terese Ferri, Counsel for the Applicant Brent W. Smith, Counsel for the Respondent
HEARD: October 23, 2020
REASONS FOR DECISION
JAMES J.
[1] There are two motions to be determined: A motion brought by Peter McNutt for a temporary order reducing his spousal support obligation to the applicant pending a full hearing on his Motion to Change request in relation to the final order of Justice L. Lacelle made on May 12, 2015 and a motion brought by Nicole McNutt for disclosure and related relief.
[2] For the reasons that follow, I have concluded that a temporary adjustment to the spousal support currently being paid should not be made and that the request for disclosure ought to be granted.
[3] The major change for Mr. McNutt since the previous support order is that he was medically released from the Canadian Forces in July, 2019. He no longer has income as a soldier and has begun drawing on his pension.
[4] The order of Justice Lacelle provided that since Ms. McNutt will be receiving the family law value of Mr. McNutt’s pension, a future variation of his spousal support obligations should not take into account any income from the portion of his pension that accrued during the marriage and which was divided in 2015.
[5] Mr. McNutt says he is unable to work due to his back and neck injuries and osteoarthritis in both hips. On the available evidentiary record, I am prepared to accept for the purposes of this motion that he cannot work at some other position at this time.
[6] Ms. McNutt is 55 years old. She lives alone and suffers from serious medical problems that prevent her from seeking or obtaining employment.
[7] Ms. McNutt received a payment of approximately $450,000 from the division of Mr. McNutt’s pension which she placed in a Locked In Retirement Account (“LIRA”). When she turned 55 years old on September 28, 2020, Ms. McNutt became eligible to access the funds in her LIRA. She has not done so yet as she is exploring different options to maximize the payout structure. The longer she is able to defer drawing on the funds, the greater the periodic payments that will be available. At present the annual payout would be in the range of $16,000 – $17,000.
[8] Mr. McNutt would prefer that Ms. McNutt start drawing as much as she can as soon as possible in order to maximize her income for support calculation purposes.
[9] Mr. McNutt’s support obligation is currently $3,398 monthly based on an income of approximately $91,000 per year.
[10] At the hearing on October 23, 2020 he indicated his gross income (without including the pension component) was about $67,000 which he says should translate into a mid-range spousal support obligation of $2,433 per month.
[11] The issue before the Court on this motion is whether it is appropriate to adjust Mr. McNutt’s spousal support obligation on a temporary basis pending a hearing on a full evidentiary record to re-assess the support that ought to be paid taking into account the material changes since 2015. The fact that this is an interim or temporary request is important because the disclosure process is still underway which means that not all relevant information has been compiled yet.
[12] The proposed variation of Mr. McNutt’s support obligation is governed by section 17 of the Divorce Act because the parties were previously married. Section 17(4.1) provides that before the court makes a variation order, the court must satisfy itself that a change in the condition, means, needs or other circumstances of either former spouse has occurred.
[13] The criteria for considering a request to make a temporary adjustment to a support payor’s support obligation pending a full hearing was reviewed by Kurz J. in Berta v. Berta, 2019 ONSC 505, where he concluded at paragraph 40:
In considering all of the above, I believe that the applicable test for an interim variation of a final support order (and by extension of a stay of the previous one) requires the moving party to prove:
- a strong prima facie case
- a clear case of hardship
- urgency
- that the moving party has come to court with “clean hands.”
[14] I will assess the merits of Mr. McNutt’s request under each of these headings.
Strong Prima Facie Case
[15] A consideration of this factor begins with a consideration of the factors enumerated in s. 17(4.1), Divorce Act. In the context of this case, there are a couple of points to mention:
a) the test is much broader than a narrow comparison of income changes; and, b) the circumstances of both former spouses are relevant.
[16] It appears to me that the removal of a significant portion of Mr. McNutt’s pension income due to equalization together with Ms. McNutt’s newly-acquired access to her LIRA may warrant a variation in the amount of spousal support to be paid. Based on the rough figures provided at the hearing, the income reduction could amount to as much as $50,000. But that is only part of the story. The decision in Boston v. Boston 2001 SCC 43, [2001] 2 S.C.R. 413 keeps open the possibility that a straight line reduction may not be appropriate.
[17] As for Ms. McNutt, she has or will soon have access to about $500,000 from her LIRA which will provide an income stream not previously available to her. Conversely, her needs due to her health and inability to work are significant as well.
[18] On balance, in my view this factor should be assessed in Mr. McNutt’s favour.
A Clear Case for Hardship
[19] In Berta, hardship was discussed in the context of the hardship experienced by the support payor but there is no reason that in an appropriate case, hardship cannot be examined for both the support payor and the support recipient.
[20] While Mr. McNutt painted a bleak picture of his situation in his initial court filings, his financial position does not seem as desperate as originally anticipated. He still has significant income and he has a partner who is employed and who is able to contribute towards household expenses. He currently receives something like $100,000 per year, about $10,000 per year more than when his spousal support obligation was calculated in 2015.
[21] In relation to Ms. McNutt, she does not live with someone who is able to contribute to her living expenses. Also, until funds flow from her LIRA, she lives on what she receives from Mr. McNutt, which barely covers her (reasonable) expenses so a temporary reduction of spousal support may result in hardship for her.
[22] I find that a delay in adjusting spousal support until the full hearing will not constitute a hardship for Mr. McNutt.
Urgency
[23] Mr. McNutt has been diligent in attempting to move this proceeding forward. He predicted dire consequences unless he obtained relief from his support obligation, but there is no recent evidence that the situation is urgent. Again, it is notable that he has a common law partner who is employed and with whom he presumably shares living expenses. Considering the recent update of his income sources, it is difficult to characterize his need for relief as urgent.
[24] Mr. McNutt says it is urgent to adjust his spousal support obligation because the 2015 order says that his pension should not be considered for support purposes. Therefore, his pension income should be immediately removed from consideration of his income for support purposes. He doesn’t want to be seen as intentionally not complying with a court order.
[25] I do not find this submission persuasive. Mr. McNutt ignores the context in which mention of his pension income was made. The 2015 order said his pension income ought to be exempt when it comes time to vary the amount of support being paid. In fact, his support obligation hasn’t been varied yet. It may be varied in the future when the Motion to Change is finalized.
[26] I find that Mr. McNutt has not established that it is urgent to adjust his support obligation on a temporary basis before the full hearing.
Has the Moving Party come to Court with Clean Hands?
[27] The “clean hands” doctrine refers to the possibility that a court may refuse to grant equitable relief to a person who has engaged in some form of discreditable conduct, thereby rendering it unjust that the order sought be made.
[28] Rule 13(15) of the Family Law Rules provides that as soon as a party discovers that a document that he or she has served under this rule (financial disclosure) is incorrect, incomplete or out of date, the party shall serve on the other party and, if applicable, file a corrected, updated or new document, as the circumstances require.
[29] The question here is whether Mr. McNutt has failed to comply with the financial disclosure requirements of the Rules, including amending or updating his information on an ongoing basis.
[30] A review of the financial statements Mr. McNutt has filed discloses the following:
a) His May 10, 2019 financial statement projected his 2019 income to be $98,304; b) His August 16, 2019 financial statement projected his 2019 income to be $61,705.44; c) His September, 2019 financial statement projected his 2019 income to be $40,939.44; d) His October 17, 2019 financial statement projected his 2019 income to be $36,632.64; e) His January 9, 2020 financial statement indicated his 2019 income was actually $124,723.60 and it projected his 2020 income to be $37,808.64; and, f) His October 19, 2020 financial statement projected his 2020 income to be $101,535.
[31] The issue is clearly not a lack of financial statements; Mr. McNutt has filed more than most litigants provide. The issue is accuracy and reliability. In part, Mr. McNutt’s disclosure was made more difficult by his retirement, his loss of employment income and the gradual coming on stream of different compensatory plans at different times. However, even allowing for the difficulty in projecting and anticipating income changes, it is hard to escape the impression that there was a “catch me if you can” approach to Mr. McNutt’s disclosure. Some examples:
a) at some point Mr. McNutt became aware that he was going to receive a severance payment of $41,272 that was actually paid in 2019 but it does not appear in any financial statement or affidavit; b) He is a joint owner of the home in which he lives and the co-owner is employed but on his financial statements it appears he pays all the expenses, with the result that his expenses are overstated; c) In terms of assets, his October 19, 2020 financial statement says his family home is worth $123,820 but the mortgage against it is for $151,510.75. It is uncommon for banks to lend amounts that substantially exceed the value of their security; d) There is an absence of candid disclosure of pending disability entitlements and income replacement benefits that Mr. McNutt would have known were in the works when he asserted that his financial situation was dire.
[32] In Roberts v. Roberts, 2015 ONCA 450 at paras. 11, 12 and 13, Benotto J. said this about a party’s disclosure obligations in a family law case:
[11] The most basic obligation in family law is the duty to disclose financial information. This requirement is immediate and ongoing.
[12] Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled.
[13] Financial disclosure is automatic: It should not require court orders – let alone three – to obtain production.
[33] Measured against this standard, it appears to me that Mr. McNutt failed to comply with both the letter and the spirit of rule 13(15).
[34] Justice Benotto’s succinct summary sets out the court’s expectations. Lawyers who practice in the area of family law are well acquainted with the applicable disclosure rules. They are also aware that as officers of the court, they have a professional obligation not to mislead the court or to conceal evidence that is not helpful but in respect of which there is an obligation to disclose. Self-represented litigants are sometimes unfamiliar with the importance and scope of what is essentially an honour system of production of relevant documents and disclosure of relevant evidence. However, there can only be one set of rules, not two or more sets of rules depending on whether a party has a lawyer or not. Non-compliance has consequences.
[35] In Berta, the clean hands doctrine was applied in relation to a litigant who ignored multiple disclosure orders and who unjustifiably stopped paying court-ordered support. In my view, Mr. McNutt’s non-compliance is not as egregious as the situation in Berta. I would not deprive Mr. McNutt of a remedy solely on the basis of the clean hands doctrine. As it turns out, two of the other factors which have been identified work against Mr. McNutt’s request for relief.
[36] A collateral matter has come to my attention that needs to be addressed. In November, 2019 Doyle J. granted an adjournment of the Motion to Change and as a condition of the adjournment, suspended the support payment due for the month of January, 2020. Confusion has arisen with the result that Ms. McNutt has not received any support payments in 2020. Mr. McNutt has apparently continued to make his support payments which have been accumulating at the Family Responsibility Office. This matter will need to be clarified and arrangements made for the release of these funds.
[37] In the result, my disposition is as follows:
a. Mr. McNutt’s motion for an order temporarily adjusting his support payments is dismissed with costs; b. Effective January 1, 2020 the respondent, Peter McNutt, shall pay spousal support to the applicant, Nicole McNutt, in the monthly amount of $3,398 as provided for in the order of Lacelle J. dated May 12, 2015; c. Any amounts held by the Family Responsibility Office in connection with Mr. McNutt’s spousal support obligations in relation to Nicole McNutt are to be paid to her forthwith, including any credit balance in the applicable account. Mr. McNutt shall receive credit for the amount disbursed by the Family Responsibility Office pursuant to this provision. d. Mr. McNutt shall provide an affidavit within 30 days containing: I. A listing of all lump sum disability awards he has received including the amount and date of receipt; and, II. A completed Schedule B to the Form 13 Financial Statement.
[38] Ms. McNutt shall provide within 30 days an updated Form 13 Financial Statement and disclosure of all relevant information and documentation respecting the various options available to her for accessing funds from her LIRA.
[39] If the parties are unable to agree on costs, Ms. McNutt may deliver a costs outline (4 pages or less) together with a draft bill of costs within 15 days and Mr. McNutt shall have 15 days to respond.
Mr. Justice Martin James
DATE RELEASED: November 5, 2020
COURT FILE NO.: FC-14-FS000688-1
DATE: November 5, 2020
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Nicole McNutt
- and –
Peter Ronald McNutt
REASONS FOR DECISION
Mr. Justice Martin James
DATE RELEASED: November 5, 2020