COURT FILE NO.: FS-98-FP241210-0002
DATE: 20210319
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Miriam Assayag-Shneer
Applicant
– and –
David Shneer
Respondent
Harvey Strosberg, for the Applicant
Julie K. Hannaford, for the Respondent
HEARD: August 17, 2020
HOOD J.
reasons for decision
Overview
[1] This is a motion to change brought by the respondent, Mr. Shneer, to vary a divorce judgement from 1999.
[2] The parties met in 1992. They started living together in March 1993. They married in August 1994. They separated in November 1997, however they used March 1998 as the formal date of their separation.
[3] The parties entered into a separation agreement in September 1999 which formed the basis for a divorce judgment dated September 13, 1999. Under paragraph 2 of the judgment, Mr. Shneer agreed to pay Ms. Assayag a total of $388,000 as spousal support at the following intervals: $50,000 by September 16, 1999, $50,000 by October 1, 1999, and starting November 1, 1999, $4,000 per month for 72 months. At the time of the divorce Mr. Shneer was 37 years old and Ms. Assayag was 32 years old. He was the CEO of his own company, AdvantEDGE, earning approximately $200,000 to $250,000 per year. She was a second-year student at chiropractic college.
[4] The divorce judgment provided that if Mr. Shneer defaulted in making any payment, then twice the amount then outstanding plus $50,000 would become due and owing to Ms. Assayag.
[5] The divorce judgment also provided that Mr. Shneer was entitled to pre-pay the lump sum owing at any time and that if he did so there would be a reduction in the outstanding lump sum then owing. The amount of reduction on any pre-payment decreased over time.
[6] Mr. Shneer paid the two initial $50,000 payments. He made 15 monthly payments from November 1, 1999 to January 1, 2001 totaling $60,000. He defaulted on the February 1, 2001 payment. At that time there were 57 payments of $4,000 each outstanding, for a total of $228,000. Pursuant to the divorce judgment, because of his default and the default provision, he owed twice this amount plus $50,000 for a new total of $506,000.
[7] Mr. Shneer paid nothing further to Ms. Assayag. If he had continued to make the monthly payments the last one would have been made on November 1, 2005. From the time of his default in 2001 Ms. Assayag attempted to collect on what was owing. She was unable to do so as Mr. Shneer was basically judgment proof - owning no real estate in Ontario, having no assets and holding significant debt. In 2009 Ms. Assayag gave up in her efforts to collect the outstanding spousal support.
[8] In his first affidavit filed in support of the motion to change, Mr. Shneer states that Ms. Assayag made no efforts for the next nine years to raise or resolve any issues of spousal support. On the other hand, Mr. Shneer made no payments despite having Line 150 income of $138,061 in 2007, $141,587 in 2008, $222,305 in 2013 and $328,146 in 2014.
[9] In December 2016, Mr. Shneer went personally bankrupt.
[10] In or around September 2017 Mr. Shneer was contacted by FRO, acting on Ms. Assayag’s behalf, to collect the outstanding support arrears. He took no steps other than advising FRO that he intended to dispute what was owing and intended to vary the support provisions. While that may have been his stated intention, he did not commence any proceeding. Eventually, FRO advised Mr. Shneer, by a notice dated July 23, 2018, that it intended to suspend his driver’s license due to unpaid spousal support arrears. Having ignored his spousal support payments from 2001 Mr. Shneer now sprung into action. A motion for a refraining order was brought returnable August 30, 2018 and he commenced a motion to charge. On August 30, 2018, Monahan J. granted the refraining order on the condition that Mr. Shneer pay $750 per month starting September 1, 2018. He has made all the payments required under the refraining order.
[11] On April 3, 2019 the parties appeared before Shore J. for a case conference. On consent, the parties agreed that a summary judgment motion should be heard on the issues of whether the court had jurisdiction to amend the September 13, 1999 divorce judgment and whether the default provision in the judgment was a penalty clause incapable of enforcement. The motion was set for July 9, 2019.
[12] On July 9, 2019 the parties appeared before Corbett J. In his view, the motion had morphed from the two discreet issues into a motion for summary judgment on the motion to change. He was not satisfied that the parties had a common understanding of scope of the motion before him. He determined that the matter should proceed before him, on the merits, as a motion to change. He directed the parties to try to establish a schedule for the return of the motion before him by the end of 2019. He dismissed the summary judgment motion without prejudice to the merits of the motion to change.
[13] The matter came before Corbett J. again, on December 19, 2019 and on consent he adjourned the matter to May 14, 2020 to be heard as a long motion. He made a number of orders regarding the delivery of pleadings, documentation and questioning. Rather than proceeding in May, the motion was adjourned to August 17, 2020. Justice Corbett was no longer seized.
[14] In his affidavit material Mr. Shneer asked that the default provision be struck out. He also asked that the amount of support be fixed at no more than $245,920 or alternatively some lesser unspecified amount, less the monthly payments of $750 already made, with no interest and with future monthly payments of $750 until paid in full. It was unclear how the figure of $245,920 was arrived at considering, according to his affidavit material, he owed $388,000 and had paid $160,000.
[15] Before me and in his factum, Mr. Shneer asked for four things: that the default provision be declared a penalty and unenforceable, that spousal support be terminated effective December 1, 2006, that the arrears of spousal support be set at $50,000 or perhaps $70,000 (both numbers were used), and that the arrears not attract interest. The Divorce Judgment provided for interest at 6% from default.
[16] Ms. Assayag asked that the motion to change be dismissed.
Decision
[17] In my view, paragraph 3 of the divorce judgment is a penalty and unenforceable. The balance of the motion to change is dismissed.
The Legal Framework
[18] The threshold question on a motion to change a spousal support order is set out in s. 17(4.1) of the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.), which provides that before the court makes a variation order the court must satisfy itself that a change in the conditions, means, needs or other circumstances of either spouse has occurred since the making of the order, and in making the variation order, the court shall take that change into consideration.
[19] Both parties agree that s. 17 of the Divorce Act allows the court to vary, rescind or suspend, prospectively or retroactively a support order or any provision thereof.
[20] Where a motion to change is bought to vary a spousal support agreement incorporated into a court order there is a two-step analysis. First, has there been a material change in circumstances and second, if there has, what variation of the existing order ought to be made in light of those circumstances? A material change in circumstances is one, which if known at the time, would likely have resulted in different terms. To suggest that an agreement was unfair in the first place is inappropriate. The court is not to second guess the original agreement. Where an agreement is incorporated into an order it is presumed to comply with the objectives of the Divorce Act: L.M.P. v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775, at paras. 31-33.
[21] The parties disagree over whether the circumstances raised by Mr. Shneer are in fact material changes and secondly, whether Mr. Shneer is even in a position to have the court consider the alleged material changes in light of the non-variation wording contained in the divorce judgment at paragraph 5. While in her submissions to me on the motion Ms. Assayag relied solely on the non-variation argument, I still have to consider whether the changes are material as the non-variation clause will not even come into play unless the circumstances raised are material changes.
[22] The other question raised, is whether the provision in the divorce judgment doubling the support plus $50,000 upon default is enforceable. Mr. Shneer argues that it is not, being a penalty and therefore unenforceable as well as being unconscionable. Ms. Assayag argues that this issue should not be considered on a motion to change, but if it is, that the clause is not unconscionable nor is it a penalty.
Material Changes
[23] It is difficult to discern whether Mr. Shneer is arguing that there have been a number of material changes in his life entitling him to a variation of the divorce judgment or whether all of the changes mentioned by him, taken together, have resulted in a material change. In his factum he seems to differentiate between the collapse of AdvantEDGE in 2001, his second marriage and new family and his health issues as being separate material changes each entitling him to the sought-after variation. However, he also argues that taken together these circumstances render him unable to pay the support ordered in 1999. He also argues that Ms. Assayag’s condition, means, needs and circumstances have changed, disentitling her to continued support under the divorce agreement.
[24] I see no need to detail all of what has happened to Mr. Shneer since 1999 when the divorce judgment was made. It is set out in his affidavits of August 28, 2018, April 23, 2019, September 26, 2019 and in the few relevant portions of his transcript that were referred to.
[25] Basically, his company, which was in financial trouble in 1997 when the parties separated, failed to obtain a potential contract in late 1999 or early 2000 and the company began to collapse. He moved to Israel and remarried in June 2000. In late 2000 the company ceased operations. His last support payment was made in January 2001. Mr. Shneer was at that point approximately 39 years old. His first child was born in September 2001 and his second in June 2004. In June 2008 he was diagnosed with testicular cancer, had three rounds of chemotherapy, and had an operation in July 2008. In February 2011 he was diagnosed with basal cell cancer or a type of skin cancer, and in September 2011 the cells were removed. In 2018 he thought he might again have cancer, but a few months later discovered he did not. He claims that his health issues have impacted his ability to earn an income comparable to what he was making when the divorce judgment was made.
[26] Whether considered separately or taken together, I fail to see that the failure of AdvantEDGE, Mr. Shneer’s new family situation or his health issues amount to a material change or changes.
[27] On his own evidence, Mr. Shneer and Ms. Assayag both knew about the issues with AdvantEDGE in or around the time the divorce judgment was made. In his first affidavit, at paragraph 25, he states that the company was in financial trouble around the time of separation in 1997 and the decline of the company continued over the following few years.
[28] For whatever reason, Mr. Shneer agreed to the divorce judgment. From reading his affidavits, it seems that what is really at issue is that he now regrets making the deal that he did. If his company had been successful in Mexico and obtained the $40 million USD contract, then the settlement reached would have been seen as a bargain. Much of his affidavits deal with the alleged duress that he was under and how he in effect entered into a bad deal and overpaid in agreeing to the spousal support. In his first affidavit, he alludes to duress stemming from Ms. Assayag and her activities that he was not at liberty to disclose but states that he was afraid of Ms. Assayag and suffered trauma from what happened. He claims he was unable to tell his then lawyer what he knew about Ms. Assayag and because of this he entered into an improvident agreement, including the penalty clause. In effect, he argues that he agreed to a highly prejudicial judgment and was forced to agree to a grossly inflated spousal support amount because of this trauma and duress. This argument was repeated in his second affidavit where again he stated he was under pressure and duress and in fear of Ms. Assayag and because of this entered into a bad deal. In his third affidavit, he indicated that he believed Ms. Assayag worked for the Mossad and Shin Bet (Israeli intelligence agencies). This was apparently what he was unable to disclose, not only to his lawyer at the time of the divorce, but also in the first two affidavits in support of his motion to change. In his subsequent factum however, he acknowledged that his lawyer at the time of the divorce judgment was in fact aware of Ms. Assayag’s alleged participation in the Mossad. While this admission arguably undercuts his duress allegation it also raises issues as to Mr. Shneer’s overall credibility. In my view, Mr. Shneer is prepared to say whatever he feels will help his position. Clearly, he is prepared to misstate the evidence or to exaggerate if he feels it will help.
[29] Mr. Shneer also talks of his “struggle” or “long battle” with cancer, which has had a detrimental impact upon his ability to work and has only allowed him to work part time for the last few years. While in no way diminishing his medical history and the after-effects of his chemotherapy and his operation, his testicular cancer was diagnosed and dealt with in a matter of months. His basal cell cancer was also dealt with quickly. There is no evidence other than Mr. Shneer’s own say-so that this had a detrimental effect on his ability to work. I was not referred to anything in the medical notes supporting Mr. Shneer’s alleged inability to work. His actual work history also suggests otherwise. While he did not work after the failure of AdvantEDGE, it would appear to be due to his choice to move to Israel. There he was supported by his wife and family members. Following his return to Ontario he worked briefly at a job sourced by his family. When that business failed, he began to work for a family business which too eventually failed in 2008, although in 2007 he earned $138,061, and $141,587 in 2008. Despite these earnings he continued to avoid paying his support.
[30] He also earned $222,305 in 2013 and $328,146 in 2014, which belies his argument that his 2008 cancer operation and the removal of the basal cells in 2011 impacted his ongoing ability to work or earn an income. While an illness could in some circumstances constitute a material change, Mr. Shneer would have had to show that his illness impacted his ability to satisfy his support obligations. As explained above, he has not.
[31] As to his second family, Mr. Shneer has an obligation to his first family first. In any event, he had already decided not to pay his court ordered support prior to the birth of his first child. He took on whatever support he provides to his second family with no intention of paying his first. It was not as if the obligations to his second family led to the non-payment to Ms. Assayag. I see no correlation between his second family’s needs and the non-payment of support. Nor is there evidence that his obligations to his first family would impoverish his second. The fact that his son has to attend a public school as opposed to a private school is not an impoverishment and it resulted from Mr. Shneer’s father no longer providing financial assistance, not from Mr. Shneer making any payments to Ms. Assayag. The evidence in any event is that it is really his second wife, Shuli, who supports his current family, not Mr. Shneer.
[32] Mr. Shneer has made choices along the way. In my view these choices were not forced upon him by his circumstances. He chose to stop paying support and made no efforts to pay it after January 2001. He chose to move to a country where he knew he could not work. He chose to start a new family and life ignoring his first wife’s needs and the divorce order. His health issues have not truly impacted his earning capacity. His own evidence discloses that this is not the case. The failure of AdvantEDGE was a possibility in 1999 and its demise in 2000 was not unforeseen. In my view the company’s success or failure was specifically contemplated at the time of the divorce judgment. It was therefore not a material change as that term was defined by the Supreme Court in Willick v. Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670, at p. 688, where the Court explains, “if the matter which is relied on as constituting a change was known at the relevant time it cannot be relied on as the basis for variation.” See also L.M.P., at para. 67.: see also L.M.P., at para. 67.
[33] Moreover, the failure of AdvantEDGE took place in 2000, when Mr. Shneer was 39 years old. There has been ample time since then and well before his health issues, even if they were material, for Mr. Shneer with his self-acknowledged business experience and acumen to find alternative employment so as to put himself in a position to pay the support. As mentioned above, there have been several years where he succeeded in doing just that, and nonetheless declined to pay support.
[34] His true motivation is set out in his email of October 25, 2017 where he states, rather emphatically, that he will pay Ms. Assayag nothing, that he owes her nothing – despite the fact that he clearly does and has owed her since 2001 – and that she tried and failed in 2007 to collect and will continue to fail to collect. Ms. Assayag had no obligation to force him to pay, rather the obligation was his to make payment.
[35] This undercuts his claims of a material change or changes. No mention is made in that email of any of the alleged material changes that have led to his inability to pay the ordered support. His non-payment was deliberate and, in my view, unconnected to any alleged material changes. This is not a situation where, for example, the payor seeks a variation because he or she reached retirement and is unable to continue to pay the agreed support, or where the payor has had a catastrophic injury and is unable to earn a comparable level of income.
[36] Mr. Shneer seems to allege in his affidavit that Ms. Assayag should be faulted for failing to continue with her efforts to collect on the divorce judgment beyond those in 2006 to 2009. In argument before me however, his counsel acknowledged that there were no laches or estoppel arguments to be made regarding the enforcement of the judgment. While delay perhaps could be argued, if a material change had been found, in fashioning a new order, that is not the case before me. Nor is the question of retroactivity and there being some unfairness in seeking payment now, as there was already a judgment in 1999. Delay did not cause any accumulated support arrears; they already existed by 2006 when Ms. Assayag tried to enforce. Mr. Shneer’s unreasonable delay in making payment is more of a consideration than Ms. Assayag’s delay in seeking to enforce. Nor do I find her delay unreasonable or unexplained. Mr. Shneer’s non-payment did not arise from his blissful ignorance or a misunderstanding as to what was owed but rather was a deliberate decision to actively avoid payment.
[37] While not argued by Mr. Shneer as a reason for varying the divorce judgment, and barely referred to in his affidavit material, I also am not satisfied on the evidence presented that there has been a change in the condition, means, needs or other circumstance of Ms. Assayag sufficient to vary the divorce judgement. She has in fact ended up where the parties anticipated – working as a chiropractor. The fact that she has ended up there without receiving most of the support that the court ordered Mr. Shneer to pay does not entitle Mr. Shneer to now say that she did not need it and that he should not now have to pay what was ordered. Nor are Ms. Assayag’s current financial circumstances such that they can be considered a reason to now eliminate all or most of the unpaid support.
[38] Having found that Mr. Shneer has not demonstrated a material change in circumstance to seek a variation of the spousal support award it is not necessary for me to consider Ms. Assayag’s argument that paragraph 5 of the divorce judgment prevents a review, in any event.
Penalty
[39] Paragraph 3 of the divorce judgment provides that if there is a two-week default in payment by Mr. Shneer following notice from Ms. Assayag, that whatever amount of spousal support is then outstanding is doubled and $50,000 is added to it. At the time of default Mr. Shneer owed $228,000. Applying this paragraph results in $506,000 owing. There is no argument that there was not a default or that no notice was given.
[40] Ms. Assayag argues that the clause was there to provide some assurance of timeliness, security and finality. While to some degree perhaps initially understandable from Ms. Assayag’s perspective, in that she wanted some assurance that the support would be paid when due, I fail to see how it provided any finality as she alleges. Mr. Shneer states that he has no memory of why this paragraph was part of the judgment.
[41] He does however now believe that the clause will provide Ms. Assayag with a windfall while having a catastrophic financial impact on his children. I do not accept that he has provided evidence of this latter statement. I do agree however, with his initial statement that it represents a windfall.
[42] I view this paragraph as a penalty and unenforceable. The fact that it is contained in a court judgment does not save it. Ms. Assayag is seeking to enforce a court award through FRO and both of the parties are entitled to have the correct amount enforced.
[43] Despite Ms. Assayag’s argument that the agreed spousal support was actually higher than $388,000, by assuming the application of paragraph 3 from the start and arguing that she was in effect taking a sizeable discount in the event of timely payment, paragraph 2 is clear as to what was to be paid and when.
[44] The doubling of the outstanding support plus an additional $50,000 bears no relationship to any loss or damage that Ms. Assayag could suffer through a default in payment. It is simply a lump sum payable regardless of the loss or damage. I do not accept her argument that this amount is an attempt to recognize the legal fees that she would necessarily incur upon default and is thus a genuine pre-estimate of her loss. The clause bears no relationship to what her costs might be in the event of a default. Moreover, costs are a separate issue. If successful in seeking to enforce payment she might be entitled to some indemnity of her legal costs, but to suggest that this was the intention of the clause in the first place and that it is a valid liquidated damages clause or genuine pre-estimate of loss is untenable.
[45] Ms. Assayag also argues that sanctity of contract should override the court’s ability to declare a contractual provision unenforceable as a penalty. That argument would carry more weight in a purely commercial context. Courts and legislatures both recognize family law contracts to be different: Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, at paras. 77, 182.
[46] The fact that I have not found there to be a material change in circumstances should not disentitle Mr. Shneer from the declaration that paragraph 3 is a penalty clause and is not capable of enforcement. If unenforceable it does not require a variation based upon a material change.
[47] Mr. Shneer also argues that there be no interest on any arrears owing to Ms. Assayag. He has provided no basis for this request in his evidence, his factums, or in his argument before me.
[48] While the court recognizes that since 1999 when the post-judgment interest rate of 6% was set, the average annual interest rates have, other than in 2007, decreased, I cannot make such an order of no interest or an order decreasing interest in a vacuum, without there being some evidence or at the very least some argument. I am prepared to hear argument on this, if need be, as set out below.
[49] The parties, following the motion, filed their respective Bills of Costs. While Mr. Shneer was unsuccessful on varying the spousal support arrears, he was successful in having paragraph 3 declared a penalty. Arguably, there was some division of success. If the parties are unable to agree upon costs, they may each make submissions of no more than 5 pages, typed and double-spaced, along with any necessary attachments such as offers to settle and any necessary case law on or before April 19, 2021. Each party will have the opportunity to file 2 pages of reply submissions subject to the same directions 15 days thereafter.
[50] If the parties are unable to reach an agreement on the question of interest on the outstanding spousal support, Mr. Shneer may make submissions of no more than 5 pages, typed and double-spaced, along with any necessary attachments on or before April 19, 2021. Ms. Assayag may make responding submissions subject to the same directions 15 days thereafter.
Hood J.
Released: March 19, 2021
COURT FILE NO.: FS-98-FP241210-0002
DATE: 20210319
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MIRIAM ASSAYAG-SHNEER
Applicant
- and -
DAVID SHNEER
Respondent
REASONS FOR JUDGMENT
Hood J.
Released: March 19, 2021