COURT FILE NO.: FC-18-FS000480-0001
DATE: October 25, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE, FAMILY COURT
BETWEEN:
Sheila McKinnon
Applicant
Self Represented, for the Applicant
- and -
Randy McKinnon
Respondent
Self Represented, for the Respondent
Heard: February 23, 2022 Supplementary Submissions Received: March 23, 2022, May 23, 2022, June 28, 2022 and August 18, 2022
Nicole Tellier J.
RULING ON MOTION TO CHANGE
OVERVIEW
Nature of this Case and the Parties’ Positions
[1] The moving party, Randy McKinnon (“Randy “) brings a motion to change, seeking to terminate his existing spousal support obligation under the operative consent order dated July 26, 2019, which requires him to pay his former spouse Sheila McKinnon (“Sheila “) monthly spousal support in the sum of $875. Randy has just retired at age 65. He also seeks a retroactive reduction for a period that precedes the commencement of this proceeding in February 2022.
[2] Sheila resists both the retroactive reduction and the termination. She asks that income continue to be imputed to Randy in the amount of $35, 000 and that his claims be dismissed with costs. She asks that his obligation be calculated using the mid-range of the Spousal Support Advisory Guidelines (“SAAG”), as in the original order.
Disposition Summary
[3] For reasons elaborated below, Randy’s claim for a reduction in spousal support prior to his retirement is dismissed. His obligation for 2022 is calculated on both parties’ full year’s incomes, using the SAAG mid-range. This generates a monthly obligation of $596 for 2022. Randy shall be credited with any spousal support payments made or collected through FRO in 2022 for ongoing spousal support. Any such credit shall be set-off against his remaining obligation in 2022 and the outstanding spousal support arrears, contempt penalty and costs orders, tax adjusted where applicable. His spousal support obligation terminates with his last payment due on December 1, 2022. Randy’s payment to Sheila for the outstanding spousal support arrears, contempt penalties and costs shall be paid in full no later than January 15, 2022, unless Randy can prove that his LIF funds remain inaccessible beyond monthly withdrawals.
BACKGROUND
The Parties’ Circumstances
[4] The parties were married for 28 years before they separated in 2007. Their Separation Agreement dated April 1, 2008 (“the Agreement “) provided for monthly spousal support for Sheila in the sum of $2431, as well as child support for their youngest child. There are no longer any dependent children for child support purposes, although the two eldest children, both of whom suffer from disabilities, are in receipt of ODSP and live with Sheila.
[5] At the time of the hearing, Sheila was receiving $960.54 monthly or $11, 526.48 annually from CPP disability benefits, in addition to the spousal support. Since Sheila’s income was about to change to an unknown amount when she turned 65, the court directed that it receive further income information and submissions once that was known, to avoid yet another dispute about the entitlement and obligation based on new financial circumstances. Her current annual income from OAS is $15, 378.
[6] Sheila owns a home. The parties’ adult sons, (who have not had contact with their father in over a decade), contribute about $800 to $1000 monthly towards the household food expense. Sheila’s monthly housing costs, which include a mortgage, taxes, insurance and utilities, are approximately $1800.
[7] Randy is 65 years old. He ceased working at General Motors some time ago. He was subsequently employed elsewhere as a mechanic. According to his financial statement sworn February 2022, he has LIF’s in the approximate amount of $83,000, which are available to him to draw on to pay a long outstanding support arrears and costs order as set out in the Bennet J.’s order. Randy ‘s current annual income from OAS/GIS is $15, 418, as of June 2022. Randy lives with his sister.
[8] At the time of separation, Sheila was 50 years old and had no income. She continued to be the primary parent of their youngest child. Their Agreement acknowledges her duty to pursue reasonable steps to become self- supporting. It provides that commencing in November 2010 and every three years thereafter, the entitlement and quantum of spousal support could be reviewed. Sheila was to provide Randy with information in writing regarding any steps she had taken and the progress she had made to secure full- time, remunerative employment.
[9] Elsewhere the Agreement provides spousal support may be varied in the event of a material change in circumstances, including Randy's retirement from General Motors. Their Agreement stipulates that Randy’s obligation to pay spousal support terminates on his death, so long as the insurance provisions are in force and effect.
[10] Randy’s recent income is:
2019: $42, 127[^1] 2020: $39, 941;
2021: $37, 746 2022: $29, 472 [^2]
Prospective: $15, 418
[11] Sheila’s recent income is:
2019: $ 21, 927, including spousal support of $10, 728
2020: $ 21, 912, including spousal support of $10, 520
2021: $11, 526 2022: $13, 137[^3]
Prospective: $15, 378
Prior Legal Proceedings
[12] The parties have been litigating the issue of spousal support for many years. Randy has brought 3 motions to change his support obligations; this is his fourth. He brought his first motion to change in 2010, seeking a reduction in child and spousal support based on a material change in circumstances arising from his job loss at General Motors, the assumption of a new position, and a subsequent termination from that position.
[13] Following a trial, by order dated September 17, 2010, McGee J. imputed income to Randy in the sum of $91,225 and imputed income to Sheila in the sum of $10,000. She also ordered that Randy maintain, until further order or agreement of the parties, a life insurance policy in the face amount of $175,000 with the appellant is beneficiary for $100,000 and the child as beneficiary for $75,000. There were provisions in relation to a review of the required life insurance to secure the support.
[14] Randy brought a second motion to change which resulted in a temporary consent order of Hughes J. dated June 8, 2012, reducing the spousal support to $345 monthly but by October 4, 2013, Hughes J. made a final order requiring Randy to pay Sheila spousal support of $800 monthly. Randy did not seek any change to the life insurance provisions.
[15] Randy initiated a third motion to change in January 2015 seeking to terminate child support for the youngest child, who had been in receipt of ODSP since August 2014, although still in school. He also sought to terminate his spousal support obligation. Again, he did not seek a review of his life insurance obligations but by March 2016 Sheila learned that the life insurance had been canceled by Randy in 2015 so she brought a motion for contempt. This motion was heard together with Randy’s motion to change.
[16] At the trial, Bennett J. varied Hughes J.’s final order of October 4, 2013 and terminated the child support for the youngest child retroactively and removed the requirement to provide life insurance for that child. The trial judge found that Sheila was still entitled to spousal support. He concluded that because of her health issues, it was unreasonable to impute an income to her beyond what she was receiving in CPP disability payments.
[17] The trial judge found that Randy was unable to work as a mechanic while his driver's license was suspended and, accordingly, he should be given an opportunity to get himself on his feet and gain employment. He granted Randy's request to terminate spousal support starting February 1, 2015 and provided for its reinstatement. The trial judge imputed income of $35,000 per year to Randy starting January 1, 2016. A SAAG calculation, using the mid-range, generated a spousal support obligation of $805 monthly, an amount that was within $5 of Randy’s obligation in the operative order.
[18] The trial judge then went on to refer to a settlement reached by the parties following trial but unimplemented. This was a settlement reached while the trial judge’s decision was under reserve and entailed a lump sum transfer from Randy to Sheila in consideration for a spousal support release. As it turned out such a transfer was not possible.
[19] The trial judge ordered monthly spousal support in an amount that would approximate what Sheila would have received if the parties’ settlement could have been affected. He terminated spousal support effective February 1, 2015 and required Randy to reinstate spousal support at a rate of $500 per month commencing the later of 90 days after his driver’s license was reinstated or May 1, 2017 until May 2022, when Randy would be 65. He then fixed spousal support at $250 per month from May 1, 2022 until April 1, 2032, when Randy would be 75.
[20] The trial judge suspended the collection of support arrears accumulated under previous orders as of December 31, 2015, and instead ordered that they be paid from monies Randy receives from his two LIF accounts at the rate of 50% of any amount he received from those accounts until the monies owing were paid in full. Further, the trial judge required Randy to name Sheila as irrevocable beneficiary of his LIF accounts and prohibited him from transferring, encumbering or otherwise dealing with them without her written consent. The trial judge directed that there was no requirement for ongoing disclosure and terminated the obligation to provide life insurance. Lastly, the trial judge dismissed the appellants contempt motion, without reasons.
[21] Sheila appealed this result, with considerable success. See McKinnon v McKinnon 2018 ONCA 596. The Court of Appeal fixed the spousal support obligation from February 1, 2015 to the end of that year at $1034 per month using the SAAG mid-point range. Randy was ordered to pay $875 per month commencing January 1, 2016, based on the undisturbed trial judge’s finding of imputed income to Randy at $35,000 annually. This order is indefinite.
[22] The court fixed the arrears, after accounting for the trial judge’s termination of child support, at $23, 452.76, less any amounts paid by Randy up to July 1, 2018. The court found Randy was in contempt for his cancelation of the life insurance and imposed a fine of $2295. The annual disclosure obligations were reinstated. Randy was ordered to pay Sheila costs for the trial and the appeal in the sum of $8000.
ANALYSIS
Material Change in Circumstances under the Divorce Act
[23] L.M.P v. L.S., 2011 SCC 64, [2011] 3 SCR 775 remains the leading authority for the correct approach to determine whether there has been a change in circumstances which warrants a review of a spousal support order under section 17(1) of the Divorce Act R.S.C., 1985, c.3 (2nd Supp.) (‘the Act”). The long established definition of a change in circumstances refers to a “material” change that “if known at the time would likely have resulted in different terms.” This definition, first found in a Willick v Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670, a child support variation was adopted for variations of spousal support in G.(L)v. B. (G), 1995 CanLII 65 (SCC), [1995] 3 S.C.R. 370. (See L.M.P. at para. 30).
[24] A section 17 variation inquiry begins with the presumption that the existing order’s terms complied with the objectives of the Act when it was made. (See L.M.P.at para. 33). This means the initial focus of the inquiry is on the nature and sufficiency of the change to determine whether the threshold test for a variation consideration has been satisfied by the moving party. The change must be enduring. If the moving party discharges this threshold onus, then the context and magnitude of the change will shape the scope of the inquiry, as well as the remedy. In this sense, L.M.P. guides us away from a rigid approach, which describes the hearing as either de novo or not, towards a more fluid approach regarding the proper scope of the hearing, driven by the unique facts of each case. (See L.M.P.at para. 47).
[25] As noted by the court in L.M.P., a parties’ agreement is not ignored under section 17 but its treatment will be different than in the context of an initial application under section 15(2) because of the different purposes for each provision. (See L.M.P. at para 27). Here, the parties’ Agreement at paragraph 12(6) provides for regular reviews of the spousal support obligation. Paragraph 14 the Agreement provides that the spousal support may [emphasis added] be varied in the event of a material change in circumstances, which shall include the husband’s retirement from General Motors. At paragraph 12(7) the Agreement stipulates that: “The obligation of the husband to pay support to the wife shall terminate on his death as long as the insurance provisions set out hereinafter are in force and effect. “
[26] The plain meaning of paragraph 14 of the Agreement is that the parties contemplated that Randy's retirement entitles him to trigger a review of the spousal support obligation. Given that there is no stipulated age of retirement in this provision, and Randy has in fact retired, I find that his circumstances have changed in a material way within the meaning of section 17 of the Act.
[27] That said, an affirmative answer to the question of whether the moving party has met the threshold test does not necessarily translate into an increase, decrease suspension or termination of the obligation. It merely opens the door to further inquiry and a consideration of what order is required now, having regard to the objectives of section 17(7) of the Act. This approach is also reflected in the permissive language of paragraph 14 of their Agreement
[28] Having found that a material change has occurred, it is open to the court to revisit Randy’s payment of any support arrears, contempt penalty or outstanding costs order. The amounts found owing by Randy were payable periodically to Sheila because of his ongoing support obligation and his locked-in LIF. Now that he has turned 65, those funds might well be more accessible, albeit with tax consequences.
The Spousal Support Obligation
Entitlement
[29] Neither the parties’ Agreement nor the subsequent rulings specifically denote whether Sheila’s support entitlement is compensatory or needs based in nature. This is relevant when considering the appropriate range within the SAAG.
[30] Neither party tendered evidence regarding their roles during marriage or following their separation and how that impacted their income earning capacity. Sheila did have the responsibility of being the primary parent during marriage and following separation. Notably their children have special needs. These responsibilities almost invariably adversely impact that parent’s participation in the paid labour force. By contrast, the other parent is free to pursue employment, including shift work or overtime, unimpeded by daily parenting responsibilities.
[31] In January 2017, the trial judge found that Sheila was still entitled to spousal support. And based on her receipt of CPP disability payments, he declined to impute any additional income to her. Sheila’s circumstances have not changed materially since then. She clearly still has need. That said, the entitlement and obligation when both parties are retired, demands a different analysis
Income Imputation
[32] In assessing quantum, the court must consider whether Sheila is maximizing her income and, if not whether, whether income ought to be imputed to her. In Boston v Boston, 2001 SCC 43, [2001] 2 S.C.R. 413 the Supreme Court held that a payee spouse must use any assets received in the property settlement to generate income when the pension-holding spouse retires. (See paragraph. 54) The court goes on to say at paragraph 59 that: “When spousal support plays a compensatory role on marriage breakdown, it may be unreasonable to expect the payee spouse to generate investment income from the matrimonial home.”
[33] If Sheila were to sell her home, incur the costs of disposition for doing so and discharge her mortgage and other debt, based on her financial statement sworn January 28, 2022, she would likely net capital in the approximate amount of $160, 000. Assuming an annual interest rate of 4%, this would generate additional income of $6400 per annum or $533 per month. In the current housing market, Sheila would very likely have to spend more on housing than she is now and would be no further ahead financially. Further, this would likely put the two adult disabled children on the street, unless Sheila was able to lease a larger dwelling to continue to accommodate them, which would cost even more. In all of these circumstances, I am not prepared to impute income to Sheila.
[34] Sheila asks that income continue to be imputed to Randy in the amount of $35,000 in keeping with the operative order. She submits he could be employed beyond the age of 65 and that his obligation under their Agreement was reviewable on retirement but did not necessarily terminate.
[35] There is ample jurisprudence to support the conclusion, on the right facts, that retirement at age 65 is not a material change in circumstances, which warrants a termination of an existing spousal support obligation. But here the parties in their Agreement consented to review of the spousal support obligation upon Randy’s retirement from GM, which they did. He now retires at age 65 from employment from a non-arms length employer. With years in the trenches of litigation, including Randy's bankruptcy, Sheila questions the veracity of his financial circumstances.
[36] The prior deemed income ruling was made on a more fulsome record when Randy was younger. Here the court is being asked to assume that Randy could and should find employment beyond age 65 as a mechanic. There is no evidence before me about hourly rates or employment opportunities. In these circumstances, and because of my decision as set out below, to vary the order as it relates to Randy’s payment of spousal support arrears, costs, and the contempt penalty, I decline to impute income to Randy post-retirement, despite Sheila’s ongoing need. Although these monies owed by Randy accrued prior to these proceedings, accelerating their repayment will help address that need. While the Agreement refers to an obligation for life, such an obligation must be grounded in Randy's ability to pay, the parties’ incomes are now equal.
Quantum and Duration
[37] Randy seeks a retroactive reduction based on a claim that his income was adversely impacted by the pandemic. In fact, his income in the years 2020 and 2021 both exceed the income imputation of $35,000. Randy submitted his income for 2019 was only $15,796 using his pre-bankruptcy Income Tax Return. Sheila tendered Randy’s post-bankruptcy ITR which shows an income of $26, 331.84 and submits his income for 2019 is a combination of the two incomes, being $42, 127. Even if my finding that this Randy’s income for 2019 is incorrect, any income reduction cannot be attributed to the pandemic, so there is no basis to disturb the income imputation in the operative order for that year, when he had not yet achieved age 65. I decline to make any downward retroactive adjustment before Randy’s year of retirement, being 2022.
[38] Sheila urges the court to use the mid-range SAAG, which was the range used in all the previous orders. I agree this is fair and appropriate on the evidence before me. Based on the parties’ incomes for 2022 the mid-range spousal support obligation is $596. Therefore, I find that Randy’s monthly spousal support obligation for each month in the year 2022 is $596. He shall be credited with any payments made through FRO collected and designated as spousal support for that year. Randy’s support spousal obligation terminates December 31, 2022.
OUSTANDING SUPPORT ARREARS, COSTS AND THE CONTEMPT PENALTY
[39] Bennett J.'s ruling, which was premised on the parties’ post-trial settlement, contemplated a transfer of various sums owing by Randy to Sheila through his LIF. As it turned out, this was not feasible. If the inaccessible nature of this fund changed when Randy turned age 65, he can finally discharge these longstanding obligations in full at this time. But if these funds can only be accessed by monthly withdrawals, then the quantum of these should be accelerated. Further, once the ongoing spousal support is terminated, Randy can pay an additional sum from his income towards the support arrears, costs and the contempt penalty.
[40] The court requires documentary proof from the parties to make the correct calculations in any final order. Once the court has the required information as set out below, the most efficient way to conclude the matter is to schedule a final hearing for submissions on whether these amounts can be paid in full as ordered here, in one lump sum, or whether the LIF remains locked in for Randy’s lifetime and monthly payments are still required. The onus is on Randy to show, with clear documentary proof, that the final payment of these amounts owing is not feasible because of the structure of the LIF. The parties shall also be given an opportunity to make submissions on costs, bearing in mind that they are each self-represented and that the outcome entails divided success.
CONCLUSION
[41] Based on the foregoing, I make the following order:
Randy’s spousal support obligation for the year 2022 is $596 per month.
Any amounts collected through FRO for ongoing spousal support in 2022 shall be credited towards that obligation. Any remaining credit shall be off-set against his outstanding spousal support arrears, contempt penalty and costs order.
Randy's spousal support obligation shall terminate on December 31, 2022, provided he is current with this obligation.
No later than November 15, Randy shall provide Sheila and the court with documentary proof of the current amount remaining in his LIF which is a sufficient amount to fulfill all his outstanding obligations to Sheila on a full and final basis in one lump sum. Tax adjustments can be made where appropriate.
No later than November 15, Randy shall provide Sheila and the court with proof that he has designated Sheila as the beneficiary of this fund, as required by the operative order. A further preservation order on the institution where these funds are held, may be required.
No later than November 21, 2022, both parties shall provide each other and the court with calculations as to the amounts that remain owing for retroactive spousal support, the contempt penalty and outstanding costs. A current statement from FRO is likely required. This amount, as determined by the court, shall be paid to Sheila in full by January 15, 2023, unless Randy can provide clear documentary, objective proof that the LIF fund remains locked in, cannot be rolled over to Sheila at this time, or that withdrawals from it cannot be accelerated. In that event, and additionally, a new monthly amount shall be payable from Randy’s OAS/GIS income to discharge his remaining sums owing to Sheila, with interest payable.
So long as Randy still owes monies to Sheila, he shall continue to be obliged to provide annual disclosure, including his ITR and NOA.
There shall be final hearing to determine these calculations and costs on December 23, 2022 at 10:00 AM. in person.
Justice N. Tellier
Date: October 25, 2022
COURT FILE NO.: FC-18-FS000480-0001
DATE: October 25, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sheila McKinnon
- and -
Randy McKinnon
RULING ON MOTION TO CHANGE
Nicole Tellier J.
Released: October 25, 2022
[^1]: This income figure combines Randy’s pre-bankruptcy income of $15,796 and his post-bankruptcy income of $26,331.84 [^2]: From January to May, Randy earned $20, 478. Thereafter he received $1285 monthly in OAS/GIS for 7 months, for an additional $8994 [^3]: From January to July, Sheila received $6724 in CPP disability. Thereafter, she received $6407 for the remainder of the year in OAS. Her evidence is that she did not qualify for the GIS.