McCulloch v. McCulloch, 2013 ABQB 177

Court of Queen ’ s Bench of Alberta Citation: McCulloch v. McCulloch, 2013 ABQB 177 Date: 20130320 Docket: 4803 117471 Registry: Edmonton Between: Patricia Marie McCulloch Plaintiff - and - Robert Wayne McCulloch Defendant _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice Peter Michalyshyn _______________________________________________________ I.

Introduction [ 1 ] At issue in this spousal support application is the post-retirement obligation of a paying spouse with little cash but much wealth. [ 2 ] The parties were married more than 42 years ago, on February 19, 1971. After a 27-year marriage, they separated 15 years ago, in February, 1998. They were divorced five years later, on January 2, 2003. Much litigation followed. [ 3 ] On the eve of a 2003 trial the parties agreed to spousal support at $9,000/month, subject to review at Mr. McCulloch ’ s retirement.

The trial proceeded on matrimonial property issues before Smith J., whose reasons are reported at McCulloch v. McCulloch

2003 ABQB 432 .​ [ 4 ] Again on the eve of trial, Smith J. granted a divorce judgment and corollary relief order. The latter came after a December 2, 2002 Formal Offer under the Rules of Court . The Formal Offer was made by Ms. McCulloch and was accepted by Mr. McCulloch on January 6, 2003. The corollary relief order granted by Smith J. on January 8, 2003 ( “ the January 8 Order ” ) repeats the terms of the Formal Offer. Simply put, spousal support was payable at $9,000/month “ until further Order of the Court ” , but reviewable on Mr. McCulloch ’ s retirement, at the option of either party. [ 5 ] Mr.

McCulloch retired in May, 2010 at the mandatory age of his partnership of 62. He lost no time in applying on May 28, 2010 to be relieved of ongoing spousal support payments. His application was denied by Thomas J. pending further evidence of the parties ’ assets and liabilities, including Mr. McCulloch ’ s corporate interests and the revenues which his companies generated for him, in any form.

In particular, Thomas J. ordered the parties to produce the following information: a. complete disclosure of assets and liabilities including corporate assets and the parties ’ estimate of the fair market value of those assets; b. complete disclosure of income and expenses from all sources and with respect to corporate interests, complete disclosure of revenues generated by the corporate assets including but not limited to interest on shareholder loans, repayment of shareholder loans and dividends; c. current budget. [ 6 ] Thomas J. also ordered, consistent with Smith J. ’ s trial decision in 2003, that Mr.

McCulloch ’ s retiring allowance would be shared with Ms. McCulloch. Her share was to be included in the $9,000/month spousal support payments, until further order. [ 7 ] Mr. Cullough appealed the order of Thomas J. His appeal was dismissed in reasons reported at McCulloch v. McCulloch 2011 ABCA 193 . The appeal court agreed his application was premature. The further information noted above was necessary to determine his spousal support obligations. Amongst other things, the appeal court held Mr.

McCulloch ’ s “ extensive corporate interests outside of his accounting practice ” would be relevant to the issues ultimately to be determined. As the court noted: His income from those sources, post-retirement, was relevant to a determination of his ongoing ability to pay spousal support. [ 8 ] By the time of the application before me, there appeared to be no serious dispute that Ms. McCulloch was entitled to some $3,800/month of Mr. McCulloch ’ s retirement allowance. Ms. McCulloch accepted Thomas J. ’ s decision netting out that sum from her ongoing claim for $9,000/month. [ 9 ] The issue then is whether Ms.

McCulloch is entitled to another roughly $5,200/month for her lifetime, or alternatively for some shorter period of time, if at all. [ 10 ] Before turning to the merits, it is worth noting the parties each complained of the other ’ s inadequate financial disclosure leading to the application before me. That is perhaps surprising given the orders coming out of Thomas J. in chambers, and out of the Court of Appeal. It is also surprising in that a review of the history of the parties ’ dispute suggests anything but a casual approach to the litigation.

A review of Smith J. ’ s thorough reasons for decision at trial reveals serious misgivings for Mr. McCulloch ’ s reliability if not candour around financial reporting in particular. [ 11 ] Yet in the lead-up to the application before me, Ms. McCulloch in particular complained that last-minute financial disclosure “ received ...literally on the eve of the application [precluded] any kind of considered analysis ” . She repeated that complaint in follow-up written materials on November 21, 2012, asserting “ Mr.

McCulloch failed miserably in his obligation to provide the information and factual basis required by [Thomas J.]... ” Nevertheless Ms. McCulloch submitted that Mr. McCulloch ’ s September, 2012 “ estimate of fair

market value ” of his assets would serve her purposes, and this court ’ s, in coming to terms with the spousal support issues. [ 12 ] For his part, Mr. McCulloch complained too that Ms. McCulloch had failed to abide by Thomas J. ’ s order compelling production in that, amongst other things, she produced an initially “ virtually unintelligible ” budget, leading to examinations and undertakings that were slow to be provided, if at all. Mr. McCulloch also complained that at no point has Ms. McCulloch accounted for what he calls her “ missing ” $500,000 in matrimonial assets. Like his former spouse, however, Mr.

McCulloch was content to get on with the application notwithstanding these apparent shortcomings in the evidence. II. Positions of the parties Mr. McCulloch [ 13 ] Mr. McCulloch ’ s basic position is that spousal support should terminate retroactive to June, 2010 owing to his retirement and retirement allowance payments. [ 14 ] After divorce, the parties were left each with some $1.1 million in net matrimonial assets. According to the 2003 Judgment, Mr.

McCulloch ’ s corporate assets were $1,554,337 net of certain deferred taxes and of exemptions. (A certain further loan adjustment had yet to be quantified.) After the 2003 trial he continued to earn substantial income from his accounting firm. He continued to manage the previously-divided assets, and acquired new assets not subject to earlier property division. [ 15 ] In the three full years before his retirement year of 2010 Mr. McCulloch had average earnings of $954,000/year. A relatively small portion of these earnings were declared for tax purposes but did not result in cash in Mr.

McCulloch ’ s hands. [ 16 ] Mr. McCulloch had employment earnings of $606,633 in the first five months of 2010. A relatively higher proportion of these earnings were declared for tax purposes but did not result in cash in Mr. McCulloch ’ s hands. Together with other sources, Mr. McCulloch ’ s total income in 2010 was $1,292,262. [ 17 ] His taxable income in 2002 was $619,315, reduced on Mr. McCulloch ’ s evidence to $514,039 in “ net professional income received ” . [ 18 ] Information was not produced regarding Mr. McCulloch ’ s income between 2003-2006.

Although anything is possible, it appears reasonable to conclude that as a long-time partner in an international accounting firm Mr. McCulloch ’ s taxable income during those undisclosed years continued to rise toward the later 3-year average of $954,000 noted above. [ 19 ] In the years for which information has been produced, in addition to ‘ professional income ’ Mr. McCulloch declared significant interest and investment income, as follows: 2007 $187,775 2008 $236,811 2009 $267,404 2010 $146,225 2011 $ 16,500 [ 20 ] Post-retirement Mr.

McCulloch says his only income is his share of the retiring allowance, plus CPP benefits in an unspecified sum. In 2010 the retirement allowance was $72,293, of which $31,032 was paid to Ms. McCulloch. In 2011, the retirement

allowance was $124,000, of which $46,892 was paid to Ms. McCulloch, leaving $77,108 for Mr. McCulloch. [ 21 ] Mr. McCulloch says that in 2011, after paying tax, spousal support and his former wife ’ s share of the retirement allowance, he had a net $46,707. He says that by comparison, Ms. McCulloch had a net income in 2011 of $95,259. [ 22 ] In 2011 Mr. McCulloch ’ s share of the retirement allowance was $77,108.

That level of retirement income is some 12% of the average ‘ professional ’ earned income he declared for the three prior full years before his 2010 retirement year ($645,666). [ 23 ] Similarly, in 2011 Mr. McCulloch declared interest and investment income of $16,500. That level of interest/investment income is some 7% of the average of the same source of income declared in the three prior full years before his 2010 retirement year ($230,663) . [ 24 ] Mr.

McCulloch says that since 2003 he has continued to live frugally, investing his considerable earnings in primarily real estate holdings which now generate no income. Some of the investments existed in 2003, but it is acknowledged at least that “ increases in value have arisen by virtue of continued contributions... ” [ 25 ] In his affidavit filed May 22, 2012, Mr.

McCulloch describes in detail his various real estate and other investments. [ 26 ] He asserts that for the most part the assets currently not available for spousal support purposes are the same assets that existed at the time of the 2003 property division. He says there has been no change in the structure of those investments. [ 27 ] These assertions do not appear to square up entirely with the evidence before me. For example, in his affidavit of May 22, 2012 Mr. McCulloch identifies AAA Equities Ltd., Healy LP, Rainbow LP, Sherwood Park LP.

It appears Healy LP owns certain a building and land as identified at trial. There is no evidence however that AAA existed at trial, or Rainbow or Sherwood Park LP, or R.W. McCulloch Professional Corp. DMI existed at trial, but it appears its interest in Branch Pole is more recent. Oliver and Cambaria existed at trial. Mr. McCulloch has “ mapped ” his corporate structure in an exhibit to his May 22, 2012 affidavit. The numbered companies referred to on the map are not the same numbered companies referred to at the 2003 trial. [ 28 ] In his same May 22, 2012 affidavit Mr.

McCulloch swore he was unable to estimate the value of certain corporate/business interests, e.g., Healy, Rainbow, AAA Equities, DMI, Oliver, and Sherwood Park LP. He repeated that position in an undertaking response given after being examined on the affidavit, on July 25, 2012. [ 29 ] Yet some two months later, by the time of his affidavit filed September 20, 2012, Mr. McCulloch was able to estimate the value, what he calls his “ best guess ” as to values.

The tenor of his affidavit is that he was ‘ hard done by ’ to produce these values notwithstanding his acknowledgment they were ordered to be produced by Thomas J. ’ s May, 2010 order, more than two years before they were disclosed: I have been concerned with estimating current values as I am not a real estate appraiser, and when viewed against the backdrop of the issues raised my estimating my 2002 income, I am concerned that any inaccuracies will open the door to revisit the issue again. I am, also concerned that [Ms.

McCulloch] will use my failure to provide my estimate of the value of corporate assets as directed by Justice Thomas as a reason to delay this matter further. As such, attached ... is my “ best guess ” as to values. [ 30 ] Mr. McCulloch thus estimates the fair market value of his corporate holdings at $10,388,149.

He then deducts his estimate of the cost of the investments, their “ increase in value to date of divorce trial ” , and estimated income taxes on their sale (at 44.7%), to arrive at his estimate of the “ unrealized gain after divorce ” at $4,216,117. [ 31 ] It is not clear in the evidence whether the $4,216,117 figure includes the $1,534,348 sum AAA Equities Ltd owes to Mr. McCulloch, or other sums AAA owes to its other shareholders, or to related companies in which Mr. McCulloch has an interest. The latter figures are disclosed in an undertaking response following a July 25, 2012 examination on affidavit.

That disclosure obviously pre-

dates Mr. McCulloch ’ s asset estimates in his September 20, 2012 affidavit. The September 20, 2012 estimates do not deal squarely with the significant sums owed to AAA shareholders. [ 32 ] Without endorsing the accuracy of the September 20, 2012 estimates, or the propriety of the deductions, it does appear the $4,216,117 figure represents at least the value of Mr. McCulloch ’ s corporate interests. [ 33 ] There is no evidence how much of this figure is gains on already-divided property as distinct from gains generated by the investment of earned income since 2003. However, given Mr.

McCulloch ’ s substantial earned income, together with his evidence he has continued to live a frugal lifestyle, there is a ready inference that a significant part of the $4,216,117 gain was income-driven since the divorce. [ 34 ] As noted above, at trial in 2003 Mr. McCulloch ’ s corporate assets were valued at $1,554,337. He had a further $59,075 in exempt assets at that time. [ 35 ] In some of his evidence, Mr. McCulloch has shown an apparent reluctance to acknowledge the impact of his large post- divorce income on the increased value of his investments.

For example, in his affidavit of May 17, 2010, he states: Any other income I will have over and above the Retirement Allowance I will be splitting with her, comes from assets or investments I received from the property settlement following the trial back in 2003. [ 36 ] Of course other evidence already reviewed belies this statement. In my view, Mr. McCulloch ’ s reluctance to acknowledge the impact of his post-divorce income betrays an attitude toward his former wife commented on in no uncertain terms by Smith J. at trial, as will be apparent later in these reasons. [ 37 ] Yet another indication of Mr.

McCulloch ’ s attitude is his assertion in a May 22, 2012 affidavit, that the post-divorce earnings he did invest in real estate – and the resulting increased value of that real estate – should be immune from further spousal support claims because “ ...of course [the increased value of the investment] arises from the income I earned and have already paid support on. ” [ 38 ] That assertion fails on at least two counts: first, the support paid by Mr.

McCulloch was based on the accepted Formal Offer/corollary relief order, without regard for post-2003 income; and second, had support been payable based on post-2003 income, almost certainly Mr. McCulloch would have paid significantly more support than $9,000/month. [ 39 ] In his affidavit of May 17, 2010 Mr. McCulloch asserts, in the context of questioning Ms. McCulloch ’ s investment returns, that 5% would be a reasonable rate of investment return for her. That same 5% rate of return on $4,216,117 would generate $210,805/year. [ 40 ] As to the January 8, 2003 corollary relief order, Mr.

McCulloch argues it was “ ...clearly contemplated that the [spousal] support would be reviewed upon retirement, as [my] income would decrease dramatically ” . [ 41 ] In a similar vein, Mr. McCulloch states in his various affidavits, amongst other things, that: Essentially, virtually all of my available earnings from my employment after separation have gone to real estate investments in the various companies. This has required not only the use of income, but also my share of the assets from divorce.

I certainly did not think that I would continue to pay spousal support after I retired from my employment ... as we both understood my professional income would be reduced substantially and we would both share in the [retirement allowance] benefit as determined by the original trial judge.

... it cannot be the case that [Ms. McCulloch] expected to receive the same spousal support until her death based on the Offer of Settlement she provided through her legal counsel. I would not have agreed to a spousal support offer that would see the payments remain the same until [Ms. McCulloch ’ s] death as I knew that my income would drop significantly upon my retirement ... [ 42 ] Mr. McCulloch argues that in law he should not be forced to sell assets to meet Ms.

McCulloch ’ s ongoing spousal support demands. [ 43 ] He argues that now some 15 years after separation and payment of spousal support, and of course the 2003 division of matrimonial property, Ms. McCulloch has been well and adequately compensated. He notes she is living well above her circumstances in the marriage, and has substantial net worth. He denies he should be responsible if Ms. McCulloch is spending beyond her means, or her spending on others. He alleges Ms. McCulloch has done a poor job of investing the more than $800,000 in cash she was awarded at trial in 2003.

He questions the whereabouts of some $500,000 of matrimonial property that he says she has not specifically accounted for. Ms. McCulloch [ 44 ] Ms. McCulloch brought a cross-application for retroactive spousal support, but effectively abandoned that application when appearing before me. [ 45 ] In her affidavit filed July 27, 2012, Ms. McCulloch deposes she believed the January 8, 2003 Order would see support payable for her lifetime. Even on review, she states, she did not assume or expect support would be reduced. She anticipated that post- trial Mr.

McCulloch ’ s earnings would continue to increase, as they had pre-trial. She further anticipated the value of his investments would increase: Most importantly, [Mr. McCulloch ’ s] investment [sic] would, over time, grow dramatically, eventually outstripping the value of his employment income. In fact, [Mr. McCulloch ’ s earned] income ... did continue to rise dramatically and his investments have grown spectacularly in value. [ 46 ] Ms.

McCulloch testified when examined on her affidavit she was aware of her former husband ’ s intention to retire, but did not consider it would be “ total retirement ” in that she believed he would continue to pursue his corporate interests. [ 47 ] She alleges her former husband ’ s continuing investment in non-income producing assets is aimed, in part, at avoiding spousal support obligations to her. She denies it is any coincidence that Mr.

McCulloch reduced his investment income on the eve of his retirement. [ 48 ] She says she has followed professional advice regarding the investment of her matrimonial property proceeds. As to her current circumstances, Ms. McCulloch acknowledges a $736,000 investment balance, a paid-off house, share in a condominium, trailer, and the like. No details are in evidence regarding her dealing with some $500,000 in divided matrimonial assets. [ 49 ] Ms. McCulloch acknowledges that since 2003 she has enjoyed a higher standard of living than she did during the marriage.

She denies she spends lavishly, but agrees her needs have been fulfilled. In this sense her claim for ongoing spousal support is not so much needs-based but compensatory: Ms. McCulloch argues she continues to be entitled to be compensated for her role in the 27-year marriage including her support that allowed Mr. McCulloch to work and amass assets and earn significant income both before and since the divorce. [ 50 ] As to her role in the marriage, Ms. McCulloch relies on the findings at trial of Smith J. in 2003.

[ 51 ] At the 2003 trial Smith J. concluded the parties ’ marriage was a traditional one. Ms. McCulloch was some six years younger than her husband; she quit high school in grade 11 when the parties married. For all intents and purposes Ms. McCulloch stayed home during the marriage while Mr. McCulloch advanced his career in accounting and in business.

He became a partner in a national accounting firm, obtained further professional degrees, and engaged himself in extracurricular professional and community activities. [ 52 ] Smith J. characterized what she called a frugal household during the marriage in the following terms: ...the parties agreed that the husband would begin giving the wife a monthly household allowance. In the mid 1970's the amount was $500 and by the date of separation it had grown to $2,500. The wife was expected to run the household from the allowance.

Large purchases which could not be covered by the allowance required the husband ’ s blessing, for the wife had no access to additional funds without his permission. They agreed to conduct their financial affairs frugally and the wife ’ s requests for costly items were often refused based on the finding that they were ‘ wants ’ and not ‘ needs ’ .

While the parties enjoyed some travel together, including through the husband ’ s work, if the wife wanted to vacation with a friend, she was required to pay for it herself. ... [13] It was the wife ’ s evidence that she was permitted to do as she wished as long as the husband ’ s routine was not disturbed. I accept this evidence. The husband ’ s long work hours and frequent trips away from home together with their frugal living required much of the wife ’ s time at home, managing the household as cheaply as she could. She clipped coupons and shopped wisely.

She could not leave for a holiday without ensuring the house was stocked with food, that child care including the children ’ s driving needs were covered by a third party, and that her husband would not be inconvenienced.

A primary objective within her role was not to inconvenience her husband with domestic concerns, and this role impinged on any aspirations she had to return to school or to enter the work force. [14] The parties ’ long term financial plan was to live frugally, pay the debts off early and quickly, invest and reap the benefits later when they retired which they planned would happen while they were still relatively young. [15] After the separation, when the wife was still unaware of the husband ’ s income, the parties agreed that the husband would continue to pay $2,500 per month as support.

That continued until she asked for another $400 per month. She received the $2,900 per month until August 17, 2000 when the court ordered spousal support in the amount of $6,500 per month payable from June 1, 2000 until trial. On October 24, 2001 that amount was again increased to $9,000 per month effective October 1, 2001, and that amount has now been continued in the Divorce Judgment by agreement. [ 53 ] Smith J. also commented adversely on Mr. McCulloch ’ s credibility at trial particularly with regard to financial matters, and with regard to his attitude toward his former wife.

Smith J. offered numerous examples of Mr. McCulloch ’ s lack of reliability and self- serving evidence; she characterized part of his evidence as “ suspicious and [showed] a disregard for the trial process and the rights of his wife ” . On another point she found his “ evidence is not believable ” . At the end of the day, Smith J. commented: [Mr. McCulloch ’ s] testimony, some of the read-ins and the pretrial process which came into evidence at trial show he was a reluctant litigant who lacked respect for his wife or her rights. (at paragraph 21) [ 54 ] An issue in the 2003 trial was the extent to which Ms.

McCulloch could share in Mr. McCulloch ’ s post-separation increased earnings. Smith J. agreed it was “ mostly true ” Mr. McCulloch ’ s earnings increased after separation. This was the result of a change in his role with the accounting firm and other related developments. [ 55 ] Smith J. put it this way in her reasons for judgment:

[51] Clearly, the nature of the duties at the Firm taken on by the husband post-separation show that he is a trusted senior partner at the Firm. One becomes such by spending years working in the trenches as a good partner. The wife contributed to the husband ’ s current position by taking on the responsibility of the home so he could work long hours and contribute in the community. Their agreement was to work hard, pay now and reap the benefits later .

In my view, the pretrial increases in the husband ’ s retirement entitlement ought to be shared with the wife, who earned her rights during the first twenty seven years of their relationship and eighteen years with the Firm. (emphasis added) [ 56 ] Ms. McCulloch denies she is now asking the court necessary to order Mr. McCulloch sell assets to pay spousal support. She says that given his significant wealth, is it reasonable to conclude Mr. McCulloch can access some $5,200/month to fulfill his obligations to her. III.

Analysis The nature of the review [ 57 ] Given the accepted Formal Offer/corollary relief order of January 8, 2003, no one needs to show a material change in circumstances to allow a review of spousal support payable. [ 58 ] There is some uncertainty however regarding the nature of the review, whether for example it should proceed under s. 15.2 of the Divorce Act essentially as a hearing de novo, or under s. 17(4.1) of the Divorce Act , arguably giving rise to a somewhat different, arguably narrower inquiry. [ 59 ] In his application before both Thomas J. and this court, Mr.

McCulloch refers to s. 17 of the Divorce Act as his basis for seeking a review of spousal support. So too not surprisingly and I think intentionally does the Court of Appeal in this case. [ 60 ] Section 17(1) of the Divorce Act enables the court to make an order varying a support order or any provision thereof. [ 61 ] Section 17(4.1) states:

(4.1) Before the court makes a variation order in respect of a spousal support order, the court shall satisfy itself that a change in the condition, means, needs or other circumstances of either former spouse has occurred since the making of the spousal support order or the last variation order made in respect of that order, and, in making the variation order, the court shall take that change into consideration. [ 62 ] Section 17(7) provides that a variation of spousal support should: (

a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown; (

b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (

c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and

(

d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time. [ 63 ] Ms. McCulloch helpfully refers to L.M.P. v. L.S. 2011 SCC 64 . In that case the majority distinguished between a s. 15.2 initial spousal support order, and a s. 17(4.1) review of an order already given. While the “ objectives ” of each order are the same, the factors for each order are different. As the court stated, at paragraph 23: 23 ... there are differences between what a court is directed to consider in making an initial support order and on a variation of that order.

Notably, unlike on an initial application for spousal support under s. 15.2(4)(c), which specifically directs that a court consider "any order, agreement or arrangement relating to support of either spouse", s. 17(4.1) makes no reference to agreements and simply requires that a court be satisfied "that a change in the condition, means, needs or other circumstances of either former spouse has occurred" since the making of the prior order or the last variation of that order.

Because of these differences in language, it is important to keep the s. 15.2 and s. 17 analyses distinct. [ 64 ] The court also comments with regard to what it calls the “ appropriate variation ” once a material change threshold in s. 17 has been met: 47 If the s. 17 threshold for variation of a spousal support order has been met, a court must determine what variation to the order needs to be made in light of the change in circumstances. The court then takes into account the material change, and should limit itself to making only the variation justified by that change.

As Justice L'Heureux-Dubé, concurring in Willick , observed: "A variation under the Act is neither an appeal of the original order nor a de novo hearing" (p. 739). As earlier stated, as Bastarache and Arbour JJ. said in Miglin , "judges making variation orders under s. 17 limit themselves to making the appropriate variation, but do not weigh all the factors to make a fresh order unrelated to the existing one, unless the circumstances require the rescission, rather than a mere variation of the order" (para. 62). 48 Variation involves the application of both s. 17(4.1) and s. 17(7) of the Divorce Act .

In Hickey , L'Heureux-Dubé J. described the interplay between them as follows: On an application for variation of an award of spousal support, the court must first find, under s. 17(4), that there has been a material change in the conditions, means, needs, or circumstances of either spouse (see Moge , supra, at pp. 875-76, and Walker v. Walker (1992), 12 B.C.A.C. 137 , at pp. 141-42) and in making the order, the court must take into consideration that change. As with the variation of child support orders, this change must be material, and cannot be trivial or insignificant.

The factors enumerated give the court considerable discretion in determining whether a variation order is justified: see J. Payne, Payne on Divorce (4th ed. 1996), at p. 321. Once this threshold is passed, the court must consider the four objectives of spousal support enumerated in s. 17(7) of the Divorce Act . [para. 20] 49 Julien D. Payne and Marilyn A. Payne observed that "[t]here is nothing in the Divorce Act to suggest that any one of the objectives [in s. 17(7) ] has greater weight or importance than any other objective" ( Canadian Family Law (3rd ed. 2008), at p. 253).

Rather, the objectives "operate in the context of a wide judicial discretion" and "provide opportunities for a more equitable distribution of the economic consequence of divorce between the spouses". 50 In short, once a material change in circumstances has been established, the variation order should "properly reflec[t] the objectives set out in s. 17(7) , ... [take] account of the material changes in circumstances, [and] conside[r] the existence of the separation agreement and its terms as a relevant factor" ( Hickey , at para. 27).

A court should limit itself to making the variation which is appropriate in light of the change. The task should not be approached as if it were an initial application for support under s. 15.2 of the Divorce Act . [ 65 ] From this I conclude s. 17(4.1) of the Divorce Act defines the nature of the review to be undertaken. I further conclude, contrary to Mr. McCulloch ’ s submission before me, that I am not dealing with a de novo hearing. I will, rather, limit myself to making the appropriate variation of the order in question, if any.

I will take into account the material change – here the bare fact of retirement – and limit myself to making only the variation justified by that change. Guided by Miglin , I will not “ weigh all the factors to make a fresh order unrelated to the existing one unless the circumstances require the rescission, rather than a mere variation of the order". [ 66 ] As to the onus, if on anyone it is with Mr. McCulloch. It is his application. He seeks to vary the order which stems from an agreement he entered into which on its face, but for this review, obliges him to pay spousal support indefinitely.

The January 8, 2003 Order [ 67 ] There is little evidence from which to ascertain the intention of the parties leading to the accepted Formal Offer on January 6, 2003 and subsequent corollary relief order. The parties ’ submissions in that regard are outlined above. They have different views of what led to the January 8, 2003 Order, and to its effect. [ 68 ] In my view the effect of the Order argued by Ms. McCulloch most closely reflects reality. Without more, the Order on its face continues during her lifetime.

Like any such order, in law it would be subject to variation based on a change of circumstances although presumably a reviewing court would have some regard for the Order ’ s contractual underpinnings . And of course by its terms it is subject to review on Mr. McCulloch ’ s retirement. [ 69 ] Notably the Order is subject to review not only at Mr. McCulloch ’ s initiative, but at the option of either party. That the Order gives Ms. McCulloch the option of seeking increased spousal support at Mr. McCulloch ’ s retirement is consistent with her evidence that she anticipated Mr.

McCulloch would retire from his firm, but not likely from all income-earning activities including from investments. [ 70 ] I have referred above to Mr. McCulloch ’ s evidence regarding the January 8, 2003 Order that “ ... we both understood my professional income would be reduced substantially and we would both share in the [retirement allowance] benefit as determined by the original trial judge. ” [ 71 ] In fact however at the time he accepted her Formal Offer Mr. McCulloch could not have known exactly how Smith J. would determine the sharing of his retirement allowance. He argued at trial for example that Ms.

McCulloch ’ s share of the retirement allowance should be based on his contributions to it up to separation, rather than up to trial. In that roughly five year period his earnings increased significantly, leading presumably to a more valuable retiring allowance. Over his objections, Smith J. ordered the retirement allowance sharing based on Mr. McCulloch ’ s contributions up to trial, presumably diminishing the share Mr. McCulloch had anticipated keeping when he accepted the Formal Offer.

His evidence cited above is misleading with regard to the intention of the parties when the Formal Offer was accepted. [ 72 ] I do not accept at face value that when he accepted the Formal Offer Mr. McCulloch had any particular consideration for Ms. McCulloch ’ s share of the retirement allowance and the effect of her share on his post-retirement spousal obligations. And based on the evidence and submissions before me, I am unable to accept Mr.

McCulloch ’ s submissions that it was obvious that upon retirement his spousal support obligations would come to an end. [ 73 ] The January 8, 2003 Order says nothing about the effect of Mr. McCulloch ’ s retiring allowance on the $9,000/month figure. No one pointed me to anything in Smith J. ’ s trial decision that dictated Mr. McCulloch ’ s share of the retirement allowance would reduce spousal support. It was only Thomas J. ’ s decision that had that effect. To that extent then the January 8, 2003 Order has already been significantly varied in Mr. McCulloch ’ s favour.

The retirement allowance set-off reduces by some 42% the spousal support payable. Ms. McCulloch did not appeal Thomas J. ’ s decision, nor did she seek to revisit the retirement allowance set-off in the application before me. I am certainly entitled to take that earlier variation into account as I consider the balance of Mr. McCulloch ’ s application. [ 74 ] I am also entitled to take somewhat into account the fact that the January 8, 2003 Order is based wholly on a contractual agreement between the parties, being of course the bargain of the accepted Formal Offer. [ 75 ] The bargain was that Mr.

McCulloch agreed to pay $9,000/month to avoid the uncertainty of a trial finding on his spousal support obligations. The bargain gave him a “ review ” at his retirement, nothing more. [ 76 ] Significantly, the bargain also effectively precluded any review of spousal support by Ms. McCulloch at least until Mr. McCulloch ’ s retirement. That part of the bargain has been very much to Mr. McCulloch ’ s benefit. But for accepted Formal Offer, Ms. McCulloch would have had a compelling argument for increased spousal support given Mr. McCulloch ’ s significantly higher income post-divorce.

[ 77 ] The bargain of course provides for review at Mr. McCulloch ’ s retirement. At law, support agreements – and I find the accepted Formal Offer to be a form of such an agreement – are important though not decisive of proper spousal support. That would particularly be the case with an accepted Formal Offer such as exists here, given the lack of evidence or agreement as to its underpinnings. [ 78 ] In L.M.P. v. L.S. the court reviewed the authorities on support agreements, their features and impact on spousal support decisions.

The court noted that the majority in Miglin , at paragraph 4, acknowledged the importance of ta king a fairly negotiated agreement into account: ... a fairly negotiated agreement that represents the intentions and expectations of the parties and that complies substantially with the objectives of the Divorce Act as a whole should receive considerable weight. [para. 4] [ 79 ] As the parties were represented by counsel when the Formal Offer was made and accepted, I have no difficulty concluding it represents their “ intentions and expectations ” .

It is more difficult to conclude, on the evidence, that it “ complies substantially with the objectives of the Divorce Act . As such, I would hesitate to conclude the accepted Formal Offer meets the test in Miglin . In the case before me it should not receive “ considerable weight ” . [ 80 ] On the other hand, in my consideration of Mr. McCulloch ’ s cause to vary spousal support, I would not disregard or completely subordinate the contracted-for $9,000/month sum in favour of other spousal support principles. [ 81 ] As noted, the parties each benefitted in their own way from the bargain.

They each avoided the expense and the uncertainty of leaving a spousal support decision to a trial judge. Ms. McCulloch gained certainty at a sum payable, subject to the effect, if any, of her former husband ’ s retirement. Equally, Mr. McCulloch gained certainty in that the bargain was silent regarding periodic income updates, without more protecting him from retroactive support applications. [ 82 ] These same questions around the effect of the accepted Formal Offer are relevant to the duration of any order I might make regarding spousal support going forward, if any. Mr.

McCulloch contracted to pay indefinitely, subject only to his retirement. But if his retirement is immaterial to his ability to pay spousal support, then on what basis would I conclude other than that he should continue to pay, indefinitely? [ 83 ] Finally, the same questions are relevant to the issue of arguable double-recovery, and to the imperfect evidence around equalized versus non-equalized monies increasing the value of Mr. McCulloch ’ s investments. Again, Mr.

McCulloch entered into a contract: how he funds his obligations under the contract, with or without ‘ equalized ’ assets, is arguably of little concern to Ms. McCulloch. The variation [ 84 ] Section 17(4.1) of the Divorce Act requires that I take the “ change ” – here Mr. McCulloch ’ s retirement – into account when considering a variation of the January 8, 2003 order. In doing so and on the facts of this case, the retirement is nothing more than a triggering event.

It is inconclusive of anyone ’ s ‘ condition, means, needs or other circumstances ’ . [ 85 ] In considering a variation, I will of course take into account the s. 17(7) objectives which, to repeat, require that I: (

a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown; (

b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

(

c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and (

d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time. [ 86 ] Subsections (a), (

c) and (

d) are in play on the application before me. As noted already, while I must take these objectives of spousal support into account, no one objective is more important than any other. Together will all of the circumstances, they “ operate in the context of a wide judicial discretion ” to determine spousal support, to again quote from Payne & Payne. [ 87 ] As to the s. 17(7) (

d) objective of promoting self-sufficiency, the starting point in the case before me is Smith J. ’ s 2003 trial decision, wherein she described Ms. McCulloch leaving high school to get married, then carrying on a quite traditional role within the marriage until separation in 1998. Post-separation Ms. McCulloch trained for two years in massage therapy. For health reasons which Smith J. accepted, Ms. McCulloch was unable to continue working as a massage therapist. There was little further evidence before me, and little argument, as to just what Ms. McCulloch has been able to do realistically to achieve self-sufficiency since 2003. [ 88 ] On the whole, s. 17(7) (

d) considerations play a limited role in the discretion I will exercise around ongoing spousal support. [ 89 ] As to ss. 17(7) (

a) and(c) , again the starting point is the 2003 trial decision, from which I have already repeated most of the relevant findings arising from the evidence before Smith J. [ 90 ] My consideration of all the circumstances includes the fact that since 2003, Mr. McCulloch has very likely not paid spousal support reflective of the Spousal Support Advisory Guidelines (SSAGs) as outlined in Ms. McCulloch ’ s materials. I acknowledge the SSAGs are advisory, and must be used with caution on higher incomes. Nevertheless they are still of some assistance in understanding the quantum of spousal support Mr.

McCulloch has not paid in the years post-separation leading up to his variation application. As argued by Ms. McCulloch, money he has not paid in spousal support doubtless has been invested in his non-income-producing real estate investments. [ 91 ] I must also consider and do appreciate Mr. McCulloch ’ s argument that Ms. McCulloch has enjoyed the use of $9,000/month, since mid-2010 including her share of the retirement allowance.

She now has clear title to her home, plus a 1/8th share of a resort property, investments valued of close to $750,000, and has spent for uncertain reasons some $500,000 in her share of the previously- divided matrimonial property. [ 92 ] Ms. McCulloch ’ s means generally however are dwarfed by her former husband ’ s, in terms of assets and income-earning capacity. She has had a limited ability to increase her means since the divorce. She has relied on professional investment advice while Mr.

McCulloch employed his own investment expertise, a skill-set of course that he developed during the marriage. [ 93 ] I have considered the evidence adduced by Mr. McCulloch going to Ms. McCulloch ’ s lifestyle now as compared to at separation. I agree her budget is high on certain points. She is not suffering. But her ’ s is not a needs-based cause for ongoing spousal support. Compensatory and to a lesser extent contractual principles play a larger

part in her cause. The relevance of those principles has not changed since the making of the January 8, 2003 Order. Again, the contract, or bargain of the accepted Formal Offer is subject only the ‘ change ’ of Mr. McCulloch ’ s retirement, if in reality that ‘ change ’ alters his ability to pay. And as to the compensatory principle, I am taking into account Smith J. ’ s findings at trial. I am also taking into account post-trial, Ms. McCulloch ’ s limited ability to become self-sufficient. All of this evidence is persuasive, without more, that Ms.

McCulloch continues indefinitely to be entitled to support. [ 94 ] I am also taking into account what I find were Ms. McCulloch ’ s reasonable expectations in retirement, very clearly stated by Smith J. at trial, and summed up in the statement: “ Their agreement was to work hard, pay now and reap the benefits later. ” Those expectations are relevant generally to compensatory principles, but if it is necessary to do so, also help justify Ms. McCulloch’s current lifestyle, as compared to her frugal lifestyle during the marriage. It would be unfair and unjust, now at Mr.

McCulloch’s retirement, not to recognize the commitment made during the frugal years of the marriage that life would improve considerably upon retirement. [ 95 ] At the end of the day, and for the reasons stated, without more I conclude Ms. McCulloch remains entitled to spousal support of $9,000 including of course her share of the retirement allowance. She remains entitled on the basis of contractual and compensatory

principles. [96] This then brings me finally to Mr. McCulloch’s ability to pay. [97] Ms. McCulloch relies primarily on Leskun v. Leskun, which holds as follows at paragraphs 29-32: Whether the Appellant's Capital Ought to Have Been Taken Into Account in Determining His Ability to Pay 29 There is no support in the case law or in logic for the proposition that the chambers judge was wrong [page934] to take into accountthe appellant's capital assets acquired after the marital break-up. In Strang v.

Strang, (SCC), [1992] 2 S.C.R. 112, theCourt stated that the traditional understanding of the word "means" includes, "all pecuniary resources, capital assets, income fromemployment or earning capacity, and other sources from which the person receives gains or benefits" (p. 119). J. D. Payne and M.

A.Payne elaborate as follows: The word means includes all pecuniary resources, capital assets, income from employment or earning capacity, and any other sourcefrom which gains or benefits are received, together with, in certain circumstances, money that a person does not have in possession butthat is available to such person. [Emphasis in original.] (Canadian Family Law (2001), at p. 195) 30 The appellant says that there was a division of capital by Collver J. at the original trial and that it is unfair that his after-acquiredcapital should now be tapped to pay the respondent continuing support.

The present case does not raise the "double dipping" issuementioned in Strang and dealt with at length in relation to pension benefits in Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43. Inthat case, Major J. described the problem in this way: ... upon marriage dissolution the payee spouse (here the wife) receives assets and an equalization payment that take into account thecapital value of the husband's future pension income.

If she later shares in the pension income as spousal support when the pension is inpay after the husband has retired, the wife can be said to be recovering twice from the pension: first at the time of the equalization ofassets and again as support from the pension income. [para. 34] 31 The appellant's capital assets at issue here did not exist at the time of the initial division by Collver J. and no issue of "double dipping"arises.

As Major J. put it in Boston, at para. 64 "the court should ... focus on that portion of the payor's income and assets that have notbeen part of the equalization or division of matrimonial assets when the payee [page935] spouse's continuing need for support is shown"(emphasis added). 32 If a court could not take into consideration after-acquired capital assets in considering a spousal support order it would createa potential injustice.

A spouse could (as is alleged here) shield his or her true worth to avoid paying support, even though his or herfinancial situation is significantly better than that of the other spouse. In this case, for example, the appellant seems to have taken theincome he earned working in Chicago and invested it into a bagel business. Morrison J. estimated that his investment in that business wasworth as much as $230,000. To say this asset cannot be taken into consideration would not reflect the true "means, needs and othercircumstances" of the parties as required by s. 15.2(4) of the Divorce Act. [98] Ms.

McCulloch also relies on Bullock v. Bullock 2007 Carswell BC 490, Jenkins v. Jenkins 2012 Carswell NS 234, andMacQuarrie v. MacQuarrie 2012 PECA 3 , 2012 Carswell PEI 5. I find none of these cases particularly helpful, in the sensethat I do have to rely on them to bolster any doubts I may have about the role of Leskun in what I have to decide. [99] Mr. McCulloch argues Leskun is distinguishable on its facts, as the court was dealing with an individual who had failed todisclose assets, and with assets which did not exist at the time of the initial division. I disagree Leskun is distinguishable on thesegrounds.

There is no reason to restrict its reach to cases in which assets are not disclosed. The Leskun principles appear tailor-made forthe scenario before me where the payor Mr. McCulloch rendered himself cash-poor and asset-rich on retirement. Nor is Leskundistinguishable on the basis it dealt with assets not earlier divided. The case before me also deals with such assets, particularly in theform of Mr. McCulloch’s earned income post-divorce.

[ 100 ] As noted, the evidence could be clearer regarding the extent to which that income increased the value of his current investments. Clearly it played a significant part. Mr. McCulloch has only himself to blame if the evidence does not more precisely account for the contributions of equalized versus non-equalized assets to his current investments. This issue is central to the application which Mr. McCulloch has put before the court. I am not prepared to fault or penalize Ms. McCulloch for any shortcomings in this aspect of the evidence, not when Mr.

McCulloch launched his application in May, 2010, then produced his estimates on the eve of the application before me, more than two years after he was ordered to, then insinuated that he was doing so only to prevent Ms. McCulloch from using his non-disclosure as “ a reason to delay this matter further ” . [ 101 ] Mr. McCulloch relies on D.B.C. v. R.M.W. 2006 ABQB 905 , Gonzales v. Ross [2007] O.J. No. 529 , Scott v. Scott [2011] N.B.J. No. 10 , and H.B. v A.B. [2012] A.J. No. 579 .

None of these authorities leave me in any doubt regarding the force of Leskun on the facts of the case before me. [ 102 ] Leskun is then clear and unequivocal authority obliging me to take Mr. McCulloch ’ s assets into account when assessing his means of continuing to pay spousal support. [ 103 ] I am not asked to make an order forcing Mr. McCulloch to sell assets to meet his ongoing spousal support obligations. I am asked to find on the evidence that it is reasonable to impose on him the obligation to pay some $5,200/month, net of course of Ms.

McCulloch ’ s share of the retirement allowance. [ 104 ] On the evidence I do not hesitate to make the finding urged upon me by Ms. McCulloch. Until shortly before his retirement, Mr. McCulloch had interest and investment income annually of more than $230,000. Now in retirement, he has virtually eliminated his interest/investment income. Mr.

McCulloch would be more hard-pressed to argue impecuniosity had he not reduced that interest/investment income in 2011 to some 7% of what it had been prior to retirement. [ 105 ] Likewise, his share of the retirement allowance is a mere 12% of his pre-retirement professional income. [ 106 ] Overall, the reductions in income are not reasonable or justifiable in the face of Mr. McCulloch ’ s ongoing obligation to pay spousal support. Mr. McCulloch knew or ought to have known that on retirement he would remain liable to pay spousal support of $9,000. In the face of that reality, Mr.

McCulloch ordered his financial affairs to make such spousal support payments difficult, based just on his retirement allowance income. In the face of his asset base worth somewhere between $4.2 million and $10 million – depending on which figures one uses – his alleged difficulty coming up with cash should not become Ms. McCulloch ’ s problem. IV. Conclusion [ 107 ] Nothing about the ‘ triggering event ’ of Mr. McCulloch ’ s retirement changes the fact that Ms. McCulloch remains entitled to spousal support, or taking into account his wealth, that Mr. McCulloch remains obliged to provide that support. [ 108 ] Mr.

McCulloch ’ s application is denied. Ms. McCulloch remains entitled until further order to spousal support of $9,000 including her share of the retiring allowance. Heard on the 26 th day of September, 2012, and on the 22 nd day of November, 2012 Dated at the City of Edmonton, Alberta this 19th day of March, 2013.

Peter Michalyshyn J.C.Q.B.A. Appearances: Robert M. Curtis, Q.C. For the Plaintiff Tina Huizinga for the Defendant