Bull v. Bull, 2013 ABQB 366

Court of Queen ’ s Bench of Alberta Citation: Bull v. Bull, 2013 ABQB 366 Date: 20130627 Docket: 4803 157381 Registry: Edmonton Between: Anita Bull Plaintiff - and - John William Bull Defendant _______________________________________________________ Oral Reasons of the Honourable Mr. Justice A.W. Germain _______________________________________________________ 1. Introduction [ 1 ] Ms. Bull applies for spousal support. The issues here are both procedural and factual entitlement. [ 2 ] This matter was first argued in a special chambers application on February 28, 2013 and further developed on May 23, 2013.

In the interim I ordered $1,500.00 per month of spousal support for three months, on a without prejudice basis. [ 3 ] I have decided to deliver an oral judgment for several reasons:

1. I am not making any new law, simply applying common-sense principles to a unique fact situation; 2. the case was ably argued by the counsel who armed me with the necessary background to make a decision; and 3. an oral judgment provides the parties with information about the case outcome with a minimum delay. Despite this being an oral judgment, I recognize that the decision may be transcribed for precedent value or for Appellate review. In such a case, I reserve the right to review the transcript and make grammatical changes to correct errors of grammar or to correct slips of the lip.

I will not, however, change the judgment or embellish it. 2. The Background [ 4 ] The underlying facts are not greatly in dispute so I wish to place those on the record first. [ 5 ] The parties began a common-law relationship in 1977, married on July 2, 1983, separated around July 16, 2010. Mr. Bull issued a statement of claim for divorce on July 11, 2011. He sought only the remedy of a divorce judgment and costs. The divorce action was not defended. The Plaintiff, Mr. Bull, did not ask for spousal support nor did he ask for a declaration that he was not obliged to pay spousal support.

On February 15, 2012 a judge of our court granted the divorce on a desk divorce basis. There was no hearing. [ 6 ] Mr. Bull voluntarily shared his income with his wife from February 2010 until August 2012. The sharing started at $4,000.00 per month, but was later reduced to $2,000.00, than $500.00, before stopping entirely in September 2012. That means these voluntary payments continued until after the desk divorce had been granted. [ 7 ] Toward the end of this period Mr. Bull began e-mailing his ex-wife telling her that he was going to end her payments. From this it can be seen that Mr. Bull voluntarily paid Ms.

Bull some equivalent to tax-free spousal support throughout the entire period between him filing for and getting a divorce. It was unclear if some of the payments came from his company, and therefore resulted in taxable income in the applicant’s hands. [ 8 ] A short time after Ms. Bull discovered the support was discontinued she made this application seeking leave to partially set aside the default divorce judgment to the extent that she may file a counter-claim for spousal support.

Alternatively she seeks a declaration that she is entitled to spousal support pursuant Divorce Act , R.S.C. 1985, c. 3 (2nd Supp), s. 15.2 , notwithstanding the unanswered divorce. 3. The Position of the Parties A. The Procedural Issues [ 9 ] The applicant admits that while she did not move as promptly as she could have to set aside the divorce judgment, she did move quickly and within a reasonable time after the voluntary payments of support ceased.

Alternatively, the applicant indicates that even if she cannot set aside part of the divorce judgment to allow her to counter-claim for spousal support corollary relief, Divorce Act , s. 15 gives her a stand-alone right to apply for spousal support under Divorce Act , s. 15.2.

Section 15 states that for spousal support, a “spouse” “includes a former spouse.” [ 10 ] The respondent’s view is that the divorce judgment is a final judgment and as the applicant cannot bring herself within the traditional three-part test for leave to open up the judgment, the judgment should be final. Second, the applicant is precluded from

utilizing Divorce Act , s. 15 once the divorce has been granted as this would be an indirect attempt to plead for relief in the divorce. B. The Entitlement Issues [ 11 ] The applicant submits that Ms. Bull is economically disadvantaged in her attempts to re-entering the job force. She was in a long-term marital relationship and is now a woman in her 50’s. She is entitled to significant support on an indefinite basis. [ 12 ] Mr. Bull replies that he too was left with no matrimonial property, but also had to assume at least $80,000.00 of family debt.

The amount that he has paid to this point in time should be sufficient as spousal support. He too is reaching retirement age, and his income is spotty. 4. Legal Analysis A. Setting Aside the Divorce Judgment to File a Spousal Support Claim [ 13 ] There are two bases on which I would order that Ms. Bull have an opportunity to argue for spousal support, that: 1. the divorce judgment may be re-opened on that issue, and 2. Ms. Bull may make a ‘new’ application for spousal support that is separate from the divorce judgment. i.

Opening the Divorce Judgment [ 14 ] I deal first with the ability to set aside a divorce judgment on a limited basis, i.e. not to reverse the divorce and have the parties remain married, but to admit a counter-claim for corollary relief. I believe that the cases that deal typically with the stringent three part test to set aside a default judgment (see Palin v. Duxbury , 2010 ABQB 833 , 15 C.P.C. (7th) 191) relate to scenarios in which a defendant becomes obliged by the judgment.

I do not believe the situation is the same where the plaintiff asked only for a divorce, and corollary relief issues were not addressed. Here, there is no obligation on Ms. Bull created by the desk divorce, rather her argument is for an implied lost entitlement. [ 15 ] I suggest that many spouses faced with an application for divorce when nothing is asked of them may well let that go into default without realizing or even legally be able to understand the possible negative inference that would be raised against them, for example that they had waived the possibility of spousal support.

In this case there was no red flag to catch Ms. Bull’s attention that her potential legal entitlement to spousal support was in play. The claim filed by Mr. Bull did not ask for a declaratory judgment that the respondent was not entitled to spousal support. The only remedy sought was a divorce. [ 16 ] This case is also factually bad for the respondent because he was voluntarily contributing to the applicant’s well-being during the period of the divorce litigation. In my view an applicant in the situation of Ms.

Bull, who is getting factual support and does not contest a divorce that is silent about the payment of ongoing spousal support, has virtually an absolute right to apply to set aside the divorce judgment, though only to the extent that the divorce judgment implicitly purports to foreclose applications for corollary relief such as spousal support. [ 17 ] There is an estoppel argument. Mr. Bull provided voluntary support at the time of the divorce. His divorce application did not explicitly indicate he rejected any legal obligation to support his former spouse.

As was recently noted by the Supreme Court of Canada in Penner v. Niagara (Regional Police Services Board) , 2013 SCC 19 at para. 69 :

Issue estoppel is about balancing judicial economy and finality and other considerations of fairness to the parties. It is a flexible doctrine that permits the court to respond to the equities of a particular case. ... [ 18 ] In a typical default judgment the defendant is ordered by the judgment to pay something or to conduct him or herself in a certain way.

The well-established three-part test is: 1) to act promptly on discovering the default, 2) to have a good defence, and 3) to have a lack of intention not to suffer a default, and in that context this test makes sense. [ 19 ] In my view, that three-part test is not applicable to a simple divorce pleading, where the only remedy sought was a divorce.

The exception would be where the other spouse attacks the granting of the divorce itself. [ 20 ] Rather than require this application to be made as soon as possible after the knowledge of the divorce judgment, that time should be a reasonable one that commences only when the applicant becomes aware that a negative inference is being drawn from the uncontested divorce. In this case the negative inference for Ms. Bull is her alleged preclusion from advancing a claim for spousal support.

Put another way, it would seem to be a great stretch of our rules of civil procedure if a divorce judgment based on pleadings that were silent about corollary relief could be inferentially interpreted as if it contained a declaration against such relief. [ 21 ] A valid defence or reasonable grounds should be presumed, where what is sought to be adjudicated is collateral to the judgment - again such as corollary relief for support.

Finally, although the applicant probably accepted the reality of a divorce, the lack of intention not to suffer a default result on unpled collateral issues could also be presumed on a common-sense presumptive basis, where the pleadings were silent on the issue. [ 22 ] In my respectful view it would require an amendment to the Divorce Act for a party who obtains a divorce which is silent on issues of support to be able to use the default divorce judgment as a barrier against at least the consideration of the entitlement for spousal support on the merits. [ 23 ] The respondent’s position might have been stronger if he had plead for a declaration that he was not obliged to pay spousal support, and in light of that pleading the defendant had notice of that position, but still failed to defend.

Mr. Bull’s case would be stronger still if he had made Ms. Bull personally aware of his intentions not to pay and she acquiesced. That is not the case here. [ 24 ] I conclude that although the divorce itself should not be set aside, the judgment should be inferentially amended to sever corollary relief from the divorce. Accordingly, the defendant is granted leave to file a counterclaim in the existing action.

This preserves the integrity of the divorce judgment as downstream legal rights could be greatly affected by actually setting aside a divorce, when a reasonable and less intrusive procedural approach exists. [ 25 ] I note that while not a case from this province, and not applying the Alberta Rules of Court , Alta. Reg. 124/2010, in Rimmer v. Adshead , 2002 SKCA 12 , 217 Sask.R. 94 the Saskatchewan Court of Appeal concluded this specific approach was available to a hearing judge even after a Divorce Certificate had issued. ii. A New Support Application

[26] Alternatively, there is also the approach of a new application to consider. Does a default divorce which is silent aboutcorollary relief preclude an application under either Divorce Act, ss. 4(

a) or 15.2? I conclude it does not, and indeed this alternative maybe a more practical solution than torturing the existing case authorities to set aside a default judgment so that those principles mesh withthe circumstance of a divorce context. [27] Several cases take this approach. I am impressed with one conclusion in MacRae v. MacRae, 2010 NBBR 121 ,2010 NBQB 121, 359 N.B.R. (2d) 289, that reasserted that a divorce judgment previously granted that was silent on corollary relief didnot preclude an application under Divorce Act, ss. 15, and 15.2 for support.

This conclusion flows from the New Brunswick Court ofAppeal decision of Fraticelli v. Fraticelli, [2000] N.B.R. (2d) (Supp.) No. 1, (NB CA), 4 R.F.L. (5th) 222(N.B.C.A.). [28] Likewise in Bergquist v. Bergquist, 2011 ABQB 623, affirmed on other grounds 2013 ABCA 165, my colleague Mdm.Justice Read was faced with a similar argument. One party had received a divorce which was silent on corollary issues.

In para. 4, JusticeRead makes clear that nothing precludes a review of spousal support under Divorce Act, s. 4(a), even assuming the granting of a divorcesilent on this issue in some fashion estopped the spouse from applying to open up the case. [29] This is supported by the analysis in James MacDonald & Ann Wilton, The 2013 Annotated Divorce Act (Toronto: Carswell,2013), where the learned authors point out that the definition of spouse in

section 15 includes a former spouse. Further at page 121 thelearned authors indicate: The right to corollary relief comes into existence at the time of divorce, but a claim for that relief need not be joined with a claim fordivorce, and need not be heard at the time of the divorce. It may be made in a proceeding independent of the divorce and may becommenced some time after the date on which the divorce was obtained.

To accommodate these two options, the Act provides that theclaim may be brought by a spouse or a former spouse: ss. 15 and 15.1-16. [30] Later on the same page the learned authors point out: There is no time specified in the act within which a corollary relief claim must be brought.

Whether the court will hear a claimcommenced long after the divorce has been granted is not a matter of jurisdiction - the jurisdiction continues indefinitely - but a questionof whether defenses based on that delay and other circumstances are available. [31] Factually, here this application was brought not long after the Divorce, and Mr. Bull has not been prejudiced by any longdelay. His obligations (if any) flows not from delay but from the length of his marriage. Equitably, to deny Ms. Bull a chance to apply forspousal support would be unjust. B.

The Merits of the Application for Entitlement [32] Counsel pragmatically asked me to consider the issue of entitlement if I concluded that analysis should occur and therebyavoid further delay and cost for new applications or amended pleadings. I agree that this approach is appropriate. [33] The quantum issue is complicated by three factors: 1. if spousal support is to be awarded, the court should not ignore the fact that Mr. Bull left the marriage (as did Ms. Bull) with noreal matrimonial property asset, but rather with debts that they allege exceeded $80,000.00;

2. Mr. Bull is nearing retirement and works through his own personal services company which experiences wide fluctuations in income; and 3. while Ms. Bull is not back at work she is mentally and physically capable of working and despite the barriers that face her re-entry into the workforce there are sufficient entry level jobs in the relatively heated Alberta economy that she could work if she wished.

In settling a fair and reasonable quantum of support it is appropriate that I consider all three of these factors. [ 34 ] The first issue is that of family debt and whether there should be some reduction in spousal support as a consequence. The details of the family debt were not well defined or documented in the application material, however Ms. Bull was cross-examined on this subject and conceded that she was aware of a Canada Revenue Agency debt of at least $35,000.00, a line of credit of approximately the same, and perhaps a credit card debt of $10,000.00.

There is also the usual debate between the parties as to who caused the debt and whether it is debt that could reasonably be expected to be shared by the litigants. I conclude that $50,000.00 of that debt should reasonably be shared by the litigants and that Mrs. Bull’s share should be $25,000.00. I will reduce the spousal support ordered by that amount to reimburse Mr. Bull that amount. [ 35 ] The second issue is that of fluctuating income and how corporate financial statements should translate into income for the purpose of settling spousal support.

The strongest indicator of these earnings is reflected in the corporate year-end statement of April 30, 2012. The gross revenue was $178,000.00. It would be unfair to base spousal support on this amount due to legitimate expenses and the cost of earning that income. A predominant cost is travel which in that year was over $41,000.00. The financial statement appears to indicate that an item identified as management fees represented Mr. Bull’s real income, and the corporate retained earnings for the year would add approximately another $7,500.00. [ 36 ] I conclude that Mr.

Bull’s income (for the calender year 2012) should be set at $148,542.00, while an income of $27,279.00 is deemed for Ms. Bull. Applying these sums to non-binding spousal support advisory guidelines results in spousal support ranged from a low of $3,789.00 to a high of $4,980.00. Counsel submits that in 2012 Mr. Bull should be paying between $3,500.00 to $4,500.00 per month spousal support. [ 37 ] No spousal support of any kind was paid for the months of September to December 2012. This is a four month period. Although I appreciate that Mr.

Bull’s corporate year-end falls toward the early part of the year it is reasonable for me to order spousal support for those four months in 2012 via a tax-free lump sum amount of $12,000.00, that is in my view equivalent to $3,500.00 per month periodic spousal support when one takes into account the impact of tax. That $12,000.00 lump sum support will be adjusted against the debt burden that Ms. Bull should have carried upon her leaving this relationship. [ 38 ] Mr.

Bull has satisfied me that his income will drop in 2013 and that his net income after expenses for 2013 will be in the vicinity of the $90,000.00 per year and not the larger amount which I accepted for 2012. I agree with this submission and conclude that on a periodic basis spousal support should be set at $2,500.00 per month for 2013. At the current time therefore to July 1 of 2013 there are total arrears of spousal support of $15,000.00, less the $4,500.00 I have already ordered and which may be enforced if it is not paid. [ 39 ] That leaves an outstanding amount of $10,500.00.

That arrears will also be deducted from the debt burden that I have concluded that Mr. Bull has assumed on behalf of his ex-wife. In short therefore Mr. Bull’s arrears of spousal support are offset against the $25,000.00 contributing debt obligation. [ 40 ] In result, Ms. Bull owes Mr. Bull a remaining $2,500.00 as her full and final contribution towards the family’s debt. ($25,000.00 - $12,000.00- $10,500.00) This will be deducted from periodic payments at the rate of $500.00 per month and Mr.

Bull will continue to pay ongoing support of a net of $2,000.00 per month commencing July 1, 2013 and for the next 4 months; on December 1, 2013 the offset will be at an end, so although the support obligation will remain at $2,500.00 per month the actual payments will increase to that amount. This sum is subject to adjustment as permitted by this court order. [ 41 ] I must also deal with the issue of taxation. I am sensitive to the tax hardship that Ms. Bull will experience by having deemed support which is actually going to pay family debt.

However, that is how the working world works; you pay your debts with after-tax dollars. I have sheltered her somewhat for 2012 because of the passage of time by creating a lump sum obligation for 2012. I am unable

to do so for 2013. All of the spousal support at a deemed or paid $2500.00 per month ($30,000.00 per year) must be included in her tax return for 2013 and may be deducted in Mr. Bull’s tax return. [ 42 ] I also create in this order an automatic spousal support adjustment. For each calender year starting in 2014 the spousal support will be based on deemed income consisting of the combination of personal income and net corporate income as revealed in the corporate financial statement of April of each year, with the following adjustments.

The gross revenue of the Company 1257780 Alberta Inc. will be treated as the income of Mr. Bull, less the legitimate corporate expenses, excluding depreciation. Expenses that constitute Mr. Bull’s wage and reflected in his personal tax return are presumptively legitimate business expenses to prevent double counting. [ 43 ] Ms. Bull has the right to review the financial statement and the background details to assure herself that all business expenses were legitimately incurred for the purpose of earning income. [ 44 ] Assuming that hurdle is overcome, in the event that Mr.

Bull’s deemed income is less than $90,000.00 (combined personal and residual corporate income); the total annual spousal support shall be reduced by 30% of the shortage. If his income is over $90,000.00, Mr. Bull’s spousal support will increase by 30% of the excess. However, in no event will the spousal support paid pursuant to this order be reduced below $1,500.00 per month or exceed $4,000.00 per month without further court order. [ 45 ] The last issue is the argument that Ms. Bull could be earning some income.

I agree that she could, however the sting of this argument has been removed by counsel’s approach in deeming her to have earned $27,300.00 per year of income. The support model that I have adopted assumes that Ms. Bull will earn that amount, whether she does or not. [ 46 ] My spousal support order is set on an indefinite basis because of the long length of this relationship and Mrs. Bull’s dependency during it. However, nothing precludes the parties from applying to the courts for review of this matter if there is a change of circumstance. Further, this court order will provide Mr.

Bull the option of an automatic review, on his application with notice to Ms. Bull, once Mr. Bull has reached 66 years of age. [ 47 ] On or before June 30 of each year starting June 30, 2013 the parties are to exchange their financial tax information consisting in both cases their personal tax return and the Canada Revenue Agency assessment for the year. In Mr.

Bull’s case, on April 30 he will also supply a copy of his annual corporate financial statement, corporate tax return, and assessment. (If the corporate information is not available by June 30 of each year, it shall be provided no later than the last day of the month that it is available.) My order will also include the usual maintenance enforcement collection clauses. 5. Conclusion [ 48 ] If the applicant had no other route it would be fair and equitable to allow a partial opening of the default divorce judgment to permit a counter-claim for spousal support corollary relief.

Second, the practical line of reasoning that either Divorce Act , s. 4(

a) or ss. 15 and 15.2 permits this action as a stand-alone independent application is sound. [ 49 ] I also conclude that Ms. Bull is entitled to indefinite spousal support. Currently this amount is $2,500.00 per month, and commences January 1, 2013, with a built in adjustment set out in the details of my judgement, and deduction in 2013 for Ms. Bull’s share of the family debts. [ 50 ] The last issue is that of costs. Normally the applicant who succeeded in setting aside the default judgment and obtaining an order of support would get costs.

Here, however, there is the offsetting issue of the respondent being entitled to thrown away costs for the setting aside of the default judgment in part. I have concluded therefore in this case the more appropriate approach is to have each party bear their own costs of this application. [ 51 ] I conclude by thanking counsel for their strong submissions and written argument on behalf of their clients.

Heard on the 28 th day of February, 2013 and the 22 nd day of May, 2013 . Dated at the City of Edmonton, Alberta this 26th day of June, 2013. A.W. Germain J.C.Q.B.A. Appearances: Zelma Hardin Family Law Office for the Applicant Collisa A.M. Coles Huizinga Di Toppa Coles & Layton for the Respondent