Bridgen v. Gaudet, 2015 NSSC 31

Supreme Court of Nova Scotia (FAMILY DIVISION) Citation: Bridgen v. Gaudet , 2015 NSSC 31 Date: 20150202 Docket: 1201-047688 Registry: Halifax Between: Douglas Bridgen Applicant v. Judith Gaudet Respondent Judge: The Honourable Justice Beryl A. MacDonald Heard: November 17, 2014 Counsel: Sheree L. Conlon, counsel for the Applicant; Mark Knox, Q.C., for the Respondent By the Court: [ 1 ] On December 24, 2013 Douglas Bridgen (the Husband) filed a Variation Application requesting a change to the Corollary Relief Judgment issued on October 10, 1995.

He requested termination of spousal support commencing July 1, 2013, termination of the requirement that he maintain a life insurance policy to secure spousal support and an order addressing arrears on his account with the Maintenance Enforcement Program. [ 2 ] The Respondent, Judith Gaudet, (the Wife) filed a Notice of Contest on August 29, 2014.

She requested the continuation of spousal support, life insurance, and enforcement of the requirement in the Corollary Relief Judgment that the Husband pay all income tax, including penalties and fines, assessed against her as a result of the spousal support she received. Income Tax Liability [ 3 ] To consider a variation request I am required to determine whether there has been a material change in the circumstances of the parties since the date of the last order. There is a material change in circumstances in this case because of the Husband’s retirement and the substantial reduction in his income as a result.

The Wife is requesting that I impute additional income to the Husband because he should be employed and is capable of finding employment. I will address this issue later in my decision. [ 4 ] On December 15, 1994 the parties entered into an agreement (Exhibit 2 “A”, Tab 4) “….with respect to maintenance paid during the calendar year 1993 and during the calendar year 1994 …” The agreement contained an acknowledgement that money paid by the Husband to or on behalf of the Wife was spousal and child support that was, for income tax purposes, to be claimed as income by the Wife and deducted by the Husband.

The agreement also required the Husband to pay the Wife “a sum equivalent to her income tax liability for 1993 and 1994 at the time that he shall receive a refund in respect of his 1993 taxes together with any interest or penalties incurred by the wife in respect to her late payment”.

Clause 2 of that Agreement indicated that the support payments upon which tax would be reimbursed covered the period from January 1, 1993 until August 2, 1994 including interest and penalties that may be incurred as a result of late filing of returns declaring the payments to or on behalf of the Wife and child as support income. [ 5 ] Minutes of Settlement were dated September 18, 1995. These were attached to and formed part of the Corollary Relief

Judgment (Exhibit 1, Tab 9a). In paragraph 14 of the Minutes of Settlement the following statement appeared: "Commencing on October 1, 1995, and continuing on the first day of each month thereafter the Husband shall pay for the maintenance and support of the Wife a sum equivalent to $2,600.00 net of any income tax which may be assessed to the Wife. The parties understand that at this time the Husband is resident in the United States and therefore support payable by the husband may not be taxable to the Wife.

If at any time the Wife is assessed income tax on the support amount, the parties agree that the amount will be grossed up to compensate the Wife for the full tax cost assessed to her.” [ 6 ] Unfortunately, although they agreed to these arrangements, the parties did not access appropriate financial assistance to ensure these provisions would be implemented in a timely fashion.

They both appear to have been under the mistaken belief that the Wife would not be required to pay income tax on the spousal support she received from the Husband while he was living in the United States. [ 7 ] Both of the so called “Tax Agreements” depended upon the Wife preparing the necessary Income Tax Returns to permit the calculation of the tax she would need to pay on the support payments she was receiving and had received.

She did not appear to have any understanding about how she should appropriately prepare those returns and the evidence before me indicates she was extremely late filing the necessary returns. As a result she was assessed significant amounts for interest and penalties. One would have thought she would have continued to work actively with her lawyer to get this matter resolved or seek other advice perhaps from an accountant to reach resolution. While there was some contact through her lawyer it was not sustained.

She did not seek out accounting advice. [ 8 ] The Husband could not know how much money he was required to provide to the Wife until he had copies of her Income Tax Returns and other correspondence from Revenue Canada (now the Canadian Revenue Agency) as it assessed penalties and interest. When the Wife had income from sources other than spousal support, a proper assessment of the Husbands liability would have required her to prepare an Income Tax Return based solely upon spousal support income.

This did not happen. [ 9 ] While there were many letters that went back and forth, some of which the Husband suggests he did not receive, I am not satisfied those letters and enclosures would not have clarified what he owed. He could not have made the necessary calculations from what he did receive to accurately determine his liability. I draw this conclusion based upon the material the Wife herself has provided which is incomplete, confusing, and, from her cross examination, indicates to me she did not know what was expected of her.

She was unable to properly carry out the responsibilities placed upon her as a result of the agreements reached between the parties. In saying this I am struck by the fact that she had her accounts with Revenue Canada falling to substantial arrears raising an expectation that she should have brought an enforcement application against the Husband at least when he returned to Canada in 2002. She did not do so.

She did not continue to engage a lawyer to assist her in communicating with the Husband to get these matters resolved - she in fact did nothing until now – now she is attempting to use monies she alleges are owing to her to obtain additional money from the Husband or to set-off against any successful claim he may have for a termination or retroactive recalculation of spousal support since his retirement. [ 10 ] I do not intend to review and comment upon every exhibit entered by the Wife in support of her claim that the Husband owes her a substantial amount as reimbursement on her income tax liabilities.

I will review one series of transactions as an example of the analysis I have undertaken to assess her claim. [ 11 ] On May 12, 1995 the Wife wrote to the Husband and enclosed a Notice of Assessment for 1993 income tax (Exhibit 2 “A”, Tab 7). It required a payment of $35, 377.71. The Husband paid this amount although he had not received an Income Tax Return, one calculated upon support only to confirm that he was not being asked to pay tax on other income the Wife may have had during that year. Perhaps he knew she did not have other sources of income at that time.

The payment was applied to the Revenue Canada account on July 25 1995 (Exhibit 2 “A”, Tab 5). On November 28, 1996 the Wife wrote to the Husband enclosing a Notice of Assessment for 1994 income tax (Exhibit 2 “A”, Tab 8). In that letter she wrote: “…You will notice from the date at the top of that I only filed this year as I had been waiting for you to comply with the tax agreement and send me the money from your refund…” [ 12 ] The Husband asserts he never received this letter or the Notice of Assessment for 1994.

Given what he did about the letter he did receive in 1995 I do not accept that he would have ignored this letter. In addition, given that the agreement was to pay the tax assessed on the support payments there was no requirement for the Husband to pay the Wife any refund he may have received on his tax account. Finally the Notice of Assessment would not have shown a breakdown of sources of income.

An Income Tax Return prepared with only spousal support income was required but not sent. [ 13 ] On June 9, 1997, counsel on behalf of the Wife wrote to the Husband (Exhibit 2 “A”, Tab 9 ): “It has recently come to my attention that payments to Revenue Canada ….have not been made….

The total tax payable for 1993 and 1994 was $44,717.00 and have no information as to what, if anything, has been paid by you to date on this account…” [ 14 ] The Husband replied on July 7, 1997 (Exhibit 2”A”, Tab 10) stating he had paid the 1993 tax assessment and had not been “provided with any evidence of the amount assessed by Revenue Canada” for the year 1994. Nor had he received anything for 1995 or 1996 although the Wife attached a letter she alleged she sent to the Husband in 1997 enclosing her 1995 Income Tax Return (Exhibit 2 “A”, Tab 11).

I accept the Husband’s testimony that he did not receive that letter. He received no further correspondence from any lawyer on the Wife’s behalf. [ 15 ] On May 25, 1998 the Husband wrote to the Wife (Exhibit 2”A”, Tab 12): “…Since your telephone call I have been able to confirm the only correspondence that I have received concerning payment of the 1994 tax bill was received from Reierson Sealy June 20,1997 and responded to in my letter of June 22. This correspondence did not provide any basis for payment of the 1994 tax bill.

Further to your telephone call I have not received any copies of assessments, statements, or other form of claim from you concerning the 1994 tax bill as discussed…” [ 16 ] On June 14, 1998 the Husband wrote (Exhibit 2 “A”, Tab 13): “… Once again I must insist that you provide me with some basis for a payment against your tax obligation for 1994. The figure represented on the latest correspondence from Revenue Canada was dated April 14, 1998. Surely you must have in your correspondence with Revenue Canada since January 1996 a Notice of Assessment (RC form T451

E) from them, which indicates the amount of tax due for 1994 plus penalties and interest. I will do whatever I can to discharge my obligation in this regard but I must have a basis (i.e. form indicated above) for the calculation of the amount of my obligation…” [ 17 ] In 2000 the Wife once again raised the issue about payment of her 1994 income tax.

She still did not provide an accurate mathematical calculation confirming what the Husband owed absent additional income assessed to her in 1994, and absent the penalties and interest not associated with the amounts the Husband had agreed to pay as a result of the December 15, 1994 tax agreement. These calculations still have not be presented in this proceeding. Perhaps the court was expected to sort out the numbers from the volumes of documents provided during the hearing. This is not the court’s responsibility.

The Wife must prove her case including satisfying the court that the monetary reward she seeks is properly calculated. She has not satisfied this burden of proof. This lack of appropriate accounting also is evident in her claim for payment of her tax liability for 1995 to 2002, when the Husband was living in the United States and from 2003 until the present.

The court cannot make a reliable assessment about what amount, if any, is owing by the Husband to the Wife for tax liability on support, as compared to tax liability for filing delays, payment delays, RRSP income or “other income”, the amounts of which were not insignificant in some years. [ 18 ] I also take note of the fact that on August 7, 2004 Revenue Canada issued a “Requirement to Pay” to the Husband for payment directly to them in respect to the Wife’s income tax arrears.

The Husband informed the Wife about this and as a result he reduced his spousal support payment by $600.00 per month (Exhibit 2 “A”, Tab 37). The Wife did not commence any action against him alleging this reduction was inappropriate. In his letter to the Wife, about his intention to reduce the spousal support amount sent to her, he also requested that she provide the necessary information calculating his appropriate income tax liability based upon the spousal support payments he was required to make. Those calculations were never provided although she sent some of her Notices of Assessment and Income Tax Returns.

I accept the Husband’s testimony that many of the Notices and Returns she allegedly sent had not been received by him. The Husband did his own calculations based upon the information he did receive and he forwarded those amounts to the Canadian Revenue Agency. Some of his payments were more than the amount that appeared to be owing. [ 19 ] The Husband’s counsel analyzed the documentary material filed by the Wife as compared to the material the Husband received and this analysis is attached as

Schedule “A” to this decision. In this analysis the “amount paid” refers to money paid by the Husband to the Canadian Revenue Agency toward the Wife’s income tax liabilities.

I accept the information provided by this analysis as accurate based upon my review of the documentary material and the testimony of the parties. [ 20 ] Shortly after this hearing concluded I received a written request from counsel acting on behalf of the Wife to permit him to call "… additional evidence regarding the absence of a Court application to ‘enforce the tax arrears during the 1995-2002 period’…” Counsel for the Husband objected stating, "…One of the key questions in the enforcement of the arrears, where there is delay, is the explanation for the delay. There can be no surprise on that point.

If there was an explanation, it should have been provided, not at the hearing, but in (the Wife'

s) evidence in chief, filed in advance of the hearing…” I would have permitted viva voce testimony about the reasons for delay if that had been requested at the hearing. It was not. [ 21 ] The reasons for the delay in enforcement to recover the "arrears" were in existence prior to the Husband commencing his application. To the extent the relevant facts would have been required as evidence in the preparation of the Wife's case there was no reason why these could not have been included in her affidavit or provided pursuant to a request to provide an opportunity for her to give the court oral testimony on direct.

It was not clear whether I should treat counsel's request as a desktop motion but in my letter of reply I stated "… Based upon the information in (counsel’

s) letter I deny his request.” However, if there was "new information, not available prior to the hearing” I invited counsel to file a formal motion to reopen the case. None was forthcoming. However, this decision does not have as its foundation a rejection of the Wife’s claim for reimbursement of money owed to her because of delay.

I am dismissing the Wife’s claim to require the Husband to pay her tax liability because she has failed to prove the amount owing. [ 22 ] During the hearing the Husband was asked whether he recognized he may not have paid income tax owed by the Wife for the period when he was living in the United States. He replied that appeared to be the case. I do not accept his statement as “proof” that he owes a specific identifiable amount to the Wife. The calculation of an amount the court could accept as accurate and owing was her responsibility and she has failed to provide that calculation.

Spousal Support [ 23 ] The Husband and the Wife were married in 1972. They have one child who was born in 1978. They separated in January 1993. The Minutes of Settlement dated September 18, 1995 provided in paragraph 6,

“The wife is currently unemployed and is permanently disabled by a degenerative bone disease and other health problems.” The Wife relies almost completely on spousal support for her income. However, she has not pursued opportunities to augment herincome such as filing an application for Canada Pension Plan disability benefits, a division of the Husband’s Canada Pension Planbenefits or enrollment in the Pharmacare program. As part of the Minutes of Settlement she retained ownership of the family home andleased it although, because she hired a property management firm, this appeared to be a money losing investment.

She sold that propertyto pay off the debt eventually owed to Revenue Canada. She purchased the home in which she now resides. It appears costly to maintain.The parties’ son has been living with her and is paying her $1,000.00 per month to assist with its upkeep. She paid for their son’seducation without contribution although paragraph 18 of the September 18, 1995 Minutes of Settlement provided: “The Husband shall be responsible for (the child’

s) tuition at (private school) for the school year beginning September ,1995, andthereafter shall be responsible for (the child’

s) reasonable education costs, provided that the (child) makes whatever contribution he isable to make toward his basic living expenses and educational costs.” [24] The Wife never did seek contribution from the Husband toward their son’s educational expenses. [25] The principles and factors the Supreme Court of Canada have directed judges to consider when faced with a request forspousal support or termination of spousal support and retroactive support requests are described in Moge v. Moge (SCC),[1992] 3 S.C.R. 813, Bracklow v. Bracklow (SCC), [1999] 1 S.C.R. 420, and DBS v. SRG, LJW v.

TAR, Henry v.Henry, Hiemstra v. Hiemstra, 2006 SCC 37. I am directed to first consider whether the Wife remains entitled to receive spousal support.If I decide she remains entitled I must then consider the appropriate amount to be paid and the appropriate duration for payment tocontinue. If I am considering a retroactive recalculation, DBS may apply to spousal support and require that I consider factors such asdelay, the timing of notice to increase or decrease support, and blameworthy conduct. [26] In Bracklow a significant issue before the Supreme Court was whether Ms.

Bracklow should receive support indefinitelybecause of her health condition that had existed during the marriage and which placed her in the position of complete financialdependency vis-à-vis the husband. Justice MacLachlan (as she then was) made it clear that the circumstance of ill health or disabilitydoes not, in itself, require lifetime spousal support. When Bracklow was returned to the trial court for an assessment of the quantum andduration of spousal support Ms.

Bracklow received continuing support but with a definite termination date. [27] I have decided the Wife remains entitled to support to recognize a pattern of financial dependency that developed during themarriage which was of 20 years duration. However the Husband has been paying spousal support to the Wife for 21 years. The length ofa marriage is a relevant factor to consider when there is a request to terminate spousal support particularly when the entitlement isprimarily non-compensatory as it is in this case.

I realize there are many who suggest there is a compensatory element be consideredbecause of the existence of a long term relationship. I have some difficulty with that analysis although there is support for it in Bracklow.(see “Spousal Support Post-Bracklow: The Pendulum Swings Again?”, Carol Rogerson, (2001) 19 Can.Fam.L.Q.185) I prefer toconsider compensatory support in the context of a known lost career advance or lost employment and benefits a person may havepursued, or received, but for the marriage.

Many spousal recipients had no employment before marriage or their employment may havebeen in minimum wage endeavours that may still be pursued if the spouse’s health permits. There is no specific loss that can beidentified. Long marriages do lull these persons into a permanent state of financial dependency but I would still categorize these as non-compensatory cases. [28] Given that the Supreme Court of Canada has directed illness does not mean an entitlement to lifetime spousal support someobjective criteria must be developed to rationalize an appropriate time when support should end.

Ability to pay is not a factor indetermining an appropriate termination date unless we are to revert to the concept that, although on the one hand the court says marriagedoes not mean support for life, even if you're disabled, if the payor spouse can afford it, then a spouse will receive lifetime support. I donot consider that to be an objective criteria upon which to analyze these very difficult situations. [29] The Husband retired on June 30, 2013, his scheduled retirement date.

On June 6, 2013 his counsel informed the Wife abouthis pending retirement and his request to terminate spousal support commencing July 1, 2013. No response was received until July 17,2013 when counsel for the Wife acknowledged his retainer and indicated he would provide a further response “in early August” (Exhibit1, Tab G). No formalized response was ever provided resulting in this variation application. [30] On February 13, 2014 the Husband advised the Wife he was reducing spousal support to $1,300.00 per month beginningMarch 1, 2014.

He has not paid any income tax on her behalf for 2013. [31] The Husband’s total 2013 income was $95,055.26 (Tax Return

Summary filed May 14, 2014.). His expected total 2014income will be $38,607.72. If his Canada Pension Plan benefits are divided equally with the Wife his income may be reduced by$456.25 per month resulting in a yearly income of $33,132.84. The income upon which the Corollary Relief Judgment was based was$7,400.00 Cdn. per month ($88,800.00). He presently has no significant assets and considerable debt. He has a partner.

She is alsoretired and her total annual income is $17,000.00. [32] The Husband did not have a substantial reduction in his income in 2013 as compared to the income disclosed in the CorollaryRelief Judgment. He did experience a substantial reduction in 2014 and his income will be further reduced when the Wife applies for adivision of his Canada Pension Plan benefits. He has not had the financial capacity to pay $2,600.00 per month net of tax since January1, 2014. Although he had the financial capacity to pay $2,600.00 per month in 2013, he has not paid the income tax the wife has claimedto pay on that amount.

Her 2013 Income Tax Return suggests her tax liability was $5,120.52 - a significant change from the payableamount as assessed by the Canada Revenue Agency in 2013 of $3,865.70. Because it appears the Wife has been unable to properlycomplete several previous returns, and likely did not properly complete her 2013 return, resulting in reassessments, I am not prepared toorder the Husband to pay her 2013 income tax liability whatever it may be.

In addition, under the present circumstances, he does nothave the ability to pay that debt. [33] The Husband calculates a deficit in his Statement of Expenses (Exhibit 1, Tab 2). He appears to be paying all the household,debt and common expenses. One would expect his partner to contribute toward these expenses. Deducting expenses that would be his

alone (his glasses, dental, drugs, clothing, life insurance to secure spousal support) would leave them with shared expenses of $3,158.00. One half of this expense would be $18,948 per year, more than his partner’s annual income. In addition this leaves nothing for her own personal expenses. I do not know what she does contribute but I consider it appropriate that she pay ½ the cost of taxes, fire insurance, electricity, telephone, food, household supplies, line of credit and visa. Her annual share of these expenses would be $10,214.00.

This contribution would eliminate the Husband’s deficit and leave him with a surplus of approximately $2,000.00. I would not reduce the expenses he has claimed because they are modest and reasonable. I could criticize his failure to resolve the spousal support issue with the wife prior to selling his previous home and deciding to build a new home with the resulting debt he now must pay. However, what has been done is irreversible. What equity there is in his new home is shared with his partner and his equity does not produce income. Any award I make we require this family to rearrange their expenses.

There will not be enough money to meet the expenses I have analyzed. That is frequently the case when spousal support is required. [ 34 ] The Wife has requested that I impute income to the Husband based upon his pre-retirement earnings. The Husband is 66 years old. He worked in the off shore oil and gas industry as a consultant. He testified that companies are looking for younger people with university degrees in their area of expertise. He does not have these credentials. He does admit that his contacts may result in an ability to access some employment but this is speculative.

The Wife provided no evidence to suggest that the Husband would readily be employable and be remunerated as he has been in the past. [ 35 ] Many of the principles used to determine whether to impute income in child support cases are often referenced in spousal support applications.

Courts regularly examine whether the potential payor: - is intentionally underemployed or unemployed - has retired when it appears appropriate and reasonable given his or her age, health, employment prospects, workplace requirements etc. - has the necessary education, skills, training and experience to be employed earning the level of income suggested by the hopeful recipient [ 36 ] The discretionary authority to impute income must be exercised judicially. It is not to be exercised arbitrarily. There must be a rational and solid evidentiary foundation upon which to impute income.

The burden of proof rests with the person seeking to impute income. In this case that burden rests upon the Wife. [ 37 ] The Husband retired when he was entitled to do so. Given his age that decision was not unreasonable. Whether he can readily become reemployed is questionable. I will not impute income to the Husband. [ 38 ] The Wife is 63 years old. She is not yet eligible to receive the Old Age Security pension. She does not have significant assets from which to support herself. She has done nothing to explore opportunities for income from sources other than the Husband.

She is maintaining a large home but because her son lives with her she is getting some benefit from the larger accommodation because he is paying her $1,000.00 per month. She has significant drug expenditures but has not applied for Pharmacare. Her illnesses may have diminished her mental capacities but I have no evidence to this effect other than my assessment, from her testimony, that she had little understanding about her circumstances or about the obligations the Corollary Relief Judgment placed upon her.

The considerable delays prompted by her counsel’s requests to provide more time for the Wife to prepare her case also may be an indication of these difficulties. However, my empathy for her situation cannot govern the findings I must make. [ 39 ] With the exception of the life insurance and food cost the Wife’s living and household expenses are not inflated but they are unaffordable given her sources of income absent spousal support. Those sources of income consist of the $1,000.00 per month her son pays her and payouts from her RRSP, when she requests.

That RRSP is valued at $55, 851.70 and will provide her little assistance towards her expenses. Her debt is considerable. She received significant monetary assets when the parties settled the property division but those do not appear to have been appropriately invested. They were spent. She would need $2,700.00 per month net of income tax to meet her current expenses. The Husband does not have the means to pay her this amount. He has been paying $1,300.00 per month since March 1, 2014.

Based upon a total 2014 income of $38,607.00 this payment would leave him with approximately $22,445.00 after tax disposable income. The Wife would have an after tax disposable income of $24,148.00. (I have used a software program to produce these estimates. I have used basic information without anything other than the usual deductions claimed.) If he had paid $1,000.00 per month his after tax disposable income would be $25,288.00 and the Wife would be left with $21,404. [ 40 ] At the time notice was given, the Wife had little time to decide how she would adjust if the Husband no longer paid spousal support.

However, he did not immediately cease paying support. She has known about his request since July 2013 and she has experienced a reduction in support since March 2014. She has put forth no plan to adjust spousal support but merely requests it continue in the same amount. No doubt this is because she has few options to replace this support other than a request for social assistance.

A sad result, but one that can occur when the possibilities of the future, such as the Husband’s retirement, are ignored. [ 41 ] Having considered all the circumstances I will reduce spousal support to $1,000.00 per month commencing January 1, 2014 in recognition of the Husband’s reduction in income. The Husband cannot afford to pay the life insurance policy he had in place. He is relieved from that obligation as of January 1, 2014 but any money he has paid to keep a policy in place since that time, if any, is not to be reimbursed by the Wife. [ 42 ] The Wife will be 65 years old in February 2016.

If the Wife applies to divide the Husband’s Canada Pension Plan benefits before that birthdate, spousal support is to decrease to $500.00 per month commencing the month immediately following the decrease in the Husband’s Canada Pension Plan benefits until the Wife reaches 65 years of age at which time spousal support is to terminate. [ 43 ] It is expected that the Maintenance Enforcement program will adjust the amount owing by the Husband as a result of this decision. Because he was paying more than required there will be a credit on his account.

This is to be applied to his ongoing payments by reducing each payment by $300.00 until the credit has been eliminated. [ 44 ] If there were offers to settle, or other circumstances, that may affect a cost award I ask counsel to notify me and I will give

filing deadlines for submissions. If there were no such offers, or circumstances, I consider the parties to have achieved divided results that would require each to bear his and her own costs. ____________________ Beryl A. MacDonald, J. Attached :

Schedule “A”