r. V. to pay to Ms., 2011 QCCA 760

Droit de la famille — 111085 2011 QCCA 760 COURT OF APPEAL CANADA PROVINCE OF QUEBEC MONTREAL REGISTR Y No.: 500-09-019931-096 (505-12-018361-975) DATE: APRIL 14, 2011 CORAM: THE HONOURABLE LOUIS ROCHETTE, J.A. JACQUES A. LÉGER, J.A. JACQUES VIENS, J.A. (AD HOC) G. V. APPELLANT - Plaintiff v. F. P.

RESPONDENT - Defendant JUDGMENT [ 1 ] THE COURT; - On appeal from a judgment of the Superior Court, district of Longueuil (the Honourable Madam Justice Chantal Masse), rendered on July 15, 2009, which allowed in part the appellant’s application to vary the corollary relief and fixed at $5,500 per month the support payable by the appellant to the respondent, as from June 1, 2008, with indexing, each party to pay his or her own costs; [ 2 ] Having examined the file, heard the parties, and on the whole deliberated; [ 3 ] For the reasons of Rochette, J.A., with which Léger and Viens, JJ.A. agree; [ 4 ] ALLOWS the appeal, each party to pay his or her own costs, for the sole purpose of replacing paragraph 108 of the trial judgment with the following: [108] ORDERS Mr.

V. to pay to Ms. P., for her personally, support of $2,916.66 per month, payable in two instalments, on the 1 st and the 15 th of each month, as from June 1, 2008. LOUIS ROCHETTE, J.A. JACQUES A. LÉGER, J.A. JACQUES VIENS, J.A. (AD HOC) Mtre Suzanne H. Pringle and Mtre François J. Poirier SUZANNE H. PRINGLE, AVOCATS For the appellant Mtre Isabelle Larocque JARRY, DESPATIS For the respondent Hearing date: February 16, 2011 REASONS OF ROCHETTE, J.A. [ 5 ] The support payable to the respondent by the appellant is at the heart of this appeal. [ 6 ] The parties married in August 1968.

They separated in October 1996 and obtained their divorce in January 1998. Two children were born of their union; they have been independent for many years.

The divorce judgment set out the financial obligations resulting from the termination of the marriage in accordance with a consent to provisional measures and corollary relief given in July 1997. [ 7 ] Concerning the support obligation assumed by the appellant in favour of the respondent, the agreement states that support of $1,000 per week was paid from October 14, 1996, to June 15, 1997; this support will be increased to $5,416.66 per month, for a total of $65,000 per year, beginning on June 30, 1997, and will be indexed annually. The agreement also stipulates:

[ translation ] 30. Considering the division of the family patrimony and the financial settlement granted by the plaintiff to the defendant, and considering the amount of the support, it is agreed that there will be no increase in the amount of support provided above for any reason whatsoever. 31. It is agreed that no review of the support may be requested by the plaintiff on the ground that the defendant earns an income, of any kind and from any source, of less than $25,000.00. … 34.

It is agreed, however, that the plaintiff may request a review, a reduction, or a termination of the support in the event that there is a significant change in his income or in his financial resources, in the event that he retires, and/or in the event that the defendant lives with another person. The support payable to the defendant will be automatically terminated, however, in the event that she remarries. [ 8 ] The support was paid as agreed. In 2008, it amounted to approximately $80,600 per year.

The appellant calculates that he has paid close to $1 million in support to the respondent since the parties separated. [ 9 ] In December 2007, the appellant filed an application to vary the corollary relief and sought termination of the support effective May 31, 2008. On July 15, 2009, the trial judge allowed the application, lowered the support to $66,000 per year as from June 1, 2008, with annual indexing, but refused to terminate the support.

The appellant appeals from this decision. * * * [ 10 ] The appellant essentially argues that the trial judge erred in concluding that the respondent made only mitigated efforts to achieve financial independence, in calculating the respondent’s resources and needs, and in attributing to the appellant an annual income of $185,000. He asks that the respondent be declared financially independent since May 31, 2008, and that support be terminated accordingly.

He also asks that the obligation to maintain a life insurance policy to guarantee payment of the support, an obligation he was required to assume under the agreement of July 1997, [1] be terminated. * * * [ 11 ] The trial judge wrote the following concerning the respondent’s alleged lack of effort to achieve financial independence : [ translation ] [10] In January 2000, counsel for Mr. V. wrote to Ms. P. to tell her that she had to take herself in hand in order to become independent. The letter mentions that Mr. V. “intends to retire in a few years”, and that Ms.

P. had to do everything possible to become financially independent because support would not be paid to her indefinitely. Ms. P. replied, in a letter dated February 14, 2000, that she had already spoken to Mr. V. about the physical and profitability difficulties she was encountering in her line of work and stated she had an income of less than $25,000. She also said she was continuing her education and working in a clinic. Ms. P. gave up this activity in 2003. Over a period of five years, she had a net loss of $649. [11] According to Ms.

P., the question of becoming independent was not discussed at the time of the separation in 1987. It was in the letter of January 2000 that the subject was first broached. [12] In 2002, Ms. P. took a course to learn about companies and started to actively manage her investments. She states that she always complied with the consent endorsed by the judgment and that she never sought a review of the support, despite the steep increase in Mr. V.’s income in the years after their divorce. … [36] The parties lived in a traditional marriage for 28 years. It is uncontested that Ms.

P. suffered an economic disadvantage as a result of the marriage. [37] Financial independence must be assessed in light of the parties’ standard of living during the marriage and their real earning capacity: … … [39] In the Court’s opinion, it was not realistic for Mr. V. to expect Ms. P. to achieve such a level of independence on her own. In fact, five years before the separation of the parties, Ms. P. had tried unsuccessfully to return to the workforce as a secretary after a few months of training to update her secretarial knowledge and skills. Mr.

V. had accepted this failure, and their life continued as in the previous years. [40] At the time of the separation, Mr. V. knew that Ms. P. wanted to become a massage therapist. Mr. V. is well aware that this activity is not likely to be very lucrative, and he acknowledges that that was his assessment at the time. In fact, he says that he first tried to dissuade Ms. P. and that he then accepted this choice. He even bought a massage table for Ms. P. …

[43] Ms. P. made some efforts to start her career as a massage therapist, but it did not work out. She testifies that she had health issues related to this occupation. However, she did not provide any medical evidence of these problems. [44] Although Ms. P.’s choice not to continue was entirely voluntary, there is no reason to hold her mitigated efforts against her in the particular circumstances of this case. [45] Her efforts, according to both the Court’s assessment and Mr.

V.’s assessment at the time, had little or no chance of succeeding. [46] Considering the parties’ standard of living during the marriage, it was not reasonable to demand that Ms. P. achieve financial independence through work when she was around 50 years old. Ms. P.’s secretarial skills were no longer really up to date and, because of her 28-year marriage to Mr. V., the last 25 of which were largely devoted to the children, Mr. V. and homemaking, she remained out of the workforce for an extended period. ... [48] Should Ms.

P. be faulted for not having been more persistent in her efforts to become a massage therapist and to earn an income that could have helped her achieve financial independence? The Court thinks not. [49] Ms. P. invested her energy in managing the money she received following the divorce. She took a 30-hour course and actively managed her investments. By choosing this avenue, rather than continuing to invest her efforts in a low-paying and physically demanding career, it is very likely that Ms.

P. was better able to grow her assets, thereby amply compensating for the limited income she could have earned as a novice massage therapist over the age of 50. [Citations omitted] [ 12 ] The appellant has failed to demonstrate any palpable and overriding error in these essentially factual findings, without which our intervention cannot be considered. The trial judge found that even if the respondent had made more of an effort to achieve financial independence, the objective was unattainable.

In fact, it was highly unlikely that the respondent could achieve this goal in the medium or long term after the divorce, and even more unlikely that she could earn an income that would meet her reasonable needs, given her previous lifestyle. The respondent undoubtedly could have applied herself more, but her failure to do so is not conclusive proof of her fault. * * * [ 13 ] The trial judge refused to terminate the support . She wrote: [ translation ] [33] Mr. V. criticizes Ms.

P. for not having tried hard enough to rejoin the workforce and argues that he should not be held responsible for the consequences of her mitigated efforts. He maintains that she should have become financially independent through work. He states that Ms. P. is now living with a de facto spouse. He argues that Ms. P. has in any case achieved financial independence as a result of the investments she managed to grow, which means that her needs no longer justify the continuation of support. He also submits that, since his retirement, he can no longer afford to pay support. [34] The fact that Ms.

P. is living with a de facto spouse is not very relevant, because her new spouse does not support her. Of course, they share their expenses, according to Ms. P’s testimony. In fact, Mr. V. also has a spouse with whom he shares his expenses. These facts provide no basis for a presumption of Ms. P.’s independence. In light of the clear authorities on the subject, this question need not be discussed further. ... [51] Mr. V. also argues that Ms.

P. managed to achieve financial independence by growing the investments made with the money she received at the time of the breakup and as support in the years following the divorce. [52] It is well established that support needs include the need for sufficient funds to save for retirement. Mr. V. cannot fault Ms. P. for having saved some of the support money she received or for having invested the sums she obtained at the time of the divorce: that is precisely what she had to do. [53] Unless Mr. V. can show that Ms.

P. is able to support herself for the rest of her life with an acceptable standard of living, there is no reason to believe that Ms. P. has achieved financial independence. This is what we will see below, through an analysis of the expert evidence on this subject in order to determine Ms. P.’s needs. [Citations omitted] [ 14 ] Shortly thereafter, the judge considered the evidence adduced on the net assets accumulated by the respondent.

Before doing so, however, she established the respondent’s net needs at $55,000 per year, [ translation ] “including a part for savings [2] and an amount of $5,000 for contingencies”. [3] She specified that it was [ translation ] “the parties’ lifestyle before their separation that must be maintained insofar as possible”. [4] [ 15 ] The appellant challenges the determination of the amount of her needs, since it is not corroborated by supporting documents despite repeated requests for such evidence.

He argues that the judge should not have believed the respondent and that [ translation ] “contingencies” should not be taken into account because the purpose of the support is to satisfy existing and established needs.

[ 16 ] The appellant does not convince me that the determination of the respondent’s needs is vitiated by an error justifying our intervention or that the respondent’s testimony should have been set aside. The trial judge is in the best position to assess the credibility of the witnesses. Our role is to intervene when the arguments made by the appellant demonstrate a need to do so.

No such demonstration is made here. [ 17 ] The appellant also maintains that the judge should not have referred to [ translation ] “the parties’ standard of living during the marriage in the context of the review of the file 11 years after the divorce judgment”. I do not see any error in principle here; the judge could not ignore the parties’ situation during the marriage, which lasted close to 30 years.

She also considered the parties’ current situation and tried to maintain the previous standard of living [ translation ] “insofar as possible”, while making some nuances that appear relevant: [ translation ] [73] The Court is of the opinion, however, that the lifestyle of the parties during the marriage, including costly trips, recreation and sports, will not be maintained indefinitely, as these types of expenses generally decrease with age.

The Court cannot fully accept the testimony of the actuary Martel, who assumes that these expenses will not decrease or that any decrease will be entirely offset by an increase in care expenses. ... [75] On this question, the opinion of the expert Brunette, who states that expenses decrease with time, seems more reasonable. But do they decrease as much as he says? Nothing could be harder to predict.

Common sense suggests that he is right, however, at least to some extent. [ 18 ] There are no grounds for intervention here. [ 19 ] This brings us quite naturally to the question of the respondent’s alleged financial independence based on the value of her assets. The judge noted in this regard: [ translation ] [77] The hypotheses presented by the expert Brunette, however, cannot be accepted either. This expert claims that Ms. P. is financially independent and able to fully support herself for the rest of her life, but his projections of Ms.

P.’s needs are substantially lower than would be required to maintain the standard of living to which Ms. P. was accustomed during her marriage and following the divorce. [78] In addition, in light of the current financial crisis, of which the Court takes judicial notice, the Court would have preferred the more conservative approach of the expert Martel concerning the rates of return. The inflation rate used by the expert Martel is that recommended by the Institut des actuaires. At present, past rates are no guarantee of future rates.

The Court would have preferred to rely on the rate recommended by the Institut des actuaires rather than the rate used by the expert Brunette. ... [98] In this case, it is not appropriate to fix a term for the support because the parties’ financial situation may change, because none of the expert reports in the record is accepted in its entirety, and because the economy may have surprises in store for the parties in the coming years. ... [ 20 ] In short, the judge believed that – at least at the time of the hearing in November 2008 – the respondent’s assets did not afford her sufficient financial independence to justify terminating the support, even though certain conditions for termination [5] mentioned in the agreement of July 1997 were satisfied.

I find here neither an error in principle nor an erroneous application of the principles relevant to the case. We may therefore move on to the last – and certainly the most delicate – issue in dispute, the amount of the support. * * * [ 21 ] I will first comment on the scope of the decision rendered on this question. The trial judge wrote in this regard: [ translation ] [79] As the Court cannot accept in its entirely either of the two expert reports presented, the amount of the support will have to be arbitrated, taking Mr. V.’s means into account as well. It will certainly be reduced from what Ms.

P. now receives. The present judgment will also certainly not put an end to any dispute between the parties. Unfortunately, they will have to re-assess their respective situations at some point in time. ... [98] It is not appropriate here to fix a term for the support because the parties’ financial situation may change, because none of the expert reports in the record is accepted in its entirety, and because the economy may have surprises in store for the parties in the coming years. Ms.

P. will certainly, at some point, have to consider encroaching upon the capital put aside to support herself, especially since the support will be indexed, while Mr. V.’s retirement allowance is not. ... [100] For the future, the Court would like the parties to make adjustments according to how their respective situations evolve. One avenue they could consider, if Ms. P. maintains that she still has needs , would be to review their situations when Ms. P. reaches the age

of 65 by consulting their experts, who could designate a third expert. Of course, in doing so, the parties would have to agree on the standard of living to maintain for Ms. P. The experts and the parties will, of course, also have to consider the fact that Mr.

V.’s retirement allowance is not indexed. [Emphasis added] [ 22 ] In short, the judge invited the parties to re-assess their respective financial situations, to try to agree on the respondent’s reasonable needs with the help of experts when she reaches the age of 65, and suggested that the respondent consider, [ translation ] “at some point”, that the time had come to encroach upon her capital.

With respect, these passages reflect an overly optimistic view of how this dispute will evolve, place the re-assessment of the support in the hands of the respondent while calling on her good will, and contain an error in principle as to the determination of the amount of support. [ 23 ] I will explain. [ 24 ] The appellant is now 65 years old.

He had to retire on May 31, 2008, because of the partnership agreement he had signed with the accounting firm where he had made his career working as a chartered accountant and partner specializing in taxation. [6] On October 31, 2008, his net worth was approximately $1.3 million. In 2006, he created a family trust. The trial judge wrote: [ translation ] [17] In June 2006, Mr. V. set up a family trust into which he put approximately $1.2 million of his assets. This amount includes a bill receivable whereby, following Mr. V.’s retirement in May 2008, sums are to be paid by his firm into the family trust.

These sums total $484,029 over five years. Mr. V. believes that the assets in this family trust no longer form part of his patrimony. [Citations omitted.] [ 25 ] In fact, if this trust were to generate a personal benefit for the appellant, the respondent would be informed of it because the judge ordered [ translation ] “Mr. V. to immediately notify Ms. P. in the event that he was named beneficiary or ‘Protector’ of the G. V.

Family Trust established in June 2006”. [7] The judge rejected the arguments of the respondent, who sought a declaration of inoperability of the fund transfers made to the trust, although she did not consider the matter [ translation ] “resolved”, [8] hence the conclusion reached in the judgment. [ 26 ] The appellant receives a retirement allowance from his former employer of $142,448. The trial judge, however, determined it to be $159,300: [ translation ] [21] In fact, Mr. V. made a choice in favour of his new spouse. If Mr.

V. predeceases her, she will be entitled to a lifetime allowance of approximately $71,000. In making this choice, he accepted a reduction in his retirement allowance from $159,300 to $142,000 . [22] The choice made by Mr. V. in favour of his new spouse, which is unenforceable against Ms. P., should be disregarded, especially since Mr. V. benefits from a similar choice made by his new spouse (although the amount of the allowance to which he would be entitled in the event that his spouse predeceases him is smaller). [23] Therefore, to calculate Mr.

V.’s real earning capacity, the retirement allowance income to consider is $159,300 (unindexed). According to Mr. V., his other investment and retirement income totals approximately $26,000.00. [9] [24] To establish Mr. V.’s real earning capacity, we must therefore consider his income to be approximately $185,000.00 per year. [Citations omitted] [ 27 ] The appellant objects to this finding, which he considers arbitrary. In my opinion, he is right. The appellant, who remade his life, had valid reasons for his choice, and I do not see under which principle it would be unenforceable against the respondent.

Consequently, [ translation ] “the real earning capacity” [10] is not $185,000, but rather $168,448 . [11] This retirement allowance is not indexed. [ 28 ] On the appellant’s capacity to pay, the trial judge concluded: [ translation ] [93] Therefore, considering the tax consequences, Mr. V.’s property and his retirement allowance, it must be concluded that Mr. V. can still afford to pay support to Ms. P., support which she still needs, for now, if she is to continue to be financially independent for the rest of her life. [ 29 ] It goes without saying that the appellant is able to pay support to the respondent.

The question is, rather, whether the support should be varied. [ 30 ] The respondent is 64 years old. As we saw earlier, the trial judge ascertained her reasonable needs to be $55,000 per year. In 2008, following the stock market crisis which has now dissipated, her net worth varied between $986,677 [12] and $857,000. [13] She is a skilful manager, as suggested by the judge’s observations: [ translation ] [49] Ms. P. invested her energy in managing the money she received following the divorce. She took a 30-hour course and actively managed her investments.

By choosing this avenue, rather than continuing to invest her efforts in a low-paying and physically

demanding career, it is very likely that Ms. P. was better able to grow her assets, thereby amply compensating for the limited income she could have earned as a novice massage therapist over the age of 50. [14] [ 31 ] This said, I do not see on what basis the judge stated, [ translation ] “unfortunately, they will have to re-assess their respective situations at some point in time”. [15] The appellant is retired, his retirement allowance is fixed and not indexed.

If his investment income is not sufficient to maintain his standard of living, he will have to encroach upon his capital. [ 32 ] As for the respondent, she will never have any employment income. The support granted meets her needs, and there is no cross- appeal. Like the appellant, she has remade her life, and she is keeping her capital intact.

Why would she decide to lower her needs, as the judge hopes? [16] In the same vein, why would the parties, at great expense to themselves, recommence these recently concluded proceedings when the respondent reaches the age of 65 – which is only a few months from now – when the trial judge did not consider this step in establishing the amount of support? The order issued has more weight than the judge assigns it. [ 33 ] The support was set at $66,000: [ translation ] [97] The Court sets at $66,000 the support to which Ms. P. is entitled beginning June 1, 2008, the day after Mr. V.’s retirement.

Adding to this support the $11,000 declared by Ms. P. on her T3 form as other income, Ms. P. will have a net income of approximately $55,000, as appears from the tax-impact statement attached to this judgment. This is the income that Ms. P. needs to maintain her standard of living at this time. [ 34 ] Indeed, including the support payments, the respondent’s net income did amount to approximately $55,000 in 2008. As for the appellant, using an annual income of $168,448, his net income after support comes to approximately $67,000.

The trial judge suggested that the appellant reduce his expenses, criticized him for setting up the family trust, and stated that if he [ translation ] “really had to reduce his lifestyle because of this decision, it would be the result of his own imprudence. He, not Ms.

P., should pay for the consequences of his choice”. [17] The condemnation is quite harsh, but that is not my point. [ 35 ] With respect, the judge made an error in principle when she disregarded the respondent’s net assets, which are largely liquid, in the determination of her resources. [18] The parties are no longer at the retirement planning stage – they are retired. [19] Counsel for the appellant argues in this regard: [TRANSLATION] 70. The trial judge should have considered the value of the respondent’s assets, especially since both parties are now retired.

Indeed, the respondent stated that she was retired in the deed of purchase of her residence, on July 9, 2007, and said during her testimony that she considered herself retired because of her age. It should be noted that she has been calling herself a “pensioner” since 1999. 71.

The trial judge’s refusal to consider the respondent’s assets constitutes an overly broad application of the principle that a support payer should not have to encroach upon his capital to cover his current needs, which conflicts with another well-established principle, namely the obligation of the support recipient to encroach upon his or her capital upon retiring. [Citations omitted] [ 36 ] At this stage of the parties’ lives, the Court must consider the enrichment that the support recipient derives from the substantial liquid assets.

Indeed, the trial judge does not hesitate to do so when suggesting that the appellant dip into his assets. [ 37 ] A sum of approximately $800,000, [20] invested in safe investments, is likely to return about $40,000 per year, without the capital being encroached upon at all. From this viewpoint, the support granted is not reasonable and our intervention is necessary. I would set the support at $35,000 per year, with each party paying his or her own costs, considering the nature of the dispute.

In addition, the trial judge’s approach is essentially to seek a balance between the parties’ assets and income at the current stage of their dispute, nearly 15 years after their de facto separation and 13 years after their divorce, which seems inappropriate to me. [21] LOUIS ROCHETTE, J.A.