H. v. H. Date:, 2015 BCPC 10

Citation: H. v. H. Date: 20150106 2015 BCPC 0010 File No: F15897 Registry: Port Coquitlam IN THE PROVINCIAL COURT OF BRITISH COLUMBIA HOLDEN AT PORT COQUITLAM IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: H.M.H. APPLICANT AND: J.R.H. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE POTHECARY Counsel for the Applicant: M. Ramage

Counsel for the Respondent: R. Davidson Place of Hearing: Port Coquitlam , B.C. Dates of Hearing: September 5 and November 12, 2014 Date of Judgment: January 6, 2015 [ 1 ] In this case, the Respondent, J. H., is applying to vary a spousal support order that was entered into by consent on April 2, 2013 without a hearing, as well as to cancel arrears that have accumulated. He relies upon a change of circumstances following an injury received at work, as well as the failure of the original Applicant, H. H., to comply with certain terms of that order. In addition, he alleges that Mrs.

H.’s employment situation changed from the time of the Order and that he could only pay spousal support for as long as she continued to work for his company. [ 2 ] In that order, Mr. H. declared an annual income of $60,000 and agreed to pay $3,000 per month for five years, commencing April 15, 2013. Spousal support would then be reviewed. This amount was intended to include funds for the minimum monthly payments on an overdraft and on specified credit cards that were in Mrs. H.’s name. She also agreed to make efforts to seek employment. [ 3 ] Mrs.

H. disagrees with the Application on the basis that there is no change in circumstances. She further states that she was not employed by the company at the time of the Order so could not have “ceased” employment. Background of the Parties [ 4 ] The parties met in 1993, began living together the following year, and were married in 1996. At the time of meeting, she had two sons, aged 4 and 6. She was 31 years old and he was 22. They were both employed; she did office work including computer assembly and he was self-employed as a dry-waller.

By mutual agreement, she left work after they were married to look after her children. After his bankruptcy in 2006, he incorporated his company. She was the sole director as a result of his bankruptcy, and she began working again, doing all of the accounting and office work. This was not full time work. He did the physical work. His bankruptcy also meant that all personal credit cards and lines of credit were in her name, by necessity. [ 5 ] In 2011, the parties moved into the house owned by Mrs. H.’s parents. The parents lived in the lower floor; the parties in the upper part of the house. Mrs.

H. has continued to reside there since the separation. For a period of time, Mrs. H. was on title to the house along with her parents, but she was removed from title soon after the separation. In lieu of payment of rent to her parents, she pays the property taxes, plus the cable, telephone and internet bundle, and Hydro, which together total about $400 per month. As well she maintains the outside of the house and garden. [ 6 ] The parties separated in November, 2012 at his instance. At that time, Mr. H. was still an employee of the company and Mrs. H., the sole director. On January 1, 2013, Mr.

H. took over as the sole director. According to Mr. H., Mrs. H. continued as an employee for the next seven months, continuing to do the accounting and office work until she quit. He paid her twice monthly from January to July 2013 except for one cheque which was missed in February, 2013. He made no further voluntary payments except one in September, 2013 through his lawyer. [ 7 ] According to Mrs. H., she ceased being an employee on December 31, 2012. She acknowledged that she continued to help out from time to time with payroll and payroll taxes, etc.

According to her, she was trying to train him to do this on his own. In addition, she was still optimistic about the possibility of reconciliation. [ 8 ] She received cheques from the company for her spousal support but when she contacted FMEP in June or July, 2013, she was told that these payments were illegal. She ultimately clarified matters with the Canada Revenue Agency as confirmed in a letter dated September 2, 2014, and the payments she received were characterized as spousal support payments, not employee earnings.

He made payments to her in this way from January until July, 2013, totalling $17,282.15. [ 9 ] In the meantime, in approximately April 2013, Mrs. H. took a bookkeeping course. She completed everything but the final exam which she has still not attempted despite receiving very high marks. She testified that the end of the marriage devastated her and that she has been unable to work since that date despite receiving significant medical assistance and counselling. She is also 53 years old which does not enhance her likelihood of finding employment.

It was clear that she has been unable to come to terms with the loss of her marriage when she replied to a question asking her about her separation, “He left me with nothing and left me a nobody.” [ 10 ] The company ceased business at the end of November, 2013, in part as a result of Mr. H.’s being unable to manage the financial side, as well as because of significant business debt. According to Mr. H., the company had an accumulated tax bill of $35,000 from 2011 to 2013 inclusive as well as HST debt of $26,000 plus the accountant’s bills. [ 11 ] Mr.

H. testified that he consented to an order for $3,000 per month spousal support on the basis that he could run it through the company. (She would receive only the net amount after payroll tax deductions which was ordinarily $1,265 per half month.) He did not seek independent legal advice at the time. The Order was based on notes prepared by Mrs. H. during a conversation between them. [ 12 ] The documents filed show Mr. H. having the following gross annual incomes: 2011 - $63,897 2012 - $43,110

2013 - $62,400 The parties agreed that for the purposes of calculating spousal support in 2014 and thereafter until Mr. H.’s work situation is resolved, his annual income should be fixed at $60,000. [ 13 ] Documents filed on behalf of Mrs. H. show her gross income as $8,904 in 2012. She had no income in 2013 other that what was received as spousal support. [ 14 ] Mr. H. suffered a work-related injury in February, 2013 but continued to work light duties until being diagnosed with a herniated disc in June, 2013.

He has been off work receiving Workers’ Compensation Benefits at the rate of $804 per week since that time. As no voluntary spousal payments had been made after September, 2013, FMEP began garnishing his WCB cheques. Mr. H. is currently dealing with medical professionals regarding impending surgery which was scheduled for November 24, 2014 as of the last hearing date. It is anticipated that he will need three months of rehabilitation and will then be reassessed regarding a return to work or possible retraining. [ 15 ] At the time of separation the parties’ credit card debts totalled $31,167.10.

As of August, 2014, that figure had increased to $35,236.41, notwithstanding the minimum payments being made by Mrs. H.. The Line of Credit increased from $2,500 to about $9,000 over the same period and the credit limit on one credit card was also raised (from $7,500 to $9,500). These figures are explained in part by Mrs. H. continuing to use these sources of credit for her personal needs when no support monies were forthcoming from Mr. H.. However it should be noted that many of the expenses shown on the statements during this time appear to be for discretionary items such as cigarettes.

Also included are payments for her medical premiums, veterinary bills and legal fees. [ 16 ] The outstanding balances on these cards and the line of credit accumulate interest charges at rates ranging from 13.75% to 20% with the Line of Credit at 12.5%. One of the credit cards notes that by paying only the minimum payments, (and not charging anything new obviously), the balance will be fully paid in 60 years and 9 months. Another states it will take about 25 years and 6 months, and the third states 131 years and 10 months! [ 17 ] At the time of the trial, Mr.

H. owed approximately $46,000 comprising $6,600 to his accountant, $26,000 for HST and GST debt, $1,761 for the source deductions incorrectly taken from Mrs. H., $12,000 for a personal loan and legal fees, and $5,000 credit card debt. Some of these are obviously debts of the now defunct company. [ 18 ] At the time of the trial, Mrs. H. owed about $44,000 on the credit cards and Line of Credit. [ 19 ] Following the first day of trial, both parties were sent for consumer debt counselling. The results were not encouraging as neither party has the income to properly manage the debts and each has only minimal assets.

Mrs. H. testified that she is still unable to job hunt as she is unable to maintain her emotional composure. She is currently receiving counselling. She last actively looked for work in 2013. [ 20 ] The debts and shortfall in income is exacerbated by personal life-style choices and extremely poor financial planning skills including the fact that both parties are heavy smokers, with that accounting for hundreds of dollars per months in each of their expenses. In fact, in Mr. H.’s budget prepared for the credit counsellors, he indicated that he spent $300 per month on tobacco.

The credit card statements filed by Mrs. H. suggest at least a similar amount. [ 21 ] The most recent FMEP statement, based on the April, 2013 order, shows arrears at $23,493.01 plus interest as of November 3, 2014. The statement also indicates that $21,741.69 was paid as of the same date. No spousal support payments were received from October to December 2013, mid-January to mid-March 2014, or in July and August 2014. Nearly all payments received are the result of garnishing orders, with most of the rest being the result of direct court orders or encouragement by counsel.

The Family Law Act [ 22 ] Matters involving spousal support are determined by

Part 7 of the Family Law Act, which came into effect March 18, 2013, just a few weeks before the consent order between these parties. Sections of the Act most pertinent to this application are: 167

(1) On application, a court may change, suspend or terminate an order respecting spousal support, and may do so prospectively or retroactively.

(2) Before making an order under subsection (1), the court must be satisfied that at least one of the following exists, and take it into consideration: (

a) a change in the condition, means, needs or other circumstances of either spouse has occurred since the order respecting spousal support was made; (

b) evidence of a substantial nature that was not available during the previous hearing has become available; (

c) evidence of a lack of financial disclosure by either spouse was discovered after the order was made…. and: 174

(1) On application, a court may reduce or cancel arrears owing under an agreement or order respecting child support or spousal support if satisfied that it would be grossly unfair not to reduce or cancel the arrears.

(2) For the purposes of this section, the court may consider: (

a) the efforts of the person responsible for paying support to comply with the agreement or order respecting support,

(

b) the reasons why the person responsible for paying support cannot pay the arrears owing, and (

c) any circumstances that the court considers relevant.

(3) If a court reduces arrears under this section, the court may order that interest does not accrue on the reduced arrears if satisfied that it would be grossly unfair not to make such an order.

(4) If a court cancels arrears under this section, the court may cancel interest that has accrued, under

section 11.1 of the Family Maintenance Enforcement Act, on the cancelled arrears if satisfied that it would be grossly unfair not to cancel the accrued interest. Change in Circumstances [ 23 ] The consent order that was entered into by the parties in April, 2013 was based on notes that the parties prepared between themselves. Mr. H. did not seek independent legal advice and the legal assistance that was received was primarily for the purpose of formalizing that agreement.

It is clear that the parties at no time turned their minds to an actual calculation of spousal support including the legality of paying it through the company as a salary with employee deductions. No consideration was given to the Spousal Support Advisory Guidelines. [ 24 ] In addition, the implicit plan regarding payment of the credit card and line of credit debts was also ill considered. There is no evidence that suggests that the parties had any actual realization of the near impossibility of ever paying off those debts by way of minimum payments even if no additional charges had been incurred.

They are now both much better informed. [ 25 ] As well, at the time of entering into that consent order, it was anticipated that Mrs. H. would complete her bookkeeping course and commence employment to assist in her support. That did not happen. [ 26 ] I am satisfied that when all of these shortcomings and new information are considered together, they constitute a change in circumstances sufficient to permit a review the order of April 2, 2013 and to make whatever variations are appropriate retroactive to the date of commencement.

I am also satisfied that it would be grossly unfair to not consider reducing or cancelling arrears if, in fact, the original spousal support ordered is varied. Analysis [ 27 ] In the consent order, the parties agreed to spousal support in the amount of $3,000 per month, for a period of five years. That amount was never paid as the most Mrs. H. received was $2,530 by way of “salary” after deductions. [ 28 ] Clearly both parties are in dire financial circumstances.

They each present with very little actual understanding of how to actually manage their finances whether as a family or in the business in the past, or currently, individually. [ 29 ] The fact that they are able to get by at all likely has more to do with the financial assistance that Mrs. H. receives from her parents and that Mr. H. receives from his current partner than from each finding a way to meet his and her financial obligations reasonably and responsibly. [ 30 ] Clearly Mrs. H. is entitled to receive spousal support, primarily on a non-compensatory basis.

Her work experience is limited and dated and essentially home-based. The work that she did for the business was in reality for a few days per month; the real operation of the business, even when it was in her name, was undertaken by Mr. H.. The business was in her name only because of his bankruptcy, not because of any real management by her.

While she does have marketable skills, she has not completed her training and feels herself to be incapable of working as a result of the emotional impact of the separation. [ 31 ] The Order of April 2, 2013 is simply not sustainable when the actual financial position of the parties, both at the time of the separation and currently, is evaluated. The minimum monthly payments required on the debts at the time of separation totalled about $720. In reviewing the credit card statements, Mrs.

H. made the minimum payment on the lowest-interest credit card (13.75%) for 15 months without making any additional purchases, from February 2013 to July 2014. In doing so, she only succeeded in reducing the debt from $7,208.10 to $6,913.02. That is a reduction of just $295.08 in well over a year.

The other cards were used by her for some purchases as mentioned above, so the debt increased from about $3,000 on one to about $9,400 and from about $14,000 on the other to nearly $19,000, notwithstanding the minimum payments over approximately the same period. [ 32 ] Neither party has actually made any headway with their debts and neither has any assets against which they might be offset. The Provincial Court does not have jurisdiction to divide responsibility for debts just as it cannot divide assets. However the parties in the Order acknowledged that the debts were the responsibility of both of the parties.

Although the Consent Order contemplated a debt repayment plan, it was minimal in the extreme and could never have realistically resulted in clearing the debts. It should be noted that although the Order was for spousal support payable over five years, it was to be reviewed and could be extended in the event that these debts were still outstanding at that time.

Therefore the debts were accepted by the parties as an integral part of spousal support. [ 33 ] Calculations for spousal support using the SSAG based on a payor’s income of $60,000 per year with no income attributed to the spouse result in recommendations of $1,200 per month at the low end to $1,400 and $1,600 at the medium and high ends respectively. If an income of $18,000 is attributed to the spouse, the figures are $840, $980 and $1,120 at the low, medium and high ends.

For comparison purposes, if the payor’s income were $125,000 per year with no income attributed to the spouse, only then do the figures approach the $3,000 monthly provided for in the order, with the figures being $2,500, $2,917 and $3,333 at the low, medium and high ends. [ 34 ] These figures of course make no provision for the debt repayment that was intended to be part of the agreement. Conclusion

[ 35 ] I have concluded that given the assistance by means of reduced housing costs that Mrs. H. receives through living in her parents’ home, that spousal support at the lower end of the scale would ordinarily be appropriate. However, both parties agreed from the outset that provision for debt repayment of joint debts in Mrs. H.’s sole name would also properly be considered as spousal support. This can be seen to have been necessary, “to relieve any economic hardship of the spouses arising from the breakdown of the relationship between the spouses”, as included in

section 161(

c) of the Family Law Act. [ 36 ] The minimum payments due on the three credit cards and the line of credit in April, 2013, at the time of the Order, totalled $720.98 (reduced from $968.95 which included a missed payment from March on the line of credit). The figures for minimum payments have varied significantly over the months depending on whether or not the payments were made, the proximity of the credit limits and on whatever other charges were made against the accounts in the meantime.

As a result I am fixing the amount to be paid rather than leaving it to fluctuate. (It should be noted that while the Order refers to a chequing account overdraft, I was provided no information about one and I assume for the purposes of this decision that it is in fact the same thing as the line of credit.) I find therefore that $721 per month should also be payable to Mrs. H. as spousal support. It is to be hoped that in addition to applying this amount to the debts, that Mrs.

H. be making additional payments toward them. [ 37 ] As a result of these findings, the order of April 2, 2013 is varied to provide for spousal support payable in the amount of $1,921 per month commencing April 15, 2013, for a period of five years, subject to review as provided for in the Order. [ 38 ] Spousal support payments have been made by Mr. H. between April 1, 2013 and October 31, 2014 in the total amount of $31,863.90, being $10,122.21 before enrolment with FMEP and $21,741.69 after enrolment. Actual spousal support due during that period pursuant to this decision is $36,499.00.

Accordingly I am varying the arrears and reducing them to $4,635.10 as of October 31, 2014. [ 39 ] Spousal support is to be paid in equal amounts on the 15 th and 30 th days of each month (except February when payment is to be made on the 28 th ), and payments in the amount of $100 are to be made against arrears on the 15 th of each month. Interest on arrears is to be recalculated by FMEP in accordance with this decision and outstanding default fees are cancelled. [ 40 ] Counsel are to prepare an order in the terms set out in this decision. _____________________________ The Honourable Judge D.

Pothecary Provincial Court of British Columbia