Court Of Appeal Summaries (November 14-18, 2016)

Good Afternoon.

Below are the summaries for this week's civil decisions of the Court of Appeal.

Topics covered included commercial leasing, by-law enforcement, municipal liability, assessments under the Solicitors Act, pension obligations under a contract and family law.

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Enjoy the weekend.

Civil Decisions:

Elmgreen v. Elmgreen, 2016 ONCA 849

[Cronk, Rouleau and Huscroft JJ.A.]

Counsel:

J. R. Webster, for the appellant/respondent by way of cross-appeal

Jens Peter Elmgreen, acting in person

Keywords: Family Law, Spousal Support, Variation, Material Change in Circumstances

Facts:

The parties married on July 17, 1985, after cohabiting for approximately one year. After the marriage, the parties resided in Cameron, Ontario. They had one child, a daughter born on January 15, 1991, who is now 25 years of age. Child support is not in issue in these proceedings. The parties entered into a Marriage Contract on July 16, 1985, the day before their wedding. The parties separated in January or February 2004, after almost 20 years of marriage.

On October 14, 2005, the Husband offered to settle the parties' post separation financial and property issues, the Wife accepted his offer, and the accepted offer was incorporated in Minutes of Settlement and approved by the court under the Consent Order. At the time of the settlement, both parties were represented by counsel. In his offer to settle, the Husband offered to pay the Wife an equalization payment in the sum of $185,000 and monthly spousal support in the amount of $2,200 commencing October 1, 2005.

The support payments were subject to a material change in circumstances and review after five years. The Consent Order mirrored these terms regarding spousal support. Within days of his offer to settle, the Husband took issue with the settlement and the services provided to him by his lawyer. Nevertheless, he paid the equalization payment and, for a period of about eight years, the monthly spousal support contemplated by the Consent Order.

After the settlement, the Husband twice sued his matrimonial lawyer for alleged negligence and breach of fiduciary duty, leading to protracted litigation between them. His first action against his former solicitor was dismissed and he appealed to this court. That appeal and the Husband's subsequent application for leave to appeal to the Supreme Court of Canada were both dismissed.

About three years later, in March 2014, the Husband commenced a second negligence action against his former solicitor. In December 2014, on a motion for summary judgment by the solicitor, the second action was also dismissed. The Husband's appeal to this court from that dismissal was in turn dismissed. In the meantime, in August 2009 and while his first action against his former solicitor was in progress, the Husband moved in the Superior Court for an order rescinding the Consent Order, determining the validity of the Marriage Contract, and requiring the Wife to provide full financial disclosure. The court addressed the issue of financial disclosure and deferred the balance of the motion pending the determination of the Husband's action against his former solicitor.

On October 22, 2014, the Husband moved in the Superior Court for summary judgment concerning the issues raised in his outstanding August 2009 motion, including an order rescinding or setting aside the Consent Order, among other relief. In his materials in support of his motion, the Husband also sought an order varying the spousal support provisions of the Consent Order based on a material change in circumstances.

The motion judge treated the Husband's 2009 and 2014 motions as a combined motion for summary judgment. She granted partial judgment in his favour, by reducing his spousal support obligation retroactively and terminating spousal support as of a set future date. In granting this relief, the motion judge imputed annual income to the Wife in the amount of $30,000 and annual income to the Husband in the amount of $80,000. The effect of her decision was that, as of the date of her ruling, the Wife owed the Husband an approximate $15,000 overpayment of spousal support and, effective November 1, 2016, the Husband was relieved of any further obligation to pay spousal support.

The motion judge denied the remaining relief sought by the Husband. She declined to set aside the Consent Order and held, in effect, that the Marriage Contract is unenforceable and does not govern the parties' post-separation rights and obligations. Both sides appealed.

Issues:

There are two main issues on the appeal:

Did the motion judge err by retroactively reducing the Husband's spousal support obligation and terminating it entirely, effective November 1, 2016? If the answer to (1) is "yes", what is the appropriate remedy in the circumstances? There is one issue on the cross-appeal:

Did the motion judge err by refusing to rescind or set aside the Consent Order and by holding that the Marriage Contract does not govern the post separation rights and obligations of the parties? Holding: Appeal allowed. Cross-appeal dismissed.

Reasoning:

(1) Yes. In order to determine whether the Husband had established a change in circumstances sufficient to warrant variation of his spousal support obligation, the motion judge undertook a detailed review of the Wife's income tax returns and those of her new partner, Mr. Moore, for the years 2004 to 2013.

The motion judge concluded that a change in circumstances had occurred after the date of the Consent Order by reason of the manner in which the Wife and Mr. Moore had structured their financial and living arrangements, as described above. Further, in the motion judge's view, this change was material because the Wife's income had increased from $5,000 (date of separation income) to $17,000 - $21,200 (income in years following separation), her capital asset position had improved and her relationship with Mr. Moore had proven to be long-term and founded on the joint sharing of incomes and expenses.

The motion judge therefore held that this was an appropriate case in which to apply a 'step down' approach to spousal support, that is, a gradual reduction in the quantum of spousal support payments, leading to a final termination of the Husband's spousal support obligation.

The court accepted that, on the evidence before the motion judge, a material change in the parties' circumstances did occur after the date of the Consent Order. The Wife's overall circumstances had also improved since separation, as she had acquired an interest in the property she shares with Mr. Moore and she had been enjoying the benefits of income and expenses pooled with those of Mr. Moore.

However, the court also agreed with the Wife's submission that the motion judge erred in her interpretation and use of the Wife and Mr. Moore's income tax returns, leading her to further err in her calculation of the annual incomes to be imputed to the Wife and Mr. Moore for spousal support purposes. Based on her review of the Wife and Mr. Moore's income tax returns, the motion judge concluded that they had understated their respective annual incomes by claiming personal expenses as deductions against their horse boarding and farm income, the full value of which should be imputed to them as income for spousal support purposes.

The court found flaws in the motion judge's interpretation of the Wife's 2010 income tax return. For example, the motion judge provided no explanation for her finding that the Wife "had a farm income in excess of $12,000" in 2010. The court found this to be an error. This amount is not reflected in the Wife's 2010 income tax return, which discloses gross farm income of $4,169. Further, no explanation for the source of this figure was provided to the court. While the motion judge indicated that she "did not use that $12,000 as farm income", nonetheless, her finding reflects an erroneous interpretation of the Wife's 2010 income tax return.

Similar errors were also evident in the motion judge's interpretation of the Wife's income tax returns for 2011 to 2013. In doing so, the court found the motion judge again erred.

The motions judge's spousal support ruling rested on her imputation of annual incomes to the Wife and Mr. Moore and her core finding that they under-declared their annual incomes - at least for spousal support purposes - by claiming personal expenses as deductions from their business income. The motion judge's errors in interpreting the couple's income tax returns fatally tainted her spousal support analysis. On this ground alone, the motion judge's spousal support ruling cannot stand.

The court found that the motion judge had erred on a further ground of hearing fairness. The parties had no meaningful opportunity to address the motion judge's concerns regarding the returns, especially her views about the nature and import of the claimed deductions, or to call evidence or make submissions on the proper interpretation of the returns in light of those concerns. The court found that hearing fairness was thereby compromised. Furthermore, the court found that the judge erred on a further ground based on the length of the marriage and the evidence of the roles assumed by the parties during marriage, it was said this was a relevant consideration which was mistakenly not taken into account.

(2) The motion judge's spousal support ruling is unsustainable. It is therefore open to the court to evaluate afresh the Husband's request for a change in his spousal support obligation.

The errors in the motion judge's spousal support analysis constituted errors in principle and reflect a significant misapprehension of some of the key evidence. Accordingly, they displaced the usual deference to be accorded by a reviewing court to a motion judge's discretionary spousal support ruling. The issues, therefore, are what spousal support should be paid by the Husband to the...