IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20121212

Docket: A901250

Registry:
Vancouver

Between:

I.R.

Applicant/Respondent

And

M.R.

Respondent/Claimant

Before:
The Honourable Mr. Justice Fitch

Reasons for Judgment

I.                
Introduction

[1]            
This is an application by I.R. under s. 17(1)(a) of the Divorce Act,
R.S.C. 1985, c. 3 (2^nd Supp.) [the Act] to vary a spousal
support order made by Parrett J. on February 18, 1993 requiring him to pay to
his ex-wife, M.R., $4,400 per month. I.R. asserts that his decision to
“semi-retire” with his second wife, P.R., constitutes a material change in
circumstances since the making of the original order. The relief sought by I.R.
on his notice of application is immediate termination of the obligation to pay
spousal support. In oral argument, counsel for I.R. conceded that immediate
termination of spousal support was unrealistic and proposed a reduction in
monthly support to $1,779 for a three year period, after which his obligation
to pay support would come to an end.

[2]            
In response, M.R. argues, apparently for the first time, that by the
terms of a post-separation agreement the parties entered into on October 2,
1991, I.R. agreed that he would have an ongoing obligation to support her and
that this obligation would be binding upon his estate. M.R. suggests as a
consequence that the application must be dismissed, as I.R. agreed to what
amounts to a permanent obligation to support her. In the alternative, M.R.
argues that no material change in circumstances has been demonstrated going to
I.R.’s ability to pay the original order that would justify its variation. M.R.
does suggest, however, that I.R.’s recent reported income warrants the making
of a lump sum retroactive spousal support order in her favour for the years
2009, 2010 and 2011 – years in which I.R. drew a substantial income from his
business. Relying on Beninger .v Beninger, 2007 BCCA 619, 75 B.C.L.R. (4^th)
228, M.R. argues, correctly in my view, that she is not obliged to bring a
separate spousal support variation application when the matter has been put
before the court by I.R. Finally, M.R. seeks what amounts to a declaration that
corporate restructuring undertaken by I.R. in 1998 amounts to a fraudulent
conveyance under s. 1 of the Fraudulent Conveyance Act, R.S.B.C.
1996, c. 163. M.R. suggests that, in all the circumstances, the only fair
inference to be drawn from the restructuring was that it was undertaken for the
purpose of eventually defeating her entitlement to spousal support.

[3]            
For the reasons that follow, I am of the view that I.R. has failed to
demonstrate a material change in his circumstances warranting a variation in
monthly spousal support payable to M.R. In light of this conclusion, it is
unnecessary for me to resolve whether the terms of the agreement the parties
entered into on October 2, 1991 oblige I.R. to pay what amounts to permanent
spousal support to M.R. Further, it is unnecessary for me to resolve M.R.’s
contention that the restructuring of I.R.’s business affairs in 1998 amount to
a fraudulent conveyance. Moreover, it would be inappropriate for me to attempt
to do so in the context of this application and the thin evidentiary foundation
upon which the issue has been raised. Finally, for the reasons that follow, I
would also dismiss M.R.’s request for a lump sum retroactive spousal support
award.

[4]            
For convenience only, I shall hereinafter refer to the parties as the
“husband” and “wife”. I shall refer to the husband’s current wife as P.R.

II.              
The Relationship, Marriage and Separation of the Parties

[5]            
The couple began cohabiting in 1963. The wife was 18 years of age and
had a grade 11 education. She did not graduate from high school. The husband
was 24 years of age and working as a salesman.

[6]            
The couple married in 1965. They had three children, all boys, who were
born in 1966, 1967 and 1971. Their second child was killed in an automobile
accident in 1982.

[7]            
By agreement between the parties, the marriage was a traditional one in
the sense that the wife worked inside the home raising the children and
supporting the family unit. She did not enter the workforce, acquire marketable
skills or, apart from a night school course in interior design, further her
education in any significant way from 1963 to the date of the separation in
April, 1990. At the time of separation, she was 47 years of age.

[8]            
The husband began selling life insurance as an employee of a firm in
1970. In 1978, he opened his own firm, now known as IRG Ltd. (“IRG”). The wife
was a director and officer of the company between 1986 and 1990. The business
is an insurance brokerage firm specializing in the marketing of insurance to
corporations, particularly “key man” policies. To borrow a phrase used by Leask
J. in Hartshorne v. Harshorne, 2009 BCSC 698; 70 R.F.L. (6^th)
106 the husband and wife “made a joint investment in one career” (para. 117).

[9]            
Following their separation in 1990, the parties dealt with the
disposition of family assets by agreement dated October 2, 1991. By that
agreement, the wife took the net sale proceeds from the disposition of the
former matrimonial home which amounted to about $54,000. Out of this amount,
she was required to pay debts totaling approximately $21,000. The husband paid
her an additional $9,000 and she transferred to him the shares she held in IRG.
The husband also retained a 29-foot sailboat. In essence, she got a portion of
the proceeds from the disposition of the former matrimonial home plus a payment
from the husband, all of which totalled about $42,000. He got the business and
the sailboat.

[10]        
The parties also agreed that the determination of spousal support
payable by the husband to the wife be referred to the Registrar of this Court
for report and recommendation and that, pending confirmation of the Registrar’s
Report, the husband would pay spousal support in the amount of $3,200 per month
commencing September 1, 1991. The husband also agreed that any order confirming
the recommendation of the Registrar in excess of $3,200 per month should be
made retroactive by an award of lump sum support for the difference, backdated
to September 1, 1991. By the terms of the agreement of October 2, 1991, the
husband agreed that his support obligations would be binding on his estate. It
is this clause that is said to underlie the husband’s permanent obligation to
provide spousal support to the wife. The husband also agreed that, for so long
as his spousal support obligations persisted, he would maintain a life
insurance policy in the amount of $300,000. The wife was named irrevocable
beneficiary of $100,000 of this policy. The two surviving children of the
marriage were each named irrevocable beneficiaries in the same amount. That
life insurance policy expires upon the husband reaching the age of 75,
approximately a year from now.

[11]        
The terms of the agreement were reflected in a consent order made by
this Court on March 26, 1992.

III.            
Judicial Proceedings

A.             
The Registrar’s Report

[12]        
As contemplated by the consent order, a hearing concerning spousal
support took place before Master Bolton, sitting as the Registrar of this Court,
on June 4 and October 1, 1992. He delivered reasons on November 25, 1992.

[13]        
The Master noted that during the 27-year union, the wife acquired no
marketable skills. He noted that after the separation she incurred significant
expenses in attempting to establish a bed-and-breakfast operation, but had been
unable to get this venture off the ground. The wife was also required to
purchase a car out of the money she realized from the division of family assets.
Of this money, about $7,000 remained at the time of the reference to the Master.

[14]        
Soon after separation, the wife took an eight-month course designed to
reintroduce women into the workforce. She completed that course in 1991. At the
time of the hearing, she had applied for admission to a real estate course at U.B.C.
– a prerequisite to employment as a real estate agent. She had also been
accepted to work as an unsalaried apprentice at a real estate agency pending
completion of the course. While the Master recognized that it would be
unreasonable to expect business acumen or decisive action on career
opportunities from a person who had worked inside the home for nearly 30 years,
he did record concerns that the wife might simply be going through the motions
of attempting to become self-sufficient.

[15]        
With respect to the husband, the Master found that he had considerably
understated his available income. He estimated the income available to the
husband at the time was about $120,000 per year. The Master had “no difficulty”
fixing spousal support at $4,400 per month. The matrimonial tax tables then in
use suggested that monthly maintenance in this amount would leave the wife with
a net $3,100 per month, an amount roughly equivalent to her monthly expenses,
and the husband with a net $3,665 per month.

[16]        
With respect to the duration of spousal support, the Master accepted
that the wife’s ability to support herself had been almost entirely stunted by
the role she discharged during the marriage. While the Master adjudged her to
be capable of acquiring the skills and qualifications which would assist her in
becoming largely self-supporting, he concluded that it was, “not realistic, at
this time, to make a recommendation or order as to the duration of maintenance
which would take into account the myriad possibilities that face the parties.” The
Master held that by opting for a long period of little or no income while
acquiring employment qualifications, the wife was giving an implied
representation to the husband that the spousal support being paid would
eventually result in qualifications that would be put to use to minimize his
continuing obligation. He expressed the view that if the wife remained unable
to support herself after a reasonable period of time, that might constitute a
change in circumstances which would warrant reduction in spousal support based
on the implied representation to which he had referred.

B.             
The Order of February 18, 1993

[17]        
The recommendations of the Master were incorporated into a judicial
order dated February 18, 1993. In addition to the monthly spousal support
payment of $4,400, the husband was ordered to pay the wife a lump sum
retroactive award of $21,600. A further term, not contemplated by the Master,
was added to the order directing that the amount of support payable to the wife
be reviewed in three years.

[18]        
It would appear that in May, 1994, the husband applied to temporarily
reduce his obligation to pay monthly spousal support to $2,200. That
application was refused.

C.             
The 1997 Review

[19]        
The quantum review contemplated by the order was in fact heard four
years later. Shortly after the Master’s Report, the Supreme Court of Canada
released its seminal decision in Moge v. Moge, [1992] 3 S.C.R. 813.

[20]        
The Chambers judge hearing the matter concluded that the wife had done
almost nothing in the intervening four years to become self-sufficient. It was
noted that she had attempted to sell dried flower arrangements but that this
had not been a successful endeavour. The Chambers judge reviewed the wife’s
efforts to set up a bed-and-breakfast operation, but noted that she had no
business plan, no cash projections, did not advertise, and had no arrangement
with her landlord to allow her to run such a business. It was noted that the
wife had, since the date of the original order, written the real estate
examination twice, but failed it on both occasions and had chosen not to write
it again. It would appear that the wife twice failed the examination despite
receiving tutoring and practical assistance from a real estate firm in
preparing for the exam. Although the wife was entitled to make one final
attempt to pass the examination, she did not do so. She explained that she
found the experience excessively stressful. The wife produced on the review
application a large number of “help wanted” advertisements to which she had responded.
She said that prospective employers showed no further interest in her
application upon learning that she had no experience in the workforce. The wife
also attempted to distribute health products and run a home-based interior
design business, but neither generated significant income. The Chambers judge
noted that the husband had offered to use his business contacts to assist her
in obtaining work but that she had declined his assistance, advising that she
did not wish to be controlled by her ex-husband.

[21]        
Applying Moge to the circumstances of this case, the Chambers
judge had “no doubt” that the wife suffered an economic disadvantage arising
from her role during the marriage and its breakdown. While the Chambers judge
accepted that the wife, who was 51 or 52 years of age at the time of the review
and facing even greater hurdles in re-entering the workforce, may require a
permanent supplement to enable her to sustain a reasonable standard of living,
she concluded that the wife was capable of and should be expected to move
towards at least partial self-sufficiency. At the time of the review, the
wife’s expenses were reported to have increased to approximately $3,700 per month.
The Chambers judge concluded that the wife should be expected to find employment
to cover roughly one half of her expenses. In the result, spousal support was
ordered to be reduced effective December 31, 1997 to $2,200 per month.

D.             
The Court of Appeal’s 1999 Judgment

[22]        
The wife appealed the order of the Chambers judge reducing her entitlement
to spousal support in both quantum and duration.

[23]        
For the Court of Appeal, Esson J.A. observed that some of the Master’s
conclusions or assumptions reflected a greater emphasis on the self-sufficiency
model than was appropriate in light of Moge. He noted that the wife’s
earning capacity at the time of the review was unproven and purely theoretical.
He accepted that, in practical terms, her ability and capacity to be
self-supporting was minimal. He further accepted that this incapacity flowed
directly from her role as homemaker and caregiver in the 27 year marriage. Esson
J.A. also noted that the wife’s circumstances were significantly less
favourable than those of many other dependent spouses who come out of a breakup
owning the matrimonial home and other assets that will earn income. He observed
that the wife did not have these advantages on the breakdown of her marriage.

[24]        
There was no issue on appeal as to whether the wife was entitled to
continuing spousal support in a substantial amount. The sole issue was whether
the Chambers judge was right to reduce the amount of monthly support payable by
the husband. Further, there was no issue on appeal as to whether the level of
support recommended by the Master reasonably reflected the needs of the wife if
she was to maintain a standard of living roughly equivalent to that which she
enjoyed before the separation.

[25]        
Esson J.A. noted that the husband did not take the position on appeal
that $4,400 per month in spousal support was excessive in relation to the wife’s
needs. Further, he did not contest his ability to pay $4,400 per month in
spousal support. Rather, he contended that his ex-wife was capable of becoming,
and should be, largely self-sufficient.

[26]        
In allowing the appeal, Esson J.A. concluded that the Chambers judge
failed to give sufficient weight to the reality for some people with life
experiences similar to those of the wife that it is not possible to overcome
the obvious disadvantages inherent in a long and traditional union and become
economically self-sufficient following its breakdown. He noted that the review
application was decided on the basis that no change had been demonstrated in
either the wife’s needs or the husband’s ability to pay. The reduction in
monthly support payments was based entirely on the factor of self-sufficiency. Applying
Moge, Esson J.A. concluded that to impose upon the wife an absolute duty
to become even partially self-sufficient would not be in accord with the law. Her
obligation was not to become self-sufficient, but to make reasonable efforts
towards that goal. The question the Chambers judge ought to have asked was
whether the wife, with her limited abilities, made reasonable efforts to become
employed and partially self-sufficient, but found that not to be achievable. Failure
to consider this question constituted an error in principle. It is noteworthy
that the Court of Appeal found nothing in the evidence to justify the view that
the wife ought to have attempted to pass the real estate examination one more
time, having twice failed in attempting to obtain her license. Further, the
Court noted that to the extent that the wife’s efforts to generate income
displayed an absence of business acumen, this was understandable given her
background and limited experience in the workforce.

[27]        
The Court concluded that while it was in the best interests of the wife
to continue to try and find a way to become at least partially self-sufficient
given that she was entirely dependent on her husband’s income earning ability
and would likely face an application based on a real change of circumstances in
the future, “it remains a matter of doubt whether [the wife] could achieve any
steady earnings.”

[28]        
In the result, the decision to reduce spousal support payments by 50%
was found to be unjustified. The appeal was allowed, the order of the Chambers
judge set aside, and spousal support payments of $4,400 per month reinstated.

IV.           
The Intervening Years

[29]        
The husband entered into a common-law relationship with his current
wife, P.R., in 1990. They were married in 2000. P.R. is now 59 years of age. P.R.
joined her husband at IRG in 1997 and worked in the office as an administrative
assistant. She became a director and officer of IRG in 2001. She did not sell
insurance policies independent of her husband.

[30]        
In 1996, the wife (M.R.) acquired a condominium with a $5,000 down
payment given to her by her mother. She has not generated income in any sizable
amount since the separation. She continues to do some work as an interior
designer but only earns $2,000 – $3,000 per year from this business. The record
on this application is largely silent on the efforts made by the wife between
the mid-1990’s and now to find other remunerative employment.

[31]        
It is obvious that through the husband’s hard work and growing
reputation in the insurance industry, his business grew over the years into a
very successful enterprise. He has, of course, been supported in this endeavour
by his current wife, P.R.

[32]        
It is my understanding that since about 1999, the administration of
client accounts on behalf of IRG has been contracted out to Tupper Financial
Services, a company owned and operated by P.R. A portion of commission income
earned on the sale of insurance policies by IRG is paid to Tupper Financial
Services. This arrangement permits the husband and P.R. to split income
generated by IRG.

[33]        
In 2007, the husband reported total income of $303,311. P.R.’s net
income that year was $112,846. In 2008, IRG earned commissions totalling
$1,054,792. The husband drew an income that year of $515,017. P.R.’s net income
that year was $161,401. In 2009, IRG earned commissions totalling $805,351. The
husband drew an income that year of $304,348. P.R.’s net income that year was
$119,751. In 2010, IRG earned commissions totalling $729,847. The husband drew
an income that year of $407,716. P.R.’s net income that year was $137,356.

[34]        
The husband has continued to pay the wife monthly spousal support in the
amount of $4,400. The amount was not indexed and, therefore, has not increased
since 1991. The wife’s expenses have obviously increased significantly since
then. No application was made by her in the intervening years to increase the
amount of monthly spousal support being paid by the husband.

[35]        
The wife deposes that she has lived modestly since the separation in 1991.
She continues to drive the vehicle she purchased from the proceeds arising from
the division of family assets. It is apparent that there has been little direct
contact between the husband and wife in the intervening years and the wife
deposes that she was quite surprised to recently discover the husband’s reported
income over the past few years.

V.             
The Current Situation

[36]        
The wife is now 67 years of age. She continues to receive $52,800 per year
in spousal support from the husband. Her only other sources of income are her
OAS and CPP benefits which now total about $800 per month (or $9,600 per year)
and the small amount she makes from her work as an interior designer. The total
annual income available to the wife is $64,000 – $65,000 per year. She reports
total annual expenses of about $73,000. While some of the reported expenses
seem higher than what one would expect, I am satisfied that the wife lives
modestly and largely from month to month without an ability to achieve any
substantial savings. She continues to own the condominium unit she purchased
with the assistance of her mother in 1996. The assessed value of the property
is $276,400. There is a mortgage outstanding on the property of $105,134. She
holds RRSPs of slightly over $15,000 and is carrying a small amount of personal
debt. She has a net worth of about $183,000. In essence, very little has
changed in the wife’s situation or needs since the making of the original
spousal support order. Her expenses have obviously increased but those are
offset, at least to some extent, by her receipt of the OAS and CPP benefits.

[37]        
The husband is now 74. In 2011, the husband, who takes medication for
high blood pressure, began to experience heart palpitations. He was referred to
a cardiologist for further investigation and treatment. The report of the
cardiologist is before me on this application. The husband is reported to be
clinically stable and responding reasonably well to medical treatment. While
the cardiologist reports that it is difficult to predict any long-term outcome
for the husband, he notes that a high stress environment and long working hours
are not conducive to the sort of lifestyle changes dictated by the husband’s
present health situation. While light to moderate duties would be acceptable,
the cardiologist concludes that given the husband’s age, “retirement would seem
entirely appropriate”.

[38]        
In light of the husband’s age and health status, he and P.R. have
determined to “semi-retire” from their insurance business. They are not
pursuing new business but IRG will continue to service existing clients. It is
this change in working status which is said to ground a material change in
circumstances warranting variation of the amount of monthly spousal support
paid by the husband to the wife. The husband does not suggest that the wife’s
circumstances have changed in a material way since the making of the original
order. Consequently, the question to be resolved on the husband’s application
is whether he has established a material change in his own circumstances
justifying a variation in the amount (and duration) of spousal support payable
to the wife.

VI.           
The Legislative Framework

[39]        
The provisions in section 17 of the Divorce Act most relevant to
the resolution of this application are as follows:

Order for variation, rescission or suspension

17. (1) A court of competent jurisdiction may make
an order varying, rescinding or suspending, prospectively or retroactively,

(a) a support order or any provision thereof on
application by either or both former spouses;

…………………..

Factors for spousal support order

(4.1) Before the court makes a variation order in
respect of a spousal support order, the court shall satisfy itself that a
change in the condition, means, needs or other circumstances of either former
spouse has occurred since the making of the spousal support order or the last
variation order made in respect of that order, and, in making the variation
order, the court shall take that change into consideration.

 …………………..

Objectives of variation order varying spousal support
order

(7) A variation order varying a spousal support order
should

(a) recognize any economic advantages or disadvantages
to the former spouses arising from the marriage or its breakdown;

(b) apportion between the former spouses any financial
consequences arising from the care of any child of the marriage over and above
any obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the former spouses
arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic
self-sufficiency of each former spouse within a reasonable period of time.

[40]        
The principles governing applications to vary spousal support orders
have recently been restated in L.M.P. v. L.S., 2011 SCC 64; [2011] 3
S.C.R. 775 and in R.P. v. R.C., 2011 SCC 65; [2011] 3 S.C.R. 819.

[41]        
Section 17(4.1) erects a threshold test that must be met before a court
may vary a prior spousal support order. Specifically, before varying a spousal
support order, the court must first be satisfied that a change in the
condition, means, needs or other circumstances of either former spouse has
occurred since the making of the spousal support order. The onus is on the party
seeking a variation to establish such a change.

[42]        
As explained in Willick v. Willick, [1994] 3 S.C.R. 670 (dealing
with the variation of child support orders), and G.(L.) v. B.(G.),
[1995] 3 S.C.R. 370 (adopting the Willick test in the context of
applications to vary spousal support orders), the legislation requires the
court to first determine whether the conditions for variation exist and, if
they do, the variation of the existing order that ought to be made in light of
the established change in circumstances.

[43]        
The threshold for spousal support variation requires the demonstration
of a material change in circumstances. As set out in Willick at p. 688,
“this means a change, such that, if known at the time, would likely have resulted
in different terms”. An application for variation proceeds on the assumption
that the judge who granted the initial order knew and applied the law, and that
the support order, when it was made, met the objectives set out in s. 15.2(6)
of the Act. In other words, the existing order is deemed to have been
correct when it was made. A “material” change said to justify a variation in
spousal support must be something more than trivial or transitory. Losses on
paper attributable to market fluctuations will be unlikely to qualify as a
material change in circumstances: R.P. v. R.C. at paras. 35-36.

[44]        
Once the “material change in circumstances” threshold has been
passed, the court must consider what variation of the existing order ought to
be made in light of the change of circumstances and the objectives of spousal
support enumerated in s. 17(7) of the Act.

VII.          
Has a Material Change in Circumstances Been Established?

[45]        
It will be recalled that the original support order was based on the
husband having an income of approximately $120,000 per year.

[46]        
The issue that arises on this application is whether the husband’s
transition to semi-retirement constitutes a material change in circumstances
warranting variation of the original order.

[47]        
There is little doubt that retirement will often trigger a significant
decrease in the payor’s income and thus constitute a material change in
circumstances. But retirement does not per se constitute a material
change in circumstances: see, for example, Henteleff v. Henteleff, 2005
MBCA 50; 16 R.F.L. (6^th) 119.  It is incumbent upon an applicant in
a situation such as the husband’s in this case to establish that retirement has
brought about a material change in circumstances going to his ability to pay
the amount fixed in the original support order: Boston v. Boston, 2001
SCC 43; [2001] 2 S.C.R. 413 at para. 61.

[48]        
In his first affidavit filed for use on hearing of this application, the
husband deposes that he has “just retired due to my age and my health issues.” 
He acknowledges that “I will have some residual income from insurance policies,
but I have yet to determine the costs of keeping a staffed office open to
assist my existing clients so I can collect that residual income. Any income I
receive will be split with my wife, [P.R.] … who is also retiring from the
business.”  The husband made no attempt to quantify in his financial statement
the residual income or commissions he would earn on policies he sold. He reported
only CPP benefits of $625 per month, plus income from a RRIF of $500 per month.

[49]        
In terms of assets, the husband and P.R. own a home valued at $840,000. While
the home is in P.R.’s name, it would seem that the husband pays all of the
expenses associated with it. The home is subject to a mortgage with a balance
of $157,000. The husband and P.R. also jointly own a small strata unit from
which the business of IRG is conducted. The 2011 assessed value of the unit is
$294,700. The 2012 Assessment Notice values this property at $324,400. The
strata unit also has an outstanding mortgage with an $86,000 balance. The
husband and P.R. also own an RV lot in California. On his financial statement,
the husband estimated the value of the lot to be $75,000 based on his 2011 tax
notice. In addition, the husband and P.R. own a motor home with an estimated
value of $170,000. They own two vehicles and, in addition, appear to lease two
vehicles at a total cost in excess of $2000 per month. They have a total of
approximately $347,000 in his RRIF and their RRSPs.

[50]        
Most significantly, the husband and P.R. have approximately $1,500,000
in the IRG investment account. As I understand it, this represents the retained
earnings in IRG and Tupper Financial Services.

[51]        
In summary, the husband and P.R. report a total of $3,229,000 in assets
as against secured and unsecured debt totaling $864,000. The husband’s
financial statement reports monthly expenses totaling $27,245. These expenses
cover the carrying costs of all three properties, all four vehicles, debt
payments and spousal support payments to the wife.

[52]        
In response to the application, the wife retained Campbell Saunders
& Co. to prepare an expert report calculating the expected future gross
annual income of the husband and P.R. from all sources from 2011 to
2021, an eleven year period corresponding with the husband’s current life
expectancy. The report estimates annual commission anticipated to be earned on
insurance policies sold by IRG along with income from other revenue streams, or
potential revenue streams, derived from capital assets.

[53]        
The estimates of future commission income relied upon by the author of
the Campbell Saunders report are based on information supplied to him by the
husband. Commission income the husband expects to earn on policies sold by him
ranges from about $161,000 – $192,000 per year from now until the end of 2014.

[54]        
 With respect to other potential revenue streams, the report notes that
as of July 31, 2010 IRG held cash and securities of $1,603,000 against
liabilities of $57,000. The report computed an expected annual income from
company investments based on a return rate of 4.1%. The report also assumes
that the husband would, due to his retirement and health concerns, sell the
strata unit housing his business, the California lot and the motor home and
invest the disposition proceeds with an annual rate of return of 4.1%.

[55]        
With respect to the RV lot and motor home, the assumptions made
concerning the disposition of those two assets appear to be sound in light of
the husband’s acknowledgment that both assets may need to be sold because his
declining health makes medical insurance difficult and expensive to obtain for
travel to the United States.

[56]        
Based on these assumptions, the Campbell Saunders report comes to the
conclusion that the expected future annual income of the husband and P.R. from
income earned on insurance policy commissions, company investments, the
proceeds of the sale of the strata unit owned by IRG, the California property
and the motor home, and, finally, RRIF income and CPP benefits, totals:

2011 – $255,476

2012 – $288,849

2013 – $289,173

2014 – $292,112

2015 – $260,894

2016 – $236,108

2017 – $236,321

2018 – $246,678

2019 – $206,604

2020 – $201,765

2021 – $185,844

[57]        
In reply, the husband engaged Clayton Schultz & Associates to
prepare an expert report estimating the average future monthly income before
income tax for the husband for the 10 year period between January 1, 2012 and
December 31, 2021. I accept the expertise of the authors of both reports,
neither of whom were cross-examined on their opinions.

[58]        
The wife argued on the hearing of this application that certain facts
upon which the Schultz report was based were not established in the evidence. She
took the position that little if any weight should be given to those portions
of the Schultz report which were premised on “facts” unsupported by admissible
evidence. Following the hearing, I gave leave to the husband to adduce
additional evidence relied upon by the author of the Schultz report in reaching
his opinion. I did so to ensure that justice be done as between the parties in
this case and on the merits of the application. I note that the wife, despite
being given the opportunity to do so, has claimed no prejudice from the
procedure adopted in this case.

[59]        
Subject to my comments below, I would admit the additional evidence
tendered by the husband. That additional evidence consists of a further
affidavit sworn by the husband and an affidavit sworn by the author of the
Schultz report setting out in greater detail the source of the information he
relied upon in preparing his report and the investigations he personally
conducted, or had conducted on his behalf, in order to reach an opinion
concerning income the husband would likely derive from his ongoing entitlement
to commissions and from capital assets he owned or held jointly with P.R. For
the most part, that evidence merely supplements evidence that was already
before me at the time of the argument of the application and, in most instances,
in relatively minor ways.

[60]        
With respect to anticipated commission income, the Schultz report
averaged the expected annual commission income of the husband over the 11 year
period in issue based on the same amounts calculated by Campbell Saunders, and
then expressed that average as a fixed monthly income stream of $12,021.

[61]        
I would make this observation about the methodology used in the Schultz
report insofar as it pertains to anticipated monthly commission income relating
to insurance policies sold by the husband. As the anticipated commission income
declines throughout the period under review, the effect of the approach taken
in the Schultz report is to evenly distribute commission income over a longer
period of time. While the approach is legitimate and would be entirely
appropriate in other contexts, it has the effect of skewing downward the income
actually available to the husband in the first five years following his
retirement from active business. As a result, the approach overstates the
impact the husband’s transition to semi-retirement actually has on his current
ability to continue paying spousal support in the amount of the original
order. Put differently, the methodology used in the Schultz report tends to
advance in time and magnify the extent of the change the husband and P.R. will
actually experience in the first five years of their semi-retirement.

[62]        
For example, taking the years 2011 – 2015, when commission income is
projected to be somewhat greater, averaging the commissions anticipated to be
earned in those years and then expressing them as a monthly income stream,
results in anticipated monthly earnings of approximately $15,208, not $12,021.

[63]        
In any event, having calculated a monthly income stream of $12,021 from
anticipated commission income over the 11 year period using this methodology,
the Schultz report proceeds to adjust downwards the commission income likely to
be received each month by factoring in costs and contingencies not addressed in
the Campbell Saunders report. I will deal with each of these adjustments
briefly.

[64]        
First, the Schultz report challenges the assumption made in the Campbell
Saunders report that the 600 square foot strata unit housing the business
operations of IRG could be sold immediately given the husband’s retirement
plans. I accept the overall position articulated in the Schultz report on this
point. It is reasonable for the husband to conclude that in order to continue
earning renewal commission, he must, at least for the foreseeable future,
maintain his business premises and continue to provide service to clients after
the insurance contract is signed. Failing to do so may result in the loss of
business and, along with it, a significant source of income moving forward. I
also accept that the business operations of IRG have been “no tech” in the
sense that reliance is placed in the great volume of paper files. It is likely
not feasible to move this business operation into storage and maintain an
adequate level of client service. Finally, I accept as reasonable the husband’s
proposal to dispose of the office in five years time when he will be 78 or 79
years of age and a significant portion of his renewal commission income will
have ceased.

[65]        
The Schultz report concludes that the monthly cost of maintaining IRG’s
business operations in the strata unit is $5,464, less rental income the unit
generates of $1,800 per month, resulting in a net monthly cost of $3,664. It is
unclear to me the basis upon which this figure was reached. The Schultz report
refers to documents that I have been unable to identify in the material filed
on this application. In the absence of this supporting documentation, I am
unprepared to accept these projected carrying costs. Given that the monthly
mortgage payments on the strata unit are $900, and that the business operation
will move away from attracting new clients to merely servicing existing
clients, the projected net monthly cost of maintaining the business premises
seems quite high. The Schultz report proceeds to average the five year monthly
cost over the ten year period canvassed in the report (2012 – 2021) to reach an
average monthly carrying cost associated with the office of $1,832 ($3,664
divided by two). I am inclined to the view that an average monthly carrying
cost associated with the office for the next five years but spread over a 10 year
period is less than $1,832 per month.

[66]        
Second, the Schultz report factors in a 15% negative contingency on
commission income to take into account the termination of policies for a
variety of reasons including that the insured’s business is sold. It would
appear that the Schultz report builds in this negative contingency on the basis
of information supplied by the husband and, in particular, information supplied
by his office which is said to reflect a 6.3% reduction in monthly income in
the four month period between September 11, 2011 in January 12, 2012. This
income drop was not reflected in the information provided by the husband to
Campbell Saunders, nor can I find support for it in any of the evidence put
before me on this application. It would appear that for the purposes of
preparing his report, Mr. Schultz relied on representations received from IRG
to build in a 15% negative contingency with respect to renewal income. I have
no doubt that some negative contingency is appropriate. Having said that, the
onus rests with the husband, as the applicant, to establish that his current
situation reflects material change in circumstance warranting revisiting the
existing spousal support order. In the absence of evidence justifying this 15%
negative contingency, I am not prepared to discount anticipated earnings in
this amount. Finally, I note that in his spreadsheet of estimated renewal income,
the author of the Campbell Saunders report observed that with respect to
anticipated renewal income from Empire Life (which makes up just under half of
the total estimated renewal income) the anticipated income stream is a
conservative estimate but likely to be offset by negative contingencies
including collapsing policies. I mention this to highlight the fact that some
consideration was given by the author of the Campbell Saunders report to the
likelihood that the full amount of the projected income stream would not be
realized.

[67]        
Third, the Schultz report adjusts downward the anticipated renewal
income from insurance policies sold by IRG to take into account the probability
of policyholders dying given their respective ages and the policy (and income
stream) lapsing as a consequence. This information was available to counsel for
the wife. I accept the negative contingency built into the Schultz report for
mortality.

[68]        
Taking into account these ongoing costs and contingencies, the Schultz
report estimates net monthly renewal income of $7,233.

[69]        
I do not accept this amount as accurately reflecting the monthly net
income the husband and P.R. will derive in the next few years from ongoing
commissions attributable to the sale of insurance policies.

[70]        
First, for the reasons expressed, I do not accept the methodology by
which gross monthly renewal (commission) income of $12,021 was derived. This estimated
monthly income stream does not reflect what the husband and P.R. will in fact
received by way of renewal income in the next five years. As noted above, that
income is likely to be in the range of $15,208 per month.

[71]        
Second, I do not accept all of the deductions from gross renewal income
built into the Schultz report. Even accepting what I consider to be a generous
allowance of $3,000 per month for ongoing business costs and related
contingency adjustments, the husband and P.R. can be expected to realize
pre-tax income from commissions alone in the neighborhood of $12,000 per month
or $144,000 per year.

[72]        
With respect to income anticipated to be earned on investments held by
IRG, the Campbell Saunders report estimated monthly earnings of $5,281 assuming
a 4.1% annualized rate of return. The Schultz report, acting on information
provided by CIBC Wealth Management adopted, instead, a return of 3.24% to
calculate a current monthly yield of just over $4,000. I am prepared to accept
the estimate reflected in the Schultz report on this point. The husband and
P.R. will, therefore, derive pre-tax earnings of approximately $48,000 per year
from their investments.

[73]        
Both the Campbell Saunders and Schultz reports proceed on the basis that
the strata unit out of which IRG conducts its business would immediately be
sold and the disposition proceeds made available to the husband and P.R. as an
additional source of income. The author of the Campbell Saunders report
projected monthly income from the disposition of this property of $713. The
author of the Schultz report, assuming a selling price of $294,700 (based on
the 2011 assessed value) projects a monthly income from the sale of this
property of about $378. The difference between the two reports is that the
Schultz report factors in the tax consequences and sales commission costs
attributable to a sale of this property. As I have come to the conclusion that
it is not unreasonable for the husband to retain this business premises for
about five years following his retirement, I will not factor in any additional
monthly income attributable to the notional sale of this property. My approach
to this issue, while favourable to the husband, reflects the fact that the
focus of this application is on whether there is a material change of
circumstances going to his current means or ability to continue paying
the spousal support order originally imposed. I would note, however, that money
from the sale of this asset will be available to the husband and P.R. in their
retirement years. It will be recalled that the most recent assessed value of
this strata unit is now $324,400.

[74]        
I am prepared, for the purposes of this application, to accept the
conclusion expressed in the Schultz report that the monthly income available to
the husband and P.R. from the disposition of the California property and motor
home would be approximately $520 per month. This amount assumes that the
property would be sold at a substantial loss (the property was acquired in 2006
for $75,000 and is said to have a current fair market value of approximately
$40,000) reflecting the economic downturn and the impact it has had on real
estate values in the United States. In light of the husband’s current health situation,
I do not think that this approach offends the general rule against selectively
triggering a notional disposition date to coincide with downturns in the market.
Rather, I think it reasonable that the husband and P.R. sell this property now
at a loss given that they will, in all likelihood not be able to use it as
contemplated.

[75]        
Finally, the authors of the two reports agree that the husband and P.R.
receive RRIF income and CPP benefits totaling just over $1,300 per month.

[76]        
In summary, I would estimate that, even assuming retention of the strata
unit and reasonable costs associated with the continuing operation of the
business from those premises, the husband and P.R. will, in the first five
years following their semi-retirement, have pre-tax income in the neighbourhood
of $214,000/year or $17,850/month.

[77]        
In my view, the husband has failed to demonstrate a material change in
circumstances since the making of the original order.

[78]        
The original spousal support award was based on the husband having
available to him from the business net earnings of about $120,000 per year. In
semi-retirement, the husband will, after adjustments are made for the
contingencies and continuing business costs I have accepted, earn income in the
range of $144,000 per year from insurance policies he sold. He will do so at
least until 2015, at which time he will begin to experience some reduction in
commission income.

[79]        
The husband argues that his obligation to pay spousal support in the
future should be determined only on the renewal commission income of the
company and, further, that half of this income should be attributed to P.R. I
cannot accept his position on either of these points.

[80]        
The husband has advanced no authority or rationale that would restrict
the analysis to renewal commission income and exclude from the spousal support
calculus income earned on assets – even those acquired after separation. In
this case, the union was lengthy and the economic dependency of the wife upon
the husband substantial. The traditional division of responsibilities that
characterized the union enabled the husband to focus on his career and launch a
successful business. I have no doubt that the wife’s contribution to the
establishment of the husband’s business in its early years was a factor in the
later success of the business. In short, she provided him a platform upon which
he could, with continuing hard work and the assistance of P.R., build a long
term successful enterprise.

[81]        
I am also unable to accept the husband’s position that half of the
renewal commission income of the company should be attributed to P.R. The
position is inconsistent with the roles each played in generating that income
and with the remuneration each has historically taken from the earnings of the
business. The husband acknowledges in the affidavit he filed for use on this
application that P.R. did not sell insurance policies independently of him. Further,
over the last three years, it would appear that the husband has drawn more than
twice the income of P.R. from the business.

[82]        
In the alternative, the husband argues that if all sources of income
available to him, including capital assets acquired after the separation, are
included in the analysis, half of that income should be considered to be P.R.’s
income.

[83]        
Even if I were to agree that $85,000 of the post-adjustment anticipated
commission income (or roughly 60%) should be attributed to the husband along
with 50% of the income earned annually on the capital assets held by the
husband and P.R. (or roughly $34,000) the husband’s income would total nearly
$120,000 per year – the precise amount upon which the original spousal support
order was based. In these circumstances, I am unable to conclude that the
husband has discharged his onus of establishing that there has been a material
change of circumstances since the making of the original order.

VIII.        
The Wife’s Claim for a Lump Sum Retroactive Award for the Years 2009 –
2011

[84]        
The wife seeks a lump sum retroactive award for the years 2009, 2010 and
2011 based on the husband’s reported income in each of those years. For the
year 2009, the wife contends that, on the basis of the husband’s earnings, she
should have had a net disposable income of $94,596 when, in fact, she had a net
disposable income of $42,336. She seeks a lump sum retroactive award for that
year in the amount of $52,260. For the year 2010, the wife contends that, on
the basis of the husband’s earnings, she should have had a net disposable
income of $120,060 when, in fact, she had a net disposable income of $42,260. She
seeks a lump sum retroactive award for that year in the amount of $77,800. For
the year 2011, the wife contends that, on the basis of the husband’s earnings,
she should have had a net disposable income of $104,328 when, in fact, she had
a net disposable income of $42,260. She seeks a lump sum retroactive award for
that year in the amount of $62,068. In summary, the wife seeks a total lump sum
retroactive spousal support order for the years 2009 – 2011 in the amount of
$192,128.

[85]        
The factors to be considered on a retroactive spousal support
application include the needs of the recipient, the conduct of the payor, the
excuse for delay in bringing the application, the payor’s ability to pay and
any hardship a retroactive award may visit upon the payor spouse: Kerr v.
Baranow, 2011 SCC 10; [2011] 1 S.C.R. 269 at para. 207; Reis v. Bucholtz,
2010 BCCA 115; 3 B.C.L.R. (5^th) 71.

[86]        
I accept that the husband and wife have had little to do with one
another since the separation and that the wife was likely unaware of increases
in the husband’s income in recent years. She moved promptly for a retroactive
award upon learning of the income the husband was drawing from the business in
the years in issue.

[87]        
At the same time, the wife has been the beneficiary of a fairly generous
monthly spousal support order since 1991. Over that period, the husband has
paid to the wife gross payments in excess of $1,100,000. As a consequence of
the disposition of this application, he must continue to pay on an indefinite
basis $4,400 per month. I consider this to be an amount sufficient to meet the
current needs of the wife. As noted earlier, the wife’s total annual income
from spousal support, the OAS, her CPP benefits and the small amount she makes
doing work as an interior designer is approximately $64,000 – $65,000. In
addition, the wife has approximately $170,000 in equity in her condominium and
RRSP’s totalling about $15,000.

[88]        
In my view, despite the length of the marriage and the wife’s
contribution to the success of the business, the connection between the wife’s
contribution and the husband’s income increases in 2009, 2010 and 2011, some
twenty years after the end of the marriage, is uncertain at best. Although not
determinative, the connection is temporally remote. On the record before me, I
am also unable to find a sufficient causal connection between the contributions
of the wife during the marriage and the husband’s income increases two decades
after separation.

[89]        
In addition, it is my view that the retroactive spousal support award
sought by the wife would also impose an unfair burden on the husband and his
current wife, P.R., who have worked hard together in continuing to build the
business and invest its earnings for their retirement. That day has now come. To
order the husband, at this stage, to pay retroactive spousal support in the
amount of $192,000 for income increases realized close to 20 years after
separation would amount to an asset transfer which is unnecessary to address
the current means and needs of the wife.

[90]        
For these reasons, I find that the wife is not entitled to the
retroactive spousal support award she seeks and I would dismiss the related
request for this relief.

IX.           
Costs

[91]        
This application was initiated by the husband for a variation of spousal
support payable by him to the wife. As that application stands dismissed, the
wife is entitled to her costs to be assessed pursuant to Appendix B of the Supreme
Court Family Rules.

“Mr. Justice G. Fitch”