IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]           J.A.L. (“J.”) and M.R.L. (“M.”) began living together in 1981 and married in 1985. They separated on June 17, 2016. They have three adult and financially independent children. From 1986 until 2003, the marriage would be described as traditional or conservative in the sense that M.’s role was to look after the children and the household and J.’s role was to earn an income to support the family. In 2003, M. took employment as a Medical Office Assistant working for J.’s brother. M. claims that she is now disabled and unable to work at all. J. is self-employed.

[2]           On May 10, 2017, an interim order was granted in this proceeding that required J. to pay spousal support of $800 per month, commencing June 1, 2017 (the “interim order”).

[3]           On August 16, 2017, a final consent order was granted requiring J. to pay spousal support of $1,800 per month commencing on September 1, 2017 and $2,500 per month commencing on March 1, 2018 (the “final order”).

[4]           Neither the interim order nor the final order indicate the income upon which the order is based.

[5]           J. applies to vary, retroactive to January 1, 2018, the final order on the basis that he does not earn sufficient income to pay the amount ordered.

[6]           J. and M. were married in South Africa and moved to Canada with their three children in 1999. In South Africa, J. worked as an accountant. He worked for a chartered accountant but he did not complete his certifications. In South Africa, M. did not work outside the home.

[7]           When the family moved to Canada, the youngest of the three children was 8 years old. J. found work in middle management positions. In 2011, J. was terminated for cause as the assistant manager of [omitted for publication] because of a safety violation directly related to not following rules. He then tried his hand at financial planning for two years with [omitted for publication] which he described as unsuccessful. He found a job in Ft. St. John as the manager of [omitted for publication]. He was terminated from [omitted for publication] in May of 2017.

[8]           J. then availed himself of the services offered by the Employment Program of British Columbia, developed a business plan and entered into an agreement for financial support with the program on December 2, 2016. The business is still in operation and is called [omitted for publication] (“[omitted for publication]”). [Omitted for publication] supplies medical office assistants to doctors’ offices. The doctor contracts with [omitted for publication] to supply the medical office assistant and [omitted for publication] contracts with the worker. This is basically a temp agency for doctors.

[9]           In 2003, M. started working as a medical office assistant. She worked in that position until 2013 and at the end of her employment she was earning $4500 per month ($54,000 per annum). She resigned her employment, she states, because she had a nervous breakdown. She states that she has not been able to work since and has a diagnosis of post-traumatic stress disorder, depression, anxiety and stomach issues. She now receives disability Canada Pension Plan and Persons with Disability Social Assistance.

[10]        When the parties separated, they entered into a written separation agreement dated June 17, 2016. M. typed the agreement and expected J. to suggest changes. However, he signed the agreement. The significance of the separation agreement is that the terms only dealt with the division of assets, debts and household contents. The agreement did not deal with the issue of spousal support.

[11]        The separation agreement provided that M. receive 100% of the equity in the family home. The family home was registered in M.’s name alone. The parties purchased the home together and lived in it before the separation. The separation agreement also provided that J. will pay approximately $16,000 for a motor vehicle loan and approximately $10,000 in bank debt. He received a Hyundai car and some other chattels. M. agreed to pay her own debts which she states amounted to $10,000. She retained household contents and a vehicle.

[12]        In August of 2016, M. sold the former family home and received net proceeds of approximately $80,000. With those funds, she purchased a double wide manufactured home where she continues to reside. She purchased the home for $42,500 and put the balance of funds in a savings account. She does not have a mortgage.

[13]        J. states that at the time of the final order he was at the beginning of developing [omitted for publication] and he was optimistic that he would earn a much higher income than what has occurred. He states that his annual income is approximately $30,000. He would not have agreed to the final order if he had known that [omitted for publication] would not generate the income that he had hoped. He also argues that he was not informed that M. had sold the former family home. He states this is significant because the amount of spousal support that he agreed to was based on his understanding of the financial needs of M. to remain living in the former family home which was encumbered by a mortgage. He states that he agreed to the final order because he felt pressured to provide for M. as he had been doing throughout the relationship. J. asks that I find that circumstances have changed, that his income is $30,000 per annum and apply the Spousal Support Advisory Guidelines (“SSAG”) to determine the amount of spousal support.

[14]        M. argues that circumstances have not changed. J.’s Financial Statement filed at the time indicated income that is the same as the income that he suggests he earns now. M. does not dispute that J. agreed to the amount of spousal support based on future projections of his earnings. However, M. states that J. is not working hard enough and is travelling rather than focusing his attentions on growing his business. She argues that if the final order is changed, income should be imputed to J. based on the fact that he is intentionally under-employed. She argues that income of $50,000 at minimum should be imputed to J. and he should be ordered to pay spousal support based on the high amount set out in the SSAG. M. relies upon the following cases: Vosburgh v. Vosburgh, 2015 BCSC 2580 and L.S.M.K. v. J.W.K., 2019 BCSC 2025.

[15]        The issues that I must determine are as follows:

[16]        Section 167 of the Family Law Act (“FLA”) provides as follows:

[17]        Although s.167 of the FLA does not refer to a “material” change in circumstances, that section has been read to require a material change. The Supreme Court of Canada in L.M.P. v. L.S., 2011 SCC 64, confirmed that the proper test to be applied in applications to change spousal support orders is to determine as a threshold issue whether there has been a material change, meaning one that, if known at the time of the order, would have resulted in a different term.

[18]        In a variation application, the court does not look behind the validity of the original order. The original order is deemed to be correct. The court must consider the circumstances as they were at the time the order was made and then look at the circumstances after the order was made. If the circumstances have changed materially, then the court will consider whether that material change will justify a variation in the order.

[19]        The change must be truly material and one that is significant and likely to be long lasting. The change must not be trivial and of short duration. This is because when parties resolve issues on a final basis by agreement or court order, or a court makes an order following the end of litigation, it is beneficial to the parties to have certainty.

[20]        The party seeking the variation of an order has the burden of proving that a material change has occurred. The onus of proof is on a balance of probabilities. If the applicant does not meet that burden and does not prove a material change in circumstances, the court’s enquiry is at an end. If the applicant is successful in proving that circumstances have changed materially, then the court moves on to consider what order should be made in the present circumstances of the parties.

[21]        To determine the appropriate order, I must consider the statutory provisions of the FLA and the principles set out in well-settled case law regarding the law of spousal support.

[22]        The relevant provisions of the FLA are as follows:

[23]        The statutory factors and objectives to be considered in awarding spousal support include compensatory and non-compensatory principles. Most spousal support awards, particularly those involving long-term marriages, will include both principles of spousal support. The SSAG incorporates both principles in the calculations that it produces.

[24]        Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420 summarized the principles of compensatory and non-compensatory spousal support at paragraph 32:

[25]        Moge v. Moge, 1992 CanLII 25 (SCC), [1992] 3 S.C.R. 813, discusses the equitable sharing of the financial consequences of relationship breakdown, particularly in long term relationships. The economic consequences of a breakdown in a relationship should not be borne by one party alone or disproportionately. The obligation to assist a spouse with the economic consequences of a breakdown in a relationship should be borne by the other spouse and not the state. The court stated the following, at page 870, concerning long term relationships:

[26]        When considering the appropriate amount of spousal support the court considers the means and needs of the parties by assessing income, living expenses and standards of living.

[27]        The court has a broad judicial discretion to impute income, pursuant to s. 19 of the Child Support Guidelines (the “Guidelines”), to either or both spouses. It is the party seeking to have income imputed to the other party who has the burden of proof. There must be an evidentiary basis for the court to impute income to the party [see Marquez v. Zapiola, 2013 BCCA 433 at paragraph 36].

[28]        The relevant portions of s. 19 of the Guidelines are as follows:

[29]        This section applies to both child support and spousal support orders. The test to be applied is set out in Marquez v. Zapiola at paragraphs 37 and 38:

[30]        When determining if a payor is “intentionally” under-employed pursuant to s.19(1)(a) of the Guidelines, it is not necessary that the court find bad faith on the part of the payor. In other words, it is not necessary to find that the payor is avoiding the earning of income in order to reduce his obligations. The payor can be found to be intentionally under-employed if the payor chooses to earn less than her or she is capable of earning.

[31]        Self-employed persons are entitled to deduct business expenses for the purpose of calculating income tax. The court recognizes that business expenses are a legitimate cost of producing business income. However, in assessing the amount of self-employment income for the purpose of determining the appropriate order of spousal support, the issue is whether the particular business expense is reasonable and whether the particular business expense is properly attributable to the business. Sections 19(1)(g) and (2) of the Guidelines provide that a business expense may be reasonable for income tax purposes but may not be reasonable for spousal support purposes [see Marquez v. Zapiola at paragraph 49 and 50].

[32]        There is a relationship between reapportionment of family property and spousal support. Because the economic consequences of the breakdown in the relationship must be equitably shared by both spouses, the court must also consider the distribution of family property and family debt [Marquez v. Zapiola at paragraph 39]:

[33]        The SSAG includes an exception where there has been a reapportionment of property but it is not the case that in all instances the existence of a reapportionment of property will result in a spousal support award outside of the SSAG ranges. At paragraph 41 and 42 of Marquez v. Zapiola the court explained as follows:

[34]        I do not agree with J.’s argument that M.’s sale of the former family home unbeknownst to him is a material change in circumstances. M. filed a financial statement on May 1, 2017 in which she clearly indicates that she has sold the home and has purchased a manufactured home. M. did not hide the fact of the sale and the information was available to J. before the final order was granted.

[35]        The final order does not indicate the amount of income upon which the amount of spousal support was based. In his financial statement filed on February 1, 2017, J. states that his income is $16,400 from Employment Insurance and $20,000 from self-employment for a total of $36,400. On page one of the financial statement, J. states the following:

[36]        J. states that he was optimistic that the business would generate sufficient income from which he could pay spousal support of $1,800 per month and then $2,500 per month. M. does not dispute that the amount of spousal support contained in the final order was based upon J.’s projection of his future income.

[37]        At the time of the final order, J. was operating [omitted for publication] for approximately 7 months. The business was new. J. testified that he soon learned that over the winter holiday season the business dries up because of holiday closures such that he has earned approximately $1,000 during that time. This information was not known to J. at the time of the final order.

[38]        J. states that he has worked at finding doctors who will use the temp services but he was overly optimistic in the numbers that would do so.

[39]        I find that J. has been forthright and transparent in the income information that he has provided. He has disclosed his financial information and bank account information to M. at her request. He has included a spread sheet to itemize his business earnings and expenses and he has listed each of the invoices for services rendered to various doctors as well as the amount paid to the medical office assistants.

[40]        J. has satisfied me that circumstances have changed materially since the final order was granted because he over-estimated the success of his business and did not account for seasonal fluctuations in income. This is a change that is material and long lasting. I find that if J. had known that his business plan was overly optimistic, he would not have agreed to pay the amount of spousal support set out in the final order.

[41]        Based upon my calculations, it appears that in order to result in a mid-range spousal support payment of $2,500 per month, J. would have to earn net self-employment income of approximately $77,000. To pay spousal support at the high range of $2,500 per month, J. would have to earn net self-employment income of $75,000. Based on the financial information provided by J., he has not earned close to that amount of net self-employment income.

[42]        M. is currently disabled and receives disability benefits. M.’s claim for spousal support is based on compensatory and non-compensatory theories of support. The compensatory claim is based on the fact that during this long-term relationship, M.’s role was largely to look after the house and the children. M. did find remunerative employment as a medical office assistant and worked at that job until 2013. However, her health did not allow her to continue in that employment and she maintains that she now cannot work at all. This gives rise to the non-compensatory claim which is largely needs based. M. does not earn sufficient income with which to meet her monthly expenses.

[43]        It is worth noting that J. does not contest these facts. J. accepts and does not dispute that M. is disabled and unable to work at present. J. accepts that M. is entitled to spousal support and he is not asking that spousal support end.

[44]        There is no question that M. remains entitled to ongoing spousal support on both a compensatory and non-compensatory basis. The issue is the amount.

[45]        M. filed a Financial Statement on April 1, 2019 in which she deposes that her annual living expenses are $34,200. Her accommodation costs for pad rent and taxes are $4,930 per year or $410 per month. M. has credit card debt of $600 and her annual debt payments are $600. She has assets that consist of the manufactured home and a motor vehicle. She testified that she had savings from the sale of the house but she has not deposed to any bank savings in her financial statement.

[46]        M. states that she has issues remembering specific dates and events. M. could not remember the amount that she receives for CPP benefits and income assistance. She stated that her CPP benefits are clawed back by any amounts that she receives in spousal support and that she receives her whole amount of social assistance regardless of receiving spousal support.

[47]        Given that M.’s memory is deficient, I will accept the information contained in her financial statement filed on April 1, 2019 where it conflicts with her testimony. In the attachments to her financial statement is documentation that makes it clear that her CCP disability pension is not clawed back by amounts received in spousal support but that her Persons with Disabilities income assistance is clawed back. She has attached a Confirmation of Assistance letter dated March 28, 2019 to indicate her Canada Pension Plan benefits are $704.39 per month and her Persons with Disabilities income assistance without clawback is $1,235.42. The CPP benefits are deducted from the Persons with Disabilities income assistance such that if M. does not receive spousal support, she receives $531.03 from income assistance and $704.39 from CPP.

[48]        J. filed a Financial Statement on April 17, 2019. He deposes to annual living expenses of $31,390 not including payment of spousal support or payment of debt. He lives in a rental apartment and has a roommate so that his rent is $900 per month. He no longer has a vehicle and he uses public transportation and car share. He has no assets and he has debt owing to Canada Revenue Agency of $10,500.

[49]        His 2017 Income Tax Return discloses Employment Insurance income of $9,666, other income of $8400 and gross business income of $17,420.57. The net business income is $9,617.53. This is income reported in the year that J. participated in the employment program offered through the Employment Program of British Columbia.

[50]        J.’s 2018 Statement of Business Activities included in his Income Tax Return reports gross business income of $104,064.68 and wages paid of $69,628.25 which represents the payments made to medical office assistants contracted by [omitted for publication]. The profit is $34,446.43 from which J. deducts $9,482.21 in expenses to arrive at a net business income of $24,964.32.

[51]        J. is entitled to deduct business expenses from his income provided that the expenses are reasonable.

[52]        J. provided a spreadsheet (marked as Exhibit 10) that he prepared to record the business expenses that he incurs on a monthly basis for each month in 2018. The expenses are not individually identified but are categorized. The categories of expenses in Exhibit 10 do not match exactly the categories of allowable expenses in the Statement of Business Activities. J. testified that he does not incur any professional fees (an expense of $1,000) and he could not explain the expense of Management Fees ($740.50). He testified that he uses a den in his apartment for office space. He deducts a portion of his rent as a business use of home expense of $3,392.34.

[53]        While I do not doubt that the expenses that J. has claimed are legitimate deductions for income tax purposes, I find that some of the expenses are unreasonable deductions for the purpose of determining spousal support.

[54]        J. does not incur professional fees so that expense is unreasonable. J. operates the business entirely on his own and there is no evidence to confirm that he incurs management fees as a legitimate cost of producing business income. J. testified that he uses the den for his office. However, he also testified that he conducts his business remotely and electronically. Meetings with doctors take place outside of J.’s apartment and J. interviews medical office assistants by video link. J. does not requires an office for meeting privately with clients. J. testified that his home office is needed as a base of operations. However, it appears that the base of operations would amount to a computer, desk top and some office supplies. Further, J. testified that the business operates wherever he happens to be and is therefore not tied to the base of operations. I therefore find that the expenses for professional fees, management fees and business use of home are not reasonable business expenses for the purposes of determining J.’s income for the calculation of spousal support. I add to J.’s net business income, expenses of $5,132.84 and I find that J.’s net self-employment income is $30,097.06.

[55]        J. is in a new relationship and he travels once every 6 to 8 weeks to California to visit his partner. M. led evidence of the dates that J. has travelled I do not find the dates that J. has travelled to be excessive. Nor do I find the fact of travel has diverted J.’s energies away from developing his business. J. explained that the nature of his business is such that it is largely conducted electronically or remotely. For example, he conducts interviews of potential medical office assistants via online video link. He speaks with doctors over the phone. He bills doctors electronically and he is invoiced by medical office assistants electronically. He pays the assistants by e-transfer and his invoices are paid by the doctors electronically or by cheque. J. described that his business operates wherever he is. J. testified that when he visits his partner they lead a quiet life. They go for walks or to museums and occasionally out for dinner. There was no evidence led, and J. was not challenged, on whether during his time in California, he treated it as a holiday and did not work.

[56]        I accept that J. can carry out his duties with [omitted for publication] remotely from California when he visits his partner.

[57]        M. argues it is not reasonable for J. to continue with [omitted for publication] because the business does not earn significant amounts of revenue. J. will be 65 in [omitted for publication], 2020. Before developing [omitted for publication] he worked in middle management jobs. He stopped working for [omitted for publication] in Fort St. John after the relationship with M. broke down. J. testified that he was depressed because the relationship ended and he was living in a remote location by himself.

[58]        J. states that [omitted for publication] severed him on compassionate grounds. He was not terminated for cause and [omitted for publication] paid him severance pay together with his remaining vacation entitlement. J. produced a letter from [omitted for publication] dated May 4, 2016 to confirm that he was terminated without cause.

[59]        J. states that he does not think he would be hired as a manager or assistant manager given his age and the fact that he has now left two management positions at big box chains ([omitted for publication] and [omitted for publication]). J. states that for this reason he decided to develop his own business.

[60]        J. agrees that he would qualify for a sale associate position at a big box chain but those jobs usually pay minimum wage. He also agrees that he could work as a bookkeeper. He states that he has considered doing this work as it is something that he is qualified to do. He states that working as a bookkeeper is something that he could look into.

[61]        J. is healthy and has marketable skills. He has demonstrated an ability to develop a business and earn an income. He has accounting experience that qualifies him to work as a bookkeeper. It may be that he can develop a bookkeeping service as part of [omitted for publication]. J.’s testimony that he has considered bookkeeping work and that it is a line of work that he could look into implies that he has chosen not to work in that field.

[62]        J. has the capacity to earn additional income and I find that J. is intentionally under-employed. It is reasonable in all the circumstances to impute some income to J. that takes in to account his existing skills as a bookkeeper and his unexplored use of those skills.

[63]        The imputation of income is somewhat arbitrary in terms of determining a number. In my view, a reasonable income to impute is an additional $10,000. When added to his net self-employment income of $30,097 I will impute income of $40,097.

[64]        The next question is to determine the amount of the spousal support order that should be made and the commencement date.

[65]        For the purposes of the SSAG calculations I make the following determinations of income:

[66]        The SSAG generates a calculation of $989 at the low range and $1088 at both the mid and high range. The mid and high range calculation is limited to 50% of net disposable income.

[67]        I am persuaded that in all of the circumstances I must consider the fact of the reapportionment of the family property in determining the appropriate amount of spousal support payable. The parties had very little property at the end of a long-term relationship and M. retained the only asset of value. M. argues that the amount received from the sale of the property was $80,000 and M. would have been entitled to 50% of that in any event. It is argued that the amount of the reapportionment ($40,000) is nominal.

[68]        I disagree. M. received a 100% reapportionment of the only asset of value. She was able to use the sale proceeds to purchase housing that will provide her with security of housing and at a low monthly expense.

[69]        There is a relationship between reapportionment of property and quantum of spousal support. The reapportionment of property addresses some of the compensatory grounds for spousal support. It also leaves J. without property. Counsel argues that J. does have the most valuable asset – the ability to earn an income. However, fairness is not achieved between the parties by also demanding that J. share equally the only asset that he has remaining, his ability to earn income, when M. has already received 100% of the only other asset acquired by the parties during the relationship.

[70]        In all of the circumstances, and in recognition of M.’s entitlement to ongoing support and the reapportionment of family property, I find that it is reasonable for J. to pay spousal support at the low range of the SSAG, $989 per month.

[71]        J. filed the application to change the final order on March 26, 2018. I order that the payment of spousal support of $989 per month commence on April 1, 2018. J. has not tendered evidence to establish that the final order should be varied retroactively. I direct that the Family Maintenance Enforcement Program make all necessary adjustments to J.’s account to reflect the terms of this order.

[72]        The parties will continue to provide each other with financial disclosure on an annual basis.

[73]        Counsel for M. will draft the form of this order. The requirement to have J. approve the form of the order is dispensed with.

[74]        I make the following orders: