J.K.T. v. A.J.T.

2012 BCSC 491 J.K.T. v. A.J.T. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: J.K.T. v. A.J.T., 2012 BCSC 491 Date: 20120402 Docket: E0669 Registry: Powell River Between: J.K.T. Claimant And A.J.T. Respondent Before: The Honourable Madam Justice E.A. Arnold-Bailey Reasons for Judgment Counsel for the Claimant: Stacey K. McCausland Counsel for the Respondent: Ian Fleming Place and Date of Trial: Powell River, B.C. May 31, June 1, 2, 3, and 29, 2011 Place and Date of Judgment: Powell River, B.C. April 2, 2012 INTRODUCTION [1] The claimant, J.K.T. ("the husband"), and the respondent, A.J.T. ("the wife"), commenced cohabitation in October 1992. They married on February 27, 1993 in Powell River, British Columbia, and resided there throughout the marriage. They separated on March 24, 2007, at the instigation of the husband. The total time of their cohabitation, including the time of the marriage, was 14.5 years. They have one daughter, A., born in February 1994, who was 13 years old at the time of separation. Their marriage was a traditional one, with the husband working as a gas plant operator and the wife working in the home and providing care for the parties' child. For the last several years prior to separation the wife kept the books for the family company and income split with the husband. [2] On May 8, 2007, the parties entered into a separation agreement that purported to resolve all outstanding issues between them. Pursuant to the separation agreement the husband received the family company, and the wife received the matrimonial home; the husband was to pay $2,500 per month in spousal support for an unspecified duration without a review, $500 per month in child support to be adjusted pursuant to the Federal Child Support Guidelines, S.O.R./97-175 [Guidelines], and the family debts that included a line of credit and a mortgage on the matrimonial home. The separation agreement requires him to continue to pay the mortgage on the matrimonial home after its transfer wholly to the wife. The husband's lawyer drew up the separation agreement. The wife's present trial counsel represented her in relation to the separation agreement. [3] Later, the husband sought to have the amounts he was paying on the mortgage characterized as additional spousal support, which was not agreed to by the wife. The husband fell into arrears with regards to spousal support and child support, despite the period of May 2008 to January 2010 when he engaged in employment in Algeria where his income increased significantly. He has returned to live and work in Canada, based in Powell River, and his income is generally higher than it was prior to separation. He has engaged in income splitting with a new partner for tax purposes and continues to be in arrears, primarily in relation to spousal support. [4] The husband's position is that the separation agreement is unfair in that it reapportioned assets almost completely in the wife's favour, made him solely responsible for the family debts, and also awarded monthly spousal support to the wife considerably higher than the Spousal Support Advisory Guidelines (the "SSAG") would have suggested, without a specified end date or review. He seeks reapportionment to him of at least a portion of the matrimonial home and reconsideration of spousal support, given that the wife's receipt of all the equity in the matrimonial home and substantial spousal support was excessive and unfair, particularly in light of his ongoing obligation to keep paying the mortgage on the matrimonial home. He seeks a spousal support obligation commensurate with his income, either of specified duration or with a review. He maintains that he did not appreciate that the separation agreement was a final agreement, nor did he appreciate at the time he entered into it, based on his usual level of employment and remuneration, that the company could not support the level of financial obligation that he committed himself to. He further submits that child support should be decreased to accurately reflect his income. The husband also seeks a divorce. [5] The wife is opposed to any reapportionment of the matrimonial home or any reduction in the amount of spousal support or its duration, which is presently not limited. She seeks to have the separation agreement upheld as it was negotiated and agreed to between the parties, with each of them represented by lawyers and having received independent legal advice. She recognizes that the division of family assets is unequal but submits it is not unfair given the husband's ability to make a good income through employment, whereas her employment opportunities are very limited because she is older than the husband, lacks marketable work skills and experience, and is in general poor health. She left the workforce after marriage. Further, following the separation the husband's income increased significantly but he did not increase the amount of child support he was required to pay on his increased income without a court application. The wife resists any reduction in the husband's financial obligations as agreed to in the separation agreement. [6] The potential unfairness to the husband arising under the terms of the separation agreement arises from the fact that the parties may have over-estimated the income that could be generated by the husband's employment through the company (no valuation was obtained at the time the separation agreement was drafted), and the fact that the husband remained obliged to pay the mortgage payments on the former matrimonial home after its transfer to the wife without receiving credit for those payments as spousal support. To the extent that the parties agreed to a form of exchange of property of equal value, the husband's interest in the matrimonial home for the wife's interest in the company, the result may have been markedly unfair to the husband given that the sole income to the company is from his employment. The wife argues that the valuation of the company was accurate as at the date of the separation agreement and that any decrease in value is the product of the husband's conduct. THE ISSUES [7] The issues to be decided are: 1. On the evidence, was the legal advice given to the husband regarding the separation agreement adequate to alleviate the alleged unfairness claimed by the husband? 2. Should the Court reapportion family assets other than as contained in the separation agreement, on the basis that the separation agreement is unfair, based on an analysis pursuant to Hartshorne v. Hartshorne, 2004 SCC 22, and within the meaning of s. 65 of the Family Relations Act, R.S.B.C. 1996, c. 128 [FRA]? 3. In the event that the separation agreement is found to be unfair and family assets are to be reapportioned how should that be done? 4. Should spousal support be adjusted, and if so, what is the appropriate amount of spousal support the husband is required to pay, and for what duration? 5. What are the husband's Guidelines incomes for the calculation of child support and what is to be paid, currently, and retroactively? BACKGROUND Prior to Separation [8] J.K.T. was born in June 1962. He is presently 49 years old. A.J.T. was born in May 1957. She is presently 54 years old. The parties began cohabiting in October 1992, married on February 27, 1993, and separated on March 24, 2007. Their daughter A. is now 18 years old and as of the date of trial continued to reside with the wife. Upon separation the parties agreed to joint custody, joint guardianship regarding A., and that her primary residence would be with the wife. [9] During the marriage the wife was a homemaker. Prior to the marriage she worked as a waitress and also part-time with a security firm maintaining a number of ATM machines in Powell River. She was 35 years old when she met J.K.T. [10] When A. was born in 1994, A. had a number of health issues. As a young child, A.'s speech was delayed and a number of other issues of concern were noted that eventually resulted in her being diagnosed at Sunnyhill Hospital in Vancouver with a multi-plex developmental disorder in the autism spectrum. As A. was growing up she required speech therapy, physiotherapy, therapeutic riding, and additional support from her mother to manage social and educational situations. As the husband was away for work for considerable stretches in the gas industry, the wife fulfilled the role of primary caregiver for A. Happily, A. has grown up to be a well-socialized young woman, who has completed each year of school, was on the Honour Roll at school, participated in track and field, has her driver's licence, a social network, and a group of friends. There are no ongoing issues in relation to A. that would militate against the wife participating in the workforce, and there is no evidence of any such constraints at the time of separation. [11] When the parties married the husband brought some debt to the marriage. During the marriage the wife managed the family finances. This was a mutual decision as she was more careful with money. After the first year of marriage the wife did not work outside the home. They purchased the matrimonial home that figures in these proceedings within the first three or four years of marriage for $115,000. They lived there together until separation. Neither of them owned any other real estate. [12] The husband has a background of working in the oil and gas industry. He is a certified pipe fitter and the parties agreed that he would resume that type of work away from home as their family needed the income. After one long contract away from home, the husband decided in 2001 to resume work as a gas plant operator. He continues to work as a contract gas field operator. [13] In 2005 the wife assumed the role of bookkeeper for the company that she and the husband had incorporated to facilitate his work in the gas industry. She kept the books manually as she did not have computer skills. She was an equal shareholder in the company and she and the husband income split with regards to his income from employment generated through the company. Apart from some office furniture, some tools, and the husband's leased truck, the only asset of the company was the husband's ability to earn an income. [14] The wife has suffered in the past from arthritis, hypertension, depression, and anxiety. She indicated that her problem with anxiety probably started after A. was born when she likely suffered from post-partum depression. She has been on various medications, particularly in 2005, and after separation. The osteoarthritis in her lower back still flares up from time to time. She takes Advil as necessary and a prescribed medication to help her sleep. [15] The wife's former family doctor, Dr. G.P. Human, provided his opinion in relation to the wife's medical issues and her employability. In his letter, dated December 3, 2009, he indicated that he first saw the wife in 1999 for low back pain, at which time she was "severely disabled... and x-rays revealed considerable degenerative changes in the lower apophyseal joints and the SI joints. There was a pseudoarthrosis with the pelvic bones." He described the treatment she received and opined that this was a chronic condition, that he did not think her prognosis for recovery was good, and that this condition would definitely impact on her ability to seek "any type of employment". Dr. Human also indicated that the wife suffers from chronic anxiety that has been aggravated by the separation and that she has struggled with anxiety as long as he has known her. His view was that her anxiety had been aggravated by having to deal with "a special needs child." In his view, as she had not worked since 1994, it would be very difficult for her to get back into the workforce. [16] The wife seems genuinely interested in upgrading her skills and finding employment. Her efforts at employment that involve standing or stretching and reaching have been unsuccessful, but she is engaged in volunteer work in an office and hopes to upgrade her computer skills and find office employment. At best, it seems she will be able to find less than full-time work in an office. [17] As indicated, in recent years the husband has been working as a gas plant operator. Shortly after the parties incorporated the company in June 2005, he had orthoscopic surgery on his knee and developed a very serious infection. He was severely ill and in hospital for about five weeks. For a time he was at risk of losing his leg. After that he was bedridden and required his wife's assistance for basic day-to-day tasks. He was able to return to work in late September or early October 2005. The wife agreed that when the husband was not able to work the company had no income. He also has ongoing back pain as a result of a fall onto a concrete pad that he indicated crushed a vertebra in his back. [18] The husband's mother died in December 2005. The husband claims that his illness and the death of his mother traumatized him, and he places them closer to the time of separation in March 2007. Where his evidence conflicts as to timing with that of the wife I accept hers, as she impressed the Court as the more accurate historian as to the dates of particular events. However, prior to separation the husband sought psychological counselling to assist him in making difficult decisions about his future. [19] During the marriage, from 2005 onwards, the parties earned income through the company. The parties' annual income generated just prior to separation was approximately $72,000, which they income split. The wife recalled that in late 2006 - early 2007 the husband brought up the topic of working in North Africa based on an opportunity a friend knew of. He said it would involve a long shift away and the wife felt it was too long for him to be away from the family and out of the country, and therefore did not support such an endeavour. He did not pursue that work opportunity until after separation. THE PARTIES' BASIC AGREEMENT REGARDING THEIR FINANCIAL MATTERS UPON SEPARATION [20] On March 24, 2007, the husband had just left to return to camp to work when he called the wife to say that he wanted out of the marriage. The wife was shocked and upset as there had been no prior discussion about separating. The company year-end financial statements had recently been completed by the accountants and the husband had picked up a new leased truck for his work. [21] In a subsequent telephone conversation the parties agreed to meet on April 9, 2007, at Willingdon Beach in Powell River to discuss the terms of their separation. The wife's recollection is as follows. [22] The wife was unsuccessful at persuading the husband not to separate. She recalled that he asked her for ideas about how to go about separating. She suggested that they continue to run the company together. However, if he insisted on separating then they could probably both maintain households on their respective incomes, drawn from the company. He offered to give her the house, pay the mortgage and the line of credit, and she would give him the company. When she said that she would have no income he said he would pay spousal support and child support and no numbers were discussed at that point. Their meeting ended, after which the husband asked the wife to accompany him to The Brick to help him pick out a bedroom suite, which she did. [23] The next day they met again at the matrimonial home and agreed that they should consider a separation agreement and both get their own legal advice. She had gone on-line to find out what information one needed to provide to a lawyer. As she paid the bills she knew what household expenses were likely to be and that the husband was likely to have to rent accommodation. She said she wrote everything down and had a list of estimated expenses for each of them on papers that later she discarded as she did not think she needed them. She estimated that she would need $2,500 in spousal support and $500 in child support, and that the husband would need to have more money paid to him from the company of about $5,000 per month. She said they needed to figure out if a total wage of $8,000 per month could be drawn from the company. She said they had just completed the year-end and the company had a fairly healthy balance sheet. The husband was making a steady income that did not seem to fluctuate much month to month. [24] The wife said that she made a call to their accountant and told him they were separating and that her husband needed to pull $8,000 per month from the company to meet their planned expenses. She recalled that the accountant called back that day when the husband was there, or the next day, and told her that she would have to write the husband a cheque for $11,000 per month to net $8,000. The wife recalled that neither of them had a problem with the $11,000 amount and she did not recall the accountant raising any concerns about the amount. The husband did not want any of the household furnishings. She did not think they discussed the RRSPs that day, but later agreed to split them. She said during that meeting she agreed to give him her interest in the company in exchange for his interest in the home. The meeting ended with them both agreeing to meet with their lawyers, and the wife said she had no problem with his lawyer drafting the agreement. [25] The husband recalled that they met briefly at Willingdon Beach to go over what she wanted. When he met with her at the matrimonial home she had a piece of paper with numbers on it that indicated what she said she needed to live on and the husband took the paper to Mr. Whyard, who he had retained about a week earlier. The husband said that what was on the piece of paper went into the separation agreement and there was no discussion of valuation regarding the assets they had. He said that he did not know what the company was earning, that he knew what the gross sales were, but said that the wife kept a tight rein on the money and did not like him to disrupt her bookkeeping. The husband said that he did not have discussions with his lawyer, Mr. Whyard, as to whether he could sustain the amounts he was to pay and that he took his wife at her word as the bookkeeper of the company that the company could afford to make these payments. He said that there was no discussion about the SSAG. Their incomes as reflected in the separation agreement were as a result of income he earned through the company then being split between him and the wife. [26] On cross-examination the husband recalled that the parties discussed him giving her the house and her giving him the company and that they mutually agreed on that. He recalled that she brought up spousal support and child support the next day when she presented him with a list of numbers on a piece of paper. He said he agreed to them "because [he] wanted out." He did not recall any discussion of debts, although he recalled after the separation agreement was signed going to the bank to make arrangements to continue to make the mortgage payments and the payments on the line of credit. He said that he trusted the wife to tell him what the company could afford and later when he got the books in October 2007 he found out that he had been misled. The husband said that he did not recall looking at the 2006 year-end financial statements for the company in March 2007 around the time they were discussing separation. He agreed, looking back, that he should have requested the company books sooner. He agreed that he knew what the gross billings were but said he did not keep a running tab. [27] The husband agreed that he did discuss the terms of the separation agreement with Mr. Whyard He said they did not go over it word by word, or paragraph by paragraph, but that Mr. Whyard handed it to him and he looked it over quickly. The husband agreed that at the time he did not raise any valuation issues and that the value attributed to the matrimonial home was more or less accurate. In terms of valuing the company, the husband said that Mr. Whyard did not ask for one and neither did he, as he "was the company." He agreed that the separation agreement does refer to it being a full and final settlement in a number of places. He characterized such language as "legalese", said he glanced over it quickly and signed it. The husband said he does not recall what he understood at the time. [28] In terms of the $500 figure for child support he said the amount came from the wife and there was nothing said about it increasing with his income or in relation to the Guidelines. With regards to the $2,500 per month in spousal support, the husband said that based on the wife's figures he assumed the company could afford it, and he just knew that he would continue working. The husband said that he did not discuss the SSAG with Mr. Whyard, nor did they discuss a possible end date for the payment of spousal support. When paragraph 38 of the separation agreement was put to the husband, which is to the effect that the agreement survived the divorce order, the husband said that he did not understand that phrase then and when asked what did it mean to him now, the husband said, "To tell the honest truth, I do not know..." Despite the references in the separation agreement to it being a final agreement the husband maintained that he always thought separation agreements lasted a year and could be renegotiated, that separation agreements were temporary agreements, and that this was "common knowledge." When he asked if he thought the property transfer could be undone, the husband said that he did not know what he thought as he never got to that stage, as he got legal advice that the separation agreement was unfair. He sought legal advice about having the mortgage payments he was making considered as spousal support. [29] The parties' annual income prior to separation was approximately $72,000 from the company, which they income split. At the time the company had $40,000 in retained earnings, which realistically permitted some additional wages to be drawn from it. After the separation agreement was signed, when the company was later appraised as at the date of separation, it was valued at $34,000. [30] Mr. Whyard was the lawyer retained to act by the husband, and who subsequently drew up the separation agreement. The wife was represented by Mr. Fleming, who represented her at trial. [31] The wife said that the typed page in evidence with various items and figures listed appears to reflect what she had written down during their meeting as her terms to go into the separation agreement. This document appears to have been typed up by someone at Mr. Whyard's office, likely from the handwritten notes of the wife. The typed page (Tab 1 of Exhibit 2) states that in relation to A., the parties agreed upon joint custody with mutually agreed access and child support of $500 per month. The divorce was to be dealt with at a later time. Spousal support was to be $2,500 per month. Under family assets it stated that the wife was to get the house and the husband was to get the company. Then, listed under the wife's name was "-Gross $3000.00, -Taxes $500.00, -$2,500, -Expenses $550 and $1,950". Listed under the husband's name was "Mtg, Med, LOC Debt - $1450.00, Support (spousal and child) $3000.00, Expenses (rent etc) $1000.00, $5450.00)". Under the husband's name, in relation to income was "Gross Approx $11,000.00 per month, Net Approx $8,000.00". THE TESTIMONY OF THE HUSBAND'S FORMER LAWYER MR. WHYARD [32] Mr. Whyard, a lawyer in Powell River, whose practice at present includes a significant portion of family law, was subpoenaed on behalf of the wife. He has been a member of the Bar since 1982. He had not discussed his evidence with counsel for the wife, Mr. Fleming, prior to testifying. [33] Mr. Whyard first met with the husband on March 16, 2007. He had previously had a phone call from the husband and had noted that he was told the wife could have the house if the husband could have the company. During the first meeting Mr. Whyard made brief notes regarding the arrangements for the child, noted the name of the parties' company, that they were equal shareholders, and the name of their accountant. Regarding the house, Mr. Whyard noted 220,000 with 80 noted underneath it, which he interpreted as reference to a mortgage of $80,000, resulting in a final number of $140,000. By the company he put a question mark. In his notes he then divided the $140,000 by two and noted down $70,000. Mr. Whyard said that this meant that he had thought about the value of the house and the company, and did the divisions while talking about property division and valuations of assets. He mistakenly noted this meeting took place on March 16, 2006, when he was sure it was took place in 2007. [34] When Mr. Whyard was asked if he recalled giving the husband any advice during this meeting he responded: Hmm, I guess I am not quite sure what advice means. Looking at my notes, we would have had discussion, I would have said various things, but it looks from my notes I would have had in mind preparing a separation agreement, meeting with him to get the primary evidence -- or information and facts so I could prepare a draft separation agreement. I don't recall if I gave him any advice. [35] Mr. Whyard's notes from the meeting of March 16, 2007, do not indicate that he discussed spousal or child support with the husband or gave him any advice in those regards. He had no indication of phone calls from the husband between their first meeting on March 16th and their second one on April 13, 2007. Mr. Whyard also had no notes of the husband being under stress or having told him about trauma associated with his knee surgery and the serious infection, or that his mother had died, although Mr. Whyard said that stress normally results from marital breakdown. [36] The second meeting, and it would seem the last meeting between Mr. Whyard and the husband was on April 13, 2007, when he met with the husband for 55 minutes. Mr. Whyard did not recall what was discussed on that occasion but did make some notes. His notes indicated to him that he did discuss spousal and child support, "but to his embarrassment" he was not sure what he was writing about. He did see a reference to 54 percent and $60,000, which meant they were discussing incomes and taxability. There was a note to the effect that $60,000 "equals $30,000" and he was not quite sure what that was regarding. There was no reference as to who would have the $60,000 income. He did not think there were any notes about spousal support to the wife, as he gleaned from his notes and his recollection was: ...that the company that [the husband] had was already doing an income split, such that we would talk about what are the current numbers, and if we're attempting to get the company into his name what would be the ramifications of that. Especially from a tax point of view. [37] There was no reference in Mr. Whyard's notes from that day regarding the house or the mortgage. [38] Portions of the separation agreement were reviewed with Mr. Whyard in court, including the fairly specific information regarding the parties' incomes from the company in the preamble. When asked where this information came from, Mr. Whyard noted that he did not have a note of calling the accountant who dealt with the company until later, when the question regarding spousal support came up. Apparently, the husband provided Mr. Whyard with the income information and the information regarding the value of the matrimonial home and the mortgage balance on the RBC mortgage. [39] Asked whether he had his complete file to refer to in court, Mr. Whyard was not sure as it had been transferred to another lawyer, Mr. Warsh, who he had placed on an undertaking to return the file if he needed it. He then said that what had been returned to him by the husband's present counsel was his correspondence file, which included his notes, telephone notes, and copies of his accounts, and a sub-file for drafts of the separation agreement. He did not recall where he obtained the amount of $80.499.25 as the mortgage balance, and agreed that there were no values attributed in Clause H to the family assets of furniture, RRSPs, or the company. The second draft of the separation agreement appeared to him to be the one that was signed, and although it was his practice to keep a signed original in his file, it was absent. [40] During the second meeting Mr. Whyard believed that he discussed different levels of spousal support with the husband. He did not recall whether he discussed end dates for spousal support with the husband, or if he had referred to the SSAG in preparation of the separation agreement. He did not recall if he discussed quantum or duration of spousal support, but said that by relying on the figures provided now on the typed sheet, they ended up with the $2,500 per month figure in the separation agreement for spousal support. [41] When asked what his general practice was in terms of discussing the quantum and duration of spousal support with clients, Mr. Whyard responded: I suppose my practice is to have that discussion depending on the sophistication of the client. I took [the husband] to be fairly sophisticated, and working with the list he provided me I relied on him to a large extent about valuations and numbers. I have no recollection specifically of discussing spousal duration. [42] When asked if he considered the property division and spousal support in the separation agreement to be fair, Mr. Whyard said that he did not generally use the word "fair" as he was not sure what it means, and it seemed to him to be "a subjective description." [43] It appeared to Mr. Whyard that he had reviewed the first draft with the husband, likely during the second meeting on April 13th, 2007, and the husband did not suggest any changes. Mr. Whyard said he made several. The first draft envisaged two schedules to list each of the parties' assets but Mr. Whyard chose not to do that in the final separation agreement. [44] Mr. Whyard asked and answered the following questions regarding the husband and the separation agreement: Q Okay. Now, from my review of the -- the agreement, it appears to indicate in many different places, in several different ways, that this is a final separation agreement, and do you recall discussing that finality with [the husband]? A No. Q And what is your practice in terms of discussing that effect of the separation agreement, or what was it at the time? A I'm sorry, I don't understand the question. Q Is it your practice -- or was it your practice in 2007 to discuss the finality of a separation agreement such as this? A It depended on the client. Q Okay. And -- A I suppose it also depended on the contents of the separation agreement. I don't always talk about -- I think the words I generally use are interim and final, but I don't always discuss those with all clients. And specifically I don't recall any discussions with [the husband] about that, which is not to say they didn't take place, I just don't recall them, and there doesn't seem to be any notes to confirm that we had those discussions. Q Okay. A Which is also to say I don't write notes about everything we discuss. [45] Mr. Whyard indicated that he did not recall if the husband had some time on his own to review the final draft, but that his review of his notes indicated there was some haste to get the separation agreement done. Asked whether it was his practice in 2007 to review the agreement with a client or let them review it themselves before allowing them to sign it, Mr. Whyard stated: I'm hesitating because I'm not quite sure what "review" means. Very often the separation agreement will result from various meetings and phone calls, which I take to be a review. So in this instance, having had two meetings with [the husband], and having seen that I have a few phone calls with him in the interim, or at least one, that's what I would take to be a review. Do I have him read it entirely before he signs it? No. Mr. Whyard then agreed that it was fair to say he leaves it up to the client to read the agreement before they sign it. [46] When asked about the solicitor's certificate of independent legal advice he signed in this case and if the assertions contained in it were true, Mr. Whyard replied: Yes. I would say this though, each time I sign these things I have some trepidation with the future aspects of the thing. It seems to make reference to the client's ability to understand everything in the future, which always makes me tremble, but based on my perception of the client and their particular sophistication, I'll spend more or less time on -- on these certificates of independent legal advice. [47] Mr. Whyard said that he would not sign the certificate of independent legal advice if the person appeared not to understand the agreement or if they appeared to be under duress or undue influence from anyone. He did not recall the husband's attitude towards the separation agreement or if anything was said about the separation agreement being a temporary agreement. Mr. Whyard also said that he did not recall giving the husband any advice to the effect that the separation agreement was only in effect until a divorce order was made, at which time everything would be renegotiated. He said his total time reflected in his bill for this matter was 4.5 hours. [48] In cross-examination, when asked about the time he spent interviewing the husband, Mr. Whyard said it was about an hour for the first meeting and 55 minutes for the second, and the rest of his time was spent preparing the agreement. He was asked about the value of the matrimonial home going to the wife and agreed that it was to be less the amount owed on the mortgage, in other words, the net equity of $140,000. He said that he noted half that amount, $70,000, with the thought that "...having already directed my mind to try to prepare an agreement which has the house in exchange for the company, wouldn't it be nice if the values [are] equal." [49] When paragraph 18 of the separation agreement was put to Mr. Whyard (in which the wife agrees to be solely responsible for taxes and utilities and all other financial obligations until it is transferred to her, except the mortgage, for which the husband agrees to be solely responsible, along with the line of credit relating to the matrimonial home), and whether these clauses were just meant to be in effect only until the house was transferred to the wife, he responded: Well, my specific recollection is that after all the agreements were signed and the company documents had been prepared, some time later [the husband] talked to me about the problems he was having as a result of this clause, but I can't recall any specific discussions at the time we were signing the agreement. [50] Mr. Whyard recalled meeting with the husband in March 2008 when the husband said that he could not afford to pay spousal support and the mortgage. He wrote to counsel for the wife and suggested that the parties revisit the matters of spousal support and the husband's continuing obligation to pay the mortgage. That suggestion was rebuffed. Mr. Whyard noted that the mortgage payments were not tax deductible for the husband, and made further efforts to arrange otherwise. Those efforts were resisted by the wife whose counsel communicated that it could result in tax complications for her. Furthermore, her counsel responded that the wife's view was that the separation agreement was properly drafted to reflect the parties' agreement that the husband pay "alimony payments" and continue to pay the mortgage, which he might pay out quickly. THE SEPARATION AGREEMENT [51] The relevant portions of the separation agreement, dated May 8, 2007, are as follows: D. The Husband is self-employed and earns approximately $36,000.00 per annum. E. The Wife is employed by [the company] and earns approximately $36,014.12 per annum. F. The parties have exchanged information concerning income and expenses, assets and liabilities, and have been fully and independently advised by their respective solicitors to do so, as to their entitlement to discovery, valuations and other legal means by which they may verify or obtain further information with respect to the other's financial affairs. I. During the marriage, the parties accumulated family debts as follows: a) RBC Royal Bank Royal Credit Line (the "RBC Royal Credit Line") with an approximate balance of $12,000.00. J. Both parties are aware of the property of the other as disclosed in this preamble and both parties make this Agreement on the basis of the information contained in this preamble and being fully aware of their respective rights and liabilities in such property. K. The parties make this Agreement with the intention and desire of a complete, final and effective settlement of their respective rights in and to the property of each other and the property held by them jointly, and a full relinquishment of all the rights, interests and claims which either party might otherwise have upon the property of the other. ... MAINTENANCE ... Spousal: 14. The Husband shall pay to the Wife the sum of Twenty-Five Hundred ($2,500.00) Dollars per month for her support and maintenance, to be paid on the 1st day of each month, commencing on May 1, 2007, and continuing on the 1st day of each month. ... DIVISION OF PROPERTY 18. The Wife shall have possession of the Matrimonial Home until its transfer to her, provided that the Wife hereby agrees to be solely responsible for payment of: a) all taxes, water, sewer, insurance, repairs, maintenance, and any other expenses related to the Matrimonial Home; and b) all financial obligations related to the Matrimonial Home, other than the RBC Royal Bank mortgage; and the Husband hereby agrees to be solely responsible for payment of all installments due under the RBC Royal Bank mortgage and the RBC Royal Credit Line. 19. The Wife agrees to transfer her full interest in the Company to the Husband and to thereby relinquish any further claim to an interest in it. The Wife acknowledges that she will need to sign company documents in order to effect the transfer of the Company to the Husband. 20. The Husband agrees to transfer his full interest in the Matrimonial Home to the Wife and to thereby relinquish any further claim to an interest in it. The Husband acknowledges that the Wife will need to register a Form A Freehold Transfer in the Land Title Office in order to be able to complete this transfer. ... 27. The parties covenant and agree that there are no matrimonial debts for which they are jointly liable or which one has incurred prior to the date of this Agreement for which the other in any way is or could be held liable. ... 29. If debts or obligations are incurred by the Wife or the Husband on behalf of the other of them before or after this Agreement, he or she shall indemnify the other from all or any claim, costs, expenses, damages and actions arising therefrom. ... 38. If either party seeks a divorce or takes any proceedings with respect to the parties' assets or responsibilities to each other, this Agreement: a) may at the option of either of the parties be filed or exhibited in such proceedings; b) shall continue in effect after any Order is made in the proceedings; c) and shall survive any Divorce Order made. ... 43. This Agreement is binding on the parties hereto and their respective estates, heirs, executors, administrators and assigns. ... [Emphasis added.] [52] The separation agreement also required the husband to pay $500 per month in child support for A. to be adjusted annually based on his income and the Guidelines. It stated each party was to keep their own Canada Pension Plan ("CPP") benefits, and that there was to be no division of CPP or any employment-related pensions. Both parties' solicitors signed the same certificates of independent legal advice and each party signed the confirmation indicating that they had read over the certificate of independent legal advice and that the statements made therein were true. The solicitor's certificate of independent legal advice signed by Mr. Whyard regarding the husband states: THIS IS TO CERTIFY that I have been retained by [the husband] to advise and have advised him with respect to signing the Separation Agreement, and that on April 23, 2007, I explained to him the Separation Agreement and advised him of the nature and effects thereof and of the liabilities and obligations which he incurs thereunder and the rights and obligations to which he has agreed both as to his current and future status under the Separation Agreement, and with respect to his status, rights and remedies under the Family Relations Act of British Columbia; that he has expressed himself to me as understanding and appeared to me as fully understanding the Separation Agreement in light of his present and future circumstances, and he stated to me, and it appeared to me, that he entered into the Separation Agreement willingly and not under any duress or stress by the other party, without any pressure or undue influence on the part of [the wife] or anyone on her behalf. I BELIEVE that upon entering into the Separation Agreement he was fully advised and informed with regard to all the foregoing matters mentioned and may fairly be said to have acted independently therein. AFTER THE SEPARATION AGREEMENT WAS SIGNED IN MAY 2007 [53] The former matrimonial home, having been assessed at $209,000 in 2007, was assessed in 2008 at $239,000, and in 2011 at $222,800. A realtor's opinion in May 2010 was that the property would sell for between $227,000 and $230,000, but stated that the market was changing rapidly. A certificate of pending litigation is registered against it. The husband stopped paying the mortgage payments after June 2010. [54] A retrospective appraisal obtained by the husband of the former matrimonial home places its value at $220,000 as at May 1, 2007. [55] A calculation valuation report was prepared by Ms. Stanley in relation to the company's value four months into 2007. The value was determined to be in the range of $31,000 to $37,000. I will fix its value at $34,000. The scope of review for the report included the unaudited financial statement prepared by the chartered accountants used by the parties for the fiscal years ended December 31, 2005 through 2007, the company's T4 slips and a related summary for the fiscal year ended December 31, 2007, and the husband's personal income tax returns for 2005, 2006, and 2007. There is no reason to doubt this valuation and I accept it. [56] After the separation agreement was signed the husband appreciated that he was to pay the mortgage, make payments on the line of credit, and to pay spousal support and child support monthly. He testified that until October 2007 the wife continued to work for the company doing the books, for which she was paid $1,000 per month. [57] The husband testified that he thought the separation agreement was in effect only until there was a divorce a year later and that everything would be sorted out evenly for the divorce. When he went back to work after the separation agreement was signed he understood that he had to take $11,000 per month from the company. When he got his company's books later in 2007 he took them to an accountant and came to appreciate that "the company was going downhill fast". He said that he felt that his wife as the bookkeeper had misled him that the company could generate $11,000 per month to make the various payments. Subsequently, he learned that the company "could not afford it" and was "going into the hole more every month." [58] In his testimony the husband reviewed the financial statements of the company. I am satisfied that generally his expenses are not significantly inflated. He explained that an employee doing what he does generally makes between $31 and $35 per hour, with the employer covering various expenses. When he works on contract his company bills his time out at $63.50 per hour, but as a contractor he has no benefits, no pension, profit sharing or bonuses, and is required to cover his own truck expenses, fuel, insurance, tools, courses, safety certificates, etc., which result in a considerable amount per year. An added expense for the husband is that to work he has to fly to and from Powell River to various job sites for shifts, which is costly. [59] The husband retained Mr. J. Cross, a certified general accountant, to prepare a report based on a review of the company's financial statements and corporate tax returns for the years 2007 to 2009, and bookkeeping information to September 30, 2010. This report shows that the company showed net losses for 2007 and 2008. It showed a net income of $46,015 for 2009. Mr. Cross stated: The Company distributes earnings through wages (2007 - $136,518.00; 2008 - $168,396.00; and 2009 - $110,559.00) and dividends of $11,280.00 for 2008 and $32,000.00 for 2009. [60] More useful, however, for the purposes of these proceedings, is the "Schedule of Earnings applicable for Child Support Payments" prepared by Mr. Cross, which indicates that he calculates the husband's income for child support purposes to be: $108,474 in 2007; $154,328 in 2008; and $165,955 in 2009. I accept this evidence and rely on it for the purposes of child support. I have also considered these income amounts in relation to the amount of spousal support to be paid by the husband. [61] The husband testified in some detail about the perils of working in a gas plant in Algeria, which he did from May 12, 2008 to January 7, 2010, a period of 19 months. Suffice to say that between the extreme heat, insects, poisonous snakes, scorpions, camel spiders, and security concerns that required a significant armed escort to go anywhere, this type of employment would not be for everyone long-term. Indeed, the husband said that he had always wanted to do this type of overseas work and did it as a personal challenge, but was no longer interested in it, particularly as a bus of oil workers was blown up in northern Algeria. During this time the price of oil fell and the industry went into a recession. Jobs of this sort overseas became scarce. He found work in Canada in March 2010 for a previous employer as an employee in Grande Prairie, but the pay was not enough. He returned to another employer, for whom he had previously worked, commencing October 2010 out of Fort St. John, and he has resumed working on contract using the company. The husband's remuneration from employment has reverted to generally what it previously was prior to his going overseas. His 2010 line 150 income is $84,231, which included $11,126 in RRSP income. [62] The husband indicated that he made the payments he was required to make until 2009 when arrears started to accumulate. His child support obligation was increased to $1,068 on January 5, 2009, by a consent order by Fenlon J. at a judicial case conference, retroactive to January 1, 2008, based on a Guidelines income of $120,000. That resulted in $6,600 in arrears that he paid off by increased monthly payments. However, he stopped paying spousal support between April and August 2009 and was found to be in contempt. [63] There is little point in reviewing the husband's evidence regarding his efforts to pay spousal and child support. According to the Family Maintenance Enforcement Program (the "FMEP"), including fees and interest, as of May 17, 2011, arrears were $31,184.91. Since enrollment in April 2009 with arrears at $6,900, they have generally increased. The husband has paid a total of $65,825.62 in combined spousal and child support since enrollment with the FMEP. He tends to pay his child support regularly, having lapsed with regards to spousal support periodically. He has a new partner with whom he shares his current living expenses and income splits with for tax purposes. [64] The husband has paid $11,200 on the line of credit which was $12,000 at the time of separation. He made payments from May 1, 2007 to January 1, 2010 ($350 per month for 32 months = $11,200), and since that time has been paying interest only. [65] The husband has also paid the mortgage on the former matrimonial home from May 1, 2007 to June 1, 2010 ($418.33 bi-weekly for 37 months resulting in 26 payments per year for three years, plus $836 for the month of June 2010), which totals $33,440. [66] His current credit card debt is about $18,000, and his operating line of credit for the company is at approximately $19,249. [67] The husband was not an entirely satisfactory witness. Some of his answers at examination for discovery were at odds with his aspects of his testimony at trial. At times he avoided answering questions directly. However, I have an abiding sense that the husband did not fully appreciate the extent of the financial obligations he took on pursuant to the separation agreement, both in terms of their cumulative effect in relation to what he could typically earn through the company, or the consequences of paying the specified amounts of spousal support and its duration, and child support in relation to the potential for increase through the Guidelines. Obviously, it dawned on him at some point that continuing to pay the mortgage payments without any tax relief was unfair in the context of the overall settlement. This caused him to assert a variety of reasons at different times as to why he considered the separation agreement to be unfair. It is important when considering the arrears to also consider what he has paid in terms of child and spousal support and family debt. I do not find the husband to be a sophisticated person. He did however impress me as a hard-working person, who was overall doing his best to meet all his financial obligations, albeit at times unsuccessfully. In the present circumstances he also is not inclined to pay his former spouse a cent more than is required by law. [68] The wife impressed the Court as an honest witness who has had a difficult time since separation. As matters stand she is presently owed significant arrears by the husband and owns a house that she may not be able to afford in terms of expenses and upkeep. A. is 18 years old and continues to live with her mother. Court Orders Following the Separation Agreement [69] On January 5, 2009, a judicial case conference was held in relation to this action before Madam Justice Fenlon. It was agreed that the husband's Guidelines income for child support purposes was $120,000 per year. On that basis child support for A. was increased to $1,068 per month commencing January 1, 2008. Arrears in child support were set at $6,600 to December 31, 2008, and were to be paid in 12 monthly installments of $550 per month, with the first such payment to be made by January 9, 2009. Both parties were to make the specified financial disclosure. The husband was to have an historical appraisal prepared within 30 days or by February 5, 2009, at a time and date agreed to between the parties, and the appraisal was to be at the husband's expense. (I assume this related to the former matrimonial home.) [70] On January 4, 2010, the wife brought an application for contempt for non-payment of spousal support before Mr. Justice Savage, which was adjourned to February 22, 2010, with the costs of the husband's application to adjourn this application to be costs in the cause. [71] On August 24, 2010, the husband's application for an interim reduction in spousal and child support was dismissed. The FMEP was ordered to suspend enforcement in relation to any accumulated arrears pending judgment or January 31, 2011, whichever occurred first. The wife's application to have the husband found in contempt of court for failure to pay spousal support between April 1, 2009 and August 27, 2009, was granted. Madam Justice Bruce found the husband to be in contempt of court in that regard. The wife was awarded costs of the application in any event of the cause. [72] As of May 17, 2011, the husband owed the wife $30,274 in maintenance arrears as calculated by the FMEP, not including interest and default fees. [73] Since this matter has been reserved the Court has been advised (with the consent of counsel for both parties) that the wife has brought three applications for contempt for late or non-payment of support, all of which have been adjourned. Material filed indicates that although the husband has been late in making his support payments, he has only missed one or two, and the arrears as recorded by the FMEP have only climbed to $34,954.13 as of February 17, 2012, which with interest and fees total $36,982.94. FINDINGS AND ANALYSIS Was the Husband's Legal Advice Adequate? [74] The evidence of the husband and Mr. Whyard, combined with the wording of the separation agreement, and its unusual feature requiring the husband to continue to pay the mortgage on the former matrimonial home after it was transferred wholly to the wife as part of their division of assets, the division itself, and also the husband's obligation to pay a significant amount of spousal support per month, give rise to a challenge to the fairness of the separation agreement on behalf of the husband. [75] I am mindful that proper independent legal advice does not prevent a party to a separation agreement from entering into an agreement more favourable to the other party upon marriage breakdown, but it serves to ensure that the party who does so has been fully advised of the consequences. It will not preserve an unfair agreement, but properly given, independent legal advice makes it more difficult for a party to a separation agreement to later assert that they did not fully appreciate its legal consequences. [76] The nature of independent legal advice in the family law context is clearly enunciated in Gurney v. Gurney, 2000 BCSC 6, where Mr. Justice Pitfield stated: [29] In the family law context, providing independent legal advice must mean more than being satisfied that a party understands the nature and contents of the agreement and consents to its terms. The solicitor should make inquiries of the party so as to be fully apprised of the circumstances surrounding the agreement. The party should be advised of his or her legal rights and obligations in relation to the subject matter of the agreement and advised of the consequences associated with a refusal to sign. The solicitor should offer his or her opinion on the question of whether it is appropriate for the party to sign the agreement in all of the circumstances. It is only with that kind of advice that the party can make an informed decision about the advisability of entering into the agreement as opposed to pursuing some other course. In this regard, the cases of Turyk v. Derby, [1980] B.C.J. No. 773 (B.C.S.C.), Inche Noriah v. Shaik Allie Bin Omar, [1929] A.C. 127 (H.L.) and Brosseau v. Brosseau (1989), 63 D.L.R. (4th) 111 (Alta. C.A.) are of assistance. [77] In Bradshaw v. Bradshaw, 2011 BCSC 1103, the Court summarized the principles concerning independent legal advice in the family law context as follows: 49 Independent legal advice, in the family law context, is important because it ensures that the spouses are fully aware of their statutory and common law rights and obligations. It safeguards against one spouse taking unfair advantage of another and redresses or at least minimizes disparity of bargaining power between them: see, for example, Gurney v. Gurney, 2000 BCSC 6 at para. 29, [2000] B.C.J. No. 13 [Gurney]. In Gurney, supra, Pitfield J. found that "the lack of independent legal advice in this case is not fatal and the agreement should not be set aside because of its absence" (at para. 30). Indeed, the absence of independent legal advice will not, by itself, invalidate an agreement: Chepil, supra, at para. 45, citing Rosen v. Rosen (1994), 3 R.F.L. (4th) 267, 72 O.A.C. 342, leave to appeal ref'd [1994] S.C.C.A. No. 392. Nor will the receipt of independent legal advice automatically cure or neutralize one or both spouses' vulnerabilities; in other words, it will not protect an otherwise invalid or unfair contract: see, for example, Stark, supra; Davidson v. Davidson (1986), 2 R.F.L. (3d) 442, [1986] B.C.J. No. 505 (C.A.); Gold v. Gold (1993), 49 R.F.L. (3d) 41, 82 B.C.L.R. (2d) 165 (C.A.), leave to appeal ref'd [1993] S.C.C.A. No. 441. [Emphasis added.] [78] I turn now to an example where independent legal advice was found lacking. In Williams v. Williams, 2008 BCSC 1603, the husband sought to rely on the provisions of a separation agreement. The wife claimed the agreement had been signed under duress. In Williams, the Court found the defendant was physically abusive and "overbearing, controlling and manipulative". With respect to independent legal advice, the Court said the following about her lawyer, Mr. Kornfeld, who provided advice to the wife: 56. The plaintiff testified that she felt that if she did not sign the Agreement in front of Mr. Kornfeld, she would really be in trouble and that she and her daughter would not be able to move into the home that the defendant had purchased on 80th Avenue (the Matrimonial Home). The plaintiff stated that, in Mr. Kornfeld's office, she understood some but not all of the Agreement, but that he was in a hurry and did not go over the Agreement clause by clause. She said that she was upset and could not think; she just wanted it all to be over. 57. A.C. Kornfeld is 81 1/2 years of age and has been practising law since 1961, which he still does with his daughter. He does not take notes and cannot recall anything about the meeting with the plaintiff. He said that it was his practice to go through the agreement with the client and to inquire about her skills. If the client was crying, upset, or did not want to sign the agreement, he would not take her signature. He says it was not his practise to ask about the value of the business that was on Schedule B to the Agreement as it "was not [his] business to ask." He said it was also not his practise to ask about the husband's income, the plaintiff's financial needs, or to explain about equal division of assets. He said that he thought the $25,000 cash reflected a 50% split of assets, even though that division does not take into account the value of the business. ... 59. I find that the legal advice given to the plaintiff by Mr. Kornfeld was wholly inadequate. [79] In the present case, unlike in Williams, there was no pressure brought to bear on the husband by Mr. Whyard to sign the separation agreement. However, there are certain other similarities of concern with regards to the nature and quality of legal advice provided to the husband. [80] Specifically, I have concerns with regards to Mr. Whyard not making some efforts to confirm the value of the company, not making a clear assessment or engaging others to assist regarding the company's income generating possibilities given the financial obligations the husband was taking on, and by failing to clearly address that if the husband was to continue to pay the mortgage on the former matrimonial home after its transfer solely to the wife, how that debt was to be reflected in the separation agreement, which otherwise extinguished debts between the parties incurred prior to separation. In addition, there is no indication how payment of the ongoing mortgage debt was to be characterized in relation to spousal support and tax issues. [81] If there was to be an exchange of assets of approximately equal value based on the parties' basic agreement between themselves (the wife's interest in the company for the husband's interest in the house) it was incumbent upon the husband's solicitor to be satisfied that there was an approximately equal value to the wife's interest in the company as there was in the husband's interest in the matrimonial home, or if not, to so advise his client. If a solicitor makes a determination that a client is sophisticated enough that certain inquiries are not necessary, and decides to rely solely upon financial information provided by the client, as Mr. Whyard did, it would be wise to have such instructions confirmed in writing in the unfortunate event that the client turns out to be mistaken. It would also seem from the brief notes made by Mr. Whyard that he was contemplating a division of property based on the value of each party's equal share in their equity in the matrimonial home (i.e. $70,000 as half of $140,000) in the context of the value of the wife's half interest in the company, whereas the equal shares in the company and the matrimonial home did not turn out to be of approximate equal value. This line of thought does not address the husband's continuing obligation to pay the mortgage on the home after its transfer to the wife. [82] There is also nothing in Mr. Whyard's notes or recollection to indicate that he discussed with the husband the specifics of quantum or duration of spousal support to which the wife was entitled. [83] However, my fundamental concern is that Mr. Whyard does not appear to have reviewed the separation agreement in detail with the husband, in order to ensure that the husband fully appreciated the extent of the financial obligations he was incurring, what he was giving up in terms of division of property and taking on in terms of spousal support; and the fact that it was a final agreement. As for the husband's overall level of sophistication, he struck the Court as someone very much in a hurry to end his marriage as a result of prolonged unhappiness, and also someone very inclined to rely on professionals, whether they were accountants or lawyers, for direction and advice. While I appreciate that Mr. Whyard may have provided the husband with more legal advice than the former's notes or recollections now support, I am not satisfied this was the case. To the contrary, when I look at all the circumstances, including the separation agreement as drafted by Mr. Whyard, I am not satisfied that the husband received adequate legal advice or fully appreciated the nature of the separation agreement and his obligations under it. As drafted and executed, the inherent ambiguity with regards to the husband's responsibility to pay the mortgage on the former matrimonial home is highly problematic. Is This Separation Agreement Unfair so as to Warrant Reapportionment? [84] In the present case, the husband seeks reapportionment of family assets other than as agreed to in the separation agreement based on unfairness. He does not allege unconscionability or undue influence. The evidence at trial does not establish duress or coercion. I accept it is likely that the husband did not appreciate the nature of the financial obligations he was taking on under the agreement and its finality. The evidence of Mr. Whyard does nothing to dispel concerns in that regard. [85] The separation agreement here meets the formal requirements of a marriage agreement under s. 61 of the FRA. [86] The approach to be taken regarding an application for reapportionment based on the alleged unfair operation of a separation agreement is as set out in the Supreme Court of Canada decision of Hartshorne, in which Mr. Justice Bastarache, for the majority, stated: 43. ... The court must determine whether the marriage agreement is substantively fair when the application for reapportionment is made. The essence of this inquiry is whether the circumstances of the parties at the time of separation were within the reasonable contemplation of the parties at the time the agreement was formed, and, if so, whether at that time the parties made adequate arrangements in response to these anticipated circumstances. ... ... 47. The ultimate point then is this: in determining whether a marriage agreement operates unfairly, a court must first apply the agreement. In particular, the court must assess and award those financial entitlements provided to each spouse under the agreement, and other entitlements from all other sources, including spousal and child support. The court must then, in consideration of those factors listed in s. 65(1) of the FRA, make a determination as to whether the contract operates unfairly. At this second stage, consideration must be given to the parties' personal and financial circumstances, and in particular to the manner in which these circumstances evolved over time. Where the current circumstances were within the contemplation of the parties at the time the Agreement was formed, and where their Agreement and circumstances surrounding it reflect consideration and response to these circumstances, then the plaintiff's burden to establish unfairness is heavier. Thus, consideration of the factors listed in s. 65(1) of the FRA, taken together, would have to reveal that the economic consequences of the marriage breakdown were not shared equitably in all of the circumstances. This approach, in my view, accords with the underlying principle of the FRA, striking an appropriate balance between deference to the parties' intentions, on the one hand, and assurance of an equitable result, on the other. ... 67. ... However, in a framework within which private parties are permitted to take personal responsibility for their financial well-being upon the dissolution of marriage, courts should be reluctant to second-guess their initiative and arrangement, particularly where independent legal advice has been obtained. They should not conclude that unfairness is proven simply by demonstrating that the marriage agreement deviates from the statutory matrimonial property regime. Fairness must first take into account what was within the realistic contemplation of the parties, what attention they gave to changes in circumstances or unrealized implications, then what are their true circumstances, and whether the discrepancy is such, given the s. 65 factors, that a different apportionment should be made. [Emphasis added.] [87] Section 65 of the FRA states as follows: Judicial reapportionment on basis of fairness 65(1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to (a) the duration of the marriage, (b) the duration of the period during which the spouses have lived separate and apart, (c) the date when property was acquired or disposed of, (d) the extent to which property was acquired by one spouse through inheritance or gift, (e) the needs of each spouse to become or remain economically independent and self sufficient, or (f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse, the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court. (2) Additionally or alternatively, the court may order that other property not covered by section 56, Part 6 or the marriage agreement, as the case may be, of one spouse be vested in the other spouse. (3) If the division of a pension under Part 6 would be unfair having regard to the exclusion from division of the portion of a pension earned before the marriage and it is inconvenient to adjust the division by reapportioning entitlement to another asset, the Supreme Court, on application, may divide the excluded portion between the spouse and member into shares fixed by the court. [88] In H.E.D.C. v. R.M.C., 2003 BCCA 420, the Court of Appeal held that under s. 65 of the FRA, the onus is on the party seeking to vary the agreement to establish that it is unfair; fairness is not to be equated with equality or near equality. It was stated: [61] To summarize, on an application to vary a settlement agreement under s.65, the onus is on the party seeking to vary the agreement to establish that it is unfair. The Court, having regard to the factors set out in s.65 and the circumstances surrounding the making of the agreement, must decide if the agreement is unfair, and if so, what reapportionment is required to achieve fairness between the parties. [62] The court may evaluate the fairness of the agreement with reference to the presumption of equal division under the FRA. The court must not, however, equate fairness with equality or near equality. [89] This is consistent with the longstanding statement of principle of McEachern C.J.B.C. in Gold v. Gold, [1993] B.C.J. No. 1799 (C.A.), in relation to the division of family property, that such a division may have to be unequal in order to be fair. He stated: 51. From the foregoing I conclude that the fairness of a marriage agreement is measured by comparing the disposition of family property in the agreement with equality in the light of the various factors enumerated in s. 51 [now s. 65]. If the agreement is unfair within one or more heads of s. 51, then the Court has a wide discretion to reapportion the family property in order to achieve fairness. However, I find nothing in the Family Relations Act, nor in the authorities, which suggests that only equality or near equality can be fair. As already mentioned, many divisions of family property must be unequal in order to be fair. [90] In Clarke v. Clarke (1991), 55 B.C.L.R. 2(d) 273 (C.A.), per curiam, the Court of Appeal held that the question of fairness in family property matters ought not to be approached from a commercial perspective. It is necessary to examine whether the agreement reached was actually fair. It was held: 14 It is apparent the learned trial judge approached the question of fairness from a conventional, commercial law point of view. 15 With respect, that is not the correct approach to questions arising under s. 51. Instead, it is necessary to examine the respective positions of the spouses objectively as of the date of the agreement to determine if the agreement they reached was actually fair, not whether each of the parties has conducted his or her affairs sensibly or negotiated well or otherwise. [Emphasis added.] [91] Clarke (at para. 33) is also authority for the general proposition that s. 65 of the FRA (then s. 51) does not permit the Court to set aside agreements; it only authorizes reapportionment on the basis of unfairness. [92] In the present case it is useful to remember that there is conceptual overlap between the considerations of fairness expressed under s. 65 and general principles concerning spousal support. In Tedham v. Tedham, 2005 BCCA 502, the Court referred to the relationship between spousal support principles and reapportionment under s. 65: [63] The relationship between the reapportionment provisions in the FRA and spousal support was referred to in the majority judgment of this Court in Toth v. Toth (1995), 13 B.C.L.R. (3d) 1, as follows (at para. 59): In discussing the relationship between maintenance and the division of property under Part 3 of the FRA, it is useful to note that ss. [65(1)(e) and (f)] of the FRA, relating to reapportionment of property, incorporate concepts which are also found in the maintenance provisions of both the Divorce Act, 1985 and the FRA. Thus, property division and maintenance are closely intertwined. One advantage of this legislative tie is that [s. 65] may be utilized in the division of property to reflect the relative abilities of the parties to become or remain economically independent and self-sufficient ([s. 65(1)(e)]), and the respective capacities and liabilities of the parties ([s. 65(1)(f)]). These concepts are also relevant to determinations of spousal maintenance. The potential pitfall presented by this legislative link between property and maintenance, however, is the danger of double recovery where, for example, property is reapportioned under [s. 65] and then further reapportioned by an award of lump sum maintenance. [93] Keeping the above principles in mind, I appreciate that division of property is typically dealt with first by the Court, prior to consideration of spousal support. In this case I also recognize that a reapportionment of assets may result in a need to restructure spousal support. [94] I turn now to the first stage of the analysis dictated by Hartshorne. The idea central to this separation agreement came from the parties themselves, namely that the husband would retain the company and the wife would receive the former matrimonial home. The company was not valued at the time and the home's value, based on the 2007 Assessment, was $209,000 with a mortgage of approximately $80,000 owing. [95] As a result of the separation agreement the wife received assets worth over $221,000 (the home worth $209,000; $7,500 in equalized RRSPs; $1,000 in a vehicle; money from the parties' bank account totalling $4,400; and the unvalued household contents). [96] As a result of the separation agreement the husband's net position was a negative one, -$50,500. He received $41,500 (the value of the company at $34,000; $7,500 in equalized RRSPs; and his CPP pension which was not valued). He also received all the family debts totalling $92,000 (the balance owing on the mortgage on the home of $80,000 and the approximately $12,000 owed by the parties on a line of credit). Payment of the mortgage debt required the husband to pay $418.33 bi-weekly. These amounts were not tax deductible to him. This obligation continued under the separation agreement even though the separation agreement required that the former matrimonial home be transferred solely to the wife, which occurred. Although he continued to pay the mortgage he did not stand to benefit from any appreciation to the property. He also paid the line of credit down at $350 per month. [97] In addition, the husband was obligated to pay $2,500 per month in spousal support and $500 in child support. While the child support was to be adjusted annually in accord with his Guidelines income and the Guidelines, the monthly spousal support obligation did not include a specified duration or provision for a review. The amount of spousal support he was required to pay was significantly higher than the mid-range amount of $1,638 per month that the SSAG would have indicated was payable on his known level of income at the time, $72,000 per year. On that same income child support according to the Guidelines was $672, not $500 per month as contained in the separation agreement. Lastly, the separation agreement was final and binds the parties and their estates in the future. [98] Therefore, upon marriage breakdown pursuant to the separation agreement the husband received next to nothing in assets and all the family debt. In the event that the husband could not work, he had virtually nothing to fall back on and heavy financial obligations to the wife and to the bank. [99] I turn to the second stage of the Hartshorne analysis, which requires the court to determine whether the separation agreement in this case operates unfairly in consideration of those factors listed in s. 65(1) of the FRA. The most relevant factors in this case are: s. 65(1)(a) - the duration of the marriage; s. 65(1)(e) - the needs of each spouse to become or remain economically independent and self sufficient; and s. 65(1)(f) - the capacity or liabilities of a spouse. [100] In the present case the length of marriage was to the high end of the medium range. The wife has a significant entitlement to a fair and reasonable amount of spousal support on both a compensatory and a non-compensatory basis for a significant duration, if not indefinitely. There is a balance to be struck in this regard that also recognizes the economic needs of the husband. This balance also must take into account the potentially very limited capacity of the wife to earn an income in the future, and the capacity of the husband to continue to earn a good income. It is also useful to remember that the starting point for division of family assets under the FRA is equal division under s. 56(2). [101] At this second stage of the analysis the Court is also to consider the parties' personal and financial circumstances, and in particular how these circumstances evolved over time. In my view it cannot be said that the current circumstances were within the contemplation of the parties at the time the separation agreement was entered into. This is because the company was not valued, and apparently something approaching an equal division of family assets was contemplated although not achieved, i.e. the wife's interest in the company in exchange for the husband's interest in the equity of the former matrimonial home. That is inconsistent with the husband continuing to pay the mortgage on the home, and at a minimum, not receiving credit for those payments as spousal support. [102] In the present case there is also is a lack of proportionality as between the reapportionment of the equity in the former matrimonial home wholly to the wife and the amount of spousal support to be paid to the wife by the husband of $2,500 per month. There is no indication that the SSAG were considered by the husband's lawyer as to amount and duration of spousal support in the context of the husband's known income at the time, or if consideration was given to the husband's plans in terms of future employment. The Court was provided with one calculation (It assumes the age of both parties to be 48 years old and one child age 16 living with the wife. His income is $72,000 and hers is $0. Length of marriage is stated as 14 years. The recipient is said to have been 46 at separation.). The SSAG with child formula provides a range for monthly spousal support payable to the wife of a low of $1,477 - a mid of $1,638 - and a high of $1,804 for an indefinite duration subject to variation and possibly review, with a minimum duration of 7 years and a maximum duration of 14 years from the date of separation. [103] Experience is proving that the SSAG provide a very useful starting point in establishing a range for spousal support that takes into account many factors, including the length of marriage and/or cohabitation, the ages of the parties and their children, and relative standards of living. [104] At this stage it is useful to consider the comments in Hartshorne (at para. 67) to the effect that unfairness is not proven because the agreement deviates from the statutory matrimonial property regime; rather, "Fairness must first take into account what was within the realistic contemplation of the parties, what attention they gave to changes in circumstances or unrealized implications, then what are their true circumstances, and whether the discrepancy is such, given the s. 65 factors, that a different apportionment should be made". [105] In this case I conclude that the separation agreement is significantly unfair to the husband and reapportionment is warranted in relation to the division of the family assets and debts. I cannot say that their initial thoughts as to how they should divide their property were either fully considered or made their way into the separation agreement. Spousal support and child support were not fully explored and explained, at least to the husband, and child support was not set at the Guidelines amount ($672). Debts were not fairly addressed, including the mortgage. The fact that the husband could not deduct the mortgage payments he continued to make surely was an unrealized implication. The parties' true circumstances are not reflected in the separation agreement, which for example, shows the wife earning an income equal to that of the husband, which only occurred through income splitting, and the company is not valued. [106] In reaching the conclusion that this separation agreement operates unfairly, I am aware that there is a range as to what may be considered fair in such cases and that reasonable deviation within that range ought not to result in the court finding an agreement unfair to the extent that reapportionment is ordered. This is well articulated in R.L.S. v. D.C.M., 2002 BCSC 1794, by Mr. Justice Harvey: [41] The fairness of an agreement is determined by examining the division that a court might have ordered at the time of the triggering event. If the agreement made by the parties is within a reasonable range of that which the court might have ordered, the agreement is considered to be fair. If it is outside a reasonable range of what the court would consider to be fair, the court may vary the agreement. See Pavlis v. Pavlis (2000), 8 R.F.L. (5th) 149 (B.C.S.C.); Gold v. Gold (1993), 49 R.F.L. (3d) 41 (B.C.C.A.) and Stark v. Stark (1990), 26 R.F.L. (3d) 425 (B.C.C.A.). [107] I do not regard the agreement reflected in the present separation agreement to be within a reasonable range of what a court might have ordered. The property division and the allocation of debt is well outside that reasonable range. Once the unfairness of the property division is addressed an adjustment to spousal support is also warranted to achieve a proper balancing of the principles in s. 65(1) of the FRA, and the provisions that inform an award of spousal support, both under s. 89 of the FRA and s. 15.2 of the Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3. How Should the Family Assets be Reapportioned and What is an Appropriate Quantum and Duration for Spousal Support? [108] Any reapportionment of family assets in this case must take into account the disproportionate earning powers of the parties. The husband's ability to work is at present and likely to remain the sole or primary source of income for the wife. Fortunately, since separation he has been able to continue to work. The job in Algeria taken after separation, while it paid more, was fraught with personal risks and hardship and when the contract ended, the husband returned to his former type of employment in Canada, generating somewhat more income than during the last years of the marriage. It is likely that the wife is substantially unemployable, but she is motivated to find meaningful work outside the home. At this time it seems unlikely that she is able to sustain full-time employment, but over time she may be able to earn an income. [109] The need of the wife to become or remain economically independent and self-sufficient (s. 65(1)(e) of the FRA) and her age and general poor health (s. 65(1)(f) of the FRA) in the context of the length of the marriage and the roles of the parties supports a reapportionment of the equity in the former matrimonial home in her favour. I find that the appropriate reapportionment with regards to the home is a 65 percent reapportionment to the wife, which results in the husband receiving a 35 percent interest. This results in an equity of $129,000 x 35 percent, and an amount of $45,150 payable to the husband, based on its value of $209,000 as of the date of separation, less a mortgage of $80,000. The company, valued subsequently to be worth $34,000 at the time of separation is to be divided equally, resulting in the husband paying to the wife $17,000 for her share of the company. [110] The RRSPs were equalized, which is appropriate. The wife took the funds in the parties' bank account upon separation in the amount of $4,400, to which the husband was entitled to an equal share of $2,200. [111] This results in the wife owing a payment to the husband of $30,350 ($45,150 + $2,200 - $17,000 = $30,350). [112] The husband's CPP is to be divided with the wife in the usual way, from the date of cohabitation, which I fix at October 1, 1992, to the date of separation, March 24, 2007. [113] The parties' debts from the mortgage and the line of credit totalled approximately $92,000 at the time of separation. The principle of fairness requires that family debts be taken into account at the time of separation: Stein v. Stein, 2008 SCC 35. They are a factor to be taken into account under s. 65(1) of the FRA. The line of credit debt of $11,000 at the time of separation is to be shared equally, including the interest that has accrued to date. The husband is entitled to a credit for the amount he had paid from May 1, 2007 to January 1, 2010 ($350 per month for 32 months), which is $11,200. [114] The amount of $33,440 paid by the husband on the mortgage on the former matrimonial home from May 1, 2007 to June 1, 2010 is difficult to characterize. However, I have concluded that these payments must be characterized as retroactive spousal support paid by the husband during the months paid, as the former matrimonial home was transferred solely into the wife's name shortly after the separation agreement was signed. His 35 percent interest in the value of the house is fixed at the date of separation. I realize that to characterize these payments in this way will have tax consequences for both parties, specifically negative tax consequences for the wife, but I am of the view this reflects their true nature. It is fair that they should be tax deductible to the husband as he is not entitled to share pro rata in the increase in the value of the matrimonial home since separation. These payments were not gifts and they were to the benefit of the wife based on an ambiguous term in the separation agreement as to whether they were to have been paid after the transfer. In all the circumstances, these payments may not be characterized otherwise. [115] However, I am also of the view that fairness dictates a retroactive calculation of spousal support based on the SSAG taking the mid-range amount. For the amount of the husband's income I rely on the expert report filed on his behalf. That amount for 2007, the year of separation, is $108,474 and I find that to be the husband's Guidelines income for his spousal support obligation from May 1, 2007, to December 31, 2009. Had his spousal support obligation been fixed at the time pursuant to the SSAG in accordance with his actual income, this would have been the amount. [116] The husband has had several years post separation when his income has been considerably higher than $108,474, and his income in 2010 was considerably lower. However, in the normal course, the separation agreement would have given rise to a final order. Therefore, it is the 2007 amount that determines the matter. Also, the husband's income of $79,977 in 2010 is to be regarded as an aberration given the termination of his contract in Algeria, his several months out of work, and his efforts to become re-established in his line of work in Western Canada. He is now doing essentially the same kind of work he did in 2007. As opposed to doing a retroactive year by year spousal support calculation it seems most appropriate in this case to take his actual income for 2007, the year of separation and deem that to be his income for subsequent years. I find that it is also appropriate for spousal support purposes to maintain the amount of his annual income at the 2007 level ($108,474) for 2010 and going forward, and he is to pay spousal support at the mid-range SSAG rate on that amount for all of 2010 and 2011, and on the same income thereafter going forward, absent a material change in circumstances under the Divorce Act. [117] Therefore, I have expressly considered and declined to order that he pay higher spousal support retroactively based on his income for 2008 and 2009, as his income has fluctuated markedly since separation. Had the separation agreement contained an accurate indication of his 2007 income (which is now available after the fact) and spousal support set at that time in a final order, the same amount would have remained in effect for subsequent years absent a material change in circumstances to support a variation application under s. 17 of the Divorce Act. [118] Either party may bring a review after three years from the date of these reasons for the purpose of consideration of spousal support payable by the husband to the wife, without need to establish a material change in circumstances. What is the husband's Guidelines Income for the Calculation of Retroactive Child Support? [119] The husband's child support obligation in relation to A. is to be calculated retroactively, based on what is now known to be his Guidelines income, as follows: - for the eight months in 2007 (May to December 2007) at $108,474; - for 2008 at $154,328; - for 2009 at $165,955; and - for 2010 at $79,977. [120] It is likely that the husband overpaid child support in 2010 and owes arrears for the eight months in 2007, 2008, and 2009. Counsel are to do the calculations and determine the final amounts to be included in the order. The provisions pertaining to child support as set out in the separation agreement remain in force, except as varied by these reasons. CONCLUSION [121] For these reasons I make the following orders: 1. The husband is entitled to reapportionment of family assets based on a finding that the separation agreement is unfair. 2. The former matrimonial home is to be divided 65 percent in favour of the wife and 35 percent in favour of the husband. 3. The former matrimonial home is valued at the time of separation to be $209,000 less a mortgage of $80,000, resulting in the husband being entitled to a payment from the wife in the amount of $45,150 representing his 35 percent interest. 4. The company is valued at $34,000 and the wife is entitled to a half interest, namely $17,000. 5. The husband is entitled to a credit on spousal support owed of $33,440 for the mortgage payments he paid on the former matrimonial home. The wife is to be responsible for the mortgage in the event she decides to keep the home. 6. The parties are to share the line of credit debt of approximately $12,000 equally, including interest. The husband is to receive a credit towards his share for the $11,200 he has paid. The husband is also entitled to a credit in the amount of $2,200 to represent his share of the funds in the parties' bank account at the time of separation. 7. The wife is entitled to monthly spousal support from May 1, 2007 payable by the husband based on the SSAG mid-range amount as determined on the husband's Guidelines annual income for 2007 in the amount of $108,474. This amount of spousal support is due and owing to the wife on the first day of every month for an unspecified duration. The husband's income for spousal support purposes for the years 2008 through 2011 inclusive and prospectively is fixed at $108,474. 8. Either party may bring a review after three years from the date of these reasons for the purpose of consideration of spousal support payable by the husband to the wife, without need to establish a material change in circumstances. 9. The husband's CPP credits are to be shared with the wife based on cohabitation commencing on October 1, 1992 and ending on March 24, 2007. 10. The husband's child support obligations are to be adjusted retroactively to reflect his Guidelines incomes for 2007 through 2010, based on the amounts set out in paragraph 120 of these reasons. Thereafter, the husband's child support obligation is to be paid in accordance with his actual annual Guidelines income for as long as A. remains a child of the marriage. 11. After these spousal and child support calculations are completed, and if arrears continue to be owed by the husband, they are not cancelled, nor are any fees or interest cancelled that he owes on those arrears. 12. The parties are required to exchange their filed annual tax returns and assessments for 2010 within 30 days of these reasons if they have not already done so, and for 2011 by June 1, 2012, and for all subsequent years by June 1 as long as an obligation of child support or spousal support remains outstanding. The husband is also required to provide a copy of the company's year-end financial statements for the previous year at the same time and on the same basis. 13. Otherwise, the provisions of the separation agreement remain binding between the parties. 14. The Court makes a divorce order to take effect 31 days after the filing of these reasons. [122] The parties have asked to make submissions as to costs and are at liberty to do so. "The Honourable Madam Justice Arnold-Bailey"