Morck v. Morck

2015 BCSC 2252 Morck v. Morck

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Morck v. Morck, 2015 BCSC 2252 Date: 20151202 Docket: E48681 Registry: New Westminster Between: Colleen Eva Morck Claimant And Michael Anders Morck Respondent Before: The Honourable Mr. Justice A. Saunders Reasons for Judgment Counsel for the Claimant: D. Hart Appearing on his own behalf: The Respondent, M. Morck Place and Date of Hearing: New Westminster, B.C. June 26, 2015 Place and Date of Judgment: New Westminster, B.C. December 2, 2015 [1] This is a review of the spousal support obligation of the respondent Michael Morck to his former wife, the claimant Colleen Morck, pursuant to the terms of the consent divorce order dated December 12, 2006 and to the order of the Court of Appeal dated April 24, 2013. Background [2] Ms. Morck is now 59 years old; Mr. Morck is 57. The parties married in May 1981; Mr. Morck was then 23 years of age, Ms. Morck was 24. They had two children, who are now adults. They separated in June 2005, after 24 years of marriage. [3] The Morcks signed a separation agreement dated October 19, 2006. The separation agreement provided that Mr. Morck would pay to Ms. Morck spousal support in the amount of $3,000 per month, to be reviewed in two years' time. That spousal support obligation was incorporated into the order of divorce pronounced December 12, 2006, as follows: 2. The defendant, Michael Anders Morck

shall pay spousal support to the Plaintiff, Colleen Eva Morck in the sum of $3000.00 per month commencing November 1, 2006. The amount of such support shall be reviewed two (2) years from the date of this order, without a change in circumstances, and in any event upon a change in circumstances, with either party having liberty to apply to a court of competent jurisdiction. [4] The asset division agreed to between the parties on separation was as follows, with Ms. Morck retaining possession of the matrimonial home at 9540 Woodward Street: Colleen Morck:

ASSETS 1 9540 Woodward Street $600,000 2 1995 Jeep Cherokee 9,000 3 RRSPs 62,000 4 Household furnishings 8,000 $679,000

DEBTS 1 Existing mortgage $128,000 2 Added to mortgage 115,000 3 MasterCard 900

NET ASSETS $435,100 Michael Morck

ASSETS 1 Canaccord RRSP Investments $100,000 2 2002 Harley Davidson 15,000-25,000 3 Honda dirt bike 1,000 4 Life Insurance policy 2,300 5 Share holdings in Advantage Enterprises Ltd. 207,000 6 Chequing account 1,000 7 Lawn tractor 3,000 8 Equalization payment 115,000 $444,300

DEBTS 1 Scotialine Visa $2,000

NET ASSETS $442,300 [5] On January 26, 2010, Mr. Morck wrote to Ms. Morck, advising her of changes in his financial situation. Whereas he had previously been one of two partners in an electrical contracting firm, Advantage Enterprises Ltd., an alleged shortage of work and Mr. Morck's decision to relocate to Kelowna had led to tensions between them, and Mr. Morck's partner purchased his half interest. Consequently, Mr. Morck no longer had an income from the business. He advised that he would be going to court to seek a reduction or cancellation of his support obligation. There is evidence of a few further such warning letters from Mr. Morck up to August 2010. [6] In August 2011, Mr. Morck's then-counsel, Ms. Taylor, provided Ms. Morck's counsel with a Notice of Intention to Proceed, and demanded an updated Form 8 Financial Statement. A notice of application was filed in December 2011, by which Mr. Morck sought termination or alternatively reduction of his support obligation. The application was heard on March 16, 2012, and judgment rendered on March 30, 2012. [7] In his reasons for judgment, indexed at 2012 BCSC 468, the chambers judge reviewed and summarized the asset position of the parties at that time as follows: Colleen Morck (February 22, 2012 Financial Statement) 1 9540 Woodward Street, Mission $612,000 2 1995 Jeep Cherokee 1,000 3 dir[t] bike and horse trailer 1,400 4 Investors Group RRSP 26,779 $641,179

DEBTS 1 Mortgage January 7, 2012 $226,362 2 Credit Cards 860 $227,222

NET ASSETS $413,957 Michael Morck (February 29, 2012 Financial Statement) 1 Christian Valley Road lot $116,000 2 Vehicles: 2008 Chevrolet pick-up 25,000 2002 Harley Davidson motorcycle 5,000 2005 Harley Davidson motorcycle 8,000 3 Chequing account 500 4 Canaccord Capital RRSP 20,000 5 Kettle River Holdings Ltd. 490,849 6 KRH Electrical Services Ltd. <6,000> $659,349

DEBTS $0

NET ASSETS $659,349 [8] With respect to Ms. Morck's income, the chambers judge noted that Ms. Morck had medical issues at the time the separation agreement was concluded, that he found clearly would have been contemplated by both parties. On the application, the only medical evidence provided by her was a note from a physician that simply said: Completely unemployable for at least 6 months severe depression. [9] Ms. Morck was getting by on her income of $36,000 per year in spousal support payable by Mr. Morck, plus $7,200 per year in rent from a Mr. Kennedy, whom she describes as a friend and a tenant. [10] Ms. Morck was continuing to reside in the matrimonial home. An affidavit filed by Mr. Morck in February 2012, not contradicted by Ms. Morck, but not referred to specifically by the chambers judge in his reasons, had described that residence: She continues to reside in the former matrimonial home, a home in which there is equity in excess of $350,000. The home is on 5 acres with a large grass area, horse riding ring, pond, 1200 sq ft combination shop and barn where the Claimant keeps her horses [11] Ms. Morck also filed an affidavit from a neighbour attesting to her depression and anxiety. The chambers judge accepted that Ms. Morck was unable to maintain gainful employment at that time, and remained in need of continued support. He commented that it was not clear that she had

been receiving a proper course of treatment for her medical condition. [12] With respect to Mr. Morck's position, the chambers judge noted Mr. Morck's income as disclosed by his tax returns, indicating a recent precipitous decline: 2007 $130,916 2008 $321,431 2009 $290,234 2010 $80,603 [13] The chambers judge noted that Mr. Morck had also received "substantial dividends" as part of his earnings from Advantage Enterprises Ltd. in 2008, 2009 and 2010. (I accept the evidence now given by Mr. Morck, that the dividends earned from his holding company represented accumulated profits from Advantage Enterprises Ltd., that had been held in that company as retained earnings for some many years.) [14] Mr. Morck deposed to having made effort to find work as an estimator. He provided a list of electrical contractors he had sought work from - 56 entities in total - but he had only secured work from four of them to date. His income from self-employment as of December 11, 2011 was $5,650, and that year he had withdrawn $47,353 from his RRSP account. He had continued drawing on his RRSPs in order to meet his spousal support obligation. [15] The chambers judge found that: [19] Mr. Morck is a journeyman electrician and a very experienced electrical contractor. He is clearly not going to be limited to earnings of $4,036.86 (2010) and $5,650 (2011). He has the ability to earn at least the income of

$74,000 he was making in February 2006 about the time the $3,000 per month was agreed to. [16] Mr. Morck's application was therefore dismissed, with the amount of support to be reviewable in a further two years. It was noted that if Ms. Morck were to take the position on a review that her ability to earn income was limited by way of her medical condition, she would have to present medical evidence including an opinion upon her ability to obtain gainful employment, and that she would have to provide evidence of the availability of disability payments or assistance for her medical condition. [17] That order was overturned on appeal (reasons indexed at 2013 BCCA 186). The Court of Appeal held that the chambers judge had erred through treating Mr. Morck's application as an attempt to vary support, instead of as a review. The provision for review in the divorce order suggested that the parties had foreseen that future events might justify re-examination of the amount of support. The chambers judge had therefore been obliged to examine the considerations and objectives set out in s. 15.2 of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), to determine if a change in the agreed-to support amount was justified. The Court of Appeal pointed particularly to the provisions of ss. 15.2(4) and (6) of the Divorce Act as factors to be considered on a review: 15.2(4) In making an order under

subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (a) the length of time the spouses cohabited; (b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse. ... (6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should (a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. [18] The Court acknowledged that the chambers judge had "touched on" Ms. Morck's failure to take steps towards economic self-sufficiency, and had addressed her medical condition "to a degree", but he had not considered other factors related to her means and needs, specifically her decision to remain in the matrimonial home. [19] The parties invited the Court of Appeal to

undertake the task of a review, but the Court held that it was preferable to remit the matter to the trial court, for two reasons. First, the trial court would be better suited to make findings of fact and credibility. Second, it was preferable to have the review determined on up-to-date information as to the parties' circumstances. The Court stated: [24] The appellant's new business was still in its early stages when the application was heard below and its potential, and his future income and opportunities, can be more accurately determined with a further year of experience. As for the respondent, it is reasonable to assume that she has taken steps to clarify her medical prognosis and future options in accordance with the order of the chambers judge. [20] The Court of Appeal held that the monthly support obligation would remain at $3,000, but that it would be open to Mr. Morck to argue for a retroactive order at the review. [21] Mr. Morck now seeks termination or alternatively reduction of his support amount, retroactive to January 26, 2010, the date of effective notice. Duplicate notices of application were filed in August and September 2013. There was some delay in setting the application date; as far as can be determined from the evidence, this was occasioned initially by delays in Ms. Morck's disclosure of evidence of her medical condition and her eligibility for

disability benefits, and then by a further delay while Ms. Morck underwent an Independent Medical Examination at the request of Mr. Morck's counsel. The review application was finally heard in June 2015. [22] The current asset position of the parties is as follows: Colleen Morck (June 19, 2015 Financial Statement) 1 9540 Woodward Street, Mission $646,000 2 1995 Jeep Cherokee 1,000 3 dir[t] bike and horse trailer 1,400 4 2000 Dodge Dakota (gift) 7,000 5 Investors Group RRSP 590 $655,990

DEBTS 1 TD Mortgage January 7, 2012 $191,698 2 Capital Direct 2nd Mortgage 140,200 3 Canadian Tire MasterCard 500 4 CRA 4,547 $336,945

NET ASSETS $318,955 Michael Morck (June 9, 2015 Financial Statement) 1 Christian Valley Road lot $110,000 2 Vehicles: 2008 Chevrolet pick-up 18,000 2002 Harley Davidson motorcycle 5,000 3 Chequing account 13 4 Savings account 0 5 Securities Accounts (margin account and TFSA account) 9,448 6 Kettle River Holdings Ltd. (accounts and property) 147,231 7 KRH Electrical Services Ltd. 1,361 $291,053

DEBTS 1 Scotiabank Visa 2,000 2 CRA (2014 taxes) 1,667 3 Property taxes (personal) 560 4 Property taxes (Kettle River Holdings Ltd.) 560 $4,787

NET ASSETS $286,266 Ms. Morck's Means and Needs [23] The most recent financial statement of Ms. Morck, sworn June 19, 2015, discloses that her sources of income, in addition to the $36,000 paid annually by Mr. Morck, consist of disability pension income of $9,360 ($780 per month), which had commenced in February 2015; and the aforementioned $7,200 in rent paid Mr. Kennedy. (The latter, I note, has not increased since early 2012). [24] Ms. Morck's June 2015 Financial Statement discloses monthly expenses of $5,003, totalling $60,036 annually. The largest monthly expense category is her mortgage payments, $1,720 on the first mortgage and $1,000 on the second mortgage. [25] Ms. Morck also reports in her financial statement that since 2012 she has had to cash in $30,000 in RRSPs to make up for spousal support payments missed by Mr. Morck. [26] With regard to her medical condition, Ms. Morck has filed as evidence a report of her family physician, a Dr. Blackwood, dated October 16, 2013. Dr. Blackwood's report documents a lengthy history of ADHD, depression and anxiety. His report indicates fluctuations in her mood, problems with remaining compliant with medication prescriptions, and periods of relatively severe depression. Some examples of Dr. Blackwood's medical entries include: · Colleen presented August 29, 2005 saying that Mike was requesting a divorce which she was aware of over

the last year. During this visit she was significantly depressed and had an overwhelming sense of hopelessness. · I next saw Colleen on March 1, 2007 and at this time she noted that she was attending the Triangle Resources Center in order to improve her life skills. She was divorced and was coping on the alimony which she was receiving from Mike at this time. She also noted that she had been off her anti-depressant for a number of months and she felt her mood was generally stable. · Colleen was reviewed on September 18, 2007. She was progressively becoming more depressed. She was having problems maintaining personal grooming and attending to her house work. She was becoming more socially isolated from her Aboriginal community which she had been involved with earlier. She was crying frequently and had an overwhelming sense of hopelessness but was not suicidal. · Colleen was not seen again until February 8, 2008. She was quite distressed at this time because her horse had died the previous day. She was taken to hospital the previous day in a totally distressed state. She was given Ativan. She stated that she was spending all day sleeping. She had stopped her Celexa at Christmas and became progressively more depressed. She was feeling overwhelmed with her property and with having been divorced. She did have a sense of hopelessness after her horse died and she did feel somewhat

suicidal. ... · Colleen was next reviewed on April 21, 2010. By this time her mood was becoming progressively worse. She was having frequent episodes of crying. She remained very frightened and hyper-vigilant finding it very difficult for her to go out of her home during the day. She was financially stressed and the fact that she may lose her property and be able to care for her animals was very much a concern for her. · Colleen next returned to the clinic on February 9, 2012 with a significant deterioration in her depression. She had stopped taking her medications over the last year. · I next saw Colleen on October 19, 2012. At this time she was significantly depressed and completely unemployable. Her sleep pattern and appetite pattern were poor. She was reclusive and was having issues with personal care. [27] It appears that there were referrals made by Dr. Blackwood to Mission Mental Health. [28] Dr. Blackwood had last seen Ms. Morck on August 26, 2013. [29] Dr. Blackwood's report concludes: Colleen remains chronically depressed and suffers from significant social anxiety. She has only a Grade 10 education but with her burden of issues as far as mental health is concerned I do not feel that she is employable or will likely be employable given her age. She will require long term treatment with anti-depressants as well as her anti-hypertensive and lipid lowering agents. She

will require ongoing counselling with Mission Mental Health and psychiatric involvement. [30] In November 2014, Ms. Morck's counsel provided to Mr. Morck's then-counsel copies of the clinical records of a psychiatrist, Dr. Sherazi, who treated Ms. Morck at Mission Mental Health. The records cover the time period of October 31, 2012 to September 13, 2013. These notes document some improvement in Ms. Morck's mental health over the summer and fall of 2013; for example: a) in July 2013, she reported that she had been feeling relatively better, although the mental status examination revealed ongoing depressive symptoms with restricted affect; b) in August 2013, she reported that she was feeling much better, that her problems persisted but that she felt better able to cope with them. The mental status examination indicated that her mood was euthymic; and c) in September 2013, she reported to Dr. Sherazi that she felt she had been doing much better and had been coping well with day-to-day stressors. [31] No opinion is expressed by Dr. Sherazi in these notes as to Ms. Morck's long-term prognosis, nor as to her employability. [32] At the request of Mr. Morck's now former counsel, Ms. Morck underwent an independent psychiatric examination in February 2015. No expert opinion report from that psychiatrist has been tendered. [33] While, as I have noted, the more recent clinical notes of Ms.

Morck's treating psychiatrist indicate some improvement in her condition, I have no reason to believe that this represents a permanent change in her condition, as opposed to transitory fluctuations in her mood. There is no evidence that she has been "cured" in any sense and no evidence that with respect to her employability her condition is improved over that stated by Dr. Blackwood in the fall of 2013. Moreover, I draw an adverse inference from Mr. Morck's failure to put forward an opinion from the psychiatrist who conducted the independent examination. [34] I find that Ms. Morck continues to be disabled from employment on account of her medical condition, and that she will remain so disabled for the remainder of what could be considered her working life. [35] A comparison of Ms. Morck's 2012, 2014 and 2015 Financial Statements discloses some modest efforts on her part to limit her spending. The gap between her annual income (including $36,000 in spousal support) and her annual expenses in 2012 was a shortfall of $2,690. In 2014 this shortfall was reported to have increased to $19,608; this was largely on account of increases in certain categories of expenditures, including her monthly mortgage payments increasing by $947, and $160 per month being spent on ferry transportation. Her 2015 Financial Statement reported a reduction in that monthly shortfall, to $7,476, but that is

accounted for in part by the commencement of her disability pension. [36] That most recent Statement also discloses that she has made a $19,000 loan to a "friend", and has banked the balance of an inheritance she has received, which she holds in a savings account in the amount of $42,631. [37] It is clearly established, on a balance of probabilities, that Ms. Morck's medical condition represents a current and ongoing barrier to her achieving economic self-sufficiency at a level anything close to the level of economic security she had during the marriage. In that regard, it is clear that Ms. Morck's disability has resulted in her continuing to be adversely affected economically by the breakdown of the marriage as set out under s. 15.2(6)(a) of the Divorce Act. [38] I find Ms. Morck is entitled to spousal support, based on her medical condition. The length of the parties' marriage - what is considered, under the Spousal Support Advisory Guidelines to have been a long marriage, in excess of 20 years - alone justifies any spousal support order being made one of indefinite duration. This is even more the case when her disability is accounted for. [39] Having stated that conclusion, I make two other observations concerning Ms. Morck's past and current income. [40] First, Ms. Morck has known since Dr. Blackwood's report of October 2013, at the latest, that her medical condition

represents a long-term barrier to employment. No explanation is given by her for having failed to apply for a disability pension once she obtained that report. Given the nature of depressive illnesses, it is probable that Ms. Morck would have qualified for a pension at an even earlier date; by the same token, it is in the nature of depression to rob its victims of the capacity to take appropriate steps to deal with their financial circumstances. For that reason, I would not impute the amount of the pension benefit to Ms. Morck as a form of foregone income prior to her receipt of Dr. Blackwood's report. I do however find it reasonable that on any retroactive adjustment of Mr. Morck's spousal support obligation, that annual pension income of $9,360 should be imputed to Ms. Morck for the 2014 calendar year. [41] Second, the only income Ms. Morck has derived and is deriving from the matrimonial home is the rent paid by her tenant. In regard to the income potential of the property, Mr. Morck said the following in his June 10, 2015 affidavit: Ms. Morck has had horses for the last 25 years and is very knowledgeable of their care. To my knowledge she has a 1200 square foot barn and 5 acres of property which could accommodate 4 or 5 more horses, which could be boarded to generate an income, in an environment she would thrive on. This statement has not been contradicted by Ms. Morck. I

make no specific finding as to income imputation in reference to this evidence; rather, I take it into account in determining at what point any support obligation of Mr. Morck should be set, within the range of support specified by the Guidelines. Mr. Morck's Means and Needs [42] Mr. Morck's Financial Statement demonstrates continued deterioration of his financial position. His recent income tax returns disclose annual employment income for each of the years 2012, 2013, and 2014 of, respectively, $8,000, $8,000 and $1,000. In each of these years, he earned further income through his contracting company, KRH Electrical Services; the unaudited Financial Statements for the company show income for those three years at only $1,407, $352, and $1,942, respectively. [43] Mr. Morck has filed evidence, including an affidavit from his former business partner, attesting to a downturn in demand for the services of commercial electrical estimators, and to the lack of demand for such services in the residential sector. He has twice applied, unsuccessfully, for advertised positions with contracting companies. In his June 10, 2015, affidavit he states that he has continued to send out letters to contractors soliciting work, and he again provides a list of contracts to whom he has sent letters. (I note that there is considerable overlap between that list, and the earlier list provided by Mr.

Morck described in paragraph 14 of this judgment, above; the individual entries on the "new" list are not dated, and it is not at all clear to me that the "new" list represents "new" contacts made since the earlier list was prepared.) [44] Mr. Morck also deposes to having a variety of medical conditions including bulging cervical discs and arthritis in his hands. There is no medical evidence that these conditions pose any real impediment to earning income either as an electrical contractor or as an estimator. [45] In each of the years 2012 - 2014, Mr. Morck's main source of income was dividend income from his holding company of between $98,000 and $127,000. However, as noted above, these amounts represent retained earnings from previous years. On this application, Ms. Morck does not claim that her support over those years should be based on him having received that dividend income; that would be a form of "double-dipping", since the retained earnings held by the holding company would have been factored into the parties' property division. Rather, on this application Ms. Morck takes the position articulated at paragraph 19 of the decision of the chambers judge, quoted above: that Mr. Morck has had and still has "the ability to earn at least the income of $74,000 he was making in February 2006 ". [46] Having the benefit of a further three years of evidence of Mr. Morck's

financial position, I do not come to the same conclusion as the chambers judge did. I accept Mr. Morck's position that he has made reasonable efforts to find work as an estimator, and that he has demonstrated he is no longer able to earn income at the level he enjoyed in the past. [47] Nevertheless, I am not satisfied that Mr. Morck has made all reasonable steps to obtain remunerative employment congruent with his background, skills and abilities. It is likely the case that his years of experience in the construction field, his work as an estimator, and his background as a partner in a construction firm have given him skills that will be transferable at least to some extent to other occupations. Mr. Morck has made no effort to undergo vocational assessment to identify his skill set and his range of employment alternatives, or to undergo any degree of retraining. He is living with a new partner in a residence she owns; his Financial Statements disclose that he has no rent or mortgage payments. The evidence is at least equally capable of leading to the inference that his current financial position is largely a matter of lifestyle choice, as opposed to him being a victim of economic circumstances entirely beyond his control. [48] Mr. Morck, I find, is entitled to an adjustment, in his favour, of his support obligation. I do not agree with his primary position that his obligation

should be cancelled. Rather this is, I conclude, an appropriate case for employment income to be imputed to Mr. Morck, for the purpose of determining spousal support, in the amount of $40,000 annually. [49] I further find that it is appropriate to make the adjustment retroactive. Pursuant to the considerations described by the Supreme Court of Canada in Kerr v. Baranow, 2011 SCC 10 - see especially paras. 206-212 therein - I find the appropriate effective date for the readjustment to be January 1, 2012, the beginning of the first month following filing of the notice of application, i.e. the date of formal notice. While there has been considerable delay since then, that does not lie at the feet of Mr. Morck; I find he has acted with dispatch since the application was filed. Mr. Morck did give effective notice of his intention to seek review in January 2010 and, as noted above, it was from that earlier date that he has sought the retroactive adjustment to apply. However, in my view, a retroactive order to that earlier date would pose a hardship on Ms. Morck. The effective notice of Mr. Morck's intentions, in January 2010, ought reasonably to have put Ms. Morck on notice of the reasonable possibility of a reduction in her support, and sufficient arrangements to cushion her against the effect of a reduction ought to have been made by January 2012. [50] The "without child" spousal

support formula set out in the Guidelines provides that for a 24-year marriage, the amount of support should be in the range of 36% to 48% of the difference between the parties' gross incomes. At an income imputed to Mr. Morck of $40,000, and income of Ms. Morck of $7,200 in 2012 and 2013, and $16,560 in 2014 and 2015 (including imputation of disability income for the year 2014), the range for spousal support retroactive to January 1, 2012 would be as follows: 2012 - 2013: $984 - $1318 per month 2014 - 2015: $703 - $938 per month [51] I adjust Mr. Morck's spousal support obligation to the amount of $1,100 per month for the years 2012 and 2013, and $780 per month for the years 2014 and 2015. [52] Spousal support of $780 per month will continue indefinitely. [53] If the parties are unable to agree on the calculation of the amount owing, net of whatever amounts actually paid by Mr. Morck since January 2012, there will be a reference to the Registrar. [54] Mr. Morck has had substantial success on this application. He is entitled to his costs, assessed on the basis of this being a matter of ordinary difficulty. "A. Saunders J."