Gray v Rizzi, 2016 ONCA 152

This case highlights the inevitable consequences of failing to make full, timely and accurate financial disclosure. It specifically emphasizes that a spouse cannot sit back, fail to make adequate financial disclosure, then move to vary a final order because it does not reflect their real income.

Background

Nadine Ellen Gray and Mario Rizzi started living together in 1986, were married in 1989, and separated in 2002. Their two children, over the age of majority, suffer from mental health problems and reside primarily with their mother.

In 2003, Ms. Gray commenced an application for divorce and corollary relief. At a case conference, Mr. Rizzi was required to provide a financial statement within 30 days. When he failed to comply, the court made a final order dealing with custody, access, child support and spousal support. The order imputed an annual income of $133,000 to Mr. Rizzi, and ordered support accordingly.

In 2009, Mr. Rizzi initiated two proceedings; first to set aside the final order, and second to have the order changed pursuant to section 17 of the Divorce Act. The first motion was dismissed. The second motion was heard, and the trial judge held that Mr. Rizzi had demonstrated a material change in circumstances in the period prior to the making of the final order (that which justified a reduction in his support obligations retroactive to the date of the parties’ separation). The trial judge recalculated Mr. Rizzi’s imputed income, varied the support amounts, and this imposed an obligation on Ms. Gray to reimburse Mr. Rizzi a significant amount as overpayment of support.

On appeal, Ms. Gray asks that the variation be set aside and dismissed.

The Court of Appeal held that the trial judge erred in principle by relying on circumstances that pre-dated the making of the final order; highlighting that events that take place prior to the making of the final order cannot later constitute a material change in a spouse’s circumstances. The court further held that the trial judge failed to apply the appropriate principles governing variations in child and spousal support.

Analysis

Mr. Rizzi brought his motion to change under section 17 of the Divorce Act, and the trial judge held that he had met the statutory requirements for two reasons: (i) he demonstrated that he had experienced a change in circumstances prior to the making of the final order, and (ii) the final order contemplated that since he had not yet made adequate financial disclosure, he could move to vary the support orders after making the disclosure.

The Court of Appeal found that these two reasons disclose errors in principle: (1) the trial judge improperly relied on events that predated the final order, and (2) the trial judge improperly reviewed the correctness of the final order.

At trial, Mr. Rizzi argued that, because the final order required payment of support retroactive to August 2002, establishing a material change after that date entitled him to a variation of the order. The trial judge accepted this argument and held that Mr. Rizzi’s significant decrease in income during 2003 and 2005 constituted a material change in his circumstances.

However, the final order was not made until November 2005. The Court of Appeal stresses that before varying the final order, section 17 of the Divorce Act required the trial judge to be satisfied that a change in circumstances had occurred “since the making of the final order” – not since the date of separation. Having incorrectly relied on circumstances that pre-dated the final order, the trial judge therefore committed an error in principle.

The trial judge further based her reasoning on the fact that neither parties’ income was fully assessed for the determining of support amounts. The Court of Appeal however attributed this unfortunate circumstance to Mr. Rizzi’s failure to organize his financial information.

Financial disclosure is the most basic obligation in family law. It is an automatic obligation and should not require reminders or court orders. The Court of Appeal held that if a party (much like Mr. Rizzi) ignores their financial disclosure obligations, they assume the risk that a judge may proceed to grant a final order based on imputed income; and that such non-disclosure ought not to be rewarded.

The Court of Appeal additionally held that the trial judge’s decision ignored the Supreme Court of Canada’s clear direction in Willick v. Willick, [1994] 2 S.C.R. 670, that a variation application is not an appeal; that the trial judge erroneously substituted her view about what the final order should have been.

The trial judge relied on section 37(2) of the Family Law Act in interpreting Mr. Rizzi’s newly declared income as “evidence not available on the previous hearing”. The Court of Appeal however notes that section 17 of the Divorce Act does not recognize such evidence as a ground for variation. The Court of Appeal further highlights the illogicality in conceiving that “evidence not available on the previous hearing” could include financial information that was “not available” because of one party’s deliberate failure to meet his disclosure obligations.

Having established that the trial judge erred in finding that event pre-dating the final order constituted a material change in circumstances, the Court of Appeal proceeds to deal with the issues raised by Mr. Rizzi’s motion to change. The court highlights that a material change is such that “if known at the time, would likely result in different terms”; and finds that Mr. Rizzi’s significant and sustained reduction in income (when compared to the income imputed) constitutes a material change and meets the threshold for a section 17 variation.

In determining the issue of retroactive variation, the Court of Appeal outlines the four factors outlined in D.B.S. v. S.R.G., 2006 SCC 37. Although the trial judge distinguished D.B.S. from Mr. Rizzi’s circumstances, the Court of Appeal held that its factors do provide useful guidance. In using the D.B.S. factors, the court concluded that Mr. Rizzi is not entitled to any retroactive variation of his child or spousal support obligations because he repeatedly engaged in misconduct and caused delays. The court did however, find that Ms. Gray had re-established her economic self-sufficiency, and therefore did not accept her submission that spousal support should continue indefinitely.