A recent Ontario Court of Appeal decision highlights how courts determine the appropriate amount of spousal support payable in instances where the payor spouse has a high-net worth, including how the Spousal Support Guidelines (SSAG) are considered.
The History of the Parties
The husband and wife were married in June 1983. They were together for 32 years and had two children (born in 1986 and 1988) before separating in June 2009 and ultimately divorcing in January 2016.
The couple had a diverse and changing history of responsibilities and earnings throughout their union. Briefly:
- When they were first married, the wife, who did not have a post-secondary education, had a series of jobs, including at a bank, as a real estate agent, and as a part-time waitress.
- Once the couple’s children were born, the wife became their primary caregiver and also took care of the household. She briefly returned to work and supported the family while the husband pursued an MBA.
- The wife resumed working as a real estate agent in 1994 and continued until 2002.
- After 1994, the couple became involved in a series of companies and their standard of living rapidly increased. The wife assisted in the administration of the various businesses.
- The family began to enjoy an affluent life style that included frequent travel abroad and a vacation home.
- From separation until October 2010, the wife received $11,500 per month, plus benefits as an administrator of the couple’s businesses.
- In October 2010 the husband abruptly relieved her of her responsibilities, changed the locks on the doors, and informed her that he would no longer allow her to work on the premises. Her monthly income dropped to $5,000.
The Initial Support Order
In 2011 the wife went to court and obtained a consent order requiring the husband to pay $10,000 in monthly spousal support and $135,000 as an advance equalization payment.
The judge had found that the husband’s lifestyle hadn’t changed following the separation and he continued to enjoy golf memberships and travel extensively. Moreover, his personal assets increased and in the year before the trial he made $1.3 million in salary and dividends.
The judge found that, in contrast, the wife had to significantly adjust her lifestyle after separation, could no longer afford to travel, eat at restaurants, or take vacations unless she had assistance from others. She had also attempted to pursue employment opportunities after separation.
The Spousal Support Trial
In 2016, the couple returned to court to determine outstanding issues including spousal support and equalization.
In determining proper quantum of support, the trial judge relied on both the Spousal Support Guidelines (SSAG) as well as caselaw involving high-income spouses. The trial judge noted, among other things, that two factors that tend to increase the amount of support awarded is the length of a marriage and the resulting merger of a couple’s economic lives. He stated that in this case, the parties had structured their lifestyle based primarily on the husband’s income.
The trial judge found that in the three years leading to the proceedings, the husband’s average annual income was just over $1 million, taking into consideration salary, dividends, corporation earnings, and other factors.
With respect to the application of the SSAG, the trial judge noted that where payor spouses had an income above the SSAG ceiling of $350,000, there was no hard “cap” on spousal support awards and court’s retained discretion to make any award they deemed appropriate. The discretion on determining quantum is always fact-specific and should take into consideration the SSAG ranges. Caselaw suggested that:
in balancing the factors in a long-term marriage, where the payor’s income is above $350,000, the SSAGs recommendation is that the payment of spousal support range between 37.5% and 50% of the gross income difference between the spouses.
On this basis, the trial judge ordered that the wife receive the “low range” of the SSAG ($28,978 per month).
Unsurprisingly, the husband appealed the decision on several grounds.
The Appeal Decision
The Court of Appeal noted that, with respect to applying the SSAG guidelines to determine support, it was important to remember that a payee spouse’s entitlement to support must be considered in a two-step inquiry: 1) is that spouse entitled to support? and 2) if so, what range of support is appropriate?
The Court of Appeal took no issue with the trial judge’s determination in the first half of this inquiry (i.e. that the wife in this case was entitled to support):
The trial judge found that the [wife] had a strong claim to compensation based on the role she played in the marriage and in supporting the [husband’s] advancement. They were equal partners he pursuing his business and she managing the home and the businesses thrived. She was clearly entitled to share in that success after the marriage was over, not just through equalization but also by means of spousal support. The trial judge also found that: the [husband] had the means to pay spousal support; the [wife’s] lifestyle had significantly decreased after separation; and, there was a great disparity in the standards of living that each enjoyed post-separation.
However, the Court of Appeal found that the trial judge had erred by not considering the significant amount that the husband had paid to the wife in equalization (over $3,000,000). The Court noted that this significant sum should have been acknowledged when reviewing the appropriate range of spousal support. This payment would at least partially have compensated the wife for the roles she played in managing the home, children, and business during the marriage.
Rather than sending the matter back to trial, the Court of Appeal went on to determine a new quantum of more appropriate support given their findings. The Court did not take into consideration the income previously imputed to either party but instead settled on an income of $675,000 (halfway between the SSAG ceiling of $350,000 and the husband’s previously imputed income of just over $1 million). The Court then determined that the low range of the SSAG should apply based on this amount, and reduced the wife’s spousal support from the $28,978 ordered previously to $20,000.
The Spousal Support Guidelines
Spousal support payments in Canada are determined, in part, by the SSAG, which were introduced in 2008 as a means to establish consistency in spousal support awards.
The SSAG are not mandatory, but do provide a recommended range as well as some guidance in determining an appropriate quantum of support. They are generally followed by family judges making arguments about spousal support and judges making final determinations about that support.
Amount is generally calculated based on several factors including:
- Length of the relationship;
- The incomes of each spouse;
- The employment history of each spouse; and
- Age of each spouse.
A number of exceptions exist in applying the SSAG including situations in which the payor spouse’s income is over $350,000.
In situations such as this one, where the marriage was long, where children are adults (and therefore child support is not payable), and where the payor spouse’s income exceeds $350,000, the spousal support ranges are between 37.5% of the combined after tax income of the spouses at the low end of the range and 50% of that combined income at the high end of the range. This can, depending on how a court exercises its discretion, result in significant spousal support awards.
If you are a high-net worth individual, own a business, or have significant assets, and have questions about how this will be treated in separation or divorce, contact Financial Litigation in Toronto. Eli Karp has excellent relationships with forensic accountants and valuation specialists to ensure that complex financial arrangements including corporations, self-employment income, and other financial instruments are properly assessed in negotiations over spousal support. To schedule an appointment, contact us online or call 416-769-4107 x1.