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How Do You Reach an Agreement on Spousal Support when the Payor Will Retire in the Future?

by Daniel Gloade on November 23, 2015

This is the very complex Divisional Court appeal in Hickey v. Princ, 2015 ONSC 5596.  You can read it here.  The facts are as follows:

The parties separated in 2001 after 17 years of marriage.  At that time, the Husband was a police staff sergeant earning approximately $78 000.00.  The wife was disabled and earned virtually no income.

The parties decided to divide their matrimonial property.  They followed the law which states that the present value of a future pension payout is an asset.  It is like a car or house, etc.  The larger one spouses share of the matrimonial property, the greater the transfer of wealth to the other spouse at the marriage’s dissolution.

The parties agreed that the Husband kept is pension. The Wife kept the matrimonial home and received $2000 per month in spousal support.  The parties never clarified the assumed date of the Husband’s future retirement.

Many years later, the Husband elected to retire at age 51.  His $122 000 income would be reduced to $74 000.00 per year.  The motion’s court judge (at the Superior Court of Justice) reduced the spousal support from approximately $2500 to about $1000 per month.  The Wife appealed to the Divisional Court.  It was heard before The Honourable Mr. Justice Heeney.

First, the Husband successfully convinced the lower court judge that there was a material change in circumstances.  The “material change in circumstances test” means that, had the parties or judge knew then what they now know, the agreement or Order would have been different.  The factors must be both important and unforeseeable.

The Husband argued that that his reduced income arising from his retirement was the material change.  Heeney J. held that a reduced income due to retirement is not an automatic material change in circumstance.  Only if the Husband’s ability to earn income was changed can the support order be reviewed.  The Husband could still work.  Also he has plenty of assets.

Second, the Husband complained that it was unfair that his pension was used as an asset in calculating the division of matrimonial property and it was an income generating asset for the spouse (spousal support (This is called “double dipping”.)  The lower court judge agreed with the Husband and held that spousal support should end because the Wife did not sell the matrimonial home and use the equity as an income-producing asset.

Justice Heeney. quoted Major J. of the Supreme Court of Canada which states:

“Despite these general rules, double recovery cannot always be avoided. In certain circumstances, a pension which has previously been equalized can also be viewed as a maintenance asset. Double recovery may be permitted where the payor spouse has the ability to pay, where the payee spouse has made a reasonable effort to use the equalized assets in an income-producing way and, despite this, an economic hardship from the marriage or its breakdown persists. Double recovery may also be permitted in spousal support orders/agreements based mainly on need as opposed to compensation, which is not the case in this appeal.”

Again, Heeney did some calculations and held that that the Wife sold the matrimonial home and invested the money, she would only get $900.00 per month.  She was better off living rent-free in the matrimonial home.

Third, the Husband held that it was unfair that his spousal support obligation continue.  Spousal support was not be used to make individuals permanent disability benefits insurers.  The lower court judge agreed and held that the Husband’s obligation to pay support would end in eight years’ time.

Justice Heeney sited past case law and held that in order to examine whether the obligation to pay spousal support should end, one needs to look at the purposes of spousal support.  The Wife suffered a disadvantage at the breakdown of the marriage. She lost the sizeable income from her former spouse.  Also, she was still disabled and still had a need for spousal support.

Finally, the Husband argued that it was also unfair to maintain the spousal support payment amount after retirement because the present value of the future pension payoffs were calculated based on the assumption that he would retire at age 51.  This assumption increased the present value of his pension when calculating the division of matrimonial assets.  Working past 51 would also confer an economic benefit to the Wife.  Doing both would be unfair.  The lower court agreed and held that one offset the other.

Heeney did some calculations and held that although the present value of a pension is increased by a closer retirement date, the value is far less than the income lost from electing early retirement.

The Divisional Court overturned the lower court’s decision.  The Husband’s spousal support payments were reinstated.

If the obligation to pay spousal support can be triggered by losing the benefit of an income from another spouse, doesn’t any financial disparity trigger a spousal support obligation?  Isn’t spousal support payments almost automatic?    Also, does a party really have to decide when he or she will retire at the time of separation?  Doe the parties need to explicitly state that the contract can be re-evaluated with a change of income regardless of the cause?

 

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