Variation of Spousal Support in Anticipation of Retirement
Spousal support obligations incurred while the payor is employed may become unbearable for the payor once they retire.
One option for the payor is to bring a variation application to change the amount of support. Section 17 of the Divorce Act allows a party to apply for an order varying, rescinding or suspending retroactice and prospective spousal support. Before the court makes a variation order, the court has to satisfy itself that a change in the condition, means, needs or other circumstances of either spouse has occurred since the making of the spousal support. The Supreme Court of Canada established, in Willick v. Willick,[1] that this change must be a material change of circumstance.
A recent decision of the Ontario Court of Appeal explores whether a payor can bring such a variation application before the date of their retirement.
Background
In Schulstad v. Schuldstad,[2] the payor was a general surgeon with an income of $275,000. He was paying his former spouse $10,000 per month in support and maintaining a life insurance policy for her benefit at a cost of $300 per month, pursuant to a court order.
In January 2014, the payor brought an application to terminate his spousal support and life insurance obligations effective June 1, 2016, on the basis that he was planning to retire in June 2016. He also sought to reduce these obligations leading up to the retirement date.
The application was heard in August 2015, ten month before the intended retirement of the payor. The application judge accepted that the payor was going to retire in June 2016 and held that he was acting in good faith in seeking to retire. The judge also determined that the payor’s motion was not premature.
The application judge accepted the payor’s evidence that his income would be reduced from an annual salary of over $250,000 USD to an annual income from pensions and investments of about $35,000 to $40,000.
The application judge also determined that the parties’ respective assets and income would be about equal after the respondent’s retirement and therefore, terminated the payor’s spousal support and insurance obligations, effective on the anticipated date of retirement.
The recipient spouse appealed this decision and raised as a ground of appeal, among others, that the application was premature since it was brought before the payor had retired.
The Court’s Decision: Was the Application Premature?
The Court of Appeal rejected the recipient spouse’s argument that the application was premature. The application judge found that the payor’s retirement was a certainty. The payor had given notice to his employer and the employer was proceeding with the process to replace him in his position. The application judge had also determined that there was sufficient evidence to support the change in income of the payor and that there was sufficient financial information to permit the judge to determine that the retirement would be a material change in circumstances.
This certainty distinguished this case from others, where the retirement was speculative and where the courts determined that the application was premature.[3] However, in its decision, the Court of Appeal cautions that this was an exceptional case and that it did not endorse as a general principle the application judge’s encouragement of the early timing of the payor’s application:[4]
27 ... I would not endorse as a general principle the application judge's encouragement of the early timing of the respondent's application because of the potential problems created by premature applications to vary. This case is exceptional in that there was evidence to support the application judge's conclusion that the respondent would, indeed, retire, that the change in income of the respondent and support payments following his retirement would be very significant, and that there was sufficient financial information to permit the application judge to determine that his retirement would be a material change in circumstances.
28 In most cases, such an application so far in advance of the alleged material change in circumstances will run counter to the fundamental principle articulated in both legislation and jurisprudence that a material change must have already occurred in order for a court to have jurisdiction to vary a final order. This is because there is a real likelihood that the financial disclosure and other evidence in support of an alleged material change in circumstances will be speculative due to its prematurity. Encouraging premature, speculative applications to vary, which lack the necessary solid and certain evidentiary foundation, will simply increase the already extremely high costs of litigation in family law proceedings.
Thus, in most cases, it would not be appropriate to bring a variation application before the payor has experienced the change in their "condition, means, needs or other circumstances." This holding is in line with other cases, which have generally held that the proper time to decide the appropriate amount of spousal support is after the income had changed and all the relevant factors can be put before the decision maker.[5]
Contact our lawyers for more information on support obligations in family law and divorce cases.
Disclaimer
Suliman Law Firm has prepared this document for information only; it is not intended to be legal advice. You should consult us about your unique circumstances before acting on this information. Suliman Law Firm excludes all liability for anything contained in this document and any use you make of it.
Endnotes
[1] Willick v. Willick, [1994] 3 S.C.R. 670
[2] Schulstad v. Schulstad, 2017 ONCA 95
[3] see Vaughan v. Vaughan, 2014 NBCA 6
[4] Schulstad v. Schulstad, 2017 ONCA 95 at paras. 27 and 28 [5] Vaughan v. Vaughan, 2014 NBCA 6 at para 14