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Lorne MacLean, QC, MacLean Law, Vancouver

An important Calgary high net worth grey divorce spousal support case of J.L.H. v R.S.W., 2017 ABCA 98  (JLH) from the Alberta Court of Appeal was just released and has it sent shockwaves through the Calgary high net worth divorce community.

JLH dealt with a disputed divorce and family finance case where the parties had divided over $5 million of assets and both spent beyond their means to the extent that the wife had used up all but 200,000 of her $2.7 million property settlement. The Calgary High Net Worth Grey Divorce Spousal Support  case discusses how a high net worth property division impacts spousal support and stands for the proposition that in long marriages it will be very difficult to obtain an order for time-limited support.

Calgary high net worth grey divorce spousal support disputes involve high stakes property division and large amounts of spousal support for long periods of time. It’s critical that you hire a Calgary high net worth grey divorce spousal support lawyer who is familiar with the complexities and arguments involved in high-stakes later in life spousal support disputes. MacLean Family Law is lead by Lorne N MacLean, QC who restricts his practice to complex family financial disputes and high conflict family matters. The firm has 6 offices across Western Canada including our downtown Calgary office.

Calgary High Net Worth Grey Divorce Spousal Support and Excessive Spending

In JLH  the wife. appealed an  award of spousal support that she felt was too low and for two short of a duration.  The Court. of Appeal agreed with her position that in long marriages substantial support should still be awarded in high net worth cases despite generous property awards. They also agreed that arbitrary cutoffs of spousal support without the right to assess circumstances in the future was inappropriate.

The fact pattern of the case indicated that both parties spent beyond their means during the marriage and after separation but the Court of Appeal said that at some point the Bite of Reality Sandwich is needed.

[2]               The respondent was a high income earner throughout the marriage. His work in the financial services industry required long hours and travel away from home. The appellant was trained as a lawyer, but did not work outside the home for much of the time. She attended to the home and the two children, assisted throughout by a full time nanny, housekeepers, gardeners, pool services, etc.

[3]               Even with the high family income, the parties lived beyond their means. The children attended a private school, the parties travelled extensively, they enjoyed the help of their staff, and they otherwise lived a luxurious life. By 2006, after a 25 year relationship, their primary substantial asset was the matrimonial home valued at about $1.9 million. They had about $950,000 in family debt.

[4]               In 2006 the respondent earned a large gain as a result of a “one-time” transaction involving his employer. After payment of taxes and the matrimonial debt, a balance of $5.548 million remained. The respondent retired in 2007 and the parties separated in 2008. The parties split these funds, with each receiving $2.774 million.

[5]               The parties did not moderate their standard of living after the separation, and continued to live beyond their individual and collective means.

[7]               The appellant has spent all but $200,000 of her half of the $2.774 million gain. She has remained in the large, expensive matrimonial home, and used part of the funds to support herself, as she was not receiving spousal support. Like the respondent, she spent other substantial parts of the gain on extravagant living expenses, including travel and luxury items for the children.

How Does Property Division Affect Calgary High Net Worth Grey Divorce Spousal Support?

In the 1980’s  courts favoured a clean break approach and in cases where property and asset division left the lower earning spouse with one or $2 million often there was no award of spousal support to support despite a large disparity in incomes between the spouses upon separation. Things began to change in the 1990’s and award of spousal support skyrocketed after the spousal support advisory guidelines were implemented. Here is what the Alberta Court of Appeal said about property division and support:

[18]           The division of matrimonial property and debt is a relevant factor in spousal support, because it is one factor in determining the “condition, means, needs and other circumstances of each spouse”. As stated in Moge at p. 849:

Equitable distribution can be achieved in many ways: by spousal and child support, by the division of property and assets or by a combination of property and support entitlements. But in many if not most cases, the absence of accumulated assets may require that one spouse pay support to the other in order to effect an equitable distribution of resources.

There may be cases where the matrimonial property is of such a magnitude that no spousal support can be justified. As noted in Boston v Boston, 2001 SCC 43 (CanLII) at para. 111, [2001] 2 SCR 413:

Assets made available to a spouse after the equalization process should be factored in when considering the needs and means, as they will sometimes allow the dependent spouse to reach a degree of independence, which reflects one of the objectives of the Family Law Act and her essential human dignity.

However, in most divorces the matrimonial property division will reflect only one branch of the compensatory spousal support analysis. It will usually be necessary to make the matrimonial property division before any realistic assessment of the condition, means and needs of the spouses can be undertaken: Taylor v Taylor, 2009 ABCA 354 (CanLII) at paras. 47-50, 15 Alta LR (5th) 303, 464 AR 245. There will often, however, be another branch of the compensatory analysis relating to the impact that the marriage and its breakup will continue to have on the spouses post-separation. Property division is at most the beginning of the spousal support analysis, not the end of the analysis.

Calgary High Net Worth Grey Divorce Spousal Support Standard Of Living

The Court of Appeal ordered higher spousal support than the trial judge ranging from over 5000 for earlier years and ending at 9000 a month for recent years and said:

[23]           The appellant relies on the principle that, in setting support, consideration should be given to the standard of living enjoyed during the marriage. That is so, but within limits. Moge at p. 870 confirms that the standard of living during the marriage is relevant, but there can be no guarantee that standard will persist after separation. The real point is to examine “great disparities in the standard of living that would be experienced by spouses in the absence of support”. These parties were living beyond their means during the marriage, and were racking up debt to support their lifestyle. A spousal support award should not attempt to perpetuate that state of affairs.

[24]           Further, the dissolution of the marriage must also be considered. Marriage is (among many things) an economic institution: Moge at pp. 848-9. Dissolution of the marriage will almost always have an impact on the spouses’ standard of living. Two can live together more economically than they can while maintaining separate residences. Thus, it was not an error for the trial judge to conclude that it was unrealistic for the appellant to expect to continue to live in the large, expensive matrimonial home, and that she had been unreasonable in refusing to sell it: Boston at para. 60.

[25]           The fact that one or both spouses have irresponsibly dissipated matrimonial assets is relevant to determining the condition, means and needs of the spouses: H.B. v A.B., 2014 ABCA 152 (CanLII) at para. 33, 45 RFL (7th) 1. The recipient spouse cannot artificially increase “needs” by squandering assets, but neither can the payor spouse artificially reduce the “means to pay” by irresponsible spending. In cases like this, where both parties have dissipated assets, both may have to accept a reduced standard of living. There is, however, a practical limit to the consideration of irresponsible spending. At some point the payor spouse will simply have no ability to pay, and at some point the recipient spouse will have “needs” that have to be met regardless of any prior dealings with matrimonial assets.

[29]           Monthly spousal support for 2015, 2016 and future years should be set on an interim basis at the sum of $9,000 per month, pending complete personal and corporate disclosure for 2015 and future years, and any review or agreement.

Duration of Spousal Support In Calgary High Net Worth Grey Divorce Spousal Support Cases

Finally, The Court of Appeal pointed out the difficulty in getting a guaranteed endpoint for spousal support on long marriage in Calgary High Net Worth Grey Divorce Spousal Support disputes.

[30]           The respondent testified that he intended to retire, possibly as early as age 62. The trial judge directed that spousal support would terminate when he reached that age, which was five years in the future, and that neither party would have the right to review the spousal support during that five year period.

[31]           The appellant argues that she has established an entitlement to ongoing compensatory spousal support, and that it should not end until (at least) the respondent’s actual retirement, which presumably would be no earlier than age 62. In the circumstances here, the ongoing spousal support should not have automatically terminated on the respondent’s 62nd birthday, but rather presumptively on his actual retirement no earlier than age 62.

[32]           The direction that ongoing spousal support would not be reviewable is inappropriate. Section 17(4.1) of the Divorce Act enables either party to apply for a review of support if there is a change of circumstances. The ability of a court to deprive either party of the statutory right to a review of support is limited at best. To avoid uncertainty, the ability of either party to apply for a review of support if the statutory conditions are met is confirmed. The respondent’s actual complete or partial retirement will qualify as one such change of circumstances.

If you have a Calgary high net worth great divorce spousal support dispute case where you can’t afford a mistake pick up the phone and call Lorne N. MacLean, QC of MacLean Family Law at 403-444-5503.