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Economic Disadvantage Due to Marriage Breakdown – How Much Money is Enough?

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Economic Disadvantage Due to Marriage Breakdown – How Much Money is Enough?

Under Canadian family law principles, when spouses decide to divorce, the court will evaluate each party’s financial circumstances in order to redress any financial or economic disadvantage that arises as a result of the marriage. This question of what constitutes “economic disadvantage” is a key factor in determining the level and duration of any spousal support to which the disadvantaged party is entitled.

Two cases from Courts of Appeal across the country illustrate some of the considerations that are taken into account by a court, and in particular the question of how much money is reasonably sufficient to compensate a spouse for the disadvantage caused by the fact of the marriage ending.

In a case from the Ontario Court of Appeal called Rioux v. Rioux, the court considered whether a $100,000 lump sum was adequate. There, the parties had been married for over 20 years. When they decided to separate, they were both 45 years old. Throughout the marriage the wife had only worked part-time, because she took on the role of managing the household and caring for the daughter they had together (who was 19 years old at the time of separation). She currently earned about $26,000, but had used $16,000 of that to pay for the daughter’s university tuition and expenses. The husband, meanwhile, was earning about $105,000 per year.

In advance of trial, the wife had obtained court orders obliging the husband to pay both spousal and child support. However, the husband had made no payments whatsoever. The matter went to trial, with the court ordering the husband to pay $100,000 in lump sum spousal and child support, plus $1,000 per month in child support. In other words, no spousal support was granted to the wife – the $100,000 was apparently intended to cover it.

The wife appealed to the Court of Appeal; that court found that the $100,000 was inadequate to address her economic needs. The court found that “self-sufficiency” is a relative concept: it relates to “achieving a reasonable standard of living having regard to the lifestyle the couple enjoyed during their marriage.” In this case, that amount was not enough to compensate her for the clear economic disadvantage that this traditional marriage had imposed on her, and that she would continue to experience now that the marriage had come to an end. Although she was still obliged to become self-sufficient, she was entitled to temporary support to soften the impact of the fact that she would have a decrease in her standard of living after the marriage breakdown.

The court ordered that the husband in addition to the $100,000 he was already paying, he should pay an additional $1,500 per month for five years, at which time a review was to take place.

Next, in a case from the Alberta Court of Appeal called Taylor v. Taylor, the well-to-do wife was nonetheless entitled to a significant amount of spousal support in recognition of the fact that there would be a considerably disparity in the spouse’s respective earning capacity after the marriage was over.

In that case, the spouses had been married for 18 years, and had two children together. Throughout the marriage and at the time of separation, the husband worked for a company owned by the wife’s father. After separation, the wife earned only about $34,000, while the husband subsequently bought his own business worth about $800,000, all of which was financed using 100% borrowed funds.

Even though the wife came from a family of considerable means and could be considered “wealthy” in her own right (she held half the shares in certain companies that were part of the business, possibly worth about $750,000, and had several hundred thousand dollars in RRSPs), she was still entitled to support from the husband in these circumstances. Her role in the marriage left her with a diminished earning capacity because she stayed home to care for their children. Meanwhile, the husband had been afforded the opportunity to hone his business skills.

(As an interesting aside: The trial court had deemed unreasonable the husband’s decision to leave his father-in-law’s business after separation, and instead ordered him to pay child and spousal support based on an imputed income of $124,000. However, the Court of Appeal overturned this ruling. Among other things, it was an error for the trial court to take wrongful dismissal principles into account, and to attribute blame to the husband for leaving that employment and to factor it into the amount of support he should pay. Moreover, the Court of Appeal found that – as with most similar cases – it was not unreasonable for someone in the husband’s position to leave employment that was being controlled by his former in-laws.)

In the end, the Court of Appeal determined that the husband’s income should be imputed at $75,000, and that spousal support payable to the wife should be reduced from $2,300 to $1,000 per month for 6 years.

Rioux v. Rioux, 252 O.A.C. 126, [2009] O.J. No. 2949, 66 R.F.L. (6th) 256, 97 O.R. (3d) 102, 2009 CarswellOnt 4077, 2009 ONCA 569 (Ont. C.A.).  http://canlii.ca/t/24kvj

Taylor v. Taylor (2009), 2009 ABCA 354; additional reasons at 2010 ABCA 103; Leave to appeal refused (2010), 493 A.R. 254 (note) (S.C.C.); varying (2009), 2009 ABQB 7.  http://canlii.ca/t/26cnx

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.