Should Wealthy Ex-Spouse Be Required to Tap into Capital to Maintain a Privileged Lifestyle?
In another Blog recent week, we touched upon the question of how courts will look at the “economic disadvantage” that is suffered by spouses after the breakdown of the marriage, and how a court will remedy the disparity through a spousal support award to the disadvantaged spouse.
In a case from the B.C. Court of Appeal, the court was faced with a wealthy couple who were divorcing, and had to consider how the breakdown of the marriage would affect the parties’ ability to support themselves in keeping with the luxurious lifestyle to which they had both become accustomed during marriage.
The case, called Bell v. Bell, involved a couple had started living together in the 1980s, and married in 1990. They had two children, who were 21 and 16. The husband was currently 71, and had been a career diplomat who retired in 1998 after having served as Canada’s Ambassador to the Ivory Coast, Brazil and Malaysia. The wife was 48 years old at the time of the divorce in 2006.
As part of the unwinding of their financial affairs, they negotiated the equal division of their family property, which was worth about $12 million. However, the question of whether the wife should get spousal support still had to be resolved, because there was a considerable difference between the husband’s and wife’s income levels post-divorce. Specifically, in recent years the husband had earned a high of almost $1.5 million per year and a low of about $650,000 per year; the wife on the other hand earned $140,000.
In allowing the wife’s appeal of a prior order terminating temporary support, the Court of Appeal summarized the wife’s financial situation as follows:
The parties met when Mr. Bell was in his forties, serving as the Canadian Ambassador to the Ivory Coast. He brought to the marriage assets of $4.0 million. Ms. Bell was in her twenties and had assets of $35,000. She had achieved considerable success as a fashion designer and had developed a clothing design business in the Ivory Coast. She moved to Brazil when Mr. Bell became the ambassador and they were married there. Operating her business was no longer viable and, shortly after their second son was born, it was closed down. She devoted herself to raising the children and fulfilling the somewhat demanding role of the spouse of an ambassador.
Mr. Bell retired from External Affairs in 1998. When the parties separated they were living in Vancouver. The equal division of their assets, on which they agreed in 2006, saw Ms. Bell retain the matrimonial home, which was appraised at $2.0 million (subject to a mortgage of about $622,000), and receive one-half of substantial holdings in income-generating cranberry farms, with her interest being valued at about $4.0 million. Ms. Bell sold the home for $2.7 million, paid off substantial debt including $250,000 in legal fees, and purchased another home in 2007 for $1.47 million. She spent $500,000 on renovations and incurred a substantial mortgage obligation. She also spent $95,000 acquiring property in the Ivory Coast. Her income from investments and dividends for 2008 as stated on her tax return (admitted as fresh evidence) was $181,574. Ms. Bell has chosen not to seek employment. She considers the skills she once had in the fashion business in the Ivory Coast would be of limited use in the North American market but she accepts she could be earning $30,000 in a sales position if she wished. Her income could then be perhaps $210,000.
Nonetheless, the Court considered the great discrepancy between the husband’s and the wife’s income, together with the consequences of the marriage breakdown. It concluded that – even with the wife’s current assets and earning potential – she was entitled to spousal support due to the economic disadvantage she incurred from the fact that the husband’s income was no longer available to her. In other words, even though her current income and accumulated capital would allow her to be economically self-sufficient, she was disadvantaged because of the marriage breakdown because she had to some degree lost the standard of living that she was able to enjoy because of the husband’s large income. Furthermore, there was nothing in Canadian law obliging the wife to encroach upon her capital in order to bring herself up to the standard of living she formerly enjoyed (and which her husband was still able to enjoy).
As a result, the Court of Appeal held that the wife was entitled to receive spousal support of $5,000 per month. (This amount was reduced from the trial court’s previous award of $10,000 per month, which had been based on higher projected income level for the husband than was actually being earned).
For the full text of the decision, see:
Bell v. Bell (2009), 2009 BCCA 280; additional reasons at 2010 BCCA 138.