Spousal Support After Equalization Payment

If a spouse receives a large equalization payment is she still entitled to spousal support?

You informed me that your client is a stock trader who left his employment during the marriage to manage his own stocks. The value of his stocks exceeds $10 million. The stocks are the sole source of his income, by way of dividends and such. Your client splits income with his wife. Their combined income is about $400,000 a year.

Your client will owe his wife an equalization payment. She will have more than $5 million in assets. Her ability to earn income will be the same as your client’s. He is willing to manage her stocks without charge.

The parties are amicable and have a shared child custody arrangement.

The wife is seeking spousal support. Your position, on behalf of your client, is that it is unreasonable for him to pay her support in these circumstances. You requested case law to support that position.

The courts accept the proposition that if a spouse’s assets after receipt of a property award provide that spouse with an appropriate level of income, spousal support will be reduced or denied. The cases below are the most applicable to your client’s situation in the context of the Ontario matrimonial property and support regime.

“Means”

Section 15.2(4) of the Divorce Act says that in awarding spousal support, the court is to consider “the condition, means, needs and other circumstances of the spouses”. In Leskun v. Leskun, [2006] 1 S.C.R. 920, at para. 29, the Court defined “means” as including “all pecuniary resources, capital assets, income from employment or earning capacity, and other sources from which the person receives gains or benefits”, adopting the formulation of the traditional interpretation of “means” in Strang v. Strang, [1992] 2 S.C.R. 112, at para. 15. The equalization payment will constitute means to be taken into account when assessing the wife’s need for spousal support.

The court must determine the equalization payment before determining the spousal support award, if any.

See Greenglass v. Greenglass, 2010 ONCA 675, 99 R.F.L. (6th) 271, at paras. 41-44. In particular, see para. 44:

[T]he amount of the equalization payment and the impact of any potential income-generating potential associated with the assets with which each party is left will almost invariably affect the support analysis. As a matter of law, therefore, the calculation of the division of assets and resulting equalization payment must always precede any support analysis.

Once the equalization payment is made and invested reasonably, there may be no need for spousal support.

In Bolt v. Bolt, 2006 CarswellOnt 1490, 2038, [2006] O.J. No. 968 (S.C.J.), the wife’s equalization payment amounted to just under $500,000 at the time of trial. It was invested in low-return RRSPs. Her income from employment, investments and child support was not enough to balance her monthly budget. If she invested the funds at a reasonable rate of interest, she would have sufficient income to live on without further assistance from the husband. See paras. 10-11.

It is inequitable to order spousal support if the result is that the recipient’s income is higher than the payor’s income

In Munro v. Munro, 1997 CarswellOnt 3905, [1997] O.J. No. 4194, 33 R.F.L. (4th) 464 (C.A.), the trial judge ordered spousal support of $275 a week for the wife. On appeal, the husband argued that the amount was excessive, considering the impact of the equalization payment on the parties’ incomes. The Court of Appeal reduced spousal support to $100 a week. See para. 18:

I am of the view, however, that the trial judge erred in fixing the quantum of support at $275.00 per week. As stated earlier, at the time of trial the respondent earned approximately $29,000 and the appellant $45,000. The parties agree that, after taking into account the impact of the equalization order, the respondent has a combined yearly income of some $33,000 and the appellant $41,000. The net effect of the trial judge’s order granting support in the amount of $275 per week ($14,300 per year) leaves the respondent with a yearly gross income of approximately $43,000 and the appellant with $31,000. In my view, this award produces an inequitable result. I find that an award of $100 per week for spousal support is adequate in the circumstances of this case.

As the annotation by the late Prof. McLeod points out, $100 a week still gives the wife more income than the husband. $77 a week would have equalized their incomes.

Conclusion

None of these cases is exactly like your client’s case. However, the principles apply. If your client’s wife will have assets that can provide her with an income equal to your client’s income, there is no basis for awarding her spousal support. Depending on her other resources, she may be entitled to interim support until the equalization payment is made.

Cases such as Adams v. Adams, [2001] O.J. No. 1575 (C.A.) and Andrews v. Andrews, [1999] O.J. No. 3578, 45 O.R. (3d) 577, 50 R.F.L. (4th) 1 (C.A.) are not relevant to your client’s situation. These are cases where the spousal support recipient is also the custodial parent of several children. In these cases, the court determined that it was not inappropriate for the payor to have less than half of the family’s disposable income. That is a different situation entirely.

 

Maryellen Symons

Barrister & Solicitor