Island Forensics
Forensic Accounting
Principles of entitlement to Spousal Support (1)
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Grounds for Spousal Support
Canadian courts have identified three grounds for entitlement to spousal support:
1 . compensatory,
2. non-compensatory (also referred to as needs-based), and
3. contractual (as in the case of a Separation Agreement).
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The Supreme Court of Canada first laid out the theoretical principles and basis for compensatory spousal support in Moge and later in Bracklow v. Bracklow, [1999].
The underlying goal of compensatory support is the equitable sharing of the economic consequences of a marriage or its breakdown.
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Compensatory support is intended to provide “redress from economic disadvantages arising from the marriage (such as diminished earning capacity and sacrificed career opportunities to take on childcare responsibilities) or the conferral of an economic advantage upon the other spouse (such as contributions to enhanced career development)”.
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Compensatory support, therefore, attempts to equitably share the economic consequences of a couple’s roles and their choices during the marriage.
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Courts have consistently held that support of an indefinite duration is appropriate in cases involving a long marriage and a strong claim to compensatory support, even where the payee has achieved a degree of self-sufficiency.
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As a general rule, a limited term support order should only be made where the court is satisfied that the objectives of the order will be met within the specified time frame.
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The justification for indefinite support on compensatory grounds arises from the fact that a spouse who has taken on a primarily domestic role in a long-term marriage will often experience a permanent and difficult to quantify economic loss, to the benefit of the other spouse: Moge v. Moge, 1992.
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This principle is mirrored in the SSAG, which provide that where entitlement to support has been established, indefinite support should be ordered in cases involving parties who were married for more than 20 years or who satisfy the “rule of 65”.
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The Rule of 65
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The “Rule of 65” is a factor in determining the length of spousal support. The rule states that if the years of marriage plus the age of the support recipient at the time of separation equals or exceeds 65, then spousal support may be paid indefinitely.
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There is an exception to the rule in the case of short marriages. The Spousal Support Guidelines consider a short marriage to be one less than 5 years.
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The exception is: if the marriage is a short marriage, even if the rule of 65 is met, the rule does not apply and spousal support would not be indefinite.
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Standards of Living
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As marriage should be regarded as a joint endeavour, the longer the relationship endures, the closer the economic union, the greater will be the presumptive claim to equal standards of living upon its dissolution.
For long marriages, the result will be a rough equivalency in standards of living.
The standards of living equivalency has been used by courts in British Columbia as a method for assessing compensatory claims in long marriages.
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Non-compensatory support is intended to address the gap between the needs and means of spouses resulting from the breakdown of a marriage:
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The degree to which non-compensatory principles apply depends on the nature and duration of the martial relationship and the standard of living.
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“Contractual” support obligations may also arise out of an agreement between parties. A Separation Agreement is relevant because it contains statements of the parties’ intentions and may govern the division of property and spousal support following the parties’ separation and prior to a review.
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Divorce Act - Subsections 15.1 and 15.2
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Courts and arbitrators are required to determine an appropriate quantum of spousal support with regard to ss. 15.2(4) and (6) of the Divorce Act, which provide that:
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In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including
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(a) the length of time the spouses cohabited;
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(b) the functions performed by each spouse during cohabitation; and
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(c) any order, agreement or arrangement relating to support of either spouse.
An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should;
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(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
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(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
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(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
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(d) in so far as practicable, promote the economic self- sufficiency of each spouse within a reasonable period of time.
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ss. 15.2(4) and (6) of the Divorce Act “take into account factors that would support both compensatory and non-compensatory support”, but even where there is more than one basis for a spouse’s entitlement to support, the resulting award is “single and indivisible”.
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* To achieve a fair and equitable distribution of resources, each of the objectives in s. 15.2(6) must be examined in light of the means, needs and other circumstances of each spouse, including the factors set out in s. 15.2(4).
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* The manner in which family property has been divided is also relevant, because the division of property affects the relative condition, means and needs of the parties.
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Discretion to Impute Income
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s. 19 provides the court with a discretion to impute income to a spouse as it considers appropriate, without the restrictions set out in ss. 16, 17 and 18.
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In every case, regardless of the method used to assess income, support must not be determined on the basis of speculative future events, which include uncertain changes in a party’s future income.
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Variations of Spousal Support
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In every case, a spousal support order remains subject to variation.
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SSAG Ceiling and Floor
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SSAG describes an income “ceiling” and “floor”, which encompass “the typical case, for which guidelines formulas can generate acceptable results.”
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The ceiling in the SSAG is not an “absolute” cap.
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Above the “ceiling of $350,000, the formulas should no longer be automatically applied to divide income beyond that threshold”.
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“Where the payor's income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support, with outcomes falling in the low-to-mid range for amount.”
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The SSAG remain relevant and may be used to determine support even where a payor’s income is in excess of the $350,000 ceiling.
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An award that is substantially above or below the range provided for in the SSAG, in the absence of exceptional circumstances to explain the anomaly, may attract appellate intervention.
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