IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Robinson v. Robinson, |
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2011 BCSC 1489 |
Date: 20111103
Docket: E072006
Registry: Vancouver
Between:
Margaret Avis Robinson
Claimant
And
David Rex Robinson
Respondent
Before: The Honourable Madam Justice Watchuk
Reasons for Judgment
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Counsel for the Claimant: |
S. Sparks |
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Counsel for the Respondent: |
J.C. Fiddes |
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Place and Date of Trial: |
Vancouver, B.C. December 6-7, 2010; and April 7, 2011 |
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Place and Date of Judgment: |
Vancouver, B.C. November 3, 2011 |
[1] This case arises after the breakdown of a long marriage between the parties. The remaining issue to be resolved is spousal support. There has been an agreement with regard to the division and reapportionment of property and there is no issue of child support since the children are in their 20s and self-sufficient.
[2] It is agreed that Mrs. Robinson is entitled to spousal support but the parties differ on the form and quantum of the support to be paid.
[3] This action was commenced by the wife on June 13, 2007. A s. 57 declaration was made at a Judicial Case Conference on November 6, 2007. The parties have sworn and delivered various Form 89 Financial Statements since the proceedings commenced and on December 11, 2009 a s. 67 order was made against the husband. There have not been any court orders or written agreements regarding spousal support.
[4] Although the order of divorce has been granted, I will refer to the parties as the husband and the wife for ease of reference.
[5] As the wife applies for spousal support to be paid by a lump sum or by a mix of lump sum and periodic payments, it must be determined if this is an appropriate case for that form of payment of spousal support, or whether payments should be made on a monthly basis as is sought by the husband.
[6] As the husband resides and is employed in Germany, his income must be determined in light of the particular location and circumstances of his employment. The tax consequences of payment of spousal support by a payor who is resident in Germany must also be considered.
[7] The issue of imputing income to the wife arises from the submissions of the husband.
[8] Finally, the quantum of spousal support must be determined.
[9] The parties were married on May 27, 1978 and separated on July 31, 2006 after 28 years of marriage. Prior to the separation, they lived separately in the same residence for two years.
[10] The separation date of July 31, 2006 reflects the date that the husband was transferred to Glasgow, Scotland by his employer.
[11] As at the date of this decision, the husband is 55 and the wife is 54 years old.
[12] They have two adult children: Paul, now 29; and Dawn, now 24 years old. Both are independent and neither child lives with the wife in West Vancouver.
[13] In 1978, at the time of marriage, the wife was employed as a secretary and the husband was employed by a shipping company.
[14] The husband had started his career at the age of 16 in 1972 as a deck cadet and advanced in his career until he was made a fleet superintendent in 1993.
[15] From 1978 until 1987, the parties lived in the north of England.
[16] The wife became pregnant in 1981 and returned to shore to live, while the husband remained at sea. The parties’ first child was born in 1982. After a short shore leave, the husband returned to sea.
[17] The parties’ second child was born in 1987. Again, the husband visited for a short time before returning to sea.
[18] In 1987, the husband was transferred to a shore job in the south of England, and the family moved there in April, 1988.
[19] In 1993, he obtained employment in Saudi Arabia and was there for 18 months with three visits home.
[20] In 1995, he obtained a new job in Dubai where he moved and remained until 1999. The wife and their daughter joined him there in 1995, and their son joined them in 1996.
[21] From 1999 to 2001, the husband worked for a Kuwaiti company. He lived in Kuwait, and the wife and the children followed him there. The move was difficult for their daughter.
[22] In 2001, the defendant accepted a job with Teekay Shipping Ltd. (“Teekay”) which required he be stationed in Vancouver. The wife was not happy with the move as she wanted to move back to England.
[23] Upon their move to Canada, the parties purchased a house in West Vancouver. At the time of that move in 2001, their relationship was deteriorating rapidly. The tensions in the household were very distressing to the parties. Their daughter was particularly affected by the move and the relationship difficulties.
[24] There were a number of incidents referred to by both parties where the tensions became readily apparent.
[25] In the later years of the marriage, the husband continued to be away from home for extended periods of time, working away from home or travelling on business. From 2004, although he lived in the home when he was in Vancouver, he stayed in separate quarters.
[26] The parties separated on July 31, 2006. The husband had been transferred by Teekay to Glasgow, Scotland, and he moved there in August, 2006. He remained in Glasgow until May of 2009, when his employment with Teekay was terminated. Soon afterward, he obtained employment with Northern Marine and was stationed in Hamburg, Germany.
[27] Throughout the marriage, until the husband’s transfer to Glasgow, the wife was the matrimonial book-keeper. The husband’s income was deposited into the parties’ joint account and the wife administered the funds.
[28] The husband has paid support to the wife since the parties’ separation in 2006, without the benefit of a written agreement or court order.
[29] Initially after the separation, the husband provided the wife with $6,000 per month, from which she supported herself and the children and maintained the matrimonial home in West Vancouver. In January, 2010, he reduced the payment to $4,000 per month due to his financial circumstances.
[30] The wife continued to work for the first three years after the marriage as a secretary. In 1980, the parties agreed that the wife would give up her job so that she could go to sea with the husband.
[31] When the parties later lived in England and the Middle East the wife took some employment at the schools of the children. These part-time positions in the children’s schools were the only work outside the home during or after the marriage. From 1991 to 1995, she earned $150 per month; from 1996 to 1999, she earned $250 per month; and from 1999 to 2001, $400 per month was earned.
[32] The husband began working for BP Shipping at the age of 16 in 1972 as an officer cadet. The husband left BP in 1993, as a result of the changing operations of BP. He then worked in Saudi Arabia, Dubai, and Kuwait for Middle East-based shipping companies.
[33] During the husband’s employment in the Middle East, he applied for a position with Teekay in Vancouver. He was not successful on his first application, but in 2001 was offered a superior job by Teekay in Vancouver. The earnings of the husband dramatically increased as a result of his employment with Teekay.
[34] All of the husband’s changes in employment, except for his position with Teekay, arose from necessity, as a result of changing circumstances.
[35] The husband was required to move to Glasgow in July 2006 because of deteriorating business conditions in the shipping industry. By the spring of 2009, it was clear that the husband’s position with Teekay would end.
[36] Given the age of the husband and his health history, the husband took employment with Northern Marine Management in Hamburg, Germany as soon as he was able, even though he had been provided with a 15-month termination settlement from Teekay.
[37] The termination benefit received by the husband in 2009, although included in his 2009 income, represents 15 months of future employment.
[38] When the husband was transferred to Glasgow in 2006 his one-bedroom apartment was paid for by the company. He took a relatively small amount of funds from the joint account initially to cover day to day expenditures and, when his employment became permanent, to cover a car purchase and rent for better accommodation.
[39] The husband continues to work for Northern Marine in Hamburg, Germany.
[40] The husband has established a new relationship, which commenced in 2007. He now lives in Hamburg, Germany with his new partner who does not work outside the home. He has plans to marry his partner.
[41] He has purchased a residence in Hamburg. It was characterized as a family asset when the property was divided.
[42] The husband suffered a series of heart attacks which resulted in quadruple bypass surgery in 1996.
[43] Shortly after the husband’s arrival in Glasgow in 2006 he suffered a stroke and was hospitalized.
[44] He had another heart attack which required surgery in October 2010.
[45] The husband continues to take medication.
[46] The wife continues to reside in the family home in West Vancouver, B.C. Neither of the two children lives with her.
[47] The wife was very distressed by the separation. She has been treated for anxiety and depression, attended a psychologist for several years, and required various anti-depressant and anti-anxiety medications. She is gradually reducing her use of prescription medications. The medication now taken for depression assists but has the effect of making her drowsy much of the time.
[48] In addition, the wife has a history of skin cancer. She was first diagnosed in 2003 and has received over 100 various treatments since that time. The treatments are painful and often exhausting, and leave visible lesions that take months to heal. The most recent lesion occurred in May, 2010.
[49] Although the husband submits that there is no independent medical evidence regarding the health of the wife, I accept her affidavit evidence as accurate in this regard.
[50] Since the date of the separation in 2006, the husband has paid spousal support to the wife although there is no court order or written agreement. The spousal support has therefore not been taxable in the hands of the wife. The amount of $6,000 per month was paid until January 2010, when the husband reduced the amount to $4,000 per month as a result of his financial circumstances.
[51] The husband has never received a tax benefit for the support paid to the wife. Since he commenced work in Germany, he is not entitled to claim support payments made to the wife for tax purposes except to a limited extent.
[52] Although approximately two payments have been late, the husband has made payments every month since separation.
[53] The parties have agreed on the division of assets. Pursuant to that agreement the wife received assets valued at $1,385,255, as well as retaining her Bank of Montreal account, which had a balance of $141,000, for a total of $1,526,255. The husband received assets valued at $1,289,119. The agreement resulted in a reapportionment in favour of the wife of 52% of the family assets. Although the reapportionment left the husband with 48% of the family assets, that resulted in his having $96,136 less than the wife. Taking into account her personal funds, she had $237,136 more than the husband in assets after the division.
[54] Under the agreement, the wife kept the family home in West Vancouver, which was valued for these purposes at $1,090,000. The husband kept the condominium in Hamburg, Germany, valued at $497,000, and the New Westminster condominium registered in the name of his partner which was valued at $100,800.
[55] The husband retained shares in BP and Teekay, and Teekay stock options, with a total value of $318,452. His pensions from BP were split with each party receiving a value of $180,040. The Teekay RSU payment of approximately $30,000 was also divided equally.
[56] Each party filed Form 89 financial statements. The financial statement of the wife shows income in 2009 (the most recent taxation year at the time the hearing commenced) of $5,200 from investments and monthly expenses of $10,145.
[57] During the course of his career, the husband has earned substantial income. Since 2004, his annual income has been as follows:
· 2004: $504,691
· 2005: $769,525
· 2006: $490,411
· 2007: $709,609
· 2008: $436,083
· 2009: $616,828
His 2009 income includes $252,639.13 received from Teekay on the termination of his employment.
[58] As a result of his change of employment, the past years’ income are not a good predictor of income for future years.
[59] The husband is now paid €135,000 gross per annum. He has the use of a company-owned automobile as a benefit. He also receives limited medical and dental benefits, but has no company pension plan.
[60] Upon the termination of his employment with Teekay, the husband was able to negotiate, at the wife’s request, an extended period of extended medical coverage.
[61] The husband provided funds necessary to complete the purchase in 2008 of a condominium in New Westminster owned by his current partner. The husband accepts that $75,000 of family funds were used as partial payment.
[62] The wife has taken $28,000 of a jointly held term deposit to her own account since the separation and also a $41,050 income tax rebate payable to the husband.
[63] The wife has present debts of $32,000 which arise from her living expenses. The present debts of the husband total $55,000.
[64] At the request of the Court the hearing was adjourned so that further evidence could be obtained regarding the tax consequences in Germany of payments of spousal support by the husband to the wife.
[65] The evidence obtained from a tax advisor in Germany states that a maximum amount of €13,805 per year can be deducted by the husband as extra expenses, which reduces the taxable income of the payor. There is no provision for further deductions if the payment exceeds €13,805 in one year, and any amount exceeding that amount cannot be used as a tax benefit in succeeding years. Spousal support qualifies for the deduction of extra expenses in the €13,805 amount.
[66] Similarly, as in Canada, the individual progressive tax rate is applied to the deduction. The tax advisor assumed a tax rate for the husband of 30%, which would result in the potential benefit of 30% of €13,805, or €4,141. The tax rate is subject to change each taxation year.
[67] With regard to the exchange rate to be applied in converting Euros to Canadian dollars, counsel agreed that the approach taken in Ward v. Ward, 2001 BCSC 847, was correct.
[68] In K.V.D.P. v. T.E., 2004 BCSC 537, Mr. Justice Warren applied the approach he had stipulated in Ward, and stated in para. 34 that “the rate of exchange of foreign currency should be calculated by averaging the Bank of Canada rate over the 12 months preceding the hearing date.”
[69] The average exchange rate in 2010 for Euros to Canadian dollars was 1.3661 according to the Bank of Canada. Since the hearing commenced in December 2010, I accept the average rate of 1.3661 for 2010 as the appropriate exchange rate.
[70] At the date of the continuation of the hearing, it was accepted that the present gross income earned by the husband in Hamburg Germany is €135,000 per year, or €11,250 monthly. In Canadian dollars at the 1.3661 exchange rate, his income is $184,424 annually, or $15,369 per month before deductions.
[71] The parties differ in their calculations of the husband’s income after deductions. The husband submits that his net disposable income is €74,454, or CAD $101,712 at this conversion rate, or $8,476 per month. On behalf of the wife it is submitted that the husband’s net income without income splitting, prior to his anticipated remarriage and with a correction for an arithmetic error, is €90,847 after taking into account the maximum German tax deduction for spousal support, or €77,042 without that deduction.
[72] The income tax calculations submitted by the wife are preferable, and I agree with the submission that the total income tax payable by the husband at the dates of this hearing, which is prior to any remarriage, is €44,713. I accept the husband’s calculations for Solidarity Tax, €2,796, and for the other deductions, as shown on the pay slip of €11,597. The husband’s net income is therefore €75,894, or $103,679 per annum which is $8,640 monthly.
[73] The wife’s claim for spousal support is based on both the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), and the Family Relations Act, R.S.B.C. 1996, c. 128.
[74] The husband takes no issue with her submission that her entitlement is on both compensatory and non-compensatory bases. The issues raised by the husband with regard to needs and means considerations of non-compensatory support are discussed below with regard to quantum.
[75] The law with regard to spousal support pursuant to the Divorce Act is set out in Chutter v. Chutter, 2008 BCCA 507 at paras. 45-55:
[45] Section 15.2 of the Divorce Act is the main provision governing entitlement to spousal support. Subsection 15.2(6) provides that a spousal support order should meet the following objectives:
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(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;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[46] In order to achieve a fair and equitable distribution of resources, all four of these objectives should be examined: Moge v. Moge, [1992] 3 S.C.R. 813 at 850-853, 43 R.F.L. (3d) 345. Having regard to these policy objectives, courts must consider the condition, means, needs and other circumstances of each spouse, including the factors set out in s. 15.2(4):
(a) The length of time the spouses cohabited;
(b) The functions performed by each spouse during cohabitation; and
(c) Any order, agreement or arrangement relating to support of either spouse.
[47] Based on the statutory provisions and the case authorities, the Supreme Court of Canada has identified three grounds for entitlement to spousal support: (1) compensatory support, which primarily relates to the first two objectives of the Divorce Act; (2) non-compensatory support, which primarily relates to the third and fourth objectives; and (3) contractual support (Bracklow v. Bracklow, [1999] 1 S.C.R. 420 at paras. 15, 41-42, 44 R.F.L. (4th) 1).
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(ii) Compensatory support
[50] Compensatory support is intended to provide redress to the recipient spouse for economic disadvantage arising from the marriage or the conferral of an economic advantage upon the other spouse. The compensatory support principles are rooted in the “independent” model of marriage, in which each spouse is seen to retain economic autonomy in the union, and is entitled to receive compensation for losses caused by the marriage or breakup of the marriage which would not have been suffered otherwise (Bracklow, at paras. 24, 41). The compensatory basis for relief recognizes that sacrifices made by a recipient spouse in assuming primary childcare and household responsibilities often result in a lower earning potential and fewer future prospects of financial success (Moge, at 861-863; Bracklow, at para. 39). In Moge, the Supreme Court of Canada observed, at 867-868:
The most significant economic consequence of marriage or marriage breakdown, however, usually arises from the birth of children. This generally requires that the wife cut back on her paid labour force participation in order to care for the children, an arrangement which jeopardizes her ability to ensure her own income security and independent economic well‑being. In such situations, spousal support may be a way to compensate such economic disadvantage.
[51] In addition to acknowledging economic disadvantages suffered by a spouse as a consequence of the marriage or its breakdown, compensatory spousal support may also address economic advantages enjoyed by the other partner as a result of the recipient spouse’s efforts. As noted in Moge at 864, the doctrine of equitable sharing of the economic consequences of marriage and marriage breakdown underlying compensatory support “seeks to recognize and account for both the economic disadvantages incurred by the spouse who makes such sacrifices and the economic advantages conferred upon the other spouse” (emphasis added).
[52] The Court in Moge discussed the relevance of the parties’ standards of living in the context of compensatory support at 870:
Although the doctrine of spousal support which focuses on equitable sharing does not guarantee to either party the standard of living enjoyed during the marriage, this standard is far from irrelevant to support entitlement…. 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.
[Emphasis added, internal citations omitted.]
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(iii) Non-compensatory support
[54] Where compensatory principles do not apply, need alone may be sufficient to ground a claim for spousal support (Bracklow, at para. 43). Non-compensatory support is grounded in the “social obligation model” of marriage, in which marriage is seen as an interdependent union. It embraces the idea that upon dissolution of a marriage, the primary burden of meeting the needs of the disadvantaged spouse falls on his or her former partner, rather than the state (Bracklow, at para. 23). Non-compensatory support aims to narrow the gap between the needs and means of the spouses upon marital breakdown, and as such, it is often referred to as the “means and needs” approach to spousal support.
[55] The concept of “needs” in the context of non-compensatory spousal support goes beyond basic necessities of life and varies according to the circumstances of the parties. As stated by Finch J.A. (as he then was) in Myers v. Myers (1995), 17 R.F.L. (4th) 298, 65 B.C.A.C. 226, at para. 10:
“Need” or “needs” are not absolute quantities. They may vary according to the circumstances of the parties and the family unit as a whole. “Need” does not end when the spouse seeking support achieves a subsistence level of income or any level of income above subsistence. “Needs” is a flexible concept and is one of several considerations which a trial judge must take into account in deciding whether any order for spousal support is warranted.
[76] The wife’s claim is also brought under s. 89 of the Family Relations Act, which states:
Obligation to support spouse
89 (1) A spouse is responsible and liable for the support and maintenance of the other spouse having regard to the following:
(a) the role of each spouse in their family;
(b) an express or implied agreement between the spouses that one has the responsibility to support and maintain the other;
(c) custodial obligations respecting a child;
(d) the ability and capacity of, and the reasonable efforts made by, either or both spouses to support themselves;
(e) economic circumstances.
(2) Except as provided in subsection (1), a spouse or former spouse is required to be self sufficient in relation to the other spouse or former spouse.
[77] Throughout the course of the marriage, the husband’s employment with various shipping companies required him to be away from home for extensive periods of time.
[78] In the early years of the marriage, he was at sea for months at a time, leaving the running of the household and upbringing of the children to the wife. During shore leaves, which were generally for two to two-and-a-half months, he took various college courses in order to advance his career, and although he was at home, the wife continued to manage all aspects of running the household and bringing up the children.
[79] Each party’s role in the context of the marriage continued throughout the marriage; the wife devoted herself to the family, the household and the children, and the husband devoted himself to advancing his career.
[80] For the duration of the marriage, more specifically, the wife was responsible for all aspects of the family’s home life, including the care of the children, the management of all household and financial affairs, and organizing, packing for and managing the family’s many moves from country to country. In addition, she made all arrangements for the children’s schooling in various countries, and was responsible for their health and dental care and extracurricular activities. She has devoted her life and energy to the family, allowing the husband to pursue his career.
[81] The wife is now 54 years of age. She is unable to become and remain economically independent and self-sufficient without ongoing financial assistance from the husband. She seeks an order that the husband pay ongoing spousal support for an indefinite period. However, because of his past behaviour, and in order to terminate all contact with the husband, she seeks an order that the spousal support be paid in a lump sum.
[82] The wife submits that both parties would benefit from a clean break, since they continue to have a difficult, stormy relationship and poor communication, which has not improved after many years. One recent example of this is their exchanges after spousal support was reduced in January 2010.
[83] She cites a number of other incidents of miscommunication and discord between the parties regarding financial matters, including: the withdrawal of funds from the parties’ joint account; the concern over the payment of RSU funds; and the situation regarding the purchase of the New Westminster condominium.
[84] It is the submission of the wife that as the relationship between the parties has been strained since 2001 and became increasingly more difficult until the separation in 2006, and since the communication between the parties remains minimal and difficult, the clean break afforded by a lump sum payment is the appropriate form of spousal support in her circumstances.
[85] The wife deposes that the wait each month to see whether funds will be forthcoming exacerbates her depression, and she believes the stress and anxiety have a negative impact on her skin cancer. A lump sum will alleviate this concern.
[86] It is further submitted that the husband’s inability to fund spousal support payments from income, but his ability to fund a lump sum payment from assets supports her position.
[87] She seeks both compensatory spousal support and non-compensatory spousal support in a lump sum of $450,000. Alternatively, she proposes periodic payments of $1,500 per month and a lump sum of $400,000.
[88] The husband submits that periodic payments of spousal support are appropriate in these circumstances since a lump sum payment is made only in exceptional circumstances.
[89] The husband submits that there is no medical evidence regarding the wife’s health. The husband is aware of no medical condition which would preclude the wife from taking employment, either in the past or currently. She has means, including her ability to earn income. The husband has consistently encouraged the wife to take either course work or find employment, but she has refused to do so.
[90] On the basis of the circumstances of this case and the case law submitted, the husband submits that the wife should use her capital to generate income, as that capital is already available as a result of a reapportionment of the family assets. Means includes the ability to earn an income both personally and from one’s capital.
[91] This is not a case where the husband can make back the capital, since his income is now reduced from previous years’ income. The capital is already available to the wife as a result of the reapportionment. She does not have a one-time need for additional capital.
[92] Enforceability is not an issue in this matter, as the husband has an excellent record of spousal support.
[93] The parties do not agree on the form of payment of spousal support. The wife submits that support should be received as a lump sum, or a combination of lump sum and periodic payments, and the husband’s position is that support should be periodic. The Divorce Act, s. 15.2, permits payment of spousal support in any of those three forms “as the court thinks reasonable for the support of the other spouse.”
[94] Both parties cite a number of authorities. The wife refers to Lodge v. Lodge (1993), 79 B.C.L.R. (2nd) 360 (B.C.C.A.); Toth v. Toth (1995), 13 B.C.L.R. (3d) 1 (B.C.C.A.); Grove v. Grove, [1996] BCJ No. 658 (B.C.S.C.); Wilson v. Wilson (1997), 27 R.F.L. (4th) 131 (B.C.C.A.); De Beeld v. De BeeId, 1999 BCCA 515; Newton v. Newton, 2003 BCSC 333; C. (K.K.) v. C. (A.P.), 2003 BCCA 295; T.D.B. v. L.B., 2004 BCSC 605; and Foster v. Foster, 2007 BCCA 83.
[95] The husband refers to Osborne v. Osborne (1974), 14 R.F.L. 61 (Sask. Q.B.); McAndrew v. McAndrew (1984), 43 R.F.L. (2d) 239 (B.C.S.C.); Fisher v. Fisher (1990), 28 R.F.L. (3d) 325 (Ont. H.C.); Mannarino v. Mannarino (1992), 43 R.F.L. (3d) 309 (O.C.A.); Elliot v. Elliot (1993), 48 R.F.L. (3d) 237, 43 A.C.W.S. (3d) 110 (O.C.A.); Jenkins v. Jenkins (1993), 47 R.F.L. (3d) 219 (B.C.S.C.); Davies v. Davies (1995), 15 R.F.L. (4th) 394 (B.C.S.C.); Wilson v. Wilson (1997), 27 R.F.L. (4th) 131 (B.C.C.A.); Trajan v. Trajan, 1999 BCCA 337; S.B.M. v. N.M., 2003 BCCA 300; Gammon v. Gammon (2008), 60 R.F.L. (6th) 210 (Ont. S.C.); and Pendleton v. Pendleton, 2010 BCSC 1167.
[96] The Ontario Court of Appeal, in Davis v. Crawford, 2011 ONCA 294, sitting as a five judge panel has recently reviewed and discussed in detail the factors that a court should take into account in determining whether or not to order lump sum spousal support:
[51] We reject the appellant’s submission that Mannarino should be treated as restricting a court’s ability to award lump sum spousal support to situations “where there is a real risk that periodic payments would not be made” or to other limited and “very unusual circumstances”. To the extent that Mannarino has been interpreted in that way, in our view, that interpretation is incorrect.
[52] Both the Family Law Act, R.S.O. 1990, c.F.3 and the Divorce Act (1985, c. 3 (2nd Supp.)) contain provisions conferring a broad discretion on judges to make an award of periodic or lump sum spousal support, or to make an award comprising both forms of support.
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[54] Section 15.2(1) of the Divorce Act reads as follows:
15.2 (1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse. [Emphasis added.]
[55] Both Acts include sections addressing the purposes of an order for spousal support and the factors to be taken into account in making such an award: see Appendix ‘A’.
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[57] None of these sections contains restrictions of the type set out in Mannarino.
[58] Had Parliament or the Legislature intended that the discretion to make an award of lump sum spousal support to a married or an unmarried spouse be as highly constrained as the appellant argues is prescribed in Mannarino, those bodies surely would have said so. Moreover, we can find nothing in the legislative history relating to either Act, or to predecessor Acts, suggesting such an intention.
[59] However, the spousal support provisions in both Acts and the jurisprudence interpreting those provisions (including Mannarino and its progeny) do provide considerable guidance concerning the factors that should be considered in determining whether an award of lump sum spousal support is appropriate in any particular case.
[60] It is well accepted – and undisputed – that a lump sum award should not be made in the guise of support for the purpose of redistributing assets: Mannarino; Willemze-Davidson v. Davidson (1997), 98 O.A.C. 335 (C.A.), at para. 32. Moreover, the governing legislation does not recognize redistribution of assets as one of the purposes of a spousal support award.
[61] That said, a lump sum order can be made to “relieve [against] financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home)”: Family Law Act, s. 33(8)(d).
[62] In any event, the purpose of an award must always be distinguished from its effect. Any lump sum award that is made will have the effect of transferring assets from one spouse to the other. The real question in any particular case is the underlying purpose of the order: Willemze-Davidson at para. 32.
[63] Similarly, it is well accepted that an important consideration in determining whether to make a lump sum spousal support award is whether the payor has the ability to make a lump sum payment without undermining the payor’s future self-sufficiency.
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[65] These statutory provisions make it clear that ability to pay is an important consideration in making an award of spousal support, including lump sum spousal support.
[66] Most importantly, a court considering an award of lump sum spousal support must weigh the perceived advantages of making a lump sum award in the particular case against any presenting disadvantages of making such an order.
[67] The advantages of making such an award will be highly variable and case-specific. They can include but are not limited to: terminating ongoing contact or ties between the spouses for any number of reasons (for example: short-term marriage; domestic violence; second marriage with no children, etc.); providing capital to meet an immediate need on the part of a dependant spouse; ensuring adequate support will be paid in circumstances where there is a real risk of non-payment of periodic support, a lack of proper financial disclosure or where the payor has the ability to pay lump sum but not periodic support; and satisfying immediately an award of retroactive spousal support.
[68] Similarly, the disadvantages of such an award can include: the real possibility that the means and needs of the parties will change over time, leading to the need for a variation; the fact that the parties will be effectively deprived of the right to apply for a variation of the lump sum award; and the difficulties inherent in calculating an appropriate award of lump sum spousal support where lump sum support is awarded in place of ongoing indefinite periodic support.
[69] In the end, it is for the presiding judge to consider the factors relevant to making a spousal support award on the facts of the particular case and to exercise his or her discretion in determining whether a lump sum award is appropriate and the appropriate quantum of such an award.
[70] As we have said, we do not endorse the submission that lump sum spousal support awards must be limited to “very unusual circumstances” as a matter of principle. Nonetheless, we agree that most spousal support orders will be in the form of periodic payments. To a large extent, this is for four very practical reasons.
[71] First, in many instances, monies will simply not be available to fund a lump sum support award either to take the place of, or to supplement, an award of periodic support. Instead, support will be paid from one spouse’s income, the only available source for support payments, and it will be paid to finance the ongoing needs of the other spouse, which will generally be of a periodic rather than lump sum character.
[97] Many of the factors listed in Davis are also referred to in the cases submitted by the parties.
[98] On the evidence in this case regarding the history of the difficult relationship between the parties, I accept the wife’s submission that a clean break is desirable. The other factors which I take into consideration are as follows.
[99] In the present case there is some indication of lateness of payments, but not of non-payment. A risk of non-payment of periodic payments is not a major factor. However, the situation is that the husband lives abroad, and has assumed new financial responsibilities involving his new partner.
[100] The fact that the husband lives outside of Canada has two effects: if he does not pay spousal support the wife will have difficulty collecting support from him; and if he paid support periodically it would not be tax deductible except for a limited amount.
[101] The wife is required to include periodic support received from the husband in her income and pay tax on it regardless of the tax treatment of these payments in Germany. A lump sum payment alleviates the problem of the absence of a corresponding tax deduction to the payor of amounts taxable to the wife.
[102] A lump sum is appropriate in circumstances where the payor spouse has insufficient income to pay on an ongoing basis, but has capital assets with which to satisfy an award. In this case, the husband would have difficulty paying monthly support from his income which is $8,640 per month net, but he does have assets.
[103] Although the circumstances here do not include the need to buy a residence, or plans for retraining, lump sum spousal support will assist the wife to be self-sufficient and meet her needs to maintain her standard of living with use of the capital from the lump sum together with the capital achieved in the division and reapportionment of the family assets. She will be more able to establish and maximize an independent income stream.
[104] The husband’s submission that spousal support should be paid from income inherently includes the proposition that the wife should share in the risk of his inability to earn income. He cannot apply to vary a lump sum award after it is paid if there is a change in circumstances. This concern can be met by applying a contingency factor in the lump sum payment.
[105] While an order for both lump sum and periodic payments would assist him by allowing the husband to take advantage of the limited tax deduction available, the advantages of a clean break outweigh the minimal tax benefit of periodic payments in addition to a lump sum.
[106] Although there are “difficulties inherent in calculating an appropriate award of lump sum spousal support” (Davis at para. 68), I am satisfied that on balancing all of the facts of this particular case, it is appropriate that spousal support be payable by a lump sum.
[107] In determining the quantum of spousal support, all factors and objectives in s. 15.2(4) and (6) of the Divorce Act as cited in Chutter above, must be taken into account.
[108] In the particular facts of this case, the matters for consideration in calculating an appropriate lump sum award of spousal support include the fact that the husband’s income is earned in Germany, such that the usual starting point of the deductability of periodic spousal support payments would not be available except to the limited extent of €13,805 per year.
[109] The wife submits that the calculation of lump sum spousal support should be based on the premise that the husband will continue to be employed until he is 65, which is approximately nine and one-half more years from the date of the judgment. The health situation of the husband casts some doubt on that premise. As mentioned above, unlike periodic support there can be no application to vary a lump sum spousal support amount after it has been paid. In determining the appropriate quantum, the significant risk of his inability to work for a further nine and one-half years must be taken into account.
[110] The husband submits that the wife could sell the house, purchase a condominium for less than the sale price of the house, and invest the balance. Although I do not accept the submission that the wife must be required to move, or that calculations should be based on the financial consequences of an imputed move to a less expensive residence, I do take those submissions to raise the issue of whether an income in excess of $5,200 per year should be imputed to the wife. That amount was earned by her in 2009, prior to the division and reapportionment of the family assets. She now has both further financial flexibility and the prospect of the receipt of proceeds from the two BP pensions in the future. Further, and in a somewhat circular manner, once the lump sum is received by the wife, it will be available as an income generating asset as well.
[111] The SSAG must also be considered. They have been accepted by the courts in British Columbia as a useful tool, but as Prowse J.A. observed in McEachern v. McEachern, 2006 BCCA 508 at para. 64, “the Advisory Guidelines are simply guidelines; they are not law. The formulas need not be slavishly adhered to by judges, who must always have regard to the particular facts before them.”
[112] The following provisions in the SSAG are of assistance in utilizing the guidelines in these circumstances:
3.1 Income Sharing
The core concept on which the Spousal Support Advisory Guidelines are built is income sharing. Under the Advisory Guidelines, budgets play a diminished role in determining spousal support outcomes. Instead the Advisory Guidelines look primarily to the incomes of the parties and rely on a mathematical formula to determine the portion of spousal incomes to be shared. Contrary to common perception, income sharing does not mean equal sharing. There are many ways of sharing income; it all depends on the formula that is adopted.
You will see below that other factors are also relevant in determining support outcomes under the Advisory Guidelines, such as the presence of dependent children or the length of the marriage. But the income levels of the parties and, and more specifically the income disparity between them, become the primary determinants of support outcomes. Under the Spousal Support Advisory Guidelines, as under the Child Support Guidelines, the precise determination of income, including the imputing of income, becomes a much more significant issue than it has been in the past.
3.4.1 Using the ranges
The location of a precise amount or duration within those ranges will be driven by the factors detailed in Chapter 9: the strength of any compensatory claim, the recipient’s needs, the age, number, needs and standard of living of any children, the needs and ability to pay of the payor, work incentives for the payor, property division and debts, and self-sufficiency incentives.
…
3.4.2 Restructuring
Although the formulas generate separate figures for amount and duration, the Advisory Guidelines explicitly recognize that these awards can be restructured by trading off amount against duration.
...
Restructuring can be used in three ways:
· to front-end load awards by increasing the amount beyond the formulas’ ranges and shortening duration;
· to extend duration beyond the formulas’ ranges by lowering the monthly amount; and
· to formulate a lump sum payment by combining amount and duration.
3.4.3 Exceptions
The formulas are intended to generate appropriate outcomes in the majority of cases. We recognize, however, that there will be cases where the formula outcomes, even after consideration of restructuring, will not generate results consistent with the support objectives and factors under the Divorce Act. The informal, advisory nature of the Guidelines means that the formula outcomes are never binding and departures are always possible on a case-by-case basis where the formula outcomes are found to be inappropriate. ... The exceptions create room both for the operation of competing theories of spousal support and for consideration of the particular factual circumstances in individual cases where these may not be sufficiently accommodated by restructuring.
...
7.1 The Basic Structure of the without child support formula
The without child support formula is set out in the box below in its most basic form. The formula is in fact two formulas – one for amount and one for duration. The formula generates ranges for amount and duration, rather than fixed numbers.
There are two crucial factors under the formula:
· the gross income difference between the spouses, and
· the length of the marriage, or more precisely, as will be explained below, the length of the period of cohabitation.
Both amount and duration increase incrementally with the length of marriage.
The Without Child Support Formula
Amount ranges from 1.5 to 2 percent of the difference between the spouses’ gross incomes (the gross income difference) for each year of marriage (or more precisely, year of cohabitation), up to a maximum of 50 percent. The range remains fixed for marriages 25 years or longer, at 37.5 to 50 percent of income difference. (The upper end of this maximum range is capped at the amount that would result in equalization of the spouses’ net incomes – the net income cap).
...
7.5.2 The meaning of “indefinite” support
In using the term “indefinite” we simply adopted a word that had been used for years in spousal support law to mean “an order for support without a time limit at the time it is made”. Under the Advisory Guidelines an order for indefinite support does not necessarily mean permanent support, and it certainly does not mean that support will continue indefinitely at the level set by the formula.
...
10.1 The General Concept: Trading Off Amount Against Duration
Restructuring is thus an important aspect of a SSAG analysis after the formulas have been applied to generate ranges for amount and duration.
10.2 How Does Restructuring Work? Some Examples
If periodic payments are converted into a lump sum, the different tax consequences must be taken into account in arriving at a comparable lump sum.
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12.8 Non-Taxable Payor Income
...
What warrants this non-taxable exception is when the non-deductibility of the spousal support poses a problem for the payor’s ability to pay, as the non-taxable payor is unable to pay the gross amount of spousal support that would be required of a payor with the benefits of deductibility.
[Emphasis in original.]
[113] In order to arrive at an appropriate quantum of lump sum spousal support the principles and applications in the following cases are also of assistance:
· As stated in Hartshorne v. Hartshorne, 2010 BCCA 327 at para. 55:
... The authors of SSAG recommend that “unusual” situations are best left “to the discretionary, case-by-case determination under the evolving framework of current law.” They have also stated that consideration of a payor’s post-separation income for the purposes of spousal support is a “complex, fact-based decision”. See ch. 14 SSAG.
· As stated in Smith v. Smith, 2006 BCSC 1655 at paras. 39 and 40:
The need for and amount of spousal support must be determined by reference to the requirements of the Divorce Act and the Family Relations Act after taking into account the effect of reapportionment, and not by any mathematical calculation. ...
The reasonableness of the lump sum support award may also be assessed in the following context. The present value of a periodic support stream in favour of Mr. Smith until Ms. Huntley attains age 65 would approximate $105,000, $123,000 and $140,000 at the low, mid and high points, respectively, of the range suggested by the draft guidelines. Allowing for income tax at an average rate of 30%, the after-tax present value amounts would approximate $70,000, $82,000 and $93,000, respectively. The reapportionment I have ordered, based as it was on markedly different income-earning capacity, accounts for approximately $50,000 of the present value of the future support stream. The reapportionment award and the additional lump support award have the effect of providing a result that would be consistent with the guideline recommendations had no reapportionment been made.
· In Wilson v. Wilson, 27 R.F.L. (4th) 131, a 1997 decision of the B.C. Court of Appeal, the lump sum award was in an amount “equal to the present value” of the monthly payments.
· In the case of Raymond v. Raymond, 64 R.F.L. (6th) 160 at para. 27, decided by the Ontario Superior Court of Justice in 2008, the calculation of lump sum spousal support took into account the net amount of the mid-range figure from the SSAG, less 6% to represent the present value of the lump sum payment, and less 50% to take into account future contingencies.
· In Durakovic v. Durakovic, 169 A.C.W.S. (3d) 614, also a 2008 decision of the Ontario Superior Court of Justice, the lump sum entitlement was calculated by using a monthly figure extrapolated for the number of months remaining in entitlement, less 30% for income tax payable, less 3% for present value, less 25% for negative contingencies which was noted to be “lower than other cases as there are only two years left to run on the calculation of the lump sum”: para. 107.
· In Hartshorne v. Hartshorne, 2009 BCSC 698, Mr. Justice Leask sets out in the technical appendix the method by which a lump sum of spousal support was calculated in a manner that referred to but did not rely upon the SSAG.
[114] Accordingly, I propose to proceed in calculating the lump sum with reference to the SSAG formulas including the computer models, the principles upon which the SSAG are based, and a calculation stemming from an appropriate level of monthly spousal support with deductions for income tax not payable, present value, and contingencies.
[115] In determining the range of spousal support in this case, I find that the compensatory claim is a strong one based on 28 years of marriage, support of a family where the husband was often away from home, and the family moves of long distances. It was not possible for the wife to be employed during those years.
[116] The needs of the wife must be assessed in terms of the family’s standard of living during the marriage. Her ability to remain in the family home is relevant to this consideration.
[117] With regard to her ability to become self-sufficient, given her health situation and the absence of any evidence of intended employment or retraining, her self-sufficiency is likely to arise from the investment of capital. It is, however, possible that with her relatively young age and if the finality of the matrimonial litigation results, as she expects, in abatement of her health concerns, that opportunities for earning income may present themselves in the future. The need is not as great and the non-compensatory claim is, therefore, not as strong as a result of her significant assets after the division of family property together with her personal assets.
[118] The needs and ability to pay of the payor must also be considered. The husband now earns less than in the past. For the purposes of calculating spousal support, I am satisfied that using his present income will give a fair result.
[119] The SSAG calculations submitted by the husband do not provide a range due to insufficient information inputted.
[120] The SSAG calculations submitted on behalf of the wife use the following amounts: an income of either $203,000 or $137,767 for the husband, arriving at a range for monthly support of $6,181 to $8,050, and a range of lump sum after tax cost to the husband of $380,050 to $544,152. It is agreed that the duration of support is “indefinite” (SSAG 7.5.2). For purposes of calculation in this particular case, the time until the husband reaches age 65 is used.
[121] The calculations provided by the wife are based on some numbers which are problematic. The husband’s age is now 55, not 54. The wife was 49 at separation, not 50. There are now 9.5 years remaining until the husband’s 65th birthday. The discount rate used, 1.6%, is low. It is not immediately apparent what tax rate and contingency rate was applied in arriving at the lump sum amounts. Most importantly in these circumstances, the lump sum payment should be based on tax neutrality.
[122] Before continuing with an analysis of the SSAG application, I would impute an income from investments to the wife of $20,000 per year. This takes into account that only some of the assets she received on the division of assets are income producing. That her income will also increase at an unknown date when she begins to receive the pensions is not taken into account at this time.
[123] An appropriate amount of monthly support is a starting point in the calculation of the lump sum.
[124] With income of the wife of $20,000, support payable for 9 and one-half years, and the husbands’ accurate income and age of 55, the SSAG range of monthly payments provided by the computer application is $5,156, low, $6,016, mid, and $6,875, high.
[125] The Without Child Support Formula (the “Formula”) set out in s. 7.1 of the SSAG provides for a range from 1.5% to 2% of the difference between the spouses’ gross incomes for each year of marriage up to a maximum of 50%. Taking 1.5% to 2% of the income difference results in a range of $5,755 to $7,633.
[126] However, the maximum under the Formula is 50% of the income difference, which is $6,851.
[127] Taking into account the Formula and the maximum, and the computer application of the Formula, the range is $5,156 to $6,851 per month. Taking into account the totality of the circumstances, I would determine monthly spousal support at the mid-point of this range or $6,000 per month as a starting point for calculation of the lump sum.
[128] The lump sum calculations provided by the computer application of the Formula do not provide an appropriate result in this case where there is a restructuring of support (s. 3.4.2 of the SSAG) to arrive at a lump sum. This is an example of an exception (s. 3.4.3 of the SSAG) where the “formula outcomes, even after consideration of restructuring, will not generate results consistent with the support objectives and factors under the Divorce Act.” As was the case in Hartshorne, the computer applications provide a reference point but an award that meets the requirements of the Divorce Act and Family Relations Act requires another method of calculation.
[129] I prefer the method illustrated by the cases of Wilson, Durakovic, Raymond, and Smith, which take into account in various manners the factors of relative tax situations, an appropriate discount rate for the present value, and a contingency rate where necessary. In this case where the health of the payor spouse is subject to a heart condition which has required quadruple bypass surgery and continues to require medication, a significant contingency adjustment is required as there is a real possibility that the husband will not be able to continue to work until his planned retirement date.
[130] There are 9 and one-half years or 114 months remaining for the payment of spousal support from December 2011, for a total of $684,000. From this gross amount, I would deduct tax which would be payable by the wife at an assumed rate of 35%. The discount rate for present value is 7%. To that amount I apply a contingency discount of 20%. The net amount is $330,782.
[131] I find that the wife is entitled to lump sum spousal support in the amount of $330,000.
[132] The sum is payable within 45 days of the date of this decision, or arrangements for payment are to be made within that time period. For clarity, the lump sum amount includes support otherwise payable in December, 2011.
[133] The major issue in this case was whether spousal support would be paid periodically or by lump sum. The wife has succeeded on that issue, albeit for a lesser sum than she sought. Unless there are matters of which I am not aware, my tentative view is that the wife is entitled to costs. If either party seeks a different cost result they should make submissions in writing within 21 days of the release of these Reasons. Any responsive submissions should be filed within 14 days thereafter.
“Watchuk, J.”