Separation agreements serve a very important role in the separation process. They are contracts that address important questions, such as how assets will be divided, whether equalization payments will be necessary, what happens to the matrimonial home, and more. But what happens after a separation agreement is signed, the couple divorces, and sometime later one of them is not satisfied with the terms of the agreement? Can they go to court to have the agreement nullified? In some cases, the courts do strike down separation agreements. A recent decision from the Supreme Court of British Columbia looks at some of the reasons why.
The family’s history
The parties were married on July 30, 1990. Their three children were born in 1994, 1996, and 1997. They separated on November 19, 2012. They were a well to do couple, with two successful companies to their name. The husband was the General Manager of one of these companies, and drew an annual salary of $230,000. The wife was a university instructor who earned $130,000 per year.
A separation agreement dated October 1, 2015 resolved issues of custody, access & support for the children, the division of family assets and liabilities, and spousal support. Each of the parties had the advice of independent lawyers as well as a jointly appointed business valuator while the separation agreement was being negotiated.
The separation agreement contained a number of provisions which would later be challenged. The first was around child support, with the parties agreeing to equally split costs related to their children. On the issue of spousal support, the agreement called for the father to pay $2,150 to the mother each month for a fixed term of six years. Finally, the agreement also addressed how they would split up the family business. The mother’s holding company was to be paid $2,000,000 in short order, with another $3,400,000 to be paid annually over six years.
They divorced in early 2016 with the order stating “The balance of the parties’ claims are hereby dismissed as though tried on their own merits without any costs to any party.”
A change of heart
In the application to change the separation agreement, the wife cited the following reasons as to why the court should vary the spousal support amounts agreed to:
- Although she received independent legal advice, she was vulnerable and continued to rely on what she perceived as (the father)’s superior knowledge of financial matters.
- There has been a material change in circumstances because: (1) she did not understand or anticipate that the Separation Agreement would produce a situation in which “the parties’ incomes differed as markedly as they do now”; and (2) neither she nor (the father) could have anticipated the federal government’s restrictions on “income sprinkling”, which limits her ability to draw dividends personally from (her holding company).
- The terms of the Separation Agreement are not substantially compliant with the objectives set out in s. 15.2 of the Divorce Act and s. 161 of the Family Law Act, although this only became evident to her in retrospect.
Essentially, her arguments were that she relied on her husband’s knowledge of financial affairs; that the difference in her and the father’s income differences over the years amounted to a material change in circumstances; that the Canada Revenue Agency restricted her ability to distribute holding company dividend payments to her children; and that the agreement does not comply with the objectives of the Divorce Act.
The court’s analysis
The court did not agree that the mother’s positions warranted a change to the separation agreement. While the father had a higher income than the mother, she had earned $197,000 and $225,000 annually over 2016 and 2017. This is in addition to money paid to her holding company. The court also pointed out that while the husband receives considerable bonuses, that money essentially goes to the wife. The court also found that the quantum of support payable under the agreement was not out of line with other high asset divorces. The court wrote,
“ In conclusion, (the mother) has not persuaded me that the circumstances in which the Separation Agreement was entered into were such that it should be set aside with respect to spousal support. Nor has she demonstrated that the Separation Agreement fails to reflect the personal parties’ original intentions or the objectives of the Divorce Act and the Family Law Act. Further, I am satisfied the children’s needs have been met under the present arrangement and that those needs will be met under that arrangement in the future. I find that, if the Separation Agreement is upheld, the reasonable needs of the children will be met.”
Borden Family Law’s experienced and compassionate team of family lawyers is ready to help you with your spousal support needs. If you are receiving spousal support and want to alter the support order, a lawyer can help you ensure that you have the best chance of success. Making changes to spousal support can be stressful because some people rely heavily on the support they receive. Our focused area of practice means our clients benefit from our in-depth knowledge of the ins and outs of the family law system, the technical legal rules governing family law matters, and trial strategy. To see how we can help you resolve your issue, call us at 905.576.6090 or contact us below. Please remember to ask us about our flat fees.