09 June 2017

Can the date of separation be used for valuation of family property in British Columbia?


The humorous subtitle to this article is "Why the heck does he/she get to benefit from the mortgage payments I made on the house since he/she left?" 


Most often in separation and divorce, couples manage their finances in an informal way for months and sometimes even years before they venture in to see a lawyer and have a formal separation agreement drawn up.  Many times, one party has moved out and the other party has stayed in the family residence, one party pays the mortgage and the other party pays their rent and their own bills and so on.  It is not surprising, therefore, that the person who has been in the family home thinks they alone should be able to benefit from their payments, so when they meet with their lawyer they often expect that the value of the family home will be the date that their spouse moved out.  This is not so, says the Family Law Act
Section 87 of the FLA requires, unless an agreement or order provides otherwise, that the value of family property be based on fair market value at the date of trial: 

Valuing family property and family debt:
87        Unless an agreement or order provides otherwise and except in relation to a division of family property under Part 6,

                        (a) the value of family property must be based on its fair market value, and
                   
    (b) the value of family property and family debt must be determined as of the date
                         
(i) an agreement dividing the family property and family debt is made, or
                         
(ii) of the hearing before the court respecting the division of property and family debt.
However, the court does have discretion to order an alternative date for valuation in order to avoid significant unfairness relating to a spouse’s post-separation contribution.   In the case of Bamford v. Mulyati, 2017 BCSC 945 CLICK HERE the 83 year old Claimant applied to divorce his 51 year old wife after she fled the country with his first (deceased) wife’s jewelry in 2013.  The family property consisted of the increase in value of the Claimant’s pre-marital investments and his claim to the Court was for reapportionment in his favour based on significant unfairness due to post separation contributions to those assets. 

The Bamford case referenced the case of Slavenova v. Ranguelov, 2015 BCSC 79 HERE to support the claim for valuation at the date of separation.  From paragraph 53:  “the FLA provides two alternate routes to address potential unfairness that may arise from a party’s post-separation contributions, namely s. 87 and s. 95.  Under s. 95 a court can order reapportionment to address any “significant unfairness” that may arise from an equal division of property and debt in light of the spouse’s post-separation contribution.  Alternatively, under s. 87 the Court may depart from the date of hearing or agreement as the valuation date.”

Madam Justice Morellato in the Bamford case agreed that the date of separation should be the date of valuation, as she found that a significant unfairness had arisen because Ms. Mulyati had not made any contributions towards the family property since her ‘sudden departure’ in 2013.  A review of the cases makes it clear that it does take a set of very unique facts for the Court to Order valuation at the date of separation. In the case of K.A.L. v. K.J.L. 2017 BCSC 651 HERE the Claimant had remained living in the family residence and was responsible for making mortgage payments.  The family residence had increased in value since separation, and the Claimant said it would be unfair for her to share that with the Respondent.  The Court looked at the financial arrangement, which as with most separated couples, involves a complicated web of payments by each party to support the family in the immediate months and years post separation, stating at paragraph 286:  “In my view, there should be compelling evidence to depart from the standard valuation date as the date of trial thereby disentitling one property owner the benefit of the increase in value of property which is brought about by market forces and not as a result of direct effort of the other party.”  And at Para 289:  “  I am persuaded by these comments to conclude that a change in valuation date from the norm should certainly be the exception and should only be ordered if it would be significantly unfair to do otherwise. 
See also Jaszczewska v. Kostanski, 2016 BCCA 286 (CanLII), HERE at para. 39, the British Columbia Court of Appeal discusses the general rule that parties should share in post‑separation increase in value of property independent of the parties’ respective contributions to post‑separation increase in value.
[39]      Also, because family property is generally valued on the date of the hearing, the parties will presumptively share in any post-separation increases in the value of family property. Once again, because of s. 81, this entitlement exists independent of the parties’ respective contribution to the post-separation increase in value.

 

05 June 2017

Is Spousal Support Paid to a Canadian Recipient by a Payor in the United States Taxable in the Hands of the Recipient?

Karen F. Redmond
Family Law Lawyer and Mediator


Recently in Court a Judge asked a colleague and I this question and although we were all fairly sure we knew the answer, none of us knew with certainty, so here is the answer:   Yes, spousal support paid to a Canadian recipient by a payor in the United States is taxable in the hands of the recipient and deductible by the payor in certain circumstances. 

A US citizen (or a US resident who is not a US citizen) can deduct spousal support payment paid to a Canadian resident.  Here is Article XVIII paragraph 6 of the Canada-US tax treaty (http://www.fin.gc.ca/treaties-conventions/unitedstates-etatunis-eng.asp) :


 “ 6.  Alimony and other similar amounts (including child support payments) arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable  as follows:


                          (a) such amounts shall be taxable only in that other State;


                           (b) notwithstanding the provisions of subparagraph (a), the amount that


would be excluded from taxable income in the first-mentioned State if the recipient were a resident thereof shall be exempt from taxation in that other State.”


Therefore, yes, the spousal support income is taxable in Canada to the recipient who is a Canadian resident and the spousal support is deductible by the payor in his/her US tax return.  In addition, the spousal support income is not taxable in the US for the recipient.


Having said that, please note the following, sent to me by a tax colleague:


1.       In order for the US citizen to deduct the spousal support in his/her US tax return:


  1. The recipient must have a US tax number (US Social Security Number or Individual Taxpayer Identification Number).  This may imply that the recipient must be willing to apply for the tax number.



  2. Without a US tax number for the recipient, the IRS will deny the spousal support  deduction.  In IRS’ point of view, a person who does not have a US tax number does not exist.


2.   I cannot conclude if the US citizen must withhold 15% US tax on the alimony paid if he resides in the US.  You may need to seek additional advice if you require further clarification.  


3.   Based on the treaty table provided by the IRS (https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1.pdf), it is silent if alimony is subject to withholding tax (see Belgium or Bulgaria where footnote f specifically mentions “include alimony”).


4.  Based on IRS’ Publication 515 (https://www.irs.gov/pub/irs-pdf/p515.pdf) Page 32 and 51, the IRS now does not require any US tax withholding on alimony payment to non-resident.  Here is the quote:


 “Income that is exempt under a treaty is not subject to withholding at source
        under the statu­tory rules discussed in this publication”


31 May 2017

Is income from a new spouse relevant in an application to cancel or reduce spousal support ?



by Karen F. Redmond
Family Law Lawyer


I am involved in an interesting case this week where the husband is applying to reduce his spousal support.  The case has raised a number of interesting issues which I will post more about this week.  The first question is whether the income of the husband's common law wife is relevant to the application for cancellation or reduction of spousal support. 


The answer to the question of whether a new spouse's income is relevant, in short, is yes, for both the recipient and the payor, in different ways, and of course it depends on the particular facts of the case and whether the application is for a change in child or spousal support.


It is fair to say, however, that income from a payor’s new spouse is relevant to a determination of support owing to a former spouse.  I looked at a few cases including:


  1. Chevalier v. Chevalier, 1993 CanLII 4475 (NS SC)  (child and spousal support variation application)   Chevalier v. Chevalier
  2. Redpath v. Redpath, 2008 BCSC 68 (child and spousal support variation application) Redpath v. Redpath
  3. Rakose v Rakose, 2008 BCSC 1165  (application to vary spousal support) Rakose v. Rakose
  4. Moreau v. Fliesen, 2008 BCSC 1358  (application to vary child support) Moreau v. Fliesen
  5. Chalmers v. Chalmers, 2009 BCSC 517   (application to vary spousal support)  Chalmers v. Chalmers


These cases say that the new spouses either are, or should be, contributing to the household expenses thus making more money available to the payor for payment of support.  I found it particularly interesting that in the Chevalier case the Judge even included the unemployment insurance of the new common law spouse as part of the payor’s household income.  The cases I read all say, in a nutshell, when the court considers an application to end spousal support and to vary child support, it should consider the earning capacity of the parties and the means of any new spouse. 


 For the recipient, re marriage will also be looked at by the Courts but not necessarily in the same way. For example in L.J.Z v. J.A.Z 2014 BCJ No. 1925 the 61 year old husband applied to cancel spousal support based on the wife’s re marriage.  The parties had been married for 29 years and the wife was 55 years old and had been receiving support for only 4 and a  half years at the time of the application.  The wife successfully argued that since the original order contained compensatory elements, the husband had not met the obligation of compensating her for the economic consequences of the marriage breakdown. 


From paragraph 57:   “If the evidence shows the recipient spouse's circumstances have materially changed to the extent they no longer need financial support to achieve a standard of living that approximates what they enjoyed during the marriage, absent a compensatory basis for the award, attachment to the payor spouse's income can no longer be justified. In the present case, therefore, the wife's remarriage and the resulting financial benefits she receives from it become relevant to determining whether she still needs financial support to allow her to maintain the marital standard of living.  And paragraph 58:  "The parties divided the family assets equally. Therefore, to the extent that the wife is entitled to compensation for economic disadvantages she sustained and the economic advantages the husband gained arising from the marital relationship, it must come through a spousal support order, whether lump sum or periodic."   Paragraph 59:  "As noticed earlier, the wife acknowledged in her affidavit that the support order contained both compensatory and non-compensatory consideration. As is most often the case, however, the order does not divide the support amount into compensatory and non-compensatory parts. In my opinion, the most practical way in this case to address that is to determine a percentage reasonably representative of the weight of evidence supporting a compensatory amount. This at least would be a useful starting point……"   The Judge went on to consider the evidence provided by the parties and found that there were both compensatory and non compensatory elements to the original support order. 


Even if the support is based also solely on non compensatory grounds, the Courts still consider the means and needs of the parties.  For example, Aujla v. Singh, [2012] ONSC 5217   Aujla v. Singh  and a line of Ontario cases including Pindur v. Pindur, [2015] O.J. No. 1598 provide direction in non-compensatory cases that involve disabled recipients.  In both the Aujla and Pindur cases, the marriages were under ten years and the husbands were both able bodied and the wives became disabled during the marriage and unable to work.  Neither cases contained strong components of compensatory support.  The Courts, in relying on Bracklow v. Bracklow, [1999] S.C.J. No. 14, said that the cases give rise to entitlement by a disabled spouse regardless of the absence of a compensatory claim (cited at paragraph 39 of Aujla).  In the Bracklow case the marriage was only 7 years and the wife became totally disabled from working.  She was unable to establish any compensatory basis for her claim and although the British Columbia Court of Appeal dismissed her appeal, the Supreme Court of Canada allowed her appeal stating that her claim could be maintained on a non-compensatory basis, at paragraph 48:


Divorce ends the marriage.  Yet in some circumstances the law may require that a healthy party continue to support a disabled party, absent a contractual or compensatory entitlement.  Justice and considerations of fairness may demand no less……….


At paragraph 31:


…. It places the primary burden of support for a needy partner who cannot attain post marital self-sufficiency on the partners to the relationship, rather than on the state, recognizing the potential injustice of foisting a helpless former partner onto the public assistance rolls.


In the Aujla case, the wife had not given up any part of her career to further the applicant’s interests and until she became disabled she was gainfully employed.  She lost her job because of her disability not because of her marriage (para 45).  At paragraph 55 the Court said, “notwithstanding that the Guidelines suggest a maximum duration of spousal support of five years, I will order the applicant to pay spousal support for an indefinite period, subject only to variation based on a material change in circumstances.”  Counsel for the wife argued for indefinite support on the basis that the payments should be based on her need, because of her disability, saying, “anything less will leave her destitute.  Apart from spousal support, her income is fixed and is entirely beyond her control.  In addition, her expenses are entirely beyond her control, and indeed they are relatively modest.  Anything less than the amount she has requested will means that she will be in poverty, and cannot live with any dignity.”


As always, speak to a family law lawyer about the particular facts of your case, but it seems, that from the perspective of the Courts, spousal support is an obligation that you can't easily contract out of, especially if you have a disabled spouse. 


FOOTNOTE:  in Court last week Mr. Justice Leask found that the income of the payer's new spouse was relevant and he was not prepared to hear the application without the information.  If we get a written decision I will post. 


Karen F. Redmond





























































10 May 2017

Annual Review of Child Support

by

Karen Redmond

Family Law Lawyer



I thank my colleague Georgialee Lang for bringing this case to my attention. 



When child support is payable under a separation agreement, the terms of payment, including the amount of the support, are reviewed on an annual basis.  This is provided for in the Federal Child Support Guidelines which can be found here.  FCSG



When drafting separation agreements, we as lawyers, try to set out as clearly as we possibly can, the procedure for annual review of child support, by detailing the timing and details of documents need to be provided to each party.  The clause usually reads something like this



"For so long as the Children are eligible to receive child support, the parties will exchange copies of their respective income and corporate tax returns for the previous year, including all attachments, by no later than May 31 each year and copies of any Notice of Assessment or Reassessment provided to them by Canada Revenue Agency immediately upon receipt, with child support to be adjusted, if necessary, for the following year beginning July 1 of each year based upon the Respondent’s financial information.”


The Court of Appeal in  R.A. v. W.A. 2017 BCCA 126  has drawn attention to this clause as follows:



"The difficulty is that the provision, while stating that support is “to be adjusted” does not explicitly set out how it is to be adjusted. There are various possibilities. The adjustment might be “automatic”, based on a tax return and the table set out in the Federal Child Support Guidelines. Alternatively, it might require agreement or a court order. If agreement or a court order is required, it is not clear what sort of interim adjustment, if any, is to be made, or who bears the onus of bringing the matter to court for resolution...   I make the obvious observation that, particularly in high-conflict family cases, it is essential that obligations under court orders are easily ascertainable. Where an order provides for adjustment of child support, the mechanism for adjustment should be fully articulated."


A good reminder to lawyers and separating parties that, although it seems tedious, and you may roll your eyes when you are presented with a 30 page separation agreement, more detail up front, saves aggravation and legal fees down the road.    My suggestions to avoid the pitfalls outlined above are:



1. Clearly set out the mechanism and timing for review.

2. Clearly set out the mechanism for dispute resolution if no agreement can be reached.

3. Attach to your separation agreements, a document where the parties can formalize the changes to child support on an annual basis. I call this "Addendum:  Annual Child Support Review"



I am happy to share it with you, just send me an email.

to email me click HERE

As always, talk to your lawyer if you  need legal advice

28 April 2017

Spousal Support in High Income Cases: Over $350,000

Payor income above the $350,000 ceiling

This week I am copying directly from the Department of Justice website because I really like their concise summary of this issue. What follows is a discussion about calculation of spousal support in high income cases.  The nugget at the end is this: the courts decide cases on the unique facts of each case, but the general trend is towards reliance on the range of payments provided for in the Spousal Support Advisory Guidelines.   SSAG


Karen F. Redmond, Family Law Lawyer


This is from the DOJ cite below:


Department of Justice


"In absolute numbers, there aren’t that many of these cases, but they are over-represented in the decided cases, partly because of the high stakes involved and partly because they test the outer limits of our thinking about spousal support. A number of these cases have made their way to the B.C. Court of Appeal: see Carol Rogerson and Rollie Thompson, “Complex Issues Bring Us Back to Basics: The SSAG Year in Review in B.C.” (2009), 28 Canadian Family Law Quarterly 263 at 283-86. B.C. cases still dominate the reported decisions, as many of these high-income cases in Ontario are resolved by arbitration or mediation-arbitration.
There are some clear principles enunciated in the case law, even if the actual outcomes are discretionary and sometimes conflicting. In J.E.H. v. P.L.H., 2014 BCCA 310, leave to appeal to SCC refused [2014] S.C.C.A. No. 412, there is a careful review of the law for cases above the ceiling, where some of these principles are stated.
  • The formulas for amount are no longer presumptive once the payor’s income exceeds the “ceiling”.
  • The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000. 
  • The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts.
  • Above the ceiling, spousal support cases require an individualized, fact-specific analysis. It is not an error, however, to fix an amount in the SSAG range, as was done in J.E.H. v. P.L.H., above. Evidence and argument are required.
  • 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. How far is “not too far above” is still not clear. Somewhere between $500,000 and $700,000, it seems.
  • Once the payor’s income is “far” above the ceiling, then the amount of support ordered will usually be below the low end of the SSAG range, but SSAG ranges are still calculated and sometimes the outcome will fall within the SSAG range.
In light of these principles, it is critical that counsel do SSAG calculations even in high income cases. It is wise to calculate the ranges for alternative income levels:  for the $350,000 ceiling (as a minimum) and for the full income (as a maximum), as well as for a range of intermediate incomes (to assist the court in triangulating an outcome). For a good example of such alternative calculations, see Saunders v. Saunders, 2014 ONSC 2459.
A number of the reported high income decisions involve interim or temporary support awards. Interim outcomes are more likely to fall within the formula range, as the goal in the interim period is to maintain the financial status quo: Cork v. Cork, 2013 ONSC 2788. In some of these cases, the estimate of the payor’s income will be low, pushing the amount higher in the range to adjust: Saunders v. Saunders, above; Loesch v. Walji, 2008 BCCA 214.
  • For incomes not too far above $350,000, courts frequently order an amount at the low end of the SSAG range for amount (payor’s income noted for each): Ponkin v. Werden, 2015 ONSC 7466 ($498,828, then $406,507); Stober v. Stober, 2015 BCSC 743 ($600,000); Piche v. Chiu, 2015 BCSC 335 ($465,000); Droit de la famille – 151740, 2015 QCCS 3284 ($375,000);  Cork v. Cork, 2014 ONSC 2488 ($562,000, final); C.E.A. v. B.E.A., 2014 BCSC 1500 ($592,122); Dymon v. Bains, 2013 ONSC 915 ($550,000); D.L.D. v. R.C.C., 2013 BCSC 590 ($652,000); Perry v. Fujimoto, 2011 ONSC 3334 ($353,000); Trombetta v. Trombetta, 2011 ONSC 394 ($660,000); and Teja v. Dhanda, 2007 BCSC 1247, appeal partly allowed on other issues, 2009 BCCA 198 ($425,000).
  • Not all of these cases end up at the low end: J.E.H. v. P.L.H., 2015 BCSC 1485 ($650,000, mid, variation); T.T. v. J.M.H., 2014 BCSC 451 ($597,000, mid-high); J.R. v. N.R.F., 2013 BCSC 516 ($471,814, mid-high); Abelson v. Mitra, 2008 BCSC 1197 ($355,000, mid-SSAG); and Y.J.E. v. Y.N.R., 2007 BCSC 509 ($602,400, mid-SSAG). In some jurisdictions, below-SSAG amounts are ordered even for these incomes, e.g. Babich v. Babich, 2015 SKQB 22 ($746,000, well below SSAG) and Milton v. Milton, 2008 NBCA 87 ($500,000, below SSAG).
  • For incomes far above the ceiling, the majority of outcomes wind up below the SSAG ranges, sometimes well below at the highest income levels: Volcko v. Volcko, 2015 NSCA 11, leave to SCC refused [2015] S.C.C.A. No. 141 ($1,248,756); J.L.A. v. M.J.G.G., 2014 BCSC 1391 ($831,648); S.R.M. v. N.G.T.M., 2014 BCSC 442 ($900,000); Frank v. Linn, 2014 SKCA 87 ($1,211,828); Margie v. Margie, [2013] O.J. No. 6193 (S.C.J.) (more than $1 million); Goriuk v. Turton, 2011 BCSC 652 ($9,740,000); T.N. v. J.C.N., 2013 BCSC 1870 ($1,163,648, custodial payor); Breed v. Breed, 2012 NSSC 83 ($1,186,585); Dobbin v. Dobbin, 2009 NLUFC 11 ($1.5 million); and Dyck v. Dyck, 2009 MBQB 112 ($3,045,205).
  • Even in cases far above the ceiling, however, some courts have fixed amounts within the SSAG range for high incomes: Saunders v. Saunders, above ($1 million, high SSAG, income estimate low); J.E.H. v. P.L.H., above ($1 million, mid-SSAG); B.L.B. v. G.D.M., 2015 PESC 1 ($1,069,724, low SSAG); Blatherwick v. Blatherwick, 2015 ONSC 2606 ($1.4 million, high SSAG); T.N. v. J.C.N., 2015 BCSC 439 ($982,626); Williams v. Williams, 2015 BCSC 112 ($1.2 million, mid-SSAG): K.R.M. v. F.B.M., 2013 BCSC 286 ($895,898, high SSAG); Elgner v. Elgner, [2009] O.J. No. 5369 (S.C.J., leave to appeal denied, 2010 ONSC 1578 (Div.Ct.) ($2.9 million, low SSAG); Loesch v. Walji, 2008 BCCA 214 ($1.6 million, husband’s income higher in past, spousal support $50,000/mo, higher than high end SSAG of $35,000/mo); and S.O. v. C.S.O., 2008 BCSC 283 ($909,569, low SSAG).
  • In some high-income with child support formula cases, courts have calculated the table amount of child support on the full payor’s income and then calculated the formula range for a gross payor income of $350,000 for spousal support purposes: J.W.J.McC. v. T.E.R., 2007 BCSC 252 and J.E.B. v. G.B., 2008 BCSC 528 (Master). Remember that if you do this hypothetical calculation for the spousal support range, it is critical that you use the child support amounts appropriate for an income of $350,000 too, and not the actual higher amount of child support (an error made in the otherwise careful analysis in Dickson v. Dickson, 2009 MBQB 274). See the discussion of two incomes under “Income” above.
Some commentators have expressed concern that there is too much defaulting to the formula range in high income cases, but no such pattern emerges from the mass of case law reviewed above. Individual high-income cases can attract considerable legal attention, but the wide discretion for these very high incomes will inevitably result in divergent and unpredictable outcomes. High income cases do not pose technical issues that can be solved by any set of guidelines, but raise fundamental theoretical questions about the rationale and purpose of spousal support."


As always, get legal advice if you need it.

11 April 2017

Integrative Mediation training, May 11-12, 2017 in Vancouver, BC

The Collaborative Divorce Vancouver Society is sponsoring the first Canadian training session on Integrative Mediation on May 11 and May 12, 2017 in Vancouver, BC.   

Integrative Mediation is a form of interdisciplinary co-mediation in which all aspects of a dispute — legal, emotional and financial — are addressed, enabling participants to resolve conflicts efficiently and reach deeper levels of resolution, healing and closure. Lawyers, mental health professionals, financial consultants and mediators with other professional backgrounds will learn to work together effectively to help clients reach enduring and mutually-satisfying resolutions.

Learn and practice this model from the initial client contact to the final resolution of the case, using realistic scenarios tailored to the needs of the training participants. Thursday will be the introductory, nuts-and-bolts training, and Friday will be an intermediate and advanced training, building on basic training.

The course has been approved by the Law Society of British Columbia for 13 hours of Continuing Professional Development (CPD) credits and for the Law Society's mediation accreditation and qualifying credits, for BC lawyers seeking to become certified as family law mediators.  The course has also been approved for MediateBC's required CPD credits and the BC Collaborative Roster Society's qualifying and annual CPD credits.

The registration form and additional information can be found on the Collaborative Divorce Vancouver's website.  The deadline for registering is April 28, 2017. 

In this two-day course, you will learn how to:
  • work effectively with other professionals in a seamless and integrated manner
  • reframe dispute resolution as a legal, psychological and emotional process
  • cut through impasse and bring meaningful resolution, healing and closure to your clients by getting to the heart of any dispute
  • improve your dispute resolution skills in all kinds of cases you practice, whether IM, solo mediation, arbitration, med-arb, or Collaborative
  • adapt your already existing skills to a new, carefully structured paradigm
  • recognize and work with emotional and psychological issues that are often conflated with positions in legal disputes
  • MPHs: apply clinical skills in a non-clinical, dispute resolution context, and learn how to differentiate clinical skills from psychologically-related mediation skills
  • assess suitability of participants
  • increase self-awareness of participants, maximizing their capacity for meaningful involvement
  • develop capacity of MHPs acting as neutral dispute resolution professionals to remain open, unguarded and empathic when working with individuals in varying states of vulnerability and crisis
  • practice skills working with professionals from other disciplines




"Interdisciplinary Settlement Conference (ISC) 

Marin Superior Court has implemented an innovative and effective program called the Interdisciplinary Settlement Program, designed to better meet the needs of families in high conflict custody matters. Once a party has filed a request for a child custody order and at the request of either party the court may set an Interdisciplinary Settlement Conference (ISC). This is a judicially supervised proceeding in which a volunteer mental health professional and a volunteer family law attorney work together with a judicial officer to help parents resolve custody disputes. The goal is to reach agreement by defusing hostility, initiating better communication and cooperation, and offering research-based information about the developmental needs of children. Self represented litigants should contact the Family Court Facilitator to obtain information and forms to file requests for order and an ISC."


02 April 2017

Talking to Kids about Divorce

My colleague Alyson Jones writes regularly for the Huffington Post.  Her article "Talking to Kids about Divorce" is posted here.  Alyson is a child and family therapist and clinical director and founder of Alyson Jones and Associates, in West Vancouver.


http://www.huffingtonpost.ca/alyson-jones/talking-about-divorce-kids_b_15456844.html


Karen F. Redmond
Collaborative Family Law Lawyer

14 March 2017

Spousal Support – Is there a clear answer on How to divide Net Disposable income? Should 50/50 NDI be the norm?

I will confess at the outset, this blog is a little long and this is because I was struggling with the question about why, following separation, the net incomes of the parties are not just equally divided.  What follows is a discussion, and my largely failed attempt to answer my own question. 



Each time I review the Spousal Support Advisory Guidelines Revised Users Guide (“RUG”) online, found here: SSAG RUG it is clear to me why the Spousal Support Advisory Guidelines (SSAG) were written in the first place.  Prior to the SSAG, there had been decades of conflicting and unsatisfactory court outcomes when it came to spousal support applications.  The SSAG were written as a response to years of complaints from lawyers, judges and the general public, who pointed out that there were no rules to follow, and therefore there was very little consistency in spousal support awards. 

First, a little background information.  What is spousal support anyway and why do people have to pay it?


The underlying reasons for an order of spousal support is the principle of equitable sharing of the economic consequences of marriage and marriage breakdown.  This from a well-known and often cited case , called Chutter v. Chutter 2008 BCCA 507 . In other words when a marriage breaks down, a court can order a sharing of the economic consequences, which, contrary to common perception, means sharing economic consequences of marriage breakdown, not necessarily sharing of income.  And I will go one step further to say as a caution readers that income sharing does not mean equal sharing. The SSAG's rely on mathematical formulas in order to determine spousal support as a percentage of each party’s incomes, and the percentage depends on a host of factors including but not limited to the length of the relationship, the incomes and ages of the parties, and the ability of the parties to earn income and be self-sufficient after the breakdown of the relationship.  The online resources provide a complex explanation which I will not go into here. 

The SSAG formulas generate ranges for spousal support amount (and for duration as well unless the conditions for indefinite (duration not specified) support are met).  The ranges allow parties and their lawyers, or a court, to adjust amount (and duration) to take into account the specifics of the particular case in light of the support factors and objectives found in the Divorce Act, which are:

The Divorce Act at 15.2(6):   a spousal support order should take into account all of the following factors:

(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.

 

Section 15.2(4) of the Divorce Act also says that the court must consider the condition, means, needs, and other circumstances of each spouse, including the length of time the spouses cohabited and the functions performed by each spouse during cohabitation.  It is important to note that the means of each spouse includes his or her capital base, and this is something that often gets overlooked in calculating spousal support. 

Why do parties have to pay spousal support?  What does it mean to compensate a spouse? 


“Compensatory spousal support” is paid to compensate a spouse for sacrifices made during the relationship in order to recognize and account for the economic disadvantages or advantages flowing from the role taken by the spouses in the marriage.  That's a fancy way of saying if you gave something up or made sacrifices and allowed your spouse and or his or her career to flourish, you may be entitled to compensation in the form of sharing income with your spouse. 
Non-compensatory spousal support” is intended to narrow the gap between the needs and means of the spouses upon marital breakdown which is why it is often referred to as the "means and needs" approach to spousal support. Again, a fancy way of saying, if one of you has a significantly higher income, the lower income earner may be entitled to share in that income.   Where compensatory principles do not apply, need alone may be sufficient to ground a claim for spousal support.  The courts have said clearly that “the primary burden of meeting the needs of a spouse after the breakdown of the relationship is on the former partner rather than on the state” (This from the Chutter case above, at paragraph 54).  That said, there is a clear obligation on the lower income earning recipient spouse to make efforts at self- sufficiency, depending on their age, training, work experience and so on.  The Family Law Act s 161(d)  FLA Section 161

And if you feel like reading a case, read this one:  Kneller v. Greenwood  2015 BCSC 1410

The point to be made here and it may be hard to accept if you are the recipient, is that the equalization of the economic consequences of the marriage or its breakdown does not necessarily mean equalization of net disposable income. The equalization of net disposable income is not the legal test for compensatory spousal support.    Another case you may want to read:  Armstrong v Armstrong  2012 BCSC 166 2012.


The SSAG RUG gives a few examples of when true equalization of net disposable incomes may be appropriate, for example, where only pension income is being shared after a very long marriage, of 25 years or more, or where both spouses are low income, or perhaps where both spouses are employed after a long marriage, but with a significant income disparity.  The writers of the SSAG were clear that they had chosen the equalization of income, (50% of the gross income difference) as the maximum level of income sharing.  More detailed discussion can be found here HERE 

A discussion about sharing of individual net disposable incomes (INDI) can be found here  INDI   and I particularly appreciated the explanation of why the range of support is between 40 and 46 (NOT 50%) percent of the INDI which the writers confirm was done deliberately stating,

Despite the intellectual attraction of a 50/50 split, there are a number of practical problems that convinced us that it was not appropriate to set the upper limit of the range there. First, very few courts are currently prepared to push spousal support amounts that high. Second, there is a live concern for the access-related expenses of the payor spouse, expenses that are not otherwise reflected in the formula. Most payors are exercising access and most are spending directly upon their children during the time they spend with their children. Third, there are concerns for the payor in the situation where the payor has employment-related expenses and the recipient spouse is at home full time and receiving large spousal support.”


So, what if there are children and we share parenting time?

Cases where parties share children on an approximately equal basis also often result in spousal support payments that equalize net disposable income.  A discussion of those principles can be found here HERE

In shared custody or shared parenting situations, where neither spouse has re-partnered and there are no new children in either household, the SSAG says that the starting point should be an amount of spousal support that leaves each household with equal net disposable income. The SSAG range in shared custody cases always includes this equal sharing of the net disposable income (50/50 NDI split), to recognize the importance of this principle. When doing the calculations, sometimes the equal NDI point is in the mid-range, but it is just as often lower or higher in the SSAG range.  The important thing to note is that it is always available as an option in shared parenting cases. 

What are the Courts saying about this? 

Whereas Ontario Courts tend towards an equal sharing of NDI in shared parenting situations, the Courts in British Columbia have continued to default to generating awards in the mid-range of the SSAG.  Although there is no support or justification within the SSAG to default to the mid range, in R.D.L.J. v. B.S.J., 2014 BCSC 1566, the court suggested that an equal NDI outcome, while not out of the question, would be “a significant change in the practice and the law in British Columbia”. 

In this writers opinion, this trend needs to be changed. 


There are a few B.C. shared custody cases where the courts explicitly equalized net incomes see here : A.M.D. v. K.R.J.,    2015 BCSC 1539  as well as Paisley v. Paisley,  2014 BCSC 1752

So, to answer my original question: 


Is there a clear answer on How to divide Net Disposable income?  Yes, and no.  The Guidelines provide the range within which the answer lies. 


Should be 50/50 NDI be the norm?  Well, this depends on whether you are the recipient or the payor, but the answer from the courts and from the drafters of the SSAG appears to be that 50/50 NDI is not the norm. 


For self represented litigants, a useful website is the BCSC site:  http://www.courts.gov.bc.ca/supreme_court/self-represented_litigants/

And as always, speak to a lawyer if you need legal advice. 

 

19 February 2017

The Spousal Support Advisory Guidelines: Why NOT to default to the MID range


by Karen F. Redmond, Family Law Lawyer


Has anyone other than JP Boyd read the entire Spousal Support Advisory Guidelines (SSAG) Revised Users Guide (“RUG”)?  SSAG RUG     I have to confess that I did not read the entire original 2008 SSAG Users Guide, nor did I make it through the 2010 updated version.  But, I have read the entire 2016 update and I learned a few things, ok I learned a lot, which I hope to share with you here in this next series of Blogs about the SSAG.   This my attempt to share some of these nuggets and to touch on some of the common mistakes and misconceptions about spousal support calculations. 


(I didn’t know, for example that it was the makers of the DivorceMate software who in 2011 provided their online calculators free for use by the general public who previously could only access spousal support calculators by hiring a lawyer or other professional. online calculator .  Shout out to DivorceMate.)  But, I digress….. 


It appears that one of the most frequent mistakes is an automatic deference by lawyers and the courts to the ‘mid-range’ of the guidelines without much consideration for the factors which support the low and high range of the calculations.  The writers of the RUG are clear that  “the mid-point is NOT some kind of “norm”, with the rest of the range only to be used in unusual circumstances”  The tendency to default to the mid range should be avoided.  They go on to say,


"If anything, in the basic formula cases for low to middle-income spouses, there should be a tendency for spousal support to push up into the mid-to-high end of the SSAG range, given the significant compensatory claims with children, the needs in the home of the primary care parent and the constraints of ability to pay upon the range. A simple default to the mid-point likely leaves many of these recipients under-compensated. There may be good reasons to locate in the mid-to-lower end of the SSAG in some of these cases, notably the specifics of ability to pay for lower income payors in individual cases, but these need to be articulated. The dynamics of location with the range will be different where there is only one child or spouses with higher incomes."


From a review of the case law, the following factors may favour a support award at the higher end of the range:

  • The recipient has a strong compensatory claim (eg. recipient moved/gave up employment for payor’s benefit; recipient funded payor’s education/training; recipient sacrificed employment opportunities because of child care).

  • The recipient has limited income.

  • The recipient has limited earning capacity.

  • The recipient has compelling needs and standard of living.

  • The recipient is older.

  • The recipient will be undertaking retraining or education in the immediate future which is aimed at promoting self-sufficiency.

  • The recipient has primary care of very young children, several children and/or special needs children (ie. age, number and needs of the children can restrict the custodial parent’s ability to work).

  • The marriage is long term.

  • The marriage is short with young children and a stay-at-home custodial parent.

  • There is no property to be divided.

  • The recipient is carrying significant family debts (but not severe enough to fall within debt payment exception).

The following factors may support an award at the lower end of the range:

    • The recipient has a weak compensatory claim.

    • The payor has limited income.

    • The payor has limited earning capacity/ability to pay.

    • The recipient does not have significant needs (eg. recipient has solid employment/income; recipient has reduced living expenses (ie. subsidized housing; mortgage free matrimonial home; shared housing costs)).

    • The recipient has remarried/repartnered.

    • The payor has significant needs.

    • The recipient is younger.

    • There is an unequal division of property in favour of the recipient.

    • The recipient holds sizeable exempt or excluded assets after division of property.

    • The payor is carrying significant family debts (but not severe enough to fall within debt payment exception).

    • In the case of a traditional marriage, the payor has costs associated with going to work, in contrast to the non-working recipient.

    • An incentive for the recipient to make greater efforts towards self-sufficiency is needed (although imputing income can also address this factor).

    • There are local and regional differences (eg. Atlantic provinces).

    • The payor has significant direct access costs (especially important when the payor is at the lower end of the income spectrum).

    • The payor makes mandatory deductions for pension contributions (especially important when the payor is at the lower end of the income spectrum).

This list is from a paper I found on the DM website HERE

My take:  This is a good reminder to us all to perhaps ask a few more questions of our clients before we make assumptions about where they may or may not fall within the SSAG range. 

Next week:  the case for 50/50 NDI (an equal sharing of net disposable income)