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. 

 

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