Redress Risk Management (post until May 31/19)
Family

What constitutes a material change in circumstances?

By Lisa Gelman

An Ontario court recently considered a case where one party sought to terminate spousal support upon retiring. This decision looks at the various factors judges must weigh when determining whether or not there has been a material change in circumstances to justify varying an agreement for spousal support.

What happened?

The parties began cohabiting in May 1987, married in January 1988 and separated in February 2008.

In 2011, the parties entered into a consent order, which required the husband to pay the wife spousal support in the amount of $3,500 per month from Jan. 1, 2011 to Dec. 31, 2020.

The parties also executed a separation agreement, which set out the husband’s spousal support obligations in the same terms of the order. The separation agreement also provided that spousal support may be varied if there was a “material change in circumstances,” and that such change may include either party’s retirement. Furthermore, the separation agreement set out the husband’s obligation to maintain a life insurance policy naming the wife as an irrevocable beneficiary.

In July 2012, following a long career, the husband retired with full pension benefits at the age of 56.

The husband brought a motion to terminate his spousal support and life insurance obligations, positing that his retirement constituted a material change in circumstances.

The relevant legal principles

The court began by outlining that, according to s. 17(1)(a) of the Divorce Act, an order may be made varying, rescinding or suspending a support order. However, before a variation order can be made, the court must:

  • consider whether the conditions for variation exist, that is, whether there has been a change in the “condition, means, needs or other circumstances” of either former spouse since the order was made; and
  • decide on the variation to be made, based on the objectives set out in s. 17(7) of the Divorce Act.

In determining whether the conditions for variation exist, the change must be “material” – i.e., it must be a change that, if known at the time, would likely have resulted in different terms. The effect of this rule is that a party cannot rely on something as a basis for variation if he or she knew about the matter at the relevant time. As a result, in this case, the court inquired about whether the income reduction due to the husband’s retirement was taken into account or contemplated in the parties’ original order.

The court’s decision

The court concluded that the husband made the decision to retire voluntarily, as the choice was not compelled by a mandatory retirement policy, and there was no evidence that his disability precluded him from being engaged in other gainful employment.

The court noted that while the husband did not retire to avoid paying spousal support, this did not give rise to an automatic right on his part to vary spousal support. It also indicated that the fact that the husband had earned the right to a full pension did not, on its own, establish a material change in circumstances. Rather, the court still had to consider the husband’s ability to pay support, which included a consideration of his capacity to earn income either from the job he chose to leave or from other employment, having regard to his circumstances.

In determining what the parties’ intention was when entering into the separation agreement, the court considered a number of factors, including the following:

  • The parties were married for 20 years and cohabited for 21 years. This was a long marriage, in which the husband was the primary income earner.
  • The discrepancy in the parties’ respective incomes at the time of separation was reflected in the agreement.
  • The wife remained heavily dependent on the spousal support payments.
  • There was no provision in the agreement providing for an automatic review of the spousal support obligation when the husband retired.
  • The husband’s retirement was voluntary.

Ultimately, the court found that there had not been a material change in circumstances. It concluded that the divorce order and separation agreement still reflected the intention of the parties, which was that the wife would receive spousal support for a limited period of ten years so as to allow her to plan her financial affairs.

Although the husband had been unrepresented at the time the divorce order was made and during the negotiation of the separation agreement, the court stated that the parties had to take responsibility for the contract they executed. In this case, the husband contracted to pay spousal support for a ten-year period, and his retirement – and the wife’s continued need for support – were not significant departures from the range of reasonable outcomes the parties anticipated at the time the final order and separation agreement were made.

Lessons learned

A separation agreement is a domestic contract, which will be accorded significant weight by the court. Make sure you understand your rights before signing anything pertaining to a separation or divorce.

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