Can A Couple Orally Agree Not to Divide Their Property? Will a Court Respect that Agreement?

GeorgiaLeeLang059Today’s decision of Mr. Justice Kelleher of the British Columbia Supreme Court  provides an answer to the two questions posed above.

If a couple decide to live together, have no children, and confirm with one another that everything each of them owns or will own will always remain separate if the couple separate, will a court interfere?  In the case of Doell v. Prentice 2018 BCSC 1115 the Court said “yes” it will.

This common law couple lived together for 23 years on property purchased with Mr. Prentice’s savings. He was a highly skilled bricklayer and stone mason, while Ms. Doell, who had a university degree, worked in menial positions taking care of dogs and horses. Her annual income was less than a full-time minimum wage job.

Many witnesses testified they were aware of the couple’s financial arrangements which were apparently openly discussed with their friends and relatives. Ms. Doell reputedly said that if their relationship ended she would leave with her belongings but nothing of her husband’s. However, after she left the home she shared with Mr. Prentice she changed her mind and brought a court action seeking an equal division of property and spousal support. Mr. Prentice argued that she should receive no property and no spousal support despite her status as a common law spouse under the law.

The judge reviewed the evidence finding they never shared property, had no joint accounts or joint credit cards; she paid for her expenses and he paid for his. When they ate at a restaurant they each paid their way. Mr. Prentice bought several other properties and fixed them up. When he sold a property he did not share the sale proceeds with  his wife.  Ms. Doell was of the view that she would not work on the properties as they were not hers and she would get nothing back for her services.

Later, during the relationship, Ms. Doell purchased a property in joint tenancy with her mother and made it clear that it was not intended to be shared with Mr. Prentice. At that point she moved her dog care business to her new property. Unfortunately, Ms Doell fell off her horse and had a concussion which caused migraine headaches. Still later several of her animals unexpectedly died which caused her upset and depression. She changed her will deleting any gift to Mr. Prentice.  By this time the relationship was clearly coming to an end.

The Court was satisfied that the parties entered into an oral contract to keep their property separate. As for spousal support, there was no definitive evidence that Ms. Doell had agreed to give up that claim.

The Court reviewed s. 95(2)  of the Family Law Act to determine if it would be “significantly unfair” not to deviate from the oral agreement:

(2)        For the purposes of subsection (1), the Supreme Court may consider one or more of the following:

(a)        the duration of the relationship between the spouses;

(b)        the terms of any agreement between the spouses, other than an agreement described in section 93 (1) [setting aside agreements respecting property division];

(c)        a spouse’s contribution to the career or career potential of the other spouse;

(d)        whether family debt was incurred in the normal course of the relationship between the spouses;

(e)        if the amount of family debt exceeds the value of family property, the ability of each spouse to pay a share of the family debt;

(f)         whether a spouse, after the date of separation, caused a significant decrease or increase in the value of family property or family debt beyond market trends;

(g)        the fact that a spouse, other than a spouse acting in good faith,

(i)  substantially reduced the value of family property, or

(ii) disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse’s interest in the property or family property to be defeated or adversely affected;

(h)        a tax liability that may be incurred by a spouse as a result of a transfer or sale of property or as a result of an order;

(i)         any other factor, other than the consideration referred to in subsection (3), that may lead to significant unfairness.

After reviewing similar cases, the Court ordered that the property of the parties would be divided 80/20 in favour of Mr. Prentice, however, he would pay indefinite spousal support of $850 per month.

Would it have made a difference if this couple had written down their agreement? Probably not. After 23 years together it is unlikely that an agreement not to share assets, where one party has an abundance and the other, very little, would be upheld by a court in British Columbia.

Lawdiva aka Georgialee Lang

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Professional Who Changes His Career Focus Receives Minimal Spousal Support Relief

GEO CASUAL In my view the heaviest family litigation traffic amongst aging boomers will be in reviews, variations, and applications to terminate spousal support, based on section 17 of the Divorce Act. The Hepburn case is illustrative of this prediction. (Hepburn v. Hepburn 2013 BCCA 383)

Dr. Hepburn, age 55, was a family physician that had a modest sideline writing a syndicated medical column for local newspapers from which he earned about $30,000.00 per annum. After 26 years of marriage the Hepburn’s separated in 2006. Mrs. Hepburn, age 65, had raised their four children and occasionally performed bookkeeping and administrative duties for her husband’s medical practice.

The parties negotiated a settlement, agreeing that Dr. Hepburn’s income for the purpose of a Spousal Support Advisory Guideline calculation was $220,000 while his wife’s was nil. He agreed to pay his wife $8,000.00 a month indefinitely with no review.

In 2008 Dr. Hepburn decided to amp up his media career and spend less time seeing patients and more time developing a media platform. Eventually he signed a contract with the Oprah Winfrey Network to produce a television show called Wisequacks. He would be paid a modest $1,250.00 per episode. As a minority owner of a group of medical clinics, in 2009 he was asked to transfer his practice to another clinic location, and he agreed.

His pursuit of a media career was not lucrative and entailed many hours of networking and creating opportunities for potential success. In 2011 he advised his ex-wife that because of a downturn in his income he would reduce her monthly support from $8,000.00 a month to $5,000.00 a month.

At a variation hearing in 2012 he deposed his annual income was only $145,000, while his former wife’s income had grown from nil to $12,000.00 a year, on account of rental income and Canada Pension Plan benefits. Dr. Hepburn argued that his change of workplace resulted in fewer patients and less income. He also suggested that the media industry was changing rapidly and that other media forms had displaced a weekly newspaper column. He contended that income should be imputed to his ex-wife because she had not taken reasonable steps to become self-sufficient.

The chambers judge dismissed his variation application opining he had not met the onus of proving a material change in circumstances. The judge found that the change in the location of his workplace was not mandatory; the fact Dr. Hepburn now spent almost fifty per cent of his time on media activities, with no commensurate financial benefit, was also a personal choice that should not give rise to a change in his spousal support obligations.

On appeal Madam Justice Neilson agreed with the chambers judge that Dr. Hepburn’s relocation in his workplace was voluntary and that he ought reasonably to have known that the change would translate to a lower income. She also found that Dr. Hepburn had failed to show that his media activities had a reasonable prospect of financial success, a factor that could have justified the hours he devoted to it.

However, the appeal court allowed the appeal recognizing that the decrease in his media income and the increase in Mrs. Hepburn’s income post-separation, albeit moderate, were nevertheless material. Dr. Hepburn’s income was found to be $200,000.00, a reduction of $20,000.000 per annum and Mrs. Hepburn’s $12,000.00 per annum, an increase from nil income.

Dr. Hepburn was ordered to pay $6,850.00 in spousal support.

IMPORTANT “TAKE-AWAYS” FROM HEPBURN

1. Although far from startling, the fact remains there is a very heavy onus on a variation applicant to prove a material change in circumstance that is not characterized as voluntary or self-serving. Any change in a payor’s income that comes as a matter of choice is fatal to a successful variation application.

2. Where an applicant has a high-paying, long-term professional position, his or her desire to “stop and smell the roses” is permitted, but not at the expense of a reduction in a dependent spouse’s spousal support.

3. There is no doubt that Mrs. Hepburn’s age was an important factor although it was not specifically mentioned by either court. Dr. Hepburn’s suggestion that his former wife had not taken serious steps to become self-sufficient garnered little comment from the courts.

Lawdiva aka Georgialee Lang

Grey Spousal Support: Will You Still Need Me, Will You Still Feed Me, When I’m 64?-Part 1

Barrister

Part 1

I naively thought that one day a discussion of spousal support would begin without the preliminary sentiment that spousal support is one of the most difficult areas of family law in Canada. That’s what I wrote in 1990 in my Canadian Bar Review article entitled “Pelech: Variations on a Theme”; in 1995 in “Spousal Support After Moge” published by the Continuing Legal Education Society; and in 2011 in The Huffington Post: “Family Law’s Crapshoot: Will Canada Reform Spousal Support Laws?”

And here I go again… the promised consistency and certainty that would allegedly flow from the Spousal Support Advisory Guidelines (“SSAG”) has proven illusory. The stark reality is pre-SSAG one could at least rely on precedent, similar cases with similar facts, but today, not so much, and don’t get me going on the discrepancy in the use and abuse of the SSAG across Canada.

Sadly, similarly situated spouses across Canada face support awards and principles that bear little resemblance to spousal support orders made in British Columbia, the jurisdiction that has most avidly welcomed, even embraced the SSAG. B.C. judges and SSAG go together like “Love and Marriage” with all due respect to the great Frank Sinatra and the fine judges of our Court of Appeal.

The lack of predictability in spousal support awards, including variation and termination of support orders, has increasing importance as Canada faces a “greying” population and long term marriages are crumbling at startling rates, owing in part to the “boomers” refusal to imitate the more languid lifestyles of previous generations. It is universally recognized that many Canadians are healthier, and with advances in medicine, life now has more “cherries in the bowl”. Statistics Canada reports that by 2036 there will be only 2.5 workers in Canada for every retired senior. That’s a lot of old people!

Spousal support for spouses 50 or older introduces considerations and consequences that require a nuanced approach to the determination of quantum and duration, reviews, variation, and termination. In this paper I will review the most recent spousal support cases from the British Columbia Court of Appeal to provide a glimpse of current trends and issues.

I believe this review will illustrate the impact of grey divorce on Canada’s divorce industry and the future prospects for family law lawyers.

1. JENDRUCK v. JENDRUCK 2014 BCCA 320

The Jendrucks were married for 34 years, were in their late 50’s, and had two independent children. Mrs. Jendruck was not employed at the time of trial but had previously worked at a bank for 20 years and operated a daycare from her home. Mr. Jendruck’s income was $80,000 per annum.

Mr. Jendruck argued his wife had made no effort to become economically independent and that income should be imputed to her. The trial judge found that Mrs. Jendruck’s lack of self- sufficiency was Mr. Jendruck’s fault as he had maligned his wife’s daycare operation, leading to her emotional issues. The trial judge expressly noted that Mrs. Jendruck could not be expected to work for minimum wage at a job that would provide no satisfaction to her.

Support was ordered at the highest range of the SSAG, an amount of $3,849.00 per month, to be reviewed in 2020 when the husband would attain 65 years of age.

The husband appealed citing the trial judge’s error in attributing his wife’s inability to continue with her daycare operations and emotional upset to him. He also argued that the notion that his wife was exempt from seeking outside employment,
albeit at minimum wage, was wrong in law.

Madam Justice Saunders agreed that the trial judge had erred on the basis of the following factors:

a) Neither the pleadings nor the trial evidence supported the trial judge’s theory that the wife was unable to restart her daycare;

b) There was no evidence, other than the wife’s; that her emotional state would prevent her from the childcare work she aspired to.

c) Mr. Jendruck’s “unenthusiastic” comments about his wife’s daycare operation did not “bear upon her ambition once he left the family home”.

d) Mrs. Jendruck had argued she needed to retain the family home in order to operate her day care, a position the trial judge acceded to.

e) The court cited Van Gool v. Van Gool (1998) 44 RFL 4th 314, for the proposition that “this Court has never sanctioned the refusal of a parent to take reasonable steps to support his or her children simply because they could not obtain interesting or highly-paid work”, declaring it to be applicable to a spouse’s obligation to contribute to her own support insofar as is practicable, pursuant to the Divorce Act.

The Appeal Court imputed income of $1,000 a month to Mrs. Jendruck; found that the review provision upon Mr. Jendruck’s 65th birthday was not unreasonable and left it in place; but also ordered an earlier review to take into account the uncertainty of Mrs. Jendruck’s earned income. This review was to take place in six months and focus on Mr. Jendruck’s income, Mrs. Jendruck’s income, and her efforts to enhance her income.

IMPORTANT “TAKE-AWAYS” FROM JENDRUCK

a) The wife’s pleadings did not include the assertion she was incapable of restarting a day care in her home. With the new “check-box” pleadings it is easy to skip over important facts that are central to a party’s case. Counsel often forgets it is the pleadings that govern the issues and argument in a case.

b) The Court found that the wife’s evidence of emotional upset and an inability to work was insufficient to make a finding of fact in that regard. When physical or emotional incapacity is relied on to support an award of spousal support, there must be independent third-party evidence such as medical records or a medical report.

c) Despite a 34-year marriage, and a 58-year old dependent spouse, with no more than a grade twelve education, but previous work experience, counsel can no longer suggest that it is inappropriate or degrading for their older female clients to work at a menial job for minimum wage.

Lawdiva aka Georgialee Lang

Nice Guys Finish Last

GeorgiaLeeLang025I remember years ago looking at a website for an American family law firm and perusing their “rules” for family law litigation. The one that most stuck in my mind was their admonition that “nice guys in family law cases finish last”. At the time I cynically thought they were correct, and I still do.

An example of this truism is the recent British Columbia Supreme Court case of T.N. v. B.N. 2018 BCSC 201 where the parties were married for 22 years. At the date of separation the parties’ two children remained in the primary care of their mother who was a registered nurse who earned $28,000 per year working part-time. Prior to the birth of her children she held prominent high-paying nursing positions. Her husband was an academic with a Ph.D degree who earned $126,000 per annum. In 2007 the parties signed a separation agreement that resolved all issues including parenting and financial issues.

Their agreement was completed just before the final Spousal Support Advisory Guidelines (SSAG) were published, but both parties were aware of them and recognized the likely amount that would flow in spousal support to Ms. N. as a result of her and her husband’s respective incomes.

The agreement stipulated that based on their current guideline incomes, Ms. N could expect to receive between $1,728.00 and $2,378.00 per month. However, Mr. N. agreed to pay his wife $3,400.00 per month for at least one year after the date of the agreement in order to ensure that Ms. N. could remain in the family home with the children. The agreement also provided that:

“The parties both acknowledge the need to adjust, within a reasonable period of time, to a level of Spousal Support that fits within national guidelines and standard customs and practices in British Columbia and Canada.”

As it turned out, Mr. N. paid this monthly sum until 2014. Besides paying guideline child support and over-paying spousal support, Ms. N also received more than 50% of the parties’ family property. Mr. N. asserted he paid her an extra $277,000, but during the hearing agreed with Ms. N. that the amount was closer to $139,000, still not a small amount.

While the agreement called for a review of spousal support, for years the parties ignored this clause and life carried on. In the meantime, Ms. N. related the children’s very negative reaction to the parties’ divorce and their escalating deviant behaviour, conduct that limited their mother in her work hours, coupled with an estrangement between the children and their father. Mr. N. deposed that parental alienation had played a part in his lack of relationship with the children, a fact that was denied by his ex-wife.

Naturally Mr. N. argued and expected that his additional financial efforts would be sufficient to support his position that he had fulfilled his legal financial obligations to his former wife.

Unfortunately for Mr. N., his former wife had also suffered from several major health ailments and for several years was unable to work at all, although by the time of the hearing she reported 2016 income of $84,000 and 2017 income of close to $60,000.

The Court determined that Ms. N. had a strong compensatory claim which called for a retroactive support order at the high end of the SSAG range, noting that if the only advantage to Ms. N. was an overpayment of spousal support the court would not decrease the length of ongoing spousal support.

However, the court acknowledged that Ms. N. received more than 50% of the value of the family home, however, the parties had not shared their employment pensions or Canada Pension. The value of these assets was not before the court, but the Court estimated that Mr. N.’s would be far greater based on his work history. The Court thus determined that Ms. N. was still entitled to spousal support albeit at the low end of the SSAG range.

A further interesting judicial observation was the Court’s statement that “one might think that a person earning between $60,000 and $85,000” may give an appearance of self-sufficiency but that would not necessarily be true. An unbiased assessor may disagree that a single woman would not be entirely self-supporting on this income, however, the family law definition of “self-sufficiency” incorporates a “standard of living” test and an unspoken “comparison of incomes between former spouses”.

It is not surprising that Ms. N. was still entitled to spousal support, based on well-known compensatory principles, however, it is very likely that Mr. N. expected that his early generosity would translate to a reduced time period for payment of support. Instead the Court ordered continuing support of $1,967.00 per month for an indefinite period of time and $9,000.00 of retroactive support beyond the contracted overpayment, based on the high range of the SSAG.

Lawdiva aka Georgialee Lang

“Extreme” Family Law Litigation Decried by the Court

GeorgiaLeeLang025Despite family law Rules of Court that call for the “just, speedy, and inexpensive determination of a family law case on its merits”, there always seem to be those cases that take on the qualities of “scorched earth” litigation. Oliverio v. Oliverio 2017 BCSC 1704 appears to be one of those cases.

The application heard by Master Muir sought orders imputing income, determining the quantum of child and spousal support, and the sale of the family home. Other orders sought in the Notice of Application had been resolved or adjourned by the parties. Nonetheless, the application took more than a day-and-a-half of court time over three separate dates.

What was equally remarkable was the two boxes of materials presented to the court containing 160 affidavits, with 26 affidavits filed by the respondent wife and 15 filed by the claimant husband in respect of the orders sought. Master Muir described this mountain of material as evidence of “an unhealthy and abusive litigation climate”.

The preparation of 160 affidavits is almost too much to contemplate and the cost enormous.

She said:

“This approach to family issues is counter to the fundamental basis of our present family system which encourages negotiation, not litigation. This is not supposed to be a war. It is supposed to be a civilized allocation of rights, responsibilities, and assets following a family break-up.”

Master Muir declared that this style of litigation was unnecessary, damaging to the parties and their children, and a waste of family assets on litigation costs. She noted that the parties had accessed capital in the amount of almost $700,000, much of which was used to fund their legal expenses, albeit their trial was still eight months away.

As both husband and wife were not employed, although capable of employment, the court imputed $95,000 of income to the husband and $25,000 to the wife, and ordered child support with a set-off to account for their equal parenting arrangement. The wife also received spousal support at the mid-range. The application for the sale of the home was dismissed.

Finally, Master Muir implored counsel to speak to their clients. She said:

“I ask that counsel convey those sentiments to their clients in the hope that this can be reined in and the parties can refocus on resolving this in some other way.”

As a mediator and arbitrator, I know this case could be resolved within 60 days, if not less, using a mediation/arbitration model, where a legal professional mediates the disputed issues, with those unresolved being decided by that legal professional. And probably at a cost of less than $20,000…just sayin’

Lawdiva aka Georgialee Lang

To Sign or Not to Sign: The Prenup Dilemma

DSC01152_2 (2)_2Pre-nuptial agreements are so commonplace today that no one gives them a second thought.  They are considered de rigueur in second marriages, particularly where there are children from a first marriage, who panic at the first sign that good ol’ dad has a girlfriend. They are also regularly used when a 50-year old wealthy bachelor moves his 25-year old girlfriend into his home. Ah…young love…

Their purpose is to protect a spouse’s assets from attack by their new partner if the relationship breaks down, and often they provide that upon separation, the wealthy spouse will not pay spousal support to the other.

But do they offer the protection the monied spouse is seeking, and what happens if your partner refuses to sign one?

Prenups are, of course, simply contracts, but unlike commercial contracts, courts look at prenups differently. When a couple begin living together or get married, there should be no expectation that each of them automatically has an interest in the other’s property or can expect to be supported by their new partner.

However, there comes a time when a couples’ lives are so intertwined that the law recognizes and provides for the sharing of property and in many cases, spousal support. Some of the factors include the birth of children, the sharing of childcare, the pooling of financial resources, the length of the relationship, and the many  non-financial contributions  each makes based on their abilities and skills.

In the usual prenup scenarios, if dad’s second marriage lasts as long or longer than his first, the prenup signed at the outset may be difficult to enforce. Our bachelor with the young girlfriend may find that after she has two children and is no longer participating in the job force, the contract they signed is simply unfair to her.

Often clients will make an appointment to discuss their desire for a prenup, but frequently it is a subject they have not yet raised with their partner. While prenups are not terribly expensive, to instruct a lawyer to draft one is rather foolish unless one has broached the issue with one’s sweetheart.

Case in point: New York executive,  Yiri Sun, is a Princeton graduate and vice-president of a large insurance company. She was very excited about her wedding day. She had booked a beautiful venue, the catering was top-notch, her bridal gown was exquisite, and the invitations sent.

At the last minute she was forced to call off the wedding as she refused to sign the prenup that was presented to her. Instead of losing her $8,000  reception deposit, she decided to turn her wedding into a party for 60 needy children and their families, referred to her by  the Salvation Army. She hosted the event wearing her wedding gown.

Ms. Sun’s professional status clearly gave her the confidence to call off the wedding when she saw the terms of the contract. Most women presented with prenups simply sign them. The good news for them is that if their relationship is not short, and they have made life choices that prejudice their financial well-being, they may be able to convince a judge to overrule the prenup.

As I tell my clients, prenups are a short-term solution, that in the long-run may not meet their expectations.

Lawdiva aka Georgialee Lang

All is Not What it Seems: Wealth and Divorce

You may be surprised to learn that many of your seemingly wealthy neighbours are not wealthy at all. They are simply part of a burgeoning group of North American families who live beyond their means. They may have all the outward signs of success: expensive cars, designer wardrobes, extravagant vacations, and upscale homes, but the reality is they owe money to everyone and live in a state of perpetual angst.

When they face an unexpected event, such as the loss of employment, the collapse of a business, a devastating illness, or a divorce their house of cards collapses. What I have seen in almost three decades of working with families in crisis is how often spouses are unaware of mounting debt and overspending, until it is too late. Most frequently the debt is consumer credit loans and unpaid personal and corporate income taxes, together with punishing interest payments and in respect of taxes, penalties and fines owed.

It can be a terrible shock to live in a splashy area of town in a million dollar home only to realize that your husband or wife has remortgaged the property multiple times to support a heavily leveraged lifestyle, and the boat, ATV’s and snowmobiles are owned by the bank!

A recent case in Britain is emblematic of court hearings across the country where apparently prosperous husbands and wives split up, agree to sell assets, pay debt, and share the proceeds, but the sinking economy negates all the good intentions.

A businessman in London made a fortune in the mining industry and was obliged to pay his wife $2 million dollars. He immediately paid her $1.375 million in 1999 and the balance was to be paid over time. But he never did pay her the remaining amount. After several futile court appearances, she asked the judge to order her ex-husband to pay what he owed together with interest for the past 17 years or be sent to prison. The man lived in an expensive rented apartment but insisted he was penniless, deeply in debt, and was relying on housing benefits for the poor, and the charity of his friends and his synagogue.

His ex-wife, of course, argued that her ex-spouse’s alleged circumstances were an elaborate façade meant to deprive her of her rightful entitlement and that he should pay or be sent to jail. The judge sympathized with her, particularly acknowledging that without the funds she may lose her home, but pointed out that there was no evidence that he had any hidden assets or secret funds. The Court declined to order a jail sentence finding that he had no current ability to pay her.

How can a spouse protect herself from a scenario like the one above? Clearly, it would have been best if this lady had received all she was entitled to upfront, but often that is not possible. If the remaining monies had been secured by an asset retained by the former husband that would also have assisted, but again circumstances do not always permit that and judges in British Columbia have been reluctant to encumber a spouse’s share of the property to protect the other spouse. A life insurance policy on the husband only helps if he dies, while still owing monies.

Most frequently this problem of collecting monies after the divorce arises in cases where a spouse has a long-term obligation to pay spousal support. Many spouses fail to realize that if they agree or are ordered to pay support, it will be most difficult to escape the obligation and unfortunately, there are spouses who create situations where they appear to be impecunious. Lump-sum support is one solution but again, judges are loath to order a spouse to give up their capital to pay spousal support.

The lesson to be learned is that spouses must insist on being aware of how family finances are handled during the marriage and that upon divorce a “bird in the hand may be worth two in the bush.”

Lawdiva aka Georgialee Lang