The Million Dollar Cheque That Went Uncashed

Written on behalf of Arbesman Hamilton LLP

The issue of spousal support is often one of the first considerations a couple has to contend with when separating. When a couple is waiting to finalize the details of a separation or divorce, there may be a period where one of the parties pays the other what is known as interim spousal support, which acts as a sort of band aid solution until a final order or agreement is made. The Ontario Superior Court of Justice, Family Court recently heard an interim support case with a particularly interesting set of facts.

30 Years of Marriage and A Successful Business

The husband and wife in this case were married for 30 years before separating in October 2011. The wife was a lawyer before the couple started their family, which grew to include three children. After a break from the workforce, she retrained as a teacher and worked in that field until she retired in 2014. The husband started a computer software company in 1993 and was able to turn it into a successful business, taking home an income of over $1,000,000 in the two years before their separation.

The Husband’s Proposal, The Wife’s Refusal

The couple entered mediation when they first separated. During this process the husband presented the wife with a proposal, that amongst other things, set out to give her 49.9% of the company’s shares (which included 18% she already owned) and a dividend of $1 million, which he cut her a cheque for. This was in addition to the nearly $1 million they had each received after the division of family property. The husband stated that this payout of $1 million would mean that interim support payments would not be necessary.

After reviewing the husband’s proposal, the wife determined she did not agree with some aspects of it, and did not want to accept the money if it meant she may surrender future claims for spousal support or prejudice her right to make other property claims. As an owner of 18% of the company’s shares, she would have been entitled to a dividend of $360,000 of the $1 million offered. The husband refused to write a cheque for the lesser amount, and the couple soon found themselves before the courts.

The Court Weighs In

The court was not pleased to be dealing with the issue, writing, “This case cries out for resolution through careful negotiation and tax planning. There is no reason the parties cannot agree to provide income to the applicant through the medium of a commercial vehicle such as a corporation if it is mutually advantageous to do so,” adding “The parties seem determined to pay their lawyers to fight about almost every aspect of issues that should have been resolvable well before now.”

The wife had been seeking monthly interim support payments of $12,544, as well as a retroactive support payment of $350,891. The court, instead, ordered a lump sum dividend payment of $360,000 as well as a payment of $300,000 90 days later. The court determined that those amounts would be sufficient for the wife to maintain her lifestyle while also avoiding heavy taxation and a complicated refilling of income tax.

The lawyers of Arbesman Hamilton LLP have experience in helping couples navigate the emotional and difficult process of separation, including issues of spousal support. Our aim is to help our clients avoid the pains that can be associated with a high-conflict, drawn-out separation. Call us at 416-481-5604 or contact us online in order to schedule a consultation.