More Money, More Problems: Calculating Spousal Support Obligations For Wealthy Individuals
In Halliwell v. Halliwell 2017 ONCA 349, the Ontario Court of Appeal examined whether a trial judge had erred in a decision involving a high net-worth couple and a substantial equalization order.
The Building of the Family Business
The husband and wife married in 1983 and had two children (born in 1986 and 1988) before separating in 2009. They ultimately divorced in 2016 after 32 years of marriage.
The husband and wife had each taken turns being the primary earner for the family during the first ten years of their marriage. In 1994, the husband incorporated the first of many companies the couple would start and work at together. It was during this time that their standard of living took off as they began to enjoy an affluent lifestyle, including frequent travel and a vacation home.
The wife continued to work as the administrator of a number of their companies after their separation in 2009. The wife was paid about $11,500 per month until October 2010, when the husband informed her that she was no longer allowed to work for the companies. In 2011, a consent order was made, requiring the husband to pay the wife $10,000 per month as well as a $135,000 advance equalization payment.
Determination of Support at Trial
The original trial was heard to determine issues of spousal support, retroactive spousal support, and equalization. While both the husband and the wife worked at the companies they started, the trial judge stated they were not equals in business. The wife performed mainly administrative duties, and any further participation was limited by her role as the primary caregiver for the couple’s two children.
Spousal support in Canada is determined by Spousal Support Advisory Guidelines, which set out support obligations based on, amongst other factors, income of the parties. However, the Guidelines’ formulas only account for income up to $350,000.
The trial judge’s decision ordered the husband to pay the wife more than $3 million in equalization payments, $29,000 per month in spousal support, and $1 million in retroactive support. The monthly support number was arrived at by calculating the husband’s average income over the previous five years, which came out to about $1,000,000 annually.
The husband appealed all of the amounts ordered by the original trial judge. One of the husband’s arguments was that the trial judge had improperly calculated the value of two of the companies the husband owned as well as their assets. The Court of Appeal dismissed this ground of appeal, explaining that two experts had also agreed on similar values for the companies and their assets.
The husband’s second ground of appeal was the trial judge made an error in establishing the monthly support payments of $29,000. The Court of Appeal found two errors in the trial judge’s determination of support. The first was that the equalization payment of $3,000,000 would go a long way in compensating the wife. The second was that the trial judge had not taken into account the potential investment income the equalization payment could provide.
As a result of its findings, the Court of Appeal adjusted the husband’s income for the purpose of calculating spousal support to be $675,000, reducing monthly payments to $21,000
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