Ontario Court of Appeal Considers Whether Material Change Can Impact a Final Separation Agreement

Written on behalf of Arbesman Hamilton LLP

In a recent ruling, the Ontario Court of Appeal issued a decision on whether amounts payable under a final separation agreement can be amended following a material change in circumstances.

The Facts

The husband and wife in question were married in 1983, and adopted a daughter in 1995. At that time the wife left her job as a legal assistant in order to become a work at home mother. The husband was employed as a lawyer with a power company.

The couple divorced in 2009. The wife continued to live in the family’s matrimonial home, and received additional financial support from the husband. The couple agreed to a partial separation agreement in 2011, in which the husband agreed to pay periodic spousal support of $4,000/month. He continued to do so until the matrimonial home was sold in November 2012, with the couple splitting the net proceeds of the sale. The husband was terminated from his employment one month prior to the sale of their house.

The Final Separation Agreement

A final separation agreement was reached in January 2013. The agreement saw the husband pay the wife an amount based on the value of his two pension plans. As a result, the wife received:

  • $101,519 in cash;
  • $768,151 in a locked in retirement account until the wife’s 65th birthday; and
  • $220,000 in net proceeds from the sale of the matrimonial home.

The couple’s adult daughter continued to live primarily with the husband, who agreed to assume full financial responsibility for her. The husband made a final support payment prior to the agreement being reached. Since he was unemployed at the time, the agreement did not provide for any additional support to be made.

The Husband’s New Employment

In January 2014, the wife filed an application seeking retroactive spousal support dating back to July 2013. She claimed the husband’s finding of a new job constituted a material change under the separation agreement. The husband had found employment with a law firm in July 2013, earning a base salary of $144,000 but had not notified the wife about his newfound employment.

The wife additionally argued their daughter was no longer a child, and having dropped out of college, required no support from her parents.

The wife’s request was based primarily on two sections of the final separation agreement, the first one stating

In the absence of a material change in circumstances she will not seek or make any claims for spousal support from Stanley in the future. In addition to the factors set out herein, the provisions for termination of spousal support as provided for in paragraph 7.2 [respecting periodic payments] also take into consideration the fact that [the husband] was terminated from his employment and the lump sum severance payment that he received in consequence thereof, and the financial provisions that have been made for [the daughter], namely that [the husband] will not receive any ongoing child support nor receive any contributions to [the daughter’s] special and extraordinary expenses from [the wife].

The second important section of the agreement said:

Spousal support may be changed if there is a material change in circumstances, even if the change is foreseen or unforeseen, foreseeable or unforeseeable. A material change in circumstances does not arise from the mere fact that [the husband] has obtained income and or employment subsequent to this agreement coming into effect. Such income and/or employment may be of limited or uncertain duration and/or amount and other circumstances such as [the daughter’s] needs or [the wife’s] financial means may, in any event, negate any income earned or employment obtained by [the husband].

Change in Circumstances

The trial judge found there had been two material changes in circumstances. The first being that the the husband had found employment was making “constant income.”

The second material change related to the couple’s daughter, who was 19 years old, had dropped out of college, and was volunteering in Finland. The trial judge found the daughter’s circumstances caused her to no longer be a “child of the marriage.”

The trial judge noted that the wife had not worked outside of the home since 1985, and despite having applied for over 100 jobs, had failed to find employment since their separation. Her sole means of income were from the funds agreed to in the final separation agreement. The trial judge ordered support payments of $5,400/month be paid to the Respondent retroactively to July 2013. Payments would eventually decrease to $2,068 per month upon the Respondent’s 65th birthday, at which time she would have access to more retirement savings.

The Court of Appeal upheld the trial judge’s decision and dismissed the appeal, finding no errors in the original decision.

The lawyers of Arbesman Hamilton LLP can help you navigate the stressful time of separation, including the process of obtaining a separation agreement. Contact us by phone at 416-481-5604 or through email if you would like to discuss a separation agreement as a means to protect your rights assets in the event of a marital breakdown.