Reduction and Termination of Spousal Support

Variation of Spousal Support – A Word to the Wise: The Cautionary Ruling of the Supreme Court of Canada in R.P. v R.C.

Nearly one year has passed since the Supreme Court of Canada (SCC) released its decision in R.P. v R.C., 2011, SCC 65. In R.P. v. R.C., the SCC was asked to determine whether an elderly and retired husband (“R.C.”) had established a material change in circumstances pursuant to s. 17(4.1) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) (“the Divorce Act“) since the original order for spousal support was made and if so, whether his spousal support obligation to his elderly wife (“R.P.”) should thereby be reduced and/or terminated.

The parties were married in Quebec in 1958 and had two (2) children. They separated in 1974 and were divorced in 1984. At the time of the divorce, R.C. was 46 years old and R.P. was 55 years old. R.P. remained in the matrimonial home with the children and R.C. was ordered to pay a combined spousal and child support amount of $1,950 per month to R.P.

In 1987, R.C. applied for a reduction in the amount of support being paid, given that the children were no longer residing with R.P. He later amended his application to seek an order suspending both child and spousal support altogether. R.P. brought a cross-motion to increase spousal support. While R.C. was successful in his application, R.P. appealed the decision and in 1991 the Court of Appeal reinstated spousal support at $2,000 per month (indexed) (the “1991 Order”). At the time, the Court of Appeal held that notwithstanding her efforts, R.P. had not been able to become financially independent owing to her domestic responsibilities. At this time, R.C. did not contest his capacity to pay spousal support but simply denied R.P.’s entitlement to support.

Following the 1991 Order, the parties entered into an agreement to substitute a surety which was incorporated into a consent judgement (the “Surety Order”). In the Surety Order, R.C. surrendered his right to request a reduction in or cancellation of spousal support based on a change in R.P.’s circumstances. The Surety Order essentially replaced hypothecs R.P. had registered against R.C.’s property with an irrevocable banking letter. In 2005, R.C. applied to change the surety and substitute a sum of money for an irrevocable letter of credit. His application was denied.

In 2006, R.C. closed down his business, retired and, sold his house with his second wife, realizing the sum of $2,000,000 which he then divided equally with his second spouse and reinvested for an annual investment income. In 2008, R.C. applied to terminate his spousal support obligation to R.P. citing that there had been a material change in his circumstances pursuant to s. 17 (4.1) of the Divorce Act. R.C. claimed that he was no longer employed; that there had been a market downturn which negatively impacted his assets; and that he had a son in university. At the time R.C.’s application was heard, he was 71 and R.P. was 80. The trial judge held that there had been a material change in circumstances justifying a variation of the spousal support order. R.C.’s spousal support obligation was therefore reduced to $1,500 per month (unindexed). The trial judge made no reference to R.P.’s financial circumstances when determining whether there had been a material change and in determining the appropriate amount of support. Moreover, the trial judge made no reference to or findings regarding R.P.’s expenses. R.P. appealed the trial judge’s decision to the Court of Appeal, which upheld the variation of R.C.’s spousal support obligation and in addition, ordered that spousal support terminate in September of 2010. R.P. appealed this decision to the SCC.

The main issue to be dealt with by the SCC was whether R.C. had in fact established a material change in circumstances since the 1991 Order for spousal support was made, pursuant to s. 17 of the Divorce Act. The Court reiterated that, to be material, the change must be one which, if known at the time, would likely have resulted in different terms to the existing order. Moreover, on an application to vary support, the court should consider the terms of the support order and the circumstances of the parties at the time the order was made to determine whether a particular change was in fact, material. The SCC held that there had not been a material change in R.C.’s circumstances since the 1991 Order for spousal support was made. R.C. had not taken the necessary steps to establish a change in his financial circumstances and so the SCC restored the 1991 Order for spousal support. While R.C. applied to the SCC to introduce fresh evidence respecting his 1990 income to meet the evidentiary burden he failed to meet in 1991, his application was dismissed as it did not meet the test for admission set forth in Palmer v. The Queen, [1980] 1 S.C.R. 759.

The SCC found that the Court of Appeal erred not only in finding that R.C. had established a material change in his financial circumstances, but in making its own unilateral assessment of the financial facts. The SCC concluded that there were two (2) crucial evidentiary gaps: first, R.C. failed to provide clear evidence of actual losses in his investments; and second, there was no evidence of R.C.’s financial situation in 1991. Therefore, the Court was unable to make any reasonable inferences with respect to a material change in R.C.’s circumstances. The Court of Appeal terminated R.P.’s support and in doing so applied the clean break theory which had been declared inoperative by the SCC in 1992 in Moge v. Moge, [1992] 3 S.C.R. 813.

The SCC stressed that a litigant cannot simply rely on a momentary downturn in the financial markets to claim that a material change in circumstances has occurred. Financial markets fluctuate, as do values. A litigant should not be able to simply “cherry-pick” a date when his or her investments decreased in value to establish a material change in circumstances. The SCC cautioned that allowing a litigant to do so may yield unwarranted benefits for the support payor in that he or she could rely on a downturn in the market to reduce or terminate his or her support payments, while at the same time regain the lost value of their unsold investments once the market rebounds. The SCC concluded its decision with a further cautionary note: do your due diligence! Ultimately, R.C.’s failure to adduce evidence of his circumstances, which was readily available to him, proved fatal for him.

While there have not been a slew of cases that have dealt with the SCC’s decision in R.P. v. R.C., it has been referenced as the case which reinforces what would constitute a material change in circumstances.

Prepared by Jessica Gonzalez, Associate at RV Law

Special thank you to Joshua Albrecht for his assistance with research.