I will confess at the outset, this blog is a little long and this is because I was struggling with the question about why, following separation, the net incomes of the parties are not just equally divided. What follows is a discussion, and my largely failed attempt to answer my own question.
Each time I review the Spousal Support Advisory
Guidelines Revised Users Guide (“RUG”) online, found here: SSAG RUG it is clear to me why the Spousal Support Advisory Guidelines (SSAG) were
written in the first place. Prior to the
SSAG, there had been decades of conflicting and unsatisfactory court outcomes
when it came to spousal support applications.
The SSAG were written as a response to years of complaints from lawyers,
judges and the general public, who pointed out that there were no rules to
follow, and therefore there was very little consistency in spousal support
awards.
First, a little background information. What is spousal support anyway and why do people have to pay it?
The underlying reasons for an order of
spousal support is the principle of equitable sharing of the economic
consequences of marriage and marriage breakdown. This from a well-known and often cited case , called
Chutter v. Chutter 2008 BCCA 507 . In other words when a marriage breaks down,
a court can order a sharing of the economic consequences, which,
contrary to common perception, means
sharing economic consequences of marriage breakdown, not necessarily sharing of
income. And I will go one step further
to say as a caution readers that income sharing does not mean equal sharing.
The
SSAG's rely on mathematical formulas in order to determine spousal support as a
percentage of each party’s incomes, and the percentage depends on a host of
factors including but not limited to the length of the relationship, the incomes
and ages of the parties, and the ability of the parties to earn income and be self-sufficient
after the breakdown of the relationship.
The online resources provide a complex explanation which I will not go into here.
The
SSAG formulas generate ranges for spousal support amount (and
for duration as well unless the conditions for indefinite (duration not
specified) support are met). The ranges allow parties and their lawyers, or
a court, to adjust amount (and duration) to take into account the specifics of the
particular case in light of the support factors and objectives found in the Divorce
Act, which are:
The Divorce
Act at 15.2(6): a spousal support order should take into
account all of the following factors:
(a) recognize
any economic advantages or disadvantages to the spouses arising from the
marriage or its breakdown;
(b) apportion
between the spouses any financial consequences arising from the care of any
child of the marriage over and above any obligation for the support of any
child of the marriage;
(c) relieve
any economic hardship of the spouses arising from the breakdown of the
marriage; and
(d) in
so far as practicable, promote the economic self-sufficiency of each spouse
within a reasonable period of time.
Section 15.2(4) of the Divorce Act also says that the court must consider
the condition, means, needs, and other circumstances of each spouse, including
the length of time the spouses cohabited and the functions performed by each
spouse during cohabitation. It
is important to note that the means of each spouse
includes his or her capital base, and this is something that often gets overlooked in calculating spousal support.
Why do parties have to pay spousal support? What does it mean to compensate a spouse?
“Compensatory spousal support” is paid to compensate
a spouse for sacrifices made during the relationship in
order to recognize and account for the economic disadvantages or advantages
flowing from the role taken by the spouses in the marriage. That's a fancy way of saying if you gave something up or made sacrifices and allowed your spouse and or his or her career to flourish, you may be entitled to compensation in the form of sharing income with your spouse.
“Non-compensatory spousal
support” is intended to narrow the gap between the needs and means of the
spouses upon marital breakdown which is why it is often referred to as the
"means and needs" approach to spousal support. Again, a fancy way of saying, if one of you has a significantly higher income, the lower income earner may be entitled to share in that income. Where compensatory principles do not apply, need alone may be
sufficient to ground a claim for spousal support. The courts have said clearly that “the primary
burden of meeting the needs of a spouse after the breakdown of the relationship
is on the former partner rather than on the state” (This from the Chutter
case above, at paragraph 54). That said, there is a
clear obligation on the lower income earning recipient spouse to make efforts at self- sufficiency,
depending on their age, training, work experience and so on. The Family Law Act s 161(d) FLA Section 161
And if you feel like reading a case, read this one: Kneller
v. Greenwood 2015 BCSC 1410
The point to be made here and it may be hard to accept if you are the recipient, is that the equalization of the economic consequences of the marriage or its breakdown does not necessarily mean equalization of net disposable income. The equalization of net disposable income is not the legal test for compensatory spousal support. Another case you may want to read: Armstrong v Armstrong 2012 BCSC 166 2012.
The SSAG RUG gives a few examples of
when true equalization of net disposable incomes may be appropriate, for example, where only pension income is being shared after a
very long marriage, of 25 years or more, or where both spouses are low income,
or perhaps where both spouses are employed after a long marriage, but with a
significant income disparity. The
writers of the SSAG were clear that they had chosen the equalization of income, (50% of the
gross income difference) as the maximum
level of income sharing. More
detailed discussion can be found here HERE
A discussion about sharing of individual
net disposable incomes (INDI) can be found here INDI and I particularly appreciated the explanation of why the
range of support is between 40 and 46 (NOT 50%) percent of the INDI which the writers
confirm was done deliberately stating,
“Despite the intellectual attraction of a 50/50 split, there are a number of practical problems that convinced us that it was not appropriate to set the upper limit of the range there. First, very few courts are currently prepared to push spousal support amounts that high. Second, there is a live concern for the access-related expenses of the payor spouse, expenses that are not otherwise reflected in the formula. Most payors are exercising access and most are spending directly upon their children during the time they spend with their children. Third, there are concerns for the payor in the situation where the payor has employment-related expenses and the recipient spouse is at home full time and receiving large spousal support.”
So, what if there are children and we share parenting time?
Cases
where parties share children on an approximately equal basis also often result
in spousal support payments that equalize net disposable income. A discussion of those principles can be found
here HERE
In
shared custody or shared parenting situations, where neither spouse has re-partnered
and there are no new children in either household, the SSAG says that the
starting point should be an amount of spousal support that leaves each
household with equal net disposable income. The SSAG range in
shared custody cases always includes this equal sharing of the net disposable
income (50/50 NDI split), to recognize the importance of this principle. When
doing the calculations, sometimes the equal NDI point is in the mid-range, but
it is just as often lower or higher in the SSAG range. The important thing to note is that it is always available
as an option in shared parenting cases.
What are the Courts saying about this?
Whereas Ontario Courts tend towards an equal sharing of NDI in shared parenting situations, the Courts in British Columbia have continued to default to generating awards in the mid-range of the SSAG. Although there is no support or justification within the SSAG to default to the mid range, in R.D.L.J. v. B.S.J., 2014 BCSC 1566, the court suggested that an equal NDI outcome, while not out of the question, would be “a significant change in the practice and the law in British Columbia”.
In this writers opinion, this trend needs to be changed.
There
are a few B.C. shared custody cases where the courts explicitly equalized
net incomes see here : A.M.D. v. K.R.J., 2015 BCSC 1539 as well as Paisley
v. Paisley, 2014 BCSC 1752
So, to answer my original question:
Is there a clear answer on How to divide Net Disposable income? Yes, and no. The Guidelines provide the range within which the answer lies.
Should be 50/50 NDI be the norm? Well, this depends on whether you are the recipient or the payor, but the answer from the courts and from the drafters of the SSAG appears to be that 50/50 NDI is not the norm.
For self represented litigants, a useful website is
the BCSC site: http://www.courts.gov.bc.ca/supreme_court/self-represented_litigants/
And as always, speak to a lawyer if you need legal advice.
