Case reference: Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43
This historical case summary discusses the decision identified above. Later decisions and legislative changes may affect how it applies today. Obtain legal advice about your circumstances.
Family law — Spousal support — Variation on retirement — Double recovery — Pension income — Whether retired payor spouse entitled to seek reduction of support payments to former spouse on basis that pension being received was previously considered in equalization of matrimonial property — Whether spouse who received assets in exchange for capitalized value of other spouse’s pension has obligation to invest those assets in order to produce income – If assets not invested, whether court will impute income to payee spouse, based on what those assets could produce if invested, thereby reducing spousal support obligation.
The parties separated in 1991 after a 36-year marriage in which the wife was a homemaker with primary responsibility for raising their seven children, while the husband pursued his career in education and financially supported the family. In 1994, the husband and wife consented to a judgment dividing their accumulated assets. The husband received approximately $385,000 in assets, of which $333,329 was attributable to the value of his pension. The wife received the matrimonial home, surrounding lands, household contents and RRSPs as her share of the assets, amounting to approximately $370,000. In addition, the husband agreed to pay the wife $3,200 per month in spousal support, indexed annually to the cost of living. At the time of judgment, the husband was earning $115,476 as Director of Education, while the wife had no income from employment. The husband, who had remarried, retired in 1997, and his total pension income thereafter was $8,000 per month. The larger portion of the pension, $5,300 per month, came from assets he retained on equalization, while the smaller portion, $2,300 per month, was earned since separation and not part of the equalization of net family property. The balance of $431 per month the husband receives as a CPP benefit. The wife invested her assets prudently and they are now worth over $493,000. By contrast, the husband’s capital assets exceed his debts by $7,000. In 1998, the husband applied to reduce the amount of spousal support provided for in the consent judgment, claiming that his retirement, reduced income, and systematic depletion of his pension as capital amounted to a material change in circumstances. The husband submitted that, considering the earlier division of assets, the wife had an obligation to contribute to her own support and only the unequalized portion of his pension should be considered when determining support on a variation application. The motions judge accepted the husband’s position, and reduced the amount of monthly support from $3,433.12, indexed, to $950, unindexed. The Court of Appeal raised this amount to $2,000 per month, indexed to the cost of living. The husband appealed from this decision.
Held (L’Heureux-Dubé and LeBel JJ. dissenting): The appeal should be allowed. The motions judge’s award should be reinstated, with the further order that the monthly amount be indexed and arrears, if any, of spousal support paid to the wife.
Per McLachlin C.J. and Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour JJ.: The retired payor spouse was entitled in this case to reduce his support obligation to his former wife on the basis that the pension now being received was previously considered in the distribution of matrimonial property.
A pension is “property” under the Ontario Family Law Act and must be included in the equalization of net family property. Where, as here, a pension is divided by the lump sum method under a compensatory spousal support order or agreement, the pension-holding spouse must transfer real assets to the payee spouse in order to equalize matrimonial property. The payee spouse must use the assets received on equalization to create a “pension” to provide for her future support based upon the principle that the payee spouse should attempt to generate economic self-sufficiency as far as it is reasonable. For spouses who remained at home during a long marriage, self-sufficiency will not be practicable, but where the payee spouse receives assets on equalization in exchange for a part of her former spouse’s pension entitlement, she must use those assets in a reasonable attempt to generate income at least by the time the pension starts to pay out. Failure to make a reasonable attempt to produce an income from equalized assets may result in the imputation of income to the payee spouse, based upon actuarial evidence. The obligation on the payee spouse to generate income from her assets would be satisfied by investing in a capital depleting income fund which would provide a regular annual income.
The support payments should provide a level of income sufficient to maintain a lifestyle that is comparable to that enjoyed during the marriage. Here, the spousal support was mainly compensatory, the purpose of which is to relieve economic hardship suffered by reason of the marriage or its breakdown. When spousal support plays a compensatory role on marriage breakdown, it may be unreasonable to expect the payee spouse to generate investment income from the matrimonial home, as the ability to remain in it usually assists the payee spouse and children to maintain their previous lifestyle. When support is based on need, different considerations apply, so that where the value of the family home has become disproportionate to the means of the parties, equity may require that it be sold and replaced appropriately.
There is no reason per se that spousal support cannot continue past the retirement date of the pension-holding spouse, but need, ability to pay and double recovery must all be considered. It is generally unfair to allow the payee spouse to reap the benefit of the pension both as an asset and then again as a source of income, particularly where the payee spouse receives capital assets which she uses to grow her estate. To avoid double recovery, the court should, where practicable, focus on the portion of the payor’s income and assets which have not been a part of the equalization division when the payee spouse’s continuing need for support is shown. This would include the portion of the payor’s pension earned after separation and not subject to equalization. Double recovery cannot always be avoided, and a pension previously divided can also be viewed as a maintenance asset, where the payor has the ability to pay, where the payee has made a reasonable effort to use equalized assets in an income-producing way and despite this, economic hardship from the marriage or its breakdown persists. Double recovery may also be permitted in spousal support orders/agreements based upon need as opposed to compensation.
In the case at bar, the amount of support should be reduced based on the material change in circumstances and the ability of the wife to reasonably produce an income from her investments. The motions judge’s award of $950 per month was carefully assessed by her and deference must be paid to that decision. The motions judge considered the relevant factors and properly concluded in this case that the unequalized portion of the husband’s pension was the principal consideration in the support to be paid. The Court of Appeal erred in determining that the amount of support awarded was outside the realm of reasonableness, overlooking the obligation to fairly avoid double recovery. The wife would not suffer hardship if double recovery were not permitted, based on the asset position of both parties at the time of the application to vary.
Per L’Heureux-Dubé and LeBel JJ. (dissenting): The Court of Appeal judgment should be upheld. The case is a straightforward matter of assessment of the needs and means of the former spouses in the context of the dynamic relationship that arises from the marriage and its breakdown. The law of support must address a wide spectrum of life experiences. Although the courts have identified models of marriage, none of the classifications can account for all situations. The categories must not be closed and inflexible, and none of the legislative purposes behind spousal support should take precedence over the others. The three bases for support are contract/consent, compensation for economic hardship, and a non-compensatory model related to the concrete needs of the spouses. In this case, support must rest on an assessment of the means and needs of the parties, and the need to compensate the wife, who stayed at home, and gave up economic independence. The first objective is to ensure that the dependent spouse has enough to live on, taking into consideration the past income and living standards of the parties.
The view that the income stream arising out of an already equalized pension should be insulated from contribution to support, because this amounts to double dipping, is rejected. It is mistaken to limit the availability of the pension asset for spousal support and to view the pension as a finally allocated asset, ignoring that it operates primarily as a source of income. The Ontario Family Law Act does not alter the complex factors and objectives governing spousal support before or after the retirement of the debtor spouse. Spousal support continuing past the payor’s retirement does not give the dependent spouse a double benefit of the pension. Even though the income stream belongs to the husband, this does not mean it cannot be accessed in order to redress the economic disadvantages of the wife that continue to flow from the marriage or its breakdown. All income streams are relevant in the assessment of means and needs and of the proper level of support considering the lifestyle and the living experience of the couple.
Upon the husband’s retirement, it was fair in the process of support determination for the courts to consider the assets of both parties and the income that could be generated from them if they were used efficiently. The husband had kept his entire pension rights with the financial and personal security that flows from them, while his wife, by reason of her moderate lifestyle, had made safe investments and had a substantial asset base under her control. The Court of Appeal imputed an income from the assets controlled by the wife but, nevertheless, given the circumstances of the parties, held that the variation of support by the motions judge was unreasonable and raised the amount of support to $2,000 per month. The Court of Appeal judgment acknowledges the lack of independence flowing from the wife’s married life and its breakdown, factoring in her former lifestyle, living standards and her need to acquire financial security. The husband, with a pension of about $100,000 per year, retains a fairly comfortable lifestyle. Under these circumstances, the wife is entitled to a reasonable standard of living without having to engage in a massive program of liquidation of assets.
An analysis based on the nature of the assets may skew the proper approach to support. Here, the needs were established, after making allowance for the efficient use of assets under the wife’s control. These needs should be evaluated reasonably, given the standard of living of the parties during the marriage and the imperative of long-term financial protection.
*source: Lexbox
