This article was originally published in Law Times on February 27, 2017.
High-income earners, long-term marriages resulting in compensatory support claims and retirement were the focus of the Court of Appeal decision in Schulstad v. Schulstad, 2017 ONCA 95. The decision was released earlier this month.
In this case, the parties had been in a long-term (24-year), traditional marriage. Campbell Karl Schulstad was a surgeon and Diann Borden Schulstad was a stay-at-home mother. They separated in 1990. During the initial years of the marriage, Diann Schulstad worked outside the home and put her husband through medical school. The couple then relocated to Ottawa so that Campbell could complete his residency. After their child (now independent) was born, Diann Schulstad left the workforce to care for their son and home, while Campbell Schulstad worked as a surgeon.
At the time of these proceedings, Campbell Schulstad had been paying $10,000 per month in spousal support, which had been indexed since the initial order. He also had maintained life insurance as security, at a cost of approximately US$300 per month. Campbell Schulstad lived in the United States and Diann Schulstad continued to live in Canada. The basis of Diann Schulstad’s spousal support entitlement was rooted in both needs-based and compensatory principles.
Approaching the age of 70, Campbell Schulstad took steps toward retirement. This included starting a proceeding to terminate his spousal support and corresponding life insurance obligation to Diann Schulstad, in anticipation of his income being drastically reduced following his retirement. The issues before the court were whether he commenced his proceedings prematurely, as he had not yet retired, whether the application judge erred in finding Campbell Schulstad’s retirement a “material change in circumstances” and whether the application judge erred in finding that the parties’ post-retirement financial circumstances would be similar, warranting a termination of Campbell Schulstad’s spousal support and insurance obligation.
Quite rightly in my view, the judge of first instance and the Court of Appeal for Ontario both found that Campbell Schulstad’s proceeding was not premature, and that the impact of his impending retirement was a material change in circumstances. On the issue of prematurity, cases where payors propose to retire often create a very real and practical quandary. Campbell Schulstad was nearly 70 years old when he began to take steps toward retirement. Having such a significant support obligation makes it impossible to take any concrete steps toward retirement without prior approval of the court to do so. Very problematic results could ensue if our courts were to say, “No, we will not hear you unless and until you have completed the act of retiring.” One can easily imagine a support payor working in a given field until well into their sixties, retiring and then having a court determine that they ought not to have retired and must maintain their support payments. People in this age bracket would undoubtedly find it difficult, if not impossible, to become re-employed in order to once again earn at the level they were earning in order to meet a support obligation. The old employer would likely have replaced the person, and many new employers do not want to invest in new employees who are at what’s considered to be “retirement age.”
As a result, allowing support payors to have this issue determined before retirement actually takes effect seems to be the most appropriate way of dealing with these cases.
Naturally, however, the evidence has to be present before the court that the proposed retirement is actually going to happen and the Court of Appeal for Ontario makes clear that speculative cases will not succeed. But in this case, Campbell Schulstad had already taken some steps with his employer to wind up his practice with a concrete end date in sight. Simply put, it was clear to the court that retirement was going to happen imminently.
With respect to the ultimate result, the Court of Appeal had outstanding questions as to what Campbell Schulstad’s actual post-retirement financial circumstances would be in comparison with those of Diann Schulstad. In this regard, the court of appeal found that the application judge erroneously concluded there was no need to assess his finances based on the equivalent value of his income and income-generating capital converted from U.S. to Canadian funds and the percentage return that could be generated by his capital. Both the judge of first instance and the Court of Appeal, however, accepted the fact that at a certain point in time, the parties would be expected to draw down on their capital savings and investments in order to fund their future. Given the outstanding financial comparison questions, the Court of Appeal remitted the matter back to the court of first instance for determination on those issues and to assess the level of support payable (if any) within the parameters of the Spousal Support Advisory Guidelines.
What is clear from this case is that income reduction as a result of retirement will be a sufficient factor to reassess ongoing support obligations, but it will not necessarily result in an altogether termination of support. Instead, clear evidence of future post-retirement income generation has to be put forward and the ongoing quantum of support will be assessed against the support ranges found in the Spousal Support Advisory Guidelines, which may result in no further support owing or some smaller amount. However, with the right evidence of a clear, impending retirement, support payors will not be forced to wait until after the act of retirement is complete before seeking recourse from the courts.