When A Deal Is Not A Deal: The BC Court Of Appeal On Spousal Support And Agreements

• Published date: 13 July 2020
• Subject Matter: Litigation, Mediation & Arbitration, Family and Matrimonial, Family Law, Trials & Appeals & Compensation, Divorce
• Law Firm: Clark Wilson LLP
• Author: Ms Diane Bell, Chantal M. Cattermole, James Cudmore, Jeannette Aucoin, Emily Raven, Sarah Tradewell and Kim Brown

The Court of Appeal recently released an important decision on spousal support.

In Nicholl v. Nicholl, 2020 BCCA 173 Ms. Nicholl appealed the dismissal of her application to set aside child and spousal support terms in the parties' Separation Agreement (the "Agreement") on the basis that the chambers judge failed to determine Mr. Nicholl's income for support purposes, and failed to conclude that the Agreement did not substantially comply with the objectives of the Divorce Act. Her appeal with respect to spousal support was allowed.

The couple separated after a 24-year relationship. They had children together and significant assets, including a family business. Ms. Nicholl, who had various academic achievements and degrees, worked part-time so that she could take care of the children and support the family business. Mr. Nicholl operated the family business (the "Business"), which was quite successful. In 2011, Ms. Nicholl started working full-time as a professor at UBC.

After attending mediation, the parties executed an Agreement dealing with child support, spousal support, and property division A "butterfly transaction" (for tax purposes) was used to pay Ms. Nicholl, through her own corporation, one-half the value of the Business, namely $5,400,000. Years later, Ms. Nicholl learned that Mr. Nicholl's income was substantially greater than was set out in the parties' Agreement, and applied to court to set aside the support terms on the basis of Mr. Nicholl's substantial income.

The Court of Appeal found that the chambers judge had erred in not undergoing a comprehensive analysis of the couple's respective incomes and standards of living. The chambers judge incorrectly applied the Miglin test in determining whether Ms. Nicholl could make a compensatory claim for spousal support notwithstanding the parties' Agreement. Also, the judge failed to take into account that part of the Milgin test which analyzes the substance of an agreement and whether it aligns with the objectives of the Divorce Act to, "reflect. an equitable sharing of the economic consequences of marriage and its breakdown."

The Court of Appeal also found that while the Spousal Support Advisory Guidelines may be valuable in determining whether an Agreement complies with the objectives of the Divorce Act, such a comparison is not an absolute requirement. The objectives of the Divorce Act include that couples are entitled to finality, certainty and the benefit of settling their own affairs on...