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Posted on August 1st 2011 in Family Law

When is Lump Sum Spousal Support Appropriate

When a marriage or common law relationship breaks down one of the issues that must be addressed is spousal support. In addition to deciding whether spousal support should be paid, and in what amount, a decision must be made as to whether the support should be paid in one lump sum or in the form of periodic payments. Traditionally, periodic payments are the most common form of spousal support, whereas lump sum payments tend to be reserved for more unique circumstances.

The Ontario Court of Appeal recently provided direction concerning when a lump sum award for spousal support is appropriate.

The Facts

The case of Davis v. Crawford involved a couple that had lived as common law spouses for 23 years. At the time they began their cohabitation, Ms. Davis was 41 and worked full-time in the field of human resources. In 1999, Ms. Davis began to experience some serious health problems and in 2000 she retired from the workforce.

In 1982, 42 year old Mr. Crawford started a collection business with a business partner. Over the years, the business became quite successful.

During their cohabitation, the parties enjoyed a comfortable lifestyle and had always lived in “upscale housing.” One of their hobbies was to search for and buy properties with older “tear down cottages.”

Following their separation, Ms. Davis had her interest in a property the couple had purchased together (the White Lake property) and her $1,200 a month workplace pension. Mr. Crawford had his share of the net proceeds of sale of the White Lake property, his half-share in his collection business and his share of the tear down cottage properties that he continued to acquire with his new live-in.

The Trial

At trial, Ms. Davis sought lump sum spousal support. Mr. Crawford argued that Ms. Davis was not entitled to any spousal support.

The trial judge ordered Mr. Crawford to pay Ms. Davis a lump sum of $135,000. In reaching this conclusion, the trial judge took into consideration the following factors:

  • That Ms. Davis’ existing assets and means were considerably less than Mr. Crawford’s.
  • The significance of the parties’ cohabitation, specifically that they relied on each other for financial and non-financial support over a lengthy period.
  • That Ms. Davis would never be able to maintain the reasonable lifestyle she had enjoyed with Mr. Crawford. She ordered that the support be paid as a lump sum. The trial judge found that Mr. Crawford had been less than credible about his financial situation and she was concerned that he would not pay periodic support. She was also concerned that without a clean break Mr. Crawford would continuously bring Ms. Davis to court to vary the spousal support.

The Appeal

Mr. Crawford appealed the decision arguing that contrary to what the trial judge found, the parties’ assets and means were approximately equal. He claimed that his only assets were his RRSP and his share of the proceeds of the White Lake property and that any other monies attributed to him were unsubstantiated speculation on the part of the trial judge.

The Court of Appeal upheld the trial judge’s decision to award lump sum spousal support. While the Court agreed that a lump sum award should not be made in the guise of support for the purpose of redistributing assets, it found that “the purpose of an award must always be distinguished from its effect” and that “Any lump sum award that is made will have the effect of transferring assets from one spouse to the other.” The Court went on to list the factors that should be taken into account in deciding whether lump sum spousal support is appropriate.

1. The payor’s ability to make a lump sum payment without undermining his/her future self-sufficiency.

2. The perceived advantages of making a lump sum award, which can include but are not limited to:

  • Terminating ongoing contact or ties between the spouses for any number of reasons (for example: short-term marriage; domestic violence; second marriage with no children, etc.);
  • Providing capital to meet an immediate need on the part of a dependant spouse;
  • Ensuring adequate support will be paid in circumstances where there is a real risk of non-payment of periodic support, a lack of proper financial disclosure or where the payor has the ability to pay lump sum but not periodic support; and satisfying immediately an award of retroactive spousal support.

The disadvantages of a lump sum award, which can include but are not limited to:

  • The real possibility that the means and needs of the parties will change over time, leading to the need for a variation;
  • The fact that the parties will be effectively deprived of the right to apply for a variation of the lump sum award;
  • The difficulties inherent in calculating an appropriate award of lump sum spousal support where lump sum support is awarded in place of ongoing indefinite periodic support.

It should also be remembered that, while periodic spousal support is tax deductible, lump some support is not. If you require advice with family law matters one of the lawyers in our family law group would be pleased to assist you.