Racco v Racco, 2014 ONCA 330, 373 DLR (4th) 240

This case addresses the issue of lump sum spousal support.

Background

The parties were married in June 1989 and separated in 2011.  The parties had two children together.  “During the marriage the parties developed a very successful real estate business in the Oakville-Burlington area” (paragraph 3).  The couple marketed themselves as a team, “Team Racco”, and had combined net incomes of $537,211 in 2008, $377,286 in 2009 and $319.696 in 2010 (paragraph 3).  In early 2011, the husband was charged with sexual assault of a female employee.  The parties separated shortly thereafter.

The appellant husband took steps to exclude the respondent from the home and business.  The respondent wife did not return to real estate after being shut out of the business by the appellant and devastated by the criminal proceedings.  The parties had resolved all issues relating to their property and children.  The issue of spousal support, however, was litigated in November 2012.

The trial judge found that the appellant husband would be less successful financially in the future as a result of his own criminal misconduct and also his unilateral termination of the partnership with the respondent” (paragraph 12).  Further, the trial judge found that “imputing significant income to the appellant for support purposes would be futile and thus a lump sum payment was the appropriate response to this ‘practical reality’” (paragraph 12).

The trial judge further found, with respect to the respondent’s income, that she chose to leave a lucrative career for one that was not as profitable.  The trial judge held that she was not entitled to ongoing periodic support, but was entitled to “transitional” support “following the termination of the partnership by the appellant” (paragraph 13).  Thus, the trial judge awarded lump sum support in the amount of $200,000.

Analysis

The Court of Appeal cited Moge v Moge, [1992] 3 SCR 813, as it established the compensatory model of support.  Thereafter, Bracklow v Bracklow, [1999] 1 SCR 420, formally recognized compensatory, non-compensatory, and contractual entitlements to support.  The Court of Appeal found that “Generally speaking, compensatory support focuses on the advantages and disadvantages flowing from the marriage or its breakdown, while non-compensatory support focuses on need” (paragraph 24).

Was the Respondent entitled to support?

The Court of Appeal held that section 15.2(5) of the Divorce Act, which requires that the court not take into consideration any misconduct of a spouse in relation to the marriage, “does not preclude a court from considering relevant misconduct outside the marriage” (paragraph 29).  As such, the Court of Appeal saw no error in the trial judge considering the husband’s “criminal conduct which led to economic hardship for the respondent” (paragraph 29).

Should the award have been a lump sum?

The Court of Appeal upheld the trial judge’s decision to award lump sum spousal support as the Husband had the ability to pay and the trial judge properly took into consideration the “animosity between the parties, a history of non-payment by the appellant, the possibility that the appellant’s financial situation would continue to be precarious, the desirability of terminating personal contact, the need to effect a retroactive award of support and the need to provide capital to the respondent” (paragraph 31).

Was the quantum of support excessive?

The Court of Appeal found that the trial judge demonstrated that he considered the objectives of section 15 of the Divorce Act, but it would have been preferable if he had referred to how the quantum of support was reached.  The Court of Appeal further found that the lump sum award in the amount of $200,000 was consistent with the Spousal Support Advisory Guidelines as the SSAG suggests a lump sum payment between $180,000 and $220,000 for a term of four years given the parties incomes.

What is the nature of “transitional” support?

The Court of Appeal found that “transitional support is not a category of support” (paragraph 39).  However, the Court of Appeal found that this description “does not reflect what the trial judge actually awarded” (paragraph 38).

The Court of Appeal found, according to Moge, that “limited-term support should be rarely awarded in marriages of long duration.  Where limited-term support is awarded after a long term marriage, particularly one with children, the term must be long enough to satisfy the objectives of the Divorce Act” (paragraph 40).

Conclusion

The trial judge’s reasons, in the context of the evidence before him, “support the conclusion that the lump sum award incorporated elements of compensatory, non-compensatory, and retroactive support” (paragraph 43).  Further, the Court of Appeal found that “the court cannot lose sight of the individual circumstances of a case in determining both entitlement and quantum under section 15 of the Divorce Act” (paragraph 44).  The reasons of the trial judge recognized the “advantages and disadvantages arising from the marriage and its breakdown as well as the economic hardship arising from the breakdown of the marriage” (paragraph 46).

As such, the Court of Appeal dismissed the husband’s appeal and did not interfere with the $200,000 lump sum payment ordered by the trial judge.