You May Be on the Hook for Longer Than You Think

In the case of Greffe v. Greffe, the parties separated after being married for 25 years.  The husband had been the primary wage earner throughout the marriage working as a steel mill foreman and municipal councillor, currently earning about $150,000.  The wife stayed at home to care for their children and took on the traditional homemaker role for the family.

At the time of the couples’ separation, they negotiated a separation agreement that was incorporated into a final divorce order in 2008.  The provisions required the husband to pay the wife $2,000 in spousal support until 2017, when the wife reached the age of 60.  In agreeing to this arrangement, the wife chose to forgo receiving an additional $5,000 per month that she would be currently entitled to in combined child and spousal support, as the youngest child lived with her and was still financially dependent. Additionally, the equalization between the parties was waived as part of their settlement.

A few years later, the husband lost his job at the steel mill and was not re-elected as municipal councillor.  As a result, his income went from $150,000 in 2009 to about $97,000 in 2010 and he was now earning $45,000 at a new job and still had a long way to go before he would be entitled to his pension.  In light of his changed circumstances, the husband brought a motion to the court to have the support order and underlying separation agreement varied.

The court reviewed the terms of that separation agreement, which it characterized as “remarkably rigid on the issue of the spousal support obligation and its irrevocability.”  The court noted that the husband’s job loss was one of the four stipulated factors that could compel a reduction in spousal support but pointed out that this event could not be considered in isolation.

After scrutinizing the husband’s pension entitlement, the court observed that the husband’s early job loss had, in fact, not affected his pension entitlement and he was still able to receive the pension at the same time and age as if he had not been let go.  More importantly, the husband’s job loss had not amounted to the “material change in the circumstance” for which the agreement expressly called for as a pre-condition to it being varied.  The fact that the husband lost his job at the steel mill was not unforeseeable and the agreement specifically contemplated precisely such an eventuality; in fact, the agreement had a formula for reviewing spousal support in such an event.

The court additionally pointed out that despite the significant drop in the husband’s annual income, he had continued to take frequent trips and had purchased a $45,000 car.  Although the husband was entitled to lead the lifestyle that he chose, the court said he did so “at his own” peril and the wife should not be penalized for his failure to set aside a reserve from which to draw from if his income changed.

Simply put, while the parties’ separation agreement envisioned that the husband might experience a significant reduction in income and directed a reduction in his support obligation pursuant to a strict formula if that happened, in this case, the threshold that had been agreed to by the parties had not been met.  The agreement had been reached with the benefit of legal advice on both sides and was effectively watertight. The court accordingly dismissed the motion.

This case shows that it’s important to get good legal advice when you are negotiating a separation agreement to ensure that it incorporates clear and comprehensive provisions that deal with the effect of any change in circumstances.