When and Why Retirement is NOT Considered a Material Change in Circumstances
Hanniman v Hanniman, 2017 ONSC 7536
The Applicant and Respondent signed a Separation Agreement which stated that the Applicant would provide spousal support to the Respondent from 2011-2020, and include her as a beneficiary of his life insurance policy. The Agreement further specified that the Separation Agreement may be altered if there is a “material change in circumstances”, including either party’s retirement. These obligations were also made out in a Divorce Order around the same time.
Eight months after signing, the Applicant voluntarily retired from the RCMP at the age of 52 after a 35 year career. He is moving to terminate his spousal support obligations and his obligation to maintain the Respondent as a beneficiary of his life insurance policy, due to a material change in circumstances.
The Divorce Order
Before a variation order in respect of a spousal support order can be made, the court must decide whether the Applicant’s retirement is a “material change in circumstances”, sufficient to justify altering the original agreement. This does not ask whether the change was foreseeable at the time the original order was made, but whether an income reduction due to retirement was taken into account or contemplated in the original order.
Justice Bell found that the Applicant’s retirement did not constitute a material change because it does not automatically result in an income reduction. While retiring from the RCMP would affect his income, whether the Applicant can still work and generate income is a crucial consideration for determining whether the circumstances have sufficiently changed. The court found that he still has the capacity to find employment; given that he already had a position teaching part-time at a university. The Applicant failed to lead evidence that his earning capacity was significantly altered, even if he does find employment. The change was not material enough to justify varying the divorce order.
The court notes that evidence that a payer retired in order to frustrate a support order is a very important militating factor against finding a material change. While retiring at such a young age in the face of this Agreement may suggest that that was the Applicant’s intention, the court makes clear that it does not believe that is the case here. The Applicant was an RCMP officer who had been on the force for over 35 years, and suffered from a minor disability as a result of a gunshot wound. In essence, the Court believes that the Applicant had a full career, and leaves the issue of his true intent alone.
The Separation Agreement
The second question is whether the court should vary the Separation Agreement. This question requires the court to consider the intention of the parties when they signed a contract, especially the provision specifying that spousal support may be changed upon the Applicant’s retirement.
The court finds that the parties could not have intended to include a provision that would allow the Applicant to automatically stop paying spousal support when he retires when it was a few months after they entered into the agreement. The fact that retirement may constitute a material change, rather than shall, was clearly an important factor.
Justice Bell looked at the incomes of the parties at the time of signing, and how little time has passed. The fact that the Applicant’s retirement was voluntary is important.
The court also recognized that the Respondent was clearly willing to forego her claim to indeterminate spousal support for an arrangement that only gave her 10 years, to permit her to plan her financial affairs.
In the end, Justice Bell comments that Separation Agreements must not be taken lightly, and that parties must be held responsible for the promises they make. The Applicant’s retirement was clearly anticipated by the parties when designing the Separation Agreement and in the final order. Given same, the court held that the Applicant’s retirement cannot be considered a sufficient “material change” that warrants the variation of the Applicant’s responsibilities to pay spousal support to the Respondent.