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Misrepresenting Income: Are You Entitled to Spousal Support?

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Are You Entitled to Spousal Support Increase if Your Spouse Misrepresents Income?

If you negotiate a separation agreement, but later find out that your ex-spouse understated his or her income, are you entitled to spousal support in a higher amount? The answer depends on factors such as the grounds for entitlement to spousal support, whether the calculation of spousal support was tied to income, and the nature of the misrepresentation.

In Best v. Best, 2016 NLCA 68, the court refused to increase the amount of spousal support payable pursuant to a separation agreement, even though it was later discovered that the husband’s income was approximately double the figure stated in the agreement. Let’s examine the decision to understand why the question (“Are you entitled to spousal support increase if spouse misrepresents income?”) was answered in the negative.

Entitlement to spousal support set out in separation agreement

Mr. and Ms. Best had two children during their 11 year relationship. After their relationship ended, Mr. and Ms. Best executed a separation agreement which dealt with child support and spousal support. The separation agreement was drafted by a lawyer and both parties obtained independent legal advice before signing the agreement in December 2009. In the separation agreement, Mr. Best’s income for calculating the quantum of child support and spousal support payments was incorrectly stated to be $178,932. This was a significant error, as his income was actually approximately twice that amount.

Spouse asks: “Am I entitled to spousal support increase?”

Ms. Best asked the court to amend the amount of child support and spousal support payable under the separation agreement in light of Mr. Best’s true income. At trial, both parties conceded that the misrepresentation of Mr. Best’s income in the agreement was a significant but innocent error. The trial judge accepted that a mistake had been made in stating Mr. Best’s income and ordered that child support be adjusted retroactively based on his true income. However, the trial judge denied Ms. Best’s request to increase the amount of spousal support. The Court of Appeal dismissed Ms. Best’s appeal.

Child support clearly based on income

Clause 7 of the separation agreement addressed the calculation of income for purposes of determining child support. Mr. Best’s child support obligation was calculated by applying the Federal Child Support Guidelines to his erroneously stated income of $178,932. Because the child support obligation was calculated based on Mr. Best income, the amount was adjusted retroactively using his actual income.

Spousal support under the separation agreement was not tied to income

There was no reference in the separation agreement whatsoever that the amount of spousal support was being made on the basis of Mr. Best’s income (as was clearly the case stated in relation to child support). The court concluded that the amount and entitlement to spousal support in the agreement was not based on Mr. Best’s income. Rather, the wording in relation to spousal support was clear and unambiguous and set a fixed amount for a fixed period. Mr. Best’s spousal support obligation was set at $3,374 per month until the earliest happening of one these events: the youngest child turning 18 years old (a period of about 10 years from the date the agreement was executed); Ms. Best earning more than $100,000 per year; Ms. Best commencing a common-law relationship; or Ms. Best getting remarried.

In making its decision, the court relied largely on Ms. Best’s decision to ignore the advice of her lawyer, who advised that more financial information should be obtained before the separation agreement was finalized. By her conduct, Ms. Best was taken to have accepted as adequate and appropriate the quantum and duration of spousal support as set out in the separation agreement regardless of the actual level of income Mr. Best might have been earning.

The court also noted that Ms. Best had not established that she had lost out financially as a result of the agreement. If Ms. Best had taken her lawyer’s advice and awaited further financial information, and if spousal support had been determined in the separation agreement by applying the Spousal Support Advisory Guidelines to the correct income figure, it could not be assumed that the ten-year duration of support would not have been offered. In this regard, the Court of Appeal discussed the grounds for entitlement to spousal support (at para. 21):

The purpose of spousal support may be compensatory, contractual or non-compensatory in nature. In general, the intention is that the support should promote the economic self-sufficiency of each party within a reasonable period of time, taking account of all the circumstances. […] In addition, spousal support is intended to compensate the recipient for losses and hardships caused by the marriage such as forgone careers and missed opportunities […].

In this case, Ms. Best was an experienced nurse capable of earning significant income of her own. In the absence of the separation agreement, it could be expected that spousal support (both compensatory and non-compensatory) would have been limited in duration to less than ten years.

Take home point: Are you entitled to spousal support increase if income has been misstated?

If there has been a misrepresentation of your ex-spouse’s income, there are a number of factors to be considered to determine if you are entitled to spousal support at an increased rate. Spousal support can be calculated by applying the Spousal Support Advisory Guidelines to income, but it can also be dealt with contractually without specific reference to income. In the latter case, an innocent mistake as to income may not result in increased entitlement to spousal support, particularly where the parties to the contract had independent legal advice. In all cases, the purpose of spousal support (both compensatory and non-compensatory) must guide the analysis.

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