“Mr. Clapp asserts that Ms. Clapp’s interest in the Oceana Trust was worth more than $5 million on December 31, 2012. He says that, based on the gifts she received from her mother during their marriage, $100,000 in annual income should be imputed to her for the purposes of calculating his entitlement to spousal support.
Ms. Clapp states that she is one of several beneficiaries of Oceana Trust, which is managed by an institutional trustee, St. George’s Trust Company Limited. She states that she has no control over what the trustee produces, and that she has produced all that she has received. This documentation discloses when the Trust was settled, the value of its assets, and what funds it has disbursed. Ms. Clapp argues that, contrary to Mr. Clapp’s assertions, she does not receive frequent disbursements from the Trust.
The Divorce Act provides, in section 15.2(4), that the court, in making orders for spousal support, “shall take into consideration the condition, means, needs and other circumstances of each spouse.”
The court employs the methodology set out in the Federal Child Support Guidelines to determine income for purposes of spousal support as well as child support. Olah J. noted in Rilli v. Rilli that the test for imputing income for child support purposes applies equally to claims for spousal support: Rilli v. Rilli, [2006] O.J. No. 2142. See also: Pellerin v. Pellerin, 2009 CanLII 60671 (ON SC), 2009 CanLII 60671 (ON S.C.). The Spousal Support Guidelines provide, in this regard:
The starting point for the determination of income under both formulas is the definition of income under the Federal Child Support Guidelines, including the Schedule III adjustments.
The Advisory Guidelines do not solve the complex issues of income determination that arise in cases involving self-employment income and other forms of non-employment income. In determining income it may be necessary, as under the Federal Child Support Guidelines, to impute income in situations where a spouse’s actual income does not appropriately reflect his or her earning capacity.
The issue of whether Ms. Clapp’s interest in Oceana Trust, or any distributions she receives from the Trust, should be included in her income, then, is determined by reference to the Federal Child Support Guidelines. Section 19 of the Guidelines provides that the court, in appropriate circumstances (that is, where the other methods set out in sections 16 to 20 of the Guidelines are found not to be fair), may impute an amount of income to a spouse:
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- Imputing income. – (1) The court may impute such amount of income to a parent or spouse as it considers appropriate in the circumstances, which circumstances include,
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(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
Mr. Clapp submits that he requires the disclosure requested in order to show the lifestyle of the parties during the marriage and the financial resources that Ms. Clapp has had during the marriage and since the parties’ separation.
In determining a spouse’s entitlement to support and the amount of such support, the general principle, as Aiken J. held in MacLaren v. MacLaren, is that the court does not require capital to be depleted to pay support: MacLaren v. MacLaren [2004] O.J. no 1473, S.C.J. per Aitken J at page 6. In emergency situations, the court makes an exception to this principle. In Plaxton v. Plaxton, Granger J. stated,
… In my view, an order for interim support which would require that it be paid from capital should only be made where the recipient requires such funds to maintain a minimal standard of living. If the effect of an interim support order is that it will be paid from capital, the order may be viewed as an attempt to equalize capital through a support order: Plaxton v. Plaxton 2002 CanLII 49545 (ON SC), 2002 CanLII 49545, (2002), 27 R.F.L. (5th) 135 (ON S.C.), at para. 33.
Pardu J., in Jackson v. Jackson, made an exception to the general principle and ordered a husband to use capital to pay interim support where he had received over $1 million from his father, or trusts established by his father, but had a very modest income. He stated,
Where there is a substantial history of use of capital to support a joint lifestyle, and where there has been a moderately lengthy marriage, I do not believe that a spouse should necessarily be relegated to a lifestyle appropriate to income only, rather than the other means available to the spouse, at least on an interim basis.
…While there is no evidence that the husband could obtain more remunerative employment at this time, it does not seem appropriate that his wife and children should suddenly be relegated to a lower standard of living while he enjoys a very comfortable lifestyle without any obligation on his part to seek employment.
It may be that the wife ultimately will accept a lower standard of living, and pursue more meaningful employment herself, however, I am of the view that on an interim basis, something approaching the pre-separation lifestyle should be provided to the family unit comprised of the wife and children: Jackson v. Jackson, 1997 CanLII 12392 (ON SC), 1997 CanLII 12392, [1997] 35 R.F.L. (4th) 194, (ON.S.C.), paras. 20, 24, and 25.
Similarly, in Gonzalez v. Ross, Thorburn J., awarded spousal support to a woman based on amounts that her co-habitant, who earned only $18,000.00, had received as an inheritance and as gifts from his father. He stated:
The case before me does not involve a long-term marriage and it is not clear on the evidence adduced by Ross, that he can or should provide spousal support in the long-term as he contends that his capital and his own standard of living have been reduced. However, there has been a sudden and dramatic decline in Gonzalez’ income. As such, notwithstanding my reservations set out above, I believe Gonzalez should receive some interim support. Gonzalez v. Ross, 2007 CanLII 3880 (ON SC), 2007 CanLII 3880 (ON SC), paras. 53 to 56 [Emphasis added]
In Laurain v. Clarke, after reviewing the jurisprudence, I concluded that capital amounts should not generally be regarded as income for the purpose of calculating support but that the income they can reasonably generate should be imputed to the payor spouse for purposes of calculating the amount of support: Laurain v. Clarke, 2011 ONSC 7195 (CanLII), at para. 55.
The court has identified the following factors, most of which help distinguish between income and capital, that should be considered when determining whether an amount received should be included in income for the purposes of calculating child or spousal support:
a) Is the amount included in income for purposes of income tax?
b) Is the amount capital that generates income?
c) Is the amount, if capital, compensation for loss of income?
d) Has the amount, if capital, been equalized, or is it exempt?
e) Is the payment of the amount gratuitous?
f) Is the payment of the amount recurrent?
g) Were the funds typically used to finance a significant proportion of the recipient’s living expenses?”