Divorce Law BC: Post-Separation Expenses

Upon divorce BC law (Family Law Act) and federal law (Divorce Act) apply to issues such as child support, spousal support, and division of property. The effective application of these laws will be hampered where the spouses fail to make meaningful financial disclosure about their post-separation expenses and income. The process can also be hampered by the spouses’ imprudent management of financial affairs post-separation. In circumstances where a family is either about to engage, or already engaged, in family litigation, it is advisable that both spouses realistically assess their respective circumstances and act reasonably and responsibly. Whether the matter is being dealt with under federal or BC law, divorcing spouses may be held accountable if they ignore these obligations.

Example of “troubling” management and disclosure of post-separation expenses

In Cichella v. Cichella, 2016 ONSC 4841, the court was highly critical of the husband’s post-separation income and employment efforts and of the wife’s management of post-separation expenses. The parties married in 2002 and separated in mid-July 2015 when their three children of the marriage were under the age of 12. The husband was the primary breadwinner, working in the housing industry as a labourer and contractor. The wife cared for the children throughout the marriage, though in some of the years before the parties separated, she was also employed outside of the home. The family’s finances were “bleak” at times, but in 2011 the husband started a renovation company called Arrowcon which thrived. The average combined income of the husband and wife in 2012 and 2013 was $223,000. Unfortunately, in 2014 Arrowcon lost its principal client and its revenue fell dramatically. The combined family income in 2014 dropped to $91,000.

The change in the parties’ financial circumstances paralleled the breakdown in their relationship. They sold the matrimonial home in January 2015, depositing the net proceeds of $224,000 into their joint bank account. Arrowcon made an assignment in bankruptcy. When the husband moved out of their rental home in mid-July 2015, there was about $160,000 left in the joint bank account. At that time, the husband was unemployed and the wife was on stress leave. In February 2016 the husband obtained employment as a labourer earning $24,000 per year. The wife brought an application for interim child and spousal support.

Financial costs of separation (true whether under BC law, Divorce Act)

The court began its analysis by expressing some exasperation with the management of post-separation expenses by spouses at large (at para. 12):

In the immediate aftermath of a marriage or relationship breakdown the vast majority of families cannot sustain a pre-separation lifestyle.  Too often temporary support motions are argued seemingly oblivious to the unanticipated financial costs of separation.  These would include, for example, alternate housing (surely a major component of any intact family’s budget!), food, transportation, even legal fees.  Refusing to acknowledge this new financial paradigm invariably leads to a race to the bottom – impoverishment of the family and, worse, blighting children’s educational options.

Post-separation overspending and under-earning

When the wife’s motion for temporary child and spousal support was argued in June 2016 (almost one full year post-separation), only a modest amount was left in the joint bank account and the wife’s evidence was that she had been obliged to borrow another $17,000 from a relative. Only the wife used the bank account after the parties separated.

The court was troubled by a number of aspects of the parties’ evidence with respect to their post-separation expenses and income:

• The wife’s sworn Financial Statements indicated that she spent in excess of $174,000 in less than 12 months. The court was at a loss to understand why, given the family circumstances that led to the sale of the matrimonial home, the wife would not have acted more reasonably in budgeting her expenses. Even accepting her estimated monthly expenses of $10,000 as accurate, she had overspent by about $54,000 in the year post-separation.

• The court did not accept the husband’s explanations about how long it took to obtain employment, and then only at a minimum wage. Also troubling was that the husband’s sworn Financial Statement indicated that he experienced a monthly cash flow deficit ranging anywhere from $1,000 to $5,000, but without any increase in debt. He could have disclosed more about how he was meeting his financial obligations but demurred. 

Order for interim child and spousal support

The husband was ordered to pay child support of $1,046 a month effective August 1, 2016, based on an imputed annual income of $54,000 (comprised of his currently acknowledged annual income of $24,000 plus $30,000 a year for the excess in average expense over his income that he was apparently able to finance without incurring additional debt). Pursuant to the Order, the husband was also responsible for the children’s s. 7 expenses based on the fact that the wife has no earned income at the time. No Order was made for spousal support.

In making the temporary support Order, the court expressed hope that there would be a more robust picture about how the parties managed their financial affairs pre- and post-separation when the matter was finally adjudicated.

Divorce law BC: Take home point on post-separation expenses

While Cichella was an Ontario decision, BC divorce law and family litigation are beset by the same issues. In circumstances where a family is either about to engage, or already engaged, in family litigation, it is incumbent on both spouses to realistically assess their respective circumstances and act reasonably and responsibly. It is equally incumbent that meaningful financial disclosure that is relevant and proportionate to the issues be made as early and as transparently as possible. At every step in a case the spouses will be held accountable if they ignore these obligations.