BC Court of Appeal: Review of spousal support under separation agreement must follow principles of contractual interpretation. Chu v. Eastman, 2016 BCCA 331

The Court of Appeal released a decision today upholding the summary trial judge’s findings that a separation agreement only provided for a decrease of spousal support if the recipient’s income increased.  The case is a clear illustration of the difference between applying for a review of spousal support under an agreement, versus applying for an order that the spousal support terms should be changed (i.e. Miglin v. Miglin, 2003 SCC 24).

During the parties’ relationship, Mr. Eastman was primarily a homemaker while Ms. Chu supported the family financially.  They had two children.  They separated August 1, 2006 and entered into a separation agreement on February 23, 2007.

The separation agreement said that the parties intended it to be a final settlement of spousal support.

The recitals of the separation agreement stated that the parties intended it to be a final settlement of spousal support.   It further stated:

Anne will pay to Peter for his support, the sum of $1,017.00 per month on the 15^th day of each month, commencing January 15, 2007 and continuing on the 15^th day of each and every month thereafter until the first to occur of the following events:

14. Peter dies;

a. Anne dies; or

b. Anne retires,

c. after which Peter’s entitlement to further support from Anne ends.

15. Spousal support will be reviewed as to Peter’s entitlement and quantum on each of the following occasions:

a. After 90 days of Peter working at any job and for any income; and

b. If Anne has a material change in her income.

16. On a review based on Peter’s being employed for 90 days (and Anne’s earning a gross income of $65,068.00), spousal support will be paid as follows:

a)  Until Peter earns $500.00 net per month, Anne will pay spousal support of $1,017.00 per month.

b) Once Peter earns $500.00 net per month, Anne’s spousal support payment will be reduced by one-half of Peter’s net income each month, for example:

–        Peter earns $500.00 net in one month – Anne pays $250.00 less in that month, being $767.00

–        Peter earns $600.00 net in one month – Anne pays $300.00 less in that month, being $717.00 … [and so on]

When the separation agreement was negotiated, Ms. Chu had not yet filed her 2006 income tax return.  Her reported income was slightly higher than the figure used in the separation agreement.  In the years that followed, her income continued to increase.   Mr. Eastman applied to court asking for a review under the agreement.  He did not ask the court to change the terms of the agreement.

By a plain reading of the terms, the agreement did not contemplate an increase in spousal support if Ms. Chu’s income increased.  The gist of the agreement is that once Mr. Eastman worked for 90 days, spousal support would be reviewed.  After he started earning more than $500.00 per month, spousal support would be reduced.  No term said that he could ask for more money if Ms. Chu’s income increased.

This case illustrates the importance of choosing the type of court application to make when a party is looking to increase the amount of support payable.  Asking the court to review spousal support based on an argument that the agreement allows spousal support to be reviewed draws on legal principles of contractual interpretation.  Interpreting an agreement is a completely different exercise from arguing that the agreement should be changed.

The case also illustrates the freedom of the parties to decide for themselves whether and how spousal support will be reviewed.  It stands in contract to the case of Emery v. Emery, 2007 BCSC 1747, which was distinguished by the summary trial judge and Court of Appeal.  In Emery, the parties did not put any pre-conditions on the review of spousal support in their Minutes of Settlement except that the review would happen seven months later.  Without any pre-conditions, the court proceeded to review spousal support without any deference to the agreed upon amount.  The current law thus allows parties to decide whether to put limits and conditions on a review of spousal support and, if so, what those limits and conditions should be.