ARE PENALTY CLAUSES ALLOWED IN DIVORCE SETTLEMENTS?
In this case, the Ontario Court of Appeal considered whether a husband can be punished for breaching a term of the divorce settlement with financial penalties that were included in the original settlement.?
In this case, the couple married in 1994 and separated in 1998. Their Separation Agreement required the husband to pay $388,000 in spousal support as follows:?
$100,000 by October 1999;
and then payments of $4,000 per month for 72 months.?
The Separation Agreement was then included in the Divorce Order.?
The couple had agreed to include a penalty clause in the Separation Agreement and Divorce Order that provided that, if the husband defaulted with these spousal support payments, then he would be required to pay the wife twice the outstanding amount plus $50,000.?
The husband made some payments and then begun to default in 2001, at which time there were 57 outstanding payments of $4,000 ($228,000 outstanding).?
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When the wife started enforcement proceedings with the Family Responsibility Office, the husband brought a motion to change the Divorce Order, asking that the penalty clause be deemed unenforceable.?
The judge found that the husband had not proven a ‘material change in circumstances’ that would allow a change, however, that the penalty clause was unenforceable.?
The Court of Appeal for Ontario did not agree.? It stated that the husband needed, as a threshold issue, to first prove a ‘material change in circumstances’ before he could change any part of the Divorce Order.? The appellate court stated that a ‘material change of circumstances’ was a threshold question and, since it was not met, then accordingly he could not set aside the penalty clause.?
In this case, the penalty stood.?
Steve Benmor, B.Sc., LL.B., LL.M. (Family Law), is the founder and principal lawyer of Benmor Family Law Group, a boutique matrimonial law firm in downtown Toronto.?He is a Certified?Specialist?in Family Law and was admitted as a Fellow to the prestigious International Academy of Family Lawyers. Steve is regularly retained as a Divorce Mediator, Arbitrator and Parenting Coordinator. As a?Divorce Mediator, Steve uses his 30 years of in-depth knowledge of family law,?court-room experience?and expert problem-solving skills in Divorce Mediation to help spouses reach fair, fast and cooperative divorce settlements without the financial losses, emotional costs and lengthy delays from divorce court.?
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Principal- Vanderschoot Family Law at Vanderschoot Family Law Professional Corporation. Chair of the OBA Family Law Section 2021/22
1 个月This is the kind of post that helps keep us lawyers current on C of A cases, and keeps the public informed. Thank you Steve!!
Family Lawyer and Mediator at Lakefield LLP
1 个月Neat, and so key to this decision is that the 1998 court incorporated the otherwise unenforceable penalty provision into the consent divorce judgment itself. Steve, do you think nowadays a consent application seeking court endorsed penalty clause is as likely to go through as it was back then?