Retroactive Support: The Marinangeli Decision

The July 2003 ruling of the Ontario Court of Appeal in Marinangeli v. Marinangeli signifies the importance of full financial disclosure in family law matters; anything less can have disastrous results.

The Marinangelis were married for 19 years. Initially, the wife supported the husband through university and professional training, and then became a full-time homemaker. The parties had a child in 1984, and they separated in 1992.

After four years of post-separation negotiations, the parties agreed that the husband would pay monthly child support in the amount of $2000 and monthly spousal support of $6000. In October of 1996, the parties signed Minutes of Settlement which provided for the variation of child and spousal support in the event of a material change in circumstances. At the same time, the husband signed a sworn Financial Statement declaring his income to be $307,925. He also declared in the Financial Statement, that he did not anticipate any material changes to his financial situation in the near future.

One day after signing the Minutes of Settlement and swearing his Financial Statement, the husband cashed in $27,850 worth of stock options. Approximately two months later, the husband cashed in additional stock options totaling $225,186. As well, the husband’s income increased considerably in 1997. The husband did not advise the wife of any of these changes in his financial situation.

Three years later, the wife initiated proceedings to vary the amounts of support. The trial took place in 2001. At that time, the wife had a net worth of $120,000. She felt she had little prospect of gainful employment outside the home. The husband had an annual salary of $890,039 (including bonuses) in 2001. His net worth was $2,500,000. He had remarried. His new wife worked outside the home.

At trial, the judge characterized the husband’s exercise of stock options as income. This finding, along with the substantial increase in the husband’s employment income, constituted a material change in circumstances. The judge decided that the husband was obliged to disclose the increase to the wife.

The trial judge found that foreseeable events such as fluctuations in income were clearly capable of amounting to a commercial change in circumstances’ in the context of the Minutes of Settlement. Accordingly, the trial judge held the husband’s non-disclosure of the gains from his options and increase in salary to be a breach of an implicit obligation in the circumstances.

The trial judge exercised his discretion to vary child and spousal support, and both spousal and child support were retroactively increased. Child support alone was increased by $223,812.

On appeal, the Ontario Court of Appeal reduced the retroactive child support. The Court reduced the 1997 support from $104,613 to $69,740 to account for the fact that the Child Support Guidelines had only come into force halfway through that year.

Anything less than full and honest disclosure will not be tolerated by Ontario Courts.

The reasoning in Marinangeli has been adopted by the Ontario Superior Court of Justice. In Murray v. Murray Justice Croll’s decision, delivered in August 2003, relied on the approach of the Ontario Court of Appeal in Marinangeli when it ordered the payment of $233,911 in retroactive spousal support. Like Marinangeli, the separation agreement in Murray was deemed to contain an implicit disclosure obligation which the husband did not satisfy.

As a result of the ruling in Marinangeli, it seems that courts will not hesitate to impose an implied duty to disclose income changes in the absence of an agreement to the contrary, where separation agreements are subject to variation in the event of a material change in circumstances.