Pensions Newsletter – July 2017

Welcome to the 18th issue of the Blakes Pensions Newsletter. This newsletter provides a summary of recent jurisprudential developments that affect pensions and benefits and is not intended to be legal advice.

FAMILY LAW

Melis v. Zwanenburg, 2017 ONSC 613

Caroline Melis (the wife) and Cornelis Johannes Zwanenburg (the husband) married in 1986 and separated in 2004. Pursuant to the subsequent divorce order, the wife was required to pay C$3,200 per month in spousal support. As part of the equalization process, the wife also paid to the husband C$217,244, plus interest, from her federal pension. The wife brought a motion to terminate or reduce the spousal support payments since the reduction in her income following her retirement constituted a "material change in circumstances" according to the divorce order.

In deciding the quantum of continuing spousal support, the court needed to determine the central "double recovery" issue of whether the unequalized portion of the wife's pension should be included as income. To make this determination, Justice Beaudoin considered the following definitions and principles delineated by the Supreme Court of Canada in Boston v. Boston, which is considered the leading case on the issue of double recovery:

Double recovery occurs where a pension that was once equalized as property is also treated as income from which the payor spouse must make spousal support payments. In such a case, the payee spouse effectively shares in the pension twice. After receiving an equalization payment from the payor spouse's pension, a payee spouse must use the funds to generate income at least by the time the pension begins to pay out. The general rule is that double recovery should be avoided. In deciding spousal support payments, courts should focus on assets that were not equalized. As an exception to the general rule, double recovery may be permitted where the payee spouse made a reasonable effort to use the equalization payment to produce income but, despite this, is still confronted with economic hardship from the marriage or its breakdown. Applying the above, the court held that the husband did use the C$217,244 pension equalization payment in an income-producing way. The husband had set aside appropriate funds in his RRSP and was not required to sell the matrimonial home to generate additional income. However, the court ultimately decided that an appropriate support order could be achieved without resorting to including the unequalized portion of the wife's pension in her income.

In this case, double recovery was avoided notwithstanding that the exception to the general rule applied.

Ontario Superior Court of Justice Decision

Almendral v. Tan, 2017 MBQB 54

The applicant (Almendral) brought a motion to dismiss the respondent's (Tan) claim for an equal division of family property, including her pension, on the basis that Tan failed to meet the limitation period stipulated in The Family Property Act (Manitoba) (FPA), which imposes a non-mandatory three-year limitation period for equalization claims, and The Pension Benefits Act (Manitoba) (PBA), which requires strict compliance with a three-year limitation on application to divide pension benefits. Tan sought an extension of time pursuant to the FPA.

Almendral argued that the FPA did not apply because the parties never cohabited. In the alternative, she argued that Tan missed the limitation period and an extension was not warranted since he was capable of filing the petition at an earlier date. She also submitted that if Tan had no right to equalization of her pension under the FPA, he also did not have a right under the PBA, since the FPA is paramount to the PBA.

Tan argued that, due to orders obtained by Almendral enjoining her employer from dividing her pension and Tan from proceeding with an application for a pension division pending a case conference, he understood that he needed to wait before filing his petition for equalization under the FPA.

The court noted that, although the FPA allows for an extension of the limitation period while the PBA does not, this is justified due to the different cohabitation requirements under the two acts and the additional rights to an accounting and equalization of family assets under the FPA. Therefore, the court found no conflict between the limitation periods in the FPA and PBA.

The court held that, because the enjoining orders prevented Tan from filing a petition, the situation was beyond Tan's control. The court exercised its discretion under the FPA and granted Tan an extension to proceed with his petition for an equalization of assets under the FPA. The court left the other issue of whether there existed a common-law relationship (and, therefore, any right to a property equalization) under the FPA to the trial judge.

Court of Queen's Bench of Manitoba Decision

S. (B.M.) v. S. (J.M.), 2017 BCSC 591

The parties married in 2002 and separated in 2007. The family assets included the respondent's pensions and RRSPs. The main issue in this case was the interpretation of the following provision included in the consent order issued previously by Justice Voith of the Supreme Court of British Columbia (Voith Order):

The Plaintiff shall be entitled to one half of the increase in the Defendant's pensions and RRSPs accumulated between December 1, 2001 and December 30, 2007, including any pensions or RRSP earned but not yet paid during this period as a result of the Defendant's retirement.

Counsel for the claimant argued that the Voith Order created a proprietary interest in the RRSPs such that the claimant's interest in them continued to accumulate even after December 30, 2007. However, the Supreme Court of British Columbia (SCBC) disagreed and held that the Voith Order did not create any proprietary interest in the respondent's pensions or RRSPs, but rather only an interest in their increased value between two specific dates. The SCBC relied on another decision in concluding that the entitlement to one half of the increase of the respondent's assets is a "compensatory award" that does not contain any proprietary interest in the pensions or RRSPs themselves.

Supreme Court of British Columbia Decision

Virc v. Blair, 2017 ONSC 1766

Pursuant to a previous court order, the husband owed C$1,283,595.86 to the wife. Seeking to enforce the order, the wife made a request for garnishment of a pension in pay to the husband. The pension was a retirement compensation arrangement (RCA), which Royal Trust Corporation of Canada (Royal Trust) administers.

The husband argued that the RCA is a pension exempt from garnishment pursuant to the Pension Benefits Act (Ontario) (PBA). The wife argued that the RCA is not a pension exempt under the PBA.

The court turned to the legislation to determine whether an RCA is exempt from garnishment. The PBA defines "pension plan" to include "any other prescribed type of plan." Regulation 909 under the PBA exempts RCAs from the application of the PBA and the regulations.

The Income Tax Act (Canada) (ITA) specifically defines RCAs in subsection 248(1). The court referenced an affidavit filed by the wife and sworn by a senior trust officer for Royal Trust. The affidavit stated that the husband's RCA is an RCA as the term is defined in the ITA and is not subject to pension legislation in Canada.

In light of the clear wording of the legislation and the evidence shown in the affidavit, the court dismissed the husband's dispute to the notice of garnishment.

Ontario Superior Court of Justice Decision

Slongo v. Slongo, 2017 ONCA 272

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