Pensions Newsletter – July 2018

Welcome to the 21st 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.

IN THIS ISSUE

FAMILY LAW

Malbon v. Malbon, 2017 BCCA 427

Leslie Alan Malbon (Appellant) and Teresa Ruth Malbon (Respondent) married in 1980 and separated in 2002. In 2007, they entered into a consent divorce order (Order), which provided that the Appellant would pay the Respondent C$1,000 each month in spousal support. The Order also stated that the pension plans of both the Appellant and the Respondent were family assets and that each party would be given a proportionate share in the benefits payable under the other party's pension plan pursuant to the former Family Relations Act (British Columbia) (FRA). The Appellant elected to receive his share of the Respondent's pension benefit by way of a lump-sum payment, instead of monthly instalments. The Respondent elected not to receive her share of the Appellant's pension as a lump-sum payment; however, she was precluded under the FRA from receiving monthly instalments until the Appellant retired. The legislative scheme changed in 2013 when the Family Law Act (British Columbia) (FLA) came into force, which stated that the Respondent is entitled to receive her share of the Appellant's pension on the earliest date that he could elect to have his pension commence (i.e., before retirement). In that same year, the Respondent started collecting her share of the Appellant's pension in monthly instalments.

The Appellant applied to the Supreme Court of British Columbia (BCSC) to reduce the spousal support owing to the Respondent on the basis that her collecting of his previously divided pension constituted a change in circumstances. The BCSC rejected the Appellant's argument, finding that the Respondent's decision to begin collecting her share of the Appellant's pension as soon as it became available was contemplated by the parties at the time of the Order and therefore was not a change in circumstances. Further, the BCSC applied the "double recovery" rule from Boston v. Boston (Boston). It noted that just as the Appellant would not be required to use pension income to pay spousal support, neither should the Respondent be disentitled to continued spousal support because of her receipt of income from a previously equalized pension.

The Appellant brought an appeal to the British Columbia Court of Appeal (BCCA), which confirmed the ruling of the BCSC and dismissed the appeal. Although the "double recovery" rule in Boston was formulated in the inverse case to prevent the recipient from receiving the benefit of a pension twice — as an asset and then again as a source of income — the BCCA held that the BCSC was correct to apply the rule to the present scenario to allow the Respondent to receive spousal support notwithstanding her collecting of a previously equalized pension.

British Columbia Court of Appeal Decision

Fawcett v. Fawcett, 2018 ONCA 150

In Fawcett v. Fawcett, 2018 ONCA 150, the Ontario Court of Appeal (ONCA) considered the division of a federal pension as family property under the Ontario Family Law Act (FLA). Charlene Fawcett (Appellant) and Timothy Fawcett (Respondent) married in 1994 and separated in 2013. The Appellant had a Canadian Forces pension provided under the Canadian Forces Superannuation Act (CFSA), with a commuted value of C$747,200. The pension had matured and the Appellant was receiving monthly payments.

To satisfy the equalization payment, the trial judge ordered an application to the pension administrator of the Canadian Forces pension, requiring the latter to transfer C$313,002 to the Respondent. The Appellant wished to pay the Respondent on a monthly basis by having her pension payments split at source. The Respondent wanted an immediate lump-sum transfer. The trial judge held that under the Pension Benefits Division Act (PBDA) (the federal statute governing the division of CFSA pensions), only a lump-sum transfer was permissible. Charlene Fawcett appealed this decision.

The ONCA dismissed the appeal and held that a lump-sum payment was consistent with all relevant legislation. In arriving at its decision, the ONCA interpreted the PBDA, the Garnishment, Attachment and Pension Diversion Act (GAPDA) and the FLA.

The ONCA found that there was nothing in the PBDA that gave a plan administrator the power to split pension payments as a method for dividing family property. It further noted that section 8 of the PBDA addressed the ways in which a pension benefit could be divided and this section only provides for a one-time transfer of funds into a locked-in financial instrument.

In addition, the ONCA held that GAPDA did not allow pension payments to be split at source as family or matrimonial property, but only applied to the enforcement of support orders, which did not encompass matrimonial property.

Finally, the ONCA held that under the FLA, there are two options for satisfying an equalization payment for a pension in pay: (i) a lump-sum transfer; or (ii) a division of pension payments. The ONCA noted that in any given case, it would be up to a judge to determine whether a lump-sum payment was appropriate. After reviewing the relevant legislation, the ONCA held that the trial court judge had not erred in the interpretation of applicable provincial and federal legislation and that in addition to being the only manner of division permissible under the PBDA, a lump-sum transfer of the appellant's pension was appropriate in the circumstances.

Ontario Court of Appeal Decision

Kraft v. Kraft, 2018 BCSC 496

This case involved a separation, divorce, and subsequent division of property between Klaus Kraft and Virginia Kraft.

Mr. and Ms. Kraft were married for over 27 years. During that time, Mr. Kraft worked for BC Hydro and Ms. Kraft remained at home to raise the couple's two children. Mr. Kraft became entitled to a defined benefit pension (Pension) under his employer's pension plan. In 1997, Mr. Kraft separated from Ms. Kraft and began living with a different partner. Mr. Kraft and Ms. Kraft formally divorced in 2015.

Ms. Kraft had a difficult time following the separation. She did not have many discernible job skills and could not earn even a modest income from any occupation. Although Mr. Kraft made small monthly support payments to her following their separation, she lived in relative destitution. She also suffered from ongoing depression, for which she was hospitalized. Ms. Kraft brought a claim against Mr. Kraft for retroactive spousal support for the 17 years between their separation and divorce, and for the division of family property, including the Pension.

The claim...