Fawcett v. Fawcett

Fawcett v. Fawcett Collection Decisions of the Court of Appeal Date 2018-02-15 Neutral citation 2018 ONCA 150 Docket numbers C62808 Judges Rouleau, Paul S.; Trotter, Gary T.; Paciocco, David M. Subject Family Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Fawcett v. Fawcett, 2018 ONCA 150 DATE: 20180215 DOCKET: C62808 Rouleau, Trotter and Paciocco JJ.A. BETWEEN Charlene Victoria Fawcett Applicant (Appellant) and Timothy Robert Fawcett Respondent (Respondent) Adam Pantel, for the appellant John F. Black, for the respondent Heard: November 14, 2017 On appeal from the judgment of Justice Timothy Minnema of the Superior Court of Justice, dated August 23, 2016, with reasons reported at 2016 ONSC 5331. Trotter J.A.: A. introduction [1] This appeal deals with the division of a federal pension as family property under the Family Law Act, R.S.O. 1990, c. F.3 (the “FLA”). [2] The appellant has a Canadian Forces pension, provided by the Canadian Forces Superannuation Act, R.S.C. 1985, c. C-17 (the “CFSA”). The parties agreed that the commuted value of the pension was $747,200. The pension has matured and is “in pay”, meaning that the appellant receives monthly payments. [3] To satisfy an equalization payment of $313,002, the trial judge ordered that an application be made to the pension administrator of the Canadian Forces pension to transfer this amount to the respondent. The appellant would have preferred 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 the Pension Benefits Division Act, S.C. 1992, c. 46, Sch. II (the “PBDA”), under which the CFSA pension is administered, only allows for a lump-sum division. [4] As explained below, I agree with the trial judge’s interpretation of the PBDA – it contains no provision that would enable the pension administrator to divide monthly payments. Moreover, the trial judge’s order was not precluded by the pension division provisions of the FLA. I would dismiss the appeal. B. the facts (1) The Parties [5] The parties are both in their 50’s. They cohabited for three years before marrying in 1994. They separated in July of 2013. They have three children who were ages 21, 19, and 17 at the time of trial. [6] The appellant was the primary income-earner during the marriage. She joined the Canadian Forces before she married the respondent. She retired in 2008 and started drawing her Canadian Forces pension. The appellant now enjoys success as a financial planner/advisor with the Royal Bank of Canada. She has pensions from the Royal Bank Pension Plan and RBC Dominion Securities Pension Plan, but they have yet to mature. [7] During the relationship, the respondent qualified as a teacher. He became a substitute teacher in 2005, and then a permanent, full-time teacher in 2011. (2) Proceedings at Trial [8] The parties were able to settle many of the issues arising from the breakdown of their marriage. They went to trial to resolve questions of child support, special expenses, and property issues. This appeal is only concerned with the division of the appellant’s Canadian Forces pension. [9] In ascertaining the value of this pension, the parties relied upon a letter sent to the appellant by National Defence. This letter, dated August 28, 2014, is significant because it also highlights the restrictions placed upon the administrator of the CFSA pension. As the letter states: Below you will find the financial information you requested under Section 13(2) of the Pension Benefits Division Act (PBDA), with respect to your pension entitlement under the Canadian Forces Superannuation Act. Mr. Tim Fawcett would receive approximately $373,600.00 as a result of the division of your pension for the cohabitation period of 14 May 1994 to 24 July 2013. This one-time lump sum payment must be deposited into his locked-in RRSP account. There would be a corresponding reduction to your pension of approximately $1,145.56 per month. For the cohabitation period of 14 May 1994 to 8 March 2014 the approximate amount is $374,900.00. The corresponding reduction to your pension is 1,149.67 per month. When indexed, the increase to your pension would be based on the amount remaining after the reduction, which is for life. [Emphasis in original.] [10] The trial judge heard evidence from an actuary, Guy Martel. Mr. Martel prepared a report on the family law value of the appellant’s other pension benefits. He also provided an opinion on the appropriate tax rate to be applied to discount the appellant’s Canadian Forces pension. [11] During his testimony, Mr. Martel was asked about the administration of the Canadian Forces pension. He explained the differences between a division of CFSA pension benefits and pensions governed by provincial legislation. Mr. Martel testified that the PBDA only allows for a lump-sum division. As he said: The Canadian Forces pension that falls under the Pension Benefits Division Act, that would also cover the Public Service Superannuation Act, [the] RCMP Superannuation Act, the Members of Parliament Retirement Allowance – those, those plans under the [PBDA], … the only option basically is to transfer a lump-sum amount up to 50 percent of the maximum transferable amount, regardless of whether … the separation is before or after retirement. [Emphasis added.] [12] In follow up questions, Mr. Martel confirmed that the “only way” to divide the CFSA pension is through a lump-sum transfer, and if the parties wished to do things differently, “the Forces will [be] unable to persist [sic] in that.” As discussed below, the trial judge interpreted the applicable legislation the same way. [13] The appellant argued that the FLA determines how her Canadian Forces pension should be treated as family property. Because her pension is in pay, s. 10.1(5) of the FLA precludes a lump-sum division; she could only be ordered to split her monthly pension payments. The appellant argued that the Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp.) allowed for the division of her monthly pension payments. The trial judge disagreed. [14] The appellant made the alternative submission that, if the trial judge were to order a lump-sum transfer, he should exercise his discretion under s. 9(1)(c) of the FLA to delay payment for 10 years, based on a claim of hardship. The trial judge flatly rejected this request, at para. 15: However, her counsel did not explain how or why the immediate lump sum payment would create hardship. Not only did she not address it, but it is hard to understand the basic argument given that her lead position was to split the income stream at source. The pension income that the applicant is currently receiving would be similarly reduced in both scenarios. Further, the applicant’s counsel did not provide any plan or proposal; she simply made the argument without detail or thought as to how it would work. Specifically she did not address how the respondent would be fairly compensated for such a delay. My sense was that rather than wanting to avoid hardship, which was not established, the applicant was seeking to gain an advantage for herself at the respondent’s expense. I decline to make that order. [Emphasis added.] [15] The trial judge ordered the appellant to make an equalization payment of $313,002 “by way of a PBDA transfer from her Canadian Forces pension, which is the $281,224 equalization payment grossed-up for taxes by 11.3 percent.” C. analysis (1) Introduction [16] At trial and on appeal, counsel focused their submissions on whether the administrator of the Canadian Forces pension could be ordered to split monthly payments at source. I agree with the trial judge that the PBDA, in conjunction with related federal statutes, does not enable a judge to order the administrator to split monthly payments for the purposes of dividing family property. [17] I disagree with the appellant’s submission that s. 10.1(5) of the FLA precluded the trial judge from ordering a lump-sum division because her pension was in pay. I would not interpret s. 10.1 of the FLA in this manner. (2) Federal Pension Legislation [18] There are numerous statutes that create and govern the administration of federal pensions. The appellant’s Canadian Forces pension entitlement derives from the CFSA; however, it does not determine how the pension is dealt with as family or matrimonial property. [19] The PBDA governs the division of CFSA pensions, as well as pensions granted under many other federal statutes.[1] By virtue of s. 3 of the PBDA, Parliament has signalled the primacy of this Act: 3 In the event of any inconsistency between this Act and the regulations made under this Act and any other law, this Act and the regulations shall prevail to the extent of the inconsistency. [Emphasis added.] The respondent contends that the section trumps all provincial law, including the FLA. I disagree. Section 3 merely prioritizes the PBDA over other federal enactments. Conflicts between provincial and federal legislation must be resolved by the federal paramountcy doctrine. However, the issue on this appeal may be resolved without resort to this doctrine. [20] As discussed below, the relationship between the PBDA and the FLA is not seamless. Nevertheless, courts must strive to interpret related federal and provincial enactments in a harmonious manner. As Ruth Sullivan observes in Statutory Interpretation, 3rd ed. (Toronto: Irwin Law, 2016), at p. 184, “the Supreme Court of Canada has shown a strong inclination to harmonize the legislation of federal, provincial and territorial jurisdictions dealing with the same subject matter” in a number of areas, including matrimonial property rights. By way of example, she refers to Clarke v. Clarke, [1990] 2 S.C.R. 795, a leading matrimonial property case, in which the Court read the CFSA and the Matrimonial Property Act, S.N.S. 1980, c. 9 harmoniously, thereby avoiding a conflict and the need to invoke the paramountcy doctrine. In Quebec (Attorney General) v. Canada (Human Resources and Social Development), 2011 SCC 60, [2011] 3 S.C.R. 635, Deschamps J. referred favourably to Clarke and said, at para. 22: “A federal provision that appears to be prohibitive may, upon consideration of its legislative purpose, prove to be compatible with a permissive provision.” See also Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327, at para. 26. Employing the same approach, the FLA and the PBDA may be interpreted harmoniously in this case. [21] The PBDA only provides for a lump-sum division of a member’s pension, whether the pension is in pay or not. A division is triggered by an application under s. 4, which provides: 4 (1) A member of a pension plan or a spouse, former spouse or former common-law partner of a member may, in the circumstances described in subsection (2), apply to the Minister to divide the member’s pension benefits between the member and the spouse, former spouse or former common-law partner. (2) The circumstances in which an application may be made are: (a) where a court in Canada of competent jurisdiction, in proceedings in relation to divorce, annulment of marriage or separation, makes an order that provides for the pension benefits to be divided between the member and the spouse, former spouse or former common-law partner. [22] The manner in which the pension is divided is addressed in s. 8. It does not facilitate a simple cash payment to the non-member spouse; it provides for a one-time transfer of funds into locked-in financial instruments. As s. 8 provides: 8 (1) A division of pension benefits shall be effected by (a) subject to subsection (4), transferring an amount representing fifty per cent of the value of the pension benefits that have accrued to the member of the pension plan during the period subject to division, as determined in accordance with the regulations, to the spouse, former spouse or former common-law partner, if that pension plan is a retirement compensation arrangement, or, in any other case, to (i) a pension plan selected by the spouse, former spouse or former common-law partner that is registered under the Income Tax Act, if that pension plan so permits, (ii) a retirement savings plan or fund for the spouse, former spouse or former common-law partner that is of the prescribed kind, or (iii) a financial institution authorized to sell immediate or deferred life annuities of the prescribed kind, for the purchase from that financial institution of such an annuity for the spouse, former spouse or former common-law partner; and (b) adjusting, in accordance with the regulations, the pension benefits that have accrued to the member of the pension plan under that pension plan, notwithstanding the provisions of that pension plan or the Act under which it is established or by which it is provided.[2] [Emphasis added.] [23] The trial judge’s conclusion that s. 8 only provides for lump-sum divisions is borne out by the plain language of the provision. It is in accord with the National Defence letter in para. 9, above. It is consistent with Mr. Martel’s understanding of the PBDA. Moreover, this feature of the PBDA has long been recognized: see Ontario Law Reform Commission, Report on Pensions as Family Property: Valuation and Division (Toronto: Ontario Law Reform Commission, 1995), at pp. 62, 171-172; Thomas G. Anderson, Q.C., “Pension Basics for Family Lawyers Part II: Canadian Models for Dividing Pensions When a Relationship Ends” (2007) 26 Can. Fam. L.Q. 91, at pp. 114, 118-119; and R. v. Francis, 2017 SKQB 28, 31 C.C.P.B. (2nd) 242, at paras. 25 and 30. [24] The appellant submits that the Garnishment, Attachment and Pension Diversion Act, R.S.C. 1985, c. G-2 (the “GAPDA”) permits pension payments to be split at source as family or matrimonial property. I disagree. This Act only applies to the enforcement of support orders. [25] Section 90 of the CFSA incorporates the operation of the GAPDA: Diversion of payments to satisfy financial support order 90(1) When any court in Canada of competent jurisdiction has made an order requiring a recipient to pay financial support, amounts payable under Part I, I.1 or III to that recipient are subject to being diverted to the person named in the order in accordance with Part II of the Garnishment, Attachment and Pension Diversion Act. [Emphasis added.] Part II of the GAPDA is titled, “Diversion of Pension Benefits to Satisfy Financial Support Orders”. Section 31 clarifies the limited scope of this Part of the Act: 31 This Part applies only in respect of the enforcement of financial support orders against pension benefits payable pursuant to the superannuation Acts and like enactments referred to in the schedule. [Emphasis added.] [26] A “financial support order” is defined in s. 32(1) in the following way: financial support order means, subject to subsection (2), an order or judgment for maintenance, alimony or support, including an order or judgment for arrears of payments, made pursuant to the Divorce Act … or pursuant to the laws of a province relating to family financial support or the enforcement of family financial support.[3] Near identical provisions were considered in Clarke. Writing for the Court, Wilson J. held, at p. 832, that a “financial support order” does not encompass “matrimonial property”. [27] To conclude, federal legislation does not clothe the PBDA administrator with the power to split pension payments as a method of dividing family property. Consequently, the administrator cannot be ordered to do so. Parliament could create such a power. It has chosen not to. Indeed, in the recent case of Francis, the federal Crown successfully argued that there is no jurisdiction to order the administrator to divide pension payments as family property under the PBDA. I agree with the analysis in that decision. (3) Provincial Legislation [28] Part I of the FLA addresses issues of family property. Section 5 creates a prima facie entitlement to an equal division of net family property. Section 9 empowers a court to order equalization payments, and to make collateral orders to secure their performance. [29] The interest of one spouse in another’s pension benefits has long been recognized as a matter of matrimonial or family property: see Clarke, at p. 824. In 2009, the FLA was amended (s. 2009, c. 11) to create specific rules, contained in s. 10.1, about the division of pension entitlements. Subsections 10.1(3), (4), and (5) provide: (3) An order made under section 9 or 10 may provide for the immediate transfer of a lump sum out of a pension plan but, except as permitted under subsection (5), not for any other division of a spouse’s interest in the plan. (4) In determining whether to order the immediate transfer of a lump sum out of a pension plan and in determining the amount to be transferred, the court may consider the following matters and such other matters as the court considers appropriate: 1. The nature of the assets available to each spouse at the time of the hearing. 2. The proportion of a spouse’s net family property that consists of the imputed value, for family law purposes, of his or her interest in the pension plan. 3. The liquidity of the lump sum in the hands of the spouse to whom it would be transferred. 4. Any contingent tax liabilities in respect of the lump sum that would be transferred. 5. The resources available to each spouse to meet his or her needs in retirement and the desirability of maintaining those resources. (5) If payment of the first instalment of a spouse’s pension under a pension plan is due on or before the valuation date, an order made under section 9 or 10 may provide for the division of pension payments but not for any other division of the spouse’s interest in the plan. [Emphasis added.] [30] The appellant argues that the combined operation of ss. (3) and (5) precludes a lump-sum division when a pension is in pay. Some cases support this interpretation (see, for example, Jovanovic v. Jovanovic, 2013 ONSC 7132, [2014] W.D.F.L. 461, at para. 40). However, I would not read these provisions so restrictively, especially without clear statutory language that prohibits a lump-sum transfer when a pension is in pay. [31] Subsection 10.1(3) creates a general power to order an immediate lump-sum division. The availability of this permissive option is guided by the non-exhaustive criteria in s. (4). Subsection (5) addresses pensions in pay. In these circumstances, a judge may make an order for the division of pension payments, “but not for any other division of the spouse’s interest in the plan” (emphasis added). I do not read this section as prohibiting a lump-sum transfer for a pension in pay. Instead, s. 10.1(5) simply provides courts with another option – division of payments. However, just like s. 10.1(3), s. 10.1(5) only allows a judge to order one form of division – lump-sum or pension payments – not both, and not any other form of division of the interest. [32] The combined operation of ss. 10.1(3) and (5) leads to the following options. Before a pension is in pay, only a lump-sum division is available. This makes sense because there is no monthly payment stream to divide. Once a pension is in pay, a judge may choose between the two options, depending on all of the circumstances of the case. Whether or not a pension is in pay, the factors set out in s. 10.1(4) provide guidance. [33] The appellant’s restrictive interpretation of s. 10.1 potentially compromises an important goal of the FLA – to achieve a division of assets that is fair to both parties. In Best v. Best, [1999] 2 S.C.R. 868, Major J. said, at para. 109: “The choice of a method for settlement of the equalization obligation is highly contextual and fact-based. A payment method that is preferable in one case might be grossly unjust in another.” The interpretation favoured by the appellant would undermine this approach by precluding resort to an option (a lump-sum payment) that may be critical in achieving a fair and just division of property. [34] A broader interpretation s. 10.1(5) of the FLA is more compatible with the PBDA. Returning to the paramountcy jurisprudence, Gascon J. said in Moloney, at para. 27: “It is presumed that Parliament intends its laws to co-exist with provincial laws.” This presumption must also apply in reverse, and with at least equal force – it is presumed that the province intends its laws to co-exist with federal laws. I am unable to find that the Legislature intended to undermine or limit the operation of the PBDA. [35] When Ontario amended the FLA in 2009 to create s. 10.1, it would surely have known that the PBDA only provides for a lump-sum division: see Ontario Law Reform Commission, Report on Pensions as Family Property, at pp. 62, 171-172. See also, Law Commission of Ontario, Division of Pensions Upon Marriage Breakdown – Final Report (Toronto: Law Commission of Ontario, 2008). As noted in para. 18 above, the PBDA applies to pensions created by many federal statutes, no doubt affecting the pensions of countless Ontarians. I would avoid an interpretation of the FLA that frustrates the PBDA. A broader interpretation of s. 10.1(5) advances the goals of the FLA, while achieving harmony with federal pension legislation. [36] This is not say that it will always be appropriate to order a lump-sum division of a pension in pay. It will depend on the nature of the underlying pension legislation, the application of the criteria listed in s. 10.1(4) of the FLA, and “such other matters as the court considers appropriate” to achieve a just result in the case: see VanderWal v. VanderWal, 2015 ONSC 384, 54 R.F.L. (7th) 410, at para. 9. (4) Application to This Case [37] The trial judge did not err in ordering a lump-sum transfer of the appellant’s pension. This method of division involves little downside to the appellant. She does not have to “find” the money or arrange financing to satisfy the equalization payment: see Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, at paras. 51 and 60. The pension is divided at source. Moreover, as the trial judge recognized, a lump-sum division puts the appellant in the same monthly position had her pension payments been split at source. [38] On the other hand, under the PBDA, the respondent will benefit from an immediate, one-time transfer of the property to which he is entitled: see Symmons v. Symmons, 2012 ONCA 747, 298 O.A.C. 224, at paras. 37-39. This, in turn, will better facilitate a “clean break” between the parties, avoiding the potential for future disputes: see Clarke, at p. 836; and Best, at paras. 109 and 111. [39] As the trial judge observed, the appellant is not interested in this arrangement; she seemed intent on putting the respondent at a disadvantage. To a certain extent, this posture continues on appeal. In the circumstances, an order that requires the appellant to pay the respondent each month is a recipe for conflict and more litigation. This is avoided by the trial judge’s order. D. disposition [40] The trial judge did not err in the manner in which he interpreted applicable provincial and federal legislation. The order that he made was both available to him under the law and appropriate in the circumstances. Accordingly, I would dismiss the appeal and order costs to the respondent in amount of $10,000, inclusive of disbursements and HST. Released: “PR” FEB 15 2018 “G.T. Trotter J.A.” “I agree. Paul Rouleau J.A.” “I agree. David M. Paciocco J.A.” [1] Section 2 of the PBDA defines a “pension plan” for the purposes of the Act. In addition to the CFSA, the PBDA governs the division of pensions established under the following statutes: (i) the Public Service Superannuation Act, R.S.C. 1985, c. P-36 (which provides for “persons employed in the public service”); (ii) the Defence Services Pension Continuation Act, R.S.C. 1970, c. D-3 (which provides for “certain persons enrolled as members of the Regular Forces before the 1st day of April 1946”); (iii) the Royal Canadian Mounted Police Superannuation Act, R.S.C. 1985, c. R-11 (which provides for “members of the Royal Canadian Mounted Police”); (iv) the Royal Canadian Mounted Police Pension Continuation Act, R.S.C. 1970, c. R-10 (which provides for “certain persons appointed as members of the Royal Canadian Mounted Police before the 1st day of March 1949”); (v) the Diplomatic Service (Special) Superannuation Act, R.S.C. 1985, c. D-2 (which provides for “senior appointees of the Department of Foreign Affairs, Trade and Development serving outside Canada”); (vi) the Lieutenant Governors Superannuation Act, R.S.C. 1985, c. L-8 (which provides for Lieutenant Governors); (vii) the Governor General’s Act, R.S.C. 1985, c. G-9 (which provides for the Governor General); (viii) the Members of Parliament Retiring Allowances Act, R.S.C. 1985, c. M-5 (which includes provisions for a pension plan or retirement compensation arrangement “to persons who have served as Members of Parliament”); and (ix) the Special Retirement Arrangements Act, S.C. 1992, c. 46, Sch. I (which provides for a special pension plan or retirement compensation arrangement to “any person” or “class of persons” designated by order of the Governor in Council, on the recommendation of the President of the Treasury Board). [2] Subsection (4) provides for lump-sum transfers of less than fifty percent. [3] Subsection (2) is irrelevant to the issues on appeal; it deals with orders that fail to sufficiently specify the dollar amounts at stake.