Farrar v. Farrar
Farrar v. Farrar [Indexed as: Farrar v. Farrar]
63 O.R. (3d) 141
[2003] O.J. No. 181
Docket No. C37272 (M28460)
Court of Appeal for Ontario
Catzman, Abella and Charron JJ.A.
January 27, 2003
Family law -- Property -- Pensions -- Trial judge accepting evidence that husband's pension plan was defined benefit pension plan and not deferred annuity and that pro rata approach to valuation was preferred -- Trial judge not erring -- Facts that pension earned entirely before marriage and that pension was in pay before date of separation not justifying departure from pro rata approach.
Family law -- Procedure -- Trial -- Valuation experts called by husband and wife both using standard mortality tables for their calculations of valuations of pension plans and not taking into account husband's greatly-reduced life expectancy -- Trial judge on her own motion at end of trial directing parties to obtain additional evidence based on husband's reduced life expectancy -- Trial judge then relying on that evidence in valuation of husband's pension assets -- New [page142] evidence having effect of dramatically changing valuations of pension plans in husband's favour -- Wife's appeal allowed -- Trial judge's intervention amounting to usurpation of function of counsel -- Trial judge bound to make determination of issues on basis of evidence before her.
Family law -- Support -- Spousal support -- Trial judge ordering wife to pay lump sum spousal support to husband on basis of husband's need in year following separation -- Wife's appeal allowed -- Evidence not establishing need on part of husband -- Differential in income of parties during year following separation not providing basis for awarding spousal support.
The parties married in 1989 when they were both in their mid- 50s and separated ten years later. The husband brought an application for a divorce, spousal support and an equalization of net family properties, among other relief. The wife, by cross-application, also claimed an equalization of net family properties. The principal valuation issues at trial concerned the husband's two pension plans and the wife's survivor benefits under those plans. At the time of separation, the husband was 65 years old and his health was very poor. He was in a category of patients of which half are not expected to survive for six months. His medical condition was essentially the same at the time of trial two years later. Two valuation experts were called at trial, one by the wife and one by the husband. Both experts used the standard mortality tables for their calculations and did not take the husband's greatly reduced life expectancy into account. The trial judge raised the possibility with the husband's expert of doing an actuarial calculation based on the assumption that there would be a reduced life expectancy. After a brief adjournment to permit counsel to discuss the matter, counsel for the husband advised the trial judge that her client had instructed her not to prolong the proceeding and to drop the issue. The trial continued without further discussion on this issue.
At the conclusion of the evidence and prior to final submissions, the trial judge revisited the issue and voiced her concern that, given the evidence from both valuation experts that an individual's particular mortality rate would significantly affect the valuation of the pension assets, she did not have the proper actuarial evidence to enable her to accurately effect the net family property equalization. She ordered the experts to review the pensions and survivor benefits that they had previously valued and provide a fresh capitalized value, based on the application of the appropriate mortality rates as a result of the evidence at trial of the husband's and wife's health. Written interrogatories were then to be exchanged and filed on the valuations, after which written submissions on the value of the pensions and survivor benefits were to be made. The trial judge adopted the recalculations provided by the husband's expert in the calculation of the equalization payment. This resulted in the wife owing the husband a net equalization payment of $62,026.86. Had the trial judge accepted the valuations provided by the husband's expert at trial without adjustment for the reduced life expectancy, the net equalization payment owing by the wife would have been $8,102.34.
The valuation of one of the husband's pensions, the Scotiabank pension, raised an additional issue. The husband retired from Scotiabank several years before the marriage. His pension came into pay prior to separation. The wife's valuation expert described the pension plan as a deferred annuity and stated that the value-added, rather than the pro rata, method of valuation was appropriate. The husband's expert disagreed, testifying that the Scotiabank plan was a defined benefit pension plan and not a deferred annuity. The trial judge found that the plan was indeed a defined benefit pension and that the pro rata approach was appropriate. [page143]
The husband's claim for spousal support was related to the period of time between the date of separation and the wife's retirement a little over a year later. In the year that followed the separation, the husband lived in a one-bedroom basement apartment with his new partner. He was 65 years old and lived entirely on his pension income of approximately $37,000. The wife was still working and her annual income was $74,000. The trial judge found that the husband was in need and ordered the wife to pay lump sum spousal support in the amount of $12,000. The wife appealed.
Held, the appeal should be allowed.
In eliciting and relying on additional expert evidence, the trial judge overstepped her role and usurped the function of counsel. This resulted in unfairness to the wife. It was clear at the time the trial judge directed the parties to obtain the further evidence that the additional evidence would only benefit the husband. The husband was represented by counsel and there was no basis for the trial judge to intervene on his behalf. If the husband had intended to rely on evidence of this nature, the onus was on him to obtain it prior to trial and to adduce it in evidence at trial. He chose not to do so. The reliability of the proposed evidence was not beyond controversy. The wife had no realistic opportunity to test the additional evidence. The written interrogatories proved unsatisfactory. The additional evidence had the effect of dramatically changing the valuation of the pension assets. Although the trial judge may have considered the evidence presented by counsel as incomplete or imperfect, she was bound to make a determination of the issues on the evidence before her. A new trial was not necessary on this ground of appeal. The issue could be disposed of on the basis of the calculations presented by the husband's expert at trial. The net equalization payment owed to the husband should be reduced to $8,102.34.
Neither the fact that the husband's Scotiabank pension was earned entirely before the marriage nor the fact that it was in pay before the date of separation justified a departure from the pro rata valuation approach. The trial judge's findings on this issue were correct.
There was no proper evidentiary basis for the lump sum spousal award. The only evidence relied on by the husband to base his claim for support was the differential in the income of the parties during the year following separation. There was no evidence that the husband was in need. The differential in income alone did not provide a basis for awarding spousal support. The award should be set aside.
APPEAL by a wife from an order with respect to equalization of net family property and spousal support.
Best v. Best, 1999 700 (SCC), [1999] 2 S.C.R. 868, 43 O.R. (3d) 740n, 174 D.L.R. (4th) 235, 242 N.R. 1, 49 R.F.L. (4th) 1, apld Other cases referred to Boran v. Wenger, 1942 306 (ON CA), [1942] 2 D.L.R. 528, [1942] O.W.N. 185 (C.A.); Lennox v. Arbor Memorial Services Inc. (2001), 2001 4868 (ON CA), 56 O.R. (3d) 795, 16 C.C.E.L. (3d) 157 (C.A.), 3 C.C.E.L. (3d) 119 (Ont. S.C.J.); Majcenic v. Natale, 1967 267 (ON CA), [1968] 1 O.R. 189, 66 D.L.R. (2d) 50 (C.A.) Statutes referred to Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) Family Law Act, R.S.O. 1990, c. F.3 Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp.), s. 25(4) Public Service Superannuation Act, R.S.O. 1980, c. 419 [page144]
Carol A. Bargman, for applicant (respondent). Gene C. Colman, for respondent (appellant).
The judgment of the court was delivered by
Introduction
1CHARRON J.A.: -- This appeal raises issues related to the valuation of the parties' assets for the purpose of equalization of net family property and to the husband's entitlement to spousal support. The parties were husband and wife. They were married on November 10, 1989 when they were both in their mid-50s. Each had been married previously. They separated approximately ten years later, on May 28, 1999. Although they are now divorced and the husband has since remarried, I will nonetheless refer to the parties as husband and wife for the sake of convenience.
2In April 2000, the husband commenced this application under the Divorce Act, R.S.C. 1985, c. 3 (2nd supp.) and the Family Law Act, R.S.O. 1990, c. F.3 claiming, among other relief, a divorce, spousal support and an equalization of net family properties. The wife, by cross-application, also claimed an equalization of net family properties. A wide range of issues remained outstanding between the parties at the commencement of the trial in April 2001. A number of those issues were resolved during the course of the trial and, by the end of the trial, the only outstanding issues related to the valuation of some of the parties' assets and to spousal support. Among other relief, the trial judge ordered the wife to pay the husband a net family property equalization payment of $62,026.86 and a lump sum support payment of $12,000.
3The wife appeals from the trial judgment. Her appeal essentially raises the same valuation and spousal support issues that were left for determination by the trial judge at the conclusion of the trial. The issues relate to the following: (a) an alleged procedural unfairness arising from the trial judge's requirement at the end of the trial that further evidence be presented; (b) the valuation of the husband's two pensions; (c) the wife's entitlement to survivor benefits under the husband's pensions; (d) the valuation of the wife's interest in her former husband's pension; and (e) the husband's entitlement to spousal support. I will deal with each ground of appeal in turn and review the relevant facts in the context of my analysis on each issue. [page145]
(1) Procedural Fairness
(1) Procedural Fairness
4The principal valuation issues at trial concerned the husband's two pension plans and the wife's survivor benefits under those plans. Two valuation experts were called at trial. The issue of procedural fairness raised by the wife relates to the trial judge's direction to counsel at the conclusion of the trial that she be provided with further expert evidence to assist her in the valuation of the pension assets. Further evidence was provided including actuarial recalculations by the husband's expert based on additional medical evidence of the husband's reduced life expectancy. The trial judge accepted the recalculations which had the effect of substantially changing the values attributed to the various pension assets. The wife takes the position that the trial judge overstepped her proper role in directing the parties to obtain this additional evidence and submits that this court should adjust the valuations to accord solely with the evidence called in the trial proper. The relevant facts relating to this ground of appeal are the following.
5At the time of separation, the husband was 65 years old and his health was very poor. He suffered from coronary artery disease and severe congestive heart failure. His physician, Dr. Newton, testified that statistically, in 1999, he was in a category of patients of which half are not expected to survive six months. His medical condition was essentially the same at the time of trial two years later. Dr. Newton considered the fact that the husband continued to live to be "a miracle". Not surprisingly, the husband's state of health and consequent reduced life expectancy became relevant in the valuation of the pension assets.
6Prior to trial, both parties initially retained the same actuary, Mr. B.B. Dibben, to provide a valuation of their various pension and survivor benefit interests. At the time of trial, however, Mr. Dibben testified on behalf of the husband, and the wife called her own expert, Mr. G. Edmund Burrows, a chartered accountant.
7During the course of Mr. Dibben's testimony, counsel for the husband questioned the witness on the appropriateness of using the standard mortality tables, which showed a life expectancy of 17.5 years for the husband, given the medical evidence to the contrary. Although Mr. Dibben had been advised of the medical evidence by counsel prior to trial, he testified that he had not made his calculations on that basis as he felt that Dr. Newton's prognosis was so dramatic that any valuation based on that evidence "would be bordering on the speculative". From an actuarial standpoint, he found it more appropriate to base his calculations [page146] on the standard mortality tables because they took into account a large sample of the population, which presumably would include persons such as Mr. Farrar. However, in his report, he added the following comment:
In my opinion, the actuarial assumptions and methods that I selected are appropriate for the purposes of the calculations I have made.
Notwithstanding the foregoing, there could be other factors and contingencies that have not been taken into account which could have positive or negative impacts on the values quoted.
If, for example, the health of either party on the valuation date was impaired to the extent that life expectancy was reduced, it may be appropriate to modify the above values.
8In his testimony, he agreed that, if the husband's reduced life expectancy were to be taken into account, the resulting valuations for the various pension assets would change considerably. The value of the husband's pension assets would be reduced and the value of the wife's survivor benefits would be increased. However, the value of the husband's Scotiabank pension plan would not be affected by the reduced life expectancy as its value was nil in any event. The valuation of that particular asset will be dealt with later in this judgment in relation to another ground of appeal.
9At the conclusion of Mr. Dibben's cross-examination and prior to re-examination, the trial judge asked the witness a number of questions. In particular, she queried him on the possibility of doing an actuarial calculation based on the assumption that there would be a reduced life expectancy. The witness agreed that this could be done if a further medical opinion on Mr. Farrar's life expectancy was obtained from a specialist in medical underwriting. He agreed that he could, if asked by the court, provide a recalculation based on the husband's reduced life expectancy. The trial judge then invited counsel to ask questions arising out of the witness's answers to her questions.
10In re-examination, counsel for the husband asked the witness whether he could do the recalculation overnight. Opposing counsel objected to any recalculation being done at this late stage of the proceedings. In response to the objection, counsel for the husband argued that there would be no prejudice to the wife since her expert, Mr. Burrows, had yet to testify and that he could comment on any new figures resulting from the recalculation.
11The trial judge indicated that she was inclined to allow the husband to reopen his case on this issue and admit the evidence of any recalculation provided that the wife would have the chance to deal with the new evidence. She adjourned the trial briefly to allow counsel to consider the matter further. Upon resuming the [page147] hearing, counsel for the husband indicated that her client had instructed her "not to prolong the proceeding and to in effect drop this issue". Counsel for the wife agreed that the matter should not be pursued. The trial therefore continued without further discussion on this issue.
12The next morning, Mr. Burrows testified for the wife and provided his opinion on the value of the various pension assets. He acknowledged that he used the standard mortality tables in his calculations and that he had not been provided with any medical information with respect to the husband's reduced life expectancy. He agreed in cross-examination that the significant reduction in the husband's life expectancy would substantially affect his calculations.
13At the conclusion of the evidence and prior to final submissions, the trial judge revisited the question of the mortality tables. She voiced her concern that, given the evidence from both valuation experts that an individual's particular mortality rate would significantly affect the valuation of the pension assets, she did not have the proper actuarial evidence to enable her to accurately effect the net family property equalization. She indicated that she was not an actuary and that she would require valuations based on the medical evidence relating to the husband's health. She directed that the necessary medical evidence be obtained and provided to both valuators for the purpose of making their recalculations. She asked counsel for their input on the procedure that should be followed. Given that the wife had now moved to British Columbia, the parties agreed that the additional evidence would be subject to written interrogatories and followed by written submissions. Consequently, the trial judge made the following order:
- Trial completed subject to the Court's direction to both counsel to provide the following evidence which shall be filed as Exhibits to the trial:
(a) The applicant husband and respondent wife's experts to review the pensions and survivor benefits that they previously valued and provide a fresh capitalized value, based on the application of the appropriate mortality rates as a result of the evidence at trial of the husband's and wife's health. Such valuation reports to be filed with the Court within 7 days of today, namely on or before April 27, 2001 at 4:00 p.m.
(b) Written interrogatories to be exchanged and filed on the valuations and mortality rates on or before May 4, 2001 at 4:00 p.m.
(c) Written submissions on the values of the pensions and survivor benefits to be made and the net family property figures, on or before May 11, 2001 at 4:00 p.m., with a written reply by the applicant husband by May 15, 2001 at 4:00 p.m.
- Matter to be directed to Barrie for completion of reasons. [page148]
14Although the wife's state of health had not been raised as an issue at trial, the trial judge, at the suggestion of the wife's counsel, left it open to the wife to submit further information with respect to her own state of health, if so advised.
15As directed, counsel for the husband obtained a letter of opinion as to the husband's life expectancy from a medical underwriter, Dr. Empringham. Dr. Empringham based his opinion on Dr. Newton's evidence at trial. In his view, based on that evidence, it would be reasonable to give the husband a life expectancy of one year from that date. Accordingly, Mr. Dibben provided new calculations that resulted, as expected, in a reduction in the value of the husband's pensions and an increase in the value of the wife's survivor benefits. The calculations provided at trial by Mr. Dibben and his recalculations based on the new evidence are as follows: TRIAL POST- EVIDENCE TRIAL
PPSA PENSION
HUSBAND'S PENSION $81,931 $35,922 WIFE'S SURVIVOR BENEFIT $29,266 $74,451
SCOTIABANK PENSION
HUSBAND'S PENSION $ 0 $ 0 WIFE'S SURVIVOR BENEFIT $9,205 $25,860
16Mr. Dibben made the following comment in his report with respect to the recalculations:
I would point out that the above methods are not those which would normally be used in carrying out an actuarial valuation.
After discussing the situation in this case with an actuarial colleague, however, we concluded that, in view of the very considerably shortened life expectancy, it would be reasonable to apply the above method in these circumstances.
17Mr. Burrows also provided a new report but without any recalculations based on life expectancy. Rather, his report provided calculations in the event that the court adopted the "if and when" approach advocated by the wife in her written submissions. Essentially, under that approach, the pension assets would not be equalized as of the date of separation but, rather, would be subject to division between the parties, if and when the benefits [page149] under the various plans came into payment. It is not necessary to describe the approach that was advocated by the wife in further detail as it was not accepted by the trial judge and is not raised as an issue on this appeal.
18In her written submissions, the wife argued that the post-trial evidence should not be admitted. In particular, she submitted that Dr. Empringham was not sufficiently qualified as an expert. She further submitted that the answers to the written interrogatories of both Dr. Empringham and Mr. Dibben had not been provided directly by them but, rather, indirectly by reporting letter from opposing counsel. The trial judge ultimately admitted the additional evidence without reference in her reasons to the concerns raised by counsel for the wife.
19The trial judge adopted the recalculations provided by Mr. Dibben in the calculation of the equalization payment. This resulted in the wife owing the husband a net equalization payment of $62,026.86. Had the trial judge accepted the valuations provided by Mr. Dibben at trial without adjustment for the reduced life expectancy, the net equalization payment owing by the wife would have been $8,102.34.
20The wife submits that the trial judge's intervention in the trial process resulted in procedural unfairness. She argues that the onus was on the husband to provide his valuator with the necessary information about his life expectancy before trial and, having failed to do so, the husband should have been bound by the figures that were provided at trial. The wife further submits that the trial judge improperly came to the assistance of the husband, to the prejudice of the wife, when she required that further valuations be produced based on a revised mortality rate. Finally, she argues that she was not given any real opportunity to test the new evidence. The wife does not suggest, however, that the whole process was vitiated as a result of this procedural unfairness. She submits, rather, that the unfairness arose solely from the use of the additional evidence and therefore asks that this court vary the judgment to accord solely with the evidence called on the trial proper.
21I find merit to the wife's argument. While the trial judge's intervention on this issue was legitimate to a degree, it is my respectful view that, in the end result, she overstepped her proper role and usurped the function of counsel. This resulted in unfairness to one of the parties. I come to this conclusion for the following reasons.
22The possible use of actuarial mortality tables to address the husband's reduced life expectancy in the valuation of his pension assets was certainly a relevant issue. Hence it was entirely [page150] open to the trial judge to question the expert witness further on this issue, particularly given the comment in his report that it may be appropriate to modify the values attributed to the pension assets if the health of either party on the date of valuation was impaired to the extent that life expectancy was reduced. A trial judge is always entitled to intervene in the trial where there is need for clarification. In seeking such clarification, a trial judge may well obtain evidence from a witness in addition to that brought out by counsel. This is not objectionable so long as counsel are permitted to further examine the witness on the additional evidence. The trial judge followed this procedure when she questioned Mr. Dibben at the end of his testimony. Hence there is nothing objectionable in her intervention up to that point.
23As noted earlier, after questioning Mr. Dibben on the possible recalculation of the valuations based on further medical expert evidence, the trial judge inquired from counsel whether this potential evidence could be made available during the course of the trial. Counsel for the wife strenuously objected to the admission of any additional evidence of this nature so late in the trial process and, in light of this objection, it was the husband's clear position that the matter be "dropped". At this point, the issue was properly dropped and the balance of the evidence was called as envisaged by both counsel.
24However, as noted earlier, the trial judge, on her own motion, revisited the issue at the end of the trial and directed the parties to obtain the additional evidence. It is my respectful view, in all the circumstances, that she erred in doing so. I find the following circumstances particularly noteworthy in arriving at this conclusion:
-- It was clear at the time the trial judge directed the parties to obtain the further evidence that the additional evidence could only benefit one party, the husband.
-- The husband was represented by counsel and there was no basis for the trial judge to intervene on his behalf.
-- If the husband had intended to rely on evidence of this nature, the onus was on him to obtain it prior to trial and to adduce it in evidence at the trial. He chose not to do so. In addition, when the suggestion that further evidence be obtained was put squarely to him during the course of the trial, his position was that the issue should be dropped.
-- The reliability of the proposed evidence was not beyond controversy. When Mr. Dibben was asked by counsel for the [page151] husband prior to trial to provide actuarial calculations based on the medical evidence of her client's reduced life expectancy, he refused to do so on the basis that it would border on the speculative. Further, Mr. Dibben still expressed reservations about the actuarial soundness of the recalculations in his additional report.
-- The wife had no realistic opportunity to test the additional evidence. The written interrogatories proved unsatisfactory.
-- The additional evidence had the effect of dramatically changing the valuations of the pension assets.
25I am not unmindful of, or unsympathetic to, the view expressed by the trial judge at the end of the trial that she needed additional evidence to assist her in making a proper calculation of each party's net family property. Undoubtedly, her request was made in good faith and with a view of achieving a just and correct result. However, in our adversarial system, litigants have the right to have their case submitted to the trial court, as they and their counsel see fit and in accordance with well-established and recognized rules of evidence; the trial judge does not have the right to take the case away from counsel and into his or her own hands. See Boran v. Wenger, 1942 306 (ON CA), [1942] 2 D.L.R. 528, [1942] O.W.N. 185 (C.A.) referred to more recently in Lennox v. Arbor Memorial Services Inc. (2001), 2001 4868 (ON CA), 56 O.R. (3d) 795, 16 C.C.E.L. (3d) 157 (C.A.). It is important that litigants reasonably know the case they have to meet so that they can govern themselves accordingly before they decide to embark upon a trial.
26I find the following observation of Evans J.A. in Majcenic v. Natale, 1967 267 (ON CA), [1968] 1 O.R. 189, 66 D.L.R. (2d) 50 (C.A.) at p. 204 O.R. particularly helpful on this issue:
When a Judge intervenes in the examination or cross- examination of witnesses, to such an extent that he projects himself into the arena, he of necessity, adopts a position which is inimical to the interests of one or other of the litigants. His action, whether conscious or unconscious, no matter how well intentioned or motivated, creates an atmosphere which violates the principle that "justice not only be done, but appear to be done." Intervention amounting to interference in the conduct of a trial destroys the image of judicial impartiality and deprives the Court of jurisdiction.
The right to intervene is one of degree and there cannot be a precise line of demarcation but if it can be fairly said that it amounted to the usurpation of the function of counsel it is not permissible.
(Emphasis added)
27In my respectful view, the trial judge's intervention did amount to the usurpation of the function of counsel and was [page152] impermissible. Although the trial judge may have considered the evidence presented by counsel as incomplete or imperfect, she was bound to make a determination of the issues on the basis of the evidence before her. This case was not one, for example, where the best interests of a child may be at stake giving rise to different considerations that may allow for the gathering of further evidence at the direction of a trial judge.
28The question becomes what remedy is appropriate. As indicated earlier, it is my view that the trial judge did not exceed her proper role during the course of the examination and cross-examination of the witnesses. The line of demarcation was crossed, rather, at the end of the trial when she entered the arena and directed counsel to obtain the additional evidence. I therefore agree with the position of both counsel that a new trial need not be ordered on this ground of appeal. The additional evidence was restricted to a discrete issue in the trial, albeit an important one, and this court has the ability to dispose of the appeal on the basis of the evidence adduced on the trial proper. In addition, it is in the interest of both parties at this point to bring finality to the proceedings. Hence I think the preferable course is for this court to vary the judgment to accord with the evidence adduced at trial.
29It is clear that the trial judge accepted the evidence of Mr. Dibben and rejected that presented by Mr. Burrows in the valuation of the pension assets. Her preference for Mr. Dibben's approach is reasonable and amply supported by the evidence. (The next ground of appeal also relates to the experts' differential approach on another issue and the trial judge's acceptance of Mr. Dibben's evidence.) Further, the trial judge's clear preference for Mr. Dibben's approach could not reasonably have been affected by her consideration of the additional evidence. Hence, it is my view that the pension assets in question should be valued in accordance with the calculations presented by Mr. Dibben at trial. While it is arguable, on the basis of his report, that those values could have been adjusted in some way to reflect the reduced life expectancy of the husband, this alternative approach was not canvassed by counsel for the husband during the course of the experts' testimony, nor was it advanced as an alternative argument on appeal.
30Consequently, I would give effect to this ground of appeal and vary the judgment with respect to the net equalization payment to accord with the calculations presented by the husband at trial in respect of the relevant assets. Hence, I would reduce the net equalization payment owed to the husband from $62,026.86 to $8,102.34. [page153]
(2) Valuation of the Husband's Scotiabank Pension
(2) Valuation of the Husband's Scotiabank Pension
31At the time of separation, the husband was receiving three pensions. Issues were raised at trial and on this appeal with respect to the valuation of his Scotiabank pension and his pension under the Public Service Superannuation Act, R.S.O. 1980, c. 419 (the "PSSA pension plan"). The third pension, from IBM, was not significant and was of no concern to the parties. The issue raised with respect to the PSSA pension plan is related solely to the trial judge's acceptance of the revised calculations. Hence this issue has effectively been disposed of. I will now deal with the remaining issue with respect to the Scotiabank pension plan.
32The husband retired from Scotiabank in October 1982, several years before the marriage. His pension of $535 per month came into pay on December 27, 1997, prior to separation. The parties did not agree at trial on the value of this pension. As noted by the trial judge at the commencement of her analysis on this issue at para. 14:
The debate between the pro-rata and value-added methods, relating to the valuation of pensions in this case resurfaced despite the Supreme Court's ruling in Best v. Best, 1999 700 (SCC), [1999] 2 S.C.R. 868.
33The trial judge reviewed the evidence of both experts. Mr. Burrows, who testified for the wife, described the pension plan as a "deferred annuity" and, as such, gave the opinion that the value-added, rather than the pro rata, method of valuation was appropriate. Reliance was placed on the following statement found in Best v. Best, 1999 700 (SCC), [1999] 2 S.C.R. 868, 174 D.L.R. (4th) 235 (at para. 58):
It is true that the present value calculation used by the value- added method imitates the common method used in valuing other assets such as annuities or bonds.
(Emphasis added)
34Under that approach, two values are calculated -- the pension's present value as of the date of separation and its value as of the date of marriage. The latter value is then deducted from the former to arrive at the value representing the pension's growth during the marriage. It is this differential in value that becomes subject to equalization between the parties upon separation. Using this method, Mr. Burrows valued the husband's Scotiabank pension plan for net equalization purposes at $66,593.
35Mr. Dibben disagreed with this approach. He testified that the Scotiabank plan was a defined benefit pension plan and not a deferred annuity. Mr. Dibben relied on the finding in Best v. Best [page154] that the pro rata approach was preferred for this type of plan. On this point, the Supreme Court concluded as follows at para. 87:
Generally speaking, however, the pro rata method yields a valuation of a defined benefit pension that is fairer than the valuation produced by the value-added method. Since the Family Law Act's primary goal is a division of assets that is fair to both spouses, I believe that the pro rata method is the preferable method of valuation under Ontario law.
36Under the pro rata approach, the net family property value of the pension is also arrived at by calculating the value of the pension at the date of separation and deducting its value at marriage, but the latter calculation is done differently. The value at the date of marriage is calculated by multiplying the present value at the date of separation by a fraction dividing the years of pensionable service prior to marriage by the years of pensionable service prior to separation: see para. 51 in Best v. Best. Mr. Dibben testified that in accordance with that approach, since the husband's pension was entirely earned before marriage, its value at the date of marriage is the same as on the date of separation and hence this asset's value for net equalization purposes was nil.
37The trial judge rejected Mr. Burrows' testimony. She found that the plan was indeed a defined benefit pension and that any attempt to describe it as an annuity failed. She found that Mr. Burrows referred to the plan as a deferred annuity in a strained attempt to link up the above-noted comment at para. 58 in Best v. Best to this case. Accordingly, the trial judge concluded that the approach followed by Mr. Dibben prevailed.
38On appeal, the wife argues that the trial judge erred in failing to recognize that the facts in this case are sufficiently different from those in Best v. Best to justify a departure from the pro rata valuation approach. She relies mainly on the following distinctions: first, the husband's pension in this case was earned entirely before the marriage, and secondly, it was in pay before the date of separation.
39In my view, neither distinction would justify a departure from the preferred approach adopted in Best v. Best. Indeed, on the first point, the Supreme Court specifically addressed the situation where the employee spouse's pension would be entirely earned before the marriage as exemplifying a major weakness in the value-added method as compared to the favoured pro rata approach. Major J., in writing for the majority, stated as follows (at paras. 70-71):
This is highlighted by an example. Suppose the appellant had actually terminated his employment on the date of marriage, and that, at that time, he had 20 years of service and the average of his five best-paid salaries was (hypothetically) $60,000. Under the benefit formula, he would have earned [page155] an annual pension benefit of $24,000 (2 percent x 20 x $60,000). Twelve years later, at the date of separation, since he had quit his job and not accumulated any more years of service or reached a higher salary level, his annualized pension benefit would still be $24,000. (The effect of pre-retirement indexing is ignored for purposes of simplicity.) Common sense would suggest that, since the interest in the pension has not changed over the course of the marriage, none of it should be considered "net family property" for equalization purposes.
Under the value-added method, however, the actuary would calculate (a) the lump sum that, if invested in risk-free assets on the date of separation, would produce an annual income of $24,000 at retirement. Assume the applicable discount rate and actuarial assumptions yielded a present value at separation of $100,000. Then the actuary would determine (b) the lump sum that, if invested in risk-free assets on the date of marriage, would produce the same stream of income ($24,000 annually) beginning on the date of retirement. Discounting $100,000 over the 12-year marriage period at a 3 percent interest rate yields a present value on the date of marriage of $70,138. Under the value-added method, the difference between the values of (a) and (b) -- in the example, $100,000 minus $70,138, i.e. $29,862 -- will be considered "net family property". This is so even though the annualized benefit to be paid -- which is a defined benefit pension's only meaningful value -- did not change at all after the marriage. The result is that the employee spouse (here, the appellant) must equalize a growth in assets that did not actually take place. I do not see any equity in that result.
40Hence, it is clear that the Supreme Court of Canada viewed the pro rata approach as the better approach even in a situation where the pension would have been completely earned before the marriage.
41The wife's second basis for distinguishing Best v. Best is the fact that the pension was in pay at the time of separation. It is difficult to understand from the evidence, or from the argument, why this fact would justify a departure from the principle in Best v. Best. Mr. Burrows was not specifically asked for his opinion on the matter although he did allude to the fact that the pension was in pay in his application of the value-added approach. It would appear from his testimony that, in applying this method, he attributed a higher value to the pension at the time of separation than at the time of marriage in part because it was in pay at the later date. On this point, the husband argues that, if this approach were adopted, a lesser value should be attributed to the pension at the time of separation, given his reduced life expectancy. Mr. Dibben was specifically asked whether the fact that the pension was in pay would be a consideration. He answered that it might be a relevant consideration with respect to the valuation of any capital fund, such as a bank account. For example, if the pension payments received by the husband prior to separation had been put in a bank account, he queried whether the value of that account should not also be [page156] excluded since it was generated from a pension that was entirely earned before marriage. However, such an issue does not arise in this case.
42In my view, the trial judge was correct in finding that there was no basis to depart from the principle in Best v. Best. I would not give effect to this ground of appeal.
43The wife advances an alternative argument in the event that the pro rata approach is to be adopted with respect to the Scotiabank pension. She submits that a similar reasoning should be adopted in respect of her own interest in her ex-husband's pension. Since her interest in that asset entirely pre-dated the marriage, she submits that the value attributed to that asset should also be nil for equalization purposes. Therefore, I will deal with the valuation of that asset next.
(3) Valuation of the Wife's Interest in Her Former Husband's Pension
(3) Valuation of the Wife's Interest in Her Former Husband's Pension
44The wife entered into a separation agreement dated July 4, 1986 with her former husband. By the terms of this agreement, the wife became entitled to an interest in her former husband's pension with York University. The agreement provided that she was entitled to "one half of the husband's pension as at December 31, 1984, as well as accrued interest on that portion of the pension from August 31, 1986" until she received payment of the pension. York University was directed to hold the wife's share in trust and to pay to her the amount to which she was entitled in accordance with the terms of the pension plan, without any further authorization by the employee spouse.
45In valuing this asset, Mr. Burrows adopted a value-added approach. He determined the amount of money the wife would have received from her former husband's pension if it had been paid at the date of separation from Mr. Farrar and he deducted from that amount the amount that she would have received if it had been paid at the date of marriage. The differential in value, after making a deduction for taxes, was $94,574. Mr. Burrows testified that whether the York University plan was a defined contribution or defined benefit plan did not affect the valuation of that asset. It was a simple matter of obtaining the account balance from York University in respect to each relevant date and calculating the growth in value over the time of marriage.
46Mr. Dibben was not asked to value this asset but he was asked to comment on Mr. Burrows' approach. He testified that the York University plan was a hybrid plan that had both defined benefit and defined contribution elements to it. Under that plan, the pension that becomes payable is the greater of (a) the pension [page157] defined by formula under a defined benefit arrangement and (b) the pension that can be generated by an account balance together with investment earnings credited to each member. He indicated that in practice, largely because of the favourable investment earnings, it is the account balance that gives the higher value. Because of these factors, Mr. Dibben took no issue with the approach adopted by Mr. Burrows and the resulting valuation.
47The trial judge accepted the $94,574 value for equalization purposes.
48The wife argues that, while the valuation of this asset at $94,574 may have been sound from an actuarial standpoint, it led to an inequitable result in this case given the approach adopted in respect of the husband's interest in the Scotiabank pension plan. She submits that both assets, each having been earned entirely before the marriage, should have been valued at nil.
49It is my view that the wife's position is not tenable. The fact that ownership of, or entitlement to, an asset pre- dates the marriage, of course, provides no basis for its exclusion from the calculation of net family property. Hence that common factor between the two assets cannot be determinative of the valuation issue. It is clear from the analysis in Best v. Best that the choice of the preferred method of valuation is a legal question, not an actuarial one. The choice should be based on a consideration of the nature of the asset in question and it should be made with a view to achieving its fair apportionment. In this case, it is clear from both experts' testimony that the wife's interest in her former husband's pension is different in nature from the husband's interest in his Scotiabank defined benefit pension plan. As noted in Best v. Best in the excerpt reproduced earlier, the inequity that would result from the adoption of the value-added method, in respect of a defined benefit pension plan that is entirely earned before the marriage, is that "the employee spouse . . . [would have to] equalize a growth in assets that did not actually take place" (at para. 71). However, the evidence is clear in respect of the wife's interest in her former husband's pension that the value of the asset in fact grew over the period of her marriage to the respondent.
50In any event, it is my view that it is not open to the wife to question the valuation of this asset for the first time on appeal. The record is clear that both parties and their respective valuation experts agreed that the value of the wife's interest in her former husband's pension plan should be valued at $94,574 for equalization purposes. I would therefore not give effect to this ground of appeal. [page158]
(4) The Wife's Entitlement to Survivor Benefits Under the Scotiabank Plan
(4) The Wife's Entitlement to Survivor Benefits Under the Scotiabank Plan
51An issue was raised at trial and on appeal as to whether the wife was eligible to receive survivor benefits under the Scotiabank plan in the event of the husband's death. The evidence at trial was clear that the husband had assigned the survivor benefits to the wife. However, the issue was raised whether the assignment survived the divorce of the parties and the subsequent remarriage of the husband. The issue is one that depends both on the applicable legislation and the provisions of the plan. In this respect, the parties noted the provisions of s. 25(4) of the Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp.). It reads as follows:
25(4) Notwithstanding anything in this section or in provincial property law, a member or former member of a pension plan may assign all or part of that person's pension benefit, pension benefit credit or other benefit under the plan to that person's spouse, former spouse, common-law partner or former common-law partner, effective as of divorce, annulment, separation, or breakdown of the common- law partnership, as the case may be, and in the event of such an assignment the assignee shall, in respect of the assigned portion of the pension benefit, pension benefit credit or other benefit, be deemed for the purpose of this Act, except subsections 21(2) to (6),
(a) to have been a member of that pension plan, and
(b) to have ceased to be a member of that pension plan as of the effective date of the assignment,
but a subsequent spouse or common-law partner of the assignee is not entitled to any pension benefit, pension benefit credit or other benefit under the pension plan in respect of that assigned portion.
52Conflicting and incomplete evidence was given at trial with respect to the terms of the Scotiabank pension plan. Each party presented opposing arguments on this issue. In the result, having found both arguments compelling, the trial judge included the value of the survivor pension in the calculation of the net equalization payment on the assumption that the wife would be entitled to receive this benefit. However, she provided the wife with a charge against the husband's estate in an amount equal to the differential in equalization payment in the event that she was not so entitled.
53The husband sought to introduce fresh evidence on appeal in the form of a letter from a pension analyst for Scotiabank confirming the wife's entitlement to survivor benefits under the terms of the plan. The wife objected to the admission of this letter because it was not in proper form. Absent consent of the parties, [page159] it is my view that the fresh evidence should not be admitted in the form in which it was presented.
54Nonetheless, in my view, the trial judge did not err in including the valuation of this benefit in the net family property based on the legislative provision and the evidentiary record before her relating to the particular terms of the plan. Further, the wife is fully protected by the charging order in the event that she does not become entitled to the benefits. I would therefore not give effect to this ground of appeal.
(5) Spousal Support
(5) Spousal Support
55The husband's claim for spousal support is related to the period of time between the date of separation in May 1999 and the wife's retirement in June 2000. In the year that followed the separation, the husband lived in a one-bedroom basement apartment with his new partner. He was 65 years old and his income, entirely derived from pension benefits from Scotiabank, PPSA and IBM, was approximately $37,000 annually. At the time of separation, the wife was 63 years old and still working as a teaching instructor at Seneca College. Her annual income from all sources was approximately $74,000. After the separation, she decided to take early retirement and retired at the end of June 2000. Her income was substantially reduced after retirement.
56The trial judge ordered lump sum support in favour of the husband in the amount of $12,000. Her reasons on this issue were brief. She stated as follows at paras. 54-55:
The husband argued that he was entitled to spousal support, it being a 10-year marriage. Further, Bernice Farrar's income was greater than his, certainly for six months prior to separation, when his sole source of income was his pension income. Despite the fact that the husband initiated no motion for interim support, he was in need and Bernice Farrar had the ability to pay, to her date of retirement.
Accordingly, the respondent wife shall pay the applicant husband lump sum spousal support in the amount of $12,000, non-taxable or deductible.
57The wife appeals from the award of spousal support. She submits that the trial judge erred in failing to consider all relevant factors and principles with respect to spousal support. In particular, she submits that there was no evidence to support the trial judge's finding that the husband was in need. Rather, the husband's claim for support was advanced solely on the basis of the differential in income between the two parties during the first year after separation. She further submits that the husband failed to make full disclosure with respect to his present spouse's financial circumstances. [page160]
58In response, the husband disputes the allegation of non- disclosure. Further, he submits that despite the brief reasons for judgment, this court should defer to the trial judge's finding.
59I do not find it necessary to deal with the question of non-disclosure. In my view, the record supports the wife's position on the lack of a proper evidentiary basis for the lump sum award. The record shows that the only evidence relied on by the husband to base his claim for support was the differential in the income of the parties during the year following separation. When asked in his testimony on what basis he was claiming support, the husband expressly stated that [it] was "[b]ased on the total discrepancy of income between the two of us. Her income at that point, in that period of time was approximately double mine." He advanced no other ground for his claim in his evidence.
60In my view, the differential in income alone did not provide a basis for awarding spousal support. I would give effect to this ground of appeal and set aside the award of $12,000.
Disposition and Costs
Disposition and Costs
61I would allow the appeal and vary the judgment in respect of the net equalization payment and spousal support award to accord with these reasons. Hence, I would vary para. 2 of the judgment by reducing the amount of the net equalization payment from $62,026.86 to $8,102.34. I would likewise vary para. 3 to reflect the different amount owed by way of net equalization payment; nothing in this judgment affects the amount owed by the husband to the wife by way or reimbursement. I would delete para. 4 in respect of the spousal support. I would confirm the balance of the judgment.
62Because of the husband's success at trial, the trial judge awarded him costs of the trial, fixed at $25,000. However, she recognized that the husband's success was due in large part to the additional evidence on the valuation of the pension assets. In light of his failure to present this evidence at trial, the trial judge reduced the award to just over $11,000.
63In light of the result on appeal, I would set aside the award for trial costs and make no order in its place. I would award the wife her costs of the appeal in the amount of $15,000.
Appeal allowed.
