Case Name:
Bennett v. Bennett
Between
William Bruce Bennett, appellant/respondent
in Cross-appeal, and
Diane Marie Bennett, respondent/appellant
in Cross-appeal
[2004] O.J. No. 5808
9 R.F.L. (6th) 242
London Docket: 1439
Ontario Superior Court of Justice
Divisional Court
J.D. Cunningham A.C.J.S.C.J., J.D. Ground and H.M. Pierce JJ.
Heard: November 11, 2004.
Judgment: December 10, 2004.
(41 paras.)
Family law — Marital property — Equalization — Valuation of assets — Pensions and investments — Maintenance and support — Spousal support.
Appeal by the 64-year-old appellant husband from as trial judgment awarding the respondent wife $1,000 per month in spousal support and a $16,000 equalization payment. Cross-appeal by the 60-year-old respondent wife for increased retroactive spousal support. The parties were married for 37 years before their separation in 2001. The wife was a homemaker for 14 years before she obtained part-time employment that was declared surplus in 2001. At trial, the husband's monthly income was $2,834. The wife's monthly income was $386. The parties had each received $147,000 from the sale of the matrimonial home. The husband had a pension plan under which the wife was to receive survivor benefits. The trial judge ordered that of the $1,000 per month, $690 per month be paid indefinitely on the basis that there was no double recovery on that amount. The wife's request for support retroactive to the date of separation was dismissed.
HELD: Appeal allowed; cross-appeal dismissed. The full value of the husband's pension had been taken into account in the parties' equalization. The trial judge erred in law in requiring a significant encroachment on the value of the survivor pension for the support of the wife. As a result of equalizing assets, the wife had adequate resources to pay her living expenses. The husband was to pay $140 per month in spousal support, being half of the unequalized portion of his pension.
Statutes, Regulations and Rules Cited:
Family Law Act, s. 4, s. 4(1), s. 4(2)
Counsel:
T. Hainsworth for the (appellant/respondent in cross-appeal).
Peter D. Eberlie for the respondent (appellant in cross-appeal.
The judgment of the Court was delivered by
[1] H.M. PIERCE J.:— This, appeal involves the difficult question of the extent to which double recovery should be permitted from equalized property in order to support a spouse. That is the substance of husband's appeal. Ms. Bennett cross-appeals for increased retroactive spousal support, and, with leave, for her costs at trial.
Background
[2] This appeal is taken from the trial judgment of Mr. Justice D. Aston dated December 30, 2003.
[3] At the time of separation in June of 2001, the husband was 61 and the wife 57. The parties had a 37 year marriage, and raised 3 children. Both parties are now retired.
[4] Ms. Bennett was a homemaker for 14 years before she obtained part-time employment that was declared surplus in August of 2001. At that time, even though the parties were separated, Ms. Bennett sought financial advice from her husband, who made a career in banking, and took a severance package that included modest pension benefits.
[5] At trial, Mr. Bennett's monthly income was $2,834; Ms. Bennett's was $386. The husband's income may increase with the receipt of the Old Age Security and Canada Pension benefits when he becomes 65 in May of 2005. He also enjoys some additional interest income from an inheritance of $48,000 he received after separation.
[6] Ms. Bennett is the beneficiary on Mr. Bennett's survivor pension benefit, by which she will receive $1,655 par month if her husband dies before he is 65 and $1,573 if he dies after that age. At trial, actuarial evidence predicted the husband's life expectancy to be 74.7 years, based on medical reports of his health.
[7] Following separation, the properties owned by the parties were sold and the proceeds divided, each spouse received about $147,000. Ms. Bennett purchased a house for $149,000 while Mr. Bennett invested his money and rented an apartment.
[8] The trial judge found the wife's savings and investments at trial to be $203,400 in addition to her home equity, survivor pension, and her personal pension. The husband's savings, including the sale proceeds from property of $147,000, were $298,000 before he paid his wife an equalization payment with pre-judgment interest of $16,000.
[9] The parties' capital positions after equalization of net family property approximated $440,000 each.
[10] Mr. Justice Aston found that it was the parties' habit to live modestly during their marriage. At trial, Ms. Bennett presented a proposed budget of $2,926 per month, while Mr. Bennett's was $2,596.
Standard of Review
[11] We are mindful of the cautionary note sounded by the Supreme Court of Canada in Hickey v. Hickey, [1999] 2 S.C.R. 518 (S.C.C.) about the deferential standard of review for family law matters, Madam Justice L'Heureux-Dube observed at p. 526:
There are strong reasons for the significant deference that must be given to trial judges in relation to support orders. This standard of appellate review recognizes that the discretion involved in making a support order is best exercised by the judge who has heard the parties directly. It avoids giving parties an incentive to appeal judgments and incur added expenses in the hope that the appeal court will have a different appreciation of the relevant factors and evidence. This approach promotes finality in family law litigation and recognizes the importance of the appreciation of the facts by the trial judge. Though an appeal court must intervene when there is a material error, a serious misapprehension of the evidence, or an error in law, it is not entitled to overturn a support order simply because it would have made a different decision or balanced the factors differently.
The Decision at Trial
[12] Ms. Bennett was awarded spousal support of $1,000 per month at trial, with support to be reviewed in May of 2005 when Mr. Bennett turns 65. Of this amount, $690 monthly was ordered as indefinite support. Her request for retroactive support from the date of separation on the motion for interim support in March, 2003 was refused. Instead, support was ordered to begin July 1, 2003, when Ms. Bennett's Employment Insurance benefits ended.
[13] Justice Aston considered the Supreme Court of Canada's decision in Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413 (S.C.C.), and the Manitoba Court of Appeal's ruling in Cymbalisty v. Cymbalisty, 2003 MBCA 138, 2003 CarswellMan 458 (Man. C.A.) to support his conclusion about double recovery in the case at bar.
[14] The notion of double recovery or "double dipping" as it is sometimes called, is this: when a spouse equalizes the value of his pension in a net family property division on separation, it is unfair to use the income stream generated by that shared asset a second time to fund spousal support. The argument is that spousal support should only be paid out of capital that is not equalized.
[15] At par. 45 of Shadbolt v. Shadbolt (1997), 32 R.F.L. (4th) 253 (Ont. Gen. Div.), Mr. Justice Czutrin described the conflict in this way:
As a general rule, it will usually be unfair for the holder of a pension to have to share the future income stream twice - once as part of the equalization of net family property and again by payment of spousal support. That is particularly so in a case such as this because all of the pension was earned before separation. The Ontario Court of Appeal in Abate v. Abate (1989) 17 A.C.W.S. (3d) 790, [1990] W.D.F.L. 370, [1989] O.J. No. 2528, 23 R.F.L (3d) xli, affirming (1988), 17 R.F.L. (3d) 251 (Ont. H.C.) confirmed that, for a pension "in pay" at the date of separation, the future income stream is "property" and the subject of equalization of net family property. Thus, the husband does not have the option on his own to simply share the income stream when and as it is received. Mr. McDougall must include the capitalized value in his net family property, and thereby share a full 50% of the predicted future income stream as property. How can it be said that he should pay support out of the remaining 50%?
[16] In this case, the support ordered was derived from two aspects of the husband's pension said not to be equalized; the portion of the pension earned before marriage, and the portion comprising the survivor benefit.
[17] Justice Aston concluded that the pre-marriage benefit was worth $281 per month to Mr. Bennett, and found that half of $140 should be allocated to pay spousal support. With respect to the survivor benefit, he determined that 39.3% of the husband's pension or $1,113 per month made up the survivor benefit, and was not equalized. On that basis, he ordered that half, or $550 per month, should be allocated for spousal support. Adding the two sums together, he concluded there would be no double recovery if support of $690 per month were ordered. Then he "topped up" this amount by an additional $310 to arrive at the support award of $1,000 per month.
[18] The appellant husband takes issue with how this was done. The wife says it was not enough.
Discussion
The Survivor Pension
[19] A pension "in pay" represents both a return of capital and investment yield in the form of a stream of income. In Boston, Major J.. noted at par. 30:
... After retirement, when the pension produces an income, the pension asset is, in a sense, being liquidated.
[20] The pension liquidates on the death of the pension member, unless a survivor is designated to receive a survivor pension. In that case, the pension liquidates on the death of the survivor. The survivor benefit is a pension in its own right; its payment, however, awaits the death of the plan member who first receives the pension. It is analogous to the pension entitlement of an employee who is not retired. It represents an expected future stream of income that can be actuarially valued.
[21] Ms. Bennett submits that the value of the survivor pension is notional only; that Mr. Bennett didn't have to pay for it; rather it reduced the amount he had to pay on equalization so that it was actually a saving to him. Therefore any "double dipping" is theoretical only; that the unshared value of the survivor pension should be used to underwrite a support award.
[22] Mr. Bennett's argument is this: at equalization, each of the parties had a similar capital position of $440,000. The survivor benefit has been valued and equalized, such that his wife will receive her monthly payments after his demise. It should not be further encroached upon for the payment of spousal support.
[23] The appellant contends that the learned trial judge was in error in concluding that the survivor pension was not "paid for" in the equalization so that encroaching on it to pay support did not offend the rule against double payment, or double recovery, as set out in Boston v. Boston, supra.
[24] At par. 56 of the judgment, Mr. Justice Aston comments:
When there are survivor benefits, the court should recognize that the husband is not "purchasing" his pension with actual dollars or property. The reality is that the pension is a single asset in which the spouses have different interests. Thus, it is possible to reframe the issue as Justice Heeney did in Walker, 19 R.F.L. (5th) 443, without reaching a conclusion that is inconsistent with Boston. The inequity that Boston attempts to redress is not that it creates a windfall for a spouse who claims support. Rather, it is the perceived injustice to the pension holder who has to pay more than once. If the pension holder does not have to pay except in notional terms (by credit for the value of the survivor pension), can it be said he has a real or actual cost that he is paying twice? I think not. To the extent that he got "credit" for the value of the survivor pension in the net family property calculation, he has not had to encroach upon his own capital whatsoever, The survivor benefits could never have had any value to him.
[25] With respect, we do not agree with this conclusion. The Family Law Act requires spouses to divide the value of assets, not to purchase assets from each other on equalization. Section 4(1) of the Act defines "net family property" as
the value of all the property, except property described in subsection (2),that a spouse owns on the valuation date, after deducting,
(a) the spouse's debts and other liabilities, and
(b) the value of the property, other than a matrimonial home, that the spouse owned on the date of the marriage, after deducting the spouse's debts and other liabilities, calculated as of the date of marriage ... [Emphasis added]
[26] Subsection (2) defines the 6 categories of excluded property, based on how assets are acquired. Otherwise the statute does not distinguish the nature of the asset. It is not necessary for Mr. Bennett to purchase an asset that is equalized. The full value of the pension, as it benefits each spouse, has been taken into account in the parties' equalization. It is not necessary to set off the value of one asset against another. The Family Law Act does not have a sub-category of assets that have notional value only, and are accorded different treatment for purposes of equalization.
[27] Even if this were not so, the conclusion of Aston J. overlooks the fact that the survivor pension is carved out of the pension as a whole, with the result that Mr. Bennett receives a reduced monthly benefit in his pay envelope by virtue of the plan funding a survivor pension plan for his wife. Thus, Mr. Bennett has foregone full value of his pension in order to supply his wife with a pension. This means that the husband has used actual dollars to buy a pension for Ms. Bennett.
[28] The appellant also submits that the learned trial judge was in error in concluding that 39.3 percent of his pension was not equalized and that the double recovery was not significant. He contends that the actuarial evidence on this point was not considered in calculating the amount of the double recovery. The argument is that the pre-tax figures should have been used in considering the pension value, not after-tax dollars, given that the pension is received without tax deducted, the same as spousal support.
[29] The judgment does not calculate the amount of the double recovery from the husband's pension, despite actuarial evidence at trial addressing the point. However, the trial judge concluded it was minimal.
[30] There was evidence that reducing the husband's pre-tax pension benefit by $ 1,000 per month (the amount of the support award) reduced the pension's gross value to $182,956. The appellant submits the amount of the double recovery is about $100,000, Against a gross pension value of $288,000 (as of April, 2003). this is a significant amount. It would have been preferable to know the findings of the judge supporting his conclusion that the double recovery was minimal. However, we cannot agree that the encroachment was minimal.
[31] In Boston v. Boston, supra, the court held that it is desirable to avoid double recovery from a pension when it is both an asset and an income source, but it recognized, at par. 65, that in some circumstances, double recovery might be required for the support of the spouse. When the payor has the ability to pay support, the recipient has made a reasonable effort to generate income from the equalized assets, and economic hardship from the marriage or its breakdown continues, then double recovery may be invoked to fund support.
[32] In this case, Ms. Bennett has chosen to buy a house with her capital, rather than draw on it for her own support. She is certainly entitled to do so, but that decision limits the extent of capital to which she has access for her own support. At par. 54 of the Boston decision, Mr. Justice Major observed,
... the payee spouse must use the assets received on equalization to create a "pension" to provide for her future support.
[33] In the case at bar, the wife will realize a survivor pension when Mr. Bennett dies, as well as his life insurance, which was ordered continued. She has capital that can be used as bridging income until the survivor pension is in pay. The trial judge found that she had not yet equalized Canada Pension Plan credits, but advised that she do so.
[34] In the result, we conclude that the trial judge erred in law in requiring an encroachment on the value of the survivor pension for the support of Ms. Bennett and in ordering a "top up" in the amount of $310. As a result of equalizing assets, Ms. Bennett has adequate resources to pay her living expenses, and she should encroach on her capital to do so.
The Value of the Pension Earned Before Marriage
[35] The appellant conceded that the pre-marriage portion of the pension, valued by Aston J. at $281 per month, was not equalized. However, he submitted he is entitled, in accordance with s. 4 of the Family Law Act, to deduct the value of assets owned on the date of marriage, of which the pre-marriage value of the pension is one. He wants to avoid equalizing this component of his pension, which he earned before he and his wife were partners. Not to let him do so is, he argues, a redistribution of capital under the Family Law Act in order to fund support. In support of this argument, he relies on Hoar v. Hoar, [1993] O.J. No. 605 (Ont. C.A.) in which the court disapproved of an order for lump sum support in the guise of redistributing capital.
[36] There are competing interests, with respect to the income generated by this unequalized portion of the pension that are balanced by the trial judge. Encroaching on this capital does not offend the rule against double recovery set out in Boston. Consequently, we would not interfere with this aspect of the judgment. The husband is ordered to pay to the wife spousal support of $140 per month commencing July 1, 2003. The wife's cross-appeal for increased support is dismissed.
Review of Support
[37] The trial judge ordered that the wife's support be reviewed in May of 2005, to coincide with expected additional income the husband may have on his 65th birthday. We agree with this approach, but suggest that the review of support should be limited to a consideration of the extra incomee realized by the husband from adjustments to his employment pension. Old Age Security, and Canada Pension, including the tax ramifications, and whether Canada Pension credits have been split between the spouses.
Costs at trial
[38] Ms. Bennett cross-appealed the decision of the trial judge on costs at trial.
[39] Leave is granted to bring the appeal. We are of the view that the trial judge appropriately exercised his discretion in considering any applicable offers, and success at trial, and we would not interfere in his determination of this issue. Cross-appeal on costs is dismissed.
Costs of the Appeal
[40] The parties may make brief written submissions on costs within 30 days of the release of these reasons, if they cannot agree.
Summary
[41] For all of these reasons,
- the appeal of William Bruce Bennett is allowed, and the judgment of Aston J. is amended to the extent that William Bruce Bennett is to pay Diane Marie Bennett spousal support of $140 per month, effective July 1, 2003;
- the cross-appeal of the wife is dismissed;
- costs of this appeal are reserved, with brief written submissions to be made within 30 days of the release of these reasons. Appeal allowed in part.
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