COURT OF APPEAL FOR ONTARIO Date: 2020-05-29 Docket: C66973
Judges: Rouleau, Hourigan and Roberts JJ.A.
Between: Lynda Mary Van Delst (Hronowsky), Respondent and Thomas John Hronowsky, Appellant
Counsel: Rodney Cross, for the appellant Katherine Shadbolt and David Migicovsky, for the respondent
Heard: March 11, 2020
On appeal from the order of Justice Tracy Engelking of the Superior Court of Justice, dated April 24, 2019, with reasons reported at 2019 ONSC 2569, 23 R.F.L. (8th) 306.
Hourigan J.A.:
Part I: Introduction
[1] Certainty in the resolution of financial issues flowing from the dissolution of family relationships has been a policy imperative underlying much of the recent reform of family law in Canada. Child support, spousal support, and the division of family property have all been clarified through legislative and regulatory reform. While certainty should be tempered by limited judicial discretion to ensure fairness, certainty facilitates two essential policy objectives of family law: the encouragement of settlement and the avoidance of costly litigation to resolve financial issues.
[2] The Government of Ontario enacted legislation that came into effect in 2012 amending the Pension Benefits Act, R.S.O. 1990, c. P.8 (the “PBA”) and the Family Law Act, R.S.O. 1990, c. F.3 (the “FLA”), to simplify the valuation of pensions for purposes of calculating net family property. This legislation brought much-needed certainty to the valuation of what, in many cases, is the most significant asset held by litigants on their valuation date. A formula was established for pension valuations and the responsibility for calculating that value was imposed on pension administrators. Thus, courts largely got out of the business of pension valuation. For litigants this provided both certainty and fairness. It also allowed them to avoid the costly process of retaining actuarial experts and litigating competing pension valuations.
[3] The Ontario rules for valuating provincially regulated pensions for equalization purposes are relatively clear and easily applied. However, the valuation of federally regulated pensions is not as certain. Parliament has not reformed the law regarding pension valuations to bring it in line with the Ontario legislation. Until it does, Ontario courts must apply, to the extent reasonably possible, the provincial approach to valuing federal pensions for family law equalization.
[4] In the present case, the most significant issue at trial was the valuation of the parties’ federally regulated pensions for equalization purposes. Three aspects of the trial judge’s reasons on this issue are challenged on appeal: (i) the determination of the parties’ normal retirement dates; (ii) the decision not to include in the respondent’s net family property the contingent interest she held in the appellant’s pension; and (iii) the inclusion of a contingent survivor benefit in valuating the parties’ pensions. While the trial judge reached the right conclusions on the survivor benefit and contingent survivor benefit issues, she erred in her approach to all three issues by failing to heed the requirement of s. 10.1(2) of the FLA that, in valuating pensions that are not provincially regulated, the Ontario method of valuation should be applied, with only necessary modifications.
[5] In my view, the correct approach to pension valuation issues such as those on appeal is for parties to obtain valuations from their pension administrator where possible. Where this is not possible or issues remain as to the proper application of the Ontario regime to a federal pension plan, the parties should refer such issues to a trial judge for determination, usually with the aid of a jointly appointed expert. However in this case, given what has transpired, I would suggest, as will be explained below, a different process to resolve these issues.
[6] In addition to the pension valuation issues, the appellant also appeals certain date of marriage deductions and notional disposition costs used by the trial judge in calculating net family property. Further, he seeks an order permitting him to pay part of his equalization payment by means of the transfer of a lump sum from his pension. I would dismiss these grounds of appeal, as they are meritless.
Part II: Background Facts
[7] The appellant and respondent were married in October 1995 and separated in September 2016. Both spouses worked for entities governed by the federal Public Service Superannuation Act, R.S.C. 1985, c. P-36 (the “PSSA”). The appellant became a pension member on December 4, 1984, and retired on December 17, 2016. The respondent started working for the Royal Canadian Mounted Police in 2008 and continues to be employed.
[8] The respondent commenced an application in the Superior Court in May 2017 seeking orders for spousal support, child support and custody, along with the equalization of net family property. In August 2017, the appellant filed his answer. In September 2018, the respondent amended her application to include a claim for divorce. The appellant was alerted to the respondent’s intention to divorce at least as early as November 2017. The parties were able to resolve all issues except equalization, which proceeded to trial. The calculation of net family property was based on a series of findings made by the trial judge that are challenged on appeal.
[9] The most significant component of the net family property calculation was the values of the parties’ pensions. According to s. 10.1(1) of the FLA, the imputed value for family law purposes of a spouse’s interest in a pension plan is determined in accordance with s. 67.2 of the PBA.
[10] If, as here, the pension plan is a plan to which the PBA does not apply, s. 10.1(2) of the FLA nevertheless requires the PBA approach be used, “with necessary modifications”. One element of the valuation calculation under the PBA is the normal retirement date under the plan. Provincially regulated plans are required to provide a normal retirement date, which permits a straightforward valuation calculation. The PSSA does not list a normal retirement date.
[11] Both parties tendered reports by experts valuating their respective pension plans. The respondent’s expert used 65 as her normal retirement date because, although retirement with an unreduced pension is possible at 60, a “fair amount” of civil servants work past 60. The appellant’s expert calculated the value using ages 60 and 65. He used 60 because this is when all members who joined prior to 2013 are entitled to unreduced benefits. The appellant’s expert opined that 65 was also reasonable for several reasons, including because it was not unusual for members to retire after 60 and the majority of pension plans in Canada define the normal retirement age as 65.
[12] The trial judge concluded that the normal retirement date for the appellant was age 60 and for the respondent age 65. These conclusions were based on the pre-separation evidence of the parties’ intended retirement dates. In approaching the issue this way, the trial judge relied on the method for determining the likely retirement date from Di Francesco v. Di Francesco, 2011 ONSC 3844, at para. 31. The trial judge found that the respondent continues to work and intends to do so until age 65. The appellant, meanwhile, planned to retire when he was entitled to an unreduced pension. There was evidence that he remained in his job slightly longer than that in order to settle a grievance with his employer.
[13] When she calculated net family property, the trial judge excluded the respondent’s survivor benefits under the appellant’s pension, because the respondent would lose her entitlement to those benefits at the time of divorce. The value of the appellant’s survivor benefit was not provided and was not included in his net family property. Contingent survivor benefits were included in the net family property calculation, over the appellant’s objection. The trial judge also made several findings on the appellant’s date of marriage deductions and the parties’ notional disposition costs.
[14] Ultimately, the trial judge calculated net family property of $1,834,578 for the appellant and $707,458 for the respondent. Accordingly, she ordered that the appellant must pay the respondent $563,560 to equalize their net family properties.
Part III: Analysis
[15] There are five main issues on this appeal: (i) the appellant’s motion to tender fresh evidence; (ii) objections to the pension valuations; (iii) objections to the date of marriage deductions; (iv) objections to notional disposition costs used by the trial judge in calculating net family property; and (v) a request for an order that part of the appellant’s equalization payment be made by means of a transfer of a lump sum out of his pension plan.
(i) Fresh Evidence Motion
[16] The appellant brought an application to tender fresh evidence. I would dismiss that application, other than with regard to the documents at tabs 12, 13, 14, and 15 of the appellant’s materials, which were trial exhibits.
[17] The appellant has not met his onus under Palmer v. The Queen, [1980] 1 S.C.R. 759, to establish that the remaining evidence could not have been adduced at trial with due diligence.
(ii) Pension Valuation Issues
(a) The General Approach
[18] The process for valuating pensions is set forth in s. 67.2 of the PBA, the relevant provisions of which provide as follows:
67.2 (1) The preliminary value of a member’s pension benefits, a former member’s deferred pension or a retired member’s pension under a pension plan, before apportionment for family law purposes, is determined by the administrator in accordance with the regulations and as of the family law valuation date of the member, former member or retired member and his or her spouse. 2010, c. 9, s. 44 (1) .
(5) The imputed value, for family law purposes, of each spouse’s pension benefits, deferred pension or pension, as the case may be, is that portion of the preliminary value that is attributed by the administrator, in accordance with the regulations,
(a) to the period beginning with the date of the spouses’ marriage and ending on their family law valuation date, for the purposes of an order under Part I (Family Property) of the Family Law Act; or
(b) to the period beginning with the date determined in accordance with the regulations and ending on the spouses’ family law valuation date, for the purposes of a family arbitration award or domestic contract. 2009, c. 11, s. 49 .
[19] The other critical legislative provisions for the purposes of the valuation of pensions in the family law context are subsections 10.1(1) and 10.1(2) of the FLA:
10.1 (1) The imputed value, for family law purposes, of a spouse’s interest in a pension plan to which the Pension Benefits Act applies is determined in accordance with section 67.2 or, in the case of a spouse’s interest in a variable benefit account, section 67.7 of that Act. 2009, c.11, s. 26 ; 2017, c. 8 , Sched. 27, s. 21 (1).
(2) The imputed value, for family law purposes, of a spouse’s interest in any other pension plan is determined, where reasonably possible, in accordance with section 67.2 or, in the case of a spouse’s interest in a variable benefit account, section 67.7 of the Pension Benefits Act with necessary modifications. 2009, c.11, s. 26 ; 2017, c. 8 , Sched. 27, s. 21 (1).
[20] The use of the phrase “with necessary modifications” in s. 10.1(2) of the FLA indicates a legislative intent that the substance of s. 67.2 of the PBA be applied, while recognizing that some details may require modification. As the Supreme Court of Canada has recently observed, the words “with necessary modifications” are a contemporary reformulation of the Latin phrase mutatis mutandis: see R. v. Penunsi, 2019 SCC 39, 378 C.C.C. (3d) 37, at para. 49. They mean that the rules to be applied are read with necessary changes in points of detail, while the matter remains the same: Penunsi, at para. 50.
[21] In a recent decision considering s. 10.1(2) of the FLA, Raikes J. held that any departure from the PBA methodology must be justified as necessary by the party seeking that departure: Kelly v. Kelly, 2017 ONSC 7609, at paras. 161-162. I agree with and adopt that statement. This approach is consistent with the language of necessary modification. If one of the parties can show that, because the plan is not regulated under the PBA, a modification to the approach is necessary, departure will be warranted. Otherwise, the default position is that the PBA approach is to be used.
[22] This approach is also consistent with the legislative intent in reforming pension valuation on marital breakdown. The purpose of the new legislation was to create a uniform approach that would create certainty and avoid costly litigation over pension valuations: see Ontario, Legislative Assembly, Official Report of Debates (Hansard), 39th Parl., 1st Sess., No. 92 (24 November 2008) at 4156 (Hon. Christopher Bentley); and Ontario, Legislative Assembly, Official Report of Debates (Hansard), 39th Parl., 1st Sess., No. 111 (19 February 2009) at 4891 (Hon. Christopher Bentley).
[23] In summary, the legislature has signalled a clear intention in s. 10.1(2) of the FLA that a non-Ontario pension be valuated wherever possible in the same manner as an Ontario regulated pension. This means that the valuation formula in the PBA regulation Family Law Matters O. Reg. 287/11 should be applied to a non-Ontario pension with modifications only where necessary. In addition, a purposive interpretation of s. 10.1(2) of the FLA requires that, to the extent that other Ontario statutory provisions or regulatory requirements impact the valuation of a pension for family law purposes, they too should be applied to the valuation of a non-Ontario pension.
[24] In other words, a pension administrator should, to the extent possible, valuate a non-Ontario pension as if it were an Ontario pension. This is consistent with the purpose of the valuation exercise, which is to obtain a fair, predictable, and consistent division of net family property. Thus, it is important that provincial and federal pensions be valuated in the same manner, to the extent reasonably possible.
[25] The problem with the trial judge’s analysis of the parties’ pensions is that she did not default to the requirement that a federally regulated pension should be valuated in the same manner as a provincially regulated pension unless a departure from the methodology was necessary in the circumstances. Instead, she applied the pre-legislative-reform approach of tailoring the pension valuation to the parties’ specific circumstances. I turn now to consider the specific objections to the trial judge’s valuation of the parties’ pensions.
(b) Did the trial judge err in determining the parties’ normal retirement date?
[26] As noted, the term “normal retirement date” is one of the variables included in the pension valuation methodology prescribed under the PBA. In this case, in order to calculate the value of the parties’ pensions in accordance with this methodology, the parties’ actuaries had to fix a value for this variable. Fixing a value for the normal retirement date for the plan at issue requires a modification. This is because “normal retirement date” is a defined term in the PBA meaning “the date or age specified in the pension plan as the normal retirement date of members”: see s. 1(1). Plans regulated by the PBA must specify a normal retirement date: s. 10(1) 4. However, the plan at issue is not regulated by the PBA and therefore is not required to, and does not, specify a normal retirement date. The definition is therefore not helpful and must be modified when applying the PBA rules to valuate these pensions for family law purposes.
[27] The question is what modification is necessary. As discussed above, the legislature signaled a desire, in prescribing the PBA methodology with necessary modifications, that the substance of this methodology be followed, even though the details of a federally regulated plan may not map perfectly onto provincially regulated plans.
[28] In the absence of a fixed value referenced in the definition, the meaning of the term normal retirement date can nonetheless be determined by reference to how it is used in the provincial scheme. An analysis of its use in the PBA and other regulated pension plans shows that the normal retirement date is not a case-specific value reflecting when a given member is likely to retire. Rather, it is a generalized value representing the date at which the pension plan entitles any given member to unreduced pension benefits.
[29] After reaching the normal retirement date, working members become entitled on terminating employment to the benefits to which they are entitled under their plan: PBA, s. 35(3). The PBA requires that this date be no later than one year after the member turns 65: s. 35(1). However, members do not necessarily all retire at the normal retirement date. The PBA foresees that members may work past the normal retirement date and potentially earn additional pension benefits, but these additional amounts can be capped by the terms of the plan: PBA, s. 35(3).
[30] This analysis is confirmed by the terms of various major pension plans. Across pension plans, members’ normal retirement date is the date at which any member is entitled to retire with unreduced pension benefits: see OMERS Primary Pension Plan, s. 16; University of Toronto Pension Plan, s. 6.01; Healthcare of Ontario Pension Plan, ss. 6.1, 6.2; OPSEU Pension Plan, s. 10.1; Rules and Regulations of the Multi-Sector Pension Plan, s. 3.01; and The College of Applied Arts and Technology Pension Plan, s. 6.01.
[31] This is consistent with guidance from the Financial Services Commission of Ontario (‘FSCO”), the agency responsible for the regulation of Ontario pensions. In their policy, Retirement Dates, R700-101, they define the normal retirement date this way:
As a minimum standard under the PBA the normal retirement date is the date or age specified in the pension plan as the normal retirement date of members. The PBA requires every plan to specify a normal retirement date. Section 10(1) of the PBA specifies the documents that create and support a pension plan shall set out the normal retirement date under the plan. Section 35(1) requires this date be no later than one year after the member reaches age 65. A member has the right to retire and begin receiving an unreduced pension at the normal retirement date, if the member so chooses. The PBA does not require a pension plan member to cease employment and begin receiving a pension at the normal retirement date or age. A former member or other person who is entitled to a deferred pension is also eligible to begin receiving an unreduced pension at the normal retirement date. [Emphasis added.]
[32] Thus, the functional meaning of the term “normal retirement date” in the PBA scheme is the date or age at which any given member of a pension plan is entitled to retire with unreduced pension benefits.
[33] The trial judge did not ask what modification was necessary in order to calculate the value of the pension in accordance with the PBA methodology. Instead, she determined the parties’ respective normal retirement dates based on their case-specific intentions.
[34] This approach is inconsistent with s. 10.1(2) of the FLA, which provides that the PBA formulae be used subject to necessary modifications. As discussed above, this language connotes the legislative intent to preserve the substance of the referenced rules, while providing for inevitable adjustment on points of detail. Though a modification was required here because the federal pension did not stipulate a normal retirement date as required under the PBA, the trial judge was required to adopt the functional meaning of normal retirement date in the PBA — namely the date or age at which any given member is entitled to retire with unreduced pension benefits.
[35] The PSSA pension benefits are structured in a similar way to pension benefits under Ontario plans. Upon reaching a specified age, a contributor who ceases to be employed in the public service is entitled to unreduced benefits (an “immediate annuity”): ss. 12(1), 12.1(2), 13(1)(a), 13.001(1)(a). Unreduced benefits are also available by reason of disability: PSSA, ss. 12(1)(a,c), 12.1(2)(a,c), 13(1)(b), 13.001(1)(b). Contributors who cease to be employed in the public service earlier may nonetheless be entitled to unreduced benefits based on their years of service, and otherwise are entitled to reduced benefits: ss. 13(1)(c), 13.001(1)(c).
[36] It is discernable from the terms of the PSSA at what age all contributors are entitled to retire with an unreduced pension, which is equivalent to the normal retirement date in the provincial plans. Using this date preserves the substance of the PBA rules in applying them to plans that do not explicitly specify a normal retirement date. This is consistent with the intention underlying s. 10.1(2) of the FLA.
[37] The trial judge erred by replacing the generalized concept of normal retirement date, as defined under the provincial scheme, with a case-specific value for which there is no statutory authority. This was not necessary because a functional equivalent to the normal retirement date is apparent on the face of the parties’ pension plan. The trial judge’s approach is undesirable because it implements a case-specific approach that is likely to involve more litigation, and is exactly what the legislature sought to avoid in enacting s. 10.1(2) of the FLA.
[38] Applying an approach based on the terms of the pension plan rather than the intentions of the parties, the normal retirement date for both parties is age 60. The parties’ benefits are outlined in s. 13 of the PSSA. It provides different sets of pension benefits depending on when the person began contributing and the amount of pensionable service they have accumulated. Contributors are entitled to s. 13 benefits where they are “Group 1” contributors with two or more years of pensionable service: s. 13(1). Both parties in this case are “Group 1” contributors because they worked for the public service before 2013: PSSA, s. 12(0.1). They both also have at least two years of pensionable service. Therefore, s. 13 applies to both parties.
[39] The functional equivalent of the normal retirement date in s. 13 is the date on which the contributor reaches 60 years of age. Section 13 provides any contributor who has reached 60 years of age and has credited two years of pensionable service with immediate unreduced benefits on retirement: PSSA, s. 13(1)(a). As in the provincial plans, there are circumstances in which certain contributors may be entitled to unreduced benefits at an earlier date due to disability or having credited a threshold of pensionable service. However, at age 60, any contributor who retires is entitled to unreduced benefits, as with the normal retirement date in the provincial scheme.
[40] For these reasons, applying the PBA valuation methodology with necessary modifications to the pension benefits provided by s. 13 of the PSSA requires the substitution of the definition of normal retirement date with the date that the parties reach age 60.
[41] I add the following regarding the process to be followed when valuating non-Ontario pensions. Generally, the same process should be followed as with a provincially regulated plan. The parties should request that the pension administrator generate a value based on the Ontario law. If a pension administrator, who is not regulated by the provincial legislation, refuses to calculate the value, or if issues arise regarding the necessary modifications to be made, directions from the court may be sought. The preferable approach is that a single jointly-appointed expert provides expert evidence. The appointment of competing valuators should be avoided because it encourages the type of costly valuation litigation that the new legislation was designed to avoid.
[42] I note the Family Law Rules were recently changed to encourage the use of joint litigation experts. Rule 20.2(8)2 now requires joint litigation experts wherever the court so orders. Rule 17(4)(d.1) prompts the court to explore expert evidence issues at case conferences and make related orders. The joint expert can set out for the court the relevant decisions that need to be made in order to apply Ontario law to a federal pension, as well as potentially necessary modifications. It would then be for the court to determine whether any of the suggested modifications meet the high threshold of “necessary” mandated by the FLA.
[43] What remains to be done in this case is a calculation of the equalization payment owing based on a correct normal retirement date of age 60 for both parties. The appellant’s expert provided a calculation assuming a normal retirement date of age 60, and it appears that the respondent’s expert prepared this calculation as well. In the circumstances of this case, where important arguments regarding normal retirement date were not clearly made before the trial judge, and where further cost and delay should be minimized, I would direct the matter back to the trial judge to determine the equalization payment owing based on the experts’ age 60 calculations plus the parties’ further equalization calculation submissions.
(c) Should the trial judge have included the survivor pension in the respondent’s net family property?
[44] The appellant submits that the trial judge erred in not including in the respondent’s net family property the contingent interest she had in the appellant’s pension in the event that he died while they remained married. The parties’ positions on appeal on this issue mirror their arguments at trial.
[45] The appellant’s position is that the respondent was entitled to a survivor pension from him that was valued at $392,270 on the valuation date and that this asset should be included in her net family property calculation. As of the date of separation, he argues, there was no intention to divorce and he notes that the respondent did not claim a divorce in her original application.
[46] In response, the respondent submits that under the terms of the PSSA she is not entitled to a survivor pension from the appellant if she is not his spouse at the time of his death. Therefore, she submits that this contingent right cannot count as an asset of hers at the date of separation. She takes the position that the fact that she did not claim a divorce in her original pleadings is irrelevant, as she subsequently sought and was granted leave to amend her pleadings to include that claim.
[47] The trial judge accepted the respondent’s submission that this amount should not be included. Her reasoning was that the respondent had asked for a divorce, which was consented to by the appellant, and therefore the appellant would not fall within the definition of a survivor within the PSSA. In making this ruling, the trial judge relied on Humphreys v. Humphreys (1987), 1987 CarswellOnt 309, 7 R.F.L. (3d) 113, and Martin v. Martin, 2018 ONSC 6804.
[48] In my view, the trial judge reached the correct result on this issue but erred in her analytical approach. She determined that the most equitable result would be that the survivor pension should not be included because the respondent would lose the benefit of this asset as soon as the divorce was granted. The correct approach was to treat this issue the same way it would be treated if this were an Ontario pension by first asking: What would the law require if this were an Ontario pension? Once that has been determined, the next question is whether any modifications of that approach are necessary in the circumstances.
[49] The appellant’s expert provided the following opinion in his report:
The Ontario Pension Benefits Act and regulations only assigns a family law value to a survivor pension payable to the former spouse if the separation occurs after retirement. This is logical for Ontario regulated pension plans since a spouse who is separated from the member prior to retirement will not be entitled to a survivor pension on the member's retirement. However, this does not necessarily reflect the survivor pension entitlements in the case of pension plans from other jurisdictions, such as the PSSA, where a separated married spouse is entitled to the survivor pension if the marriage commenced prior to retirement and the member and spouse are not divorced at death.
[50] In the present case, neither spouse had retired as of the date of separation. The appellant’s expert testified that inclusion of the survivor benefit, and exclusion of the contingent survivor benefit, would be modifications of the usual approach but they might be necessary:
Q. What necessary modifications did you have to make?
A. … The other issues of necessary modifications are the two issues we've discussed in Section 2.1 and 2.2. And whether those modifications are necessary is for the court to decide, but one modification could be to remove the contingent survivor benefits from the value in this case. Another modification could be to ascribe some value for the survivor pension payable to Ms. Hronowsky - her current entitlement to it I should say, not payable. But other than that, I haven't made any, any modifications to the rules per se, aside from making a judgment on the normal retirement age. But I provided Section 2.1 and 2.2 due to the unique nature of the survivor benefits in this plan. The Court might deem it appropriate to make an, an adjustment to the standard rules, so I provided sufficient - tried to provide sufficient information to allow the court to make that judgment. [Emphasis added.]
[51] The appellant’s expert was of the view that including some value for the survivor benefit in these circumstances would represent a “modification” of the usual approach, and an “adjustment of the standard rules”. He suggested that this might be necessary because, unlike with an Ontario pension, the respondent remained technically entitled to the survivor benefit post-separation until the parties divorced.
[52] I do not see modification of the usual approach to include this benefit as necessary on the facts of this case. The expectation is that the Ontario regime will be applied where reasonably possible, unless there are compelling reasons not to. In these circumstances, where entitlement to the survivor benefit terminates upon divorce, and the respondent sought a divorce early on in proceedings, and the appellant consented to the granting of a divorce, there is no compelling reason to depart from the requirements of the standard rules to include the full value of an asset never to be realized in the hands of the respondent.
[53] Based on the forgoing, I would dismiss this ground of appeal.
(d) Did the trial judge err in including a contingent survivor benefit in the appellant’s net family property?
[54] The appellant argues that the trial judge erred in including a contingent survivor benefit in valuating his pension. A contingent survivor benefit is payable to a pension member’s future potential spouse. Some value for a contingent survivor benefit is included in the value of a pension based on the probability of the member having an eligible spouse at death and based on the age of the spouse. The appellant took the position that this figure should not be included in the value of his pension, whereas the respondent’s expert included the figure in her pension valuation. The trial judge included these figures in calculating the value of both parties’ pensions.
[55] Again, the trial judge reached the correct result on this issue but erred in her analytical approach. As with the other pension issues, the correct approach was to determine what the law would require if this were an Ontario pension and then determine whether any modifications of that approach are necessary in the circumstances.
[56] The appellant’s expert stated that the Standards of Practice of the Canadian Institute of Actuaries require actuaries to include contingent survivor benefits in the commuted value of a member’s pension benefits on termination. He further stated that the FSCO has instructed pension plan administrators “to include the value of contingent survivor benefits in the family law value in the same way the pension plan includes this value when determining the commuted value for terminated pension plan members.” He described the inclusion of this benefit in the appellant’s net family property as “in accordance with the regulations and the generally accepted methodology for calculating Ontario family law values.”
[57] The appellant’s expert opined that, notwithstanding the foregoing, including the survivor pension payable to a possible future spouse was unfair because the member may not have an eligible spouse, and even if the member does have an eligible spouse, the survivor pension would be an asset of the future spouse, not an asset of the member.
[58] According to even the appellant’s expert, if this were an Ontario pension the pension administrator would have been obliged to follow the FSCO direction and include these figures. In the testimony quoted above, the appellant’s expert acknowledged that exclusion of the contingent survivor benefit would represent a modification of the standard methodology. Again, I see no compelling reason why the usual valuation approach should be modified for the parties’ federal pensions. The ability to confer a survivor benefit on a future partner is of value to a pension member even if the member does not receive these funds personally. In any event, no changes are necessary for the court to apply the usual provincial approach to these federal pensions. The appellant’s retirement was a post-separation event, and such events generally will not affect the valuation of assets on valuation day according to the standard methodology. I would, therefore, dismiss this ground of appeal.
(iii) Date of Marriage Deductions
[59] The issue here is the treatment of interest in the appellant’s net family property statement. In his date of marriage property, he included prorated figures for interest earned on his Scotiabank Guaranteed Investment Certificate, Canada Savings Bonds, and Bank of Nova Scotia RRSP. The trial judge found that it was permissible for the appellant to include the interest earned on his pre-marriage assets. However, in order to include this interest as property owned on the date of marriage, she found that the appellant was obliged to include interest for the property he owned on the date of separation. The trial judge found that he did not undertake this exercise for these date of separation assets and stated that the appellant “cannot benefit by including interest in his calculations when it is advantageous to him and not including it when it is not.”
[60] The appellant submits that the trial judge erred in fact in finding that he did not include interest in his date of separation assets. I am not persuaded by this argument. The appellant’s net family property statements suggest that he did not include interest in his date of separation assets. For example, in his December 10, 2018 statement, his Scotiabank Guaranteed Investment Certificate is assigned a value of $85,000 as of the valuation date and the same figure is used for the current value. This strongly suggests that interest was not included, as there is no increase in the value between the two dates. The onus is on the appellant to show that the trial judge’s factual findings should be overturned. This would require evidence of the inclusion of interest in his date of separation values, and the methodology used to reach such figures, sufficient to displace the trial judge’s findings against him on this issue.
[61] Having found as a fact that the appellant did not include interest in these date of separation asset values, I see no legal error in the trial judge’s decision to disregard the date of marriage interest values for the sake of consistency. I would, therefore, dismiss this ground of appeal.
(iv) Notional Disposition Costs
[62] The appellant has raised a number of alleged errors regarding the treatment of notional disposition costs. Specifically, he submits that the trial judge erred in:
- not using a marginal tax rate of 26.9% for the pre-marriage portion of his retiring allowance;
- using a 25.8% marginal tax rate at age 60 instead of a rate of 26.9%;
- not using a 45% marginal tax rate for the retiring allowance as at the date of separation;
- not applying a notional disposition cost for his non-registered SSI account; and
- using an 18% disposition rate for the respondent’s remaining contribution deficiencies.
[63] I am not persuaded that there is a basis to interfere with the trial judge’s calculation of notional disposition costs. The appellant failed to meet his onus of adducing sufficient evidence to establish these costs. For example, the appellant led no evidence regarding the appropriate tax rate to apply to his date of marriage severance pay, and the only information the court had with regard to the appellant’s marginal tax rate as at the date of separation was the agreement of the parties that the tax rate on the retroactive pay he received should be 45%. Moreover, the 25.8% rate used was the same one used by the appellant’s actuary assuming a retirement age of 60. In addition, the 18% rate was the same rate the appellant used in his Net Family Property Statement dated December 10, 2018, and he did not challenge this rate at trial. Deference is owed to the trial judge’s assessment of the evidence relating to costs of disposition: see Berta v. Berta, 2015 ONCA 918, 128 O.R. (3d) 730, at para. 82.
[64] For these reasons, I would dismiss this ground of appeal.
(v) Method of Equalization Payment
[65] The appellant submits that the trial judge should have permitted him to satisfy part of his equalization payment by transfer of a lump sum out of his pension plan. He submits that the requirement to make such a large equalization payment means that he will have to arrange financing to satisfy the equalization payment.
[66] I would not give effect to this submission. The appellant stated explicitly in his amended answer, in the context of his argument that the respondent should have his survivor pension added to her net family property, that he would not apply for division of his pension under the Pension Benefits Division Act, S.C. 1992, c. 46, Sch. II, as this would terminate her entitlement to the survivor benefit. Thus, he made a strategic decision not to seek an order for a lump sum transfer.
[67] In addition, the evidence at trial established that he had the ability to make the required equalization payment without the need to rely on a lump sum transfer from his pension. His financial statement showed substantial liquid assets, including cash, proceeds from the sale of the family home, and securities.
[68] In his closing argument, the appellant’s counsel summarized his client’s position this way:
The last point I will bring up, Your Honour, is splitting - my friend alluded to splitting Mr. Hronowsky’s pension of the Pension Benefits Division Act. He does not want to do that, he’s able to pay, and therefore there’s no need to make that order. Certainly, in light of the fact that he has enough liquidity, that, within a matter of a month or so, he should be able to pay the – whatever the equalization payment, Your Honour, thinks is appropriate.
[69] The trial judge cannot be criticized for doing exactly what the appellant invited her to do. In taking the strategic position he did at trial, the appellant was no doubt aware of the possibility that the trial judge would be making an order for a substantial equalization payment.
[70] I would dismiss this ground of appeal, as I see no basis for appellate interference. The cross-appeal seeking an order that any lump sum payment be grossed up need not be addressed, given the result on this issue.
Part IV: Disposition
[71] I would allow the appeal in part and order that the parties’ pensions be valuated in accordance with these reasons, and that the resulting adjustment be made by the trial judge to the equalization order. If the parties cannot agree on the costs of the appeal and the trial, they may serve and file written submissions of no more than five pages, plus bills of costs, within two weeks of the date of these reasons.
Released: “P.R.” May 29, 2020 “C.W. Hourigan J.A.” “I agree. Paul Rouleau J.A.” “I agree. L.B. Roberts J.A.”
