Birce v. Birce

[Indexed as: Birce v. Birce]

56 O.R. (3d) 226 [2001] O.J. No. 3910 Docket No. C36052

Court of Appeal for Ontario Laskin, Rosenberg and Cronk JJ.A. October 10, 2001

Family law -- Property -- Equalization of net family property -- Deductions -- Early retirement payments -- Payments to husband by his employer as incentive for taking early retirement did not constitute gift -- Trial judge properly included entire amount of payments (including that portion attributable to husband's employment before marriage) in husband's net family property.

The husband and the wife were married in 1988. The marriage was the second one for both parties. Under the terms of the divorce judgment, the husband's first wife was entitled to a certain percentage of his pension when he retired, and those pension benefits included "on a pro-rated basis . . . all payments of every nature and kind paid to the husband from his employment as a consequence of his retirement or disassociation with his employer". The husband took early retirement in 1992. His employer was going through a period of "work force adjustment" and offered employees incentive payments for taking early retirement. At that time, the husband took the position that his first wife was not entitled to any of the retirement payments since the allowance was not based on past employment. The husband and wife separated in 1997. At trial, the husband sought to have most of the retirement payments deducted from his net family property on the basis that he was married to the wife for only four of his 35 years with his employer. The trial judge rejected that argument and included the entire amount of the payments in the husband's net family property. The husband appealed. For the first time, he raised the argument that the payments constituted a gift and therefore should be excluded entirely from matrimonial property accounting.

Held, the appeal should be dismissed.

It would be unfair to permit the husband to raise for the first time on appeal the entirely new argument that the payments constituted a gift. In any event, he had not met the burden of showing that the payments were a gift. In its usual meaning, a gift is a voluntary transfer of personal property without consideration. On the limited record of this case, the payments by the employer to the husband could not fairly be characterized as gifts. They were paid to the husband as inducements and in consideration for his taking early retirement. They were a tool used by the employer to reduce its work force. The fact that the payments were made according to a formula devised by the employer and were non-negotiable did not make them gifts from the employer.

The burden was on the husband to prove entitlement to have the 31/35ths of the payments deducted from his net family property. On the sparse record of this case, while the amount of the payments was based upon the husband's years of service and his position within the company, his entitlement arose solely because in 1992, his employer was attempting to reduce its work force. It was not unreasonable for the trial judge to treat the husband's position with respect to the payments in denying his first wife a share of them as an admission that the payments were unrelated to recognition for past services. It was open to the trial judge to conclude that the husband had not met the onus to prove the deduction or exclusion.

APPEAL from a decision of Rutherford J. (2000), 2000 22512 (ON SC), 7 R.F.L. (5th) 256 (S.C.J.) with respect to net family property.

Read v. Read (1993), 1993 7036 (AB KB), 9 Alta. L.R. (3d) 87, 46 R.F.L. (3d) 426 (Q.B.); Sutton v. Davidson (1999), 1999 ABCA 280, 76 Alta. L.R. (3d) 216, 1 R.F.L. (5th) 157 (C.A.), supp. reasons (1999), 1999 ABCA 339, 76 Alta. L.R. (3d) 227 (C.A.), consd Other cases referred to Cameron v. Cameron (1994), 1994 1861 (BC SC), 100 B.C.L.R. (2d) 104, 9 R.F.L. (4th) 358 (S.C.); Christian v. Christian (1995), 1995 4531 (NS SC), 139 N.S.R. (2d) 246, 397 A.P.R. 246, 10 R.F.L. (4th) 302 (S.C.); Dolman v. Dolman (1998), 1998 29637 (ON SC), 38 R.F.L. (4th) 362 (Ont. Gen. Div.); Jering v. Jering (1987), 1987 6920 (MB QB), 45 Man. R. (2d) 296, 7 R.F.L. (3d) 42 (Q.B.); Pretty v. Pretty (1995), 1995 10426 (NL SC), 133 Nfld. & P.E.I.R. 70, 413 A.P.R. 70, 16 R.F.L. (4th) 122 (Nfld. S.C.); Ross v. Ross (1999), 1999 NSCA 162, 181 N.S.R. (2d) 22, 4 R.F.L. (5th) 134 (C.A.); Yaschuk v. Logan (1992), 1992 2595 (NS CA), 110 N.S.R. (2d) 278, 299 A.P.R. 278, 39 R.F.L. (3d) 417 (C.A.), revg in part (1991), 1991 4392 (NS SC), 103 N.S.R. (2d) 371, 282 A.P.R. 371, 33 R.F.L. (3d) 316 (S.C.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, s. 4 Public Service Superannuation Act, R.S.C. 1985, c. P-36

Leonard Levencrown, for appellant. Ian Vallance, for respondent.

The judgment of the court was delivered by

[1] ROSENBERG J.A.: -- The principal issue in this appeal from the decision of Rutherford J. concerns the treatment of what the appellant husband characterizes as ex gratia payments by his former employer when he took early retirement. The husband submits that the payments are a gift and therefore should be excluded entirely from matrimonial property accounting in accordance with s. 4(2) of the Family Law Act, R.S.O. 1990, c. F.3. In the alternative, he submits that most of the payments should be deducted from his net family property (NFP) -- namely, that portion that can be attributed to his employment before his marriage to the respondent, his second wife. I have concluded that the payments cannot be properly characterized as a gift and that in the particular circumstances of this case, the trial judge properly included the entire amount of the payments in the husband's NFP.

[2] A second issue concerns the treatment of a survivor's pension to which the wife would become eligible should the husband predecease her. The decision not to include the wife's interest in the value of this pension in the wife's NFP was fact-driven and, in my view, the husband has not shown any reason to interfere with the trial judge's decision.

[3] Accordingly, I would dismiss the appeal with costs.

The Facts

[4] The appellant and the respondent were married in 1988. This was a second marriage for both parties. The appellant previously married Maureen Coons in 1959 and divorced her in 1987. For convenience, I will refer to the appellant as the husband and the respondent as the wife and Ms. Coons as the first wife. The divorce judgment with the first wife provided that she would get a certain percentage of his pension when he retired. The judgment further provided that these pension benefits would include "on a pro-rated basis . . . all payments of every nature and kind paid to the husband from his employment as a consequence of his retirement or disassociation with his employer".

[5] The husband retired from his employment with Bell Canada after 35 years of employment in December 1992. The husband and wife had been married for just over four years. At the time, Bell was going through a period of "work force adjustment". Bell gave certain employees the option to take early retirement in return for certain payments referred to as the Paid Absence Prior To Retirement (PAPP) and a Voluntary Termination Incentive Plan (VTIP). The husband received $19,220.85 under the PAPP and $123,132 under the VTIP. Later in December, the husband wrote to the first wife a letter that included the following:

Any post retirement allowance as received over future years . . . is not based in any way, shape or form on anything that accrued prior to today, let alone prior to May 14, 1986. In fact, the cost of the work adjustment program is being charged to the Business Unit involved, not the Pension Plan fund itself. As such, I am simply receiving an allowance in lieu of being on the payroll and Bell is in the process of saving expense money. . . .

(Emphasis added)

[6] Similarly, counsel for the husband (who also acted for the husband at trial and in this court) wrote counsel for the first wife in February 1993 that, "In our view, your client is not entitled to any of the termination allowance, as previously discussed, as this arose after separation." A letter from Bell introduced at the trial showed that the husband would not have been eligible for these various payments when he married the wife in 1988.

[7] The husband and wife separated on August 6, 1997 after nine years of marriage. They are both 63 years of age. The wife had abused alcohol for many years and also has had a number of health problems including osteoarthritis and cancer that resulted in the loss of one kidney. She is in receipt of a Canada Pension Plan disability pension and a small pension under the Public Service Superannuation Act, R.S.C. 1985, c. P- 36 from her employment with the federal government. She owns her own home and lives frugally. The husband owns his own home, enjoys good health and is active in various sports. The trial judge found that the husband was not forthcoming in disclosing his financial records.

[8] When he retired, the husband elected to provide for a survivor's pension for his wife. Should the husband predecease the wife, she will receive a survivor's pension of $1,829.02 with cost of living adjustment.

The Trial Judge's Reasons

The early retirement benefits

[9] At trial, the husband argued that the approximately $140,000 he received from Bell because of his early retirement under the VTIP and PAPP were paid to him because of his 35 years of employment and should be treated on a pro-rated basis. Thus, only that proportion of the amounts that relate to the years he was employed during the marriage should be included in his NFP. The trial judge held that all of these amounts should be included in the husband's NFP, except for approximately $6,000 that the husband paid to his first wife from the PAPP. In reaching that conclusion, the trial judge principally relied upon the position that the appellant and his counsel had taken with the first wife. However, he also took into account the letter from Bell indicating that had the husband left the company at the time of his marriage to his wife in 1988 he would not have received any of these benefits.

[10] The husband did not take the position at trial that these amounts were excluded property under s. 4(2) of the Family Law Act.

The survivor's pension

[11] The trial judge refused to include any amount for the survivor's pension in the wife's NFP. An expert testified that this future benefit had a value of $22,419. The expert arrived at this amount on the assumption, using standard mortality tables, that the wife would survive the husband by 5.17 years. The trial judge held that the assumption could not be relied upon in view of the evidence that persuaded him that the wife would not outlive the husband. He held that in light of the relative state of health of the parties,

. . . I do not think I can find on the evidence that she will outlive [the husband]. In the circumstances of this case, I don't think the contingencies are sufficiently clear and predictable to justify the inclusion of anything in [the wife's] NFP statement for the possible benefit she [may] some day enjoy from survivor's benefits under [the husband's] Bell pension plan, if, in fact, she should outlive him.

Analysis

The early retirement benefits

[12] As I have indicated, the husband's principal position is that none of the amounts paid to him by his former employer upon his early retirement should be included in his NFP. He argues that this is a gift and is therefore excluded property under s. 4(2) of the Act. Counsel for the wife submits that this court should not entertain this submission since it was raised for the first time on appeal. He argues that had this issue been raised at trial he might have introduced further evidence from Bell about the nature of these benefits. Counsel for the husband submits that the treatment of these benefits was clearly an issue at trial, albeit he did not expressly argue that they should be excluded as a gift.

[13] I agree with the wife's position. In my view, it would be unfair to permit the husband for the first time on appeal to raise an entirely new argument. There was very little evidence, other than some documents from Bell, about these benefits and nothing that expressly dealt with the gift argument. See Ross v. Ross (1999), 1999 NSCA 162, 4 R.F.L. (5th) 134, 181 N.S.R. (2d) 22 (C.A.) at p. 143 R.F.L.

[14] In any event, on this record the husband has not met the burden of showing that these payments were gifts. The relevant provisions of the Family Law Act are the following. Subsection 4(1) defines "net family property" as follows:

"net family property" means 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 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 the marriage.

[15] Subsections 4(2) and (3) of the Act deal with certain exemptions. Subsection 4(2)1 provides as follows:

4(2) The value of the following property that a spouse owns on the valuation date does not form part of the spouse's net family property:

1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.

[16] Subsection 4(3) puts the burden on the husband in this case to prove that these payments were gifts:

4(3) The onus of proving a deduction under the definition of "net family property" or an exclusion under subsection (2) is on the person claiming it.

[17] The term "gift" is not defined in the Act. In its usual meaning, a gift is a voluntary transfer of personal property without consideration. On the limited record in this case, the payments by the employer to the husband cannot fairly be characterized as gifts. They were paid to the husband as inducements and in consideration for his taking early retirement. They were a tool used by Bell to reduce its work force and hardly fall in the same category as the proverbial gold watch given by the employer to valued employees when they retire. The fact that the payments were made according to a formula devised by the employer and were non-negotiable does not in my view make them gifts from the employer. I agree with Professor McLeod's brief annotation to the decision in Sutton v. Davidson (1999), 1999 ABCA 280, 1 R.F.L. (5th) 157, 76 Alta. L.R. (3d) 216 (C.A.) at p. 160 R.F.L., where he notes that an Ontario court would likely not treat such payments as gifts but rather "as part of the consideration for an employee's giving up his or her employment and include the payment in the [NFP] accounting". [See Note 1 at end of document]

[18] Further, the documents in the record from Bell describing the VTIP, in particular, are written in contractual terms of offer and acceptance rather than in terms suggesting a gift. For these reasons, I would not give effect to this ground of appeal.

[19] In the alternative, the husband repeats the argument made at trial that, although the early retirement benefits were received during the marriage, only 4/35ths of the amount should be included in his NFP on the basis that he was only employed for four of his 35 years with Bell while he was married to the wife. The treatment of these types of payments seems to be a matter of first impression in this court. As Professor McLeod points out in the Annotation referred to earlier, [See Note 2 at end of document] the proper treatment of such payments will depend on a number of factors including the following:

(i) whether the payment was made before or after separation;

(ii) whether the decision to take advantage of the inducement, and hence entitlement to the inducement, was made before or after separation;

(iii) whether the payment is compensation for income that would have been earned after separation;

(iv) whether the payment is compensation for income that would have been earned before the parties were married.

[20] In Sutton v. Davidson, the Alberta Court of Appeal generally agreed with the approach taken by Perras J. in Read v. Read (1993), 1993 7036 (AB KB), 46 R.F.L. (3d) 426, 9 Alta. L.R. (3d) 87 (Q.B.). He held based upon the evidence in that case that there were two components to the severance package. The first was recognition for past services and was "distributable matrimonial property" as it was for past service earned during cohabitation. The second component was recognition for loss of future income and was not distributable matrimonial property as it was for wages the husband would have earned after the separation. As such it was not property acquired during the marriage.

[21] There is merit to the approach set out in Sutton and Read [See Note 3 at end of document] and on that approach only amounts of the incentive payments that can be attributed to recognition for past services to the employer during the marriage or for future income that would have been earned during the marriage should be treated as property acquired during the marriage. However, it seems to me that each case will depend upon the facts and the nature of the incentive payment, bearing in mind that in accordance with s. 4(3) of the Act, the burden is on the spouse receiving the incentive payment to prove entitlement to the deduction. On the sparse record in this case, while the amount of the payments was based upon the husband's years of service and his position within the company, his entitlement arose solely because in 1992 Bell was attempting to reduce its work force. I cannot say that it was unreasonable for the trial judge to treat the husband's letter to his first wife and his counsel's letter to his first wife' s counsel as admissions that these payments were unrelated to recognition for past services. To repeat, at that time the husband and his lawyer both took the position that these payments were not based on anything that accrued prior to 1992. It was open to the trial judge to conclude in this case that the husband had not met the onus to prove the deduction or exclusion in accordance with s. 4(3). As such, the amounts were properly characterized as property acquired during the marriage to the wife.

[22] Accordingly, I would not give effect to this ground of appeal.

The survivor's benefit

[23] In oral argument, counsel for the husband agreed that in law the trial judge was entitled to exclude the value of the survivor's benefit from the wife's NFP if he found as a fact that it was unlikely the wife would outlive the husband. Counsel argued, however, that this finding of fact was unreasonable. He noted that notwithstanding the wife's previous health problems, the trial judge described the wife as being in good health. In my view, the evidence supports the trial judge's finding. While at present the wife appears to enjoy good health, she has had serious life-threatening illnesses. Given the relative medical histories of the parties, the standard mortality tables used by the expert were of little value. It was open to the trial judge, having heard the evidence of the wife's medical history, to find as a fact that it was unlikely that she would survive the husband. I would not give effect to this ground of appeal.

Disposition

[24] Accordingly, I would dismiss the husband's appeal with costs. The wife cross-appealed the decision of the trial judge to include the value of her Canada Pension Plan disability pension in her NFP. Prior to the hearing of the appeal, she abandoned her cross-appeal. Accordingly, the cross-appeal is dismissed without costs.

Appeal dismissed.

Notes

Note 1: I note that Philp J. reached a different conclusion in Dolman v. Dolman (1998), 1998 29637 (ON SC), 38 R.F.L. (4th) 362 (Ont. Gen. Div.) at p. 369. In Dolman, the husband, a firefighter, elected to take early retirement and was given a "Retirement Cash Incentive" by the employer. Philp J. characterized the payment as "purely voluntary and discretionary on the part of the City of Hamilton", although the amount was calculated using the husband's salary and length of service. He concluded that the payment "was not compensation for employment but rather a gift from the City for taking early retirement". While I have some concern with this reasoning, the result in Dolman may be explained by the fact that the trial judge accepted the husband's evidence that he had intended to retire in any event.

Note 2: Also see Professor McLeod's Annotations to Yaschuk v. Logan (1992), 1992 2595 (NS CA), 39 R.F.L. (3d) 417, 110 N.S.R. (2d) 278 (C.A.) at pp. 418-20 R.F.L. and Jering v. Jering (1987), 1987 6920 (MB QB), 7 R.F.L. (3d) 42, 45 Man. R. (2d) 296 (Q.B.) at pp. 43-44 R.F.L.

Note 3: It may, of course, be difficult to determine the proportion of the payment attributable to past service and to recognition for loss of future income. In Cameron v. Cameron (1994), 1994 1861 (BC SC), 9 R.F.L. (4th) 358, 100 B.C.L.R. (2d) 104 (S.C.) and Pretty v. Pretty (1995), 1995 6561 (NB CA), 16 R.F.L. (4th) 122, 413 A.P.R. 70 (Nfld. S.C.), the trial judges found that the whole amount of the early retirement incentive was offered for purchase of future service rather than a reward for past service. A different result was reached in Christian v. Christian (1995), 1995 4531 (NS SC), 10 R.F.L. (4th) 302, 139 N.S.R. (2d) 246 (S.C.), where the wife was held to be entitled to a pro rata share of the separation pay based on the number of years the husband was employed during the marriage.