The Ontario Teachers' Pension Plan Board v. Superintendent of Financial Services et al.

[Indexed as: Ontario Teachers' Pension Plan Board v. Ontario (Superintendent of Financial Services)]

70 O.R. (3d) 61

[2004] O.J. No. 331

Docket No. C39764

Court of Appeal for Ontario

O'Connor A.C.J.O., Catzman and Doherty JJ.A.

February 10, 2004

Family law -- Property -- Pensions -- Death benefits -- Pension benefits, including pre-retirement death benefits, may be transferred under domestic contract without aid of s. 48(13) of Pension Benefits Act -- Member's interest in pension plan including interest in death benefits that might become payable under plan on his death -- Fact that death benefits are conditional on member's death not precluding assignment of member's interest by way of domestic contract -- Pension Benefits Act, R.S.O. 1990, c. P.8, s. 48(13).

M was a schoolteacher and a member of the Ontario Teachers' Pension Plan. As part of the settlement of family property following his separation from his wife S, M agreed that S would be entitled to specified interests in his pension benefits, including an interest in death benefits that might become payable under the Plan. In s. 10(1) of the separation agreement, the parties agreed that S had a substantial interest in M's pension which, if M retired, would be equal to one-half of that portion of his pension that was attributable to the period of their married cohabitation, fixed at 25 years. Section 10(4) of the separation agreement set out S's interest in benefits that might become payable under the Plan on M's death, providing that if a death benefit became payable under the pension and S was not M's only surviving spouse, then S was to be entitled to an interest in the death benefit as follows: 25 years of married cohabitation during which pension contributions were made, divided by the total number of years (or portion) during which contributions were made to date of death, times the death benefit payable. M married C in 1992. M died in 1995, before retirement. Pursuant to the terms of the Plan, pre-retirement death benefits became payable on M's death. After M's death, the Ontario Teachers' Pension Plan Board began paying C all of the death benefits payable under the Plan. S sought the intervention of the Financial Services Commission ("the Tribunal"). The Superintendent of Financial Services served on the Board a Notice of Proposal to make an Order, directing the Board to pay out a portion of the post- 1986 death benefit to S. The Superintendent alleged [page62 ]that the Board had contravened s. 48(13) of the Pension Benefits Act, R.S.O. 1990, c. P.8 ("PBA") because it had failed to pay S her interest in the death benefits as provided in the separation agreement relating to M's service after December 31, 1986. The Board delivered a Request for Hearing in respect of the Notice of Proposal. The Tribunal found that S was not entitled to any portion of the death benefits. The crux of the Tribunal's reasoning was that only domestic contracts that were binding on the surviving spouse at death were exempted from the obligatory scheme set out in s. 48(1) of the PBA. The Tribunal also held that M had no proprietary interest in the pre- retirement death benefits provided in the Plan and could not therefore convey them to S by way of the separation agreement. The Tribunal directed the Superintendent to refrain from issuing the order contained in the Notice of Proposal. The Divisional Court overturned the decision of the Tribunal and held that pension benefits, including pre-retirement death benefits, may be transferred pursuant to a domestic contract and, at least to that extent, were property. Section 48(13) of the PBA specifically permits a transfer of pre-retirement death benefits by way of domestic contract and there is no requirement that a subsequent spouse be a party to the domestic contract in order to make the transfer effective. The Divisional Court ordered that the Superintendent direct the Board to make payments to S according to the formula in the domestic contract, subject to the 50 per cent limit in s. 51(2) of the PBA. On a motion for clarification under rule 59.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the Divisional Court reaffirmed its conclusion that the separation agreement transferred a portion of M's rights under the Plan to S subject to the 50 per cent limit in s. 51(2) of the PBA. The court recognized that s. 48(13) of the PBA protects the interests of a former spouse under a domestic agreement only with respect to post-1986 death benefits. However, the court found that the separation agreement was a valid assignment of both pre-1987 and post-1986 death benefits because ss. 51 and 65 of the PBA and para. 86a of the Plan made the domestic contract effective as to the pre-1987 period without the aid of s. 48(13). Further, the Divisional Court decided that for the purpose of s. 51(2) of the PBA the pension benefits transferred to S should be calculated as of March 7, 1991, the date that M and S were divorced. The court held that the 50 per cent limit on transfers under a domestic contract found in s. 51(2) of the PBA applied to the death benefits transferred to S in respect of employment both before and after January 1, 1987.

In the result, the Divisional Court ordered the Superintendent to direct the Board to honour S's post-1986 entitlement. The court declared that S was entitled to that portion of the pre-1987 death benefit as provided in the separation agreement subject to the 50 per cent limit in s. 51(2) of the PBA. The Board appealed. S cross-appealed, arguing that the Divisional Court erred in finding that the death benefit derived from M's pre-1987 service was also subject to the 50 per cent limit.

Held, the appeal should be dismissed and the cross-appeal should be allowed in part.

At the time of the separation agreement, M had an assignable interest in the pre-retirement death benefits provided by the Plan and he intended to assign an interest in these benefits to S with respect to his employment both before and after January 1, 1987. The Divisional Court correctly found that pension benefits, including pre-retirement benefits, may be transferred under a domestic contract without the aid of s. 48(13) of the PBA. When M executed the separation agreement in 1990, he had a vested interest in the pension credits, then accrued. His interest in the Plan was not confined to the deferred benefits to which he would become entitled upon retirement. The scope of his interest included, as well, an interest in the death benefits that might become payable under the Plan on his death. Death benefits, like other pension benefits, result from the member's participation in the [page63 ]Plan. A member is able to assign his or her interest in death benefits in the same fashion that the member is entitled to assign his or her interest in other pension benefits. The fact that death benefits are conditional on the death of the member does not render them without value nor does it operate to preclude an assignment of the member's interest in the asset. The Plan itself contemplates that a Plan member has an assignable interest in a benefit payable under the Plan. Paragraph 86a of the Plan prohibits assignments of a "pension or benefit" except in limited circumstances, one of which is assignment by way of domestic contract. The term "benefit" is not limited and clearly includes a pre-retirement death benefit. The prohibition against assignments in para. 86a is a recognition that, absent a prohibition, pension benefits, including death benefits, are assignable. In addition, the statutory scheme of the PBA supports the notion that a plan member may assign pre- retirement death benefits by way of a domestic contract. Section 65(1) prohibits the alienation of "money payable under a pension plan". Section 65(3) exempts assignments by domestic contracts from this prohibition. Money payable upon death constitutes "money payable under a pension plan" within the meaning of s. 65. Section 65(3) evidences a statutory intention that domestic contracts assigning pension benefits, including pre-retirement death benefits, are to be respected. Furthermore, s. 51 of the PBA recognizes and facilitates the enforcement of domestic contracts which provide for sharing of pension benefits on marriage breakdown. Section 51(3) contemplates the division of a pension between spouses. Where a surviving spouse steps into the shoes of a deceased individual, this division amounts to a division between current and former spouses. Section 51(4) gives direction to plan administrators on what steps to take when a domestic contract affects a pension. Section 51 applies to all types of pension benefits, including pre-retirement death benefits. Because s. 48(13) of the PBA recognizes the priority of an interest set out in a domestic contract over the pre-retirement death benefit required by s. 48(1) for post-1986 service, it does not follow that there is no right of assignment for pre-1987 death benefits. Section 48(1), which was first enacted in 1987, establishes a statutory minimum standard for pre-retirement death benefits accumulated after 1986. Section 48(13) ensures that domestic contracts are effective to transfer an interest in the benefits referred to in s. 48(1), nothing more. The inclusion of s. 48(13) in the statutory scheme in 1987 should not be interpreted as indicating that a plan member did not previously have the authority to assign, by way of domestic contract, a vested interest in a pension plan. The Divisional Court correctly held that M assigned an interest in the death benefit relating to his pre-1987 service.

The proper date at which to calculate the death benefit assigned to S for purposes of applying the 50 per cent limit set out in s. 51(2) of the PBA was the date of M's death, not the date of the divorce. Section 56 of R.R.O. 1990, Reg. 909 (Created under the PBA) sets out the method of calculation of death benefits for purposes of s. 51(2): "For purposes of subsection 51(2) of the Act, the pension benefits accrued during the period a member has a spouse or same-sex partner shall be determined as if the member terminated employment at the valuation date in accordance with the terms of the plan at that date and without consideration of future benefits, salary or changes to the plan but with consideration for the possibility of future vesting." "Valuation date" in the context of s. 56 can be interpreted as referring to the date that the parties use as a valuation date for equalizing family property ("the equalization date") or the date the parties intended to use to calculate the value of the pension benefits assigned under the domestic contract ("the pension calculation date"). The latter may or may not be different from the equalization date, depending on the specific terms of a domestic contract. When the parties to a domestic contract have selected a date for calculating the value of pension benefits to be assigned that is different from the equalization date, it [page64 ]makes more sense to use the date the parties selected for purposes of s. 56 of the regulation. To interpret s. 56 as referring to the equalization date rather than to the date the parties to a domestic contract have agreed to use to calculate the assignment of pension benefits would needlessly restrict what parties to domestic contracts can agree to in settling their financial affairs. "Valuation date" as it is used in s. 56 should be interpreted in the way that affords parties to a domestic contract the greatest latitude and in a way that interferes to the least extent permitted by the language in an agreement that is freely and fairly negotiated and executed. It is open to the parties to a domestic contract to agree that, for purposes of s. 56 of Regulation 909, the valuation date is the actual date that the member's employment terminates. In this case, the parties intended to calculate the value of the pre-retirement benefits as of M's death.

The 50 per cent limit in s. 51(2) of the PBA applied to the pre-1987 benefits. By virtue of s. 51(3) of the PBA, the Board was required to pay S's portion of the survivor pension directly to her. The survivor pension to which S was entitled should continue for her lifetime, not the lifetime of C. M was entitled to assign a portion of the pre-1987 death benefit to S; as a result, C's interest under the Plan was limited to the unassigned portion of that benefit. C had no interest in that portion of survivor's pension that was assigned to S under the separation agreement. Having regard to the domestic contract and the statutory scheme of the PBA, the most sensible approach was that the survivor pension to which S was entitled under s. 62(3) should continue for her lifetime and should not be tied to C's life. The Board should also pay S's portion of the post- 1986 benefit directly to S. Pursuant to s. 63(4) of the Plan, one of the options available to the recipient of the post-1986 benefits was to be paid an immediate or a deferred survivor pension for life, the commuted value of which is at least equal to the commuted value of the credited service for employment after January 1, 1987, calculated as if the member had retired on the date of death. As a result, for actuarial purposes the amount of the pension under that option is tied to the age of the recipient. If S opted to receive her entitlement under s. 63(4) of the Plan by way of immediate or deferred pension as opposed to a lump sum, the amount of the pension should be valued in accordance with her birth date and not that of C.

APPEAL and CROSS-APPEAL from orders of the Superior Court of Justice, Divisional Court overturning a decision of the Financial Services Commission of Ontario.

Dick v. Dick, 1993 16077 (ON SC), [1993] O.J. No. 140 (QL), 46 R.F.L. (3d) 219 (Gen. Div.), consd Other cases referred to Best v. Best, 1999 700 (SCC), [1999] 2 S.C.R. 868, 174 D.L.R. (4th) 235, 242 N.R. 1, 43 O.R. (3d) 740n, 49 R.F.L. (4th) 1; Miles Estate v. Miles (1997), 1997 12279 (ON SC), 35 O.R. (3d) 312, 47 C.B.R. (3d) 291, 152 D.L.R. (4th) 755 (Gen. Div.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, ss. 4(1) "property", Part IV Pension Benefits Act, R.S.O. 1990, c. P.8, ss. 1 "pension benefit", 19, 37, 48, 51, 65, 87 Teachers' Pension Act, 1989, c. 92, Schedule 1, ss. 61-66, 86a, Teachers' Pension Act, R.S.O. 1990, c. T.1 Teachers' Superannuation Act, 1983, S.O. 1983, c. 84 Rules and regulations referred to R.R.O. 1990, Reg. 909 (Pension Benefits Act), s. 56 Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 59.06 [page65 ] Authorities referred to Ontario Law Reform Commission, Report on Pensions as Family Property: Valuation and Division (Ontario: The Commission, 1995)

Christopher G. Riggs, Q.C., and Elizabeth M. Brown, for appellant. Deborah McPhail, for respondent Superintendent of Financial Services. Ari N. Kaplan, for respondent Anne Stairs.

The judgment of the court was delivered by

[1] O'CONNOR A.C.J.O.: -- This appeal raises a number of issues relating to the entitlement of a former spouse of a pension plan member to pre-retirement death benefits. In this case, the former spouse claims an entitlement pursuant to the provisions of a separation agreement.

BACKGROUND

(a) The Facts

[2] The appellant, Anne Stairs, and Roger Mowbray were married on May 6, 1961. Mr. Mowbray was a high-school teacher. On September 1, 1965, he became a member of the Ontario Teachers' Pension Plan (the "Plan").

[3] Ms. Stairs and Mr. Mowbray separated on July 1, 1988 and entered into a separation agreement on August 10, 1990. As part of the settlement of the family property, Mr. Mowbray agreed that Ms. Stairs would be entitled to specified interests in his pension benefits, including an interest in death benefits that might become payable under the Plan. They divorced on March 7, 1991.

[4] On September 25, 1992, Mr. Mowbray married Catherine Mowbray ("Mrs. Mowbray"). Mr. Mowbray died on April 17, 1995, before retirement. Pursuant to the terms of the Plan, pre- retirement death benefits became payable on Mr. Mowbray's death. I describe those benefits in detail below.

(b) The Separation Agreement

[5] At the time of the separation agreement, Mr. Mowbray had been contributing to the Plan for just under 25 years and had a vested interest in the Plan arising from his credited service and contributions. [page66 ]

[6] Section 10 of the separation agreement deals with Mr. Mowbray's pension. In s. 10(1), the parties agree that Ms. Stairs has a substantial interest in his pension which, in the event that Mr. Mowbray retired, would be equal to one-half of that portion of his pension that is attributable to the period of their married cohabitation, fixed at 25 years.

[7] Section 10(4) of the separation agreement sets out Ms. Stairs' interest in benefits that might become payable under the Plan on Mr. Mowbray's death. Section 10(4) reads as follows:

10(4) In the event a death benefit becomes payable under the pension and the wife is not the only surviving spouse of the husband then the wife will be entitled to an interest in the death benefit as follows:

twenty-five (25) years of married cohabitation during which pension contributions were made, divided by the total number of years (or portion thereof) during which contributions have been made to date of death, times the death benefit payable.

[8] Section 10(5) of the separation agreement provides that Mr. Mowbray shall be the trustee of Ms. Stairs' share in the pension.

[9] Section 10(6) directs that Mr. Mowbray shall notify the administrator of the Plan, the Teachers' Superannuation Commission (the predecessor of the Ontario Teachers' Pension Plan Board) (the "Board"), of Ms. Stairs' interest and shall authorize the Teachers' Superannuation Commission to disclose all information concerning his benefits to Ms. Stairs.

[10] On July 14, 1994, Mr. Mowbray delivered a copy of the separation agreement to the Board.

[11] At the time of his death, Mr. Mowbray's total number of years of credited service amounted to 29.70865. Accordingly, under the terms of the separation agreement, Ms. Stairs would be entitled to an interest in the death benefits payable under the Plan on the basis of the following formula: 25/29.70865 x the death benefits.

(c) The Ontario Teachers' Pension Plan

[12] The Plan is a contributory, defined benefit plan. Initially, it was a registered plan under the Teachers' Superannuation Act, 1983, S.O. 1983, c. 84, and in 1990, it was continued as a statutory plan under the Teachers' Pension Act, R.S.O. 1990, c. T.1. The terms of the Plan are set out in Schedule 1 of that Act.

[13] Sections 61-66 of the Plan provide for pre-retirement death benefits. When a Plan member dies before retirement, the member's surviving spouse on the date of death is entitled to the pre-retirement death benefits under the Plan. There are two elements to the pre-retirement death benefits in this case: [page67 ]

(a) for employment before 1987, the Plan provides the surviving spouse with a monthly pension for life equal to half of the pension the member would have received had the member lived to retirement; and

(b) for employment after 1986, the Plan provides the surviving spouse with an option to receive either a lump sum payment or an immediate or deferred pension for the lifetime of the spouse equal to the commuted value of the pension.

[14] The critical sections of the Plan are ss. 62(2) and (3) in respect of employment before January 1, 1987 and ss. 63(2) and (4) in respect of employment after that date. Those sections read as follows:

62(2) The spouse of a member with ten years or more qualifying service is entitled to the survivor pension described in subsection (3) for the lifetime of the spouse.

(3) The amount of the survivor pension, before adjustment for inflation, shall be based upon the member's credited service for employment before the 1st day of January, 1987 and shall be one half of the amount of the pension, before adjustment for inflation.

63(2) The spouse of a member with two years or more qualifying service is entitled to the benefit described in subsection (4).

(4) The benefit referred to in subsection (2) is,

(a) a lump sum payment equal to the commuted value of the deferred pension to which the member was entitled for credited service for employment on or after the 1st day of January, 1987; or

(b) an immediate or a deferred survivor pension for the lifetime of the spouse, the commuted value of which is at least equal to the commuted value of a pension for credited service for the member's employment on or after the 1st day of January, 1987, calculated as if the member had become entitled to a retirement pension on the date of death.

[15] Mr. Mowbray's number of years of qualifying service entitled his surviving spouse to the pre-1987 death benefit described in s. 62(3) and the post-1986 death benefit described in s. 63(4). Mrs. Mowbray was Mr. Mowbray's legal spouse at the time of Mr. Mowbray's death and she has not waived any of her rights to the pre-retirement death benefits.

[16] Paragraph 86a of the Plan prohibits the assignment of pension benefits earned under the Plan except in specified circumstances, one of which is assignment by domestic contract as [page68 ]defined under Part IV of the Family Law Act, R.S.O. 1990, c. F.3 ("FLA"). Paragraph 86a reads as follows:

86a. No pension or benefit shall be capable of being assigned, charged, anticipated, given as security or surrendered [except] as provided for in section 65 of the Pension Benefits Act.

(Note: The parties agree that the word "except" has inadvertently been omitted from the text of the Plan.)

[17] Section 65(3) of the Pension Benefits Act, R.S.O. 1990, c. P.8 ("PBA") permits an assignment by way of domestic contract as defined in Part IV of the FLA. It is accepted that the separation agreement between Mr. Mowbray and Ms. Stairs is a domestic contract as defined in Part IV of the FLA.

(d) The Pension Benefits Act

[18] Under s. 19 of the PBA, a pension plan must be administered in accordance with that Act whether or not the pension plan is amended to comply with the Act.

[19] There are three sections of the PBA that play a central role in the discussion of the issues that follows. They are ss. 48, 65 and 51.

[20] Section 48 establishes a mandatory statutory pre- retirement death benefit. Section 48(1) reads as follows:

48(1) If a member or former member of a pension plan who is entitled under the pension plan to a deferred pension described in section 37 (entitlement to deferred pension) dies before commencement of payment of the deferred pension, the person who is the spouse or same-sex partner of the member or former member on the date of death is entitled,

(a) to receive a lump sum payment equal to the commuted value of the deferred pension; or

(b) to an immediate or deferred pension the commuted value of which is at least equal to the commuted value of the deferred pension.

[21] Section 37 provides for a deferred pension only in respect of employment after December 31, 1986. Thus, the statutory pre-retirement death benefit required by s. 48(1) is payable to a spouse living at the member's death and relates only to pension entitlements accruing from post-1986 employment.

[22] Section 48(13) provides that the benefit required by s. 48(1) is subject to any right or interest set out in a domestic contract. It reads as follows:

48(13) An entitlement to a benefit under this section is subject to any right to or interest in the benefit set out in a domestic contract or an order referred to in section 51 (payment on marriage breakdown).

[23] The parties agree that the pre-retirement death benefit provided by s. 63(4) of the Plan for post-1986 employment complies [page69 ]with the statutory requirement for pre- retirement death benefits set out in s. 48(1) of the PBA. It is also accepted that s. 48(13) applies to render that benefit subject to the interest of Ms. Stairs as set out in s. 10(4) of the separation agreement.

[24] Section 65 is the second section of the PBA that is relevant to this appeal. Although s. 65(1) prohibits the assignment of money payable under a pension plan, s. 65(3) exempts domestic contracts from this prohibition. Section 65 reads as follows:

65(1) Every transaction that purports to assign, charge, anticipate or give as security money payable under a pension plan is void.

(2) Every transaction that purports to assign, charge, anticipate or give as security money transferred from a pension fund in accordance with section 42 (transfer), 43 (purchase of pension), clause 48(1)(b) (pre-retirement death benefit) or subsection 73(2) (transfer rights on wind up) is void.

(3) Subsections (1) and (2) do not apply to prevent the assignment of an interest in money payable under a pension plan or money payable as a result of a purchase or transfer under section 42, 43, clause 48(1)(b) or subsection 73(2) (transfer rights on wind up) by an order under the Family Law Act or by a domestic contract as defined in Part IV of that Act.

[25] Finally, s. 51 addresses a number of issues that may arise on a marriage breakdown including, in s. 51(2), a restriction on the amount of pension benefits that may be transferred under a domestic contract. Section 51 reads as follows:

51(1) A domestic contract as defined in Part IV of the Family Law Act, or an order under Part I of that Act is not effective to require payment of a pension benefit before the earlier of,

(a) the date on which payment of the pension benefit commences; or

(b) the normal retirement date of the relevant member or former member.

(2) A domestic contract or an order mentioned in subsection (1) is not effective to cause a party to the domestic contract or order to become entitled to more than 50 per cent of the pension benefits, calculated in the prescribed manner, accrued by a member or former member during the period when the party and the member or former member were spouses or same-sex partners.

(3) If payment of a pension or deferred pension is divided between spouses or same-sex partners by a domestic contract or an order mentioned in subsection (1), the administrator is discharged on making payment in accordance with the domestic contract or order.

(4) If a domestic contract or an order mentioned in subsection (1) affects a pension, the administrator of the pension plan shall revalue the pension in the prescribed manner.

(5) A spouse or same-sex partner on whose behalf a certified copy of a domestic contract or order mentioned in subsection (1) is given to the administrator of a pension plan has the same entitlement, on termination of [page70 ]employment by the member or former member, to any option available in respect of the spouse's or same-sex partner's interest in the pension benefits as the member or former member named in the domestic contract or order has in respect of his or her pension benefits.

(e) The Superintendent's Notice of Proposal

[26] After Mr. Mowbray's death, the Board began paying Mrs. Mowbray all of the death benefits payable under the Plan. None of the payments contemplated in the separation agreement have been made to Ms. Stairs.

[27] In January 1997, Ms. Stairs sought the intervention of the Financial Services Commission of Ontario (the "Tribunal") requesting that the Board be ordered to pay a portion of the pre-retirement death benefits to her in accordance with the separation agreement. In response, on May 13, 1999, the Superintendent of Financial Services (the "Superintendent") served upon the Board a Notice of Proposal to make an Order. The Notice of Proposal directed the Board to pay out a portion of the post-1986 death benefit to Ms. Stairs.

[28] The Superintendent alleged that the Board had contravened s. 48(13) of the PBA because it had failed to pay Ms. Stairs her interest in the death benefits as provided in the separation agreement relating to Mr. Mowbray's service after December 31, 1986.

[29] The Superintendent's Notice of Proposal also set out that, because of s. 51(2) of the PBA, the benefits payable to Ms. Stairs in respect of the post-1986 service were limited to 50 per cent of the benefits provided under the Plan.

[30] The Superintendent's Notice of Proposal did not require the Board to pay to Ms. Stairs any benefits accruing from Mr. Mowbray's pre-1987 employment.

(f) The Tribunal Hearing

[31] On June 14, 1999, the Board delivered a Request for Hearing in respect of the Superintendent's Notice of Proposal. There were six issues before the Tribunal:

(a) Was the Board required to pay Ms. Stairs an interest in the pre-retirement death benefits pursuant to s. 48(13)?

(b) Was the jurisdiction of the Superintendent and the Tribunal limited to benefits accruing from post-1986 service?

(c) On what date should the benefits to which Ms. Stairs is entitled be calculated for the purpose of s. 51(2) of the PBA? [page71 ]

(d) Was Ms. Stairs' interest limited to 50 per cent of the benefits accrued between January 1, 1987 and the valuation date under the separation agreement of July 1, 1988?

(e) Could Mrs. Mowbray be ordered to repay the Board that portion of the benefits received by her which relates to Ms. Stairs' entitlement (if any)?

(f) What was the quantum of the interest payable to Ms. Stairs (if any)?

[32] On the first issue, the Tribunal found that Ms. Stairs was not entitled to any portion of the death benefits. The crux of the Tribunal's reasoning was that only domestic contracts that were binding on the surviving spouse at death were exempted from the obligatory scheme set out in s. 48(1) of the PBA. The Tribunal also held that Mr. Mowbray had no proprietary interest in the pre-retirement death benefits provided in the Plan and could not therefore convey them to Ms. Stairs by way of the separation agreement.

[33] The Tribunal directed the Superintendent to refrain from issuing the order contained in the Notice of Proposal and, consequently, the Tribunal did not make any determination of issues (b) to (f) referred to above.

(g) The Divisional Court

[34] The Divisional Court overturned the decision of the Tribunal and held that pension benefits, including pre- retirement death benefits, may be transferred pursuant to a domestic contract and, at least to that extent, are property. Section 48(13) specifically permits a transfer of pre- retirement death benefits by way of domestic contract and there is no requirement that a subsequent spouse be a party to the domestic contract in order to make the transfer effective.

[35] The Divisional Court ordered that the Superintendent direct the Board to make payments to Ms. Stairs "according to the formula in the domestic contract" subject to the 50 per cent limit in s. 51(2) of the PBA.

[36] It was unclear from the Divisional Court's reasons whether the court intended to limit Ms. Stairs' entitlement to the benefits accrued by Mr. Mowbray after December 31, 1986. As a result, the Board sought clarification by a motion under rule 59.06 [Rules of Civil Procedure, R.R.O. 1990, Reg. 194].

(i) The rule 59.06 motion

[37] On the return of the Board's motion, the issue of the court's jurisdiction to amend its prior order was not contested. [page72 ]The parties argued the issues that were raised by the Board's motion on their merits.

[38] After hearing the rule 59.06 motion, the Divisional Court reaffirmed its conclusion that the separation agreement transfers a portion of Mr. Mowbray's rights under the Plan to Ms. Stairs subject to the 50 per cent limit in s. 51(2) of the PBA. Mrs. Mowbray is entitled only to the unassigned portion.

[39] The Divisional Court recognized that s. 48(13) protects the interests of a former spouse under a domestic agreement only with respect to post-1986 death benefits. However, at para. 28, the Divisional Court found that the separation agreement was a valid assignment of both pre-1987 and post-1986 death benefits "because sections 51 and 65 [of the PBA] and paragraph 86a of the Plan make the domestic contract effective as to the pre-1987 period without the aid of section 48(13)".

[40] Further, the Divisional Court decided that for the purpose of s. 51(2) of the PBA the pension benefits transferred to Ms. Stairs should be calculated as of March 7, 1991, the date that Mr. Mowbray and Ms. Stairs were divorced.

[41] The Divisional Court held that the 50 per cent limit on transfers under a domestic contract found is s. 51(2) of the PBA applied to the death benefits transferred to Ms. Stairs in respect of employment both before and after January 1, 1987.

[42] In the result, the Divisional Court ordered the Superintendent to direct the Board to honour Ms. Stairs' post- 1986 entitlement. Due to the statutory nature of the appeal to the Divisional Court and the fact that the Superintendent's original proposal only related to Ms. Stairs' post-1986 entitlement, the court did not order the Superintendent to direct the Board to comply with the separation agreement with respect to Ms. Stairs' pre-1987 entitlement. Rather, the Divisional Court made a declaration that Ms. Stairs was entitled to that portion of the pre-1987 death benefit as provided in the separation agreement subject to the 50 per cent limit in s. 51(2) of the PBA.

[43] By supplementary order (costs), the Divisional Court ordered the Board to pay Ms. Stairs' costs on a substantial indemnity basis fixed in the amount of $40,000 plus disbursements of $2,487.10.

[44] On March 19, 2003, this court granted the Board leave to appeal and Ms. Stairs leave to cross-appeal the judgment of the Divisional Court.

ISSUES

[45] The appeal and the cross-appeal raise seven issues: [page73 ]

(a) Is Ms. Stairs entitled to an interest in the death benefit attributable to Mr. Mowbray's pre-1987 employment?

(b) What is the date for calculating the amount of the death benefits transferred to Ms. Stairs for purposes of applying the 50 per cent limit in s. 51(2) of the PBA?

(c) Does the 50 per cent limit in s. 51(2) apply to the death benefits payable under the Plan or to Mr. Mowbray's deferred pension entitlements at the time of his death?

(d) Are the death benefits to which Ms. Stairs is entitled calculated and paid independently of Mrs. Mowbray or is Ms. Stairs merely an assignee of Mrs. Mowbray's benefits?

(e) Did the Divisional Court have the jurisdiction to make a declaration with respect to Ms. Stairs' entitlement to the pre-1987 death benefit?

(f) Did the Divisional Court err in applying a standard of review of correctness on the appeal from the decision of the Tribunal?

(g) Did the Divisional Court err in ordering the Board to pay Ms. Stairs' costs on a substantial-indemnity basis?

[46] I should point out that although the Tribunal ruled that Ms. Stairs was not entitled to a portion of the post-1986 death benefit, the Board does not seek to maintain that finding. On this appeal, the Board and the Superintendent (as he did before the Tribunal) accept that the effect of s. 48(13), at a minimum, provides a statutory basis for Ms. Stairs' entitlement to part of the post-1986 death benefits.

Issue 1 -- Ms. Stairs' Interest in the Pre-1987 Death Benefits

[47] The Board submits that the Divisional Court erred in finding that the separation agreement effectively transfers a portion of the interest in Mr. Mowbray's pre-1987 death benefits to Ms. Stairs. The crux of the Board's argument is that the death benefits belong to Mrs. Mowbray by virtue of ss. 61, 62 and 63 of the Plan, which provide that the pre- retirement death benefits are to be paid to the spouse of the plan member living at his death. Thus, the death benefits were not Mr. Mowbray's to assign and the separation agreement was not a valid assignment.

[48] The Board argues that neither the PBA nor the Plan authorizes Mr. Mowbray to assign the pre-1987 death benefits. [page74 ]Although s. 48(13) of the PBA allows for an assignment, its scope is limited to post-1986 death benefits. Section 65(1) of the PBA and para. 86a of the Plan prohibit assignments of interests in pension plans. Although both s. 65(3) of the PBA and para. 86a of the Plan make exceptions from those prohibitions for assignments made in domestic contracts, neither provision confers the authority to assign pension benefits where that authority does not otherwise exist. Finally, the Board argues that, while s. 51 of the PBA recognizes that assignments in domestic contracts are permitted, there is nothing in s. 51 that creates the power to assign.

[49] The Superintendent takes the position that the maximum potential interest to which Ms. Stairs is entitled under the PBA results from s. 48(13). That interest is limited to the death benefits derived from Mr. Mowbray's post-1986 employment. However, the Superintendent accepts that, by virtue of the separation agreement, Ms. Stairs may have an interest in addition to the post-1986 pre-retirement death benefits. However, to the extent that is the case, Ms. Stairs must look to a remedy other than a Superintendent's order under s. 87 of the PBA.

[50] In this regard, I note that the Divisional Court accepted the Superintendent's argument and did not order the Superintendent to direct the Board to pay Ms. Stairs the pre- 1987 entitlement. Rather, as I point out above, the Divisional Court made a declaration that Ms. Stairs is entitled to that portion of the pre-1987 death benefits that was assigned to her under the separation agreement.

[51] I do not accept the Board's argument that Ms. Stairs has no interest in the death benefits with respect to the pre-1987 employment. In my view, the Divisional Court correctly found that pension benefits, including pre-retirement death benefits, may be transferred under a domestic contract without the aid of s. 48(13) of the PBA.

[52] When Mr. Mowbray executed the separation agreement on August 10, 1990, he had a vested interest in the pension credits, then accrued. Mr. Mowbray's interest in the Plan was not confined to the deferred benefits to which he would become entitled upon retirement. The scope of his interest included, as well, an interest in the death benefits that might become payable under the Plan on his death. Death benefits, like other pension benefits, result from the member's participation in the Plan. A member is able to assign his or her interest in death benefits in the same fashion that the member is entitled to assign his or her interest in other pension benefits. The fact that death benefits are conditional on the death of the member does not render them without [page75 ]value, nor does it operate to preclude an assignment of the member's interest in the asset. [See Note 1 at end of the document]

[53] The Board argues that ss. 61, 62 and 63 of the Plan specify that the recipient of the pre-retirement death benefits is to be the member's surviving spouse at death. Accordingly, Mr. Mowbray had no interest in that benefit to assign to Ms. Stairs. The maxim nemo dat quod non habet operates to render the assignment to Ms. Stairs invalid.

[54] This argument ignores the fact that at the time of the assignment, August 10, 1990, Mr. Mowbray was not married to Mrs. Mowbray. Indeed, Mr. Mowbray and Ms. Stairs were not yet divorced. The Board's argument also ignores what I point out above -- that it was Mr. Mowbray who, through his service and his contributions, had created the asset: his interest in the death benefits. At the time of the separation agreement, that interest in the Plan belonged to Mr. Mowbray -- no one else.

[55] Importantly, in my view, the Plan itself contemplates that a Plan member has an assignable interest in a benefit payable under the Plan. Paragraph 86a of the Plan prohibits assignments of a "pension or benefit" except in limited circumstances, one of which is assignment by way of domestic contract. The term "benefit" is not limited and clearly includes a pre-retirement death benefit. The prohibition against assignments in para. 86a is a recognition that, absent a prohibition, pension benefits, including death benefits, are assignable.

[56] In addition, the statutory scheme of the PBA supports the notion that a plan member may assign pre-retirement death benefits by way of a domestic contract. Section 65(1) prohibits the alienation of "money payable under a pension plan". Section 65(3) exempts assignments by domestic contracts from this prohibition. Money payable upon death constitutes "money payable [page76 ]under a pension plan" within the meaning of s. 65: see also Miles Estate v. Miles (1997), 1997 12279 (ON SC), 35 O.R. (3d) 312, 152 D.L.R. (4th) 755 (Gen. Div.). Section 65(3) evidences a statutory intention that domestic contracts assigning pension benefits, including pre-retirement death benefits, be respected.

[57] Further, s. 51 of the PBA contains a number of subsections addressing issues that arise on a marriage breakdown. Like s. 65(3), the policy underlying s. 51 is to respect the bargain set out in a domestic contract subject only to certain statutory limitations contained in the section. Section 51 recognizes and facilitates the enforcement of domestic contracts which provide for sharing of pension benefits on marriage breakdown. For example, s. 51(3) contemplates the division of a pension between spouses. Where a surviving spouse steps into the shoes of a deceased individual, this division amounts to a division between current and former spouses. Section 51(4) gives direction to plan administrators on what steps to take when a domestic contract affects a pension. Section 51 applies to all types of pension benefits, including pre-retirement death benefits.

[58] I do not agree with the Board's argument that, because s. 48(13) of the PBA recognizes the priority of an interest set out in a domestic contract over the pre-retirement death benefit required by s. 48(1) for post-1986 service, it follows that there is no right of assignment for pre-1987 death benefits. Section 48(1), which was first enacted in 1987, establishes a statutory minimum standard for pre-retirement death benefits accumulated after 1986. Section 48(13) ensures that domestic contracts are effective to transfer an interest in the benefits referred to in s. 48(1), nothing more. The inclusion of s. 48(13) in the statutory scheme in 1987 should not be interpreted as indicating that a plan member did not previously have the authority to assign, by way of domestic contract, a vested interest in a pension plan.

[59] Finally, the Board argues that the decision in Dick v. Dick, 1993 16077 (ON SC), [1993] O.J. No. 140 (QL), 46 R.F.L. (3d) 219 (Gen. Div.) stands for the proposition that pre-retirement death benefits are not property, and are therefore not capable of assignment. I do not accept that argument. In fact, Ferrier J. went so far in that case as to hold, at pp. 231-32 R.F.L.:

Death benefits have a uniqueness which makes them difficult to compare to other forms of assets. They are property. They have value. In given circumstances they may be said to have value to the pension holder even though he or she may never receive them (for example, if the pension holder has debt at the time of death, the debt might be satisfied by his estate from the death benefits). [page77 ]

[60] In Dick, one issue was whether a pension plan member was required to include in his net family property statement the value of his death benefits in addition to the value of his deferred pension. The spouse in that case was trying to inflate the value of her husband's assets for the purposes of maximizing the equalization payment to be made to her. The court in Dick determined that death benefits were not property for that purpose since, to require their inclusion would result in the pension benefits being included twice. No such double counting would result in the case at bar. That case does not support the Board's position.

[61] The ability of a pension plan member to transfer a vested interest in a pension plan on marriage breakdown makes sense from a policy standpoint. In many cases, a pension will represent a significant portion of the family property available for division as part of the equalization exercise. The capacity to assign pension entitlements, including death benefits, provides flexibility to the parties or to a court in resolving family property issues in an equitable manner that recognizes the economic reality of many families.

[62] Moreover, the transfer of pre-retirement death benefits to a former spouse under a separation agreement does not unfairly prejudice a subsequent spouse. As I point out below, the subsequent spouse living at the time of a member's death is assured of at least 50 per cent of the death benefits by virtue of s. 51(2) of the PBA. Further, a subsequent spouse who marries after a valid assignment of a pre-retirement death benefit to a former spouse should not reasonably expect to receive the already-assigned interest.

[63] Accordingly, I conclude that at the time he entered into the separation agreement, Mr. Mowbray had an assignable interest in the pre-retirement death benefits that would become payable under the Plan on his death.

[64] It is clear from the separation agreement that Mr. Mowbray intended to assign to Ms. Stairs that portion of the pre-retirement death benefit that accrued during their marriage, including that portion of the death benefit that derived from his pre-1987 employment. In s. 10(1) of the separation agreement, the parties agreed that Ms. Stairs had a "substantial interest" in the benefits under Mr. Mowbray's plan. In that section, Mr. Mowbray assigned a one-half interest in the pension benefits that would be payable to him if and when he retired.

[65] The Plan also provided for benefits payable if Mr. Mowbray died before retirement. Section 10(4) of the separation agreement addresses the situation that in fact occurred: Mr. Mowbray predeceased Ms. Stairs, the death benefit became payable, and [page78 ]Mr. Mowbray had a subsequent surviving spouse. In anticipation of such circumstances, Mr. Mowbray assigned to Ms. Stairs the portion of the death benefit that reflected benefits accrued under the Plan during their 25 years of marriage.

[66] There can be no doubt that Mr. Mowbray intended to assign to Ms. Stairs an interest in the pension benefits attributable to both his pre-1987 and post-1986 employment. The provisions of the separation agreement assigning to Ms. Stairs an interest in the pension do not distinguish between entitlements arising before and after January 1, 1987.

[67] In summary, I am satisfied that at the time of the separation agreement, Mr. Mowbray had an assignable interest in the pre-retirement death benefits provided by the Plan and that he intended to assign an interest in those benefits to Ms. Stairs with respect to his employment both before and after January 1, 1987. For the above reasons, I am satisfied that the Divisional Court correctly held that Mr. Mowbray assigned an interest in the death benefit relating to his pre-1987 service.

Issue 2 -- The Calculation Date

[68] The Divisional Court held that the calculation date for determining the 50 per cent limit in s. 51(2) of the PBA is the date that Mr. Mowbray and Ms. Stairs were divorced, March 7, 1991. The Board argues that the correct date is the date of separation, August 10, 1990. By way of cross-appeal, Ms. Stairs submits that the date should be the date of Mr. Mowbray's death, April 17, 1995. For the reasons that follow, I agree that the date of Mr. Mowbray's death is the proper date at which to calculate the death benefit assigned to Ms. Stairs for purposes of applying the 50 per cent limit set out in s. 51(2).

[69] Section 51(2) reads as follows:

51(2) A domestic contract or an order mentioned in subsection (1) is not effective to cause a party to the domestic contract or order to become entitled to more than 50 per cent of the pension benefits, calculated in the prescribed manner, accrued by a member or former member during the period when the party and the member or former member were spouses or same-sex partners.

(Emphasis added)

[70] Section 56 of Regulation 909 sets out the method of calculation of death benefits for purposes of s. 51(2). It reads as follows:

56. For purposes of subsection 51(2) of the Act, the pension benefits accrued during the period a member had a spouse or same-sex partner shall be determined as if the member terminated employment at the valuation date in accordance with the terms of the plan at that date and without [page79 ]consideration of future benefits, salary or changes to the plan but with consideration for the possibility of future vesting.

(Emphasis added)

[71] The term "valuation date" is defined in Regulation 909 of the Pension Benefit Act Regulations, R.R.O. 1990, but only with respect to solvency tests, which clearly have no application in the context of s. 56. The term is not defined in the PBA or in the Plan.

[72] The task, then, is to identify what "valuation date", in the context of [s.] 56, means. It seems to me there are two logical choices: the date that the parties use as a valuation date for equalizing family property ("the equalization date") or the date the parties intended to use to calculate the value of the pension benefits assigned under the domestic contract ("the pension calculation date"). The latter date may or may not be different from the equalization date, depending on the specific terms of a domestic contract.

[73] The equalization date is a date used by parties to a domestic contract or by a court making an order under Part I of the FLA for the purpose of valuing net family property as part of the equalization of property exercise that takes place upon a marriage breakdown. A spouse's interest in a pension plan will often form a significant part of the net family property that is to be valued and divided. However, when pension benefits are not yet in pay because the plan member is still employed, it becomes necessary to determine whether those benefits, for purposes of the settlement of matrimonial property, should be calculated as if they come into pay on the equalization date or on the basis that they will come into pay on the happening of some future event -- the retirement or death of the plan member. As Major J. indicated in Best v. Best, 1999 700 (SCC), [1999] 2 S.C.R. 868, 174 D.L.R. (4th) 235 at para. 61, "Because of the many contingencies involved in any effort to value a pension before it is 'in pay', all valuation methods will involve some degree of artificiality."

[74] The pension calculation date will be later than the equalization date if the parties to a domestic contract adopt an "if and when" approach to the assignment of pension benefits. Under this approach, the assignee spouse receives a portion of the pension benefit when the benefit comes into pay -- upon the plan member's retirement, termination of employment, or death, as the case may be. In this scenario, an assignee spouse participates in the actual pension paid by the plan which would be calculated at the date of the event that triggers payment. As Major J. also points [out] in Best, supra, at paras. 108 and 110, in certain situations, the use of an "if and when" approach has certain advantages, including transferring to the assignee spouse a share of [page80 ]the pension benefits based on the actual value of the benefits when the pension comes into pay.

[75] A method that requires calculation of the amount of the pension benefit at retirement or death is often called "the retirement method". Where the amount is linked to the best or final years of salary, this method of valuation permits an assignee spouse to share in salary or plan improvements that occur after the date of a domestic contract. Conversely, if events transpire such as the death or termination of employment before retirement, pension benefits actually paid may turn out to be less than is anticipated at the time the parties enter into the domestic contract. For a discussion of these issues, see Ontario Law Reform Commission, Report on Pensions as Family Property: Valuation and Division (Ontario: The Commission, 1995), c. 5; Best, supra.

[76] When the parties adopt a retirement method for purposes of calculating the amount of a pension to be assigned under a domestic contract, it is open to them to determine the actuarial value of the deferred entitlement for purposes of arriving at an equalization of the net family property. Variables such as projected salary increases, possible plan improvements or the likelihood of the plan member dying or terminating employment before retirement can be actuarially calculated in order to arrive at the present value of the future benefits being assigned under the domestic contract.

[77] It is also open to parties to a domestic contract to choose to calculate the pension benefits assigned to a plan member as if employment is terminated prior to retirement or death ("the termination method"). Under the termination method, the amount transferred to the assignee spouse is fixed on a specific date and the assignee spouse's interest is not dependent upon the happening of a future event. It would not be unusual for parties to a domestic contract who choose to use the termination method for calculating the amount of pension benefits to use the same date as the date for equalization of matrimonial property.

[78] In the separation agreement in this case, Mr. Mowbray and Ms. Stairs clearly selected the retirement method in order to calculate the amount of the pension benefit to be assigned to Ms. Stairs. Section 10(1) of the separation agreement assigned to Ms. Stairs a pro-rated one-half interest of that portion of Mr. Mowbray's pension that reflected their 25-year marriage that Mr. Mowbray would have received if he had lived to retirement. Similarly, s. 10(4) assigned to Ms. Stairs a pro-rated share of the death benefits that would be payable under the plan upon Mr. Mowbray's death.

[79] I use the term "pro-rated" to reflect the fact that Ms. Stairs' interest is not limited to the amount of pension benefits that had accrued up until the parties' divorce. Rather, the formula [page81 ]devised by the parties gave Ms. Stairs a pro-rated interest of 25/n multiplied by Mr. Mowbray's total pension, where "n" is his total number of years of pensionable service. See Best, supra, at paras. 45-48.

[80] In each case, retirement or death, the domestic contract linked Ms. Stairs' entitlement directly to the actual benefit that would become payable. Calculating the amount of the benefit was not possible until the date of retirement or the date of death, as the case may be. In this particular case, the "pension calculation date" would be April 17, 1995.

[81] Mr. Mowbray and Ms. Stairs did not specifically set out an "equalization date" in their separation agreement. However, they did agree that July 1, 1988 was the date of separation. The separation agreement, combined with the operation of s. 4(1) of the FLA, leads to the conclusion that the date of separation was the date that they used for equalizing net family property.

[82] It is important to note that the fact that July 1, 1988 is the date used by the parties for equalization purposes is not determinative of the issue of what date should be used to calculate the value of the death benefit transferred to Ms. Stairs under the separation agreement. To quote again from Best, supra, at para. 60:

The Family Law Act does not require that all property be stretched to fit one valuation method without regard to the fact that different types of assets may accumulate value in different ways. If proper consideration for the nature of a defined benefit pension suggests that a different method should be used to determine its value, the statute does not preclude it.

[83] That then brings me back to s. 56 of Regulation 909. The question is to which date, the equalization date (in 1988) or the pension calculation date (in 1995), the regulation refers when, as here, the two are different. No ready answer emerges from the language of the Act or the regulations. However, in my view, when the parties to a domestic contract have selected a date for calculating the value of pension benefits to be assigned that is different than the equalization date, it makes more sense to use the date the parties selected for purposes of s. 56 of the regulation.

[84] In order to give s. 56 a proper interpretation, it is necessary to bear in mind the purpose of s. 51 of the PBA to which s. 56 applies. Two purposes are relevant to the analysis here. First, s. 51 is designed to recognize and respect freely negotiated domestic contracts. Second, it seeks to impose certain limits on the ability of a pension plan member to contract away his or her pension entitlements. Accordingly, s. 51(2) expressly gives effect to a domestic contract so long as the contract does not deny the pensioner (or his or her surviving spouse) at least 50 per cent of the pension benefits. Therefore, keeping in mind those two purposes [page82 ]of s. 51, domestic contracts should be given effect to the extent that they do not deny the plan member at least 50 per cent of the moneys to which he or she is entitled upon retirement. In the case of a death benefit, domestic contracts should be given effect to the extent that they do not deny the surviving spouse at least 50 per cent of the death benefit.

[85] To interpret s. 56 of the regulation as referring to the equalization date rather than to the date the parties to a domestic contract have agreed upon for calculating the assignment of pension benefits would needlessly restrict what parties to domestic contracts can agree to in settling their financial affairs. Beyond ensuring that at least 50 per cent of the value of the pension is unassignable, there is no compelling reason to further limit the freedom of the parties to negotiate and organize their financial affairs. Thus, I choose an interpretation of "valuation date" as it is used in s. 56 of Regulation 909 in the way that affords parties to a domestic contract the greatest latitude and in a way that interferes to the least extent permitted by the language in an agreement that is freely and fairly negotiated and executed.

[86] In reaching this conclusion, I recognize that s. 56 of Regulation 909 uses the term "valuation date" for calculating the pension benefit and that that term is defined in the FLA for purposes of the equalization exercise. There is a superficial appeal to adopting the same date for purposes of s. 56. However, given that the exercise being carried out under s. 51(2) of the PBA is for a different purpose than the equalization exercise, there is no reason to insist that the term be interpreted in the same way for both purposes. For the reasons set out above, I do not adopt the FLA definition of "valuation date" for purposes of s. 56.

[87] The Board also argues that the language of s. 56 of Regulation 909 itself signals an intent that the "valuation date" is to be a date earlier than the date on which the pension benefits become payable. In particular, the Board relies upon the language in s. 56 providing that the pension benefit shall be determined at the valuation date "without consideration of future benefits, salary or changes to the Plan but with consideration for the possibility of future vesting". I recognize that this language may suggest that the "valuation date" may precede the date that payments commence. Indeed, that might be the situation in the case of some domestic contracts. However, there is nothing in the language of s. 56 to require that the valuation date precede the date of actual termination, retirement or death. I am satisfied that it is open to the parties to a domestic contract to agree that, for purposes of s. 56 of Regulation 909, the valuation date is the actual date that the member's employment terminates. [page83 ]

[88] In this case, Mr. Mowbray and Ms. Stairs entered into an agreement whereby Ms. Stairs would participate in the actual benefits paid under the plan. The record does not disclose how the parties valued those benefits for equalization purposes but it is reasonable to assume that they did so in accordance with sound actuarial principles. Were one to interpret the date for calculating the death benefits as a date other than the date of Mr. Mowbray's death, the parties' clearly expressed intention would be frustrated. In my view, that is neither necessary nor desirable.

[89] Moreover, because the scheme of the separation agreement is such that Ms. Stairs is to receive her entitlement to pension benefits on an "if and when" basis and because Mr. Mowbray died before retirement, the interest Ms. Stairs will receive in the death benefit could be significantly less than the amount she would have received had Mr. Mowbray lived to retirement and lived for some years thereafter. The scheme of the separation agreement is such that Ms. Stairs was to assume both the positive and negative risks that accompany an "if and when" approach to the settlement of pension benefits. It would be inconsistent to further limit Ms. Stairs' interest by requiring that her share be calculated as if Mr. Mowbray had died on a date earlier than he actually did.

[90] The Divisional Court concluded, as have I, that the parties intended to calculate the value of the pre-retirement death benefits as of Mr. Mowbray's death. However, the Divisional Court went on to find that the date for determining the amount of pension benefits transferred to Ms. Stairs could not extend beyond the date they ceased to be spouses, March 7, 1991. The court reasoned that the language of s. 51(2) of the PBA limited the transfer of pension benefits under a domestic contract to 50 per cent of the benefits "accrued by a member . . . during the period when the party and the member . . . were spouses".

[91] With respect, I disagree with the Divisional Court. I think that the Divisional Court erred in mixing two different concepts. The language in s. 51(2) limiting the transfer of pension benefits to those accrued by a member during marriage has nothing to do with the date on which the amounts of those benefits are to be calculated. Section 10(4) of the separation agreement provides for the transfer of that portion of the death benefits that was accumulated over a 25-year period, the approximate period that the parties were spouses. Section 10(4) therefore complies with the accrual restriction in s. 51(2) of the PBA.

[92] In summary, I conclude that the proper date for purposes of determining the 50 per cent limit of the pension benefits transferred to Ms. Stairs pursuant to s. 51(2) of the PBA is April 17, 1995, the date Mr. Mowbray died. [page84 ]

Issue 3 -- Does the 50 Per Cent Limit Apply to the Pre-1987 Benefits?

[93] This issue concerns the application of the 50 per cent limit in s. 51(2) of the PBA to the transfer of the pre- retirement death benefits to Ms. Stairs under s. 10(4) of the separation agreement.

[94] Again, I point out that there are two components to the death benefit: the death benefit that results from service prior to 1987 and the death benefit that results from service after 1986.

[95] The parties agree that the transfer of the death benefit attributable to Mr. Mowbray's post-1986 service is subject to the 50 per cent limit. However, by way of cross-appeal, Ms. Stairs submits that the Divisional Court erred in finding that the death benefit derived from Mr. Mowbray's pre-1987 service is also subject to the 50 per cent limit.

[96] For convenience, I repeat the wording of s. 51(2). It reads as follows:

51(2) A domestic contract or an order mentioned in subsection (1) is not effective to cause a party to the domestic contract or order to become entitled to more than 50 per cent of the pension benefits, calculated in the prescribed manner, accrued by a member or former member during the period when the party and the member or former member were spouses or same-sex partners.

(Emphasis added)

[97] Ms. Stairs argues that the term "pension benefits" in s. 51(2) refers to Mr. Mowbray's deferred pension entitlement at the time of his death, not to the pre-retirement death benefits payable under the Plan on his death. A "deferred pension" is the term used to describe a vested, locked-in entitlement that is not yet in payment. Payment is deferred until the person entitled to the pension reaches normal retirement age. The value of Mr. Mowbray's deferred pension entitlement at his death was greater than the death benefit payable under s. 62(3) of the Plan relating to his pre-1987 service. As a result, Ms. Stairs argues that the 50 per cent limit set out in s. 51(2) should be applied to that higher amount, the deferred pension, thereby permitting a transfer of more than 50 per cent of the actual death benefit accrued from Mr. Mowbray's service prior to 1987. [See Note 2 at end of the document] [page85]

[98] I do not accept that argument. The answer to the argument is found in the definition of "pension benefit" in the PBA. I am satisfied that the term "pension benefit", when used in the context of a plan member's death, refers to the death benefit payable under the Plan and not to the deferred pension entitlement of the member at death.

[99] The term "pension benefit" is defined in s. 1 of the Act as follows:

"pension benefit" means the aggregate monthly, annual or other periodic amounts payable to a member or former member during the lifetime of the member or former member, to which the member or former member will become entitled under the pension plan or to which any other person is entitled upon the death of a member or a former member.

(Emphasis added)

[100] This definition expressly includes benefits payable upon the death of a member. In the case of the death of a member or former member of a plan, the pension benefit is limited to the amount to which the recipient of the death benefit under the plan is entitled.

[101] By way of alternative argument, Ms. Stairs argues that the pre-1987 death benefit provided in s. 62(3) of the Plan, by its terms, already complies with s. 51(2). Since that benefit is 50 per cent of what Mr. Mowbray's post-retirement pension would have been, Ms. Stairs argues that the 50 per cent limit in s. 51(2) is respected.

[102] I do not accept that argument. The 50 per cent limit in s. 51(2) applies to the "pension benefits" which, in this case, are the pre-retirement death benefits. The fact that the death benefit for pre-1987 service is only 50 per cent of what Mr. Mowbray's post-retirement pension would have been is of no consequence. Section 51(2) limits the amount that can be transferred to 50 per cent of the moneys payable. Thus, no more than 50 per cent of the death benefit provided in the Plan may be transferred to the former spouse under a domestic contract.

[103] For the above reasons, I would dismiss this ground of Ms. Stairs' cross-appeal.

Issue 4 -- Ms. Stairs' Survivor Pension

[104] I have found that Ms. Stairs is entitled to a pro-rated share of the death benefit derived from Mr. Mowbray's service both before and after January 1, 1987.

[105] Section 62(3) of the Plan sets out the pre-1987 death benefit, referred to in that section as a survivor pension. The amount of the survivor pension is equal to one-half of the amount of the [page86 ]pension that would have been paid to Mr. Mowbray if he had been 65 when he died. By virtue of s. 51(2), Ms. Stairs' interest in that survivor pension is limited to 50 per cent of its value.

[106] Pursuant to s. 62(3) of the Plan, a surviving spouse is entitled to a pension for the lifetime of the spouse. Under s. 10(4) of the separation agreement, Mr. Mowbray assigned an interest in "the death benefit", in this case the survivor pension, to Ms. Stairs.

[107] The amount of the survivor pension payable under s. 62(3) does not depend on who the surviving spouse is, rather it is directly linked to the amount that would have been paid to Mr. Mowbray if he had retired on the date of death.

[108] Two questions arise. First, is the Board required to pay Ms. Stairs' portion of the survivor pension directly to her? By virtue of s. 51(3) of the PBA, I am satisfied that it is.

[109] The relevant part of s. 51(3) reads as follows:

51(3) If payment of a pension . . . is divided between spouses . . . by a domestic contract . . ., the administrator is discharged on making payment in accordance with the domestic contract . . .

(Emphasis added)

[110] The intent of s. 51(3) is to provide for direct payment to spouses entitled to pension benefits under a domestic contract: Best, supra, at para. 108. This avoids the obvious impracticalities of having a former spouse who is entitled to a pension benefit looking to an ex-spouse or a subsequent spouse, as the case may be, for payment of a pension benefit.

[111] The second question is whether the survivor pension to which Ms. Stairs is entitled should continue for her lifetime or for the lifetime of Mrs. Mowbray. Sections 62 and 63 of the Plan provide that the death benefits are to continue for the "lifetime of the spouse" living at the death of the member.

[112] Under s. 19 of the PBA, a pension plan must be administered in accordance with the Act whether or not the pension plan is amended to comply with the Act. As set out above, s. 51(3) of the PBA contemplates payment of a pension in accordance with a domestic contract. Section 51(4) directs the administrator of the Plan to "revalue" a pension if a domestic contract affects a pension. While neither of those provisions directly addresses the question of whether a pension benefit assigned under a domestic contract should continue for the life of the assignee spouse, both sections evidence a legislative intent to rearrange the calculation and payment of pension benefits as agreed upon in a domestic contract.

[113] In this case, Mr. Mowbray was entitled to assign a portion of the pre-1987 death benefit to Ms. Stairs. As a result, [page87 ]Mrs. Mowbray's interest under the Plan is limited to the unassigned portion of that benefit. Mrs. Mowbray has no interest in that portion of survivor's pension that was assigned to Ms. Stairs under the separation agreement. I am satisfied that, having regard to the domestic contract and the statutory scheme of the PBA, the most sensible approach is that the survivor pension to which Ms. Stairs is entitled under s. 62(3) should continue for her lifetime and should not be tied to the life of Mrs. Mowbray.

[114] As is the case with the pre-1987 benefit, the Board should also pay Ms. Stairs' portion of the post-1986 benefit directly to her. There is, however, an additional issue. Pursuant to s. 63(4) of the Plan, one of the options available to the recipient of the post-1986 benefits is to be paid an immediate or a deferred survivor pension for life, the commuted value of which is at least equal to the commuted value of the credited service for employment after January 1, 1987, calculated as if the member had retired on the date of death. As a result, for actuarial purposes the amount of the pension under that option is tied to the age of the recipient.

[115] I am satisfied that if Ms. Stairs opts to receive her entitlement under s. 63(4) of the Plan by way of immediate or deferred pension as opposed to a lump sum, then the amount of the pension should be valued in accordance with her birth date and not that of Mrs. Mowbray. Again, doing so would accord with the statutory scheme of the PBA that I have discussed above.

[116] The above conclusions, regarding whose age the benefit should be tied to, are supported by s. 51(4) of the PBA. Section 51(4) reads as follows:

51(4) If a domestic contract or an order mentioned in subsection (1) affects a pension, the administrator of the pension plan shall revalue the pension in the prescribed manner.

(Emphasis added)

[117] The Act and regulations do not define what is meant by "revalue" nor do they prescribe the manner for revaluing the pension. The parties were not able to point us to any authorities for interpreting this section. Although it is not entirely clear what is intended by the phrase "revalue the pension in the prescribed manner", it seems to me that the best interpretation, and the one that most closely respects the statutory intention of recognizing domestic contracts, is that a pension should be revalued in accordance with the manner prescribed by the domestic contract. Indeed, if the phrase "in the prescribed manner" does not refer to the manner prescribed by the domestic contract, it is difficult to know to what else it could refer. [page88 ]

[118] That being the case, the exercise of revaluing the pension when the pension is a survivor's pension must refer to calculating the amounts to be paid based on the age of the recipient of that pension.

[119] In this case, if Ms. Stairs should opt to receive her post-1987 entitlement by way of survivor pension, the plan administrator should revalue her entitlement in accordance with her birth date and provide her with a pension for her lifetime calculated in that manner.

Issue 5 -- The Divisional Court's Declaration Re the Pre-1987 Entitlement

[120] The Board argues that the Divisional Court did not have jurisdiction to make a declaration that the Board is bound to honour the entitlements of Ms. Stairs regarding the pre-1987 entitlements.

[121] The Superintendent's Notice of Proposal gave rise to the Tribunal hearing. The Tribunal's decision regarding the Notice of Proposal was appealed to the Divisional Court. In that notice, the Superintendent proposed to order the Board to pay out a portion of the post-1986 pre-retirement death benefit to Ms. Stairs. The Superintendent did not propose to make an order regarding the pre-1987 pre-retirement death benefit.

[122] The Superintendent's jurisdiction is limited, by s. 87 of the PBA, to ordering the Board to comply with the PBA and pension plan terms. Because Ms. Stairs' entitlement to the pre- 1987 death benefit arose under the separation agreement and not under the Act or the Plan, the Superintendent does not have jurisdiction to order the Board to pay to Ms. Stairs that portion of her entitlement. Accordingly, the Divisional Court declined to direct the Superintendent to make an order respecting the pre-1987 death benefits. Instead, the Divisional Court made a declaration as to Ms. Stairs' pre-1987 entitlement.

[123] Given the way that the issues were argued before the Divisional Court, I am satisfied that it was open to the court to issue that declaration. The pre-1987 issue was argued in full on the rule 59.06 motion. All of the parties to this appeal were parties to that motion. No one objected to the court's jurisdiction to consider the argument. Indeed, there are obvious advantages to having all of the issues concerning Mr. Mowbray's pension determined in a single proceeding.

[124] The Divisional Court no doubt had a serious concern about the costs of this litigation and the inefficiency of having another tribunal or court decide issues related to matters that were argued fully before it. The Board was not prejudiced by the [page89 ]Divisional Court proceeding as it did and issuing a declaration with respect to the pre-1987 entitlement.

[125] I see no merit to this ground of appeal.

Issue 6 -- The Standard of Review

[126] The Board argues that the Divisional Court erred in applying a standard of correctness when reviewing the decision of the Tribunal.

[127] There were six issues before the Tribunal. They are summarized in para. 31 above.

[128] The Tribunal disposed of the Board's application by addressing only the first issue, regarding whether the Board was required to pay Ms. Stairs an interest in Mr. Mowbray's pre-retirement death benefit. The Tribunal held that the Board was not. The Tribunal did not answer or provide reasons with respect to the other five issues.

[129] The Divisional Court overturned the Board on the first issue. At the request of the parties, the Divisional Court also dealt with some of the other issues that had been raised before the Tribunal, but not answered.

[130] The Board is not asking this court to reinstate the Tribunal's disposition on the first issue. The appeal and cross-appeal are concerned with other issues.

[131] The Board points out that some of the Tribunal's reasoning in disposing of the first issue before it could apply to other issues decided by the Divisional Court. That may be. However, the Tribunal only fully addressed the first issue. In those circumstances, I do not consider that the Divisional Court was required to show any deference to the Tribunal's reasons when it addressed the other issues.

Issue 7 -- Costs Below

[132] The Divisional Court ordered the Board to pay Ms. Stairs her costs on a substantial indemnity basis and fixed those costs in the amount of $40,000 plus disbursements.

[133] For the reasons given by the Divisional Court, I consider the costs awarded to be entirely appropriate.

DISPOSITION

[134] In the result, I would dismiss the appeal and allow the cross-appeal in part. I would vary the order of the Divisional Court dated December 23, 2002 by deleting the words "valued at March 7, 1991" in paras. 2 and 3 and substituting the words "valued at April 17, 1995". [page90 ]

[135] In addition, under Issue 4, I have set out certain conclusions with respect to the calculation and payment of Ms. Stairs' survivor pension. I leave it to the parties to calculate Ms. Stairs' pension entitlement on the basis of these reasons and the order of the Divisional Court as amended.

[136] Ms. Stairs seeks her costs of this appeal on a substantial indemnity basis. The Board argues there should be no order as to costs.

[137] In my view, there should be an award of costs in favour of Ms. Stairs. In all, there were seven issues raised in the appeal and cross-appeal. Ms. Stairs was successful in all but one of those issues, Issue 3.

[138] Ms. Stairs has submitted a bill of costs on a substantial indemnity basis in the total amount of $59,000. I would order that the Board pay to Ms. Stairs her costs on a partial indemnity basis, fixed in the amount of $25,000 inclusive of Goods and Services Tax and disbursements.

[139] I would make no order of costs with respect to the Superintendent.

Appeal dismissed; cross-appeal allowed in part.

Notes

1. The FLA is instructive in this regard. Section 4(1) reads as follows:

"[P]roperty means any interest, present or future, vested or contingent, in real or personal property and includes,

(c) in the case of a spouse's rights under a pen- sion plan that have vested, the spouse's interest in the plan ...

To the extent that public policy reasons suggest limiting the right of a spouse to transfer a vested interest in pre- retirement death benefits, the legislature is free to do so. Section 51(2) is an example of the legislature limiting a right to transfer. Otherwise, however, the legislature has not prohibited the transfer of pre-retirement benefits when that transfer is executed pursuant to a domestic contract.

2. This issue arises because s. 62(3) of the Plan provides for a death benefit that is only one-half of the death benefit that would have been paid to Mr. Mowbray as if he had reached retirement at the age of death. The same problem does not arise for the post-1986 death benefit because, pur- suant to s. 63(4), the amount of that benefit correlates directly to the commuted value of the deferred pension at the date of death.