Court File and Parties

Court File No.: 16-526 Date: March 1, 2019

Superior Court of Justice – Ontario

Re: Gallagher v Gallagher

Between: Arlene Christine Gallagher, Applicant And: Stewart Michael Gallagher, Respondent

Before: Honourable Mr Justice Martin James

Counsel: Caroline Kelly for the Applicant Self-represented Respondent

Date Heard: January 23, 2019

Reasons for Decision

James J.

[1] This is a motion brought by the applicant for an order to correct a provision in a previous order that is alleged to contain a mistake. The “mistake” relates to the arrangements for the division of the respondent’s pension under the Canadian Forces Superannuation Act as set out in para. 20 of the final order of Sheard J. dated May 8, 2017. Specifically, it raises the question of whether the applicant entitled to 2% interest (or interest at any rate) on the sum of money to be transferred to her as a result of the division of the respondent’s pension.

[2] The respondent was a member of the Canadian Forces. He retired in 2011.

[3] The parties separated on October 31, 2015.

[4] Following separation, the respondent requested information from his pension administrator about the division of his pension.

[5] In January, 2016 the pension administrator estimated on a preliminary basis the applicant’s share of the respondent’s pension under the Pension Benefits Division Act (“PBDA”) to be $433,170.

[6] The respondent then retained an actuary to perform an independent calculation of the family law value of the applicant’s interest. The report of the actuary, Guy Martel, found that the family law value of the pension was $812,825 with the applicant’s interest being one half of this amount or $406,412.50.

[7] Mr. Martel raised the issue of interest applicable upon the division of pensions under the Family Law Act in Ontario when he said in his report, “Under the Ontario Pension Benefits Act (for provincially regulated plans), interest would be credited at an annual rate of 2% from the Family Law Valuation Date to the date of transfer.”

[8] There does not appear to be an equivalent provision respecting interest under the federally-enacted PBDA.

[9] This prompted the respondent to ask Mr. Martel whether, because his pension was regulated federally, the 2% requirement would apply. The same day, January 12, 2017, Mr. Martel responded as follows:

Hi Stu,

Excellent question, Paragraph 10.1(2) of the Family Law Act requires that the value of the pension, when a plan is not provincially regulated, be valued in accordance with section 67.2 of the Ontario Pension Benefits Act (so calculated the same way as provincially regulated pensions). Paragraph 30 of the Ontario Regulation 287/11 states that the Family Law Value must be increased with interest for purposes of subsection 67.3(6) of the Act. And 10.1(2) mentions 67.2, not 67.3. So the argument can be made that s.30 does not apply and that interest should only be credited in accordance with Courts of Justice Act prejudgment interest.

Guy

[10] On March 28, 2017 the applicant served an offer to settle which dealt with the pension issue in the following terms:

1. The value of the Respondent’s interest in the Canadian Forces Superannuation Act Pension Plan will not be included in the calculation of his net family property. The wife’s entitlement will be paid according to the Pension Benefits Division Act and this Offer. Upon acceptance of this Offer, the Minister will transfer $406,412.50, together with interest at the rate of 2% per annum from the date of separation through to the date of the transfer, into a qualified retirement savings vehicle chosen by the wife in accordance with the Regulations under the Pension Benefits Division Act. Both parties will cooperate in submitting an application for division forthwith upon acceptance of this offer. The Respondent (hereinafter “the husband”) will be a trustee of the wife’s interest in the Plan pending this transfer. If the Maximum Transferable Amount as calculated by the Minister is less than the amount prescribed in this paragraph, the husband will pay the difference to the wife. Any balance owed to the wife will be deducted by her from the RSP roll-over prescribed in paragraph 2 below.

[11] On March 30, 2017 the respondent made a counter-proposal, also by way of a written settlement offer. On the issue of equalization of property, the respondent agreed to accept the terms contained in paras. 1 to 4 of the applicant’s offer quoted above.

[12] On April 28, 2017 the respondent made another written offer to settle. This time he proposed to deal with the pension in the following terms:

26. The Respondent’s pension under the Canadian Forces Superannuation Act shall be divided, such that the Respondent shall transfer and the Applicant shall receive $406,412.50 together with interest at the rate of 2% per annum from the date of separation to the date of transfer.

[13] On May 1, 2017 counsel for the applicant, Ms. Kelly, sent a letter to Mr. Pantalone, then counsel for the respondent, summarizing where the parties were apart on certain issues. The letter did not mention anything about dividing the respondent’s pension. She included with her letter a draft order that addressed the division of the respondent’s pension in the following terms:

The value of the Respondent’s interest in the Canadian Forces Superannuation Act Pension Plan will not be included in the calculation of his net family property. The Applicant’s entitlement will be paid according to the Pension Benefits Division Act and this Order. Pursuant to section 4(1) of the Pension Benefits Division Act and the terms of this Order, the Minister will transfer the sum of $406,412.50, together with interest prescribed by the accompanying Regulations from the date of separation (October 31, 2015) through to the date of the transfer, into a qualified retirement savings vehicle chosen by the wife in accordance with the Regulations under the Pension Benefits Division Act. The “period subject to division” will be September 22, 1995 to October 31, 2015. Both parties will cooperate in submitting an application for division forthwith upon acceptance of this offer. The Respondent will be a trustee of the Applicant’s interest in the Plan pending tis transfer. If the Maximum Transferable Amount as calculated by the Minister is less than the amount prescribed in this paragraph, the Respondent will pay the difference, together with interest, to the Applicant.

[14] Due to the similarities in these offers, it appears to me that the pension division issue was no longer contentious but there were other issues that remained unresolved. Typically, settlements are usually concluded on a comprehensive basis. Unless the parties specifically agree to settle issue by issue, a contract of settlement does not arise until there is a “meeting of the minds” on all substantial points. Therefore, it cannot be said that at this point in the negotiations the parties were contractually bound on some, but not all, aspects of the settlement. The parties were making progress but there was not yet a binding deal on any points of discussion.

[15] A comprehensive settlement followed a short time later. The approved version of the final order dealt with the division of the respondent’s pension in the same terms as the draft order attached to the May 1st letter.

[16] It is obvious that the draft final order did not reflect the discussion of interest in the same way that it had been referred to in the settlement negotiations. I understand that both parties agree that the terminology regarding interest found in the order leads to a different result than if it had provided for interest at 2%.

[17] In September, 2017 the administrator of the respondent’s pension rejected the request that his pension be divided because it failed to state the precise rate of interest intended by the parties to be applied to the transfer and the basis of its calculation, whether simple or compounded. Since that time, the respondent has resisted the applicant’s requests to amend the order to include a specific, unconditional reference to interest at 2% per year.

Issue

[18] The core issue involved in this motion is whether there was an agreement that interest would accrue at 2% per year that was not included in the final order due to a mistake and if so, can/should the final order be amended to reflect the intention of the parties as expressed in the documentation they exchanged prior to the preparation of the final order.

Position of the Applicant

[19] The applicant says this motion ought to be granted to correct an “oversight” in the consent final order.

[20] Rule 25.19(b) of the Rules of Civil Procedure permits mistakes in orders to be corrected. Ms. Kelly says that the mistake in this case was the failure to express the agreement respecting interest in the final order in the same terms as the offers to settle. The effect of the mistake was to deprive the applicant of interest on her share of the pension division from the date of separation to the date of payment even though parties actually agreed to an interest payment in their settlement discussions.

Position of the Respondent

[21] The respondent has advanced several reasons why the motion shouldn’t be granted:

a) The applicable legislation, the PBDA, doesn’t provide for the payment of interest; b) The PBDA refers to a concept called the maximum transferrable amount and the payment to the applicant should not or cannot exceed this sum; c) The context and content of discussions at the case conferences; and, d) Fairness considerations.

Discussion and Analysis

[22] The structure of legal settlements is governed by contract law which provides the framework for how legally-binding agreements are formed.

[23] In this case, both parties were alive to the subtleties of pension division, with particular reference to the accrual of interest, and the interplay and differences between the federal PBDA, the corresponding provincial pension legislation and regulations and the Family Law Act of Ontario prior to making their settlement.

[24] The actuarial report of Guy Martel provided a solid basis for the respondent to insist that the maximum transferable amount determined under the PBDA overstated what the applicant was entitled to. At the same time, it brought with it the issue of interest on the applicant’s share.

[25] Settlement offers are privileged communications. The privileged nature of the communications may be expressly or implied waived after a putative settlement is made when issues arise that warrant an examination of the negotiations either to aid in an interpretation of the terms of settlement or to assess whether the settlement actually reflects what the parties intended. In this case both parties have referred to the settlement negotiations in their affidavits.

[26] A request to correct an error in a consent order engages similar considerations to those applicable to the remedy of rectification in contract law. (see Monarch Construction Ltd. v. Buildevco Ltd., 1988 CarswellOnt. 369 (C.A.) at para. 3).

[27] Rectification is a means of “rectifying” an agreement to conform with the parties’ true intentions (see Waddams, “The Law of Contracts” Seventh Edition p. 226).

[28] Paraphrasing Brooke J.A. in H.F. Clarke Ltd v. Thermidaire Corp Ltd., (1973), 33 D.L.R. (3d) 13 (Ont. C.A.) pp.20-1, aff’d. , [1976] 1 S.C.R. 319 at p. 324, in order to succeed on a plea of rectification, the requesting party must satisfy the court that the parties were in complete agreement as to the terms of the contract but wrote them down incorrectly. This involves inquiring into whether the written agreement records the intention of the parties as ascertained from an examination of their prior discussions, the surrounding circumstances and the context in which the agreement was made. The person who seeks to contradict a signed writing (in this case an order made on consent that encompasses the terms of the parties’ settlement) will always have to rebut the inference that the complaint is simply an effort to escape from a bad bargain. But if she does rebut that inference, and she can do so by evidence of anything said, written or done in connection with the transaction, the court can provide a remedy. I would add that this is codified in relation to orders by rule 25(19)(b) of the Rules of Civil Procedure.

[29] What did the parties intend? The applicant’s offer of March 28, 2017 referred to the transfer of $406,412.50 together with interest at the rate of 2% per annum. On March 30, 2017 the respondent accepted this proposal. On April 28, 2017 the respondent reformulated his offer and reiterated that the applicant was to receive $406,412.50 together with interest at 2%.

[30] In short, all the evidence points to an agreement that interest was to accrue at the rate of 2%.

[31] It is not open to the court to rewrite or revise the order to achieve a result that accords with one or the other side’s view of what is fair. If the court determines that the order does not contain a mistake, it can’t be amended pursuant to rule 25(19) of the Rules of Civil Procedure. The converse is also true.

[32] Consider whether either party would have been in a position to complain if the order had included a reference to 2% interest on the amount to be transferred. Could someone successfully say the reference to 2% interest was a mistake? I would say not because such a suggestion would be inconsistent with the discussions leading up to the order.

[33] Based on the foregoing considerations, I have concluded that the order ought to be amended.

[34] A further question needs to be addressed. Does the interest accrue on a simple or compound basis? The applicant’s notice of motion requests that the interest be compounded annually. It is not clear to me what this request is based on. The terms of the offers to settle do not specify compound interest. Mr. Martel’s report does not explicitly address this issue although in a recent letter to Ms. Kelly on this issue, Mr. Martel referred to paragraph 2 of subsection 30(5) of Regulation 287/11. This provision states that “the rate of interest is the same rate of interest used to calculate the preliminary value of the pension benefits or deferred pension.” Standing alone, I do not find this helpful. In my view the uncertainly respecting the basis for calculating the interest should be resolved in favour of simple interest because support for compounded interest is lacking in the evidence.

[35] I note that Ms. Kelly has included an additional phrase at the end of the form of order she proposed in the notice of motion which adds the words, “in such manner as agreed to, or failing agreement, as determined by this Honourable Court by motion.” The applicant does not suggest that these words are added to deal with or correct a mistake. The affidavit in support of the motion provides no evidence as to the reason why these additional words are sought. It is not open to the court to revise the order except to the minimum extent necessary to correct an error.

Disposition

[36] Paragraph 20 of the order of Sheard J. dated May 8, 2017 is amended by deleting the words “prescribed by the accompanying Regulations” as they appear in line 5 thereof and substituting in their place the words “at the rate of 2% per year, calculated on a simple basis and not compounded”. In all other respects, the said order shall remain in full force and effect.

[37] If the parties are unable to agree on the issue of the costs of this motion, the applicant may serve and file a costs outline and a bill of costs within 15 days and respondent shall have 15 days to respond. It appears that various proposals were exchanged prior to the motion being brought that may be relevant to the issue of costs but it is not clear that the evidence filed on the motion references all the proposals that were made by either party. The applicant shall include in her costs outline a comprehensive chronology of the sequence of events and the settlement positions of the parties leading up to the hearing of the motion together with copies of source documents.

James, J. Date: March 1, 2019