Court File and Parties
COURT FILE NO.: FC-17-1064
DATE: 2019/04/24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lynda Van Delst Applicant
– and –
Thomas John Hronowsky Respondent
COUNSEL:
Katharine Shadbolt, Counsel for the Applicant
David Tobin and Trevor Smith, Counsel for the Respondent
HEARD: January 21, 22 and 23, 2019
REASONS FOR JUDGMENT
Justice Engelking
[1] The Applicant, Ms. Van Delst, commenced an application in May of 2017, in which she seeks orders for custody and support in relation to the three children of the marriage, as well as spousal support, pursuant to the Divorce Act[^1], the Children’s Law Reform Act[^2] and the Family Law Act (“FLA”)[^3]. She also seeks equalization of the parties’ net family properties pursuant to the Family Law Act, pre-judgment interest on her equalization payment, and she did seek, but is no longer, exclusive possession of the matrimonial home and its contents. On September 17, 2018, Ms. Van Delst’s application was amended to include a claim for Divorce, which her original application did not include, notwithstanding her request for relief pursuant to the Divorce Act. The amended application also seeks retroactive as well as on-going child support, and essentially withdraws the claims for exclusive possession on the basis that the matrimonial home was to be sold on October 17, 2018.
[2] In his Answer dated August 23, 2017, Mr. Hronowsky also sought exclusive possession of the matrimonial home, which he is no longer, as well as support, custody and access for and to the children pursuant to the Children’s Law Reform Act, and equalization of the parties NFP’s pursuant to the Family Law Act. In his Amended Answer dated December 11, 2018, he also sought an unequal division of the net family properties, which claim he abandoned at trial.
[3] The parties have been able to resolve all of the issues but for equalization of their net family properties. A consent order will be granted with respect to those issues, including Divorce. In that regard, I find that the parties have lived separate and apart since September 2, 2016 and there is no reasonable prospect of reconciliation.
Issues
[4] Ms. Van Delst and Mr. Hronowsky disagree quite significantly on the value of a number of items in their NFP statements, the most significant of which by far relate to the Family Law value of their respective pensions. While equalization of the parties’ net family properties is the only remaining issue, there exist a number of sub-issues within that larger one. With respect to Ms. Van Delst’s NFP statement, they are:
(1) How are Ms. Van Delst’s leaves without pay to be treated in the calculation of the Family Law value of her pension?
(2) Is the survivor benefit existing at the date of separation to be included as an asset in Ms. Van Delst’s NFP?
(3) What are Ms. Van Delst’s appropriate date of marriage deductions?
[5] With respect to Mr. Hronowsky’s NFP statement, they are:
(4) What is the appropriate “normal” or “reasonable” age of retirement to adopt in determining the Family Law value of Mr. Hronowsky’s pension?
(5) Should a contingency survivor benefit be excluded from the value of Mr. Hronowsky’s pension?
(6) What are Mr. Hronowsky’s appropriate date of marriage deductions?
[6] One remaining issue, once those questions are answered, is to what pre-judgment interest Ms. Van Delst will be entitled on her equalization payment.
[7] For the reasons that follow, I find that the Family Law value of Ms. Van Delst’s pension is $447,465.00, that the value of the survivor pension in favour of Ms. Van Delst will not be included in her NFP as a valuation date asset, that the net value of Ms. Van Delst’s date of marriage property is $74,823.70, that the reasonable age of retirement for Mr. Hronowsky is 60 and the Family Law Value of his pension is therefore $1,129,294.00, that there will be no deduction from Mr. Hronowsky’s pension for a contingent survivor benefit and that the net value of his date of marriage property is $185,930.38. As a result, Ms. Van Delst is entitled to an equalization payment of $563,560.23, and pre-judgment interest on her equalization payment as of September 17, 2018.
Background Facts
[8] The facts are straight forward and not in dispute. The parties were married on October 6, 1995 and separated on September 12, 2016. Mr. Hronowsky was employed in the federal public service throughout the marriage. Ms. Van Delst has been a civilian employee of the Royal Canadian Mounted Police since 2008. However, she too has always worked for an entity governed by the Public Service Superannuation Act (“PSSA”).[^4] Both are members of the PSSA. Mr. Hronowsky retired on December 17, 2016. Ms. Van Delst continues to work.
[9] Ms. Van Delst retained Mr. Guy Martel to provide an expert report with respect to the Family Law value of her pension[^5]. Mr. Hronowsky retained Mr. Jamie Jocsak to provide an expert report with respect to the Family Law value of his pension.[^6] Both were qualified as experts by me for these purposes.
[10] Mr. Martel has provided the parties and the court with two scenarios as to how to treat Ms. Van Delst’s leaves without pay over the course of the marriage. The parties disagree on which scenario ought to be adopted by the court.
[11] Mr. Jocsak has provided two possible “reasonable” ages of retirement for Mr. Hronowsky. The parties disagree on which age ought to be adopted by the court.
[12] Additionally, Mr. Jocsak has provided values for a survivor benefit attributable to Ms. Van Delst and a contingent survivor benefit deductible by Mr. Hronowsky. The parties disagree on the appropriate treatment of those values.
Position of the Parties
[13] Ms. Van Delst takes the position that the Family Law value of her pension is $394,398.00, which is what is provided in Scenario #2 by Mr. Martel. She is of the view that only the pension actually accrued at the valuation date by virtue of her reimbursement of pension contributions resulting from her leaves of absence should be included in the value of her pension. It is Ms. Van Delst’s further position that the survivor benefit to which she was entitled at valuation date from Mr. Hronowsky’s pension should not constitute an asset to be included in her NFP on the basis that it is not truly “vested”, because she will cease to be entitled to it as a result of the divorce which this court is going to grant. Her further position is that age 60 is an appropriate age of retirement at which to calculate Mr. Hronowsky’s pension, and that his pension should not be reduced by a contingent survivor benefit. She states that the Family Law value of Mr Hronowsky’s pension is $1,129,294.00. Finally, Ms. Van Delst also disagrees with certain date of marriage deductions claimed by Mr. Hronowsky. Ms. Van Delst seeks pre-judgment interest on her equalization payment to the commencement of her application.
[14] Mr. Hronowsky’s position is that the Family Law value of Ms. Van Delst’s pension is that contained in Scenario #1 provided by Mr. Martel, or $447,465.00. He states that all Ms. Van Delst’s pensionable service for which she is repaying contributions should be included in the calculation. He is also of the view that a survivorship benefit to which Ms. Van Delst was entitled at the date of separation of $392,270.00 should be included as a valuation date asset in her NFP. Mr. Hronowsky takes the further position that the reasonable age of retirement to be attributed to him is 65, and that his pension should be reduced by a contingent survivor benefit. Mr. Hronowsky’s position is that the Family Law Value of his pension on valuation date is $951,332.00 (being $1,012,182.00 less the contingent survivor benefit). Finally, Mr. Hronowsky also disputes certain date of marriage deductions claimed by Ms. Delst.
Equalization
Issue #1 – What is the appropriate treatment of Ms. Van Delst’s Leaves Without Pay?
[15] Ms. Van Delst took a number of leaves without pay during the course of the marriage, some of which constituted non-pensionable leave. These included three maternity leaves in relation to the parties’ three children, as well as a number of “care and nurturing leaves” because the children were close together in age and it was not feasible to have them all in daycare at the same time. The leaves were confirmed by letter of Ms. Louise Saulnier of the Government of Canada Pension Centre to GML Actuaries dated October 25, 2018[^7], and are undisputed. They were:
• February 15, 1997 to August 24, 1997;
• April 1, 2000 to July 27, 2000;
• July 28, 2000 to January 30, 2001;
• August 18, 2001 to December 15, 2001;
• December 16, 2001 to August 18, 2002;
• August 19, 2002 to August 17, 2007
• August 18, 2007 to November 30, 2008 (non-pensionable leave);
• July 20, 2009 to August 21, 2009 (non-pensionable leave);
• July 4, 2011 to August 5, 2011 (non-pensionable leave);
• July 3, 2012 to August 6, 2012 (non-pensionable leave); and,
• July 4, 2013 to August 7, 2013 (non-pensionable leave).
[16] Both Mr. Martel and Mr. Jocsak indicated that, pursuant to the PSSA,[^8] a plan member is required to contribute to their pension for the first three months of leave, but thereafter may elect to do so or opt out of doing so. If the member elects to do so or does not specifically opt out, then pension benefits accrue to that member while on leave, and she is required to pay the deficiencies in contribution, either by way of a lump sum payment or by equal contributions over time. Ms. Van Delst testified that she was not able to make a lump sum payment and so she opted for the equal contributions. She was subject to a payment schedule and at the date of separation, she was still owing 142 payments of $88.35 to January 19, 2022. She is estimated by Mr. Martel to have owed contribution deficiencies of $12,546.00 at the valuation date of September 2, 2016.
[17] In his report dated October 26, 2018[^9], Mr. Martel provides two scenarios with respect to this issue. In the first, he assumed that Ms. Van Delst continued to accrue pensionable service while on leave without pay. He concluded in this scenario that her pensionable service during the marriage was 19 years and 90 days. He applied a deduction of the contribution deficiencies of $12,546.00 she was still owing at valuation date to arrive at a total Family Law value of $447,465.00.
[18] In the second scenario, Mr. Martel assumed that “the service for the period of leave without pay is accrued over time as the contribution deficiencies are being repaid.” In other words, Ms. Van Delst would be credited only for those deficiencies she has already repaid at the date of separation. Mr. Martel concluded in this scenario that Ms. Van Delst’s pensionable service during the marriage was 16 years and 183 days, and arrived at a Family Law value of her pension of $394,398.00.
[19] Mr. Martel testified that when the government calculates the maximum transferable amount of a federal pension under the Pension Benefits Division Act[^10] (PBDA), it uses the method contained in his Scenario #2.
Analysis
[20] The section 4(1) definition of property in the Family Law Act “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 pension plan, the imputed value, for family law purposes, of the spouse’s interest in the plan, as determined in accordance with section 10.1, for the period be beginning with the date of the marriage and ending on the valuation date.
[21] Section 10.1 (1) of the FLA provides that “the imputed value, for family law purposes, of a spouse’s interest in a pension plan to which the Pension Benefits Act (“PBA”) applies is determined in accordance with section 67.2 of that Act.” Section 10.1 (2) of the FLA provides that “the imputed value, for family law purposes, of a spouse’s interest in any other pension plan is determined, where reasonably possible, in accordance with section 67.2 of the Pension Benefits Act with necessary modifications.” In this case, the pension plans of both Ms. Van Delst and Mr Hronowsky are “other” as per this latter section of the Family Law Act. Because they are federal public employees, their pension plans are pursuant to the Public Service Superannuation Act. Actuaries are, thus, tasked with calculating these pensions in accordance with section 67.2 of the PBA “with necessary modifications.”
[22] Ms. Van Delst relies upon s. 8(1) of the PBDA, which provides that a pension benefits division is effected by transferring an amount “representing fifty per cent of the value of the pension benefits that have accrued to the member of the pension plan during the period subject to division…” (Emphasis added). Ms. Van Delst argues that only that portion of the pension benefits she had actually paid for had accrued to her at the date of separation. She characterized the outstanding amount as subject to a “clawback” of her pension benefit entitlements, in the event that they were not in future fully paid for by virtue of her leaving the public service, retiring or dying. Ms. Van Delst also relies on the case of Kirvan v. Kirvan[^11], in which Justice Shelston of this court found at paragraph 106 and 107, in a situation where Mr. Martel had similarly provided the two scenarios set out above:
The Court ought not to use hindsight in determining the value of an asset but, rather, ought to calculate the value of that asset based on information that existed at the time of separation.
I find that using scenario 2, which calculates the value of the parties’ pensions based on the amount of days bought back as of the date of separation, is consistent with the principles of the Family Law Act.
[23] Mr. Hronowsky submits that Kirvan can be distinguished from the case at bar in that it involved a situation of a voluntary buy back of pension benefits as opposed to a required reimbursement of contributions pursuant to section 5.3(1) of the PPSA. He argues that once Ms. Van Delst elected to repay those contributions, or failed to opt out, the entitlements became hers, and the fact that she had not paid them all back by the date of separation is immaterial. Mr. Hronowsky relies on the Public Service Superannuation Regulations^12 in support of his argument, in particular, on sections 7(1) and 7.2(4) and (5), which provide:
7(1) Subject to subsection 5.3(2) of the Act and subsections (2) and (3), a contributor who is absent from the public service on leave without pay is required to contribute to the Superannuation Account
(a) In respect of the first three consecutive months of any such absence, the amount required to be paid by that contributor pursuant to subsection 5(1) and section 65 of the Act had the contributor not been absent; and
(b) In respect of any portion of the period of absence subsequent to the portion referred to in paragraph (a), twice the amount required to be paid by that contributor pursuant to subsection 5(1) and section 65 of the Act had the contributor not been absent.
7.2 (4) Where the amount payable by a contributor pursuant to section 7 is unpaid at the time the contributor ceases to be employed in the public service, that amount shall be paid out of any benefit that is or becomes payable under the Act to or in respect of the contributor
(a) Where the benefit is an annuity, annual allowance or supplementary benefit,
(i) By reservation from the monthly instalment of the benefit of an amount equal to the amount of any instalment otherwise payable under this section or 30 percent of the gross amount of the monthly instalment, whichever is the lesser, or
(ii) If the recipient so elects, in a lump sum immediately on the benefit becoming payable; or
(b) In the case of any benefit other than a benefit described in paragraph (a), in a lump sum immediately on the benefit becoming payable.
(5) Where an amount payable by a contributor pursuant to section 7 is unpaid at the time of death of the contributor, that amount may be recovered, under subsection 8(8) of the Act, from any allowance payable under Part I of the Act to the survivor and children of the contributor at the option of the recipient,
(a) By reservation in a lump sum immediately on the allowance becoming payable; or
(b) By reservation from the monthly instalment of the allowance of an amount equal to the amount of any instalment otherwise payable by the contributor under this section prior to the death of the contributor or 30 per cent of the gross amount of the monthly installment, whichever is the lesser.
[24] Mr. Hronowsky submits that Ms. Van Delst mischaracterizes the result of potential non-payment of the outstanding contribution deficiencies as a “clawback” of her pension entitlements. He states, rather, that the federal government can recover what is owed to it in the various ways outlined in section 7.2(4) of the PSSR, but that Ms. Van Delst, having made the election to pay the contribution deficiencies, remains forever entitled to her pension benefits.
[25] Mr. Hronowsky also relies on the case of Barbot v. Treasury Board[^13]. While this is a case having to do with a grievance related to unpaid sick leave, Mr. Hronowsky states that it is equally applicable in this situation because the unpaid leave and recovery of pension benefits related thereto were, like in this case, pursuant to the PSSA. In Barbot, the griever was found to be liable for approximately $50,000.00 in unpaid contribution deficiencies. At paragraph 20 of the case, the Public Service Labour and Relations Board panel found:
20 The debt recovery began on July 4, 2012. The original value of the debt, as calculated by the Payroll Office, was $50,887.49 for the pension plan benefits arrears and $2,821.25 for the supplementary death benefits plan. Despite the difference, the employer confirmed and the bargaining agent agreed that the pensionable service appears in the grievors’s account. (Emphasis added)
[26] The Board panel found at paragraph 53 of the decision that:
53 The grievor knew that if she did not make a choice [to opt out], option (b) would be selected by default. It stated that on her return to work, payroll deductions would occur for a time equal to twice the pensionable leave without pay period. Even if the employer makes contributions during such a period, the employee must reimburse it after returning to work.
[27] Mr. Hronowsky submits that this case stands for the proposition that the totality of the pension benefits of Ms. Delst accrued over the life of the marriage (or 19 years and 90 days) were hers, whether she had paid for them in full or not at the time of separation. With this submission, I agree. What I believe Barbot stands for is the proposition that once the member has elected to pay for contribution deficiencies (or not elected to opt out), the pensionable service will appear in the member’s account. Ms. Van Delst is entitled to the pension benefits for which she has elected to recompense the government. If she does not pay for them in their totality, Ms. Van Delst will not lose her entitlement to them; they will simply be paid for by other means. If she does not continue with the federal government or dies, they will be collected in some other manner as per s. 7.2 (4) and (5) of the PSSR.
[28] This situation can be distinguished from that in Girvan, where the parties were choosing, on application, to buy back certain pension entitlements. Presumably, in that situation, whether they followed through or not may have affected what their ultimate entitlements were. In this case, as counsel for Mr. Hronowsky stated in submissions, Ms. Van Delst “does not have the option to not receive her benefits”. She is compelled by the PSSA and its regulations, once the election is made, to receive all of her pension benefit entitlements. They are, thus, good and truly “vested” within the meaning of property in Section 4(1) of the FLA.
[29] For these reasons, I find that the Family Law value of Ms. Van Delst’s pension is that pursuant to Scenario #1 of Mr. Martel, or $447,465.00.
Issue #2 - Is the survivor benefit existing at the date of separation to be included as an asset in Ms. Van Delst’s NFP?
[30] For similar reasons, I come to an opposite conclusion with respect to the survivor benefit which Mr. Hronowsky seeks to have included as a valuation date asset of Ms. Van Delst. Unlike her pension entitlement, it was not vested at the date of separation and it will be lost upon the granting of Divorce. In my view, it makes little sense, nor would it be fair to Ms. Van Delst, to require her to claim an asset which she will absolutely, factually never realize.
[31] Mr. Hronowsky states that Ms. Van Delst was entitled to a survivor pension from him that was valued at $392,270.00 on the valuation date. He submits that it be included as a valuation date asset for Ms. Van Delst in her NFP statement. Mr. Hronowsky’s position is that the definition of property in the Family Law Act is very broad, and encompasses this benefit. He states that the operative date was the date of separation and that there was no intention to divorce at separation. He relies additionally on the fact, that Ms. Van Delst did not claim a divorce in her originating pleadings. He submits that it is inappropriate for the court to assume that all separating spouses will divorce.
[32] In this case, Ms. Van Delst submits that given that the PPSA makes it very clear that she will not be entitled to a survivor pension from Mr. Hronowsky if she is not his spouse at the time of his death, it cannot count as an asset at the date of separation. She submits, moreover, that the fact that she did not claim a divorce in her original pleadings is irrelevant, as she subsequently sought and was granted leave to amend her pleadings to include a claim for a divorce, which she then did plead in her Amended Application dated September 17, 2018.
Analysis
[33] In support of his position, Mr. Hronowsky relies on Egan v. Burton[^14] at paragraph 18 where a survivor benefit is included as a valuation date asset in the husband’s net family property. However, Egan is of no real assistance to this court as it did not identify the type of pension with which it was dealing. Mr. Hronowsky also relies on Farrar v. Farrar[^15] in support of his submission that the survivor benefit should be included by Ms. Van Delst as an asset at separation. In Farrar, an “if and when approach” was taken to the survivor benefit in Mrs. Farrar’s favour. The pension in question was a Scotia Bank pension subject to the Pension Benefit Standards Act, 1995. It, in fact, appeared uncertain as to whether Mrs. Farrar would receive a survivor benefit from Mr. Farrar if she was not his spouse within meaning of that Act upon his death. The court, therefore, took the approach that Mrs. Farrar should share with Mr. Farrar’s estate one half of any survivor pension she might receive, if and when she receives it.
[34] Ms. Van Delst relies on section 3(1) of the PSSA, which provides:
3 (1) In this part,
survivor, in relation to a contributor, means
(a) A person who was married to the contributor at the time of the contributor’s death,
or
(b) A person referred to in subsection 25(4);
[35] Ms. Van Delst has asked for a divorce in this trial, which is consented to by Mr. Hronowsky, and does not, therefore, anticipate falling within the definition of a survivor within the PPSA. In this regard, Ms. Van Delst relies on Humphreys v. Humphreys[^16] and Martin v. Martin[^17]. In Humphreys, the court found at paragraphs 34:
The essential qualifying condition for entitlement by Mrs. Humphreys to those benefits is that she be Mr. Humphreys’ wife on the date of his death. Divorce would terminate her entitlement to those benefits. It seems to me that whether or not the value of such benefits should be attributable to a spouse’s property will depend upon the court’s finding as to whether or not it is probable that the spouses will still be married to each other at the time of the pensioner’s death.
[36] At paragraph 35 of that case, the court found that it was highly probable that the parties would divorce prior to Mr. Humphreys’ death, notwithstanding that no divorce proceedings were even pending at the time of the order.
[37] In Martin, the court ordered a division of Mr. Martin’s pension at source, and also ordered that a divorce issue upon the required documents being filed.[^18] The court found that as a result of these orders, pursuant to s. 3(1) of the PPSA and s. 25 of the Pension Benefits Division Regulations[^19], Ms. Martin lost her entitlement to and any interest in a survivor pension.
[38] Ms. Van Delst similarly “ceases to be entitled to any pension to which she would have been entitled as a surviving spouse”[^20] as a result of my order of Divorce, and the value of the survivor pension will consequently not be included in her NFP as a valuation date asset.
Issue #3 – What are Ms. Van Delst’s appropriate date of marriage deductions?
[39] Ms. Van Delst claims date of marriage assets of $86,000.00 as well as accrued severance pay of $11,644.00. Mr. Hronowsky disputes that she had $86,000.00 in assets on October 6, 1995, but agrees that she has accrued $11,644.00 in severance pay at that time.
[40] Ms. Van Delst was only able to provide documentation which supports that she owned $59,802.00 in assets as of October 6, 1995 (the figure contained in her NFP), but she testified that her assets were in actual fact valued at $86,000.00. In support of this contention, Ms. Van Delst stated that she contributed one half of the purchase price of the parties’ first home on May 23, 1997. The home was purchased for $173,550.00, one half of which is $86,775.00. Mr. Hronowsky agreed that Ms. Van Delst contributed one half of the value of the purchase price. The home was purchased outright; there was no mortgage on it.
RRSP
[41] Ms. Van Delst testified that she commenced paying into an RRSP when she began working in 1985, and that she paid every year, typically in January or February of the following year, to the maximum amount she could contribute, ranging from $2,500.00 to $3,000.00 per year. She was able to produce a statement from the Canada Revenue Agency which confirmed her yearly contributions from 1991 (the farthest back she could get, according to her) up to and including 2016. This record shows contributions for every year from 1991 to 1994, which totaled $11,464.00. (Ms. Van Delst’s 1995 contribution would, of course, had been made in January or February of 1996, or after the date of marriage).
[42] Ms. Van Delst also provided a “Home Buyers Plan Statement of Account” dated December 6, 1999, which evinced that she withdrew $20,000.00 from her RRSP in 1997 to put towards the purchase of her and Mr. Hronowsky’s home. The above-noted CRA statement of her yearly contributions to her RRSP demonstrates that Ms. Van Delst contributed $0.00 in 1996 and another $3,000.00 in 1997, which would bring the pre-home purchase total to approximately $14,000.00. However, Ms. Van Delst withdrew $20,000.00 from her RRSP in 1997, which supports her evidence that she was making contributions to her RRSP prior to 1991.
[43] Although Ms. Van Delst was unable to confirm her pre-1991 contributions in a documentary fashion, I accept her evidence that she contributed to her RRSP to the maximum allowed between 1985 and 1990. If she is credited for even the minimum payment of $2,500.00 over those six years, it would equal an additional $15,000.00. I find that the value of Ms. Van Delst’s RRSP at date of marriage is $26,464.00.
[44] The values of Ms. Van Delst’s date of marriage GIC and Savings Bonds are not in dispute.
Disposition Costs
[45] The parties appear to agree on the disposition costs to Ms. Van Delst on her severance pay, which she received in 2011, at a marginal tax rate of 33.14%, or $3,858.82.
[46] They also appear to agree that the marginal tax rate to be applied to Ms. Van Delst’s RRSP is 18%. However, I have found that the total pre-marriage value of her RRSP is $26,464.00. Therefore, I find that the notional disposition cost on that sum is $4,763.52.
Issue #4 - What is the appropriate “normal age of retirement” for Mr. Hronowsky?
[47] Mr. Hronowsky retired on December 17, 2016, approximately three months after separation. He was 61 years of age on the date of his retirement.
[48] In valuing Ms. Van Delst’s pension, Mr. Martel indicated that one of his “valuation assumptions” was that the normal age for retirement for the purposes of his calculation is 65. Mr. Martel was of the view that age 65 was the most reasonable to use because, although retirement with an unreduced pension is possible at 60, a “fair amount” of civil servants work past 60. Mr. Martel stated that as the age of retirement is not defined in the PSSA, 65 is the age he always uses for such calculations.
[49] Mr. Jocsak calculated Mr. Hronowsky’s pension based on what he referred to as the “two most reasonable dates to use as the normal retirement date in the PPSA”, namely age 60 and age 65. Mr. Jocsak indicated that age 60 may be reasonable because it is the age at which all vested members of the PSSA who joined prior to 2013 can retire with an unreduced pension benefit, stating that many pension plans only provide for an unreduced pension for all members for retirement on or after the plan’s normal retirement date. He indicated that age 65 was, on the other hand, also a reasonable age to be considered the normal retirement date for a number of reasons. These include that it is not unusual for plan members to retire after 60[^21], that all members joining the PSSA from January 1, 2013 are eligible for an unreduced pension commencing at age 65 (and not 60), that certain other plans permit members to receive unreduced pensions prior to the plan’s normal retirement date even where the normal retirement age is 65[^22], that the majority of pension plans in Canada define the normal retirement age as 65, and that Mr. Hronowsky will only become entitled to an unreduced pension from the Canada Pension Plan at age 65.
[50] Mr. Jocsak calculated the pre-tax family law value of Mr. Hronowsky’s pension to be $1,129,294.00 at age 60, and $1,012,182.00 at age 65.
[51] Ms. Van Delst is of the view that Mr. Hronowsky’s pension should be valued as of age 60 in his NFP. She submits that the court should look at his specific intentions and actions to determine the appropriate normal age of retirement for him.
[52] Mr. Hronowsky’s position is that his pension benefits should be valued as of age 65. He submits that consistency is required, and if Ms. Van Delst’s pension is being valued as of age 65 so too should his.
Analysis
[53] Mr. Martel and Mr. Jocsak both indicated in their respective reports and evidence that the reasonable age of retirement in the case of a pension plan where it is not defined is a legal, as opposed to actuarial, question. Mr. Martel indicated that he always uses age 65, because it is not (statistically) safe to assume that people will retire at 60 solely because they become eligible for an unreduced pension. As I have indicated above, approximately 40% do not. Mr. Jocsak identified that age 60 could be a reasonable normal age of retirement because it is the age at which all vested members of the PSSA who joined prior to 2013 can retire with an unreduced pension benefit. He testified, in fact, that he’s always used age 60 for this type of plan. Notwithstanding this reality, Mr. Jocsak provided more reasons in his report and testimony for finding 65 a reasonable normal age of retirement than he did for 60.
[54] In the case of Ms. Van Delst, she continues to work and intends to do so to age 65. In the evidence given at trial, there was no suggestion otherwise, by either Ms. Van Delst or Mr. Hronowsky. Nor was there any evidence led as to any pre-separation intention by her in this regard. Age 65 is, therefore, a reasonable age of retirement for her, notwithstanding the lack of a definition in the PSSA.
[55] With respect to Mr. Hronowsky, the evidence led was that it was Mr. Hronowsky’s plan to retire at the point he became eligible for an unreduced pension. In his Answer dated August 23, 2017[^23], Mr. Hronowsky indicated the following on page 4 at paragraph 15:
- The Respondent is 62 years of age. He retired effective December 17, 2016. The Respondent’s plan and expectation, throughout the marriage, with the full knowledge of the Applicant, was that he and the Applicant would retire when they each became eligible for an unreduced pension. The Respondent’s financial planning and savings for the family, including his significant RESP savings which he started in 2004, reflected this plan and expectation. For the Respondent, he became eligible for an unreduced pension in July of 2014. His actual retirement date was slightly delayed because he stayed longer in order to resolve an outstanding grievance with his employer. Prior to retirement, the Respondent was a manager for Shared Services Canada. (Emphasis added)
[56] Mr. Hronowsky admitted in cross-examination that this was the case. He also admitted that he had signalled his intention to retire early to his employer prior to September of 2016. Although all members are entitled to retire with an unreduced pension at 60, Mr. Hnorowsky was in fact eligible to retire with an unreduced pension prior to 60 (due to his age and years of service). As is noted in the report of Mr. Jocsak in footnote #2 on page 8, Mr. Hronowsky purchased 1 year and 145 days of elective service on July 29, 2014. This was, thus, the date at which Mr. Hronowsky could have retired, according to his intentions as stated in his Answer, but for the outstanding grievance. Mr. Hronowsky would have been 59 years of age on July 29, 2014. Mr. Hnornowsky did, in fact, retire on December 17, 2016, at which date he was 61 years of age.
[57] In Di Francesco v. Di Francesco, 2011 ONSC 3844, Justice Lococo found at paragraph 31:
In order to determine a value for pension benefits using the termination method, a determination must be made of the likely retirement date that the plan participant would contemplate on the date of separation, taking into account the relevant facts known to the plan participant at that time. Post separation evidence should not be used in determining a likely retirement date unless the evidence reflects facts that were within the plan participant’s contemplation at the time of separation. There is no presumption as to a likely retirement date. Each case must be decided on its own facts.[^24]
[58] The pre-separation evidence in this case is clear, including from Mr. Hronowsky’s own Answer; the retirement date contemplated by him was for as soon as he was entitled to do so with an unreduced pension.
[59] Consequently, I find that the reasonable age of retirement for Mr. Hronowsky for the purposes of valuing his pension is age 60. The Family Law Value of his pension to be included in his NFP, therefore, is $1,129.294.00.
Issue #5 - Should a contingency survivor benefit be excluded from the value of Mr. Hronowsky’s pension?
[60] While the survivor benefit referred to in Issue #2 above relates to a current spouse (to whom the member is married at the time of death), a contingent survivor benefit relates to a future potential spouse (to whom the member is either married or not). Some value for a contingent survivor benefit is built to the family law value of the member’s pension based on the probability of he or she having an eligible spouse at death and on the age of that spouse. Mr. Hronowsky seeks to have that value deducted from the value of his pension. Ms. Van Delst’s expert has included it in hers.
Analysis
[61] Mr. Martel testified that one of his valuation assumptions in his calculation of Ms. Van Delst’s pension was that there is a 58% chance of plan members having a spouse at death of roughly the same age. Mr. Jocsak’s assumption was that there is a 60% chance of this. However, Mr. Martel’s assumption changed to a 0% chance when the plan member retires within one year of the family law valuation date. The reason for this is that one cannot acquire a future eligible spouse within that timeframe. To qualify as an eligible spouse, the plan requires that the new person be with the contributor for at least one year. However, in this case, Mr. Hronowsky retired within just over three months of the valuation date. Mr. Martel was, thus, of the view that Mr. Hronowsky’s pension entitlements should not be reduced by a value calculated for a contingent survivor benefit.
[62] Mr. Jocsak indicated at page 6 of his October 6, 2017 report that it is required by the Canadian Institute of Actuaries Standard of Practice to include contingent survivor benefits in the commuted value of a member’s pension benefits on termination. He noted additionally that the regulator of the OPBA has instructed pension plan administrators “to include the value of contingent survivor benefits in the family law value in the same way the pension plan includes this value when determining the commuted value for terminated pension plan members.” Mr. Jocsak goes on to state, however:
Including the value of the contingent survivor pension is logical when determining the commuted value of a member’s pension on termination of membership (which is the purpose of the “commuted value” calculations), since the pension plan is compensating the member for the survivor pension that would be payable to their eligible spouse (which may very well be their current spouse). However, including the value of the contingent survivor pension in the family law value of a member’s pension on marriage breakdown is not logical from a family law perspective. The member is effectively including the value of the survivor pension payable to a possible future spouse even though the member may not have an eligible spouse, and even if there is an eligible spouse, the survivor pension would be an asset of the future spouse and not an asset of the member.
[63] Not including it where there is a 58% to 60% probability that Mr. Hnorowsky would have a new spouse may be logical. However, in this case, there is no such probability. I agree with Mr. Martel’s assessment that, because Mr. Hronowsky retired within three months of separation, there was no probability of him acquiring a future spouse for whom the survivor pension will ever be an asset. I find that in the circumstances of this case, there should be no exclusion of a contingent survivor benefit from the family law value of Mr. Hronowsky’s pension. Therefore, the family law value of Mr. Hronowsky’s pension remains $1,129,294.00.
Issue #6 - What are Mr. Hronowsky’s appropriate date of marriage deductions?
[64] The parties disagreed on the value of Mr. Hronowsky’s car at the date of marriage and over the course of the trial, Mr. Hronowsky conceded that it was worth $7,500.00; it consequently ceased to be an issue.
[65] In her NFP statement, Ms. Val Delst was of the view that the remainder of Mr. Hronowsky’s date of marriage property totaled $192,823.48, which Mr. Hronowsky, in his NFP statement, indicated was $203,570.00. The difference appears to be in the value Ms. Van Delst had for Mr. Hronowsky’s severance pay ($24,659.25) versus the total Mr. Hronowsky had ($26,594.24), and the inclusion by Mr. Hronowsky of interest on his Scotiabank Guaranteed Investment Certificate, Canada Savings Bonds and Bank of Nova Scotia RRSP.
Severance Pay
[66] When Mr. Hronowsky retired on December 17, 2016, his severance pay covering the period of employment of June 4, 1984 to July 6, 2013 became payable to him. Based on the “Transfer of Severance Pay” document annexed to a letter to Mr. Hronowsky from Public Works and Government Services Canada dated April 26, 2017, the total amount payable was $68,217.21, of which he attributes $26,594.24 to his pre-marriage assets for the period June 4, 1984 to October 6, 1995. He has done so by multiplying the total number of days in that period of 4139 by the daily amount (when divided by the total number of days overall of 10,617). I accept Mr. Hronowsky’s explanation of how he arrived at this number, and I find that the date of marriage value of his severance pay is $26,594.24.
Guaranteed Investment Certificate, Canada Savings Bonds and RRSP
[67] Mr. Hronowsky included in his date of marriage assets a Scotiabank Guaranteed Investment Certificate of $15,000.00 on which he accrued interest of $90.62 in 1995, which he then prorated to October 6, 1995. The sum total of interest he earned prior to marriage was $36.68. He seeks to claim it as part of his pre-marriage property.
[68] Mr. Hronowsky also had Canada Savings Bonds of $133,500.00 upon which he earned $8,510.67 in interest for the year 1995. Again, pro rating the interest earned results in Mr. Hronowsky claiming $7,927.75 as a pre-marriage asset.
[69] Mr. Hronowsky additionally had a Scotiabank RRSP at the date of marriage valued at $16,762.32. In 1995, interest accrued on the RRSP in the sum of $1,216.95, which pro-rated to the date of marriage results in a claim by him of an additional $883.71.
[70] While I find nothing particularly objectionable in Mr. Hronowsky seeking to include the interest earned on his pre-marriage assets in the values of such assets in his NFP statement, I am of the view that if he seeks to claim them as property owned on the date of marriage, he would have to have done the same exercise with respect to the property he owned on the date of separation. He has not. To be fair, Mr. Hronowsky cannot benefit by including interest in his calculations when it is advantageous to him and not including it when it is not.
[71] As a result, I find that the date of marriage value of Mr. Hronowsky’s GIC is $15,000.00, of his Canada Savings Bonds is $133,500.00 and of his RRSP is $16,762.32.
Disposition Costs
[72] Ms. Van Delst and Mr. Hronowsky disagree on tax rates to be applied to the date of marriage values of Mr. Hronowsky’s RRSP and severance pay. Mr. Jocsak has identified that Mr. Hronowsky’s estimated average income tax rate at a normal age of retirement of 60 to be 25.8%. Ms. Van Delst is of the view that the 25.8% can be applied to the nominal disposition of Mr. Hronowsky’s RRSP, but that a marginal tax rate of 45% should be applied to his pre-marriage severance pay. Mr. Hronowsky’s position is that a 26% tax rate should be used to calculate the cost of disposition of the severance pay he accrued before marriage. Mr. Hronowsky did not identify whether this tax rate was that identified as his average tax rate at retirement or his marginal tax rate at the date of marriage. In fact, Mr. Hronowsky provided no evidence with respect to his marginal tax rate at the date of marriage. The onus is on Mr. Hronowsky to prove that 26% is the appropriate date of marriage tax rate to apply to his date of marriage severance pay. He has not done so. The only evidence the court has with respect to Mr. Hronowsky’s marginal tax rate is at the date of separation, and it is based on Mr. Hronowsky and Ms. Van Delst agreeing that the tax rate on the retroactive pay he received is 45%. In relation to his date of separation severance pay, Mr. Hronowsky referred in his NFP statement to a letter from Mr. Jocsak wherein he identified a marginal tax rate for him of 44%, but no such letter was provided to the court. Absent specific evidence as to Mr. Hronowsky’s marginal tax rate at separation, I am inclined to accept that it is 45%. Absent any other evidence as to what it may have been at marriage, I find that the cost of disposition of pre-marriage asset of severance pay will be at 45%.
[73] The nominal disposition cost for Mr. Hronowsky’s RRSP will be $4,552.68. The nominal disposition cost for Mr. Hronowsky’s severance pay will be $11,967.41.
Equalization
[74] As I have indicated above, the parties have used 45% as Mr. Hronowsky’s marginal tax rate for his nominal disposition cost on his retroactive pay. Absent specific evidence that it is any different, I have used 45% as Mr. Hronowsky’s marginal tax rate at separation. Ms. Van Delst’s position as it relates to Mr. Hronowsky’s valuation date severance pay is that 25.8% be used on $24,000.00, the maximum amount that can be rolled into a retirement savings vehicle, and that 45% be applied to the remainder. The court must presume, without resorting to hindsight, that an individual is going to apply the most advantageous tax strategy, and in this case, that would be for Mr. Hronowsky to roll the maximum amount possible from his severance pay into further retirement savings. The notional cost of disposition to him of $24,000.00 will be at a tax rate of 25.8%, and at 45% on the remaining $44,217.21.
[75] Accordingly, based on the values agreed to by the parties and my finding of fact, I calculate the net family property as follows:
| Assets on Valuation Date | Wife | Husband |
|---|---|---|
| 6519 Empire Grove Street | $239,950.00 | $239,950.00 |
| Household Items and Goods | $12,500.00 | $13,725.00 |
| Pension | $447,465.00 | $1,129,294.00 |
| RBC ***301 RRSP | $118,817.00 | |
| RBC ***739 TFSA | $52,761.00 | |
| RBC ***976 | $7,052.00 | |
| RBC ***939 | $4,899.00 | |
| RBC ***137 | $675.48 | |
| Severance Pay | $68,217.21 | |
| Scotia ***129 | $162,615.93 | |
| Scotia ***720 | $4,853.00 | |
| Canada Savings Bonds | $85,000.00 | |
| Cash | $7,000.00 | |
| Canada Savings Bond Registered Product | $4,653.28 | |
| Scotia Securities Inc. | $441,957.48 | |
| ScotiaTrust ***266 | $65,120.66 | |
| ScotiaTrust ***082 RRSP | $154,407.85 | |
| Retroactive Pay | $3,028.62 | $4,000.00 |
| TOTAL | $887,148.10 | $2,380,794.41 |
| Debts and Liabilities on Valuation Date | Wife | Husband |
|---|---|---|
| VISA card debt | $2,037.66 | |
| Notional cost of disposition on pension | $80,543.70 | $291,358.00 |
| Notional cost of disposition on RRSP | $21,387.00 | $41,037.77 |
| Notional cost of disposition on retroactive pay | $897.98 | $1,800.00 |
| Notional cost of disposition on severance pay | $26,089.74 | |
| TOTAL | $104,866.34 | $360,285.51 |
| Assets on Marriage Date | Wife | Husband |
|---|---|---|
| RRSP | $26,464.00 | $16,762.32 |
| RBC Term Deposits | $23,5000.00 | |
| Canada Savings Bonds | $12,500.00 | $133,500.00 |
| Bank balances | $9,338.04 | $2,865.83 |
| Severance pay | $11,644.00 | $26,594.24 |
| Scotiabank GIC | $15,000.00 | |
| Vehicle | $7,500.00 | |
| TOTAL | $83,446.04 | $202,222.39 |
| Debts and Liabilities on Marriage Date | Wife | Husband |
|---|---|---|
| Disposition cost on RRSP | $4,763.52 | $4,324.60 |
| Disposition cost on severance pay | $3,858.82 | $11,967.41 |
| TOTAL | $8,622.34 | $16,292.01 |
| Summary | Wife | Husband |
|---|---|---|
| Net Value of Property on Valuation Date (Assets – Debts and Liabilities) | $782,281.76 | $2,020,508.90 |
| Net Value of Property on Marriage Date (Assets – Debts and Liabilities) | $74,823.70 | $185,930.38 |
| Net Family Property (NFP) (Net Value of Property on Valuation Date – Net Value of Property on Marriage Date) | $707,458.06 | $1,834,578.52 |
| Difference Between NFP | $1,127,120.46 | |
| Equalization Payment | $563,560.23 |
[76] I find that Mr. Hronowsky owes Ms. Van Delst an equalization payment of $563,560.23.
Pre-judgement Interest
[77] Ms. Van Delst seeks an order for pre-judgment interest from the date of her original application, which was issued on May 19, 2017. As I have indicated above, Ms. Van Delst did not plead for a divorce in her original application, and only did so on September 17, 2018, after leave was granted by order of Justice Backhouse dated January 31, 2018. Mr. Hronowsky concedes that there is a general rule that a party receiving a monetary award is entitled to pre-judgment interest, but states that the degree to which it is ordered it is ultimately in the court’s discretion.
[78] Section 128 of the Courts of Justice Act[^25] provides that “a person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.”
[79] Section 130(2) of the Act provides that, in making or not such an award, it take into account changes in the market interest rates, the circumstances of the case, the fact that an advance was made, the amount claimed and recovered in the proceeding, the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding, and any other relevant consideration.
[80] In this case, there is no evidence of any significant change in the market interest rate, there are no extraordinary circumstance, there was no evidence of any advance having been made (notwithstanding that the proceeds of the sale of the matrimonial home are being held in trust), the amount claimed and recovered are well within Mr. Hronowsky’s ability to pay, and the case was lengthened by the conduct of Mr. Hronowsky, particularly in relation to the sale of the matrimonial home, his appeal to the Division Court in relation thereto and his requested adjournment of the trial in December of 2018.
[81] In Burgess v. Burgess[^26], the Ontario Court of Appeal found at paragraph 25:
[25] ….The weight of jurisprudence in family law cases at the trial level indicates that exceptions do exist to the usual award of interest on an equalization payment. Specifically, the court’s discretion will be exercised under s. 130 of the Courts of Justice Act, supra, and prejudgment interest will not be awarded on an equalization payment where, for various reasons, the payor spouse cannot realize on the asset giving rise to the equalization payment until after the trial, does not have the use of it prior to trial, the asset generates no income, and the payor spouse has not delayed the case being brought to trial.
[82] None of those exceptions exist in the case. However, given the issues which were adjudicated in this matter, the request for and the granting of a divorce are pivotal. Absent a divorce, Ms. Van Delst would continue be entitled to a survivor benefit from Mr. Hronowsky’s pension. I, therefore, find that Ms. Van Delst is entitled to pre-judgment interest from September 17, 2018, the date she amended her pleadings to seek a divorce.
Order
[83] My order, therefore, is as follows:
Divorce is granted;
The Respondent shall pay to the Applicant an equalization payment of $563,560.23
The Applicant is entitled to pre-judgment interest on the equalization payment as of September 17, 2018; and,
The Respondent shall pay the equalization payment and pre-judgment interest owing to the Applicant within 15 days of this order.
[84] The parties have submitted a draft divorce order containing those items consented to prior to the commencement of trial. The parties shall amend the draft to omit the following from the first page: “The Divorce Order is unopposed by the Respondent. The Divorce Order shall be made without prejudice to the Respondent’s right to argue that the parties’ survivor pensions shall be included in his claims made under Part 1 of the Family Law Act; and this is without prejudice to the Applicant’s right to defend such arguments and claims”, incorporate the equalization payment and pre-judgment interest ordered, and resubmit it for my signature.
Costs
[85] Failing agreement as to the liability for costs of this trial by May 15, 2019, counsel will make written submissions of no more than three pages, along with copies of their bills of costs and offers to settle, to me at intervals of 10 days from that date and I will make an order.
Engelking J.
Released: April 24, 2019
COURT FILE NO.: FC-17-1064
DATE: 2019/04/24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lynda Van Delst Applicant
AND:
Thomas John Hronowsky Respondent
REASONS FOR JUDGMENT
Engelking J.
Released: April 24, 2019
[^1]: R.S.C. 1985, c. 3 (2nd Supp.) as am. [^2]: R.S.O. 1990, c. C.12, as am. [^3]: R.S.O. 1990. C. F.3, as am. [^4]: R.S.C. 1985, c. P.-36 [^5]: GML Actuaries, “Capitalized Value of Accumulated Pension Entitlements During Marriage”, October 26, 2018 [^6]: BCH Actuarial Services, “Actuarial Report on the Family Law Value of Mr. Hronowsky’s Pension Benefits in the PSSA”, October 6, 2017 [^7]: Trial Exhibit #1 [^8]: Section 5.3 (1), PPSA [^9]: Capitalized Value of Accumulated Pension Entitlement During Marriage for Ms. Lynda Hronowsky, Trial Exhibit #2 [^10]: S.C. 1992, c. 46, Sch II. [^11]: 2016 ONSC 7712 [^12]: C.R.C., c. 1358 [^13]: Barbot v. Treasury Board (Department of Foreign Affairs, Trade and Development), 2016 PSLREB 113 [^14]: 2013 ONSC 3063, 2013 CarswellOnt 6947 [^15]: 2001 CarswellOnt 3999 [^16]: 1987 CanLII 8328 (ON SC), 1987, CarswellOnt 309 [^17]: 2018 ONSC 6804 [^18]: Ibid., paragraph 175 [^19]: SOR/94-612 [^20]: Martin, ibid. at paragraph 174 [^21]: According to the Report of the Public Service Pension Plan for the year ended March 31, 2016, up to 40% of members retired with an unreduced pension after age 60 in 2014, 2015 and 2016. [^22]: The Healthcare of Ontario Pension Plan, for example. [^23]: Applicant’s Trial Record, Tab 3 [^24]: In doing so, Justice Lococo relied upon Best v Best, 1999 CanLII 700 (SCC), [1999] 2 SCR 868 (SCC) at para 104, and Kennedy v Kennedy, [1996] OJ No 764 (CA) at para 3. [^25]: R.S.O., 1990, c. C.43 [^26]: 1995 CarswellOnt896 ONCA