COURT FILE NO.: 172/19 DATE: 2021-03-03

ONTARIO SUPERIOR COURT OF JUSTICE FAMILY COURT

BETWEEN:

Linda Ginet McMullen Applicant – and – Mark McMullen Respondent

COUNSEL:

M. Lucarelli, for the Applicant B. Macdonald, for the Respondent

HEARD: February 10, 2021

THE HONOURABLE JUSTICE J. R. HENDERSON

REASONS FOR JUDGMENT

INTRODUCTION

[1] The primary issue on this summary judgment motion is whether the court has the jurisdiction to remove the applicant’s survivor’s benefit pension (hereinafter called “the applicant’s survivor pension”) from the net family property (“NFP”) calculations and separately equalize it.

[2] During the parties’ marriage, the respondent was employed as a police officer with the Niagara Regional Police Service (“NRPS”), through which he acquired an OMERS pension (hereinafter called “the respondent’s pension”). As of the date of the parties’ separation, the respondent had retired from his employment with NRPS and his pension was in pay. The applicant’s survivor pension is associated with the respondent’s pension, and it will provide benefits to the applicant if and when the respondent predeceases her.

[3] The specific question is whether the court has the authority to order that the imputed value of the applicant’s survivor pension be removed from the applicant’s NFP calculation and set off against the monthly pension payments that are being made out of the respondent’s pension.

[4] A related issue is whether the court should order that the respondent’s pension payments be divided at source. Depending upon my decision on the jurisdiction issue, both parties have made submissions as to the manner in which the respondent’s pension and the applicant’s survivor pension should be divided.

[5] Further, if the respondent’s pension payments are divided at source, there will be an amount owed by the respondent to the applicant for her share of the pension payments retroactive to the date of the separation. By agreement between counsel, I will not attempt to calculate the value of any retroactive share of the pension payments, but I will defer that issue until counsel have reviewed and analyzed my decision.

[6] In addition, both parties have delivered motions related to disclosure issues. By agreement between counsel, those parts of these motions will be adjourned without a date to be brought back to court, if necessary.

[7] In summary, the issues on this summary judgment motion are as follows:

(1) Does the court have jurisdiction to remove the applicant’s survivor pension from the applicant’s NFP calculation and deal with it separately so that the value of the applicant’s survivor pension is set off against the respondent’s pension payments?

(2) Depending upon the answer to the first question, how should this court equalize the respondent’s pension and the applicant’s survivor pension?

THE BACKGROUND FACTS

[8] The parties were married in 1986 and separated in September 2017. The respondent was employed for many years with the NRPS. As a benefit of his employment with the NRPS, the respondent acquired his interest in his OMERS pension. The applicant’s survivor pension is also a benefit of the respondent’s employment and it is associated with the respondent’s pension.

[9] The respondent retired in June 2017 and began to receive monthly payments from his pension. The gross monthly pension payments were initially in the amount of approximately $8,315, but those monthly payments have now increased to approximately $8,720. After retiring from the NRPS, the respondent took a position with the Niagara Parks Police until he fully retired in March 2019. The respondent is currently 56 years of age and is not working for a wage. He states that his pension is his only source of income at present.

[10] The applicant worked irregularly during the marriage. I accept that she was financially dependent upon the respondent during most of the marriage. The applicant qualified as a registered massage therapist (“RMT”) in 2013 and has been working in that field since that time. She is currently 56 years of age and earns approximately $38,000 per year gross as an RMT.

[11] After the separation both parties remained in the matrimonial home until it was sold in October 2019. The net proceeds of the sale, in the approximate amount of $409,000, are currently being held in trust.

[12] After the matrimonial home was sold, the applicant brought a motion for spousal support. To resolve that motion the parties agreed to split the respondent’s monthly pension income between them. Therefore, as of April 1, 2020, the respondent has paid to the applicant approximately 50 percent of the net amount of his monthly pension income. In rough terms the respondent currently receives a net monthly pension payment of approximately $6,600, and the respondent pays approximately $3,300 to the applicant as her share of this monthly payment.

[13] Subject to the alternative positions set out below, the parties generally agree that the respondent’s monthly pension payments should continue to be divided equally between them. They also agree that if this court decides that the respondent’s pension payments should be divided at source, the division of the respondent’s pension should be retroactive to the date of separation. If so, there will be an amount owed by the respondent to the applicant for her share of the payments from the date of separation to April 1, 2020. Depending upon the calculation that is used, the amount owed by the respondent to the applicant for her retroactive share of the monthly payments will be between $83,000 and $90,000.

[14] Pursuant to the legislation, the parties have determined the imputed values of the pension interests of the respondent and the applicant. The parties agree that the imputed value of the respondent’s pension is $2,434,434, and that the imputed value of the applicant’s survivor pension is $206,099. The exact NFP calculations for both parties have not yet been finalized, and that issue is not before me on this motion. It is clear, however, that the respondent’s pension is by far the most valuable asset owned by either of them.

[15] If the respondent’s pension is divided at source, the imputed value of the respondent’s pension would be removed from the respondent’s NFP calculation, and each of the parties would receive 50 percent of the monthly pension payments. The difficulty for the parties is that the imputed value of the applicant’s survivor pension must be included in the applicant’s NFP calculation and the applicant will be required to account for same in any equalization payment.

[16] The parties have engaged the services of an actuary who has proposed that the imputed value of the applicant’s survivor pension could be removed from the applicant’s NFP calculation and set off against the respondent’s monthly pension payments that would otherwise be divided at source. If the applicant’s survivor pension is set off in this manner, the applicant would receive 46.17 percent of each monthly pension payment and the respondent would receive 53.83 percent of each monthly pension payment.

[17] Both of the parties have submitted NFP statements and equalization payment calculations. Although they do not agree on all aspects of those calculations, the calculations nevertheless provide me with a general view of the relevant assets and debts of the parties. Excluding the pensions, the parties most valuable asset is the matrimonial home. Without further adjustment, each of the parties has an interest in the proceeds of sale of the matrimonial home that will be in the range of $200,000. Both parties have some savings and investments that are in the range of $100,000 to $200,000, depending upon the precise valuation that is accepted by the court.

THE POSITIONS OF THE PARTIES

[18] The parties agree that if the imputed value of the respondent’s pension is included in his NFP calculation, that value should be reduced for notional tax consequences. Even so, if the net imputed value of the respondent’s pension is included in his NFP calculation, the parties acknowledge that it would be difficult, if not impossible, for the respondent to make the resultant equalization payment to the applicant. Therefore, both parties take the position, in the first instance, that the respondent’s pension should be removed from the respondent’s NFP calculation and that the respondent’s pension payments should be divided equally at source pursuant to s.10.1 of the Family Law Act (“FLA”).

[19] The applicant’s position is that the court has the jurisdiction to remove both the respondent’s pension and the applicant’s survivor pension from the NFP calculations, and that the court should exercise that jurisdiction in this case. Accordingly, the applicant requests that the respondent’s pension be equalized by dividing the monthly payments at source, and that the applicant’s survivor pension be equalized by setting off the imputed value of the applicant’s survivor pension against those monthly payments in the manner proposed by the actuary.

[20] If the applicant’s position is accepted, the applicant would receive 46.17 percent of the respondent’s pension payments. The remaining items in the NFP calculations would result in a small equalization payment owed by the respondent to the applicant in the approximate amount of $3,000, according to the applicant’s calculations.

[21] The respondent’s position is that this court has no jurisdiction to remove the applicant’s survivor pension from the NFP calculations. The respondent agrees that the court has the authority to remove the respondent’s pension from the NFP calculations, but submits that all other assets, including the applicant’s survivor pension, must remain in the NFP calculations. Therefore, the respondent requests that his pension be removed from his NFP calculation and divided at source, but that the applicant’s survivor pension remain in her NFP calculation.

[22] If the respondent’s position is accepted, the applicant would receive 50 percent of the respondent’s monthly pension payments, but the applicant would owe an equalization payment to the respondent. The applicant calculates this equalization payment to be approximately $76,000, whereas the respondent calculates this equalization payment to be approximately $106,000.

[23] The applicant submits that the respondent’s position is unfair to her as it would cause her to suffer a financial hardship. Therefore, the applicant puts forward an alternate position. If this court finds that there is no jurisdiction to remove the applicant’s survivor pension from her NFP calculation, the applicant requests that both the respondent’s pension and the applicant’s survivor pension remain in the NFP calculations. This would result in the respondent owing an equalization payment to the applicant in the approximate amount of $736,000.

JURISDICTION

[24] Pursuant to Part I of the FLA, the general rule is that all property owned by a spouse on the date of separation must be included in that spouse’s NFP calculation for the purpose of determining the equalization payment, as discussed in Carutun v. Carutun, 1992 ONCA 7715, 10 O.R. (3d) 385 (Ont.C.A.), and Ross v. Ross, 2006 ONCA 41401, 83 O.R. (3d) 1 (Ont.C.A.).

[25] A spouse’s interest in a pension plan constitutes “property” as defined in the FLA, and therefore, prima facie, it must be included in that spouse’s NFP calculation. See the decisions in Jackson v. Mayerle, 2016 ONSC 72, and Martin v. Martin, 2018 ONSC 6804.

[26] A spouse’s interest in a pension plan may be removed from his or her NFP calculation and dealt with separately in certain circumstances that are set out in s.10.1(3), (4), and (5) of the FLA. Those sections of the FLA give the court some options for dealing with pension divisions outside of the NFP calculations. The options include the transfer of a lump sum out of the pension plan, or the division of periodic pension payments if the pension is in pay. See Fawcett v. Fawcett, 2018 ONCA 150 at paras. 31-32, Grassie v. Grassie, 2013 ONSC 1490 at paras. 60-66, L.M. v. D.B.M., 2017 ONSC 5197 at para. 73, Jackson at para. 597, and Martin at paras. 160-170.

[27] A survivor’s benefit pension is a pension in its own right as it represents an expected income stream that can be actuarially valued. It is analogous to the pension entitlement of an employee who is not retired. See Bennett v. Bennett, 2004 ON SCDC 40000 (Div. Ct.) at para. 20.

[28] A survivor’s benefit pension falls within the definition of “property” in the FLA and prima facie must be included in a spouse’s NFP calculation. See the Divisional Court decision in Bennett at paras. 20-27. Also see the trial decision in Bennett, 2003 ONSC 1957, 68 O.R. (3d) 619, MacMillan v. MacMillan, 2000 ONSC 22390 at paras. 26-28, and Withers v. Withers, 2013 ONSC 1441 at para. 69.

[29] There is no court decision at any level that specifically states that a survivor’s benefit pension cannot be removed from the NFP calculations and dealt with separately. However, in every case in which a survivor’s benefit pension has been found to have value, the court has included the survivor’s benefit in the NFP calculations.

[30] In the Bennett case, the husband had acquired a pension plan through which the wife had a survivor’s benefit pension. The trial judge included the value of the wife’s survivor’s benefit pension in the calculation of the equalization payment. Writing for the Divisional Court, Pierce J. wrote at para. 27 that “the survivorship pension is carved out of the pension as a whole, with the result that Mr. Bennett receives a reduced monthly benefit in his pay envelope by virtue of the plan funding a survivor pension for his wife.”

[31] In the MacMillan case, both parties agreed that the husband’s pension should be excluded from the equalization payment and divided at source. At issue was the treatment of the wife’s survivor’s pension benefit. The trial judge held that the wife’s survivor’s pension benefit was to be valued and included in her NFP calculation for the purpose of determining the equalization payment.

[32] In the Withers case, the husband had acquired a pension that included the wife’s survivor’s benefit pension. At trial the wife submitted that it would be fundamentally unfair to include her survivor’s pension in her NFP calculation because to do so would cause her to suffer a financial hardship and because she may never actually receive a payment from the survivor’s pension. The husband submitted that the wife’s survivor’s pension had value as the husband had in fact contributed money, or money’s worth, through his employment, to the acquisition of the survivor’s pension. Relying upon the Bennett decision, the trial judge in Withers held that the wife’s survivor’s pension must be included in the wife’s NFP calculation for the purpose of determining an equalization payment.

[33] In Armstrong v. Armstrong, 2016 ONSC 126, the wife’s survivor’s pension was not included in the NFP calculations, but the circumstances were very different than in the present case. In Armstrong, unlike the present case, the terms of the husband’s federal pension provided that the wife’s survivor’s benefits would terminate on divorce. Wein J. found that the wife’s survivor’s benefits should not be included in her NFP because the parties’ divorce was almost a certainty and the wife’s survivor’s benefit was “very unlikely to vest.” Thus, it was not included in the wife’s NFP calculation as it had no value.

[34] Given the above-mentioned court decisions, I accept that the applicant’s survivor pension in this case is property in the form of an interest in a pension plan, and it has value. Therefore, it must be included in the applicant’s NFP calculation unless there is specific authority in the FLA to exclude it.

[35] The relevant provisions of the FLA are s.10.1(3), (4), and (5). No evidence was presented on this motion to suggest that the applicant’s survivor pension could be divided by way of a lump sum transfer, and neither party has asked for a lump sum transfer. I acknowledge that a lump sum transfer may in fact be mathematically impossible. Therefore, the first part of s.10.1(3) is not applicable in this case.

[36] Accordingly, in my view, the parties are bound by the second part of s.10.1(3) that reads, “except as permitted under subsection 5” the court does not have the authority to order “any other division of a spouse’s interest in the plan.”

[37] Therefore, the court may only order that the applicant’s survivor pension be divided outside of the usual NFP calculations if section 10.1(5) permits the court to do so. This is an unassailable obstacle for the applicant in this case because the first words of s.10.1(5) make it clear that s.10.1(5) only applies if the pension is in pay on or before the valuation date. In the present case, the applicant’s survivor pension was not in pay. In fact, the applicant’s survivor pension can never be in pay before the valuation date as the pension will not be in pay until and unless the respondent dies. Therefore, in my view, section 10.1(5) does not give the court the authority to remove the applicant’s survivor pension from the usual NFP calculations.

[38] The applicant submits that because the respondent’s pension was in pay, the court has jurisdiction to divide the respondent’s pension payments in a manner that includes a set-off of the value of the applicant’s survivor pension. I do not agree with the applicant’s submission on this point as it incorrectly conflates the two different pensions. On a plain reading of s.10.1(5), if the respondent’s pension is in pay, then the court has the authority to divide the respondent’s pension payments. However, that subsection does not give the court the authority to divide another pension that is not in pay as part of the process.

[39] Therefore, I find that the court has no jurisdiction to remove the applicant’s survivor pension from the NFP calculations and set off the imputed value of the applicant’s survivor pension against the monthly pension payments from the respondent’s pension.

[40] I acknowledge that the applicant in this case would like to “cash in” her survivor pension because the applicant would like to have more liquidity, and because the applicant may never receive any benefit from the survivor pension. If the court had jurisdiction to make the order requested by the applicant, it may be an appropriate way of resolving the issue. However, given the lack of jurisdiction, this court cannot make the order requested by the applicant.

DISPOSITION

[41] As discussed above, the respondent’s pension was in pay on the valuation date, and therefore the court has the authority to order a division of the respondent’s pension payments at source.

[42] There is no presumption or onus under s.10.1 of the FLA that the equalization of a pension will be made by way of a lump sum transfer. See VanderWal v. VanderWal, 2015 ONSC 384. I find that there is also no presumption or onus that applies to a request to divide pension payments at source.

[43] I find that the factors that are set out in s.10.1(4) are also applicable to a request to divide pension payments at source. In my view, the most significant factors in this case are those listed as numbers 1, 2, 3, and 5. All of those factors support a division of the respondent’s monthly pension payments at source.

[44] Specifically, the respondent’s pension is by far the greatest and most valuable asset of either of the parties. If the imputed value of the respondent’s pension, reduced for notional taxes, is included in the respondent’s NFP calculation, it would result in an equalization payment of approximately $736,000. The respondent does not have the assets available to make such payment. In this scenario, the respondent would be required to transfer his entire interest in the matrimonial home and all of his savings and investments to the applicant, and he would still owe a further amount of approximately $400,000. This is not an acceptable result.

[45] On the other hand, if the respondent’s pension is divided at source, the applicant would owe an equalization payment of between $76,000 and $106,000, depending upon the exact calculations. However, the respondent would still owe the applicant for her share of his pension payments retroactive to the date of separation in an amount that will be in the range of $83,000 to $90,000. Moreover, each of the applicant and respondent would receive approximately $200,000 from the proceeds of the sale of the matrimonial home, and they would both retain their own savings and investments in the range of $100,000 to $200,000.

[46] Further, I find that the division of the monthly pension payments at source would provide both parties with sufficient liquidity to meet their future needs, particularly considering that both parties will be receiving a substantial monthly pension payment. In my view, this is a far more acceptable result.

[47] For all of these reasons, I find that it is appropriate and reasonable to equally divide the respondent’s monthly pension payments at source.

CONCLUSION

[48] For the reasons set out herein it is ordered:

(1) The respondent’s OMERS pension shall be removed from the respondent’s NFP calculation, and the pension payments will be divided equally at source between the applicant and the respondent pursuant to section 10.1(5) of the FLA.

(2) The imputed value of the applicant’s survivor pension will be included in the applicant’s NFP calculation for the purpose of determining the equalization payment.

(3) The parties shall calculate the amount owed by the respondent to the applicant, retroactive to the date of separation, for the division of the respondent’s pension payments at source. If the parties cannot agree on this amount, this matter may be brought back to the court on four days’ notice.

(4) All other aspects of the motions before me are adjourned without a date to be brought back by either party on four days’ notice.

[49] If there are any issues arising out of this decision, including costs, I direct that the party seeking relief shall deliver written submissions to the trial coordinator at St. Catharines within 14 days of the release of this decision with responding submissions to be delivered within 10 days thereafter. If no submissions are received within this timeframe, the parties will be deemed to have settled all of the remaining issues as between themselves.

J. R. Henderson J.

Released: March 3, 2021