DATE: 20220819
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
NEIL LABATTE
Applicant
– and –
BELINDA LABATTE
Respondent
Heng Du, for the Applicant
Kenneth Younie, for the Respondent
HEARD: August 9, 2022
M.D. Faieta j.
REASONS FOR DECISION
[1] The parties’ 18-year-old daughter, DL, and her 16-year-old sister, BL, reside with the Respondent mother. The Applicant father does not have a close relationship with his daughters. DL notified her father in May 2022 that she had been accepted to attend an undergraduate program at McGill University commencing September 2022. DL indicated that she would need funds from a Registered Education Savings Plan (“RESP”) that her parents had established many years ago for her and her 16-year-old sister. Months have passed and the funds remain in the RESP.
[2] Notwithstanding that the value of this RESP is about $206,000.00, and the fact that the Respondent mother has agreed to abandon any claim for section 7 expenses, the Applicant father took the position that each parent and DL should share the expense of DL’s post-secondary education based on their incomes. He sought tax returns and other financial information from the Respondent, the Respondent’s company, and DL.
[3] The Respondent mother submits that their daughter’s post-secondary education expenses should be paid from the RESP. She relies on their separation agreement which states that “the RESPs maintained by the parties shall be used for the children’s postsecondary education”. The Respondent states that she is not seeking contribution from the Applicant father for any section 7 expenses and thus there is no reason to provide him financial disclosure. In these circumstances, the Respondent submits that there should be no objection to the withdrawal of funds from the RESP to pay for DL’s post-secondary education expenses.
[4] In response, the Applicant father submits that the RESP should be split between the parties based on their relative contributions, which would result in the Applicant being the sole subscriber of a RESP in the amount of about $88,500.00 and the Respondent mother being the sole subscriber of an RESP in the amount of about $117,420.00.
[5] The Applicant states that the Respondent’s approach is unfair given that his income in 2021 ($83,379) was less than 10% of the Respondent’s income ($1,063,754) in 2021. He states that:
[the Respondent mother] would successfully evade her financial disclosure obligation and take the credit for being the sole provider of our girls’ section 7 expenses, while actually paying the girls’ post-secondary education expenses from the RESP Account that I contributed almost half. It goes without saying that Belinda’s plan is prejudicial and unfair to me, because her much higher income obliges her by law to pay proportionally higher amount of the children’s university expenses.
[6] The Respondent mother brings this motion for:
An Order that the parties’ joint RESP CIBC account #59918542 shall be transferred into the sole name of the Respondent, Belinda Labatte, to use only for the purpose of funding the post-secondary education expenses of the children, namely DL and BL.
In the alternative, an Order that the Respondent shall have sole carriage over the RESP and sole authority to disburse its funds for the purpose of funding the children’s education.
[7] In turn, the Applicant father brings this motion for:
An order to split the parties’ joint RESP account with CIBC bearing account number 599-18542 as follows: a. 7,347.584 units of the CIBC Balance Index Premium CL to the Applicant father, Mr. Neil Labatte; and b. 7,704.166 units of the CIBC Balance Index Premium CL to the Respondent mother, Ms. Belinda Labatte.
An order directing the Respondent mother to sign the form/application from CIBC to split and/or divide the RESP account bearing account number 599-18542.
BACKGROUND
[8] The parties were married on June 29, 2003 and separated on May 21, 2010. They are the parents of two daughters, DL, born in May 2004 and BL, born in April 2006.
Marriage Agreement
[9] The parties entered into a Marriage Agreement on June 11, 2003. The parties released all spousal support and equalization claims.
[10] The Applicant father states that “[p]ursuant to the Marriage Agreement” the parties opened a Registered Education Savings Plan investment account in their joint names with CIBC (“the CIBC RESP”). There is nothing in the Marriage Agreement that references an RESP nor were their children born at that time. I dismiss the Applicant’s suggestion that the establishment of the CIBC RESP was contemplated by the Marriage Agreement.
[11] The Marriage Agreement provides that there shall be no net family property and no equalization payment.
[12] At some point during their marriage, the parties opened the CIBC RESP to save for the post-secondary education of their daughters. There is no evidence of the agreement(s) that the parties signed with CIBC in respect of the CIBC RESP.
Partial Separation Agreement
[13] On May 5, 2011, the parties signed a Partial Separation Agreement (“the PSA”). Unlike the Marriage Agreement, the PSA specifically addresses the RESP as follows:
RESP
7.1 Both parties shall continue to contribute to maximum amount allowable to the RESP currently in place for the children on a 50-50 basis, with the payment to made into the account before the end of the taxation year.
POST-SECONDARY EDUCATION EXPENSES
8.1 The parties will review the issues of their contribution to a child’s post-secondary educational expenses.
8.2 The parties contribution to post-secondary education shall be based on a child attending a Canadian University (or equivalent in cost). Neither party shall be required to contribute to the costs of a US or foreign university that is in excess of the costs of a Canadian University unless they specifically consent thereto.
8.3 Nothing in this section relieves a child from contributing to their own support once reaching the age of 18 years.
8.4 The RESPs maintained by the parties shall be used for the children’s postsecondary education.
EXCHANGE OF INCOME INFORMATION
9.1 There shall be no obligation by the parties to exchange annual financial information or tax returns during the period the parties have a shared residential arrangement in respect of the children.
9.2 The parties agree to exchange true copies of their income tax returns as filed with the Canada Revenue Agency in connection with any review associated with a child attending university or other post-secondary institution.
SPECIAL TRUST ACCOUNT
10.1 The parties will open a bank account with the CIBC (“the Special Trust Account”) in trust for the children of the marriage. The Special Trust Account shall require the joint signatures of the parties for any withdrawals. The parties agree to hold and invest said funds for the purposes of the children’s post-secondary educational costs or such other purpose as the parties may jointly decide. … [Emphasis added]
[14] The PSA also incorporates a Parenting Plan, dated May 21, 2010, which provides that the parties shall have equal parenting time with the children on a two-week alternating schedule. At the time that the parties signed the PSA they lived both lived in downtown Toronto. The PSA provides that neither party shall pay child support under this shared residential arrangement. There is no indication of whether the PSA has been filed with the Court pursuant to section 35 of the Family Law Act, R.S.O. 1990, c. F.3.
Legal Proceedings
[15] The Applicant father moved from Toronto to Nobleton, Ontario in May 2019.
[16] In January 2020, the Respondent mother commenced an Application in the Ontario Court of Justice for sole custody of the children and child support. She alleges that the children were estranged from the Applicant father, particularly after he moved in May 2019 to Nobleton. In a lengthy Answer, the Respondent alleges that the Respondent mother has “alienated” the children from him. As a result, his oldest daughter stopped residing with him in January 2018 and his youngest daughter stopped residing with him in June 2019. Thereafter, the children have had little contact with him. In his Answer, the Applicant father sought an Order that he have sole access and control of the CIBC RESP and an Order that the Respondent mother pay 100% of all future maximum annual contributions to the CIBC RESP. In her Reply, the Respondent mother indicated that the Applicant should not control the CIBC RESP given that his administration of the RESP would be impaired by his dislike for the Respondent, to the children’s detriment.
[17] In November 2020, the Applicant commenced a civil action in this Court for $20 million in damages and other relief. During their marriage the parties formed Capital Lab Inc. In 2009, the Applicant sold his interest in Capital Lab to the Respondent. The Respondent alleges that he recently discovered that the Respondent misrepresented Capital Lab’s financial position and, as a result, he sold his interest at less than fair market value.
[18] On January 13, 2021, the Applicant commenced this family law proceeding seeking amongst other things, an order that the parties follow the parenting plan in the PSA.
[19] On May 14, 2021, the Ontario Court of Justice (“OCJ”) granted the Respondent mother’s motion for child support and ordered that: (1) the Applicant father pay child support of $1,765.00 based on his 2019 income of $124,670.00 and (2) the OCJ proceeding be transferred to this Court. O’Connell J. stated:
[20] However, I am troubled by the father’s actions in this case. It is not disputed that [he] has made no voluntary payments of child support since May 1, 2019, even though the children have been living with the mother since that time. It is further not disputed that rather than dealing with the parenting and support issues in this case, the father has brought two separate SCJ proceedings which have caused the mother considerable expense and delayed the determination of the issues affecting the children.
[21] The father has also filed voluminous documents in the OCJ proceedings, totaling several hundred pages. He makes very serious and criminal allegations against the mother in what appears to be an attempt to obfuscate the real issues before the court. Early on in these proceedings, the father also disputed paternity of the children, who are now teenagers, and refused to sign a consent to permit the mother to travel outside of Canada with them on vacation unless she removed all wording from the travel documents referring to him as the “biological” father.
[22] The children are now 17 and 15 years old. They have been living with the mother since the father unilaterally moved to Nobleton, Ontario in May of 2019, approximately 50 kilometres away from Toronto, thereby making the shared parenting agreement reached in May of 2011 unworkable. The children are now old enough to express their views on the parenting arrangement. In addition to making no voluntary child support payments since that time, it does not appear that he has made efforts to reach out and spend time with the children. He instead has responded to the mother’s relatively simple claims for child support and custody by commencing two very complex SCJ proceedings seeking damages, unjust enrichment and constructive trust claims regarding the parties’ separation agreement that was entered to in 2011.
[20] In August 2021, this Court ordered that the OCJ Application and the family and civil proceeding in this Court be consolidated.
DL’s Request for Funds from the CIBC RESP
[21] With the exception of 2020 and 2021, the parties have contributed an equal amount each year to the CIBC RESP since its inception. In 2020 and 2021, the Applicant father made no contribution, and, in those years, the Respondent mother doubled her contributions to $5,000 per year in order to make up for the shortfall. Based on their relative contributions, the Applicant calculates that he has made 43.508% of the contributions to the CIBC RESP and thus he submits that he owns 43.508% of the asset value of the CIBC RESP.
[22] On May 19, 2022, DL sent the following message to the Applicant father:
Hi, I sent you another email last week, but got no response so resending it to a different email in case you didn’t get it. I wanted to update you as to what I’m doing next year. I was accepted to all 4 universities I applied to – U of T, OCAD, Concordia, and McGill. I accepted my offer to McGill for a Bachelor of Arts. Also wanted to let you know that I will need to take funds from the RESP soon, as early as next week possibly, as I am now confirming residence and meal plan; and more university expenses will be coming in soon. I spoke with mama about it already, so wanted to let you know. Please let me know if you have any concerns. Best, [DL].
[23] The Applicant responded with the following, largely inappropriate, message on May 19, 2022:
Hi [DL]. Time flies. I miss you a lot. I am happy about your choice to learn art at McGill, and I believe that you are a talented artist. The RESP is jointly owned by Belinda and me, and it is an issue that is to be determined by a trial judge; If Belinda could provide her complete and truthful financial disclosures, this issue could be resolved very shortly.
Even though Belinda rejected my offer to pay my fair portion for Section 7 Expenses (which is for your tuition only), as her incomes are 5 times more than mine, I still believe that all of us should make complete and truthful disclosures to determine our payments for [BL]’s and your Section 7 Expenses.
I know you are over 18 years old, and you are a strong young lady, but in my heart, you are always my daughter, and I should try my best to let you know that please do not let anyone use you as a weapon in any fight, including your parents.
Based on your email below, I assume that Belinda made some stories to you that are untrue or misleading. Since you are an adult now, I wanted you to know that I have been paying child support of $1,765.
[24] There were five email exchanges by the parties on May 24, 2022.
[25] First, the Applicant father sent the following email to counsel for the Respondent:
To withdraw the RESP to the Special Trust Account for [DL]’s Post-Secondary Education Expenses, I request you to kindly provide the information listed below:
Evidence of [DL]’s Post-Secondary Education Expenses, including true copies of invoice for tuition, residence and meal plan.
True copies of Belinda’s 2021 income tax returns, notices of assessment and re-assessment.
True copies of [DL]’s 2021 income tax returns, notices of assessment and re-assessment.
True copies of 2019, 2020 and 2021 financial statements, income tax returns, notices of assessment and re-assessment for Capital Lab and [DL] SL Art Gallery, and any other company Belinda and/or [DL] own.
The Separation Agreement is attached herein for your reference. And please kindly note that the Information is required under these terms of the Separation Agreement, as set forth below:
Section 8: Post-Secondary Education Expenses
Section 9: Exchange of Income Information
Section 10: Special Trust Account
In good faith, I will provide you true copies of my 2021 income tax return (that I already have) and notice of assessment…
Once we exchange the Information, we should be able to agree to an amount that should be transferred from the RESP to the Special Trust Account simply by a Consent Letter to the CIBC, hopefully very soon.
For clarity, my claim (for damages of the Separation Agreement, including the payments I made to the RESP based on Belinda’s fraudulent financial disclosures) is still an issue for trial.
[26] Ms. Vanderschoot responded to the Applicant as follows:
As you know Ms. Labatte has agreed to pay for all s. 7 expenses for the girls since this litigation commenced in 2020. And she has been doing that (and if you dispute that, please send me evidence of your contributions to any of the girls s. 7 expenses beyond potentially some orthodontic expenses that were already in pay).
Therefore, while I can see no reason not to send you #1 in your letter if [DL] permits that information to be released, you are not entitled to further income disclosure from Ms. Labatte. Section 7 expenses are no longer your concern, as you have not been making regular contributions, and both your and Ms. Labatte’s legal positions align: you have stated she must assume responsibility for these expenses, and she has agreed.
So, given the above, if you are continuing to refuse to release access to the RESP funds in place for [DL]’s education, and instead are trying to use this request to improperly force Ms. Labatte to give you her personal and corporate information to which you are not entitled under law, that is your choice. I feel confident that your own lawyer will tell you that your position is not supportable … .
[27] The Applicant responded to Ms. Vanderschoot as follows:
Based upon your lengthy email below, could you please confirm that:
Belinda has agreed to pay for all section 7 expenses for the girls since January 2020.
And Belinda will pay for [DL]’s Post-Secondary Education Expenses from her RESP account.
Therefore, Belinda wants that:
• First to separate the RESP from our joint account to be my RESP account and her RESP account.
• After the separation of the RESP, Belinda will pay [DL]’s Post-Secondary Education Expenses from her RESP account.
Please confirm such, or be clear on the terms.
[28] Ms. Vanderschoot replied to the Applicant:
The way you have framed your questions below are unhelpful. Here are my responses, as I understand your email below:
Responding to your points 1 & 2: Ms. Labatte has paid all of the children’s s. 7 expenses for some years, except for any that were already in pay, such as the example I gave to you. Since she has started the January 2020 simple litigation to receive child support due to the change in the children’s residency, she has not been sending you receipts or asking for contributions from you. She will not do so in her future court materials; this should be clearly indicated in her court materials to you.
Responding to your point 3: Ms. Labatte is endeavouring to use [DL]’s RESP funds already in place to meet [DL]’s post-secondary expenses that will being now that she has been accepted to McGill University. She requires your consent to release these funds. There has been no suggestion to “separate” accounts. Our understanding is that you want to do this, to recoup your RESP contributions over the years. In fact, these funds are needed for the girls’ educations and what we are asking for is for you to agree to release those funds for that purpose. …
[29] Finally, the Applicant responded to Ms. Vanderschoot as follows:
Even though, you don’t understand what is a RESP, and your response below is unhelpful and unreasonable, I still hope that we can solve the RESP without a motion. And I am asking you to admit that:
Under the law and the Separation Agreement, the RESP is my assets (of approx.. $100,000) and Belinda’s assets (of approx.. $100,000) and it is not the children’s assets; and
Under the Separation Agreement, how to use the RESP is subject to a Review.
I suggest that we should solve the matter of RESP in good faith. If you disagree with me, then could you please explain to me what are your legal grounds to set aside the law and the Separation Agreement relating to the RESP? …
[30] On May 27, 2022, the Applicant sent a further proposal to Ms. Vanderschoot:
Please respond to my solutions below one by one, if you disagree please explain why and what is your proposed solutions:
Since Belinda is insisting on paying 100% of section 7 expenses, she shall pay [DL]’s tuition $8,730.30 and further costs, such as laptop and book expenses, etc.) from her RESP. I am happy to release the RESP after the RESP is divided into my RESP and Belinda’s RESP.
Relating to [DL]’s living expenses for Residence of $895/month - $1,700/month and meal plan of $6,200, first [DL] shall provide her total incomes from all resources to determine whether or how much we need to pay for supporting an adult daughter who is co-founder and owner of a successful corporation, then Belinda and I will use our individual RESP to pay for our individual fair portion based upon our total income from all resources.
The temporary order of child support for [DL] shall end by August 2022.
ISSUES
[31] The following issues arise:
• Is the relief sought by the parties available on a motion?
• Should the CIBC RESP be split such that each party becomes the sole subscriber of their own RESP?
• Should the CIBC RESP be amended to provide that the Respondent mother is the sole subscriber of the RESP or, alternatively, that the Respondent mother have sole carriage over the CIBC RESP and sole authority to disburse its funds for the purposes of the children’s post-secondary education expenses?
ISSUE #1: IS THE RELIEF SOUGHT BY THE PARTIES AVAILABLE ON A MOTION?
[32] I requested that the parties address the issue of whether the relief they seek is available on a motion.
[33] Rule 14(1) of the Family Law Rules states that:
A person who wants any of the following may make a motion:
A temporary order for a claim made in an application.
Directions on how to carry on the case.
A change in a temporary order.
[34] Each party seeks an order for the transfer in whole or part of the RESP.
[35] Neither of the orders proposed by the parties is a “temporary order’ nor do they come within the scope of s. 14(1) of the Family Law Rules.
[36] In Linett v. Linett, 2006 CanLII 12956 (ON CA), [2006] O.J. No. 1622 (C.A.), the Ontario Court of Appeal stated at para. 20 that the list of matters that can be heard by motion under Rule 14 is not exhaustive. It went on to state, at para. 20, that:
… a failure to comply with the Family Law Rules is an irregularity and does not render a proceeding or step or order taken in a proceeding, a nullity. As an irregularity, the court may deal with the failure by making any order it considers necessary. In the circumstances, I do not consider an order [under Rule 1(8)] to be necessary. By bringing a cross-motion for the enforcement of the Agreement and responding to Mr. Linett's motion, Ms. Linett consented to the matter proceeding by way of motion.
[37] Both parties rely on Linett and take the position that this Court should grant the relief they seek on this motion. In my view, both parties have consented to the relief sought being determined by way of motion, and I find that it is in the interests of justice to determine their motion.
ISSUE #2: SHOULD THE RESP BE SPLIT SUCH THAT EACH PARTY BECOMES THE SOLE SUBSCRIBER OF THEIR OWN RESP?
[38] The Applicant father submits that the CIBC RESP is the property of the parties and that this Court has the authority to split the jointly subscribed CIBC RESP into two plans such that each party would be the sole subscriber of a plan.
[39] Leaving aside for the moment the issue of whether the CIBC RESP is the property of the parties, the Applicant did not identify the statutory authority to make the Order sought, although he did rely on Virc v. Blair, 2016 ONSC 49, 80 R.F.L. (7th) 124; Popovski v. Pirkova, 2017 ONSC 2363, [2017] O.J. No. 1888; Chong v. Donnelly, 2021 ONSC 5263, [2021] O.J. No. 4105; and Christakos v. De Caires, 2016 ONSC 702, [2016] O.J. No. 512.
[40] In Christakos, the Court ordered that the parties shall equally divide any RESPs accumulated during the marriage on a 50/50 basis. However, this decision is not helpful as it appears to have been made on consent. There is no discussion in the decision of the circumstances or analysis that led to this relief being granted.
[41] In none of the other cases relied upon by the Applicant did the Court split an RESP into two plans. Instead, in Virc and Chong, the Court indicated that withdrawals from an RESP could be used to offset their contributions towards section 7 expenses for post-secondary education expenses: See Virc, para. 425 (b) and Chong, paras. 73, 75 and 76. Finally, Popovski states that nothing more than funds withdrawn from an RESP can be taken into account in apportioning a parent’s obligations to contribute to the cost of post-secondary education.
[42] I am not satisfied that this Court has the legal authority to order that an RESP be split into two other RESPs. The Applicant father’s motion to split the CIBC RESP is dismissed.
ISSUE #3: SHOULD THE CIBC RESP BE AMENDED TO PROVIDE THAT THE RESPONDENT MOTHER IS THE SOLE SUBSCRIBER OF THAT RESP OR, ALTERNATIVELY, SHOULD THE RESPONDENT MOTHER HAVE SOLE CARRIAGE OVER THE CIBC RESP AND SOLE AUTHORITY TO DISBURSE ITS FUNDS FOR THE PURPOSES OF THE CHILDREN’S POST-SECONDARY EDUCATION?
[43] The Respondent mother submits that the CIBC RESP is not the property of its subscribers and must be held in trust for the education of the beneficiary children. Given the high-conflict nature of this proceeding, the Respondent submits that it is in the children’s best interests for her to control the disbursement of funds from the RESP. As noted, the Applicant father submits that the CIBC RESP is property owned by the parties in proportion to their contribution.
[44] Whether assets in an RESP are the property of the subscriber or are held in trust for a beneficiary has not been consistently answered in the caselaw: See Kira Domratchev, “Is an RESP a Trust? …And So What If It Is?” (May 2021) 40 Est. Tr. & Pensions J. 257; Charles Wagner & Mari Maimets, “Litigation and RESPs”, 20th Annual Estates and Trusts Summit, October 16, 2017.
[45] Before briefly reviewing the case law, I will describe the features of an RESP:
• The basic framework for an RESP is established under the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.) (“ITA”).
• An RESP is a contract between an individual (“the subscriber”) and an organization (“the promoter”) designed to help parents, family, and friends to save towards a beneficiary’s post-secondary education: Canada Revenue Agency, Information Circular No. IC93-3R2, Registered Education Savings Plans, May 4, 2016 (“CRA Circular”), page 2; ITA, s. 146.1 (1).
• Under the contract, the subscriber names one or more beneficiaries and agrees to make contributions for them, and the promoter agrees to pay educational assistance payments to the beneficiaries. The subscriber’s contributions are not deductible from their income tax.
• Aside from helping a child finance their cost of post-secondary education, the benefits of an RESP are that: (1) taxes on income earned on contributions are deferred until the income is withdrawn, and (2) federal government grants are paid on contributions made to an RESP.
• Various government grants and incentives are available. A basic Canada Education Savings Grant (“CESG”) of 20% on the first $2,500 of annual RESP contributions is paid into the RESP under the Canada Education Savings Act, S.C. 2004, c. 26 (“CESA”).
• An RESP is a vehicle designed for individuals to accumulate income for post-secondary education.
• The only permissible payments out of an RESP are:
o Subject to the terms and conditions of the RESP, the promoter can return contributions to the subscriber or to the beneficiary at any time.
o Educational Assistance Payments (which does include a refund of contributions but does include the RESP’s accumulated investment earnings (earnings on the money saved in the RESP) and CESGs) can be paid to or for the beneficiary student to help finance the cost of post-secondary education if the student is enrolled in a post-secondary educational institution or other qualifying educational program or if the beneficiary student is at least 16 years old and is enrolled in a specified educational program.
o Accumulated income payments (“AIPs”), which are investment earnings that accumulate on contributions made to a RESP and on amounts paid under the CESA, can be paid to a subscriber if the beneficiary is 21 years old and is not pursuing post-secondary education and the plan has been in existence for at least ten years. AIPs must be included in the subscriber’s income for the year the payments are received. The payments are subject to a 20% additional tax on top of the regular tax rate payable on the subscriber’s income. The subscriber can reduce or eliminate this additional tax by contributing the AIPs to his or her RRSP or to a spousal RRSP up to a maximum of $50,000.00.
o Repayment of amounts under the CESA: See section 11 of the Canada Education Savings Regulation, S.O.R./2005-151.
o Payments to a designated educational institution and payments to a trust to accommodate transfer of property between RESPs.
• Any amount received by a taxpayer in satisfaction of a subscriber’s interest under an RESP must be included in computing the taxpayer’s income except:
o Any amount received in satisfaction of a right to a refund of payments under the plan: ITA, ss. 146.1 (7.1)(b), 146.1 (7.2)(b)(ii).
o Any amount received by a taxpayer under a court order or agreement relating to a division of property between the taxpayer and the taxpayer’s spouse or common-law partner in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership: ITA, ss. 146.1 (7.11)(b), 146.1 (7.2)(b)(iii).
• The subscriber of a plan can change the named beneficiary under an RESP if the terms of the plan allow: CRA Circular, paras. 74-75.
• If a subscriber dies, their estate may continue the RESP or name another individual as an alternate subscriber. The terms of the RESP and provincial law will dictate what happens to the RESP: CRA Circular, para. 8.
RESPs are the Property of the Subscriber
[46] In bankruptcy proceedings, an RESP has been found to be the property of the bankrupt subscriber.
[47] In Re Payne, 2001 ABQB 894, 29 C.B.R. (4th) 153, the Court found that a bankrupt mother who had contributed to an RESP for her children did not hold that interest in trust for her children because the bankrupt could collapse the plan at any time and because the children might not become eligible students for purposes of drawing from the RESP. As a result, the RESP was not exempt from creditors pursuant to s. 67(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 as property held in trust by the bankrupt for another person. The Court found that the trustee in bankruptcy was entitled to claim as estate property the after-tax value of the contributions and interest earned in the plan as of the date of bankruptcy. Also see MacKinnon v. Deloitte & Touche Inc., 2007 SKQB 39, 292 Sask. R. 1, and Re Vienneau, 2007 NBQB 332, 834 A.P.R. 244.
[48] In family law proceedings, RESPs are often found to be the property of the subscriber. Contributions to an RESP and any accumulated investment income remain the property of the subscriber until the subscriber directs payment to the beneficiary: Vetrici v. Vetrici, 2015 BCCA 146, 57 R.F.L. (7th) 18, para. 36; C.S. v. D.A.S., 2020 ONCJ 16, [2020] O.J. No. 103, paras. 144-145. An RESP is not an asset of the beneficiary child: Chong, para. 70. While these savings may be earmarked for the post-secondary education of a child, they need not be used for that purpose: Popovski, para. 49. In R.K.L. v. B.M.M., 2017 YKSC 35, [2017] Y.J. No. 354, the Court found that the defendant mother, as the sole subscriber and contributor to an RESP, who withdrew her contributions from the RESP in order to travel to Europe, was under no legal obligation to ensure that the funds were preserved for her daughter’s benefit and thus not obliged to repay the funds that she had withdrawn.
RESPs are held in Trust for the Beneficiary
[49] The Respondent mother relies on McConnell v. McConnell, 2015 ONSC 2243, [2015] O.J. No. 1710, for the following principles:
(1) An RESP is not property belonging to or in the possession of either spouse: para. 118.
(2) An RESP is a trust fund held by the trustee, who is the administrator of the RESP, on behalf of the children, who are its beneficiaries. An express trust is made out where the three certainties are met, namely, intent, subject matter, and objects: para. 122.
(3) The funds, while in the RESP, are impressed with an express trust because they are paid by the settlor/subscriber (the depositor, and the Government, with regard to their respective contributions) for the specified purpose of the children's education. The Children are the objects of the trust with the provision that the proceeds be used for an educational facility that is acceptable and is a qualifying or specified educational institution under the RESP program. When the account is set up, it is an express term that the funds will be advanced on behalf of the child to the qualifying or specified educational facility, as allowed by the Government of Canada. The RESP monies are advanced by a settlor to an account whose title is held by the trustee who may also be the subscriber. If the child does not end up using the RESP monies, the trust fails, or is exhausted, and the funds revert to the settlor: para. 123.
(4) At the time a parent sets up an RESP for their child, it is their intention at that time that matters in determining whether the certainty of intent to establish a trust exists. The intention is that the funds advanced be used on behalf of the child for his or her education and at that point, the trust interest crystallizes. The fact that after the trust has been created, a parent can then withdraw moneys from the RESP does not take away from the fact that it is a trust. A trustee can always breach a trust and withdraw proceeds. The fact that a party is not aware that this is wrong does not make it any less a breach of trust. Where parents seize RESP funds after the account has been constituted, they run the risk of being removed as a trustee and of being found liable for breach of trust…: para. 124.
[50] Having regard to solely the statutory framework for an RESP, it is my view that the establishment of an RESP does not establish a trust for a beneficiary given that the ITA permits a subscriber to, at any time, obtain a refund of their contributions from the promoter. A subscriber also has the right to change beneficiaries: See Canada Revenue Agency, Registered Education Savings Plans (RESP), RC 4092(E) Rev. 21 (17 November 2021), at p. 12.
[51] Accordingly, unless the circumstances dictate otherwise, an RESP is the property of the subscriber. This conclusion also appears to be supported by s. 146.1(1) of the ITA which in its definition of “subscriber” appears to contemplate that an RESP may be considered to be the property of a subscriber. The definition states:
… an individual who has before that time acquired a subscriber’s rights under the plan pursuant to a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the individual and a subscriber under the plan in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership. [Emphasis added]
[52] However, an RESP will not be the property of the subscriber if the actions of the subscribers lead to the conclusion that the RESP is being held in trust for the beneficiary. The creation of a valid trust requires proof of three elements: certainty of intention to create a trust; certainty of subject matter; and certainty of objects: Corvello v. Colluci, 2022 ONCA 159, 467 D.L.R. (4th) 693, para. 7.
[53] The “three certainties” are described in Donovan M.W. Waters, Law of Trusts in Canada, 5th ed. (Toronto: Thomson Reuters, 2021), at p. 140, as follows:
For a trust to come into existence, it must have three essential characteristics. As Lord Langdale M.R. remarked in Knight v. Knight, in words adopted by Barker J. in Renehan v. Malone and considered fundamental in common law Canada, (1) the language of the alleged settlor must be imperative; (2) the subject-matter or trust property must be certain; (3) the objects of the trust must be certain. This means that the alleged settlor, whether giving the property on the terms of a trust or transferring property on trust in exchange for consideration, must employ language which clearly shows his or her intention that the recipient should hold on trust. No trust exists if the recipient is to take absolutely, but he or she is merely put under a moral obligation as to what is to be done with the property. If such imperative language exists, it must, second, be shown that the settlor has so clearly described the property which is to be subject to the trust that it can be definitively ascertained. Third, the objects of the trust must be equally and clearly delineated. There must be no uncertainty as to whether a person is, in fact, a beneficiary. If any one of these three certainties does not exist, the trust fails to come into existence or, to put it differently, is void.
[54] To ascertain certainty of intention in the absence of a written trust agreement, “the surrounding circumstances and the evidence as to what the parties intended, as to what was actually agreed, and as to how the parties conducted themselves" must be considered: Corvello, para. 10.
[55] In this case, there is no evidence of a written trust agreement nor the RESP contract between the subscribers and the CIBC. However, the parties signed a PSA which states:
The RESPs maintained by the parties shall be used for the children’s postsecondary education. [Emphasis added]
[56] I find that the RESP is held in trust for the children’s post-secondary education given that the three certainties have been established by the language of the PSA as follows: (1) the use of the word “shall” establishes a legal, rather than a moral, obligation that the RESP be used for the beneficiaries; (2) the subject-matter or property of the trust is certain given the reference to “the RESPs maintained by the parties” and thus includes the CIBC RESP; and (3) the objects of the trust are certain in that the “children” are identified as the beneficiaries.
[57] Further, in Stones v. Stones, 2002 BCSC 1558, a consent Order, which stated that the respondent shall continue to hold the RESP for the child of the marriage for her university education, was found to have established a fiduciary relationship between the respondent and her daughter. The court found that the respondent had breached her fiduciary duty to her daughter by removing her as a beneficiary of the RESP. Given that the PSA can be enforced as an order of this Court pursuant to section 35 of the Family Law Act, R.S.O. 1990, c. F.3, paragraph 8.4 of the PSA may also place the parties in the position of being the fiduciaries of their children in respect of the use of the CIBC RESP; although, I make no such finding one way or the other given that this point was not raised on the motion.
[58] I find that the welfare of the children in the efficient, timely and sensible administration of the RESP is better served by the Respondent mother having sole carriage over the CIBC RESP and sole authority to disperse funds for the purpose of the children’s education given the Applicant father’s estrangement from the children and antipathy towards the Respondent mother. Accordingly, as was done in McConnell, I exercise this Court’s inherent jurisdiction in respect of trusts, to make such Order. The Respondent shall account to the Applicant for any withdrawals that she makes from the CIBC RESP within 14 days of any withdrawal.
[59] An order that resolves the parties’ dispute regarding the extent to which funds from the CIBC RESP should be used to pay for DL’s post-secondary education expenses was not the subject of the relief sought by the parties on this motion. Until this Court otherwise directs, I order that the CIBC RESP may be used, in the Respondent’s sole discretion, to fund all the children’s post-secondary education expenses. This Order is made on a without prejudice basis to any motion that may be brought for an order directing whether all of DL’s post-secondary education expenses should be paid from the CIBC RESP or whether such expense should be paid by some combination of funds from the CIBC RESP, each of the parties, and DL.
CONCLUSIONS
[60] Given my findings, I dismiss the Applicant father’s motion and grant the Respondent mother’s motion on the terms described below.
[61] Order to go as follows:
(1) The Respondent shall have sole carriage over the CIBC RESP and sole authority to disburse its funds for the purpose of funding the children’s post-secondary education expenses.
(2) Until this Court otherwise directs, the CIBC RESP may be used, in the Respondent’s sole discretion, to fund all of the children’s post-secondary education expenses.
(3) The Respondent shall account to the Applicant for any withdrawals that she makes from the CIBC RESP within 14 days of any withdrawal.
[62] The Respondent shall deliver her costs submissions by August 29, 2022. The Applicant shall deliver his responding submissions by September 9, 2022. The Respondent shall deliver her reply submissions by September 16, 2022. Each submission shall be no more than three pages.
Mr. Justice M.D. Faieta
Released: August 19, 2022
DATE: 20220819
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
NEIL LABATTE
Applicant
– and –
BELINDA LABATTE
Respondent
REASONS FOR DECISION
Mr. Justice M. D. Faieta
Released: August 19, 2022