Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43
Willis Barclay Frederick Boston Appellant
v.
Shirley Isobel Boston Respondent
and
Women’s Legal Education and Action Fund Intervener
Indexed as: Boston v. Boston
Neutral citation: 2001 SCC 43.
File No.: 27682.
2001: January 17; 2001: July 12.
Present: McLachlin C.J. and L’Heureux‑Dubé,
Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel JJ.
on appeal from the court of appeal for ontario
Family law -- Spousal support -- Variation on
retirement -- Double recovery -- Pension income -- Whether retired payor spouse
entitled to seek reduction of support payments to former spouse on basis that
pension being received was previously considered in equalization of matrimonial
property -- Whether spouse who received assets in exchange for capitalized
value of other spouse’s pension has obligation to invest those assets in order
to produce income – If assets not invested, whether court will impute income to
payee spouse, based on what those assets could produce if invested, thereby
reducing spousal support obligation.
The parties separated in 1991 after a 36-year
marriage in which the wife was a homemaker with primary responsibility for raising
their seven children, while the husband pursued his career in education and
financially supported the family. In 1994, the husband and wife consented to a
judgment dividing their accumulated assets. The husband received approximately
$385,000 in assets, of which $333,329 was attributable to the value of his
pension. The wife received the matrimonial home, surrounding lands, household
contents and RRSPs as her share of the assets, amounting to approximately
$370,000. In addition, the husband agreed to pay the wife $3,200 per month in
spousal support, indexed annually to the cost of living. At the time of
judgment, the husband was earning $115,476 as Director of Education, while the
wife had no income from employment. The husband, who had remarried, retired in
1997, and his total pension income thereafter was $8,000 per month. The larger
portion of the pension, $5,300 per month, came from assets he retained on
equalization, while the smaller portion, $2,300 per month, was earned since
separation and not part of the equalization of net family property. The
balance of $431 per month the husband receives as a CPP benefit. The wife
invested her assets prudently and they are now worth over $493,000. By
contrast, the husband’s capital assets exceed his debts by $7,000. In 1998,
the husband applied to reduce the amount of spousal support provided for in the
consent judgment, claiming that his retirement, reduced income, and systematic
depletion of his pension as capital amounted to a material change in circumstances.
The husband submitted that, considering the earlier division of assets, the
wife had an obligation to contribute to her own support and only the
unequalized portion of his pension should be considered when determining
support on a variation application. The motions judge accepted the husband’s
position, and reduced the amount of monthly support from $3,433.12, indexed, to
$950, unindexed. The Court of Appeal raised this amount to $2,000 per month,
indexed to the cost of living. The husband appealed from this decision.
Held (L’Heureux-Dubé
and LeBel JJ. dissenting): The appeal should be allowed. The motions judge’s
award should be reinstated, with the further order that the monthly amount be
indexed and arrears, if any, of spousal support paid to the wife.
Per McLachlin C.J. and
Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour JJ.: The retired
payor spouse was entitled in this case to reduce his support obligation to his
former wife on the basis that the pension now being received was previously considered
in the distribution of matrimonial property.
A pension is “property” under the Ontario Family
Law Act and must be included in the equalization of net family property.
Where, as here, a pension is divided by the lump sum method under a
compensatory spousal support order or agreement, the pension-holding spouse
must transfer real assets to the payee spouse in order to equalize matrimonial
property. The payee spouse must use the assets received on equalization to
create a “pension” to provide for her future support based upon the principle
that the payee spouse should attempt to generate economic self-sufficiency as
far as it is reasonable. For spouses who remained at home during a long
marriage, self-sufficiency will not be practicable, but where the payee spouse
receives assets on equalization in exchange for a part of her former spouse’s
pension entitlement, she must use those assets in a reasonable attempt to
generate income at least by the time the pension starts to pay out. Failure to
make a reasonable attempt to produce an income from equalized assets may result
in the imputation of income to the payee spouse, based upon actuarial
evidence. The obligation on the payee spouse to generate income from her
assets would be satisfied by investing in a capital depleting income fund which
would provide a regular annual income.
The support payments should provide a level of income
sufficient to maintain a lifestyle that is comparable to that enjoyed during
the marriage. Here, the spousal support was mainly compensatory, the purpose
of which is to relieve economic hardship suffered by reason of the marriage or
its breakdown. When spousal support plays a compensatory role on marriage
breakdown, it may be unreasonable to expect the payee spouse to generate
investment income from the matrimonial home, as the ability to remain in it
usually assists the payee spouse and children to maintain their previous
lifestyle. When support is based on need, different considerations apply, so
that where the value of the family home has become disproportionate to the
means of the parties, equity may require that it be sold and replaced
appropriately.
There is no reason per se that spousal support
cannot continue past the retirement date of the pension-holding spouse, but
need, ability to pay and double recovery must all be considered. It is
generally unfair to allow the payee spouse to reap the benefit of the pension
both as an asset and then again as a source of income, particularly where the
payee spouse receives capital assets which she uses to grow her estate. To
avoid double recovery, the court should, where practicable, focus on the
portion of the payor’s income and assets which have not been a part of the
equalization division when the payee spouse’s continuing need for support is
shown. This would include the portion of the payor’s pension earned after
separation and not subject to equalization. Double recovery cannot always be
avoided, and a pension previously divided can also be viewed as a maintenance
asset, where the payor has the ability to pay, where the payee has made a
reasonable effort to use equalized assets in an income-producing way and
despite this, economic hardship from the marriage or its breakdown persists.
Double recovery may also be permitted in spousal support orders/agreements
based upon need as opposed to compensation.
In the case at bar, the amount of support should be
reduced based on the material change in circumstances and the ability of the
wife to reasonably produce an income from her investments. The motions judge’s
award of $950 per month was carefully assessed by her and deference must be
paid to that decision. The motions judge considered the relevant factors and
properly concluded in this case that the unequalized portion of the husband’s
pension was the principal consideration in the support to be paid. The Court
of Appeal erred in determining that the amount of support awarded was outside
the realm of reasonableness, overlooking the obligation to fairly avoid double
recovery. The wife would not suffer hardship if double recovery were not
permitted, based on the asset position of both parties at the time of the
application to vary.
Per L’Heureux-Dubé and
LeBel JJ. (dissenting): The Court of Appeal judgment should be upheld. The
case is a straightforward matter of assessment of the needs and means of the
former spouses in the context of the dynamic relationship that arises from the
marriage and its breakdown. The law of support must address a wide spectrum of
life experiences. Although the courts have identified models of marriage, none
of the classifications can account for all situations. The categories must not
be closed and inflexible, and none of the legislative purposes behind spousal
support should take precedence over the others. The three bases for support
are contract/consent, compensation for economic hardship, and a
non-compensatory model related to the concrete needs of the spouses. In this
case, support must rest on an assessment of the means and needs of the
parties, and the need to compensate the wife, who stayed at home, and gave up
economic independence. The first objective is to ensure that the dependent
spouse has enough to live on, taking into consideration the past income and
living standards of the parties.
The view that the income stream arising out of an
already equalized pension should be insulated from contribution to support,
because this amounts to double dipping, is rejected. It is mistaken to limit
the availability of the pension asset for spousal support and to view the
pension as a finally allocated asset, ignoring that it operates primarily as a
source of income. The Ontario Family Law Act does not alter the complex
factors and objectives governing spousal support before or after the retirement
of the debtor spouse. Spousal support continuing past the payor’s retirement
does not give the dependent spouse a double benefit of the pension. Even though
the income stream belongs to the husband, this does not mean it cannot be
accessed in order to redress the economic disadvantages of the wife that
continue to flow from the marriage or its breakdown. All income streams are
relevant in the assessment of means and needs and of the proper level of
support considering the lifestyle and the living experience of the couple.
Upon the husband’s retirement, it was fair in the
process of support determination for the courts to consider the assets of both
parties and the income that could be generated from them if they were used
efficiently. The husband had kept his entire pension rights with the financial
and personal security that flows from them, while his wife, by reason of her
moderate lifestyle, had made safe investments and had a substantial asset base
under her control. The Court of Appeal imputed an income from the assets
controlled by the wife but, nevertheless, given the circumstances of the
parties, held that the variation of support by the motions judge was
unreasonable and raised the amount of support to $2,000 per month. The Court
of Appeal judgment acknowledges the lack of independence flowing from the
wife’s married life and its breakdown, factoring in her former lifestyle,
living standards and her need to acquire financial security. The husband, with
a pension of about $100,000 per year, retains a fairly comfortable lifestyle.
Under these circumstances, the wife is entitled to a reasonable standard of
living without having to engage in a massive program of liquidation of assets.
An analysis based on the nature of the assets may
skew the proper approach to support. Here, the needs were established, after
making allowance for the efficient use of assets under the wife’s control.
These needs should be evaluated reasonably, given the standard of living of the
parties during the marriage and the imperative of long-term financial
protection.
Cases Cited
By Major J.
Applied: Hickey v.
Hickey, [1999] 2 S.C.R. 518; referred to: Best v. Best,
[1999] 2 S.C.R. 868; Shadbolt v. Shadbolt (1997), 32 R.F.L. (4th) 253; Veres
v. Veres (1987), 9 R.F.L. (3d) 447; Butt v. Butt (1989), 22 R.F.L.
(3d) 415; Linton v. Linton (1990), 1 O.R. (3d) 1; Strang v. Strang,
[1992] 2 S.C.R. 112; Flett v. Flett (1992), 43 R.F.L. (3d) 24; Rivers
v. Rivers (1993), 47 R.F.L. (3d) 90; Grainger v. Grainger (1992), 39
R.F.L. (3d) 101; Nantais v. Nantais (1995), 16 R.F.L. (4th) 201; Rintjema
v. Rintjema, [1996] O.J. No. 4717 (QL); Hutchison v. Hutchison
(1998), 38 R.F.L. (4th) 377; Campbell v. Campbell (1998), 40 R.F.L.
(4th) 462.
By LeBel J. (dissenting)
Bracklow v. Bracklow,
[1999] 1 S.C.R. 420; LeMoine v. LeMoine (1997), 185 N.B.R. (2d) 173;
Nantais v. Nantais (1995), 16 R.F.L. (4th) 201; Moge v. Moge, [1992]
3 S.C.R. 813; Droit de la famille--1688, [1992] R.J.Q. 2797; Ross v.
Ross (1995), 168 N.B.R. (2d) 147; Iurincic v. Iurincic (1998), 40
R.F.L. (4th) 258; Strang v. Strang, [1992] 2 S.C.R. 112; Shadbolt v.
Shadbolt (1997), 32 R.F.L. (4th) 253; Dolman v. Dolman (1998), 38
R.F.L. (4th) 362; Carter v. Carter (1998), 42 R.F.L. (4th) 314; Linton
v. Linton (1990), 1 O.R. (3d) 1.
Statutes and Regulations Cited
Civil Code of Québec, S.Q. 1991,
c. 64, art. 426.
Divorce Act, R.S.C. 1985, c. 3 (2nd
Supp .).
Family Law Act, R.S.O. 1990, c. F.3, ss. 4(1) “property”, 5(1), (6), 7, 9,
33, 37.
Pension Benefits Act, R.S.O. 1990, c.
P.8.
Authors Cited
Goubau, Dominique. “The Clear and
Clouded World of Spousal Support in Canada” (2000-2001), 18 C.F.L.Q.
333.
Hogg, Peter W., and Joanne E. Magee. Principles
of Canadian Income Tax Law, 2nd ed. Scarborough, Ont.: Carswell, 1997.
Hovius, Berend, and Timothy G. Youdan. The Law
of Family Property. Scarborough, Ont.: Carswell, 1991.
McLeod, James G. Annotation to Shabdolt
v. Shadbolt (1997), 32 R.F.L. (4th) 253.
Payne, Julien W., and Marilyn A. Payne. Canadian
Family Law. Toronto: Irwin Law, 2001.
Walker, Tom. “Double Dipping: Can a Pension Be
Both Property and Income?”, in Best of Money & Family Law, vol. 9,
No. 12, 1994.
APPEAL from a judgment of the Ontario Court of Appeal
(1999), 126 O.A.C. 296, [1999] O.J. No. 4140 (QL), allowing the respondent’s
appeal from a judgment of the Ontario Court (General Division) reducing the
amount of spousal support. Appeal allowed, L’Heureux-Dubé and LeBel JJ.
dissenting.
J. Yvonne Pelley and Susan
Tindal, for the appellant.
Maurice J. Neirinck,
for the respondent.
Nicole Tellier and Joanna
Radbord, for the intervener.
The judgment of McLachlin C.J. and Gonthier,
Iacobucci, Major, Bastarache, Binnie and Arbour JJ. was delivered by
1
Major J. – “Double
recovery” or “double dipping” are terms that have come to describe the
situation where, after an equal division of assets on marriage breakdown, one
spouse claims continued support from the previously divided or equalized assets
of the other spouse. This usually arises, as here, when a pension is involved.
In place of the common designations of “appellant” and “respondent”, the use of
the terms “husband” and “wife” from time to time in these reasons might add to
the clarity of what follows.
2
Pension rights give rise to special difficulties in questions of spousal
support. Under the Ontario Family Law Act, R.S.O. 1990, c. F.3, a
pension right must be valued as a capital asset that is an entitlement to a
future income stream. After retirement, the pension changes from a capital
asset into an income asset. When the pension is in pay, in a sense, the
pension asset is being liquidated.
3
When a pension changes from an asset into income the “double recovery”
difficulty can arise, usually in the following way. On marriage dissolution,
the parties equalize the matrimonial assets. The pension-holding spouse (the
husband in this appeal) must include the future right to his pension as part of
his net family property. For the husband to retain his pension, the payee spouse
(the wife in this appeal) must get other assets of the same value, in order to
equalize their net family property. While the husband is still employed, he
may be obliged to make spousal support payments to the wife. When he retires,
however, and his pension comes into pay, the wife is said to be making a double
recovery if she continues to receive spousal support from the husband’s pension
income, as she received assets equal to the capital value of the pension at the
time of settlement. If support payments from the pension are maintained, she
is collecting twice from the same source.
4
Is the husband therefore entitled to reduce the support obligation to
his former wife when he retires on the basis that his pension was previously
part of the agreed division of the matrimonial property?
5
In this appeal, the appellant husband sought to reduce the amount of
spousal support provided to the wife because he had retired, his pension was in
pay and his income was reduced. He also argued that his ability to pay support
should not be determined using his pension income, as this was the same pension
that was previously divided with the wife on the equalization of net family
property.
6
The motions judge reduced the amount of spousal support from $3,433.12
per month (indexed annually to the cost of living) to $950 per month (not
indexed). The Court of Appeal varied this amount to $2,000 per month
(indexed). The husband appealed to reinstate the spousal support award of the
motions judge. For the reasons outlined, this appeal is allowed and the $950
per month award of the motions judge reinstated with indexing and arrears, if
any, added.
I.
Facts
7
Willis Boston and Shirley Boston separated in 1991 after a 36-year
marriage. At the time of separation, the husband was employed as a Director of
Education. The wife was a homemaker throughout the marriage and was never
employed outside the home. She took care of their seven children and the
household and, to that significant extent, assisted with the husband’s career.
8
On October 21, 1994 the parties consented to a judgment which settled
property and support matters. The total of the combined assets, while not
precise, was approximately $750,000. On equalization, the husband retained
his Ontario Teachers’ pension, which was valued at $333,329 after tax on the
valuation date. He also received one half of the proceeds of the sale of the
family cottage of $23,694 as well as items from a farming business, some
furniture, personal property and a 1991 Oldsmobile totalling about $65,000. As
well, the husband assumed payments of all debts arising out of the marriage
amounting to approximately $65,000.
9
The wife received the mortgage-free matrimonial home on 168 acres of
land and its contents, all valued at $213,000. She received one half of the
proceeds of sale of the family cottage of $23,694 and a 1992 Honda worth
$2,000. She also received payments of $18,000 and $25,000 that were
transferred by the husband in RRSPs, in partial discharge of the equalization
payments owing to her.
10
Three parcels of vacant lands were sold to the parties’ son in trust for
$68,500 of which the wife received $64,000. She collected half of the proceeds
of sale amounting to $34,250 and also received $24,000 from the husband as
another installment to her equalization payment which was deducted from his
half of the proceeds of sale of the vacant lands. The amount of $6,100 was
also deducted from the husband’s half of the proceeds and paid to the wife by
way of arrears for spousal support. The husband retained approximately $4,000
in total from the proceeds of sale of the vacant lands.
11
Four remaining vacant lots were sold after the hearing of the motion in
March 1999 but before the appeal in November 1999. The parties sold one parcel
to their daughter and divided the proceeds of $16,000 equally. The other three
lots were transferred to the wife, who sold to a third party and paid the
husband one half of the proceeds amounting to $16,000.
12
In summary and in general terms, the consent judgment provided an almost
equal division of matrimonial assets. The husband received net assets of
approximately $385,000 ($333,329 being the capitalized value of his pension)
and the wife received assets of approximately $370,000.
13
At the time of the consent judgment in 1994, the husband’s income from
employment was approximately $115,476 per year as a Director of Education. He
agreed to pay the wife $3,200 per month in spousal support, indexed annually to
the cost of living.
14
The parties divorced in 1995 and the husband remarried in 1996. He
resides with his new wife, who works part time as a nurse, and with her two
sons from a previous marriage.
15
On January 31, 1997 the husband retired but continued to work for the
School Board as a consultant until the end of December 1997. He began
receiving his indexed pension from the Ontario Teachers’ Pension Plan Board of
almost $7,600 per month in February 1997 and his Canadian Pension Plan (CPP)
benefits of around $431 per month in August 1998. His total pension income at
the hearing date was approximately $8,000 per month.
16
Since the consent judgment the wife has not earned any employment
income. However, since that time she has invested her assets prudently and
they are now worth over $493,000. She has no debts. By contrast, the
husband’s capital assets exceed his debts by $7,000.
17
In January 1998 the husband applied to reduce the amount of spousal
support provided for in the consent judgment of October 1994. He claimed that
his retirement, his reduced income and the systematic depletion of his pension
as capital amounted to a material change in circumstances.
18
The husband’s Ontario Teacher’s pension had two components. The larger
portion of the pension, $5,300 per month, came from the asset he retained on
equalization of the matrimonial assets and, according to the husband, should
not be considered in assessing spousal support. The second component of the
pension, $2,300 per month, was earned since separation and was not part of the
equalization of assets. The husband’s submission was that, considering the
earlier division of assets, the wife had an obligation to contribute to her own
support and only the unequalized portion of his pension should be considered
when determining support on a change in circumstances.
II.
Judicial History
A. Ontario Court (General Division), Family
Court -- Order of Robertson J., March 16, 1999
19
The motions judge reduced the amount of support from $3,433.12 per month
(indexed annually to the cost of living) to $950 per month (not indexed).
20
She found jurisdiction to vary the spousal support order in s. 37 of the
Family Law Act which provides, in part, that the court may vary an order
where it is satisfied that there has been a material change in circumstances.
The motions judge found two material changes: “the husband has experienced a
13% overall income decrease and the bulk of his income is derived from the
liquidation of an asset”. According to Robertson J., without variation, the
wife would receive some double recovery as she had already received 50 percent
of the matrimonial assets.
21
The motions judge considered the length of the marriage, the roles
assumed by the parties during the marriage, and the fact that the wife had
wisely invested her share of the matrimonial assets. She noted that the wife
had not earned an income from employment but had undertaken “impressive
community positions of responsibility” including chairing a hospital board
during a period of restructure. She commented that:
[The wife’s] lawyer expects me to assume she cannot
find paid employment or that she need not look. . . . A lack of paid
employment does not equate to a lack of skill. There is no evidence that her
ability to secure paid employment has been addressed.
Robertson J.
concluded that this was a “small factor” which she addressed only because her
failure to do so “may undermine the value of [the wife’s] role during the
marriage”.
22
Robertson J. then reviewed the parties’ financial positions. The
husband had, in addition to his pension of approximately $8,000 per month,
assets of $7,000. The wife had assets of $493,486. The husband earned some
pension credits since separation resulting in a higher pension value and these
credits had not been equalized. The motions judge considered that this
unequalized portion of the pension was a factor in the amount of continuing
support to be paid. As previously noted, the unequalized portion of the
pension amounted to $2,300 of the $7,600 per month of the Ontario Teachers’
pension.
23
The motions judge concluded that the wife had an obligation to use her
assets in an income-producing way. The husband, by contrast, was “asset poor”
because his pension (Ontario Teachers’ pension and CPP benefits) was his only
source of income. He had no ability to accumulate assets. She found that:
The law discourages double recovery. Without
relief, the husband would be paying twice. He has no ability to accumulate
assets presently. The wife’s obligation to attempt self-sufficiency extends
beyond employment income. On these facts, she has an obligation to look
towards her assets in an income producing way. The husband has done this. She
does not have to sell her home and the husband does not seek this. The
reality is she cannot continue to save her money and live on the liquidation of
the husband’s main asset from the marriage, namely his pension. [Emphasis
added.]
24
After finding that “[w]ithout relief, the result will be that the wife
accumulates an estate and the husband liquidates his estate”, Robertson J.
concluded that there was a significant material change in circumstances
sufficient to reduce the support order to $950 per month, not indexed. Any
arrears were rescinded. She also provided for a review of the quantum of
support when the wife reached 65 in 2002.
B. Ontario Court of Appeal (Catzman,
Labrosse and Moldaver JJ.A.) (1999), 126 O.A.C. 296
25
The Court of Appeal set aside the motions judge’s order, varied the
amount of spousal support to $2,000 per month, indexed, and ordered the payment
of arrears.
26
In the Court of Appeal, the parties conceded that there was a material
change in circumstances. The court found that there was a need on the part of
the wife for support while the husband had the ability to pay it.
27
The court examined the total assets of the wife that could be liquidated
and estimated that she could earn a yearly investment income of approximately
$15,000 plus CPP benefits. The court found that the motions judge erred in
factoring into her decision an ability on the part of the wife to earn
employment income. In addition, the amount of variation allowed by the motions
judge was “outside the realm of reasonableness” (para. 10).
III. Issues
28
1. Is a retired payor spouse entitled to seek to reduce the support
obligation to a former spouse on the basis that the pension now being received
was previously considered in the distribution of matrimonial property?
2. Does the spouse who received
assets in exchange for a share of the capitalized value of the other spouse’s
pension have an obligation to invest those assets in order to produce an
income? If those assets are not invested to produce an income, should the
court impute to the spouse an income based on what those assets could produce
if invested and thereby reduce the spousal support obligation?
IV. Analysis
A. The
Nature of Pensions
29
On marriage breakdown, pensions present special difficulties in
determining spousal support. In case of long-term marriages, one spouse often
gives up a career in the workforce to take care of the household and/or the
children and thereby assist with the other spouse’s career. As a result, the
non-employed spouse is dependent upon the employed spouse for income on which
to live. Obviously, unlike the employed spouse, the non-employed spouse has no
pension. On separation or divorce, within the concept of a compensatory order,
one issue is how to fairly distribute the value of the employed spouse’s
pension.
30
The nature of a “pension” complicates matters. A pension right arises
as an asset or a contingent bundle of rights to a future income
stream. After retirement, when the pension produces an income, the pension
asset is, in a sense, being liquidated. This has caused debate about whether a
pension is property (a capital asset) or income (a maintenance asset), or a
combination of both.
31
Pension rights are sparsely dealt with in Part I of the Family Law
Act. In s. 4(1) “property” is defined as follows:
“property” 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 that have vested, the spouse’s interest in the plan including
contributions made by other persons.
32
As property, a pension must be included in the equalization calculations
and valued along with the spouses’ other net family property. A pension
entitlement involves a determination of the present value of a future income
stream. Thus, the valuation of a pension is a matter of educated guesswork,
undertaken by actuaries.
33
Once a pension is valued, there are different ways in which the
equalization of net family properties can be implemented. With respect to
pensions, the two methods are the “lump sum” and the “if and when” method (see Best
v. Best, [1999] 2 S.C.R. 868). The issues in the present case arise
when a pension is equalized by lump sum, the method chosen by the parties in
this appeal.
B. The
Double Recovery Problem
34
The term “double recovery” is used to describe the situation where a
pension, once equalized as property, is also treated as income from which the
pension-holding spouse (here the husband) must make spousal support payments.
Expressed another way, upon marriage dissolution the payee spouse (here the
wife) receives assets and an equalization payment that take into account the
capital value of the husband’s future pension income. If she later shares in
the pension income as spousal support when the pension is in pay after the husband
has retired, the wife can be said to be recovering twice from the pension:
first at the time of the equalization of assets and again as support from the
pension income.
35
Double recovery appears inherently unfair in cases where, to a large
extent, the division or equalization of assets has addressed the compensation
required. In equalizing the spouses’ net family properties, the husband or
wife as the case may be must include the future right to the pension income as
“property” on his or her side of the ledger. This means that the
pension-holder must, on separation or divorce, transfer real assets of equal
value to the pension to the other spouse in order to retain the pension under
the property accounting.
36
The pension-holder cannot divide the actual pension as it cannot be
accessed until retirement. The pension entitlement cannot be sold or
transferred. The apparent unfairness arises when the other spouse receives
support payments from the pension income after the pension-holder retires.
Professor James G. McLeod stated in his annotation to Shadbolt v.
Shadbolt (1997), 32 R.F.L. (4th) 253, at p. 253: “Put another way, [the
pension-holding] spouse receives nothing in return for the real assets
transferred to his or her partner in order to retain his or her pension under
the property accounting.”
37
The double recovery issue here arises if the wife is permitted to seek
further support from her former husband where the ability to pay support is
determined by including the same pension, the value of which was previously
used to determine the value of the husband’s net family property, and to
calculate the equalization payment owing to the wife. It is this issue which
remains unsettled.
C. Review
of Early Case Law
38
The first approach to double recovery was rigid. In making spousal
support orders on marriage breakdown, two Ontario trial courts found that
spousal support should cease entirely when the pension-holding spouse retires
so that support payments would not continue from the already-equalized pension
asset (see Veres v. Veres (1987), 9 R.F.L. (3d) 447 (Ont.
H.C.), and Butt v. Butt (1989), 22 R.F.L. (3d) 415 (Ont.
H.C.)).
39
Subsequent decisions provided that spousal support could continue beyond
retirement. Neither Linton v. Linton (1990), 1 O.R. (3d)
1 (C.A.), nor Strang v. Strang, [1992] 2 S.C.R. 112, are
considered to be true “double recovery” cases as the pension comprised only a
small part of the total assets to be divided or equalized on marriage
dissolution. The court in each case stated that even if there was some overlap
between the inclusion of a small portion of the pension in the matrimonial property
division and using its income as a source for maintenance payments, the overlap
was so minimal that it should not be considered.
40
Other decisions went further, providing that a pension should be one of
the factors that a court could consider in determining a spouse’s ability to
pay (see Flett v. Flett (1992), 43 R.F.L. (3d) 24 (Ont.
U.F.C.), and Rivers v. Rivers (1993), 47 R.F.L. (3d) 90
(Ont. Ct. (Gen. Div.))). In Grainger v. Grainger (1992),
39 R.F.L. (3d) 101 (Sask. C.A.), the court found at para. 8 that:
The pension asset, even though it is a right to an income stream,
should not, because of its uniqueness, be excluded from being considered as one
of the factors in determining an ability to pay. If the asset was a business,
the income from the business could be considered in assessing the
business-owning spouse’s ability to pay maintenance.
D. Trends
in Recent Case Law
41
The issue of whether a retired spouse is entitled to seek to reduce his
or her support obligation to the former spouse on the basis that the pension
was previously considered in the distribution of property arose squarely in Nantais
v. Nantais (1995), 16 R.F.L. (4th) 201 (Ont. Ct. (Gen. Div.)), per
Brockenshire J. The court found no difficulty with the continuation of support
beyond retirement. Brockenshire J. stated at para. 32:
In short, I do not look upon the pension income now being received as
the realization of an asset, but rather as a contractual replacement of an
income. This income, like the wages received before retirement, is fully
available for the support of a needy former spouse.
In Rintjema
v. Rintjema, [1996] O.J. No. 4717 (QL) (Gen. Div.), the court stated
that it had “considerable sympathy for the view [that] there should not be
‘double dipping’” (para. 9). However, the court felt bound by Nantais
to consider the capital that the payee received on equalization as a factor in
her support maintenance.
42
The problem with the Nantais decision was identified in the
Ontario trial court decision Shadbolt v. Shadbolt (1997),
32 R.F.L. (4th) 253 (Ont. Ct. (Gen. Div.)), per Czutrin J., at para. 35:
With all due respect to Brockenshire J. [in Nantais]
I do not share his view that pension is only a replacement of income and not a
realization of an asset. If that were the case then why should it be
considered as part of the equalization payment calculation?
43
Czutrin J. offered a reasonable solution to the problem of double
recovery. He enunciated a general rule, a rule which in my opinion should be
the starting point for double recovery issues: “The challenge for the court is
to determine how to fairly avoid ‘double recovery’” (para. 46 (emphasis
added)). Czutrin J. stated that property and support issues are “somewhat
intertwined” (para. 48) and that cases recognize the need to take double
recovery into consideration in determining support, need and ability to pay.
44
Czutrin J.’s approach has received academic approval. See Professor
McLeod’s annotation to Shadbolt, supra, at p. 255:
Czutrin J. applies the logic of the if-and-when
division cases to cases where a pension benefit has been divided as capital in
the property accounting. Pension income is not simply an income replacement.
Rather, pension income represents the realization of a capital asset into an
income stream. The pension changes from a capital asset into an income asset.
A court deciding support after a payor’s retirement should force a payee to
change its pension capital replacement into income in order to fairly compare
the parties’ positions. In this way, reasonable deterioration in property will
be recognized and one party will not be allowed to retain capital and live off
another’s income while the other consumes its capital (the pension).
If a pension is divided on an if-and-when basis,
each spouse is required to live off his or her capital, and that capital is
converted to income upon the employee’s retirement. Czutrin J. holds that a
spouse who receives his or her pension entitlement as real capital under the
matrimonial property accounting, he or she must convert the capital to income
when the other spouse retires and live off capital, as the other is required to
do. As a result, a court can compare the capital available at retirement
and the income available from capital at retirement to decide whether a further
adjustment is needed to promote inter-spousal fairness.
Czutrin J.’s reasoning and analysis are sound and
recognize that pensions are different from other assets. He balances the
competing policies and comes up with a solution that treats both spouses
fairly. His solution to the double-dipping problem is so obvious that it is
surprising that no one has adopted it before. [Emphasis added.]
45
Subsequent case law has applied the reasoning to avoid double recovery
in Shadbolt. See Hutchison v. Hutchison (1998), 38 R.F.L.
(4th) 377 (Ont. Ct. (Gen. Div.)), and Campbell v. Campbell
(1998), 40 R.F.L. (4th) 462 (Ont. Ct. (Gen. Div.)). In Campbell, Mazza
J. stated at para. 4 that:
It is clear from both the Shadbolt and Hutchison cases,
that the trend of recent cases is away from “double-dipping”, and any
determination of support in the future, after equalization, should be
restricted to unequalized amounts.
E. Pension
Implementation
46
As stated above, a pension is “property” under the Family Law Act
and must be included in the equalization of net family properties. The
equalization entitlement can be implemented by the “if and when” method or by
the lump sum method.
47
An “if and when” implementation may be ordered by the court under s.
9(1)(d) of the Family Law Act. Briefly, an “if and when” implementation
means that the pension-holding spouse would pay the other spouse a share of the
pension benefits “if and when” he or she received them.
48
There are advantages and disadvantages to an “if and when”
implementation in cases where the pension has been given a specific value for
the purpose of the division of assets. It is advantageous when a major part of
the difference in net family properties is attributable to the capitalized
value of a pension. The pension-holding spouse cannot use the pension asset to
satisfy the equalization burden on marriage dissolution because the pension
cannot be accessed until retirement. He or she must use assets other than the
pension to equalize the net family property. This could expose the
pension-holding spouse to hardship if the pension is his or her main or only
asset. The “if and when” scheme alleviates this hardship by carving the equalization
payment from the pension itself.
49
A significant disadvantage of the “if and when” method is the
requirement that the ex-spouses must continue financial association after
separation or divorce. Also, there is the risk of underpayment to the non-pension-holding
spouse if the pension-holder dies before the full equalization amount has been
paid (see Best, supra, at para. 113).
50
The present case and the cases mentioned above deal with lump sum
implementation. With a lump sum implementation, in order to retain his
pension, the pension-holding spouse (here the husband) must transfer real
assets to the wife to equalize matrimonial property. The wife can use these
real assets immediately. The husband cannot use the pension entitlement until
retirement.
51
There are accompanying advantages and disadvantages to both parties with
implementation by the lump sum method. There is an advantage to the payee
spouse (here the wife) by making an immediate provision of assets to address
her needs. She need not wait until the payor spouse’s pension matures and the
payments commence. There is a disadvantage to the husband who must make an
immediate payment in exchange for his pension rights, but cannot use the
pension rights to make that payment.
52
Another advantage to the wife is that a lump sum payment is not
dependent upon the risks affecting the husband’s pension. The husband must
bear the risk that the pension income might be less than the value that was
placed on it. This depends on the type of pension, whether it is
guaranteed-benefits or otherwise. There is also the risk that the pension is
undervalued or broke, although by increased government regulation it is
becoming less likely that the pension fund will be insolvent when called upon.
The advantage to the husband is that, ideally, he can keep his pension income
as provision for when he retires. Also, the lump sum method attempts to place
a final resolution on the parties’ economic relationship (see B. Hovius and T.
G. Youdan, The Law of Family Property (1991), at pp. 510-14, for a
detailed review of lump sum implementation).
53
The issue of how a payor spouse is to settle his equalization obligation
would benefit from overdue and much-needed legislative attention (see Best,
supra, at para. 2 and 116). The double recovery problem likely would
not arise if the pension was divided between the parties on an “if and when”
basis; however, various disadvantages to the “if and when” implementation
prevent it from providing the final solution to the problem of double
recovery. The parties agreed to a lump sum method of implementation so the
merits of it compared to the “if and when” method are not relevant in this
appeal.
F. Payee
Spouse’s Obligation to Use Equalization Assets
54
I agree with Czutrin J.’s reasons in Shadbolt and Professor
McLeod’s comments in annotation to that case. When a pension is dealt with by
the lump-sum method, the pension-holding spouse (here the husband) must
transfer real assets to the payee spouse (here the wife) in order to equalize
matrimonial property. The wife can use these real assets immediately. Under a
compensatory spousal support order or agreement, the wife has an obligation to
use these assets in an income-producing way. She need not dedicate the
equalization assets to investment immediately on receiving them; however, she
must use them to generate income when the pension-holding spouse retires. The
ideal would be if the payee spouse generated sufficient income or savings from
her capital assets to equal the payor spouse’s pension income. In any event,
the payee spouse must use the assets received on equalization to create a
“pension” to provide for her future support.
55
This requirement is based on the principle that, as far as it is
reasonable, the payee spouse should attempt to generate economic
self-sufficiency. Self-sufficiency is only one factor of many that is
weighed. It is obvious that in most cases of long-term marriage, the goal of
self-sufficiency is decidedly difficult to attain, particularly for spouses who
remained at home during the marriage. Self-sufficiency will often not be
practicable largely due to the residual effects of being outside the labour
market for a protracted period of time. In addition, there are factors to consider
such as age, education and parenting responsibilities. Consequently, it is
often unreasonable to expect the payee spouse to earn an income from employment
after separation or divorce.
56
However, where the payee spouse receives assets on equalization in
exchange for a part of her former spouse’s pension entitlement, she must use
those assets in a reasonable attempt to generate income at least by the time
the pension starts to pay out. The reason for this requirement is clear. The
payee spouse cannot save the assets that she receives upon equalization and
choose instead to live on the liquidation of the payor spouse’s pension when he
retires. If she were permitted to do so, the payee spouse would accumulate an
estate while the payor spouse’s estate is liquidating.
57
Pension income is obviously different from business income or income
from an investment. See T. Walker, “Double Dipping: Can a Pension Be Both
Property and Income?”, in Best of Money & Family Law, vol. 9, No.
12, 1994, in which the author argues that pensions should not be treated as
other assets subject to equalization consideration. When a pension produces
income the asset is being liquidated. The same capital that was equalized is
being converted into an income stream. By contrast, when a business or
investment is producing income, that income can be spent without affecting the
asset itself. In fact, the business or asset may continue to increase in
value. The value of the business or investment can be equalized, but neither
is depleted solely by producing income.
58
The obligation of the payee spouse to generate investment income from
the assets that she received on equalization is not an onerous one. It is not
predicated upon insensitive standards on how the payee spouse should have
managed her finances from the point of separation. Nor does it require
investment-savvy decisions, premised upon an extensive knowledge of the
marketplace. The obligation on the payee spouse to generate income from her
assets would be satisfied by investing in a capital depleting income fund which
would provide a regular annual income.
59
When spousal support plays a compensatory role on marriage breakdown, it
may be unreasonable to expect the payee spouse to generate investment income
from the matrimonial home. As far as is practicable, the support payments
should provide a level of income sufficient to maintain a lifestyle that is
comparable to that enjoyed during the marriage. The ability to remain in the
matrimonial home usually assists the payee spouse and the children in
maintaining their previous lifestyle.
60
Each case depends on its own facts. Generally, the payee spouse would
not be expected to sell or leave the matrimonial home, particularly if there
are dependent children. However, in cases where the support order is based
mostly on need as opposed to compensation, different considerations apply. It
is not impossible to envisage circumstances where the value of the family home
has become disproportionate to the means of the parties so that equity requires
that it be sold and replaced appropriately. Such considerations do not arise
in this appeal as the support agreement was mainly compensatory.
G. Variation
on Retirement
61
The purpose of spousal support in cases such as this is to relieve the
economic hardship suffered by reason of the marriage or its breakdown. There
is no reason per se that spousal support cannot continue past the date
of retirement of the pension-holding spouse. However, several factors must be
considered in making that decision. On retirement, the pension-holding spouse
may apply to vary the support order if his ability to pay support is
compromised (see Linton, supra, at p. 31, and Rivers, supra,
at para. 17). The decision of whether to vary support depends on whether the
applicant can demonstrate that there has been a material change in
circumstances pursuant to s. 37(2) of the Family Law Act.
62
The payee spouse’s need and the payor spouse’s ability to pay are always
factors which a court considers when determining spousal support (see s. 33(9)
of the Family Law Act). Another issue is the extent, if any, of “double
recovery”.
63
How is double recovery fairly avoided? (See Shadbolt, supra,
per Czutrin J., at para. 46.) It is generally unfair to allow the payee
spouse to reap the benefit of the pension both as an asset and then again as a
source of income. This is particularly true where the payee spouse receives
capital assets which she then retains to grow her estate. The comments of
Walker, supra, at p. 233, bear echoing:
It is well-recognized that a borrower should not be
compelled to continue monthly loan payments to the lender if the borrower has
previously paid the full amount owing. “Double dipping” is analogous to such a
situation and is logically and mathematically indefensible.
64
To avoid double recovery, the court should, where practicable, focus on
that portion of the payor’s income and assets that have not been part of the
equalization or division of matrimonial assets when the payee spouse’s
continuing need for support is shown (see Hutchison, supra, at
para. 9). In this appeal, that would include the portion of the pension that
was earned following the date of separation and not included in the
equalization of net family property.
65
Despite these general rules, double recovery cannot always be avoided.
In certain circumstances, a pension which has previously been equalized can
also be viewed as a maintenance asset. Double recovery may be permitted where
the payor spouse has the ability to pay, where the payee spouse has made a
reasonable effort to use the equalized assets in an income-producing way and,
despite this, an economic hardship from the marriage or its breakdown persists.
Double recovery may also be permitted in spousal support orders/agreements
based mainly on need as opposed to compensation, which is not the case in this
appeal.
H. Imputing
Income
66
Finally, if the payee spouse receives assets in exchange for a share of
the capitalized value of the other spouse’s pension and she does not invest
those assets in an attempt to produce an income, the court should impute an
income to the payee spouse based on what those assets could reasonably produce
if invested. This should not be based on artificial assumptions but on
professional actuarial advice.
I. Application
to Case at Bar
67
As outlined in the facts, after his retirement, the husband brought an
application to vary the amount of spousal support provided for in the earlier
consent judgment. The motions judge granted the application and reduced the
amount of support from $3,433.12 per month (indexed annually to the cost of
living) to $950 per month (not indexed). The Court of Appeal varied the amount
of spousal support to $2,000 per month (indexed). The husband seeks the
reinstatement of the order of the motions judge.
68
A court has jurisdiction to vary a support order where there is a
material change in circumstances. The motions judge noted two material changes
in circumstances. After retirement, the husband experienced a 13 percent
overall decrease in income and the bulk of his income derived from the
liquidation of his pension asset. While employed as Director of Education, he
was earning employment income of $115,476 per year. After retirement, his
pension income was approximately $96,000 per year, a reduction of about 13
percent in income. The material change in circumstances arose out of the fact
that his reduced income after retirement was derived from his pension, the same
pension which was previously subject to an equalization of net family property
with the wife.
69
Before the Court of Appeal it was conceded that there was a material
change in circumstances. The court also found that the wife still had a need
for support and, as his reduction in income was only 13 percent, the husband
retained the ability to pay. The husband was not requesting a termination of
the support order, but a reduction in amount given his retirement.
70
The wife’s stated needs were $3,400 per month. She invested her assets
wisely and they are now worth almost $493,000. She has an obligation, as far
as it is reasonable, to attempt self-sufficiency by using those assets to
produce an income. Douglas C. Townsend, an actuary, calculated the annual
income which the wife could expect to receive if she converted her current
assets into an income payable to her for life. If the wife invested $250,000
in a life annuity, it would produce $18,025 per year for life. If she invested
$500,000 it would produce $36,050 per year for life.
71
I agree with the motions judge that the amount of support should be
reduced based on the material change in circumstances and the ability of the
wife to reasonably produce an income from her investments, but by how much?
72
In Hickey v. Hickey, [1999] 2 S.C.R. 518, L’Heureux-Dubé J. for
the Court set out the approach to be taken by appellate courts in reviewing
spousal support and child support orders made at trial (at para. 11):
Our Court has often emphasized the rule that appeal
courts should not overturn support orders unless the reasons disclose an error
in principle, a significant misapprehension of the evidence, or unless the
award is clearly wrong.
73
We are left to determine whether the motions judge’s decision to vary
the spousal support order to $950 per month (not indexed) was an error in
principle, a significant misapprehension of the evidence, or clearly wrong.
She took into account the fact that some of the husband’s pension credits were
earned following the date of separation and, as such, were not equalized with
the other net family property. This unequalized portion is approximately
$2,300 per month of the total Ontario Teachers’ pension income of $7,600. The
previously equalized portion amounts to approximately $5,300 per month. The
motions judge correctly found that the unequalized portion of $2,300 per month
should be “factored into the support to be paid”.
74
The motions judge concluded that because the wife has assets of over
$493,000 while the husband is “asset poor” with assets of $7,000 , the wife
must look to her assets in an income-producing way. She found that the support
order should be varied to $950 per month. One of her stated considerations was
that, without relief, the wife would accumulate an estate while the husband’s
estate would be depleted.
75
It would be inequitable in this case to allow the wife to reap the
benefit of the pension first on the division of assets and again as a source of
income. The wife received capital assets on equalization which she is saving
and accumulating presumably for her beneficiaries. By contrast, the husband’s
only tangible asset, his pension, is diminishing.
76
The motions judge concluded that the wife still had a need for support and
the husband still had an ability to pay, and focussed on that portion of the
husband’s income that had not been the subject of division with the wife in the
past. I agree with her conclusion that the unequalized portion of the
husband’s pension was the principal consideration in the support to be paid.
77
With respect, I disagree with the Court of Appeal’s brief reasons in
concluding that the motions judge’s decision was “outside the realm of
reasonableness”. The motions judge’s decision was not an error in principle, a
significant misapprehension of the evidence, or clearly wrong. I conclude that
the Court of Appeal erred in changing the motions judge’s award of $950 to
$2,000 per month, an amount more than double that awarded in the lower court.
In addition, while the motions judge clearly considered the issue of double
recovery, in my view, the Court of Appeal overlooked its obligation to do so
and failed to consider the earlier division of matrimonial property.
78
Although the Court of Appeal imputed a yearly investment income of
$15,000 plus $3,240 in CPP benefits to the wife, it is unclear on what basis
the court derived this figure. It is also unclear on what basis the Court of
Appeal awarded $2,000 per month in spousal support. It is possible that the
Court of Appeal was attempting to provide a level of support over and above the
imputed income which would meet the wife’s stated needs of $3,400 per month.
However, the award of $2,000 per month plus the yearly income of $18,240
imputed by the Court of Appeal provided the wife with an amount of support
greater than her stated needs of $3,400 per month.
79
It is my opinion, based on the asset positions of both parties viewed at
the time of the application to vary, that the wife would not suffer hardship if
double recovery from the previously equalized portion of the pension was not
allowed.
80
Finally, the Court of Appeal erred in finding that the motions judge
mistakenly factored into her decision an ability on the part of the wife to
earn employment income. The motions judge stated in her reasons, and I accept,
that the purpose in addressing this “small factor” was because to fail to do so
might not recognize the wife’s abilities and her role during the marriage. It
played no part in the motions judge’s financial allocations and was not a
suggestion that the wife, now close to age 65, seek employment.
V. Disposition
81
The adjusted amounts of spousal support reached by both the motions
judge and the Court of Appeal are not detailed, as calculations were not
provided by either court. Both parties proceeded on the apparently rounded
amounts. The motions judge’s award of $950 was carefully assessed by her and
deference must be paid to that decision. Double recovery can be fairly avoided
in this case. In the result, the appeal is allowed and the judgment of the
motions judge is reinstated with the further order that the monthly amount be
indexed and arrears, if any, of spousal support be paid to the wife.
82
Based on the divided success of this appeal, each party shall bear its
own costs in all courts.
The reasons of L’Heureux-Dubé and LeBel JJ. were delivered by
LeBel J. (dissenting) –
I. Introduction
83
This appeal concerns spousal support after the breakdown of a marriage.
It requires a discussion of the impact of the retirement of the supporting
spouse on support and the problems raised by the allocation of pension rights,
at the time of the division of the family assets and at the moment of
retirement.
84
Justice Major’s reasons fully review the facts, and I will return to
them only as required by these reasons. The appellant and the respondent were
married for a long time. Mrs. Boston worked only inside the home where she
raised a large family. The marriage broke down after some 30 years, a division
of family assets intervened, and, by agreement, spousal support was set at
$3,200 per month, indexed annually to the cost of living. At the time the family
assets were divided, arrangements were made to value and divide the appellant’s
pension rights. Three years later, Mr. Boston retired, started to draw his
pension and asked for a review of the support order.
85
Robertson J. of the Ontario Court (General Division) reduced the amount
of support to $950 per month, not indexed. The Ontario Court of Appeal raised
the amount of spousal support to $2,000 per month. With respect for the
contrary view, the judgment of the Court of Appeal should be upheld and the appeal
dismissed. Albeit concise, this judgment seems grounded on a proper
application of the legal principles governing the equalization of net family
property of family assets and spousal support.
86
In the end, this case remains a very straightforward matter of
assessment of the needs and means of the former spouses in context of the
dynamic relationship that arises from the marriage and its breakdown. This
relationship is governed by a set of legal principles common to the Family
Law Act, R.S.O. 1990, c. F.3, and the Divorce Act, R.S.C. 1985, c. 3
(2nd Supp .).
II. Analysis
87
Analysis in such a case should not be overly influenced by catch words
like “double dipping”and its alleged unfairness in the determination and the
process of support, where none really exists, once the relevant legal
principles are identified and applied. On the other hand, a lack of fairness
should be found when a wife does not receive a level of support congruent with
the lifestyle she enjoyed, although a separation or divorce may lower the
living standards of both parties. A spouse should not be penalized mainly
because she adopted a moderate lifestyle and prudently invested her assets. The
argument raised by the appellant, to a certain extent, reverts to the old idea
that, after the breakdown of the marriage, the supported spouse is not really
entitled to much more than a subsistence level income. The process of the
division of assets and determination of spousal support must remain fair, but
should also attempt to address in a realistic way the consequences of the
breakdown of a marriage, in the context of the life experience of the spouses.
88
After the breakdown of a marriage, the process of settling financial
matters may appear complicated. Two basic stages must be distinguished:
first, the division of family assets and, second, deciding whether spousal
support will be warranted and determining its quantum.
A. Equalization
of Net Family Property
89
Under the Family Law Act, the equalization of net family property
differs fundamentally from the determination of the quantum of support
payments. The Act does not provide for a re-apportionment of assets. Rather,
it creates a debtor/creditor relationship resulting in a payment obligation.
Section 5(1) makes clear that the equalization of net family property is an
entirely mechanical process. The spouses calculate their respective net family
properties under s. 4 of the Act. An application is then made under s. 7 to
equalize the net family properties. The spouse with the lesser net family
property must receive a payment equal to half the difference between the two
net family properties, subject to the discretion of the Court to vary this
entitlement under s. 5(6) in case of unconscionability.
90
After the determination of the entitlement, the Court must then decide
how payment will be made, having regard to s. 9 of the Act. Pension rights,
like all family assets, are thrown into the pot and must be equalized. Despite
their importance for a number of couples, the Act contains no provision
addressing the specific problems arising out of the division and allocation of
pension rights. At the end of the process of division and equalization, the
creditor spouse will be left with certain assets including, sometimes, a claim
against the other spouse.
B. Spousal
Support
(1) Legislative Purposes
91
The process of determining support, by contrast, remains anything but mechanical.
It requires an often subtle analysis, based on complex factors set out in s. 33
of the Family Law Act. Specifically, the Act identifies a number of
purposes: any support order must recognize the spouse’s contribution to the
relationship and its economic consequences, the burden of child support, and
must provide assistance to the spouse to gain autonomy and to relieve financial
hardship, if this has not been done by the equalization of net family
property. These are enumerated as follows:
(8) [Purposes of order for support of spouse] An
order for the support of a spouse should,
(a) recognize the spouse’s contribution to
the relationship and the economic consequences of the relationship for the
spouse;
(b) share the economic burden of child support
equitably;
(c) make fair provision to assist the spouse
to become able to contribute to his or her own support; and
(d) relieve financial hardship, if this has
not been done by orders under Parts I (Family Property) and II (Matrimonial
Home).
92
This approach does not differ substantially from the objectives of
support and variation orders under the Divorce Act . Under both
statutes, any final order of support will have factored in what assets come
under the control of each spouse and what income they can generate from their
property, work or other sources.
93
As is well known, the determination and application of the principles
governing the law of support have given rise to a considerable amount of
controversy and litigation in Canadian courts. The question keeps coming
back. This Court has rendered several judgments in this area, the most
important in recent years remaining Moge v. Moge, [1992] 3 S.C.R.
813, and Bracklow v. Bracklow, [1999] 1 S.C.R. 420.
94
The law of support must address an almost infinite number of situations
and life experiences. Nevertheless, courts have attempted to define models of
marriage. As McLachlin J. (as she then was) pointed out in Bracklow, supra,
it appears useful to try to identify some basic models. She suggested, for
example, a distinction between the “basic social obligation” model (para. 23)
in which the primary responsibility falls on the former spouse to provide for
his or her ex-partner and the “independent” model (para. 24) in which each
party is viewed as an autonomous actor retaining his or her economic
independence during the marriage. She then associated each type of marriage
with a model of spousal support. In the end, though, McLachlin J. noted that
none of these classifications would really account for all situations or allow
the development of an entirely just law of spousal support (para. 32).
95
The spectrum of situations remains wide. This Court should be careful
not to establish closed and inflexible categories that might bear little
relationships with the actual life experiences and needs of Canadian couples.
This case would certainly not be an appropriate one for such an attempt. As
can be seen from the facts of the case, it is clear that the parties had a
traditional long-term marriage. Absent legislative schemes like the
equalization process under the Family Law Act and the right to support,
the respondent would have been left with no assets, no experience in the job
market and no income. She would have found herself in a situation of utter
dependency, arising out of the way of life and the allocation of
responsibilities, accepted by the couple during a long marriage. On the other
hand, Mr. Boston would have been left with most of the assets including his
pension and the income stream arising out of them.
96
One of the primary objectives of the modern law of spousal support is to
address such unfairness. In Moge, however, L’Heureux-Dubé J. pointed
out that the legislative purposes behind spousal support are various, and that
none should take precedence over any other. She made this point at p. 853 as
follows:
Many proponents of the deemed self‑sufficiency
model effectively elevate it to the pre‑eminent objective in determining
the right to, quantum and duration of spousal support. In my opinion, this
approach is not consonant with proper principles of statutory interpretation. The
objective of self‑sufficiency is only one of several objectives
enumerated in the section and, given the manner in which Parliament has set out
those objectives, I see no indication that any one is to be given priority.
Parliament, in my opinion, intended that support reflect the diverse dynamics
of many unique marital relationships. [Emphasis added.]
97
The same four legislative objectives articulated in the Divorce Act
form part of the Family Law Act. Thus, the treatment of those four
objectives under the Divorce Act in Moge and Bracklow
applies to the provincial statute, mutatis mutandis. In both of those
cases, however, this Court has treated the four objectives in the larger
context of three bases for support payments. Accordingly, I will review this
approach.
(2) Bases for Spousal Support
98
The major issue in Bracklow was whether there was a basis for
spousal support beyond (i) contract/consent and (ii) compensation for economic
hardship suffered as a result of the marriage or its breakdown. Based on a
close reading of the relevant statutory provisions, McLachlin J. held at paras.
37 et seq., that a third, non-compensatory, basis could be found,
related to the very concrete needs of the spouses.
99
At para. 40, McLachlin J. asserted there must be a non-compensatory
ground for spousal support in the following terms:
While the statutes contemplate an obligation of
support based on the grounds of contract and compensation, they do not confine
the obligation to these grounds. The “ability and capacity of, and the
reasonable efforts made by, either or both spouses to support themselves” (Family
Relations Act, s. 89(1)(d)), suggests a concern with need that
transcends compensation or contract. . . . Similarly, “economic
circumstances” (s. 89(1)(e)) invites broad consideration of all factors
relating to the parties' financial positions, not just those related to
compensation. The same may be said for the broad injunction of the Divorce
Act that the court consider the “condition, means, needs and other
circumstances of each spouse”. [First emphasis added; second emphasis in
original.]
100
This analysis entails very significant consequences. Some academic
comments viewed them as potentially far-reaching but as yet uncertain. For
example, Professor D. Goubau (in “The Clear and Clouded World of Spousal
Support in Canada” (2000-2001), 18 C.F.L.Q. 333) suggests that this
decision opens the door to an award of spousal support wherever there is need
on the part of one spouse and an ability to pay on the part of the other,
regardless of whether or not that need was occasioned by the marriage. To
remove the connection between the need and the marriage, he argues, forces one
spouse to pay for another’s misfortune, even though it has nothing whatsoever
to do with him.
101
Instead of removing the causation requirement altogether, Professor
Goubau argues that a relaxing of the causation requirement – so that not only
needs that are caused by the marriage but also those that are caused by its
breakdown are compensable – is sufficient. As an example of this strategy, he
points to a decision of the Quebec Court of Appeal, rendered shortly before Moge,
which rejected a reading of the Pelech-Richardson-Caron trilogy that
would require an unduly mechanistic application of the requirement of causation
(Droit de la famille – 1688, [1992] R.J.Q. 2797). Simply relaxing the
requirement, rather than removing it altogether, allows the court to maintain
the conceptual link between the payment of support and the marriage without
limiting recovery by unduly legalistic categories.
102
In my view, Bracklow does not discard altogether the requirement
of a causal connection between the needs of the payee spouse and the marriage,
its history and its breakdown. McLachlin J.’s reasons, which build upon prior
judgments of the Court, emphasize the diversity of the factors affecting the
right to support and its quantum, but do not appear to reject the consideration
of a broad form of causal connection, as a requirement for some categories of
support orders.
103
Julien and Marilyn Payne argue that it “is amply demonstrated by Bracklow
v. Bracklow [that] needs and capacity to pay as the basis of spousal
support have not been superseded by the notion of compensatory support. They
have been complemented by it” (J. D. Payne and M. A. Payne, Canadian Family
Law (2001), at p. 207). This much seems clear from the following passage
from Bracklow, at para. 32: “. . . Parliament and the legislatures have
decreed otherwise by requiring courts to consider not only compensatory
factors, but the ‘needs’ and ‘means’ of the parties”. Julien and Marilyn Payne
also laud this decision as making clear what should have been so all along:
that simply because courts have examined the sacrifices made by women in a marriage
and have sought to compensate them for such sacrifices, this does not mean that
all other considerations should be ignored after the breakdown of a marriage.
104
Finally, the reality faced by family court judges should be recognized.
Although the compensation rationale remains very important, in most cases it
will not be clear exactly how much compensation is required and how to compute
it. (See Payne and Payne, supra, at p. 209.) Thus, even when
compensation is acknowledged as an important rationale, the means and needs of
the parties are often used by courts simply because they supply the only
available numbers. Bastarache J.A. (as he then was) recognised this reality in
Ross v. Ross (1995), 168 N.B.R. (2d) 147 (C.A.), at para.15, as follows:
It is in cases where it is not possible to determine the extent of the
economic loss of the disadvantaged spouse that the court will consider need and
standard of living as the primary criteria, together with the ability to pay of
the other party.
105
In the case at bar, any order of support must address both the
consequences of the marriage and of its breakdown. It must rest on an
assessment of the needs and means of the parties and it should acknowledge the
need to compensate the spouse who stayed home, worked there and gave up any
idea of a career and the economic independence it allows.
106
The first objective of any order is to make sure that the dependent
spouse, after the breakdown of the marriage, has enough to live on. In
assessing the adequacy of support, the courts must consider the past income and
living standards of the parties. (See Payne and Payne, supra, at p.
205; Moge, supra, at pp. 866 and 870.) The creditor spouse
remains entitled to an income proportionate to her former living standards,
although some economic disadvantages and costs often arise out of the splitting
up of the family unit. It is also fair and consistent with the objectives of
the Family Law Act to include an element of compensation for the
consequences of the breakdown of a marriage where a spouse has given up any
possibility of a career outside the home.
107
Then, in assessing the needs of a spouse, a judge must factor in the
need of both spouses for security. This factor may very well have become of
critical importance for a dependent spouse like the respondent. Absent an
actual division of pension credits, she will be left entirely on her own, if her
spouse predeceases her, and she will have to rely on the asset base and income
rights she may have acquired at or since the breakdown. Such factors seem to
have been considered when the parties separated and agreed on the amount of
support. The law and the courts have recognized that such arrangements should
not be tampered with, unless a material change occurs. I abstain from
expressing any opinion as to whether such a material change actually happened
here. Given the concession in the Court of Appeal, I will dispose of the
matter, assuming, without deciding, that such a change happened when Mr. Boston
retired.
C. The
Pension Problem
108
As an Ontario judge put it: “I confess that there is one word which,
given the choice, I would prefer not to hear in a matrimonial proceeding:
‘pension’” (Iurincic v. Iurincic (1998), 40 R.F.L. (4th) 258 (Ont. Ct.
(Gen. Div.)), per Quinn J.), at para. 1. Much as we may prefer to
forget about this problem, it is a live issue, in respect both of the process
of family property equalization and of determination of support. When Mr. and
Mrs. Boston separated, the pension rights acquired under the Ontario Teachers’
Pension Plan were an important family asset. As indicated above, the Family
Law Act does not provide for any specific rules on the splitting of pension
credits, contrary to what is found in other provincial laws dealing with the
equalization of family assets, like the Civil Code of Québec, S.Q.
1991, c. 64, art. 426. The Pension Benefits Act, R.S.O.
1990, c. P.8, though, sets out a number of rules governing the splitting of
several credits or rights, but was not discussed or considered in the present
case. Absent any other rule than the principle of an equal division, the
parties and the courts are left to their own devices. The problem becomes:
shall we split now or later, if and when the spouse holding the pension rights
retires? I will not attempt to discuss which approach should be preferred.
Both have their advantages and their downsides. Each involves an element of
risk. For example, the “if and when” formula sometimes may require complex
legal arrangements, in order to protect the creditor spouse until the time of
retirement and to provide also for the possibility of an early death. The
parties here chose another commonly used method, as explained in Justice
Major’s reasons. It requires an immediate transfer of assets or money in order
to extinguish a claim in respect of pension rights which will be exercised only
later.
109
In the separation agreement, the parties put a value on Mr. Boston’s
pension rights and then the total marital assets were split. Mr. Boston dealt
with the claim arising out of this arrangement through the transfer of a number
of assets to his wife. The process allocated Mrs. Boston most of the
matrimonial property. On the other hand, Mr. Boston retained his full pension
rights and the right to the entire income stream arising out of it. Although
the parties did not discuss this aspect of the case, it remains probable that
such a public service pension ensures him a substantial degree of protection
against inflation, periodic revisions of pension payments and an almost
ironclad protection against any economic risks. The respondent got her
long-term security through the management of assets that must be used
efficiently and remain exposed to a degree of market and economic risk.
110
Mr. Boston paid off his wife’s claim, transferred assets and avoided a
division of his pension rights and credits, hence the problem when he retired.
He took the view that the payment of support out of the income stream
generated by his pension was inherently unfair, and that this amounted to
double dipping. He asserts that the income stream arising out of an already
equalized pension should be insulated from contribution to support. This
problem has never been addressed directly by this Court, although it was
mentioned in Strang v. Strang, [1992] 2 S.C.R. 112, at p. 120, where
Cory J. considered it irrelevant, given the facts of that case. Interestingly
enough, it appears that counsel for the debtor spouse, in that case, advanced a
distinction between property assets and maintenance assets. The former would
be free from contribution to spousal maintenance. Pension rights would fall
within this category (see p. 119). A basically identical argument is raised in
this appeal.
(1) Double Dipping
111
The issue of “double dipping” in respect of pension rights has
generated controversy in Canadian courts. Some case law supports the view
that spousal support should be paid only from the portion of the pension that
was unequalized at the time of the separation and from other sources of
income. (See Shadbolt v. Shadbolt (1997), 32 R.F.L. (4th) 253 (Ont. Ct.
(Gen. Div.)).) Nevertheless, this process of limiting the availability of the
pension asset for spousal support purposes is mistaken. It views the pension
as a finally allocated asset and ignores that it operates primarily as a source
of income. Also, it should not be forgotten that, while spousal support and
property division may be ordered or agreed to as part of an overall settlement
package, they serve different purposes. In some situations, support is
designed both to compensate the dependent spouse and to address essential economic
needs arising out of the marriage breakdown. This rationale remains distinct
from the property division, with which it should not be confused. Assets made
available to a spouse after the equalization process should be factored in when
considering the needs and means, as they will sometimes allow the dependent
spouse to reach a degree of independence, which reflects one of the objectives
of the Family Law Act and her essential human dignity. On the other
hand, the Act does not modify the nature of the complex factors and objectives
governing spousal support before, as well as after the retirement of the debtor
spouse. A number of judgments make this clear.
112
For example, in Dolman v. Dolman (1998), 38 R.F.L. (4th) 362
(Ont. Ct. (Gen. Div.)), Philp J. found that the Family Law Act of
Ontario allows spousal support to continue after an equalization payment if the
dependent non‑pensioned spouse remains in need, and if the payer remains
able to pay. Shadbolt was referred to in the case of Carter v.
Carter (1998), 42 R.F.L. (4th) 314 (Ont. Ct. (Gen. Div.)), dismissing a
motion to suspend existing support obligations. Kozak J. held that,
although the initial jurisprudence under the Family Law Act stood for
the principle that, after equalizing the pension, the pension should not again
be the basis of spousal support payments, the later case law confirmed that
spousal support continuing past the payer’s retirement did not give the
dependent spouse a double benefit of the pension.
113
As Bastarache J.A. said in LeMoine v. LeMoine (1997), 185
N.B.R. (2d) 173 (C.A.), at para. 29, referring to Linton v. Linton (1990),
1 O.R. (3d) 1 (C.A.), it is not improper “to extend support beyond the payor
spouse’s retirement simply because of the inclusion of the pension in the
property division”. He went on to say (at para. 30):
Although the pension income stream may belong to the husband . . . this
does not mean that it cannot be accessed in order to redress the economic
disadvantages of the wife that continue to flow from the marriage or its
breakdown. It is not a case of re-dividing an asset, but of ordering a person
to continue paying support.
114
Finally, Brockenshire J. made clear in Nantais v. Nantais (1995),
16 R.F.L. (4th) 201 (Ont. Ct. (Gen. Div.)), that the mere fact that the source
of a payor or spouse’s income is a pension rather than employment should not prima
facie exclude such income from consideration when determining the quantum
of spousal support. Brockenshire J. viewed it as “a contractual replacement of
an income [and], like the wages received before retirement, is fully available
for the support of a needy former spouse” (para. 32).
(2) The Process of Fixing Support After Retirement
115
No assets or income streams should be set aside or treated
differently after a debtor spouse starts drawing a pension. This Court should
not entertain in any manner the view that we should draw a distinction between
what some would call property assets and maintenance assets. All income
streams are relevant in the assessment of means and needs and of the proper
level of support considering the lifestyle and the living experience of the
couple. Pension payments remain income. Indeed, the Income Tax Act
views them as fully taxable for income tax purposes (see P. W. Hogg and J. E.
Magee, Principles of Canadian Income Tax Law (2nd ed. 1997), at pp.
357-58). The problem to be addressed in a question of spousal support is not
the nature of the assets available to the parties, but how they should be used
by each party.
116
I agree that a spouse may not sit on a pot of gold, while fleecing his
or her former life partner. As the trial judge and the Court of Appeal found,
by reason of her moderate, if not frugal lifestyle, Mrs. Boston had made safe
investments and, therefore, had a substantial asset base under her control.
On the other hand, Mr. Boston had kept his entire pension rights with the
financial and personal security that flows from them, but few other assets. No
information as to the nature and conditions of the Teachers’ Pension Plan of
Ontario is available in the record. Normally, this kind of pension guarantees
lifelong economic security for the pensioner, and beyond this for designated
surviving companions. Mr. Boston gave up assets, but retained this security.
This arrangement did not amount to trading assets for nothing, as some academic
or judicial comment asserts. On the other hand, Mrs. Boston has substantial
assets, and has taken insurance on the life of her husband, but will be left
on her own if her former spouse predeceases her. In the circumstances of the
case, the reasoning of the Court of Appeal implies that the calculation of support
payable to her had to factor in her former lifestyle and living standards and
also her need to acquire some financial security throughout her life. The
appeal judgment acknowledges the lack of independence that flows from her
married life and its breakdown.
117
Upon the appellant’s retirement, it was fair, in a process of support
determination, that courts considered the assets of both parties and the income
that could be generated from them if they were used efficiently. The Court of
Appeal decided to impute an income from the assets controlled by the
respondent. The Court of Appeal based this income on the value of the assets
considered as liquid, which amounted to about $250,000 and deducted a notional
income of some $15,000 a year, which appears as accurate as can be. Given the
circumstances of the parties and the ambiguous reference in the trial judge’s
order as to the respondent’s ability to take care of herself, it held that the
variation of support by Robertson J. was unreasonable. Indeed, the support
fixed by the Court of Appeal might appear somewhat conservative, considering
the income left to Mr. Boston. After all, he draws a pension of about $100,000
per year. Although he has few assets, he retains a fairly comfortable
lifestyle. Mrs. Boston is entitled to a reasonable standard of living, as
contemplated by the separation agreement. She should not have to engage in a
massive program of liquidation of assets, based on an assumption that her
lifestyle is frugal, and hence her needs modest.
118
Pension rights deplete over time, but they provide, especially in this
case, a stable and protected income. By any means, income arising out of the
pension rights of a pensioner remains income and may be subject to contribution
for maintenance, if the circumstances warrant it. Neither the Family Law
Act nor the Divorce Act supports the drawing of a distinction
between categories of assets and particular income streams for the purpose of
spousal support. Support should remain governed by the factors and objectives
defined in the law and applied by the jurisprudence of the Court.
119
An analysis based on the nature of the assets may skew the proper
approach to support. In this case, needs had been established, after making
allowance for the efficient use of assets under the respondent’s control.
These needs should be evaluated reasonably, given the standard of living of the
parties during the marriage and the imperative of long-term financial
protection.
120
For these reasons, I would dismiss the appeal.
Appeal allowed, L’Heureux-Dubé
and LeBel JJ. dissenting.
Solicitor for the appellant: J. Yvonne Pelley, Kingston.
Solicitors for the respondent: Maurice J. Neirinck &
Associates, Toronto.
Solicitors for the intervener: Nicole Tellier and Epstein Cole,
Toronto.