Date: 19981030
Docket: A-648-97
CORAM: DESJARDINS J.A.
ROBERTSON J.A.
McDONALD J.A.
BETWEEN:
BARBARA SWAN
Applicant
(Respondent)
- and -
THE ATTORNEY GENERAL OF CANADA
Respondent
(Appellant)
Heard at Edmonton, Alberta, on Monday, October 19, 1998
Judgment delivered at Ottawa, Ontario, on Friday, October 30, 1998
REASONS FOR JUDGMENT BY: ROBERTSON J.A.
CONCURRED IN BY: DESJARDINS J.A.
McDONALD J.A.
Date: 19981030
Docket: A-648-97
CORAM: DESJARDINS J.A.
ROBERTSON J.A.
McDONALD J.A.
BETWEEN:
BARBARA SWAN
Applicant
(Respondent)
- and -
THE ATTORNEY GENERAL OF CANADA
Respondent
(Appellant)
REASONS FOR JUDGMENT
ROBERTSON J.A.
[1] This appeal brings into consideration the division of matrimonial property through the rubric of federal pension legislation. The principal question before us is whether the date for valuing pension benefits is the date of divorce or the date that the actual division of pension benefits is effected. In the present case, the divorce judgment in 1987 ordered a division of pension benefits. Swan applied to the responsible federal administrator for a division in 1996. A final determination as to the value of future pension benefits to be paid to her was made in 1997. Obviously, the valuation of pension benefits as of the date of divorce, rather than at some later date, may significantly affect the value of pension benefits to be divided.
[2] The essential facts are as follows. Laurie Robichaud enlisted in the Canadian Armed Forces in October 1954. He and Barbara Swan were married on December 17, 1960. In February 1973, Robichaud was released from the Forces and began receiving a monthly superannuation pension. Swan and Robichaud separated on June 30, 1985. A divorce judgment issued by the British Columbia Supreme Court on April 21, 1987 divided the matrimonial property. Pursuant to its order, Robichaud's superannuation pension was divided in accordance with the Rutherford formula. The Rutherford formula incorporates a numerator equal to the number of years of marriage during which a spouse accumulated pensionable service. In the present case, there were 12.15 years during which Swan and Robichaud were married and Robichaud was contributing to his pension plan (1960 to 1973). The denominator in the Rutherford formula is the total number of years of pensionable service. Robichaud had contributed to his pension plan for 19 years (1954 to 1973), before becoming entitled to a monthly pension in 1973. Thus, assuming an equal division of Robichaud's pension, the Rutherford formula can be expressed as 12.15/19, or 31.97% of the present value of the pension, times 1/2.
[3] Under the divorce order, Swan was ordered to make maintenance payments to Robichaud. Swan appealed the division of family assets and maintenance order to the British Columbia Court of Appeal. That court upheld the lower court's order dividing the family assets and Robichaud's superannuation pension equally. According to the court of appeal, the "triggering date" for the division of family assets under the Family Relations Act was the date of the divorce (April 21, 1987).
[4] On April 27, 1989, Swan wrote to the Department of National Defence requesting a division of Robichaud"s pension benefits pursuant to the divorce order. Her application was denied because the federal Garnishment, Attachment and Pension Diversion Act , R.S.C. 1985, c. G-2, only permitted the assignment of pension benefits to satisfy support orders, not to effect a division of family assets. Since Swan was not entitled to support, no division was permitted. However, on September 30, 1994, the federal Pension Benefits Division Act, S.C. 1992, c. 46 (the "Act") came into force. That Act permitted the division of certain federal pension plans, regardless of whether they were part of a support order.
[5] On September 30, 1996, Swan applied to the Directorate of Pay Services, Canadian Armed Forces Pension Inquiries, for a division of Robichaud"s pension benefits pursuant to section 4 of the Act. Subsection 7(5) of the Act allows for the division of pension benefits notwithstanding that the court order or spousal agreement ordering such division was made prior to the Act coming into force. The Directorate wrote to Swan on October 29, 1996, acknowledging the validity of her application and estimating that she was entitled to a lump sum of approximately $32,000, representing one-half of the present value of Robichaud's future pension benefits. Under the Act, a final calculation is not made until "valuation day", which is defined in the Regulations as the day on which the actual determination is made. In this case, "valuation day" was April 9, 1997. The division of Robichaud's pension benefits was effected by transferring $33,164.84 to Swan's registered retirement savings plan.
[6] Swan sought judicial review of the Directorate's decision, claiming that she was legally entitled to receive approximately $58,000, rather than the $33,164.84 which was paid over to her. Swan based this claim on the assertion that the present value of Robichaud's pension benefits was to be calculated as of the date of the divorce in accordance with the Rutherford formula, as prescribed by the divorce order of the British Columbia Supreme Court. The Directorate took the position that Swan was entitled only to the present value of future pension benefits to be received by Robichaud and not the value of pension benefits already paid; thus, the appropriate date of valuation was April 9, 1997. The Motions Judge ruled in favour of Swan, remitting the matter back to the Directorate with instructions to calculate the value of pension benefits in accordance with the Rutherford formula (31.97% x 1/2). He used the date of divorce, April 21, 1987, as the date on which to calculate the present value of Robichaud's pension benefits.
[7] This appeal is complicated by two additional factors. First, no evidence was lead at the hearing of the judicial review application by counsel for the Directorate with respect to how the present value of Robichaud's pension was actually calculated. It is apparent, however, that its calculation was not based on the Rutherford formula. Second, in delivering judgment from the bench, the Motions Judge neglected to provide reasons in support of his decision setting aside the Directorate's determination, ordering a division based on the Rutherford formula, and calculating the present value of Robichaud's pension as of the date of divorce. It is within this complex framework that this Court must adjudicate on a case of first impression.
[8] During the hearing of this appeal, the parties agreed that the real dispute concerned the date of valuation; that is, whether the future value of Robichaud's superannuation pension was to be calculated in accordance with the divorce order or pursuant to the Act and Regulations. If the divorce order prevails, the proper date of valuation is the date of the divorce and the proper method of calculating the division of pension benefits is the Rutherford formula. If, however, that order is simply a condition precedent to a division under the Act, then it is common ground that the Directorate did not err in calculating the present value of Robichaud's pension. This concession flows from actuarial evidence submitted by Swan's expert that the amount calculated by the Directorate "falls within a range of values we would have expected" (Appeal Book at 119). It is also common ground that if the divorce order prevails over the provisions of the Act, then the Motions Judge was correct. In my respectful opinion, the Motions Judge erred for the following reasons.
[9] Subsection 4(1) of the Act sets out who may apply for a division of pension benefits. Subsection 4(2) lists the circumstances in which an application for division may be made. Those subsections read as follows:
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4.(1) A member of a pension plan or a spouse or former spouse of a member may, in the circumstances described in subsection (2), apply to the Minister to divide the member's pension benefits between the member and the spouse or former spouse. |
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(2) The circumstances in which an application may be made are: |
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(a) where a court in Canada of competent jurisdiction, in proceedings in relation to divorce, annulment of marriage or separation, makes an order that provides for the pension benefits to be divided between the member and the spouse or former spouse; .... |
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[10] Section 4 makes it clear that a divorce order incorporating a division of pension benefits triggers the application of the Act. Specifically, subsection 4(2) provides that an application may be made to the Minister if a court of competent jurisdiction has ordered the division of pension benefits. However, that subsection does not provide that the division will be made in accordance with the terms of the court order. Section 8 sets out how the Minister is to effect the division of pension benefits. Subsections 8(1) to (3) inclusive are relevant to this appeal and read as follows:
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8(1) A division of pension benefits shall be effected by |
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(a) subject to subsection (4), transferring an amount representing fifty per cent of the value of the pension benefits that have accrued to the member of the pension plan during the period subject to division, as determined in accordance with the regulations, to the spouse or former spouse,... |
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(b) adjusting, in accordance with the regulations, the pension benefits that have accrued to the member of the pension plan under that pension plan, notwithstanding the provisions of that pension plan or the Act under which it is established or by which it is provided. |
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8(2) For the purposes of subsection (1) but subject to subsection (3), the period subject to division is |
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(a) the period specified by the court order or spousal agreement as the period during which the member of the pension plan and the spouse or former spouse cohabited; or |
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(b) where the court order or spousal agreement does not specify a period as described in paragraph (a), such period as may be determined by the Minister, on the basis of evidence submitted by either of the interested parties or both, as being the period during which the member of the pension plan and the spouse or former spouse cohabited. |
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8(3) For the purposes of subsection (1), where the application is based on a court order and the order provides that pension benefits that have accrued to the member of the pension plan during a period specified in the order are to be divided, the period specified in the order is the period subject to division. |
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Pursuant to paragraph 8(1)(a), the Minister is required to transfer one-half of the value of pension benefits that have accrued to a plan member during the "period subject to division" to his or her spouse or former spouse. I pause here to note that the Directorate's correspondence with Swan indicated that payment was to be based on the entire period of cohabitation, that is, from the date of marriage (December 17, 1960) to the date of separation (June 30, 1985): see Appeal Book at 38 and 44. However, paragraph 8(1)(a) does not refer to the entire period of cohabitation of the spouses, but only the period subject to division during which pension benefits accrued to the plan member. As noted earlier, Swan and Robichaud cohabited for 12.15 years during which time he contributed to his superannuation plan. (This figure is also the same as the numerator in the Rutherford formula.) In any event, it appears that the Directorate used the 12.15 figure in calculating the value of Robichaud's pension benefits, notwithstanding what is stated in the correspondence: see Appeal Book at 124.
[11] The period subject to division must be determined in one of three ways. First, paragraph 8(2)(a) stipulates that the period subject to division is the period of cohabitation, as set out in the court order or separation agreement. Second, paragraph 8(2)(b) states that if a court order does not specify a period of cohabitation, the Minister is entitled to fix a period based on evidence submitted by either or both of the former spouses. Third, as I read subsection 8(3), if the court order specifies a period, other than the cohabitation period, as the "period subject to division", the period specified in the court order is the period subject to division. My view is buttressed by the fact that subsection 8(2) is explicitly subject to subsection 8(3) with respect to the period subject to division.
[12] As for the date for calculating the present value of pension benefits that have accrued to the plan member during the period subject to division, section 13 of the Regulations is definitive. It states that, where a "member is vested" at valuation day, the actuarial present value on valuation day of pension benefits which have accrued during the period subject to division is determined in accordance with sections 14 and 15 of the Regulations. "Valuation day" is defined in subsection 2(1) of the Regulations as "the day in respect of which the determination of the value of a member's pension benefits is made pursuant to these Regulations." In the present case, valuation day was April 9, 1997.
[13] In light of the above, I do not accept that the purpose of subsection 8(3) is to provide a triggering mechanism for making payments out of pension funds, as argued by counsel for Swan. I see nothing in the language used by the draftsperson which can reasonably support the notion that an order of a provincial superior court regarding the division and valuation of pension benefits can displace those provisions. In particular, I do not see how subsection 8(3) of the Act can be construed so as to imply that such an order displaces the method and date for calculating future pension benefits set out in the legislation. As noted above, subsection 8(3) merely states that if a court order specifies a shorter or longer period than the actual period of cohabitation as the "period subject to division", then the period specified in the court order prevails.
[14] Even if I were to assume that the provisions of the Act and Regulations are ambiguous as to whether a court order is to displace the provisions of the Act and Regulations, I do not arrive at the same legal conclusion as counsel for Swan. The essence of her argument is that if Parliament gave the Minister a right to recover an overpayment stemming from the receipt of past pension benefits by Robichaud, then it is reasonable to infer that Parliament intended that pension benefits should be calculated as of the date of the divorce. For the sake of completeness, I shall deal with this argument in the following manner.
[15] There is little doubt that the application of the Rutherford formula as of the date of divorce would bring about a just result for Swan, at least as between her and her former spouse. However, Swan is not the only party affected by the division of Robichaud's pension benefits. The federal government, which administers the plan, paid full pension benefits to Robichaud from the date of divorce (1987) to the date that the division was effected (1997). For this reason, the Minister contends that the value of Robichaud's pension is the present value of what remains in the pension fund as of valuation day (April 9, 1997). In other words, the Minister should not have to pay out "twice" in relation to the same pension benefits. In response, counsel for Swan argues that any overpayment by the Minister to Robichaud can be recovered under section 11 of the Act, which reads as follows:
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11. Where an adjustment is made under paragraph 8(1)(b) and an amount is or has been paid to a member of a pension plan that exceeds the amount to which that member is or would have been entitled under that pension plan after the effective date of that adjustment, the amount in excess constitutes a debt due to Her Majesty in right of Canada by that member and may be recovered at any time by set-off against any pension benefit that is payable to that member under any pension plan, without prejudice to any other recourse available to Her Majesty in right of Canada with respect to the recovery thereof. |
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[16] In my view, section 11 does not support the proposition that the Minister is entitled to recover from Robichaud one-half of the value of pension benefits which it paid to him from the date of divorce to the date of division effected by the Directorate. Section 11 only comes into play when an excess payment has triggered an "adjustment" under paragraph 8(1)(b). This adjustment reflects the fact that the plan member is no longer entitled to some portion of his or her benefits because his or her spouse was awarded a division of pension benefits under paragraph 8(1)(a). In my opinion, section 11 was drafted in contemplation of the possibility that, notwithstanding a division of pension benefits, a plan member may in error continue to receive benefits as if no such division had transpired. In such circumstances, the Minister is entitled to seek reimbursement for any overpayment. Thus, I can only conclude that Parliament did not grant the Minister a right of recovery in respect of pension benefits already paid to Robichaud. Unfortunately, Swan will have to seek a remedy against Robichaud for her portion of those benefits received prior to the actual division and payment.
[17] For the above reasons, I would allow the appeal, set aside the order of the Motions Judge dated September 18, 1997, and dismiss the application for judicial review; the whole without costs since this case is a matter of first impression.
"J.T. Robertson"
J.A.
"I concur
Alice Desjardins J.A."
"I agree
F.J. McDonald J.A."
FEDERAL COURT OF APPEAL
Date: 19981030
Docket: A-648-97
BETWEEN:
BARBARA SWAN
Applicant
(Respondent)
- and -
THE ATTORNEY GENERAL OF CANADA
Respondent
(Appellant)
REASONS FOR JUDGMENT
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