Boston v. Boston

Boston v. Boston
Collection
Supreme Court Judgments
Date
2001-07-12
Neutral citation
2001 SCC 43
Report
[2001] 2 SCR 413
Case number
27682
Judges
McLachlin, Beverley; L'Heureux-Dubé, Claire; Gonthier, Charles Doherty; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis
On appeal from
Ontario
Subjects
Family law
Notes
SCC Case Information: 27682
Decision Content
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 wit