Slongo v. Slongo, 2015 ONSC 2093

Following the breakdown of Mr. and Ms. Slongo’s marriage, the parties resolved their outstanding issues by executing a separation agreement. Mr. Slongo’s pension was divided on the basis of a valuation that assumed he would continue to work until age 65. The separation agreement further provided that either party could seek to vary the spousal support obligations if there was a material change in circumstances, which was defined to include a material change in either party’s financial position and Mr. Slongo’s cessation of employment prior to age 65. Mr. Slongo retired earlier than expected at age 55 and began to receive pension payments. Following his retirement, Mr. Slongo returned to work for the same employer as a consultant and received consulting income. Ms. Slongo brought a motion to vary support obligations on the basis that Mr. Slongo’s retirement amounted to a material change in circumstances. 

The Ontario Superior Court held that there had been a material change in circumstances warranting a variation in spousal support and turned to consider to what extent Mr. Slongo’s pension had already been equalized and to what extent any unequalized funds could be imputed as income received by Mr. Slongo for the purposes of determining Ms. Slongo’s support.

The court considered the fact that the value of Mr. Slongo’s pension was much larger than the value agreed to at the time of the separation agreement as it was now expected to pay him for 10 years longer than expected, as well as additional service accruals and post-separation changes in actuarial assumptions and interest rates. The court held that an amount of Mr. Slongo’s pension had not yet been equalized and therefore a portion of the pension income received by Mr. Slongo was considered in determining his ongoing spousal support obligations.

Ontario Superior Court Decision

Murphy v. Murphy, 2015 BCSC 408

Following a breakdown of the parties’ 25-year marriage, all issues between the parties were resolved in a consent order that provided for spousal support for Ms. Murphy and the transfer of 50 per cent of Mr. Murphy’s benefits accrued under the Canadian Forces Superannuation Plan (Plan) to Ms. Murphy’s locked-in RRSP. On an application by Mr. Murphy to vary or cancel his spousal support obligations pursuant to section 1 of theDivorce Act, at issue was whether the quantum of spousal support would exclude the value of Mr. Murphy’s pension income from the portion of the Plan that was divided or would be based on Mr. Murphy’s total income from all sources.

The British Columbia Supreme Court discussed the principles of double recovery, citing its decision in Peters v. MacLean, 2014 BCSC 990 where the court stated that “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. . . . 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.”

The court considered that Mr. Murphy had the ability to pay support and that Ms. Murphy had continued to suffer an economic hardship since the breakdown of the marriage, but did not consider as relevant the fact that Ms. Murphy had suffered significant investment losses in her RRSP. The court held that approximately 60 per cent of the amount of Ms. Murphy’s one-half interest in the Plan was depleted by her through poor investment choices and to cover living expenses rather than to earn income, and consequently this amount would not be factored into Mr. Murphy’s continued spousal support obligation. Accordingly, “double recovery” was permitted in part and 40 per cent of the pension amount previously equalized was considered as part of Mr. Murphy’s income for the purpose of determining his spousal support obligations.

British Columbia Supreme Court Decision

Welsh v. Ashley, 2015 ONCA 297

Ms. Robin Welsh was Mr. Michael Poisson’s spouse at the time of his death although they were living separate and apart. Following their final separation, the parties executed a separation agreement (Separation Agreement) which provided that Ms. Welsh was to receive 50 per cent of the benefits accrued under Mr. Poisson’s pension plan during the parties’ co-habitation. When the Separation Agreement was prepared, the Pension Benefits Act(Ontario) (PBA) did not permit transfer of a portion of Mr. Poisson’s pension benefit to Ms. Welsh. The Separation Agreement adopted a “wait and see” approach and provided that Mr. Poisson would sever his pension into two parts when it was possible to do so. Paragraph 16(5) of the Separation Agreement provided that Ms. Welsh was to be considered the surviving spouse in the event Mr. Poisson died before his pension came into pay. Following Mr. Poisson’s death, Ms. Welsh sought a declaration that she was the sole beneficiary of Mr. Poisson’s pre-retirement death benefits. Mr. Poisson’s adult children opposed the motion, claiming they had a partial interest in the benefit as the designated beneficiaries.

The motion judge interpreted the Separation Agreement and held that Ms. Welsh and the children were each entitled to approximately half of the pre-retirement death benefit. The motion judge held that paragraph 16(5) of the Separation Agreement was in conflict with subsection 48(3) of the PBA, which precludes a separated spouse from receiving pre-retirement death benefits, and subsection 48(13) of the PBA, which gave statutory priority to domestic contracts over the entitlements provided pursuant to section 48. The motion judge held that the parties’ intention was to equalize Mr. Poisson’s pension, for Ms. Welsh to receive her proportionate share of the pension accrued during the course of the marriage, and for Mr. Poisson to divide his pension into two parts when he was able to do so. The motion judge concluded that the declaration sought by Ms. Welsh would grant her a greater share of Mr. Poisson’s pension than was intended. The motion judge determined that 50.13 per cent of the pension benefit accrued during the course of the marriage and Ms. Welsh was therefore entitled to 50.13 per cent and Mr. Poisson’s beneficiaries were entitled to the balance.

The Ontario Court of Appeal (Court of Appeal) allowed the appeal and held that the motion judge erred in failing to distinguish the terms in the Separation Agreement intended to govern in the event Mr. Poisson died after the pension was in pay and those meant to govern in the event Mr. Poisson died before he ever received his pension. As the legislation did not permit the equalization of Mr. Poisson’s pension at the time of the Separation Agreement, the parties specifically contemplated what was to occur in the event Mr. Poisson died before his pension came into pay. Paragraph 16(5) of the Separation Agreement provided that in the event Mr. Poisson died before he began to receive his pension, Ms. Welsh was to be “considered the sole surviving spouse and shall receive all benefits payable to a surviving spouse under the plan.” In the event that Mr. Poisson lived and began to receive pension benefits, Ms. Welsh was to receive a one-half share of the pension benefits and the change in beneficiary designation filed by Mr. Poisson was therefore not effective. The Court of Appeal held that the motion judge also erred in finding a conflict between sections 48(3) and 48(13) of the PBA. In the Court of Appeal’s view, section 48(13) gives clear statutory priority to the provisions of a domestic contract. As a result, Ms. Welsh was entitled to the pre-retirement death benefit in its entirety.

Ontario Court of Appeal Decision

Cossette v. Cossette, 2015 ONSC 2678 (Divisional Court)

This is an appeal of the dismissal of a motion brought by Mr. Cossette for an order terminating his spousal support obligations following his retirement at age 55 which caused a drop in his annual income from C$104,000 to C$48,000 per year. Mr. Cossette argued before the motions judge that his retirement was necessary for medical reasons. The motions judge held that Mr. Cossette withdrew from the labour force because he wanted to retire and because he sought to end his spousal support obligations. On appeal, Mr. Cossette argued that his retirement amounted to a material change in circumstances because he was contractually eligible to retire and he therefore could not be required to continue to work upon becoming eligible for full retirement in order to satisfy spousal support obligations.

The Federal Court rejected Mr. Cossette’s argument and held that his retirement was not a material change in circumstances. The Federal Court held that a voluntary retirement may in some circumstances constitute a material change; however, parties cannot avoid spousal support obligations by making a unilateral decision to leave the workforce and claiming that it is a material change in circumstances. The court also held that it would be useful for parties to turn their minds to the potential of early retirement and its effect on spousal support obligations in drafting separation agreements. As a result, the court ordered that the payment of spousal support shall continue until Mrs. Cossette reaches age 64.

Divisional Court Decision