Clarke v. Clarke,  2 S.C.R. 795
Grace Lorraine Clarke Appellant
Franklyn Vernon Clarke Respondent
indexed as: clarke v. clarke
File No.: 20151.
1989: December 6; 1990: October 4.
Present: Dickson C.J.* and Wilson, La Forest, L'Heureux‑Dubé, Sopinka, Cory and McLachlin JJ.
on appeal from the court of appeal for nova scotia
Matrimonial law ‑‑ Property ‑‑ Pensions ‑‑ Husband receiving monthly pension payments following his retirement from the armed forces ‑‑ Whether pension payments a "matrimonial asset" and therefore subject to equal division ‑‑ Canadian Forces Superannuation Act, R.S.C. 1970, c. C‑9 ‑‑ Matrimonial Property Act, S.N.S. 1980, c. 9, ss. 2, 4, 12, 13.
The parties were married in 1955. Respondent elected to receive his pension in the form of monthly payments when he retired from the armed forces in 1976. After the parties separated in 1980, respondent petitioned for divorce and appellant counter‑petitioned, seeking a division of pension benefits as matrimonial assets, inter alia. Section 12 of the Nova Scotia Matrimonial Property Act provides for the equal division of matrimonial assets upon the dissolution of a marriage and s. 13 allows the court to make an unequal division where a division in equal shares would be "unfair or unconscionable". The trial judge included respondent's pension in calculating the equal division of property between the spouses. He included the value of the pension payments respondent received between the date of separation and the time of trial in his matrimonial assets, and ordered that he pay appellant one half of the pension payments received in future. The Court of Appeal found that the periodic pension payments constituted income, not a matrimonial asset. It varied the calculation of the matrimonial assets by deleting from respondent's assets the pension payments he had already received and deleted from the trial judge's order the monthly pension payments to be paid to appellant in the future. The issue before the Court is the appropriate means by which appellant may participate in respondent's pension benefits.
Held: The appeal should be allowed.
Pensions should be included as matrimonial assets subject to equal division. This interpretation of the legislation is clearly more consonant with the spirit and intent of the Act than s. 13, which will not be an effective option where the only substantial asset is the pension. Maintenance is not an acceptable alternative to a share of a capital asset since maintenance is contingent both on the continuing need of the appellant and on the ability to pay of the respondent. Discretionary support payments are an inadequate and unacceptable substitute for an entitlement to share in the assets accumulated during the marriage as a result of the combined efforts of the spouses.
Pensions, because they are not business assets and therefore not included in the list of exceptions in s. 4(1), are matrimonial assets to be divided equally. The weight of appellate authority in several provinces supports this classification of pensions. Pensions are not "income" in the sense of payments for present work, nor are they income to be earned in the future. Rather pensions are benefits earned throughout the period of the pension. It would be unjust to find that, because respondent elected to take monthly payments rather than a lump sum, the pension ceases to be a matrimonial asset.
The difficulty in valuing pensions is not a bar to concluding that they are property for the purposes of equal division. The prohibition against alienation found in s. 8(6) of the Canadian Forces Superannuation Act does not prevent respondent's pension benefits from being characterized as matrimonial assets. There is no conflict between s. 8(6) and the Matrimonial Property Act.
There is no reason to interfere with the trial judge's findings in this case. His order reflects the spirit and intent of the legislation, and while it does not result in a "clean break" between the parties, it enables both of them to enjoy the benefits of the pension as and when they fall due.
Approved: Lawrence v. Lawrence (1981), 25 R.F.L. (2d) 130, leave to appeal to S.C.C. refused 49 N.S.R. (2d) 209; disapproved: Isbister v. Isbister (1981), 22 R.F.L. (2d) 234; referred to: Rutherford v. Rutherford (1981), 23 R.F.L. (2d) 337, aff'g (1979) 14 R.F.L. (2d) 41; Harwood v. Thomas (1981), 45 N.S.R. (2d) 414; Lefort v. Lefort (1988), 13 R.F.L. (3d) 359; Tataryn v. Tataryn (1984), 38 R.F.L. (2d) 272; Curren v. Curren (1987), 81 N.S.R. (2d) 118; Lemmon v. Lemmon (1987), 77 N.S.R. (2d) 113; Stevens v. Stevens (1987), 7 R.F.L. (3d) 127; McNulty v. McNulty (1989), 24 R.F.L. (3d) 41; Herchuk v. Herchuk (1983), 35 R.F.L. (2d) 327; McAlister v. McAlister,  2 W.W.R. 8; George v. George (1983), 35 R.F.L. (2d) 225; Geisel v. Geisel (1981), 24 R.F.L. (2d) 424; Hierlihy v. Hierlihy (1984), 48 Nfld. & P.E.I.R. 142; Cleaves v. Cleaves (1982), 27 R.F.L. (2d) 239; Muise v. Muise (1982), 30 R.F.L. (2d) 296; Nolet v. Nolet (1985), 46 R.F.L. (2d) 388; Bank of Montreal v. Hall,  1 S.C.R. 121; Derrickson v. Derrickson,  1 S.C.R. 285; Multiple Access v. McCutcheon,  2 S.C.R. 161; Rawluk v. Rawluk,  1 S.C.R. 70; Rafferty v. Rafferty (1984), 39 R.F.L. (2d) 374.
Statutes and Regulations Cited
Act to amend the Pension Benefits Act, S.N.S. 1987, c. 11, s. 61(2).
Canadian Forces Superannuation Act, R.S.C. 1970, c. C‑9, s. 8(6) [rep. & sub. 1980‑81‑82‑83, c. 100, s. 41].
Civil Code of Quebec, Arts. 462.2, 2nd para., 462.3.
Divorce Act, R.S.C. 1970, c. D‑8.
Family Relations Act, R.S.B.C. 1979, c. 121.
Garnishment, Attachment and Pension Diversion Act, S.C. 1980‑81‑82‑83, c. 100, ss. 22, 41.
Marital Property Act, S.M. 1978, c. 24, C.C.S.M., c. M45, s. 1(b).
Matrimonial Property Act, R.S.A. 1980, c. M‑9.
Matrimonial Property Act, R.S.S. 1979, c. M‑6.1.
Matrimonial Property Act, S.N.S. 1980, c. 9, ss. 2, 4, 12, 13.
Pension Benefits Act, R.S.A. 1980, c. P‑3.
Pension Benefits Act, S.M. 1975, c. 38 [am. 1982‑83‑84, c. 79, s. 19].
Pension Benefits Act, S.N.S. 1975, c. 14.
Public Service Superannuation Act, R.S.B.C. 1960, c. 57.
Bissett‑Johnson, Alastair. "Three Problems of Pensions ‑‑ An Overview" (1990), 6 C.F.L.Q. 137.
Campbell, Neil. "Division of Pensions Under the Ontario Family Law Act: A Comment on Marsham v. Marsham and Humphreys v. Humphreys" (1988), 7 Can. J. Fam. L. 79.
Hogg, Peter W. Constitutional Law of Canada, 2nd ed. Toronto: Carswells, 1985.
Knight, Philip A. "Splitting and Sharing Pension Assets on Marriage Breakdown" (1985), 14 Man. L. J. 419.
Marmer, Jack. "Valuing Registered Retirement Savings Plans" (1987), 2 C.F.L.Q. 97.
McBean, Jean M. "The Treatment of Pensions Under the Alberta Matrimonial Property Act: Some Unresolved Issues". In Payne's Divorce and Family Law Digest. Edited by Julien D. Payne. Don Mills: De Boo, 1986, p. E‑25.
Patterson, J. B. "Determining a Realistically High Value of the Spouse's Interest in the Employee's Pension" (1987), 1 C.F.L.Q. 345.
Pollock, Michael L. "Division of Pension Rights on Marriage Breakdown in Alberta: A Review of some Proposed Amendments to the Alberta Matrimonial Property Act" (1987), 2 C.F.L.Q. 83.
Roche, Evita M. "Treatment of Pensions upon Marriage Breakdown in Canada: A Comparative Study" (1987), 1 C.F.L.Q. 189.
Winokur, Paul M. and Stephen A. Eadie. "Current Pension Valuation Issues from an Ontario Perspective" (1988), 3 C.F.L.Q. 197.
APPEAL from a judgment of the Nova Scotia Court of Appeal (1986), 72 N.S.R. (2d) 387, 173 A.P.R. 387, 29 D.L.R. (4th) 492, 1 R.F.L. (3d) 29, allowing an appeal from an order of MacDonnell J. ordering a division of pension benefits as matrimonial assets. Appeal allowed.
Bruce Errol McKay, for the appellant.
Richard Johnson, for the respondent.
The judgment of the Court was delivered by
WILSON J. -- The main issue in this appeal is whether a periodic pension benefit paid pursuant to the Canadian Forces Superannuation Act, R.S.C. 1970, c. C-9, as amended, is a "matrimonial asset" within the meaning of the Nova Scotia Matrimonial Property Act, S.N.S. 1980, c. 9, as amended, and therefore subject to equal division thereunder.
1. The Facts
The parties, Grace Lorraine Clarke (appellant) and Franklyn Vernon Clarke (respondent), were married on August 6, 1955. At the time of the marriage Mrs. Clarke was 21 years of age and Mr. Clarke was 26. They lived and cohabited in various places in Canada, mainly on or near Canadian Armed Forces Bases, until the end of July, 1980. At the commencement of the marriage both parties were employed by the Royal Canadian Air Force. During the course of the marriage the parties had five children. From the date of marriage until the youngest child reached the age of five, which was in 1968, Mrs. Clarke raised the children and cared for the home. In 1968 she began working outside the home as a cleaner and at various other jobs as well as maintaining the home and caring for the children. All the money she earned was used for household and living expenses. Mr. Clarke remained a member of the Armed Forces until his retirement on February 2, 1976. He was then entitled to an annuity pursuant to the Canadian Forces Superannuation Act and had the option of receiving either a cash settlement or monthly payments. Mr. Clarke elected to receive monthly payments which amounted to $564.21 per month. The election is final. He cannot now re-elect to take a cash settlement.
After the parties separated Mrs. Clarke moved to Thunder Bay, Ontario, and lived in an apartment owned by her mother and another relative. Mr. Clarke moved out of the matrimonial home as well and subsequently entered into a common law relationship. He resided in Shelburne County, Nova Scotia. Only the children remained in the matrimonial home in Berwick, Nova Scotia. Mr. Clarke continued to pay the mortgage and the taxes on the matrimonial home and Mrs. Clarke sent money to the children to help with expenses.
Neither party has a significant income. At the time of separation Mrs. Clarke was doing seasonal work but at the time of the trial she was unemployed and receiving $860.00 per month in unemployment insurance. At the time of the trial Mr. Clarke was employed at a lumber company earning $7.50 per hour. During the year of the trial he made approximately $8,200.00. He was also receiving the monthly pension benefit.
The jointly owned matrimonial home had an assessed value of $56,500.00, subject to a mortgage with an outstanding balance as of May 31, 1985 of $18,623.26, or a net value to each party of $18,938.37. The home was sold in July of 1986. Excluding the pension benefit the remaining matrimonial assets amounted to just over $40,000.00. Thus, the only assets of substance were the matrimonial home and the pension benefit.
Mr. Clarke petitioned for divorce in the Supreme Court of Nova Scotia, Trial Division. Mrs. Clarke counter‑petitioned and sought as corollary relief an order for maintenance, a division of property and a division of pension benefits as matrimonial assets. In granting a decree nisi of divorce MacDonnell J. included Mr. Clarke's pension in calculating the equal division of property between the spouses. He included in Mr. Clarke's matrimonial assets $27,815.56, being the value of 58 months of pension payments received by him between the date of separation and the time of trial. He ordered that one half of the monthly pension payments received by Mr. Clarke in the future should be paid to Mrs. Clarke. After adjusting for income tax the amount to be received by Mrs. Clarke amounted to $239.79 per month.
Mr. Clarke appealed and the Appeal Division of the Supreme Court allowed the appeal and varied the order of the trial judge by deleting from it the monthly pension payments to be paid to Mrs. Clarke. The Appeal Division further ordered that the calculation of the matrimonial assets made by the trial judge be varied by deleting from Mr. Clarke's assets the pension payments he had already received, or $27,815.56. Mrs. Clarke was granted leave to appeal to this Court.
2. The Issues
This appeal is limited to the treatment in the courts below of the pension benefits being received by Mr. Clarke under the Canadian Forces Superannuation Act. The main issue is whether the pension is a "matrimonial asset" within the meaning of the Nova Scotia Matrimonial Property Act and therefore subject to equal division thereunder.
Section 12 of the Act provides for the equal division of matrimonial assets upon the dissolution of a marriage. It reads:
12 (1) Where
(a)a petition for divorce is filed;
(b)an application is filed for a declaration of nullity;
(c) the spouses have been living separate and apart and there is no reasonable prospect of the resumption of cohabitation; or
(d)one of the spouses has died,
either spouse is entitled to apply to the court to have the matrimonial assets divided in equal shares, notwithstanding the ownership of these assets, and the court may order such a division.
Matrimonial assets is defined in s. 4(1) as follows:
4 (1) In this Act, "matrimonial assets" means the matrimonial home or homes and all other real and personal property acquired by either or both spouses before or during their marriage, with the exception of
(a) gifts, inheritances, trusts or settlements received by one spouse from a person other than the other spouse except to the extent to which they are used for the benefit of both spouses or their children;
(b) an award or settlement of damages in court in favour of one spouse;
(c) money paid or payable to one spouse under an insurance policy;
(d) reasonable personal effects of one spouse;
(e) business assets;
(f) property exempted under a marriage contract or separation agreement;
(g) real and personal property acquired after separation unless the spouses resume cohabitation.
Should this Court find that the pension is not a matrimonial asset, the appellant seeks in the alternative an unequal division of the matrimonial assets under s. 13 of the Act on the basis that equal sharing would be "unfair or unconscionable" having regard to the respondent's exclusive entitlement to the pension.
Section 13 of the Act provides:
13 Upon an application pursuant to Section 12, the court may make a division of matrimonial assets that is not equal, or may make a division of property that is not a matrimonial asset, where the court is satisfied that the division of matrimonial assets in equal shares would be unfair or unconscionable taking into account the following factors:
(a) the unreasonable impoverishment by either spouse of the matrimonial assets;
(b) the amount of the debts and liabilities of each spouse and the circumstances in which they were incurred;
(c) a marriage contract or separation agreement between the spouses;
(d) the length of time that the spouses have cohabited with each other during their marriage;
(e) the date and manner of acquisition of the assets;
(f) the effect of the assumption by one spouse of any housekeeping, child care or other domestic responsibilities for the family on the ability of the other spouse to acquire, manage, maintain, operate or improve a business asset;
(g) the contribution by one spouse to the education or career potential of the other spouse;
(h) the needs of a child who has not attained the age of majority;
(i) the contribution made by each spouse to the marriage and to the welfare of the family, including any contribution made as a homemaker or parent;
(j) whether the value of the assets substantially appreciated during the marriage;
(k) the proceeds of an insurance policy, or an award of damages in tort, intended to represent compensation for physical injuries or the cost of future maintenance of the injured spouse;
(l) the value to either spouse of any pension or other benefit which, by reason of the termination of the marriage relationship, that party will lose the chance of acquiring;
(m) all taxation consequences of the division of matrimonial assets.
The appellant raises a third issue. She objects to the Court of Appeal's suggestion that she is not being deprived of any interest in the pension by its being excluded from matrimonial assets since it may still be used to form the basis of a maintenance order. She submits that a contingent right to obtain support is not an acceptable substitute for the absolute ownership of property arising from a division of matrimonial assets.
3. The Courts Below
Supreme Court of Nova Scotia, Trial Division
In dealing with the pension payments MacDonnell L.J.S.C. first stated that the leading case on whether entitlements under pension and retirement plans are matrimonial assets subject to distribution under the Matrimonial Property Act is Lawrence v. Lawrence (1981), 25 R.F.L. (2d) 130 (N.S.S.C., App. Div.), leave to appeal to this Court refused, 49 N.S.R. (2d) 209 (S.C., App. Div.). Hart J.A. held in that case that the pension benefit at issue was a matrimonial asset as opposed to a business asset. MacDonnell L.J.S.C. followed this authority. He rejected the submission that because the pension had been capitalized and was being received as income it could not be viewed as an asset. In his opinion it would be highly inequitable and unjust if, just because Mr. Clarke elected to take the pension benefit by way of monthly income rather than as a lump sum benefit, it should cease to be a matrimonial asset so that Mrs. Clarke could not benefit therefrom. MacDonnell L.J.S.C. further stated that:
During the 25 year duration of this marriage the evidence clearly indicates that the wife contributed to the up-keep of the home, the accumulation of matrimonial assets, and matrimonial benefits in all respects and at least an equal portion, if not more than the husband. The ability of the husband to accumulate the pension benefits which he is now enjoying on a monthly basis was very definitely made possible in a great part by the contribution of the wife. It would be highly unjust to deprive her of her proper benefit accruing from the said pension payments on the specious argument that having vested the said benefits do not have a value. The pension benefits most certainly have a value, namely, $564.21 monthly, less whatever income tax the same attracts.
MacDonnell L.J.S.C. therefore ordered that the pension benefits received by Mr. Clarke between the date of separation and the date of trial be added to his matrimonial assets and that one half of the future pension payments he received be paid to Mrs. Clarke. He found that both the past and future payments should be discounted by 15 percent for income tax purposes.
Turning to the issue of maintenance, MacDonnell L.J.S.C. noted that Mrs. Clarke was collecting unemployment insurance at the time of trial and found that no need had been proved. He added that, if Mrs. Clarke did not obtain employment in the future, it may be that her circumstances will have changed to such a degree that an application for maintenance could be successfully pursued.
Nova Scotia Court of Appeal (1986), 1 R.F.L. (3d) 29
Pace J.A., for the court (Hart, Jones and Pace JJ.A.), noted that the monthly pension payments received by Mr. Clarke were being received long before the separation and stated that the evidence revealed that the payments were not treated as matrimonial assets but rather as income in his hands. He distinguished the decision in Lawrence, supra, on the basis that Hart J.A. was referring to a return of pension contributions made by a husband who had changed his vocation from one university to another and whose pension was not transferrable and had to be withdrawn as a cash sum. In this case the pension payments were made on a periodic basis and constituted income, not a matrimonial asset. He observed as well that, as no evidence was adduced as to the capitalized value of the pension, it appeared that the trial judge had treated the pension benefit as income even although he had divided it as a matrimonial asset.
Pace J.A. recognized that some pensions might be matrimonial assets but expressed concern about classifying pensions as matrimonial assets in circumstances where the legislature had declared them to be inalienable and free from seizure or execution as was the case here. He stated at pp. 39-40:
Accepting as I must the judgment of this court in Lawrence, supra, that some pensions under certain circumstances are to be classified as matrimonial assets, the problem then arises as to the type of pension to be so classified and the valuation of the benefit. I must confess that I have grave difficulty classifying any type of pension as a matrimonial asset where there is an express legislative prohibition declaring the pension benefits inalienable and free from seizure and execution.
He found no authority in the Matrimonial Property Act which would permit the courts to override the express provisions of the Nova Scotia Pension Benefits Act, S.N.S. 1975, c. 14, or the federal Canadian Forces Superannuation Act.
Pace J.A. then reviewed Isbister v. Isbister (1981), 22 R.F.L. (2d) 234, wherein Monnin J.A., for the Manitoba Court of Appeal, commented on the difficulty of valuing pensions and held that non-assignable pensions had no calculable present value but could be used in calculating monthly or yearly maintenance. Pace J.A. stated at p. 42:
I agree with Monnin J.A. that the amount of monthly earnings received from a pension may be used in calculating the amount of maintenance to be paid to the other spouse. However, this does not mean that under our provincial Matrimonial Property Act a trial judge can divide the proceeds of the pension between the spouses, but rather he may treat it as income in the hands of the recipient in deciding the issue of maintenance.
Earlier in his reasons Pace J.A. had noted that Mrs. Clarke was not precluded from applying for maintenance at a future time if the need arose.
Jones J.A. agreed with the conclusion of Pace J.A. but added, inter alia, the following remarks at p. 44:
In Isbister v. Isbister . . . Monnin J.A. noted the impossibility of valuing pension benefits as anticipated by the Ontario Law Reform Commission report. Subsequent cases have simply confirmed that view where, legislatively or through judicial precedent, the definition of matrimonial assets has been extended to include pension benefits. The problem cannot be solved by simply including pension benefits under the Matrimonial Property Act and leaving it to the discretion of the judge to determine the value of those benefits. The legislative policy should be clearly expressed, preferably in pension legislation, so that spouses will know exactly what benefits they are entitled to in the event of a marriage breakdown.
The appellant submits that Mr. Clarke's pension was the security for their retirement. The appellant's contribution to the marriage partnership enabled Mr. Clarke to maintain his employment and accumulate the pension benefits he has received and continues to receive. The appellant further submits that the pension was built up by a diversion of funds that otherwise would have been available on a current basis to the family. Indeed, the appellant points out that these were factual findings made by MacDonnell L.J.S.C. at trial which were not disturbed by the Court of Appeal. The appellant therefore submits that it would be inequitable and unjust, as well as inconsistent with the policy of the Act, to prevent her from sharing in the pension benefits that the respondent is receiving on a monthly basis.
The objective of the Act found in the preamble supports the appellant's position. The preamble reads:
WHEREAS it is desirable to encourage and strengthen the role of the family in society;
AND WHEREAS for that purpose it is necessary to recognize the contribution made to a marriage by each spouse;
AND WHEREAS in support of such recognition it is necessary to provide in law for the orderly and equitable settlement of the affairs of the spouses upon the termination of a marriage relationship;
AND WHEREAS it is necessary to provide for mutual obligations in family relationships including the responsibility of parents for their children;
AND WHEREAS it is desirable to recognize that child care, household management and financial support are the joint responsibilities of the spouses and that there is a joint contribution by the spouses, financial and otherwise, that entitles each spouse equally to the matrimonial assets;
Thus the Act supports the equality of both parties to a marriage and recognizes the joint contribution of the spouses, be it financial or otherwise, to that enterprise. The Act goes further and asserts that, due to this joint contribution, both parties are entitled to share equally in the benefits that flow from the union -- the assets of the marriage. The Act is accordingly remedial in nature. It was designed to alleviate the inequities of the past when the contribution made by women to the economic survival and growth of the family was not recognized. In interpreting the provisions of the Act the purpose of the legislation must be kept in mind and the Act given a broad and liberal construction which will give effect to that purpose.
In this case, as the trial judge found, it was in large part due to Mrs. Clarke's contribution that Mr. Clarke was in a position to receive the pension. Prima facie, therefore, in light of the object and purpose of the Act, her contribution should be recognized by awarding her a share in the benefits accruing to the respondent from the pension. Having regard to the reality that in the case of many Canadian families a pension is their only substantial asset, it would seem inequitable to place pension benefits outside the scheme of equal division: see Rutherford v. Rutherford (1981), 23 R.F.L. (2d) 337 (B.C.C.A.), per Seaton J.A., at p. 342. I appreciate that there are differences in the Matrimonial Property Acts of the several provinces but each supports the equal partnership concept of marriage and the equal division of property. Accordingly, judicial comments from other jurisdictions can provide helpful guidance.
From this starting point of equality of treatment, it is my view that the issue raised by this appeal is really the appropriate means by which the appellant may participate in the benefits of the pension. The options appear to be: (1) finding that the pension is a matrimonial asset and subject to equal division; (2) ordering an unequal division of the matrimonial assets if the pension is not a matrimonial asset in order to achieve equality; or (3) taking the pension into consideration in making a maintenance order. The first two solutions rely upon the division of property provisions of the Matrimonial Property Act while the latter depends upon the maintenance provisions of the Divorce Act, R.S.C. 1970, c. D-8, as amended.
From the appellant's perspective the first option is undoubtedly the most attractive. When assets fall within the ambit of "matrimonial assets" s. 12 mandates equal sharing. There is no discretion at this stage of the inquiry. It is only when equal sharing would result in unfairness that s. 13 comes into play and a trial judge has a discretion to make an unequal division of the matrimonial assets. This discretion may or may not be exercised in favour of the non-recipient spouse. The non-recipient spouse bears the onus of "satisfying" the court within the meaning of s. 13 that equal sharing is unfair or unconscionable. That this is not an easy onus to meet is made clear by the Nova Scotia Court of Appeal in Harwood v. Thomas (1981), 45 N.S.R. (2d) 414, at p. 417:
Equal division of the matrimonial assets, an entitlement proclaimed by the preamble to the Act and prescribed by s. 12 should normally be refused only where the spouse claiming a larger share produces strong evidence showing that in all the circumstances equal division would be clearly unfair and unconscionable on a broad view of all relevant factors. That initial decision is whether, broadly speaking, equality would be clearly unfair -- not whether on a precise balancing of credits and debits of factors largely imponderable some unequal division of assets could be justified. Only when the judge in his discretion concludes that equal division would be unfair is he called upon to determine exactly what unequal division might be made. [Emphasis added.]
Moreover, s. 13 will not be an effective option where the only asset of substance is the pension. Hall L.J.S.C. was faced with this situation in Lefort v. Lefort (1988), 13 R.F.L. (3d) 359 (N.S.S.C.T.D.), a case arising after the Court of Appeal's decision in the present case. Hall L.J.S.C. distinguished Clarke and concluded that in these circumstances the pension had to be treated as a matrimonial asset in order to give effect to the purpose of the Act. He stated at p. 365:
The problem here, however, is that there are not adequate assets to respond to an order for an unequal division that would be of any practical benefit to the wife. The only asset of any consequence, matrimonial or otherwise, owned by the parties other than the rather modest household goods and furnishings and the husband's automobile is the husband's pension fund. In my opinion it would be intolerable and contrary to the intent of the Matrimonial Property Act to permit the husband to claim for himself sole entitlement to this asset with the benefit of future security accruing only to him, while the wife, who has the principal responsibility of the care of the children, is left with a few sticks of furniture.
I would add that even in cases where another asset of substance exists, an unequal division due to the existence of a pension that has not yet matured may result in one partner being "present asset rich" while the other is "present asset poor".
In my view therefore, as between the two options under the Matrimonial Property Act, including pensions as matrimonial assets subject to equal division is clearly the most consonant with the spirit and intent of the legislation.
Turning to the maintenance option, which is the appellant's third issue, I note that it arises out of the statements made by Pace J.A. in the Court of Appeal. He expressed the view that even although the pension benefit was not a matrimonial asset, the appellant might still be entitled to participate in it through an award of maintenance should the need for maintenance arise. The pension in this context would be income in the hands of the recipient spouse.
The appellant submits that maintenance is not an acceptable alternative to a share of a capital asset, the former being contingent on continuing need on the one hand and ability to pay on the other. I think the appellant's submission is sound. Cameron J.A., in Tataryn v. Tataryn (1984), 38 R.F.L. (2d) 272 (Sask. C.A.), clearly identified the difference between the two interests at pp. 285-86:
In my respectful view, the term "maintenance asset" has no place in determining whether a right to a pension is, or is not, matrimonial property within the meaning of s. 2(h) of the Act. Nor can a pension entitlement, if it constitutes matrimonial property, be excluded from distribution on the footing it is a source of income from which alimony or maintenance obligations can be paid.
A matrimonial property right is not to be confused with a right to alimony or maintenance. The two differ fundamentally. Not only do they depend for their existence on different enactments and spring from different assumptions, their legal character is wholly dissimilar; the first is proprietary in nature, and concerns capital and its division: the other is personal, and involves income and the support of one spouse by the other.
The statutory right of a married woman to share in the property accumulated during her marriage is rooted in the modern view of marriage as a partnership, and derives from the presumption of the Matrimonial Property Act that each of the partners contributed equally and independently to the acquisition of the marital property. Neither the conduct or condition, nor the needs or means, of either of the partners to the marriage have anything to do with the earned right of each of them to share in the property of the marriage -- except to the limited extent that these factors may incidentally touch upon the existence and extent of an exemption, exception, or equitable consideration mentioned in the Act. Generally speaking this Act, which provides for an orderly dissolution of the economic partnership on marriage breakdown, envisages a complete accounting and final sharing of the marriage capital following the breakdown.
A married woman's right to alimony and maintenance is, of course, a very different matter. It is anchored, historically, in the notion that marriage imposed a duty upon the husband to support his dependent wife according to his means as long as she did not absent herself without cause. The rights to alimony and maintenance . . . remain altogether dependent upon the behaviour of the wife, and on the condition, means and other circumstances of each of the spouses. And, generally speaking, there is little finality to the right of support; if it exists it survives separation and divorce, and remains, at all times, subject to review as circumstances change.
All of this is not to say that the two rights are altogether unrelated, for obviously they are not, but in my respectful opinion they have to be kept separate when determining whether a given thing is or is not matrimonial property. [Emphasis added.]
I agree with Cameron J.A.'s analysis. Discretionary support payments are a wholly inadequate and unacceptable substitute for an entitlement to share in the assets accumulated during the marriage as a result of the combined efforts of the spouses.
Having concluded that the preferred option is to characterize the pension as a matrimonial asset, we must consider whether this option is open to the Court. This would appear to be the first time the issue has come before us.
"Pension" is a colloquial term rather than a term of art. There are a wide variety of pensions payable under a variety of plans. Pension plans may be contributory or non-contributory and the employee's interest under the plan may be vested or contingent. When the pension is vested the employee has a guaranteed right to receive his or her entitlement even if the employment relationship terminates prior to the fixed retirement date. The employee may also have a choice as to mode of payment, as was the case here, or a choice as to when to begin receiving the pension if early retirement is available.
Over the past several years lower courts have frequently been faced with the question whether pensions are matrimonial assets and they have discussed the various kinds of pension plans and their peculiar characteristics. Thus, even although there is a discernible trend in Canada in favour of pensions as a form of matrimonial property subject to equal division upon divorce, there are also a number of decisions in which the courts have been at pains to restrict their decisions to the particular kind of plan before them. For example, in Tataryn, supra, the Saskatchewan Court of Appeal unanimously held that a vested pension should be considered matrimonial property within the meaning of the Saskatchewan Matrimonial Property Act, R.S.S. 1979, c. M-6.1, but went out of its way to restrict its decision to vested pensions. Quoting from p. 288:
None of this is to say that every interest in a pension scheme will constitute matrimonial property. Some may not. Indeed, I would say that generalization is more hazardous than usual when it comes to pension rights because there are so many kinds of pension plans, containing such a wide variety of provisions.
Accordingly, while I think the policy of the Act supports the trend towards treating pensions as matrimonial property for purposes of the division of matrimonial assets, it may not be possible to establish a general principle to that effect given the variety of plans under which pension entitlements may arise. It is with this caution in mind that I approach the question whether this particular pension is a matrimonial asset under this particular legislation.
The Canadian Forces Superannuation Act
Under the Canadian Forces Superannuation Act it was mandatory that Mr. Clarke contribute a certain percentage of his wages toward his pension. This contribution was matched by his employer. Under the Act the amount of the annuity to be received when the named recipient ceased to be a member of the regular force or died is based on a formula which takes into account the number of years of pensionable service to the credit of that person and an average annual income based on the "best" six years of service. The pension in this case matured prior to the parties' separation. Before the respondent retired he had the option of taking a cash settlement which would have been payable to him less the income tax payable on it, or a monthly benefit of $564.21. Mr. Clarke chose the latter option and is currently receiving the monthly payments. There is a possibility that these pension benefits will be indexed to cost of living increases.
The wording of the Matrimonial Property Act
I turn first to the relevant provisions of the Act in order to determine whether its language prevents pensions generally from being considered matrimonial assets. Section 4(1), of course, is relevant to this question as it provides a definition of matrimonial property. The definition is very wide in scope. It includes all real and personal property other than that listed in the exceptions. The Court of Appeal in Lawrence gave a broad interpretation to this definition, Hart J.A. stating at p. 141:
Matrimonial assets include all assets acquired by the spouses either before or during the marriage, but certain types of property are excluded. The principal exclusions are business assets and property received by gift which is not used as a family asset. Unless property can be brought within one of the exclusions in s. 4, however, it remains a matrimonial asset no matter what its kind or use. [Emphasis added.]
Aside from its breadth, however, the definition does not provide much guidance on the subject of pensions specifically. They are neither included nor excluded.
The respondent submits, however, that pensions are excluded from the definition of matrimonial assets by virtue of their inclusion in the "business assets" exception. The definition of business assets is found in s. 2(a) of the Act which reads:
2In this Act,
(a) "business assets" means real or personal property primarily used or held for or in connection with a commercial, business, investment or other income or profit producing purpose, but does not include money in an account with a chartered bank, savings office, loan company, credit union, trust company or similar institution where the account is ordinarily used for shelter or transportation or for household, educational, recreational, social or aesthetic purposes;
Hart J.A., for the court, considered this section in Lawrence and concluded that pensions were not "business assets". He noted that too broad an interpretation of s. 2(a) could result in removing virtually all assets from the classification of matrimonial assets except the matrimonial home. He concluded that the only assets which fall within the definition of business assets are those that are purposely held or used for the production of income or profit. Pensions in their ordinary form and use would not fit that description. He stated at pp. 142-43:
It seems to me therefore that the only assets that should be classified as business assets are ones that are purposely held or used for the production of income or profit. Thus an apartment house would be a business asset, whereas a piece of land held in the hope of gain would be a matrimonial asset. A car used in business would be a business asset, and a car used for family purposes would be a matrimonial asset. Money invested in savings certificates, stocks or bonds would be business, whereas money resting in current accounts or accounts used for household purposes would be matrimonial. Works of art would be matrimonial whereas an operating farm would be a business asset. It is not enough to say that some gain or benefit may accrue in the future from the asset, but rather it must be said that it is working in a commercial, business or investment way for the production of income or profit.
In my opinion entitlements to insurance, pension and other similar benefits pursuant to contractual arrangements would not fall within the definition of business assets contained in the Act. They are not primarily held for the purpose of producing income or profit. They are in reality schemes for saving which divert present income to future use in times of peril or when the ability to earn income has passed.
Nor would schemes, such as registered retirement savings plans be business assets under the Act. Their primary purpose is to save funds and lessen the income tax which would otherwise be payable on those funds. [Emphasis added.]
I agree with Hart J.A. that pensions are not business assets. It seems to me that business assets are assets which have as their purpose the generation of income in an entrepreneurial sense. A pension is not such an asset. Pensions may tangentially generate income through interest but essentially they are funds comprising income diverted from the date on which it was earned. Pensions are more analogous to savings accounts than to business assets and thus cannot be excluded from the definition of matrimonial assets under s. 4(1)(e). The fact that the pension benefits in this case are being paid on a monthly basis does not, in my view, affect the essential nature of the pension. Its purpose remains the same.
Section 13(l) of the Act must also be considered in determining whether pensions were intended to be included as matrimonial assets. As Pace J.A. noted in the Court of Appeal, the Matrimonial Property Act gives no specific direction as to the classification and division of pension benefits except under s. 13 where the court may, in making an unequal division of matrimonial assets, take into account "the value to either spouse of any pension or other benefit which, by reason of the termination of the marriage relationship, that party will lose the chance of acquiring".
The respondent submits that the fact that s. 13(l) provides for an unequal division based upon the value of a pension or other benefit lost because of the termination of the marriage evinces an intention that pensions are not to be considered matrimonial assets. He argues that it is implicit in this section that upon termination of the marriage the non-recipient spouse loses his or her chance to acquire an interest in the pension and it may be appropriate, therefore, in such circumstances to make an unequal division in that spouse's favour. This interpretation, if correct, would preclude the inclusion of pensions in matrimonial assets since, if they were matrimonial assets, there would be no such loss.
The respondent's position assumes, however, and in my view erroneously, that the subsection was intended to benefit only the non-recipient spouse. If pensions are included as matrimonial assets so that the non-recipient spouse is awarded an equal share in it, it will be the recipient spouse who may wish to assert a claim for an unequal division. He or she will also have lost the chance of acquiring a portion of the pension benefit by reason of the termination of the marriage.
I find support for this interpretation of the section in the overall scheme of the Act. Since pensions are not included in the list of exceptions in s. 4(1), it is logical to assume that pensions are indeed matrimonial assets and hence are to be divided equally. This was the approach recently taken to s. 4(1) by Davison J. of the Nova Scotia Supreme Court, Trial Division in Curren v. Curren (1987), 81 N.S.R. (2d) 118, where the issue was the characterization of promissory notes. It was also the approach taken by the Court of Appeal in Lawrence when dealing with pensions. In Curren Davison J. stated at p. 123:
The real contentious issue involves characterizing the two promissory notes or the proceeds therefrom. I use the word "characterizing" advisedly because it would be easy to fall into the trap of attempting to fit assets into one of two "pigeonholes" -- matrimonial assets or business assets. It is my view, with respect, that one starts with the presumption that "all . . . property acquired by either or both spouses before or during their marriage . . ." are matrimonial assets and that it is incumbent on one who asserts that a particular asset is not a "matrimonial asset" to prove that the asset falls within the exceptions set forth in s. 4(1). As stated by Hart, J.A., in Lawrence v. Lawrence (supra) at 113:
"Unless property can be brought within one of the exclusions in s. 4, however, it remains a matrimonial asset no matter what its kind or use."
It seems to me that those exceptions have one common characteristic in that all of the exceptions contemplate assets which are unrelated to the marriage but are associated with one spouse to the exclusion of the other and to that extent could be termed "personal assets". [Emphasis added.]
If, in other words, the asset does not fall clearly within one of the exceptions in s. 4(1) it is a matrimonial asset subject to division.
After including all property acquired either before or during the marriage the court may then go on to consider whether, in light of the factors enumerated in s. 13, equal division would be unfair. One such factor enumerated in s. 13(l) is the value of any pension benefit lost as a result of the termination of the marriage.
Depending upon the view taken as to whether or not pensions should be included as matrimonial assets, the courts in Nova Scotia have used s. 13(l) in different ways. When the courts have found that pensions are not matrimonial assets, an unequal division in favour of the non-recipient spouse has been made in order to rectify the inequity resulting from one partner's exclusive entitlement to the pension: see, for example, Lemmon v. Lemmon (1987), 77 N.S.R. (2d) 113 (S.C.T.D.) and Stevens v. Stevens (1987), 7 R.F.L. (3d) 127 (N.S.S.C.T.D.). On the other hand, where pensions have been included as matrimonial assets, the courts have found it appropriate to award an unequal division in favour of the named recipient. In McNulty v. McNulty (1989), 24 R.F.L. (3d) 41 (N.S.S.C.T.D.), Davison J. held that the pensions in issue were matrimonial assets but concluded that an equal division would be unfair due to the fact that Mr. McNulty, the named recipient, had built up a major portion of the pension prior to the marriage, had developed multiple sclerosis, and because Mrs. McNulty had not made any significant contribution to Mr. McNulty's career.
It seems to me therefore that the way in which s. 13(l) is applied turns on the prior characterization of pensions, i.e. whether or not they are properly characterized as matrimonial assets. The section does not come into play until this determination has been made. In other words, the section does not assist us in determining whether or not the pension is a matrimonial asset.
A brief review of the relevant provisions of the Act persuades me that nothing in its wording forecloses the characterization of pensions as matrimonial assets. The respondent's main argument, however, is that pensions, particularly periodic pension payments, are not "property" and therefore cannot be included when dividing matrimonial property under s. 12. I turn now to a consideration of that submission.
Is the pension "property"?
The appellant submits that a pension is properly viewed as "property" and is a matrimonial asset subject to equal division under the Act. She argues that a pension is a right to receive fixed periodic payments and that such a right constitutes a chose in action which is a form of property. The appellant cites a number of cases to support this submission: see Rutherford, supra; Herchuk v. Herchuk (1983), 35 R.F.L. (2d) 327 (Alta. C.A.); McAlister v. McAlister,  2 W.W.R. 8 (Alta. Q.B.) and Tataryn, supra. Moreover, at the time this litigation was instituted the matrimonial property legislation of British Columbia, Manitoba and Ontario all provided that pensions were matrimonial assets. In several other provinces where the legislation is similar to the legislation in issue here the appellate courts treated pensions as matrimonial assets. Since that time amending legislation has been enacted in some of the other provinces. In Nova Scotia the Pension Benefits Act was amended in 1987 (S.N.S. 1987, c. 11) and under s. 61(2) a spouse may apply to the court for a division of the pension of his or her former spouse. As the following review demonstrates, the current trend to treat pensions as matrimonial property presumptively subject to equal sharing has been both judicial and legislative. The courts are, of course, restricted by the language of the particular statutes but it is quite apparent that the provinces consider it generally unfair to exclude one partner to the marriage from the benefits of a pension.
However, one of the first appellate level decisions to deal with the issue of pensions in the matrimonial context, Isbister, supra, was out of step with the current trend and is heavily relied upon by the respondent. In Isbister the husband had contributed to three pension plans and the trial judge fixed the value of these benefits as of the date of separation at $35,000. The husband appealed this valuation and claimed that the trial judge had erred in accepting actuarial evidence to evaluate the pension rights. Monnin J.A., for the Manitoba Court of Appeal, commented that decisions from other jurisdictions must be viewed with caution because under s. 1(b) of the Manitoba Marital Property Act, S.M. 1978, c. 24, C.C.S.M., c. M45, a commercial asset was defined so to include rights under a pension scheme or plan. Thus a pension could not be a family asset. Monnin J.A. also expressed concern about the problem of valuing pensions in light of the legislative prohibitions against alienation. He held that pension benefits had no market value and could not be included as assets under the Act. He stated at p. 243:
How anyone can place any market value on a pension fund or scheme in light of those two sections is difficult to fathom. There is not likely to be any market value for funds which are so clearly, by statute, declared to be inalienable, unassignable, unable to be charged, and free from seizure, execution, attachment, and any transaction which purports to assign, charge, anticipate, or give as security such moneys is declared to be void. Who in his right mind would want to purchase such an asset? Without a purchaser, it is impossible to put a price on same or to valuate it for the purpose of division or accounting of assets. Consequently, s. 1(b) of the Marital Property Act, which purports to include in commercial assets rights under a "pension scheme or plan" is not likely to result in any accountable value. . . . Pension benefits are income to be earned in the future, once a person has retired from employment. There are many ifs and buts until date of the payment of the pension. The amount of such yearly or monthly earnings may be used in calculating monthly or yearly maintenance to be paid to the other spouse when the husband is in receipt of his pension, but no spouse can or should be compelled to put up solid cash or money value for something which is independent of him until he has reached retirement age, which no one can be certain of reaching because employment may cease, the pension fund may be bankrupt, or death may arrive prior to retirement.
A different view of the matter was taken by the Manitoba Court of Appeal in George v. George (1983), 35 R.F.L. (2d) 225. The court distinguished Isbister and affirmed the trial judge's decision that the pension was a divisible asset. The focus of the judgment was on the appropriate means of valuing the pension. O'Sullivan J.A., for the majority, overturned the trial judge's order for an immediate accounting and division, declared the named recipient of the pension a trustee and Mrs. George entitled to an interest in any benefits payable in the future. Matas J.A., in dissent, affirmed the trial judge's immediate division and in the course of his reasons approved of Geisel v. Geisel (1981), 24 R.F.L. (2d) 424, a Manitoba Court of Queen's Bench decision in which Morse J. held that the guaranteed portion of the plan should be included as a matrimonial asset.
It is accordingly clear that at the present time pensions are to be included when dividing matrimonial property in Manitoba. Following these decisions The Pension Benefits Act, S.M. 1975, c. 38, was amended, effective January 1, 1984, to specifically provide for a division of pension benefits on marriage breakup. The inequity of Isbister undoubtedly prompted this change. The initial judicial treatment of pensions in Manitoba was anomalous when compared with other jurisdictions.
Pension benefits also constitute part of the "family patrimony" in the province of Quebec (Art. 462.2, second paragraph, C.C.Q.) available for equal division between the spouses on marriage dissolution (Art. 462.3 C.C.Q.).
The situation in British Columbia has been clarified by statute for a number of years. Section 45 of the Family Relations Act, R.S.B.C. 1979, c. 121, specifically includes pensions in its definition of family assets. It reads, inter alia, "a right of a spouse under an annuity or a pension, home ownership or retirement savings plan". However, cases from that jurisdiction may still be instructive. In Rutherford v. Rutherford (1979), 14 R.F.L. (2d) 41 (B.C.S.C), Bouck J. did not seem to base his decision solely on the language of s. 45. Rather, he stated at p. 58 that "[c]learly, the pension is a family asset, if not by statute then by logic, under s. 51". Section 51 is a general provision which allows a court to include property not specifically described in the Act and to re-arrange the division of property on the grounds of fairness. The Court of Appeal affirmed his decision. Seaton J.A., for the court, interpreted s. 45 so as to include a wide variety of pension benefits and rejected the argument that there must be a present right to a pension in order for it to be a family asset. He stated at p. 342:
I would read "a right of a spouse under an annuity or a pension" to include any right, even one that can be said to be inchoate, contingent, immature, or not vested. In short, I would interpret these provisions broadly, so as to give full effect to the policy adopted by the legislation.
The leading case in Alberta on the division of a pension on marriage breakdown is Herchuk, supra. The Court of Appeal was faced with the question whether the husband's right in a contributory pension plan was "property" within the meaning of the Alberta Act. The pension at issue was vested but had not matured and the named recipient could not commute his interest to a single cash payment but had to take the benefits in accordance with a number of options. There was a death benefit payable to his estate worth approximately $40,000. The value of the pension based on the cost of purchasing an equivalent pension plan ranged from approximately $71,000 to $82,000. The pension was not assignable; the Alberta Pension Benefits Act, R.S.A. 1980, c. P-3, prohibited the pension from being assigned, charged, attached, anticipated, or given as security. The Alberta Matrimonial Property Act, R.S.A. 1980, c. M-9, does not define the kinds of property to which the Act applies and makes no reference to pensions. In characterizing the pension as property Stevenson J.A. stated at pp. 335-36:
Matrimonial property legislation seeks to distribute the assets the parties have accumulated. A contribution to a pension plan represents a significant diversion of income, sometimes compulsory, sometimes not. Moreover, employer contributions to such funds may be viewed by a wage earner as an important component of his income even though it may be returned in a capital form. While we recognize that there are considerable difficulties in valuation and that there are inequities inherent in making a distribution, to disregard these accumulations is to disregard the object of the Act. In Mazurenko v. Mazurenko [citations omitted], I took the object of the Act from the report of the Institute of Law Research and Reform to be the sharing of economic gains. The accumulation of capital to provide for retirement or other future needs cannot be distinguished from the accumulation of pension credits. If we were to develop the concept of "maintenance assets", creating a class of such assets, its application for the benefit of the spouse would be based on relative need, not on the capital contribution. The object of the Act is to ensure that the spouses share accumulations . . . I disagree with the conclusion reached in Isbister. I characterize the rights of the husband here as property. The Act is cast in terms of the distribution of property, not its value (although valuation should be relevant and is required in cases of exemptions). The term "property" is not qualified in our statute. It is a broad term which embraces choses in action. [Emphasis added.]
Stevenson J.A. did not comment on valuation and distribution but remitted the matter to the trial judge. He did, however, approve of the analysis and conclusions of Dea J. in McAlister, supra, where the characterization of pensions and numerous Canadian authorities were considered at length. It had been argued before Dea J. that pension rights should not be classified as matrimonial property because they were mere contractual rights or future rights to income. In reply to this argument Dea J. stated at pp. 19-20:
Under either head the objection would not in my view preclude the inclusion of pension benefits as matrimonial property in this province. Here the only test is "property". A chose in action is property. But this objection does raise what may be an underlying unstated objection to a characterization of pension rights as property. A review of the pension terms discloses that every contributor, upon completing a certain number of years of employment, is entitled to a pension. That is the scheme of the legislation and its regulations. While the occurrence of certain contingencies may defeat that entitlement, until those contingencies occur, the entitlement is there. It is a present interest subject to defeasance.
To inferentially compare the pension rights created here to a contract subject to a condition precedent so that nothing exists until the condition is fulfilled seems to me contrary to the plain words and intendment of the legislation and the regulations creating the rights. These rights are better compared to a contract subject to conditions subsequent, where the interest created by the statute exists but may be defeated upon the occurrence of the subsequent conditions.
Pensions are not specifically included in the definition of family property in the Matrimonial Property Act of Saskatchewan. It defines matrimonial property as any real or personal property, regardless of its kind or nature, that is owned, or in which an interest is held, by one or both of the spouses. Until the Saskatchewan Court of Appeal decision in Tataryn there had been conflicting treatment of pensions by the lower courts. In Tataryn Cameron J.A. held that vested pensions, irrespective of whether they had matured, constituted choses in action and formed part of the matrimonial property. He stated at p. 287:
With that I return to the question of whether the pension entitlement in this case is matrimonial property. I have no doubt that it is. Mr. Tataryn has a contractual right to receive, on retirement, a periodic sum for life. His entitlement is vested -- in the sense I earlier referred to -- although not yet matured. Expressed in traditional terms this is incorporeal personal property. It is a chose in action, an existing personal right of property capable of enforcement by action. And, since it was acquired during the marriage, the husband and wife are, by virtue of s. 20, equally entitled to it -- subject only to the exceptions, exemptions, and equitable considerations mentioned in s. 21.
Similarly, the Newfoundland Court of Appeal held in Hierlihy v. Hierlihy (1984), 48 Nfld. & P.E.I.R. 142, that a pension is a family asset. The legislation at the time did not specifically address the subject of pensions.
In Nova Scotia, prior to the decision of the Court of Appeal in the present case, Lawrence was the leading authority. The pension benefits in issue had to be withdrawn as a cash sum since the husband was moving to a new work place and the contributions could not be transferred. The trial judge found that the pension contributions were matrimonial assets. The husband appealed alleging that the benefits were a business asset and not subject to distribution. Hart J.A., for the court, rejected his submission and held that pension benefits generally fall into the classification of matrimonial assets for the purpose of equalization under s. 12. Subsequent to Lawrence, but prior to this appeal, a number of decisions of the Nova Scotia Court of Appeal had upheld trial court decisions that pensions were matrimonial assets subject to equal sharing: see, for example, Cleaves v. Cleaves (1982), 27 R.F.L. (2d) 239; Muise v. Muise (1982), 30 R.F.L. (2d) 296, and Nolet v. Nolet (1985), 46 R.F.L. (2d) 388.
As evidenced by this brief review the weight of appellate authority in several of the provinces supports the classification of pensions as matrimonial property. I think this is an entirely appropriate classification. As found by the courts in both Herchuk and Tataryn, pensions are choses in action or incorporeal personal property. The named recipient of a pension is entitled to the benefits therefrom as of right. As stated by Dea J. in McAlister at p. 15, the receipt of the pension benefit is not "dependent upon arbitrary whim or the exercise of any discretion by any third party".
Nor do I find persuasive the respondent's submission that the pension benefits being received in this case are income rather than property and accordingly not subject to division. I must respectfully disagree with Pace J.A.'s conclusion to that effect. Pension benefits are not "income" in the traditional sense, i.e. payments for present work, nor are they income to be earned in the future. They are benefits earned throughout the period of the pension. By the time of maturation the earning period is in the past. Hart J.A. stated it this way in Lawrence -- pensions "are in reality schemes for saving which divert present income to future use in times of peril or when the ability to earn income has passed" (p. 143). A pension is created by earlier savings which give rise to future benefits. In this sense it is like an insurance plan or any other savings scheme, structured or otherwise, which would be considered matrimonial property. Thus, to characterize the pension benefits in this case as income is to disregard the nature of pensions and place form ahead of substance with resultant unfairness.
I agree also with the trial judge that it would be unjust, indeed somewhat absurd, to find that because Mr. Clarke elected to take monthly payments rather than a lump sum this changes the character of the asset and distinguishes the case from Lawrence. The monetary contributions to the fund were made during the course of the marriage and had the effect of reducing the moneys otherwise available to the household. Again, the fact that the pension benefits are being received as a form of "income" does not, in my view, change their essential nature.
However, the respondent raises as impediments to classifying pensions as matrimonial property the fact that they cannot be properly valued and cannot be assigned. These concerns were raised in the judgments of the court below. Pace J.A. was concerned about the inalienability of pension benefits and Jones J.A. about their valuation. I will deal with each of these concerns in turn.
The difficulty in valuing pension benefits has been addressed in a number of Canadian cases. Indeed, it led to the conclusion in Isbister. It will be recalled that Monnin J.A. found that because the pension benefit at issue was inalienable it had no market value and thus could not be valued for the purpose of division or accounting of assets. In several subsequent cases, however, the reasoning in Isbister has been criticized, especially for the importance it placed on the difficulty of valuation. For example, after reviewing Isbister and thoroughly examining the case law, Cameron J.A. commented in Tataryn at p. 283:
With respect, I do not agree with much of this reasoning. Whether a thing is, or is not, matrimonial property subject to the provisions of the Act does not fall to be determined on the ease or difficulty with which it may be valued or distributed. These are distinct issues. Nor in my respectful opinion may the distribution, required by law, be avoided by treating the pension as a source of future maintenance.
Similar criticism is also found in McAlister where Dea J. stated at p. 17:
But is it reasonable to conclude that because the pension may not be alienated that it has no value? It seems to me that almost the opposite conclusion should be drawn. It was because the legislators knew that pension rights had value that they enacted laws or regulations prohibiting alienation. They wanted to ensure that the owner of the pension plan would receive the benefits and so they enacted law to ensure that the pensioner could not alienate his interest, and as well to ensure that his creditors could not attach it.
Without in any way minimizing the difficulties that may arise when courts are faced with the valuation problem, it is my view that such difficulty is not a bar to concluding that pensions are property for the purposes of equal division. Courts are frequently required to put a value on items that have no readily ascertainable value such as pain and suffering or the goodwill of a business. They have shown a willingness to place a value on different kinds of pensions and have displayed considerable initiative in seeking a just result in particular circumstances. The task is not an impossible one and the difficulty of placing a current value on pension rights is not, in my view, a good enough reason for refusing to characterize pensions as matrimonial property.
In any event, valuation does not appear to be an insuperable problem in this case. Once a pension has matured and is being paid out either in a lump sum or on a monthly basis valuation is relatively simple. The payments that had already been made to the respondent since separation were totalled and added to the respondent's asset list for division purposes. The monthly payments of $564.21 he was currently receiving and would be receiving in the future were also ordered to be divided between the parties. This approach does away with the need to establish the present value of the pension.
I note, however, that there have been a number of scholarly articles which review and criticise the methods courts have sometimes employed in valuing pensions. Their insights may prove helpful when valuation is difficult. For example see: P. Knight, "Splitting and Sharing Pension Assets on Marriage Breakdown" (1985), 14 Man. L. J. 419; J. McBean, "The Treatment of Pensions Under the Alberta Matrimonial Property Act: Some Unresolved Issues", in Payne's Divorce and Family Law Digest (1986), p. E-25; E. Roche, "Treatment of Pensions upon Marriage Breakdown in Canada: A Comparative Study" (1987), 1 C.F.L.Q. 189; J. Patterson, "Determining a Realistically High Value of the Spouse's Interest in the Employee's Pension" (1987), 1 C.F.L.Q. 345; M. Pollock, "Division of Pension Rights on Marriage Breakdown in Alberta: A Review of some Proposed Amendments to the Alberta Matrimonial Property Act" (1987), 2 C.F.L.Q. 83; J. Marmer, "Valuing Registered Retirement Savings Plans" (1987), 2 C.F.L.Q. 97; P. Winokur and S. Eadie, "Current Pension Valuation Issues from an Ontario Perspective" (1988), 3 C.F.L.Q. 197; N. Campbell, "Division of Pensions Under the Ontario Family Law Act: A Comment on Marsham v. Marsham and Humphreys v. Humphreys" (1988), 7 Can. J. Fam. L. 79; and A. Bissett-Johnson, "Three Problems of Pensions -- An Overview" (1990), 6 C.F.L.Q. 137.
Restrictions on Alienation
The Court of Appeal in this case placed great reliance on the legislative prohibitions against alienation in finding that the respondent's pension benefits could not be characterized as matrimonial assets. This prohibition is found in s. 8(6) of the Canadian Forces Superannuation Act, as amended by the Garnishment, Attachment and Pension Diversion Act, S.C. 1980-81-82-83, c. 100, s. 41, and reads:
8. . . .
(6) Except as provided by Part II of the Garnishment, Attachment and Pension Diversion Act, amounts payable under this Part are not capable of being assigned, charged, attached, anticipated or given as security and any transaction purporting to assign, charge, attach, anticipate or give as security any such amount is void.
The only relevant exception provided for by Part II of the Garnishment, Attachment and Pension Diversion Act is s. 22 and it deals with support orders:
22. (1) In this Part,
. . .
"financial support order" means, subject to subsection (2), an order or judgment for maintenance, alimony or support (including an order or judgment for arrears of payments) made pursuant to the Divorce Act or pursuant to the law of a province relating to family financial support;
In oral argument before this Court the respondent submitted that this restriction on alienation prevents the courts from diverting or attaching periodic pension payments in any manner. By implication, therefore, the pension cannot be matrimonial property. The respondent further submitted that the legislature made it quite clear that the strict prohibition applied to property division since it amended the Act to make a specific exception for maintenance. As I understand the respondent's submissions, he argues that not only are non-assignable pensions not property, but it is constitutionally beyond the power of the province to deal with pensions that arise out of employment in the federal sphere.
The appellant for her part submits that the restrictions on alienation were never intended to apply in the matrimonial context and are not a bar to characterizing pensions as matrimonial property. In any event, the appellant submits that the type of order made by the trial judge in this case or the type of order where a trust is imposed on the recipient spouse by the court for the benefit of the non-recipient spouse avoids any conflict between the two Acts because the pension administration is not interfered with in those circumstances and the actual pension payments are not being attached.
Again I find myself in agreement with the appellant. In my view, s. 8(6) does not place any concrete legal barriers in the way of a finding that pensions are property and therefore matrimonial assets. The first branch of the respondent's argument, that non-assignable pensions are not property, has already been touched upon. In my opinion, while there may not be a market for such pensions, they have a value to the named recipient (evidenced by the abundance of litigation on the issue) even if they cannot be transferred to others. They do not cease to be assets on that account. Indeed, at common law all choses in action were unassignable but they were nonetheless recognized as property. I agree with the comments of Dea J. in McAlister that, if anything, a legislative prohibition against alienation is a recognition of the value of such rights and of their essential nature as "property".
I turn now to the second branch of the respondent's argument, namely that the province may not constitutionally deal with the pension as a matrimonial asset. The reason for this, it is said, is that if the pension is treated as a matrimonial asset and subject to division, a conflict will arise between the Matrimonial Property Act and the Canadian Forces Superannuation Act. In order to avoid this conflict, the respondent submits, the provincial legislation should be read as not including pensions within its definition of matrimonial assets. I do not agree.
The proper approach to determining questions of paramountcy is stated by Professor Hogg in Constitutional Law of Canada (2nd ed. 1985) at p. 354:
The doctrine of paramountcy applies where there is a federal law and a provincial law which are (1) each valid, and (2) inconsistent . . . . [I]t should not be overlooked that the issue [of paramountcy] does not arise unless each law has first been held to be valid as an independent enactment.
Once independent validity and inconsistency are established, the doctrine of paramountcy is invoked. The effect of that doctrine is stated by Professor Hogg at p. 367 to be as follows:
Once it has been determined that a federal law is inconsistent with a provincial law, the doctrine of federal paramountcy stipulates that the provincial law must yield to the federal law. The most usual and most accurate way of describing the effect on the provincial law is to say that it is rendered inoperative to the extent of the inconsistency. Notice that the paramountcy doctrine applies only to the extent of the inconsistency. The doctrine will not affect the operation of those parts of the provincial law which are not inconsistent with the federal law, unless of course the inconsistent parts are inseparably linked up with the consistent parts.
There is no doubt in my mind that Professor Hogg has accurately described the process of determining paramountcy questions. Indeed, this Court has recently had occasion to apply the doctrine of paramountcy in Bank of Montreal v. Hall,  1 S.C.R. 121. There, La Forest J., writing for the Court, indicated that an otherwise valid provincial law will be held inoperative only to the extent that it conflicts with a valid federal law. I note at this point that there is a flaw in the respondent's argument. A finding of paramountcy does not preclude this Court from determining that pensions are property and therefore matrimonial assets. At most, the invocation of the doctrine of paramountcy will result in the provincial law being rendered inoperative to the extent of its inconsistency with federal law. The question remains, therefore, whether such a conflict exists between the legislation at issue.
There is no doubt that the legislature of Nova Scotia has jurisdiction over matters of family property: Derrickson v. Derrickson,  1 S.C.R. 285. Sections 4 and 13(l) of the Matrimonial Property Act are intra vires the province. Nor was it argued that Parliament was without jurisdiction to enact s. 8(6) of the Canadian Forces Superannuation Act and I am of the view that Parliament did indeed have such jurisdiction.
Having found that both Parliament and the Nova Scotia legislature were acting within the confines of their respective jurisdictions in enacting the provisions under review, the question becomes whether by virtue of the operation of the doctrine of paramountcy the federal provision should prevail. The test to be used in determining whether a conflict exists between the provisions was identified by Dickson J. (as he then was) in Multiple Access Ltd. v. McCutcheon,  2 S.C.R. 161, at p. 191:
In principle, there would seem to be no good reasons to speak of paramountcy and preclusion except where there is actual conflict in operation as where one enactment says "yes" and the other says "no"; "the same citizens are being told to do inconsistent things"; compliance with one is defiance of the other.
In that case, this Court found that no inconsistency or conflict existed where both the federal and provincial legislatures had enacted substantially similar measures dealing with the problem of insider trading.
Is there conflict between a provision prohibiting the attachment of pension payments and a provision including such payments as property subject to division between the spouses? If such payments are matrimonial assets is the judge being told to do inconsistent things -- to protect the payments against attachment for the benefit of the pension recipient and to deprive him of part of the payments for the benefit of his or her spouse? Would compliance with the Matrimonial Property Act involve defiance of the Canadian Forces Superannuation Act? If the answer to these questions is yes, then there is conflict under the test in Multiple Access Ltd. and the provincial legislation would be inoperative to the extent of the inconsistency.
The appellant submits that the answer to these questions is no. She submits first and foremost that the restrictions on alienation were never intended to apply in the matrimonial context because, in the case of a married recipient, the pension was intended to provide security for the recipient's spouse as well as for the recipient following the recipient's retirement. Indeed, she submits, in many cases the recipient's spouse will have earned an interest in the pension during the period of the marriage by her contribution to it. It cannot have been the intention of Parliament to foreclose the spouse from earning such an interest or from receiving the benefit of it when the marriage comes to an end.
I believe that support for this submission of the appellant is to be found in s. 22(1) of the Garnishment, Attachment and Pension Diversion Act. That section provides the only legislative exception to the prohibition against attachment, etc. It provides that where a court has ordered support or maintenance in favour of a non-recipient spouse, pension benefits may be diverted so that such an order may be adequately enforced. It seems to me that by specifically providing a mechanism by which such orders could be enforced against a pension, Parliament has unequivocally demonstrated an intention to ensure that the financial needs of a recipient's family were not adversely affected by the prohibition in s. 8(6).
Moreover, while it was necessary for Parliament to enact such provision for the protection of non-recipient spouses in respect of orders for support or maintenance, it was not necessary for it to add anything with respect to orders for the division of matrimonial property. I say this for three reasons which relate directly to the absence of operational conflict between the federal and provincial Acts.
The first is that the language of s. 8(6) does not capture what is done when a division of assets is ordered by a court. The section specifically lists the prohibited acts. It does not include asset division by a court pursuant to matrimonial property legislation.
Second, it is clear that when a court does order a division of assets, equal or otherwise, it is not necessarily dealing with the assets in specie. The process of ordering a division of assets is in the nature of an accounting. The court does not order that the pension be divided, but rather that each partner to the marriage should share in the value of the assets accumulated during the union. As Cory J. remarked in Rawluk v. Rawluk,  1 S.C.R. 70, at p. 92:
The distinction between a share in ownership and a share in property value through an equalizing transfer of money is more than an exercise in judicial formalism. This distinction . . . reflects conceptual and practical differences between ownership and equalization. Ownership encompasses far more than a mere share in the value of property. It includes additional legal rights, elements of control and increased legal responsibilities. In addition, it may well provide psychological benefits derived from pride of ownership. Where the property at issue is one to which only one spouse has contributed, it is appropriate that the other spouse receive only an equalizing transfer of money.
When faced with possible restrictions on the transfer of a pension to a third party, several courts have attempted to avoid any conflict by imposing a trust in favour of the non-recipient spouse upon the benefits of the pension in the hands of the named recipient. The imposition of a trust as opposed to a court order for payment is more advantageous to the non-recipient spouse for enforcement purposes and ensures that the named recipient does not prejudice his or her partner's interest. This method of distribution was employed in George, supra, under a legislative scheme which did not specify that pensions were matrimonial assets and also in Rutherford where the relevant Act specified that pensions were family assets. Appellate courts accepted the propriety of the trust approach in both Herchuk and Hierlihy, supra.
In Rutherford, even although the relevant legislation specified that pensions were family assets, Mr. Rutherford argued that the non-vested pension could not be dealt with as a family asset and that Mrs. Rutherford was not entitled to any interest in it. Bouck J. at trial found the pension to be a family asset and gave Mrs. Rutherford an undivided one-half interest as tenant in common to be calculated as of the date of separation. Mr. Rutherford appealed and Mrs. Rutherford cross-appealed, submitting that Bouck J. should have ordered the superannuation commissioner to divide the pension benefits and deal with her separately. The Court of Appeal dismissed Mr. Rutherford's appeal and, while it refused to make an order directly against the pension commissioner, it did declare Mr. Rutherford to be a trustee of Mrs. Rutherford's proportionate share. In dismissing Mr. Rutherford's claim that the pension was not a family asset due to the Public Service Superannuation Act, R.S.B.C. 1960, c. 57, Seaton J.A. stated at p. 342:
The appellant bases arguments on the pension legislation to support the position that this pension plan is not capable of being a family asset. It is said the Public Service Superannuation Act should prevail, that the Family Relations Act must not be permitted to amend the pension legislation, that the general statute (the family relations legislation) must yield to the special (the pension legislation), that the earlier legislation should not be defeated by later legislation enacted for an unrelated purpose, and that the pension legislation should not be deemed to be amended by inference. In my view, none of those propositions is valid. Neither Act need yield in its own sphere. As between Mr. Rutherford, the superannuation commissioner and the government, the pension legislation prevails; as between Mr. and Mrs. Rutherford, the family relation legislation prevails.
The Manitoba Court of Appeal in George likewise declared that Mrs. George was entitled to an interest in any benefits payable to her husband in the future and stated that there should be a declaration of trust similar to that made in Rutherford. There is judicial authority in British Columbia also for the imposition of a trust on pension benefits presently being paid pursuant to the Canadian Forces Superannuation Act: see Rafferty v. Rafferty (1984), 39 R.F.L. (2d) 374 (B.C.S.C.).
In my view the courts have been overly cautious on this issue. The imposition of a trust is not in my opinion necessary to avoid conflict with the federal legislation for the reasons I have already given. As a remedy, however, it may prove to be the most effective way of ensuring that a non-recipient spouse's interest in the value of the pension is protected.
Third, to the extent that a court may in fact deal with the pension in specie, it may only do so when the non-recipient spouse has acquired a beneficial interest in it. Prior to the enactment of the various statutory regimes family assets were dealt with at common law on the basis of the doctrine of the presumption of advancement and the equitable doctrines of resulting and constructive trusts. These doctrines proved inadequate in redressing many of the inequities that arose in the context of family property. The provincial legislatures responded by enacting various statutory schemes to remedy the problem. A typical feature of these schemes is the deeming of most property items to be matrimonial assets. With the exception of some statutorily excluded items the value of real and personal property has been decreed to be subject to equal sharing by both spouses.
For all of the above reasons I find that no conflict exists between the federal and provincial legislation within the meaning of Multiple Access Ltd. Neither the order made in this case nor the imposition of a trust results, in my view, in conflict for the reasons given by Seaton J.A. No attempt is being made to alienate the pension qua pension. The recipient spouse is simply required to pay a certain amount to the non-recipient spouse each month after maturation of the pension.
One final issue must be addressed, namely the propriety of the trial judge's order on the facts of this case.
Method of Division
Courts, generally speaking, employ two methods of dividing pensions. The first is to award lump sum compensation to the non-recipient spouse either by way of a money payment or a transfer of assets. The second is to preserve the jurisdiction of the court until the pension matures either by ordering periodic payments to be made to the non-recipient spouse or impressing the pension with a trust. When selecting the appropriate method of distribution it is important to bear in mind that the primary goal of the legislation is to effect the adjustment of property in an equitable manner. Of equal importance in some cases is the desire to sever the financial ties between the parties. These two goals may occasionally come into conflict. A fair distribution in some cases may require the parties to wait until the pension matures before it is subject to division. This will necessitate a continuing financial association between the parties. Capitalizing the pension for an immediate accounting may succeed in severing the financial ties between the parties but result in hardship to one of them if, for example, there are no other substantial assets to be divided. The preferable result in any given case will obviously depend upon a number of factors and it is my view that appellate courts should not lightly interfere with the discretion of the trial judge in this regard.
In this case the trial judge included in the respondent's list of matrimonial assets the pension benefits he had already received and took their value into account when equalizing the matrimonial property. He also ordered that one-half of the value of future pension payments be paid to Mrs. Clarke on a continuing basis. No evidence was adduced at trial as to the capitalized value of the pension but this would only have been necessary had the trial judge concluded that the facts warranted an immediate valuation and accounting. I see no reason to interfere with the findings of the trial judge. His order reflects the spirit and intent of the legislation and, even although it does not result in a "clean break" between the parties, it enables both of them to enjoy the benefits of the pension as and when they fall due.
In view of my conclusion on the first issue it is not necessary for me to address the appellant's alternative argument, namely that compensation should be granted by way of an unequal division of matrimonial assets. I do, however, find it surprising that the Court of Appeal did not address that issue once it concluded that the pension was not a matrimonial asset. I have already addressed the appellant's third issue.
I would allow the appeal and restore the decision of the trial judge. I would award the costs of the application for leave to appeal, the costs of the appeal to this Court and the costs in the Court of Appeal to the appellant.
Appeal allowed with costs.
Solicitor for the appellant: Bruce Errol McKay, Thunder Bay.
Solicitors for the respondent: Waterbury, Newton & Johnson, Kentville, Nova Scotia.