BC Court of Appeal remits matter of spouse’s entitlement to pension’s survivorship benefits back to trial judge

11 June 2019

By Kevin Zakreski

In a decision released last week, the Court of Appeal for British Columbia held that an earlier decision of the Supreme Court for British Columbia had failed to consider statutory and case authority in deciding not to reopen a family-law proceeding that had purported to establish separating spouses’ entitlement to pension benefits. The court remitted the issue back to the supreme court for determination.

Kraft v Kraft, 2019 BCCA 204, involved a couple who married in 1970 and separated in 1997. The husband retired in 2015 and

Upon retirement he was entitled to a defined benefits pension plan (the “Pension”). He initially designated [the appellant] as his beneficiary and then later designated [his subsequent partner] as his beneficiary. The form of pension payment was “joint and survivor 100%.”

The case took a somewhat twisted path to the court of appeal. In a trial decision, “after dealing with property division and spousal support, the trial judge ordered that the Pension be divided as follows: ‘In the result, I order that [the respondent’s] BC Hydro pension be divided equally between [the respondent] and [the appellant] at source as at the first day of trial. Since the pension has already commenced, its division must be dealt with under s. 117 of the [Family Law Act]. Under this section, [the appellant] is entitled to receive her proportionate share of the benefits payable under the plan until [the respondent] dies.’ ”

After this trial decision, the respondent “then sought to reopen the question of survivor benefits under the Pension,” which was addressed in a reconsideration decision in the supreme court. The reconsideration decision held:

[The appellant] in essence sought to reopen the issue of the pension by arguing the survivorship issue of [the respondent’s] pension and hers. The pension has been divided at source and is the property of each respective party which he or she can do what he or she sees fit. This issue, accordingly, has been determined and will not be further addressed.

This decision was overturned on appeal. The court of appeal began by noting some ambiguities in the order pronounced at trial:

Although the judge may have intended to divide the Pension at source, this is not the effect of her order. Paragraph 6(a) of the judge’s order provides that [the respondent] is entitled to become a limited member of the Pension:

  1. [The appellant] is entitled:

(a) to file the prescribed forms under Part 6 of the Family Law Act to become a limited member of the [Pension]. . . .

A “limited member” is defined in s. 110 of the Family Law Act, S.B.C. 2011, c. 25 [FLA], as “a person designated under section 113 (designation of limited members) as a limited member of a local plan.” A “local plan” is also defined in s. 110 and includes various types of pension plans. As the Pension has commenced, [the appellant’s] benefits as a limited member of the Pension would be payable pursuant to s. 117 of the FLA. Under s. 117(2), [the appellant] would be entitled to receive benefits only until the death of [the respondent] (or the termination of benefits).

A second interpretation of the judge’s order is that the pension account itself was not divided but [the appellant] is entitled to her share of [the respondent’s] benefits, but only until his death. Of course, if this interpretation is correct and [the respondent] were to die tomorrow, then [the appellant] would get nothing, and, arguably, all of the reasoning that the judge conducted in determining spousal support and arrears and offsetting the various awards would be without any benefit to [the appellant].

The court also noted that the reconsideration decision had failed to cite some significant case law and statutory provisions:

The judge was referred to but did not discuss this Court’s decision in Tarr Estate v. Tarr, 2014 BCCA 315 (CanLII). In Tarr Estate, the Court held that upon pension commencement, the survivorship interest in a member’s pension becomes irrevocably vested in the member’s spouse. Under the [Pension Benefits Standards Act] [the respondent’s subsequent partner] was the member’s spouse when the pension commenced. The judge did not refer to, or expressly consider, the consequences of Tarr Estate in her analysis.

There are differences between the circumstances in Tarr Estate and the circumstances of this case. For example, [the appellant] does not meet the definition of a spouse under the PBSA, unlike the spouse in Tarr Estate, and Tarr Estate was decided under the Family Relations Act, R.S.B.C. 1996, c. 128, and a now repealed version of the PBSA, rather than the FLA and the current version of the PBSA.

In fairness to the judge it is not apparent that she was referred to the appropriate statutory provisions of the FLA or the PBSA that could have assisted her. For example, she could have made an order with reference to s. 126(2)(b) of the FLA, which provides that the Supreme Court must expressly refer to this subsection in allocating all or part of survivor benefits to a person other than the spouse. Moreover, s. 114 of the FLA (which the parties also did not refer to in argument before us), if applicable, allows benefits to be divided upon giving appropriate notice under s. 136.

In the result, the court allowed the appeal and remitted “the matter of the pension survivorship rights to the judge to reconsider.”

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