McMorran v McMorran, 2013 ABQB 610

Court of Queen ’ s Bench of Alberta Citation: McMorran v McMorran, 2013 ABQB 610 Date: 20131023 Docket: 4803 118052 Registry: Edmonton Between: Scott Menzies McMorran Applicant - and - Catherine McMorran Respondent _ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice Robert A. Graesser _________________________________________ ______________ Introduction [ 1 ] This application is about the pension division between the parties when they entered into a consent matrimonial property order granted on March 11, 2003.

They had been divorced on April 12, 2002, having been married on July 26, 1986. [ 2 ] Mr. McMorran was in the Edmonton Police Service and had been participating in the Special Forces Pension Plan. He continued to participate in the plan after the parties’ divorce and the matrimonial property order until his retirement. [ 3 ] The order provides: That the Defendant, Catherine McMorran, has an ownership interest in the Plainitff’s benefits and pension acquired pursuant to the Special Forces Pension Plan .

The Defendant’s share of the benefits and pension shall be determined upon the Plaintiff’s retirement or commencement of receipt of any benefit from the Plan. The Defendant’s then share of the benefit shall be in the same proportion that one half of that period from 26 th July 1986 to 12 th April 2002 expressed in years, including the number of years of past or prior service purchased during that period of time, bears to the number of years of the Plaintiff’s pensionable service recognised by the Plan calculated at the time of the Plaintiff’s retirement or commencement of receipt of any benefit from the Plan.

The Defendant, Catherine McMorran,

is the owner of that share. [4] Mr. McMorran remarried on September 6, 2005. He retired from the Edmonton Police Service on April 30, 2011 and beganto draw his pension at that time. [5] He named his new wife as his joint annuitant. [6] Two issues have arisen. Firstly, under the provisions of the pension plan, he is required to name a “pension partner” whichdetermines how long the pension will run. All benefits under the pension will end after he and his pension partner have died. Secondly,he is required to elect the percentage reduction in the pension following his death.

He can elect to have no reduction, although that willresult in a smaller pension during their joint lives. Or he can have the pension reduce by up to fifty percent, which will give him a muchlarger pension during his lifetime, and a much-reduced pension for his widow. [7] Ms. McMorran is by the terms of the consent matrimonial property order entitled to her portion of Mr. McMorran’s pension.Mr. McMorran is apparently entitled to have his new wife as a joint annuitant with his portion of his pension. Where Ms.

McMorran fitsinto this is if she is not the “pension partner”, her entitlement to receive her portion of the pension would end on the deaths of Mr.McMorran and his new wife. [8] As long as either Mr. McMorran or his new wife is alive, Ms. McMorran’s entitlement remains. But should they bothpredecease her, she would get no further payments. [9] Secondly, Ms. McMorran is affected by Mr. McMorran’s choice of the percentage of reduction in the pension benefits on hisdeath. If he elects to have no reduction on his death, then Ms. McMorran’s ongoing pension is larger.

If he elects to have a significantreduction on his death, Ms. McMorran’s pension would be smaller. [10] She has thus brought this application to have Mr. McMorran name her as his pension partner, and to have him elect a pensionthat does not have her pension reduce on his death. [11] Mr. McMorran opposes the application, stating that he wants to take the largest pension he can while he is alive, and he wantsto protect his new wife. If she is not his pension partner, her entitlements would end if both he and Ms. McMorran die before she does. [12] Thus, there are two issues: a.

Who should be the pension partner; and b. What election regarding pension amount should Mr. McMorran be required to make? Arguments Ms. McMorran [13] Ms. McMorran argues that she would never have agreed to a pension division that did not guarantee her a pension for herlifetime. It is an unacceptable risk for her to accept a situation where her entitlement to Mr. McMorran’s pension might depend on hisnew wife surviving her. [14] The contingency of remarriage and the effect of remarriage on Ms. McMorran’s pension entitlement were not discussedbetween them. [15] She argues that if Mr.

McMorran wants to protect his new wife, it should not be at the expense of his obligations to his formerwife. He will have to look at other means to guarantee her lifelong financial security in the event he predeceases her. [16] As for the election as to survivorship reduction percentage, Ms. McMorran argues that she should be entitled to the largestpension possible. Mr. McMorran should not be able to maximize his benefits at Ms. McMorran’s expense. [17] She cites Rawlins v.

Rawlins, 2005 ABQB 503 and s. 22(3) of the Public Sector Pension Plans (Legislative Provisions)Regulation, A.R. 365/93. [18] The Regulations provide that when pensions are split between spouses by agreement or by court order, the spouse who is amember of the pension plan remains a member of the plan and continues to accrue benefits under the provisions of the plan.

The spousein whose favour the division is being made does not receive a pension, but rather receives the value of the pension division by way of atransfer into a new plan under the control of the spouse. [19] Section 22(3) provides that the new regime applies only to matrimonial property orders made on or after June 24, 2003. [20] Ms. McMorran notes that when she and Mr. McMorran divided his pension, such divisions were generally under theprovisions of McAlister v. McAlister, (A.B.Q.B.). [21] A similar situation arose in Rawlins. There, the parties’ agreement had Mr.

Rawlins declare himself to be a trustee of Ms.Rawlins’ portion of his pension for her. The trust obligations included that he would not do anything “harmful to (his ex-wife’

s) interestin the Plan” and that he would “not elect or change any election of a Benefit under the Plan which affects (his ex-wife’

s) portion” withouther written approval. [22] Mr. Rawlins had also elected a “normal” pension, which would reduce on his death. He also sought to have his new wife ashis pension partner. Ms. Rawlins thus faced the same jeopardy as Ms. McMorran does here: her pension entitlements would cease if both

Mr. Rawlins and his new spouse predeceased her. [23] Langston J. held that the expectation of the parties was that Ms. Rawlins would fully share in the benefits of the pension (atpara. 13). [24] He noted that as trustee of Ms. Rawlins’ interest, Mr. Rawlins had to take Ms. Rawlins’ legitimate concerns in relation to herfinancial needs. [25] He thus directed the pension authority (which also happened to be the Special Forces Pension Plan) to ensure that Ms.Rawlins’ options be recognized. [26] Mr. McMorran notes that while Ms. McMorran has rights under his pension plan, so does his new wife. Just as Ms.

McMorranwas entitled to a pension division relating to his pensionable service during their relationship, his new wife has similar entitlements. [27] He resists Ms. McMorran’s application and instead seeks an order requiring the pension authority to provide Ms. McMorranwith the commuted value of her share in his pension to some retirement vehicle of her choosing. [28] Ms. McMorran resists that, as even if it were possible, the commuted value of her portion would not provide the same incometo her because Mr. McMorran’s pension is a defined benefit plan and not a defined contribution plan.

She estimates that if she were to tryto draw a similar amount as the defined benefit from her own retirement vehicle, the funds would be exhausted in a relatively shortperiod of time. [29] She wants to continue to be entitled to a share in Mr. McMorran’s pension and not be left with the responsibility anduncertainty of having to manage the pension funds herself. [30] Mr. McMorran cites Strachan v. Strachan, [1992] A.J.

No 66 (Q.B.), which held that the pension administrator was bound toadminister the pension in accordance with the terms and conditions of the legislation and regulations relating to the plan. [31] He argues that when the pension was divided between him and his ex-wife, there was no formal legislative or regulatorymethod of dividing a pension between divorcing spouses.

Rather, the payments when they began to be made would be bifurcatedbetween the parties and the spouse was deemed to own a share of the overall pension benefit rather than having her own pension withthe plan. [32] In 2003, the plan provided: The right of any person to receive a benefit is subject to the rights of a spouse or former spouse of his arising under a MatrimonialProperty Order. [33] Mr. McMorran refers to AR 365/93 s. 13 which provides: 13

(1) Interpretation provisions in

Part 3 apply in this section (2) Notwithstanding

Part 3, either pension partner may file a Matrimonial Property Order under this

section that reflects the laws thatwere applicable with respect to the division and distribution of benefits before June 14, 2003, and in that case those laws continue toapply with respect to the division and distribution of the participant pension partner’s benefit.

(3) The right of the pension partner to file under subjection (2) expires and this

section is repealed, at the end of December 2005. [34] He states that Ms. McMorran made no attempt to have the March, 2003 consent order varied to conform to s. 13 so any abilityto have her portion of Mr. McMorran’s plan administered as a McAlister-type division was lost when the grandfathering of thoseprovisions expired in 2009. [35] He also cites Olsen v. Olsen, [1996] A.J. No. 251 (Q.B.).

There, Clarke J. ordered the administrator of the pension plan toissue a separate cheque for each portion of the pension payment to be sent to each spouse separately, conforming to the minutes ofsettlement between the parties and a consent order embodying those terms. [36] The argument there was that the administrator objected to being directed to divide the pension payment as the pensionlegislation and regulations did not authorize that expressly.

However, Clarke J. held that “where a Matrimonial Property Order expresslyorders the pension spouse to transfer a portion of the ownership of the pension the legislation and regulation clearly requires theAdministrator to honour the Order.” (at para. 14). [37] He concluded as well that the administrator was bound to administer the pension in accordance with the applicable legislationand regulations. [38] Mr. McMorran also refers to Walker v. Walker, (AB KB), [1993] A.J.

No. 478 (Q.B.) In that case, Veit J.determined that a spouse affected by a pension division was entitled to name someone other than his former spouse as his pensionpartner or administrator, so long as it did not affect the rights of the former spouse. She also found that the former spouse was entitled toinsist that elections be made that would maximize her entitlements. She concluded that Ms. Walker was not acting unreasonably byrefusing to consent to Mr. Walker naming someone else as pension partner, or electing a higher pension for himself but with lowerbenefits for Ms. Walker. [39] In a different Walker v.

Walker case, [1997] A.J. No. 549 (Q.B.), the issue was over the election of an option (joint or solelife) on the husband’s retirement. Kent J. stated at para. 5 “the Court must as much as possible give effect to the fact that each party has apiece of property which each should be able to deal with as independently as possible.”

[ 40 ] Kent J. decided that Ms. Walker should not be exposed to risks or something she had a right to expect at the time of the judgment: the right to secure payment to the end of her life. [ 41 ] What Mr. McMorran seeks is an order (somewhat similar to the one in Olsen ) requiring the administrator of the plan to divide Mr. McMorran’s pension at source in the old McAlister fashion. He argues that the grant of an ownership interest in the pension to Ms. McMorran should entail a complete grant of ownership including the right to make her own pension choices. [ 42 ] If that is not possible, according to Mr.

McMorran, that is a problem of Ms. McMorran’s creation. Ms. McMorran should have filed the March 2003 order before December 31, 2009 under regulations AR 365/93 , 206/2003, 383/2003 and 247/2004. That would have preserved her right to maintain that she is entitled to a separate pension from Mr. McMorran’s. [ 43 ] After June, 2003, Ms. McMorran’s right under the pension plan was to be paid out her commuted value of her interest in Mr. McMorran’s plan; Mr.

McMorran continued to be entitled to his portion of the benefits under the plan, and he was required to select his present wife as his pension partner absent her waiver. [ 44 ] If creation of a separate pension for Ms. McMorran does not work, then Mr. McMorran says she should be paid out the commuted value, as would have been the case had the parties settled a few months later. Administrator [ 45 ] The administrator, who was separately represented on this application, argues that the administrator must administer the pension as a McAlister pension division because Ms.

McMorran did file the March 2003 order with the office of the Alberta Pensions Administration Corporation. [ 46 ] To the administrator, that means that the pension has to be administered in accordance with the laws as they existed before June 24, 2003. There was no jurisdiction to pay out the commuted value before that date. [ 47 ] The administrator cites

section 30 of Regulation 383/2003 which states: 30(1) The non-participant pension partner’s share shall, (

a) if the participant pension partner was not vested at the end date, and at the non-participant pension partner’s option, either be paid as a lump sum or transferred to a retirement savings vehicle belonging to the non-participant pension partner, (

b) if at the end date the participant pension partner was vested but was not yet within 10 years of pensionable age and has not yet commenced to receive a pension, be transferred to a retirement savings vehicle belonging to the non-participant pension partner, or (

c) if at the end date the participant pension partner was vested and was within 10 years of or had already attained pensionable age and has not yet commenced to receive a pension, at the non-participant pension partner’s option, either (

i) be transferred to a vehicle referred to in clause (b), or (ii) be paid or so transferred at the participant pension partner’s event date.

(2) Notwithstanding subsection (1), if and to the extent that the non-participant pension partner’s share were a benefit under the plan rules which the plan rules would treat (

a) as locked in, the share is locked in, or (

b) as not locked in, the share is not locked in.

(3) Notwithstanding subsections (1) and (2). the non-participant pension partner’s share under the Closed Management Plan is not locked in except to the extent that it is based on commuted value.

(4) Notwithstanding subsection (1), where a pension has already commenced to be paid at the time the matrimonial property order is made, the non-participant pension partner’s share is to be paid directly to the non-participant pension partner in the form of a pension which, for the purposes of the Plan, is a portion of the participant’s pension partner’s pension. [ 48 ] According to the administrator, s. 30(4) is the only

section which might apply because Mr. McMorran has already started receiving benefits. That gives Ms. McMorran a share in the benefits Mr. McMorran is receiving. Analysis [ 49 ] It is clear from Olsen , Strachan and other cases that the court does not have the ability to re-write the provisions of a statutory pension plan. The court must require the administrator to administer the pension in accordance with the legislation and regulations. [ 50 ] The only factual dispute appears to be whether the March, 2003 order was served in accordance with the regulation. Mr. McMorran says it was not, but Ms.

McMorran swears that it was, and the administrator acknowledges that the order was properly served on it in time for the McAlister grandfathering to be applied. [ 51 ] I accordingly find that the order was served such that s. 13 of the applicable regulation preserves the McAlister nature of the March 2003 order.

[ 52 ] The March 2003 order states that Ms. McMorran is to have “an ownership interest in (Mr. McMorran’

s) benefits and pension acquired pursuant to the Special Forces Pension Plan” to be determined on his retirement or commencement of receipt of benefits. At that time, Ms. McMorran is to have a “share of the benefit” and she is described as the “owner of that share”. [ 53 ] I conclude that I have no jurisdiction to order the plan to pay Ms. McMorran the commuted value of her share of Mr. McMorran’s benefits and pension. Even if I did, I would not do so, following the logic in Rawlins and the two Walker cases. It would be unfair to deprive Ms.

McMorran of her interest in a defined benefit pension and instead require her to do the best she can managing the funds herself. [ 54 ] It is not unreasonable for Ms. McMorran to want to receive the benefit she agreed to in 2003: an income stream determined in accordance with the pension plan rather than a lump sum for her to manage and hope to generate (with no certainty) an income equal to or possibly greater than that provided for under the plan. Certainty and the absence of risk are not unreasonable objectives, and Ms.

McMorran should not be required to take something different than that which was agreed to and ordered in 2003. [ 55 ] I also conclude that I have no jurisdiction to direct that the plan treat Ms. McMorran as if she were a participant pension partner of her share in her own right, which would entitle her to have her own pension partner (and Mr. McMorran his own pension partner). That would potentially require the plan to create two separate joint pensions.

With the reality of high divorce rates, it may be desirable to protect the new spouses of former spouses who have divided pension benefits, that would seem to me to require a change to the legislation and regulations, and may have significant actuarial implications for funding purposes. Two Pension Partners [ 56 ] The agreement and March 2003 order describe Ms. McMorran’s share as part of Mr. McMorran’s pension and they do not purport to create separate pensions within the plan. They are tied together. [ 57 ] That being said, is there any reason why Mr. McMorran cannot have two pension partners? The

Interpretation Act , R.S.A. 2000, c I-8 provides in s. 26 that “In an enactment, words in the singular include the plural, and words in the plural include the singular.” [ 58 ] Legislation is to be given a purposive

interpretation, following Re Rizzo & Rizzo Shoes Ltd. , [1998] 1 S.C.R. 1 . The purpose of allowing pension plan members to name a pension partner and have joint life pensions is to enable the member to protect his or her spouse. Indeed, the spouse is the pension partner by default. [ 59 ] In this era, it is not uncommon for a person to have several marriages (legal or common law) during his or her lifetime. It is certainly not beyond the realm of possibility that any employee who participates in a pension plan may, during his or her employment, have more than one spouse.

Each spouse may acquire rights to or obtain an interest in the employee’s pension. [ 60 ] It makes little sense to interpret the pension regulations to provide protection or benefits to only the first spouse where there may be

interpretations that protect all of them, if that

interpretation is neither absurd nor contrary to the intention of the legislation. [ 61 ] Consider the situation here. Mr. McMorran worked for the same employer for some twenty-two years. He accrued about fifteen years of pensionable service while married to Ms. McMorran. The parties agreed in their division of matrimonial property that Ms. McMorran was entitled to an interest in Mr. McMorran’s pension. The determination of that interest was left until Mr. McMorran’s retirement. Roughly, Ms. McMorran is entitled to 50 percent of 15/22 of his pension (about 36 percent).

She has no interest in about 64 percent of his pension. [ 62 ] It is unclear in the evidence the extent to which Mr. McMorran’s new wife has a potential claim to Mr. McMorran’s pension. The evidence indicates that Mr. and Ms. McMorran were separated for some five years before the March 2003 order. It is conceivable that his new wife has a claim to the remaining seven years of Mr. McMorran’s pensionable service. [ 63 ] If something had gone wrong with their relationship before Mr.

McMorran retired and began receiving benefits, his new wife would likely have been entitled to receive the commuted value of her interest in Mr. McMorran’s pension (1/2 of 7/22). It would not have been unreasonable for her to expect, on their marriage, that she would have some financial security by reason of Mr. McMorran contributing to the pension plan during their marriage. She would not likely have expected any of her entitlements to be affected by Mr. McMorran’s former wife’s mortality. [ 64 ] I see no reason why under the legislation Mr.

McMorran cannot have two pension partners or why that is outside the spirit and intention of the legislation. He should be able to have Ms. McMorran as his pension partner as to the 15/22nds of his pension entitlements he agreed to and is required by court order to share with Ms. McMorran. He should also be able to have his new wife as his pension partner for his remaining pension entitlements. [ 65 ] Interpreting the legislation in this fashion gives effect to the reality that a person may have more than one spouse with interests in his or her pension.

It protects the interests of both spouses and leaves neither dependent on the other to survive so that their expected benefits will continue to be paid. [ 66 ] Does this

interpretation do any injustice to the plan? I can see none. Mr. McMorran made pension contributions in the required amount while married to Ms. McMorran. He may have made further contributions while married to his new wife. Ms. McMorran has a defined and documented interest in his pension; his new wife may have an interest in the remainder of his pension. I do not see any mischief in requiring the plan to pay Ms. McMorran her share of Mr. McMorran’s pension for her lifetime, while requiring the plan to pay Mr. McMorran’s new wife her share of Mr. McMorran’s pension for her lifetime.

That does not seem to me to amount to any double payment. Neither spouse should be dependent on the other surviving to receive her benefits. [ 67 ] While the legislation uses the singular, a purposive

interpretation allows the plural and is not contrary to any express

provision. [68] As this point was not raised in argument, I invited counsel to provide me with written argument on the point. Mr. Pollock onbehalf of Mr. McMorran agreed with this

interpretation as did Mr. Shortreed on behalf of Ms. McMorran. [69] Alberta Pensions Services Corporation argued that the court does not have the power to use a matrimonial property order tochange the nature of an asset being divided. It relies on Taylor v Taylor, (AB KB), [1994] A.J. No. 47 (Q.B.) for thisproposition. I have no doubt that the Matrimonial Property Act does not grant the court authority to simply fabricate a property interest.There is no evidence before the court, however, indicating that having a second pension partner would have the effect of altering thenature of Mr. McMorran’s pension.

Designating two pension partners involves a division of the existing pension asset, not creating anew one. [70] Further, no evidence was presented that this

interpretation, permitting two pension partners in the limited circumstances ofmarriage, divorce and remarrying thereafter before 2003, would have any significant effect on the actuarial basis of the pension andcontributions to it. [71] Mr. McLaughlin, on the Corporation’s behalf, argued that Boardwalk Reit LLP v. The City of Edmonton, 2008 ABCA 220,limits the use of s. 26(3) of the

Interpretation Act to situations where a contrary opinion does not appear (at para 5). [72] I disagree that Boardwalk Reit LLP applies here. There is no contrary intention expressed by the Regulation. The Regulationis silent about the consequences of remarriage. “Relevant time” for the purposes of the Regulation can surely mean the time thesuccessive spouses were married to the participant. [73] While “pension partner” is defined by the Special Forces Pension Regulation as “a person” and Mr.

McLaughlin points outthat one can only lawfully be married to one other person at a time, I do not read the definition as being inconsistent with a participantbeing married to different pension partners at different times during his or her time as a contributor to the plan. [74] Mr. McLaughlin also argues that s. 21(1)(

k) of Regulation 365/93 is clear that the singular is intended. I do not see thatregulation as being inconsistent with there being two pension partners having different interests in the participant’s pension. [75] Mr. McLaughlin further argues that permitting two pension partners would be an improper modification of the plan, contraryto Taylor v. Taylor, (AB KB), [1994] A.J. No. 47 (Q.B.). [76] I do not see this as an impermissible modification of a statutory plan under Taylor v Taylor. Both spouses here are owners ofan interest in Mr. McMorran’s plan. I see no mischief in treating each of them as Mr.

McMorran’s pension partners. [77] Accordingly, I find that Ms. McMorran should be designated as Mr. McMorran’s pension partner as to his pensionable serviceaccrued during their marriage. Mr. McMorran’s new wife is entitled to be designated as his pension partner for the remaining portion ofhis pension, unless she waives that right. Pension Choices [78] As for pension choices, Mr. McMorran shall elect a joint life not reduced pension as to the pension he shares with Ms.McMorran, so that it will be non-reducing on Mr. McMorran’s death. There is no good reason why Mr.

McMorran should be entitled toa greater benefit during his lifetime at the expense of Ms. McMorran after his death (if he predeceases her). Ms. McMorran should nothave to run the risk that her retirement income will be reduced by Mr. McMorran’s death, when there is a reasonable pension choice thatallows her to continue to receive a level income stream. As in the cases cited by counsel, Ms. McMorran’s concerns are reasonable, andMr. McMorran is stuck with her choice. [79] I do not see any reason why Mr.

McMorran cannot elect a normal pension as to the remaining portion of his pension, tomaximize the benefits of that portion during his lifetime. I cannot think that technology has not progressed to the point of enabling theplan to make the necessary calculations. I also do not see that calculating Mr. McMorran’s pension in this fashion should be any morecostly to the plan than having a single election as to the whole pension entitlement. [80] I recognize that the protection for Mr. McMorran’s new wife will be relatively small and relate to about 30 percent of hispension.

Nevertheless, that is all he has to share with his new wife. The other 70 percent was, by the time of their marriage, alreadyshared with Ms. McMorran. [81] It seems to me that such an arrangement should not be too cumbersome for the plan. Arrangements like this will only occurwhere a McAlister-style division has been grandfathered by December 31, 2009. Otherwise, spouses affected by marriage breakdownwill have been paid their commuted value of the pension and will have no further interest in the contributor’s pension. [82] Any benefits accruing from the pension to Mr. or Ms.

McMorran in the event of their death should be paid to their respectiveestates or designated beneficiary. [83] If the parties (including the Corporation) are unable to agree on the wording of any necessary order, I will reserve jurisdictionto resolve any such disagreements.

Summary [84] Mr. McMorran is directed to name Ms. McMorran as his pension partner as to the portion of his pension he agreed (and was

ordered) to share with Ms. McMorran under the March 2003 order. He is directed to elect a joint non-reducing pension as to this portion of his pension entitlements. If he fails or refuses to do so, the administrator is authorized to make these elections on his behalf. [ 85 ] With respect to the remainder of his pension entitlements, I see no reason why Mr. McMorran cannot name his new wife as his pension partner for that share, and select whatever option they agree upon. Heard on the 5 th day of July, 2013 . Dated at the City of Edmonton, Alberta this 22 nd day of October, 2013. Robert A. Graesser J.C.Q.B.A.

Appearances: Michael L. Pollock Pollock & Pollock for the Applicant John R.B. Shortreed Biamonte Cairo & Shortreed for the Respondent D.M. McLaughlin Field Law for the Pension Plan