Alberta Motor Association v Gladden, 2017 ABQB 174

Court of Queen’s Bench of Alberta Citation: Alberta Motor Association v Gladden, 2017 ABQB 174 Date: 20170313 Docket: 1603 13737 Registry: Edmonton Between: Alberta Motor Association Plaintiff/Applicant - and - James Gladden, Dana Gladden, Sprockit Apps Inc., 1926378 Alberta Ltd, Marathon Marketing Inc., Quiet Light Brokerage Inc., and Easetime Software Ltd Defendants/Respondents _______________________________________________________ Endorsement of the Honourable Madam Justice J.B. Veit _______________________________________________________ [ 1 ] In Canada, parties enjoy basic freedom to contract.

Nevertheless, the law prohibits contracts which are illegal. Illegal contracts include those which breach a statute. [ 2 ] Benefits-conferring legislation frequently contains provisions which expressly prevent a party from contracting out of the benefits established by the legislation. Alberta's pension legislation, in common with similar legislation across Canada, contains provisions which prevent the beneficiary of a pension plan from alienating benefits under the plan. Alienating pension benefits is

prohibited under s. 72(1) of Alberta’s Employment Pension Plans Act 2012 S.A. c E-8.1: No disposition or attachment of benefits and money 72(1) Subject to subsections (3) to (6), the following must not be assigned, charged, alienated or anticipated and are exempt fromexecution, seizure or attachment: (

a) benefits; (

b) all or any portion of the pension fund; . . .

(2) A transaction purporting to assign, charge, alienate or anticipate benefits or other assets referred to in subsection (1) is void. (3) Subsection (1) does not apply in respect of the execution, seizure or attachment of a retirement savings vehicle within the meaning ofand under

section 17.1 of the Maintenance Enforcement Act. (4) Subsections (1) and (2) do not apply . . .

b) to an agreement or matrimonial property order, as defined in Division 4, providing for a transfer of entitlement between a memberand a pension partner or former pension partner because of a breakdown of their relationship. [3] Although the language against alienation of benefits in the Employment Pension Plans Act is not as explicit as some of thelanguage in provincial statutes, there can be no doubt that the Alberta Legislature intended to prevent the alienation of a pension benefit. [4] The prohibition against alienation in the pension legislation is enforced pursuant to the Civil Enforcement Act, RSA 2000, c.C-15 and its regulations, Alta Reg. 276/1995, However, s. 93 of the CEA dispenses with all exemptions contained elsewhere in the Act:

Part 10 Exemptions Non-applicability of

Part 93 The exemptions set out in this Part do not apply to the following: . . . (

c) to writ proceedings on a judgment for the payment of support, maintenance or alimony; (

d) to property that the enforcement debtor has abandoned; (

e) to writ proceedings on a money judgment arising out of

an act for which the enforcement debtor has been convicted of an offenceunder the Criminal Code (Canada). [5] In 2006, a judge of our court held that the CEA did not permit attachment of a teacher’s pension fund: Ms. R. v Mr. W. 2006ABQB 819. Co-incidentally, I was collaterally involved in those legal proceedings as the judge who had previously granted the multi-million dollar judgment against the teacher. Subsequent to the 2006 decision, the CEA was amended to exempt RRSP contributions fromattachment by a judgment creditor: Exemption of registered plans and registered disability savings plans 92.1

(1) In this section, . . . (i) “RRSP” means a registered retirement savings plan as defined in

section 146 of the federal Act.

(2) Property in a registered plan, including any current obligation or future obligation under the plan, is exempt from any enforcementprocess, but a payment out of a registered plan to a plan holder is not exempt. [6] The exemption for RRSP contributions is contained in

Part 10 of the CEA and is therefore subject to the limits set in s. 93,above. [7] In relation to pensions, case law has specifically held that courts cannot over-ride pension legislation: see, for example,Pavlicevic v Pavlicevic (BC SC), [1998] B.C.J. No. 579, at para. 15: The Act does not provide expressly that a contracting out provision or a waiver of a right to a statutory division under s. 55.1 shall bevoid. It does not expressly state that such an agreement is illegal. It does not say specifically that the division shall be madenotwithstanding any agreement to the contrary.

Arguably, Parliament does not have the power to do any of those things. But the effect ofwhat it does say is the same - unless a spousal agreement meets certain requirements, or the Minister if satisfied that the division is to the

detriment of both spouses, a division is to take place. The imposition of a trust to enforce an agreement avoids those requirements andpermits the parties to do indirectly what they cannot do directly. In other words, the court's order contradicts the specific provisions ofthe statute. [8] Even a consent order cannot do an end run around pension legislation: Spencer v Spencer 2016 NLTD(G) 130 at para. 82 [9] On the other hand, case law has also attenuated its approach to contracts which are illegal. As part of a very helpfuljudgment on the development of judicial thinking in relation to illegality, in Still v.

M.N.R. (C.A.) (FCA), [1998] 1F.C. 549, Robertson J.A., speaking for the Federal Court of Appeal, said: 35 Justice Krever's decision in Grobman is best known for his criticism of the illegality doctrine found at pages 651-652 of hisreasons: "As I understand the evolution of the current law of contract, modern judicial thinking has developed in a way that hasconsiderably refined the knee-jerk reflexive reaction to a plea of illegality." He formulated the modern approach in this way (at page653): "The serious consequences of invalidating the contract, the social utility of those consequences and a determination of the class ofpersons for whom the prohibition was enacted, are all factors which the Court will weigh." 36 Justice Krever went on to adopt the reasoning of Laskin J.A. in Sidmay and the principle articulated in the Restatement of the Lawof Contracts, supra.

In the end, he held that it would be inconsistent with the purpose underlying the existence of the lending restrictionto hold the security unenforceable. 37 At this point, it is proper to ask how it is that the classical model of illegality differs from the modern approach. In my view, thelatter approach rejects the understanding that simply because a contract is prohibited by statute it is illegal and, therefore, void ab initio.There are alternative ways of expressing this legal conclusion: (1) the contract may be declared illegal but relief is granted under theguise of an exception.

Alternatively, (2) the contract is held not to be illegal and therefore enforceable. In either case the legal result isthe same. The other distinguishing feature of the modern approach is that enforceability of a contract is dependent upon an assessment ofthe legislative purpose or objects underlying the statutory prohibition. Under the classical model, the purpose of the statute was onlyrelevant when determining whether the prohibition was for the sole purpose of raising revenue.

Today, the purpose and object of astatutory prohibition is relevant when deciding whether the contract is or is not enforceable. [10] In light of that law and those provisions of the applicable statutes, an explanation of my willingness to issue a consent orderpursuant to which the beneficiary of his employers’ pension plan purports to give up his right to access his pension is called for.

a) Factual background [11] These are the pertinent facts: - earlier this year, at a time when Mr. Gladden was represented, the AMA received a consent judgment against James Gladden inthe amount of $10,236,945.26; the judgment expressly provides that the judgment liability arose from a fraud perpetrated by Mr.Gladden while he was acting in a fiduciary capacity as a senior employee of AMA; - the contributions to Mr.

Gladden’s pension plan were provided entirely by the AMA; indeed, the AMA pension plan has notpermitted or required any contributions on the part of AMA employees since September 1, 1992; - at a time when he was represented, James Gladden agreed, and his represented wife consented to his agreement, to transfer thecommuted value of his pension to the AMA.

b) Legal analysis [12] I adopt Robertson J.A.’s approach to the illegality argument in relation to contracts: the purpose and object of a statutoryprohibition is relevant when deciding whether a contract is void from the outset or merely voidable. [13] I also adopt the AMA’s argument relating to the purposive analysis of the pertinent legislation: The change in the CEA reflects the legislature’s intention in balancing two competing public policy objectives. Society has an interest inensuring retiree have a means of sustenance in retirement.

However, society also has an interest in ensuring that perpetrators of criminaloffences do not receive benefits from their wrongdoing to the prejudice of their victims. By making otherwise exempt RRSPcontributions subject to enforcement proceedings for judgments arising from criminal offences, the legislature has indicated a cleardesire that the financial interests of a victim outweigh those of an offender [14] The legislative policy must be harmonized throughout existing legislation.

In the absence of material differences betweendifferent types of retirement benefits vehicles, presumably all such retirement benefits vehicles should be treated in a similar way. In thiscontext, there is no material difference between RRSPs and pension benefits: in order to provide for their post-employment, someindividuals rely on RRSP savings while others rely on their pension plan.

Allowing creditor attachment of RRSPs in the wake ofcriminal activity but not allowing similar attachments in similar circumstances of pension plans where the pension plan beneficiary hasbeen convicted of a crime would not only be arbitrary, it would also undermine the broad social policy expressed in the legislation. Astatutory

interpretation that would create arbitrary distinctions is an absurdity and must be avoided: Rizzo & Rizzo Shoes Ltd. (Re) (SCC), [1998] 1 S.C.R. 27, R. Sullivan, Sullivan on the Construction of Statutes. Indeed, in the circumstances here, theabsurdity would be all the more ironic because the criminal activity, financial fraud, was perpetrated on the sole funder of the pensionbenefit.

In the teacher case mentioned above, the criminal activity was perpetrated by the teacher but the criminal activity had nothing todo with the teacher’s functions as a teacher. [15] There is a further absurdity in the circumstances here: a judgment creditor could not enforce the judgment against the pensionitself, but could enforce it on an ongoing basis against any proceeds or other assets coming out of the pension: s. 37(2)(

a) CEARegulation 276.

[16] Here, Mr. Gladden has not been convicted of a crime. However, Mr. Gladden has knowingly consented to a judgment basedon fraud, which misconduct comes within the definition of the crime of fraud under the Criminal Code. Therefore, there is no principledreason to hinge AMA’s civil recovery on an actual conviction. [17] Finally, an argument can be made that the consent judgment together with the consent order constitute an abandonment of hispension by Mr. Gladden.

As to what constitutes abandonment of a chattel in law, in Ericsson v Novatel Inc. 2001 ABCA 199, our Courtof Appeal accepted the principles established in an earlier Ontario case: To constitute abandonment, we find the test in Simpson v. Gowers (1981), (ON CA), 121 D.L.R. (3d) 709, (Ont.C.A.) to be apt. In that case, a case involving property, specifically chattels, McKinnon, A.C.J.O., said at p. 711 quoting from R.

A.Brown, in his text The Law of Personal Property, 2nd ed. (1955), at p. 9: "Abandonment occurs when there is a giving up, a total desertion, and absolute relinquishment of private goods by the former owner. Itmay arise when the owner with the specific intent of desertion and relinquishment casts away or leaves behind his property..." 15 Here there is no specific intent of desertion and relinquishment.

Even if this doctrine is applicable in determining a privilege issue,which we do not decide, we caution that we also do not decide whether this court ought to decide what may be characterized as aprocedural issue in the Texas court. In the circumstances of this case, where there is a consent judgment and a consent order, there is ample evidence of specific intent ofdesertion and relinquishment. [18] For these reasons, I issue the consent order, despite its apparent conflict with the legislation. Heard on the 28th day of February, 2017. Dated at the City of Edmonton, Alberta this 13th day of March, 2017. J.B.

Veit J.C.Q.B.A. Appearances: Munaf Mohamed, Bennett Jones LLP for the AMA