Sim v. Sim 2009 Ont. S.C.J. – The Interconnection of Pensions, Bankruptcy and Family Law Obligations

The parties in this case were involved in two separate family law litigation proceedings. In the first proceeding, the respondent father was ordered to pay the applicant mother spousal support in the amount of $575.00 per month. This first proceeding also dealt with the issue of custody and child support. The second proceeding occurred some time later when the applicant made a claim for equalization of net family properties. On September 9, 2005, the court ordered that the respondent pay the applicant $60,000.00 in an equalization payment.

Unbeknownst to the applicant, the respondent made an assignment of bankruptcy less than a month prior to the second order dealing with equalization. The respondent was discharged from bankruptcy on October 16, 2006. In accordance with bankruptcy law, the respondent was entitled to retain his pension entitlement which had a value of just under $100,000.00 in December 2003.

The mother then made an application for an interest in the father’s pension in satisfaction of the order for the equalization payment. In the alternative, the mother made an application for lump sum support to be secured against the pension.

The court began by considering the first issue that is, can the applicant recover her equalization payment directly from the respondent’s pension? The court concluded ‘no’ as this would go against the purpose of bankruptcy law. The effect of a discharge of a bankrupt is to release him or her from all debts. An equalization payment is a money debt and this debt had essentially been extinguished by the bankruptcy proceedings.

The second issue is whether the applicant could claim lump sum spousal support? The court decided that the applicant’s new claim for spousal support should be treated as a motion to vary the initial order which required the respondent to pay the applicant $575.00 per month in spousal support. According to the court, there had been a material change in circumstances since the first order. The applicant had become entitled to an equalization payment and the bankruptcy of the respondent left her without the benefit of the equalization payment. At the same time the respondent was still fully entitled to his pension.

The court noted that the parties had been in a relationship for 24 years and had two children; the mother was the primary caregiver of the two children and was primarily responsible for household chores.

The court concluded that there was a material change in circumstances due to the respondent’s bankruptcy which entitled the applicant to lump sum support which should be secured against the respondent’s pension entitlement. The respondent did not file an answer or did not otherwise argue his case and the court found that the respondent had acquiesced to the finding that the applicant’s entitlement to lump sum spousal support be in the amount of $60,000.00 as claimed in the application. This amount was to be secured against the respondent’s pension.

This Post Has 2 Comments
  1. I commend the court for finding there had been a material change in circumstance, the bankruptcy of the Father prevented the Mother from realizing the equalization payment she was expecting to receive and therefore varied the terms of the spousal support order. Bankruptcy law prevented the Mother from obtaining an equalization payment, or securing the payment against the Father’s pension, as all debts were extinguished by the bankruptcy proceedings.

    This case highlights other ways, within the family law, to obtain the appropriate and fair relief.

    I query, however, if the result would have been the same had the Father opposed the Application. He had not responded to the Application, and therefore the Mother’s request for lump sum spousal support, secured against the Father’s pension, was deemed accepted by the Father.

    This was a short and succinct decision and well worth the read.

  2. I also agree with the court that the husband claiming bankruptcy was considered a material change in circumstances. Further, the bankruptcy prevented the wife from receiving an equalization payment that she would have most ‘likely’ received had the husband not claimed bankruptcy.

    In addition, given the length of the parties’ relationship and the roles played during the marriage, it was appropriative for the court to award the wife lump sum support to be secured by the husband’s pension.

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