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Court of Appeal Examines Whether a Debtor’s Pension Benefits Can Be Garnished

Can a creditor garnish a debtor’s pension benefits? As in many instances in law, it all depends. In particular, it depends on the type of the pension plan. The arcane workings of pension plans were the subject of Virc v. Blair, a 2017 decision of the Ontario Court of Appeal.

The Claim

The debtor’s pension was known as a retirement compensation arrangement (“RCA“). It was contractually negotiated between Royal Trust Corporation of Canada, as trustee, and the debtor’s former employer, which just happened to be a corporation that he owned and controlled. The debtor argued that the benefits from the RCA were pension benefits and could not be garnished.

Ground Rules

Section 66(1) of the Pension Benefits Act (“PBA“) of Canada protects money payable under a “pension plan” from garnishment. A pension plan is defined as a plan organised and administered to provide pensions for employees. However, it excludes some pension arrangements, in particular those that are prescribed by regulation. The regulations under the PBA exempt an RCA, as defined in the Income Tax Act, from the application of the PBA.

Result

Accordingly, after following the bouncing ball, the Court held that the debtor could not benefit from the provisions of the PBA to protect his RCA from garnishment.

Worse yet, payments made through the RCA were held not to be wages as defined in the Wages Act of Ontario. The debtor therefore was not able to receive the benefit of the Wages Act which limits a garnishment to 20% of the wages being garnished.

We doubt that too many tears will be shed for the debtor in this case. The creditor was his wife, who was garnishing to collect on her judgment enforcing an equalisation payment and for support. The husband’s RCA, which he negotiated with and for himself, did not insulate him from his responsibilities.

Image courtesy of mconnors.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.