Written by Munaf Mohamed and Mathieu J. LaFleche

In the recent decision of Alberta Motor Association v. Gladden, 2017 ABQB 174, the Alberta Court of Queen’s Bench clarified the limits to which employer-sponsored pension benefits will be immunized from enforcement proceedings in fraud cases. In this case, the defendant, Mr. Gladden, had agreed to a consent judgment in favour of his former employer arising from a fraud that he had perpetuated during the course of his employment. One of Mr. Gladden’s assets was his employer-sponsored pension plan. Mr. Gladden agreed to transfer the commuted value of his pension benefits to his employer in partial satisfaction of the consent judgment.

The pension plan at issue was governed by the statutory framework set out in the Employment Pension Plans Act. As is common in pension legislation, this act imposes strict prohibitions on both the alienation and seizure of pension entitlements. This decision clarifies that these prohibitions are not absolute. In particular, the court held that pension entitlements under the Employment Pension Plans Act are subject to the same limitations set out in section 93 of the Civil Enforcement Act that would be applicable to other property that would typically be exempt from judicial seizure. Section 93(e) of the Civil Enforcement Act, in particular, permits enforcement against otherwise exempt assets where judgment liability arises from an act for which the debtor has been convicted of a criminal offence. Given the fraudulent conduct acknowledged by Mr. Gladden in the consent judgment, the court approved the transfer of the pension.

In coming to this conclusion, the court applied a purposive analysis to the existing legislation. The court concluded that the legislature’s intent, as set out in the existing legislative framework, demonstrated an overall desire to place the interests of a victim of fraud over those of the perpetuator of a fraud. The public policy of ensuring that criminal wrongdoers do not profit from their crimes outweighed the interest of ensuring the wrongdoer has means in their retirement. The court’s approach also cured two absurdities that would otherwise result by exempting employer-sponsored pension entitlements in these two circumstances:

1. It avoids treating employer-sponsored pension plans differently from RRSPs.
2. It avoids creating a situation where the judgment creditor would otherwise be able to seize all of the proceeds of the pension, through a burdensome piecemeal basis at the time of distribution, but not the pension itself.

As the consent judgment Mr. Gladden entered into specifically acknowledged fraudulent conduct, the court concluded that this was sufficient to meet the requirement of section 93(e) of the Civil Enforcement Act. The court clarified that an actual conviction is not necessary where a defendant knowingly enters into a consent order that describes conduct which would constitute an offence.

This decision provides some helpful guidance in approaching settlement in cases of fraud, particularly employee fraud: 

1. When considering potential assets to include as part of a settlement, an assessment of a defendant’s pension entitlements should be undertaken. This decision makes it clear that pension benefits funded by a defrauded employer can be a potential asset recovered as part of a settlement.
2. If a settlement is supported by a consent judgment, the language of the consent judgment should make it clear that all (or some) of the judgment liability arises out of conduct that would give rise to an offence under the Criminal Code.
3. In addition to a consent judgment, any settlement involving the transfer of a pension entitlement should be supported by a consent order confirming the transfer of the commuted value of the pension. In this decision, the court accepted that the existence of such a consent order provided an alternative basis to permit the transfer of the pension entitlement on the grounds of abandonment by Mr. Gladden.

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