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November 14, 2012
Court flexes its muscles, forces lump sum transfer from LIRA

The Ontario Superior Court demonstrated that it is prepared to force the transfer of funds from a locked-in savings account (LIRA) when plan members renege on spousal support payments.

The case involved a common-law couple whose relationship had dissolved after 24 years.  The court had initially required the man to pay $2,000 per month in spousal support.  However, within days of receiving the order, the man terminated his employment and received a severance amount totalling more than $120,000.  A year later, he also cashed out his pension, which had a commuted value of more than $569,700.  He then transferred more than $363,000 to a LIRA and placed the remaining $144,000 into a personal savings account.

A few months after that, he also applied to the Financial Service Commission of Ontario to unlock $24,150 from the LIRA, citing financial hardship.  His application was approved.

When his former partner learned of his attempts to liquidate his assets, she began litigation.  By this point, the man owed more than $57,000 in unpaid spousal support.  

In reviewing the circumstances surrounding the woman’s application, the court ordered that the man’s LIRA be frozen and that all amounts owing to his former partner be paid from the fund.  In addition, it ordered that his spousal support arrears continue to grow at rate of $1,900 per month.

However, the man’s actions were then elevated to another, far more serious consideration:  contempt of court.  The woman’s counsel argued that the man’s attempt to liquidate his assets after the initial settlement could be considered contempt of court.  However, rather than seek a contempt order, the woman would accept a lump sum settlement amounting to $200,000 from the LIRA as well as the $24,150 from his lump sum withdrawal.

In reviewing the situation, the court agreed that there were ample grounds to find the man in contempt of court and agreed to the $200,000 lump sum transfer from the LIRA in addition to the $57,000 in unpaid spousal support payments, as well as the earlier $24,150 withdrawal.

In summarizing its award, the court noted that the man “has had at several times significant funds at his disposal and has failed to pay support to the respondent.  In such a situation, a lump sum award is appropriate.”

While forcing the transfer of a lump sum from a LIRA is unusual, the Ontario court’s action demonstrates that the legal system is prepared to take strong measures to ensure settlements are enforced following relationship breakdowns.  Attempts to circumvent court judgements by asset liquidation or similar means could result in contempt charges and/or substantial financial ramifications for the offending party.

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