In the matter of Thibodeau v. Thibodeau the parties were involved in lengthy litigation which ultimately ended with the parties taking part in arbitration. In arbitration, the wife was awarded a lump sum amount for spousal support arrears, equalization payment and costs by arbitration. The arbitration award specifically provided that the matrimonial home was to be sold on consent and that the husband was to pay amounts owing to wife from his share of the proceeds of the sale. The terms of the arbitration award were incorporated into a court order and therefore entitled the wife to seek remedy under the law if the husband failed to abide by the order.

Following the arbitration, the husband made an assignment in bankruptcy. As a result of the husband going bankrupt the wife successfully brought a motion for a declaration that she had priority over other unsecured creditors to the husband’s half the proceeds from the sale of their jointly owned home. Not only was the wife granted the relief she sought, but the motions judge also ordered that balance of husband’s bankruptcy exempt RRSP was to be transferred to wife.

The husband successfully appealed the motions judge decision on the basis that the arbitration award did not affect the “division of property” prior to the date of bankruptcy, but rather divided the proceeds of sale. As such, the order did not elevate the wife’s status in the bankruptcy proceedings from that of unsecured creditor to that of preferred creditor by way of equitable trust. On appeal, it was found that the motions judge lacked the authority to alter the arbitrator’s award.

While the Bankruptcy and Insolvency Act had been amended to give preferred status to claims for support under the family law, the same did not apply with respect to equalization payments in relation to family property. In fact, the legislation was clear that a spouse entitled to equalization payment was an unsecured creditor of the payor spouse. Essentially, it was determined that the order for equalization payment did not create property rights. The award did not impose an equitable trust on proceeds, nor did it create an equitable lien or assignment on the husband’s share of the proceeds of sale.

With respect to the motions judge’s order for the balance of the husband’s RRSP being transferred to the wife, on appeal, the court found that there was no specific relief of this sort requested or asserted in arbitration proceedings. Therefore, the motions judge could not alter or correct the arbitration award retroactively in way that impacted the rights of third parties.