COURT FILE NO.: 06-DV-1194
DATE: 20061121
ONTARIO
SUPERIOR COURT OF JUSTICE
(DIVISIONAL COURT)
CUNNINGHAM A.C.J.S.C, McCARTNEY AND WHITTEN JJ.
B E T W E E N:
MALACHI MADORE-OGILVIE By his Litigation Guardian, STEPHANIE MADORE and ACKIL OGILVIE by his Litigation Guardian, DENISE CHAMBERS
Respondents (Applicants)
Marc-Nicholas Quinn, for the Applicant Malachi Madore-Ogilvie
Howard Yegendorf for the Applicant Ackil Ogilvie, for the
- and -
MARY KULWARTIAN (also known as MARY OGILVIE) In her capacity as ESTATE TRUSTEE For THE ESETATE OF LLOYD OGILVIE, deceased
Appellants (Respondents)
Bruce F. Simpson, for the Appellant Mary Ogilvie
-and-
THE MANUFACTURERS LIFE INSURANCE COMPANY operating as MANULIFE FINANCIAL and THE MARITIME LIFE ASSURANCE COMPANY
Respondents
HEARD: October 19, 2006.
D E C I S I O N
I Introduction
[1] This is an appeal from the decision of Justice A de Lotbinière Panet of December 9, 2005. The primary basis of the appeal is that the justice erred by including a joint flex term policy issued by Royal Life Insurance Company of Canada January 26, 1998 (referred to as the second policy) as part of the estate of the deceased by virtue of s. 72(1) of the Succession Law Reform Act. The effect of this inclusion was that the sum of approximately $109,000 would then be available to satisfy the needs of acknowledged dependant children and the spouse of the deceased. His Honour, although he acknowledged the spouse as a dependant, proceeded to divide the estate into three portions to provide annuities for the dependant children alone. A secondary basis of the appeal is that the dependency of the spouse was not addressed in the distribution. In our opinion that appeal point would become academic if the second policy was not included within the estate.
II Standard of Review
[2] The Supreme Court of Canada addressed the standard of review of an appeal from a judge’s decision in Housen v. Nikolaisen (2002), 2002 SCC 33, 211 D.L.R. (4th) 577 (S.C.C.), [2002] S.C.J. No. 31 (Cited to QL). In Summary:
On a pure question of law, the basic rule with respect to the review of a trial judge’s findings is that an appellate court is free to replace the opinion of the trial judge with its own. Thus the standard of review on a question of law is that of correctness. (at ¶8)
The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”: Stein v. The Ship “Kathy K” 1975 146 (SCC), [1976] 2 S.C.R. 802 (at ¶10).
Where the trier of fact has considered all the evidence that the law requires him or her to consider and still comes to the wrong conclusion, then this amounts to an error of mixed law and fact and is subject to a more stringent standard of review [than for findings of fact]. (at ¶28)
III Background
[3] The policy as indicated above was issued January 26, 1998 to both the deceased and his spouse. They were both owners and beneficiaries. Basically, the policy provided that the survivor of the two would receive the face amount of the policy. The policy, if the owners decided, could be split into two separate policies each with respect to the life of one of the original owners. That was not done. The unrefuted evidence is that the spouse made the majority, if not all, of the payments. The policy was in a way “mortgage insurance”. The intent was that the survivor would be able to pay down the mortgage on the matrimonial home. Obviously, the inception of the insurance policy precedes the conception of the child Malachi Jamieson Madore-Ogilvie.
IV Issues
[4] The principal issue is whether the proceeds of the policy are to be included into the estate for distribution by virtue of s. 72(1)(f) which states “any amount payable under a policy of insurance effected on the life of the deceased and owned by him or her” (underlining mine). There is no doubt that the section would trap for an insurance policy owned entirely by a deceased. What is referred to as policy #1 in this appeal is such a policy. Although there has been debate in the past as to whether this section would include a group life policy, for example Juarez (Litigation Guardian of) v. Juarez, 1996 7959 (ON SC), [1996] O.J. No. 400, that debate is now academic given the inclusion of section (f.1). As indicated by counsel for the appellant, with such policies there are no other policy owners who are adversely affected. There is a range of ownership between sole ownership of a policy and a group life policy.
V Analysis
[5] The applicable sections of the Succession Law Reform Act are designed to trap for intentional depletion of the value of an estate at the expense of dependants. Having said that, there are transactions within the lifetime of a testator which would be considered the normal personal commerce of an individual. For example, the purchasing of a home by a couple and the registration of the home in joint tenancy. These are not necessarily transactions contemplated to disenfranchise a dependant. Justice Ferrier in Modopoulos v. Breen Estate, [1996] O.J. No. 2738 had the opportunity to review such a transaction in the context of the dependant relief provisions of the Succession Law Reform Act. His Honour considered the import of s. 72(1)(d) “any disposition of property made by a deceased whereby property is held at the date of his or her death by the deceased and another as joint tenants.” His Honour concluded that this section contemplated the inclusion of property that was originally owned by the testator and then subsequently transferred by the testator to himself or herself and another as joint tenants. The section did not trap for property which from its purchase was held in joint tenancy. Such an interpretation recognizes the contractual rights of individuals which are exercised absent the intentional actions contemplated by the Succession Law Reform Act.
[6] “Owner” is neither defined in the Succession Law Reform Act nor the Insurance Act. The application judge noted as had Meredith C.J.O. in Wynne v. Dalby (1913) 1913 578 (ON CA), 30 O.L.R. 67 at p. 72 (referred to as well by Brockenshire J. in Juarez v. Juarez, 1996 7959 (ON SC), [1996] O.J. No. 400 at p. 3). “The word “owner” is an elastic term and the meaning which must be given to it in a statutory enactment depends very much upon the object the enactment is designed to serve.”
[7] The application judge noted that the deceased was named as the owner of the second policy with all the attendant rights and privileges. He concluded that consequently that policy then came within the ambit of s. 72(1)f. He stated “(t)he only basis for finding that the second policy did not come within subsection (f) would be to read into the subsection the intent of the legislature that the subject policy of insurance must be “solely” owned by the deceased. In my view, given the purpose of the legislation that interpretation would not be correct.” What the application jurist states would have to be read into the section, namely “sole ownership” is in a way correct. It can not be ignored that there is another owner of the policy, the appellant, who paid the premium and who was subject to the terms of the policy. Under the policy, the testator could very well have ended up as the beneficiary of the policy proceeds if the appellant had predeceased him. Are the contractual rights of the appellant sacrificed as a result of the testator inadequately providing for his dependants?
[8] The application jurist noted that the appellant had asserted that s. 196 of the Insurance Act provided that the proceeds of an insurance policy were immune to the demands of creditors. It was mistakenly stated that the initial phraseology of s. 196 commenced with the words “Despite the Succession Law Reform Act”. It is acknowledged it is s. 199(1) that so commences. This latter section was discussed at the hearing of the application, but the import was not appreciated. The possibility that the Insurance Act might prevail in this situation was met in the opinion of the application jurist by Dunn v. Estate of Dunn (1993) 1993 8586 (ON SC), 12 O.R. (3d) 601 (Div. Ct.) Dunn v. Dunn is factually distinct from the matter at hand. In Dunn, the testator had purchased term life policies, in which his current spouse was the beneficiary. It was noted by the trial judge “that all indicia point to the deceased as “owner”… on the evidence…there is nothing in the application or in the books of Carpet Van Go or RMD Carpet that would stamp their policy as “key-man” insurance and thus the property of one or more of those corporations.”
[9] In Dunn v. Dunn the Divisional Court panel focused on the import of s. 196 of the Insurance Act which speaks in terms of insurance proceeds being immune to the claims of creditors. The court stated that “(a) dependant of an insured entitled to “support” pursuant to the SLRA is entitled by statute as a “dependant” and is not a “creditor of the insured.”
[10] Dunn v. Dunn does not interpret the significance of s. 199(1) of the Insurance Act. The section states:
199.(1) Despite the Succession Law Reform Act, where in a contract or in an agreement in writing between an insurer and an insured it is provided that a person named in the contract or in the agreement has, upon the death of the insured, the rights and interests of the insured in the contract,
(a) the rights and interests of the insured in the contract do not, upon the death of the insured, form part of his or her estate; and
(b) upon the death of the insured, the person named in the contract or in the agreement has the rights and interests given to the insured by the contract and by this Part and shall be deemed to be the insured.
Successive owners
(2)Where the contract or agreement provides that two or more persons named in the contract or in the agreement shall, upon the death of the insured, have successively, on the death of each of them, the rights and interests of the insured in the contract, this section applies successively, with necessary modifications, to each of such persons and to his or her rights and interests in the contract.
Saving
(3)Despite any nomination made pursuant to this section, the insured may, prior to his or her death, assign, exercise rights under or in respect of, surrender or otherwise deal with the contract as if the nomination had not been made, and may alter or revoke the nomination by agreement in writing with the insurer. R.S.O. 1990, c. I.8, s. 199.
[11] This section appears to envisage the situation in a jointly owned survivor insurance policy. Is the import of this section eclipsed by principles of interpretation such as contained in R. v. Greenshield, 1958 36 (SCC), [1958] S.C.R. 216? Justice Locke had stated (at p. 6 LexisNexis) “Special Acts are not repealed by general Acts unless there be some express reference to the previous legislation or a necessary inconsistency in the two Acts standing together which prevents the maxim generalia specialibus non derogant being applied. In Greenshield the apparent contradiction was within the same statute, the Quebec Succession Duties Act (1943) c. 18 as amended. In the matter at hand both the Insurance Act and the Succession Law Reform Act can be considered specialized statutes dealing with distinct subjects. Section 199(1) has a specific exemption clause which given its context must be with respect to the sections of the Succession Law Reform Act which encroach upon the type of insurance policy contemplated by s. 199(1).
[12] Section 199(1) phraseology to the effect “that a person named in the contract…has…the rights and interests of the insured in the contract” is compatible with the recognition of ownership of another in an insurance policy. The discussion of ownership under the Succession Law Reform Act can not end with a testator being one of many owners. In Goodis (Litigation Guardian of) v. Goodis Estate, [2003] O.J. No. 3364 (Divisional Court), the testator and his current spouse each owned 50% of a corporation. That corporation purchased two life insurance policies on the life of the testator, initially to secure loans advanced by the spouse to the testator. The corporation or another corporation paid the premiums. The spouse was the sole beneficiary of the policy. It was advanced by dependants that s. 72(1)(f) applied to the policy in question.
[13] Justice McRae speaking on behalf of the panel stated:
With respect, I am unable to agree. The policies were owned by Gerlyn Enterprises Ltd. The deceased had only a 50% ownership interest in that corporation. To say that he owned the polices ignores the interest of the Corporation and of the co-owner of the Corporation – Lynn Goodis.
This is not a case of a sole shareholder using their company as a vehicle to effect estate planning. While 686171 made the premium payments, they were funded at the relevant time by Gerlyn in which both Gerald and Lynn had a 50% shareholder interest. It is difficult to see how her 50% shareholder interest in Gerlyn could be deemed to be owned by Gerald’s Estate under any circumstances. Although there may have been an element of estate planning as described by the Motion’s Judge, the policies were also in place as security for the approximately $606,000 still owing from Gerlyn to Lynn Goodis for advances made by her to that corporation. In the circumstances of this case, it cannot be said that the connection Gerald Goodis had to the policies amounted to ownership within the meaning of s. 72(1)(f) of the Succession Law Reform Act.
[14] The ownership and terms of an insurance policy can not be ignored. In a way, this policy is analogous to the joint tenancy of real property contemplated by s. 72(1)(d) of the Succession Law Reform Act. Similar to what Justice Ferrier identified in Modopoulos v. Breen Estate, supra, property (in this case the policy) was purchased at its inception by both parties, for reasons ostensibly for management of a mortgage debt, as opposed to defeating the claims of dependants (one of whom was not even conceived). To paraphrase Justice Ferrier, the mere fact of joint ownership of the policy is not enough to trigger the provisions of s. 72(1)(f).
[15] Therefore for all of the above reasons, the inclusion of the second policy, simply on the strength of the deceased being one of two owners, into the estate is not correct. The exclusion of the second policy from the estate available for distribution to the dependants, it is agreed, would eclipse any further claim by the appellant/spouse to the remainder of the estate. Therefore the appeal is granted to the extent that the second insurance policy is excluded from the estate.
[16] Counsel have agreed that the applicable amount of costs payable to the successful party is that of $3,500 inclusive of disbursements. Notwithstanding this agreement, given the novelty of this appeal, there shall be no order as to costs.
McCartney J.
Whitten J.
CUNNINGHAM A.C.J.S.C. (Dissenting):
[17] I have, with interest, read the reasons of my colleagues McCartney R.S.J. and Whitten J. Unfortunately, I cannot agree with them as I take a different view of the impact of s. 72 of the Succession Law Reform Act (“SLRA”) in the present case.
[18] This appeal comes before us pursuant to s. 19 of the Courts of Justice Act and the principal issue for us to consider is whether the application judge erred in including the jointly owned policy in the net value of the subject estate. This determination by the application judge involved statutory interpretation and accordingly the standard of review is correctness. For the reasons that follow, I have concluded the application judge correctly decided the matter.
[19] The application judge, relying upon various cases which support the view that the purpose of s. 72(1)(f) of the SLRA is to remedy, in situations of dependency, the non-inclusion of certain assets in a deceased’s estate, ruled that the jointly owned policy should become part of the estate. He then ordered the net value of the estate to be divided into three equal shares to be used for the purchase of annuities for each of three children, including Malachi.
[20] The appellant says that s. 72(1)(d) ought to be interpreted to apply only in situations where the deceased initially owned the property in question entirely, but, without consideration, placed it in the name of himself and another as joint tenants. Here, the appellant says, the jointly owned policy was owned jointly from the beginning and as such is not caught by s. 72(1)(d) and as a result should not be included as part of the estate. The jointly owned policy, the appellant says, became her sole property on the death of the deceased and that the SLRA does not provide that the property interest of a third party can be affected in order to support the deceased’s dependants.
[21] I have concluded that s. 72(1)(d) of the SLRA does not apply to the insurance policy in issue because it is apparent this subsection only deals with property held in joint tenancy. This implies real property, not property such as an insurance policy.
[22] Moreover, the SLRA specifically deals with insurance policies in subs. 72(1)(f) and 72(1)(f.1).
[23] Subsection 72(1)(f) reads as follows:
Subject to section 71, for the purpose of this Part, the capital value of the following transactions effected by a deceased before his or her death, whether benefitting his or her dependant or any other person, shall be included as testamentary dispositions as of the date of the death of the deceased and shall be deemed to be part of his or her net estate for purposes of ascertaining the value of his or her estate, and being available to be charged for payment by an order under clause 63(2)(f),
(f) any amount payable under a policy of insurance effected on the life of the deceased and owned by him or her;
[24] Because the Act has a specific subsection dealing with insurance policies, the paramountcy rule of statutory interpretation (that the general does not derogate from the specific), directs us to apply this specific subsection rather than any other (see Sullivan, Statutory Interpretation (Toronto: Irwin Law, 1997) page 5; Mills v. Star Quality Homes Ltd. (1978), 1978 1389 (ON CA), 21 O.R. (2d) 39 (C.A.). Importantly, I think, while s. 72(2) specifically refers to s. 72(1)(d), it makes no reference to s. 72(1)(f). Furthermore, s. 72(1)(f.1) which specifically deals with group insurance, seems to make it clear that any insurance policy contemplated by s. 72(1) (f) or (f.1) may be owned by more than one person.
[25] Counsel for the appellant and indeed my colleagues refer to Modopoulos v. Breen Estate [1996] O.J. No. 2738. That case involved the proceeds from the sale of a house which had been held by Breen (the deceased) and his mother at the time of his death. Ferrier J. concluded that although the house at the time of death was held in joint tenancy, that tenancy was not the result of a disposition by Breen and indeed it was his mother who had initially purchased the house. Moreover, in that case, unlike the one before us, there was no evidence that Breen had not adequately provided for the support of Modopoulos or indeed that Modopoulos was in need of support. This clearly was a case that engaged subs. 72(1)(d) of the SLRA which, as I have stated, was obviously intended to deal with real property, and the disposition of real property. In my view, it has no application to the case at bar.
[26] The application judge in the present case, I think quite correctly, concluded in his consideration of subs. 72(1)(f) that the deceased “…has all the incidents of ownership available to the owner of an insurance policy” referring to the elasticity of the word “owner” as noted by Meredith C.J.O. in Wynne v. Dalby (1913), 1913 578 (ON CA), 30 O.L.R. 67 at p. 72. The learned application judge had this to say,
The only basis for finding that the Second Policy (the one at issue) did not come within subsection (f) would be to read into the subsection the intent of the legislature that the subject policy of insurance must be “solely” owned by the deceased. In my view, given the purpose of this legislation that interpretation would not be correct.
[27] I have noted, with some interest, that this policy was issued in 1998 and that in May of 2004, at a time when he was seriously ill, the late Lloyd Ogilvie changed the beneficiary to his wife Mary Ogilvie by completing a change of beneficiary form with Maritime Life. In other words, the late Lloyd Ogilvie was making estate plans that did not include any benefit to his other children.
[28] The spectre of the Insurance Act has been raised on this appeal. As I understand the appellant’s position, because s. 199 commences with the words, “Despite the Succession Law Reform Act”, this section should effectively override the provisions of s. 72 of the SLRA. Quite correctly, the learned application judge noted the decision in Dunn v. Dunn Estate (1993) 1993 8586 (ON SC), 12 O.R. (3d) 601, which considered this issue and indeed the legislative history leading to the enactment of s. 72(1) of the SLRA. While my colleagues correctly note that the facts in Dunn (supra) are different from those in the present case, nevertheless the principles enunciated in Dunn remain. I am of the view that the very specific provisions of s. 72(1)(f) of the SLRA prevail over the general provisions of s. 199(1) of the Insurance Act given the clear remedial legislative intent of the SLRA. As Robins J. (as he then was) stated in Moores v. Hughes (1981), 1981 1870 (ON SC), 37 O.R. (2d) 785 at 787 when speaking of s. 72(1) of the SLRA stated,
Manifestly, the section was intended to ensure that the maintenance of a dependant is not jeopardized by arrangements made, intentionally or otherwise, by a person obligated to provide support in the eventuality of his death. It is designed to alleviate the hardship that can be visited upon a dependant by causing money or property to pass directly to a beneficiary (donee or joint tenant) and not as part of the estate.
[29] For the above reasons, I am satisfied that the application judge was correct in his statutory interpretation. With respect to the other grounds of appeal, in my view, these all relate to issues over which the application judge exercised his discretion appropriately and it cannot be said he made a palpable or overriding error in coming to the conclusion he did. The application judge carefully considered all of the evidence before him.
[30] I would dismiss the appeal.
Cunningham A.C.J.
Released: November 21, 2006
COURT FILE NO.: 06-DV-1194
DATE: 20061121
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
MALACHI MADORE-OGILVIE By his Litigation Guardian, STEPHANIE MADORE and ACKIL OGILVIE by his Litigation Guardian, DENISE CHAMBERS
- and –
MARY KULWARTIAN (also known as MARY OGILVIE) In her capacity as ESTATE TRUSTEE For THE ESETATE OF LLOYD OGILVIE, deceased
Appellants (Respondents)
- and -
THE MANUFACTURERS LIFE INSURANCE COMPANY operating as MANULIFE FINANCIAL and THE MARITIME LIFE ASSURANCE COMPANY
McCartney J.
Whitten J.
Dissenting: Cunningham A.C.J.
Released: November 21, 2006