Court File and Parties

COURT FILE NO.: FC-04-1974-1 DATE: 20170515 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

CAROLINE MELIS Applicant – and – CORNELIS JOHANNES ZWANENBURG Respondent

Counsel: John E. Merner, for the Applicant Jennifer Johnston, for the Respondent

HEARD: By written submissions

Endorsement

Beaudoin J.

[1] On January 27, 2017, I released my decision with regard to the Applicant (Melis)’ Motion to Change. In response, the Respondent (Zwanenburg) had sought an order that Melis provide security for any support payments ordered. I noted that there was no evidence before the Court with respect to Melis’ existing policy of insurance although, I was advised that it was no longer in effect and that Melis could not obtain insurance due to health reasons.

[2] At that time, I relied on the original divorce order which contained this provision at paragraph. 34:

If the wife dies without this insurance in effect, her obligation or liability to pay support will survive her death and be a first charge on her estate.

[3] I concluded that since the provision continued to be in effect and, subject to any further submissions from counsel, this appeared to be the only practical security available.

[4] I have received additional submissions from Zwanenburg. He notes that Melis had filed two financial statements in these proceedings; neither of which has listed a life insurance policy. His counsel sought confirmation of any insurance that may be available. Melis’ counsel replied that there is insurance available totaling $360,125 based on three separate policies. These policies will either automatically reduce as the applicant ages, or will be carried only for a finite period of time.

[5] The amounts available will reduce as follows:

• February 2017: $360,125 (age 60)
• February 2018: $328,750 (age 61);
• February 2019: $289,375 (age 62);
• February 2026: $110,000 (age 70) and
• February 2027: $10,000 (age 71).

[6] Zwanenburg is not a designated beneficiary for any of these policies. The named beneficiaries are a mix of Melis’ estate, her sister, and the parties’ adult daughter. The total amount of insurance required to secure the Applicant’s support obligation is $296,773. Melis does not dispute that figure.

[7] The Respondent notes that both parties will turn 70 in 2026. At that time, support will still be payable at $1304 per month on an indefinite basis. Relying on Divorcemate calculations, Zwanenburg maintains that the total amount of insurance required to secure support as of that date will be $166,074. By that time, the total amount of insurance available to the Applicant will be only $110,000 which will further reduce to $10,000 in February 2027.

[8] Zwanenburg notes that Melis had equity in her home totaling approximately $101,000 at the time of her swearing her financial statement on September 20, 2016. While Zwanenburg acknowledges that there is sufficient insurance available to provide security for support at this time, there will be a deficit commencing February 1, 2026. He relies on the Court’s jurisdiction to make an order requiring one spouse to secure pay periodic support as set out in section 15(2) of the Divorce Act, 1985, c. 3 (2nd Supp) and cites the Court of Appeal decision in Katz v. Katz, 2014 ONCA 606, 50 R.F.L. (7th) 1, where Justice Simmons reviewed the law regarding security for support.

[9] Zwanenburg asks that I order Melis to secure a collateral mortgage as security for support in the amount of $166,000 that being the quantum of security required as of February, 2026. He maintains that the collateral mortgage could be treated as having a current value of $100,000 being the approximate current equity in Melis’ home. He further asks that Melis be required to obtain sufficient insurance policies to make up the difference between the $100,000 collateral mortgage and the current support obligation of $296,773 and to designate him irrevocably as beneficiary.

[10] On February 1, 2026, Melis’ ability to maintain existing insurance coverage would terminate, and Zwanenburg suggests that security for support would be entirely in the form of a collateral mortgage for $166,074. He submits that a collateral mortgage should specify that its value shall be determined in the event of Melis’ death or sale of the house as the total outstanding support obligation which could be calculated by counsel using Divorcemate or similar software. That amount would be paid out to him, regardless of the face amount of the collateral mortgage. In other words, the mortgage would not result in a windfall to him.

[11] In response, the applicant notes that she is 59 years of age, has retired from her position in the government and is a cancer survivor. She maintains that the cost of securing additional insurance would be prohibitive.

[12] She notes that the original divorce order addressed the matter of insurance. Paragraph 31 required the Applicant to name the child of the marriage and the Respondent as the irrevocable beneficiaries of the insurance policy that was in force pursuant to her then employment. The order required the wife to name the husband as trustee of policy for the benefit of the child.

[13] As already noted, paragraph 34 of the original order provided that if Melis died without this insurance in effect, her obligation or liability to pay support would survive her death and be a first charge on her estate. Paragraph 35 provided “at such time that the child is no longer a child of the marriage within the meaning of the Divorce Act, the wife may deal with such policy of insurance as she shall see fit.”

[14] In addition, paragraph 36 stated: “the trust terms upon which the trustee holds the insurance proceeds for the child are set out in the executed minutes of settlement, paragraphs 40 through 52 and shall remain in force until such time as the child is no longer a child of the marriage under the meaning of the Divorce Act.”

[15] The divorce order was based on the minutes of settlement signed by the parties on November 20, 2006 which contained substantially the same wording. Paragraph 42 provides:

So long as either party is required to pay spousal support, and for so long as such policy is available to her through her employment, the Wife will name the child and the husband as the irrevocable beneficiaries in trust, in equal shares. The Wife will name the Husband as the trustee of the policy for the benefit for the child.

[16] Melis submits that her only obligation to provide insurance for support is through the policy of insurance through her employment failing which the support obligation would survive her death.

[17] Melis argues that she owns her current residence as a joint tenant with her sister. That property was purchased on March 31, 2005; which agreement of purchase and sale predated the minutes of settlement and the divorce order. She argues that if a collateral mortgage was registered against the property, such an order would affect the sister’s equity in the property should Melis predecease the Respondent. Such an order would be adverse to her sister’s interest who is not a party to the proceedings.

[18] Melis submits that the only security that needs to be provided is that as specified in the minutes of settlement/divorce order; failing which her obligation to pay support would be a first charge on her estate.

Conclusion

[19] It is apparent that Melis has sufficient polices of insurance currently in place to secure her support obligations at this time. Any problem with security for support will not arise until 2026 when her insurance policies will no longer be available. It is important to remember that the parties originally agreed that Melis’ support obligations were to be secured by her life insurance policies that were available through her employment.

[20] The Court’s ability to secure a support order under the Family Law Act and the Divorce Act was canvassed by the Court of Appeal in Katz v. Katz, where it concluded at paras. 69, 70, 71, 72, and 74:

[69] Given that a support order under the Family Law Act is binding on a payor spouse’s estate unless the order provides otherwise, on its face, s. 34(1)(k) is broad enough to permit a court to order a spouse to obtain an insurance policy to secure payment of the order following the payor spouse’s death. The concluding words “or otherwise” in s. 34(1)(k) afford the court broad scope for securing the payment of a support order.

[70] Because a support payor’s estate is bound by a support order following the payor’s death, the court making a support order is entitled to secure the payments to be made in the event of the payor’s death by requiring the payor to obtain and maintain life insurance for a specified beneficiary while the support order is in force and to give directions concerning the extent to which the payout of the insurance proceeds will discharge the support obligation: see Laczko v. Laczko (1999), 176 D.L.R. (4th) 507 (Ont. S.C.), at pp. 511-12.

[71] The situation under the Divorce Act is somewhat different. There is no provision similar to s. 34(1) of the Family Law Act listing the specific powers of the court in an application for support. Rather, the court is given broad discretion to impose terms, conditions or restrictions in connection with the order or interim order as it thinks fit and just: ss. 15.1(4) (child support), 15.2(3) (spousal support). It is generally accepted that as part of its discretionary power under these sections, a court may impose terms aimed at securing payment of a support order: see Trinidad v. Trinidad (2007), 47 R.F.L. (6th) 128 (Ont. S.C.), at para. 97; Jardine-Vissers v. Vissers, 2011 NSSC 195, 303 N.S.R. (2d) 200, at para. 44. With respect to a child support order made under the Divorce Act, s. 12 of the Federal Child Support Guidelines gives a court express authority to order a spouse to supply security.

[72] There is, however, no provision in the Divorce Act similar to s. 34(4) of the Family Law Act, making a support order binding on a payor’s estate. On the contrary, it has long been held that a support or maintenance obligation under divorce legislation ends when the payor dies unless there is a specific agreement to the contrary: Schwartz Estate v. Schwartz (1998), 36 R.F.L. (4th) 110 (Ont. Gen. Div.), at paras. 23, 27 and 28. There are conflicting authorities across Canada concerning whether a court may order that support payments under divorce legislation are binding on the payor’s estate: see e.g. Carmichael v. Carmichael (1992), 1992 NSCA 62, 43 R.F.L. (3d) 145 (N.S.C.A.), at paras. 17, 27; Will v. Thauberger Estate (1991), 34 R.F.L. (3d) 432 (Sask. Q.B.), at para. 14, varied on other grounds, , 38 R.F.L. (3d) 68 (Sask. C.A.). Nonetheless, the prevailing view in Ontario has long been that the court has that power, but that explicit language in the order is required to make that intention clear: Schwartz, supra; Linton v. Linton (1990), 1 O.R. (3d) 1 (C.A.), at p. 32.

[73] In my view, therefore, the same power that exists under the Family Law Act to order a spouse to obtain insurance to secure payment of support payments that are binding on the payor’s estate also exists under the Divorce Act.

[74] That said, where there is no existing policy in place, a court should proceed carefully in requiring a payor spouse to obtain insurance. This case demonstrates the desirability of having evidence of the payor’s insurability and of the amount and cost of the available insurance. Careful consideration should be given to the amount of insurance that is appropriate. It should not exceed the total amount of support likely to be payable over the duration of the support award. Moreover, the required insurance should generally be somewhat less than the total support anticipated where the court determines that the recipient will be able to invest the proceeds of an insurance payout. Further, the amount of insurance to be maintained should decline over time as the total amount of support payable over the duration of the award diminishes. The obligation to maintain insurance should end when the support obligation ceases – and provision should be made to allow the payor spouse to deal with the policy at that time. Finally, when proceeding under the Divorce Act, the court should first order that the support obligation is binding on the payor’s estate.

[21] Melis does have insurance available, and based on the evidence before me, the value of that insurance will decline over time until the costs of maintaining it will become prohibitive at age 71. I am not willing to order Melis to obtain an additional mortgage on her property given the impact on the joint tenant’s interest in the property and the Court of Appeals’ direction that the court should first order that the support obligation be a binding on the payors’ estate. This property was acquired before the minutes of settlement were signed and Zwanenburg did not seek any additional security beyond the issuance policies available through Melis’ employment.

[22] Given that Melis’ half interest in the home she now occupies will pass to her sister in the event of her death, it is difficult to estimate what other assets may be in her estate at that time. So long as the current life insurance policies remain available to her, I conclude that I have the jurisdiction to order Melis to designate Zwanenburg as the irrevocable beneficiary until she reached to the age of 71. I accordingly order that Melis designate Zwanenburg as beneficiary of 70% of the total declining value of her policies of life insurance until age 71. In the event of any shortfall, her obligation to pay support would be a first charge on her estate.

[23] Given the parties’ divided success on this issue and having regard to the costs award already made, I do not believe that this is an appropriate case to order costs. If the parties disagree, they may make further submissions on costs which submissions should not exceed three pages in length.

Mr. Justice Robert N. Beaudoin Released: May 15, 2017