Tennant v. Tennant [Indexed as: Tennant v. Tennant]
62 O.R. (3d) 185
[2002] O.J. No. 4333
Docket No. C36681
Court of Appeal for Ontario,
Laskin, MacPherson and Simmons JJ.A.
November 15, 2002
Family law -- Support -- Spousal support -- Former spouse is not "spouse" within meaning of s. 196(2) of Insurance Act -- Section 196(2) did not bar former spouse from enforcing order for spousal support against ex-husband's annuity contracts or annuity payments -- Insurance Act, R.S.O. 1990, c. I.8, s. 196(2).
Insurance -- Life insurance -- Annuities -- All annuity payments are exempt from creditors' claims under s. 196(1) of Insurance Act where beneficiary is designated -- Exemption from creditors' claims not limited to moneys that are payable to beneficiary -- Section 196(1) precludes insured's ex-wife (who was also beneficiary under insured's annuity contracts) from enforcing order for spousal support against annuity payments -- Former spouse is not "spouse" within meaning of s. 196(2) of Insurance Act -- Section 196(2) did not bar ex-wife from enforcing order for spousal support against insured's annuity contracts or annuity payments -- Insurance Act, R.S.O. 1990, c. I.8, ss. 196(1), (2).
The parties divorced in 1990 and the appellant was ordered to pay spousal support to the respondent. Following the divorce, the appellant purchased two joint-survivor annuity contracts, both of which provided that the respondent would receive the monthly annuity payments for the balance of her life if she survived the appellant. In 2000, the appellant moved to Mexico and stopped paying spousal support. Because the appellant had no other assets in Ontario, the respondent brought an application for an order requiring that the appellant's interest in the two annuity contracts be vested in her or that his annuity payments be paid to her. The appellant objected to the application, claiming that s. 196 of the Insurance Act barred the respondent's claims against both the annuity payments and the annuity contracts. The motions judge dismissed the appellant's preliminary [page186] objection. He found that the purpose of s. 196(1) is to protect the flow of income to a beneficiary of a life insurance policy, and concluded that it did not protect annuity payments to the appellant from creditors' claims because the appellant, as the "insured", was excluded from the definition of beneficiary. As for s. 196(2), he concluded that, provided that the insured has designated a beneficiary from the class specified in the opening words of the section (i.e. "a spouse, same-sex partner, child, grandchild or parent of the person whose life is insured"), it protects the insured's interest in the annuity contract and in the annuity payments, but that the respondent, as an ex-spouse, did not fit within the specified class. Section 196(2), accordingly, did not protect the appellant's interests. The appellant appealed.
Held, the appeal should be allowed in part.
Designating a beneficiary triggers the protection from creditors' claims provided in s. 196(1). In the context of an annuity contract, the plain meaning of the section is that, where a beneficiary is designated, all annuity payments are protected from creditors' claims. It strains the broad language of s. 196(1) to suggest that, in the context of an annuity contract, the phrase "where a beneficiary is designated" somehow limits the scope of the exemption from creditors' claims to moneys that are payable to a beneficiary. At this stage, the respondent asserted her claims solely as a creditor, and not in her capacity as a beneficiary. The motions judge's declaration that the respondent was entitled to proceed with her claims against the income stream arising from the annuities should be set aside.
The Pension Benefits Act, R.S.O. 1990, c. P.8 contains a more limited exemption for annuity payments under a contract purchased with pension funds than the exemption contained in s. 196(1) of the Insurance Act. The issue of how these provisions interact was not before the motions judge and the evidence concerning the funds used to purchase the annuity contracts forming the subject matter of the application might not be complete. Further, depending on the proper interpretation of s. 196(1), there might be additional issues concerning what steps the respondent may take to exercise her remedies under s. 196(2). All of these issues should be reserved to the application judge.
The motions judge did not err in failing to find that a former spouse is a "spouse" within the meaning of s. 196(2) of the Insurance Act. Section 196(2) did not protect the appellant's interest in the annuity contracts or the annuity payments.
APPEAL from a judgment dismissing a preliminary objection to an application to enforce a spousal support order against the appellant's annuity income.
Cases referred to Bank of Montreal v. Freedman (1984), 1984 250 (BC SC), 58 B.C.L.R. 289 (S.C.); Christensen (Trustee of) v. Christensen (1996), 1996 ABCA 179, 39 Alta. L.R. (3d) 101, 41 C.B.R. (3d) 11 (C.A.) [Leave to appeal refused [1996] S.C.C.A. No. 323]; Crosson v. Crosson (1985), 1985 6492 (BC SC), 14 C.C.L.I. 246 (B.C.S.C.); Gray v. Kerslake (1957), 1957 21 (SCC), [1958] S.C.R. 3, [1957] I.L.R. 1-279, 11 D.L.R. (2d) 225, revg 1956 106 (ON CA), [1956] O.R. 899, [1956] I.L.R. 1-240, 6 D.L.R. (2d) 320 (C.A.), revg [1956] O.W.N. 594 (H.C.J.) (sub nom. Kerslake v. Gray); M.N.R. v. Anthony (1995), 1995 5595 (NL CA), 129 Nfld. & P.E.I.R. 91, 124 D.L.R. (4th) 575, 402 A.P.R. 91, 32 C.B.R. (3d) 109 (Nfld. C.A.); Sykes (Re) (1998), 1998 4597 (BC CA), 48 B.C.L.R. (3d) 169, 156 D.L.R. (4th) 105, [1998] 8 W.W.R. 120, [1999] I.L.R. 1-3630, 2 C.B.R. (4th) 79 (B.C.C.A.), revg (1993), 1993 2360 (BC SC), 80 B.C.L.R. (2d) 368, 18 C.B.R. (3d) 148 (S.C.); Toronto Dominion Bank v. Berezowsky (1987), 1987 3308 (AB KB), 49 Alta. L.R. (2d) 337, 36 D.L.R. (4th) 235, 77 A.R. 297 (Q.B.); Whalley v. Harris Steel Ltd. (1997), 1997 1318 (ON CA), 46 C.C.L.I. (2d) 250 (C.A.), affg (1994), 20 O.R. (3d) 740, 29 C.B.R. (3d) 168 (Gen. Div.) [page187] Statutes referred to Amendments Because of the Supreme Court of Canada Decision in M. v. H. Act, 1999, S.O. 1999, c. 6, s. 31(1) Family Law Act, R.S.O. 1990, c. F.3, s. 34(1) Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31, s. 32 Insurance Act, R.S.O. 1990, c. I.8, ss. 1 "life insurance""insurance money""spouse", 171 "beneficiary""insured", 179, 196, Pension Benefits Act, R.S.O. 1990, c. P.8 The Insurance Amending Act, 1980, S.O. 1980, c. 55, s. 1 Authorities referred to McDonald, B.R., Life Insurance Laws of Canada (Common Law Provinces) (Don Mills: Life Underwriters Association of Canada, 1995) Norwood, D., and J.P. Weir, Norwood on Life Insurance Law in Canada (Toronto: Carswell, 2000) Ontario, Legislative Assembly, Select Committee on Company Law"The Insurance Industry: Fourth Report on Life Insurance" (Chair: J.R. Breithaupt)
Patrick D. Schmidt, for appellant. Stephen F. Shine, for respondent.
The judgment of the court was delivered by
SIMMONS J.A.: --
Introduction
[1] The main issue on this appeal is whether s. 196 of the Insurance Act, R.S.O. 1990, c. I.8, bars the respondent from enforcing an order for spousal support against the appellant's annuity income.
[2] The appellant and the respondent divorced in 1990. Ten years after their divorce, the appellant moved to Mexico and stopped paying spousal support. Because the appellant has no other assets in Ontario, the respondent applied for an order requiring that the appellant's interest in two annuity contracts be vested in her or that his annuity payments be paid to her.
[3] The appellant objected to the application, claiming that s. 196(1) of the Insurance Act bars the respondent's claim against the annuity payments and that s. 196(2) of the Insurance Act bars her claims against both the annuity payments and the annuity contracts. The motion judge declared that s. 196 does not bar the respondent's claims. [page188]
[4] For the reasons that follow, I would set aside the motion judge's ruling concerning the effect of s. 196(1) and reserve that issue for subsequent determination in the application. However, I find no merit in the appellant's submissions concerning s. 196(2), and I would not interfere with the motion judge's ruling concerning that section.
Background
[5] The parties married in 1946, separated in 1986, and divorced in 1990. They dealt with financial and property issues in a separate proceeding and ultimately settled those issues. On January 23, 1990, an order was made, based on minutes of settlement, that the appellant pay the respondent $3,000 per month for her support.
[6] Following the parties' divorce, the appellant purchased two joint-survivor annuity contracts that pay him a monthly income slightly in excess of $3,000. Both annuity contracts provide that the respondent will receive the monthly annuity payments for the balance of her life if she survives the appellant.
[7] The appellant paid the spousal support required under the January 23, 1990 order by way of post-dated cheques until December 1999. In January 2000, the respondent was unable to contact the appellant to obtain additional post-dated cheques. After making inquiries, she discovered that the appellant had sold all of his tangible assets and moved to Mexico. The respondent attempted to enforce her support order through the Family Responsibility Office. However, in November 2000 she was informed that that office was closing her file because she had not provided a mailing address for the appellant.
[8] On March 23, 2001, the respondent commenced this application in the Superior Court claiming an order that the annuity payments be made to her, that the appellant's interest in the annuity contracts be vested in her, that the annuity payments be divided at source, or that a receiver be appointed. She also brought a motion requesting an interim order for the same relief.
[9] The appellant did not file responding material. However, on the motion for interim relief he objected to the application, claiming that s. 196 bars the respondent's claims against both the annuity payments and the annuity contracts.
[10] The order under appeal is the motion judge's ruling dismissing the appellant's preliminary objection.
The Annuity Contracts
[11] The respondent's material did not include complete copies of the annuity contracts purchased by the appellant. However, the [page189] excerpts that were filed confirm that the respondent is entitled to receive the annuity payments under the contracts for the balance of her life if she survives the appellant. The contract particulars that were contained in the respondent's material are set out below.
(i) Annuity issued by The Manufacturer's Life Insurance Company
[12] On October 17, 1990, The Manufacturer's Life Insurance Company issued a joint and survivor life annuity to the appellant for a single premium of $153,638.48. The monthly annuity payments of $1,500 commenced on January 1, 1991 (the "Annuity Date"). The contract includes the following provisions:
OWNER: ALBERT V. TENNANT, THE ANNUITANT WHILE LIVING, THEN MARJORIE M. TENNANT
PAYEE: ALBERT V. TENNANT, THE ANNUITANT WHILE LIVING, THEN MARJORIE M. TENNANT
BENEFICIARY: ESTATE OF THE SECOND TO DIE
The instalments or other amounts payable to the beneficiary on the death of the surviving Annuitant . . . are as follows:
If the death of the surviving Annuitant occurs prior to the Annuity Date, an amount equal to the Single Premium will be paid immediately in a single payment. No other amount is payable after such death.
If the death of the surviving Annuitant occurs on or after the Annuity Date, no instalments or other amount will be paid after such death except that if fewer than 60 instalments have been paid during the lifetime of the surviving Annuitant the instalments will be continued until a total of 60 instalments have been paid under this policy.
(ii) Annuity issued by Standard Life
[13] On November 19, 1990, Standard Life issued an annuity to the appellant for a single premium of $116,385.31 and a further single premium of $33,841.56. A schedule to the contract includes the following provisions:
The Prime Annuitant is: TENNANT, ALBERT V.
The Joint Annuitant is: TENNANT, MARJORIE H.
An annuity of $1,510.53 per month will be paid from 01 January 1991 until 01 December 1995. Thereafter and for as long as either of TENNANT, ALBERT V. or TENNANT, MARJORIE H. is alive, such instalments will continue to be paid, and they will cease with the instalment due on or immediately preceding the date of the death of the survivor of them. [page190]
Relevant Provisions of the Insurance Act
[14] I will note three preliminary matters before setting out the provisions of s. 196.
[15] First, s. 196 is contained in Part V of the Insurance Act, which deals exclusively with life insurance.
[16] Second, following various decisions [See Note 1 at end of document] that annuities did not constitute life insurance, the definition of "life insurance", which is contained in s. 1 of the Insurance Act, was amended to include annuity contracts issued by an insurer. [See Note 2 at end of document] The amended definition provides as follows:
"life insurance" means an undertaking by an insurer to pay insurance money,
(a) on death; or
(b) on the happening of an event or contingency dependent on human life; or
(c) at a fixed or determinable future time; or
(d) for a term dependent on human life,
and, without restricting the generality of the foregoing, includes,
(e) accidental death insurance but not accident insurance;
(f) disability insurance; and
(g) an undertaking entered into by an insurer to provide an annuity or what would be an annuity except that the periodic payments may be unequal in amount and such an undertaking shall be deemed always to have been life insurance.
(Emphasis added)
[17] Third, several of the words used in s. 196 are defined terms. In particular"insurance money" and "spouse" are defined in s. 1 of the Insurance Act:
"insurance money" means the amount payable by an insurer under a contract, and includes all . . . annuities payable under the contract;
"spouse" means either of a man and a woman who,
(a) are married to each other, [page191]
(b) have together entered into a marriage that is voidable or void, in good faith on the part of the person asserting a right under this Act, or
(c) are not married to each other and live together in a conjugal relationship outside marriage. ("conjoint")
[18] "[B]eneficiary" and "insured" are defined in s. 171 of the Insurance Act, which is contained in Part V of the Act:
- In this Part"beneficiary" means a person, other than the insured or the insured's personal representative, to whom or for whose benefit insurance money is made payable in a contract or by a declaration;
"insured",
(a) in the case of group insurance, means, in the provisions of this Part relating to the designation of beneficiaries and the rights and status of beneficiaries, the group life insured, and
(b) in all other cases, means the person who makes a contract with an insurer;
[19] I turn now to s. 196. The appellant claims that s. 196(1) bars the respondent's claim against the annuity payments. Section 196(1) provides:
196(1) Where a beneficiary is designated, the insurance money, from the time of the happening of the event upon which the insurance money becomes payable, is not part of the estate of the insured and is not subject to the claims of the creditors of the insured.
[20] In addition, the appellant claims that 196(2) bars the respondent's claims against both the annuity payments and the annuity contracts. Section 196(2) provides:
196(2) While a designation in favour of a spouse, same-sex partner, child, grandchild or parent of a person whose life is insured, or any of them, is in effect, the rights and interests of the insured in the insurance money and in the contract are exempt from execution or seizure.
Reasons of the Motion Judge
[21] The motion judge found that the purpose of s. 196(1) is to "protect the flow of income to a beneficiary of a life insurance policy". He concluded that it does not protect annuity payments to the appellant from creditors' claims because the appellant, as the "insured", is excluded from the definition of beneficiary.
[22] As for s. 196(2), the motion judge concluded that, provided that the insured has designated a beneficiary from the class specified in the opening words of the section, it protects the insured's [page192] interest in the annuity contract and in the annuity payments. Although the motion judge found that the respondent is a beneficiary [See Note 3 at end of document] under the contracts, because the appellant and the respondent are no longer married, he concluded that the respondent does not fit within the specified class and that s. 196(2) does not therefore protect the appellant's interests.
Other Authorities that Support the Motion Judge's Conclusions Concerning s. 196(1)
[23] Three cases decided in other provinces [See Note 4 at end of document] during the 1980s support the motion judge's view of the purpose and effect of s. 196(1): Bank of Montreal v. Freedman (1984), 1984 250 (BC SC), 58 B.C.L.R. 289 (S.C.); Crosson v. Crosson (1985), 1985 6492 (BC SC), 14 C.C.L.I. 246 (B.C.S.C.); and Toronto Dominion Bank v. Berezowsky (1987), 1987 3308 (AB KB), 77 A.R. 297, 36 D.L.R. (4th) 235 (Q.B.).
[24] Those three cases identify two reasons for interpreting s. 196(1) as protecting beneficiaries. First, they reject the possibility that the legislature(s) could have intended that individuals would be able to insulate their own assets from creditors' claims by purchasing an annuity (or similar plan) for themselves and designating a beneficiary. Second, they point out that if s. 196(1) is interpreted as protecting both beneficiaries and insured, then, in the context of an annuity contract, there is no rational connection between the precondition requiring that a beneficiary be designated and the effect of the section.
Grounds of Appeal
[25] The appellant raises the following grounds of appeal:
(i) the motion judge erred in failing to conclude that, where a beneficiary is designated, annuity payments to an insured [page193] are exempt from creditors' claims under s. 196(1) of the Insurance Act; and
(ii) the motion judge erred in failing to find that a former the spouse is "a spouse" within the meaning of s. 196(2) of Insurance Act.
Analysis
(i) Did the motion judge err in failing to conclude that, where a beneficiary is designated, annuity payments to an insured are exempt from creditors' claims under s. 196(1) of the Insurance Act?
[26] For ease of reference, I will repeat the definitions of "beneficiary""insurance money", and "insured", and the provisions of s. 196(1):
"beneficiary" means a person, other than the insured or the insured's personal representative, to whom or for whose benefit insurance money is made payable in a contract or by a declaration;
"insurance money" means the amount payable by an insurer under a contract, and includes all benefits, surplus, profits, dividends, bonuses, and annuities payable under the contract;
"insured",
(a) in the case of group insurance, means, in the provisions of this Part relating to the designation of beneficiaries and the rights and status of beneficiaries, the group life insured, and
(b) in all other cases, means the person who makes a contract with an insurer
196(1) Where a beneficiary is designated, the insurance money, from the time of the happening of the event upon which the insurance money becomes payable, is not part of the estate of the insured and is not subject to the claims of the creditors of the insured.
[27] I respectfully reject the motion judge's conclusions concerning the purpose and effect of s. 196(1) for five reasons.
[28] First, although neither of the appellant's annuity contracts refers to the respondent as a "beneficiary", [See Note 5 at end of document] I agree with [page194] the motion judge's finding that she is a beneficiary under both contracts. However, contrary to the motion judge's view, for reasons that I will explain below, in my view, that finding triggers the protection from creditors' claims created by s. 196(1) that the appellant claims.
[29] The definition of "beneficiary" in s. 171 of the Insurance Act is very broad. It includes "a person, other than the insured . . . to whom . . . insurance money is made payable in a contract". On a plain reading of the definition, the respondent falls squarely within it. Unlike the appellant, the respondent is not an "insured" under the contracts, and she is not, therefore, excluded from the definition of beneficiary based on that status. I accordingly conclude that the motion judge's finding that the respondent is a beneficiary under the appellant's annuity contracts is correct.
[30] Second, I accept the appellant's submissions that designating a beneficiary triggers the protection from creditors' claims provided in s. 196(1), and that, in the context of an annuity contract, the plain meaning of the section is that, where a beneficiary is designated, all annuity payments are protected from creditors' claims.
[31] I found it helpful to begin my analysis of s. 196(1) by considering its meaning in the context of traditional life insurance, i.e. where the "insurance money" is payable on the death of the life insured.
[32] As a matter of common law, life insurance proceeds payable on the death of a life insured passed through the life insured's estate. [See Note 6 at end of document] In the context of traditional life insurance, the obvious purpose of s. 196(1) is to protect the beneficiary's interest from creditors' claims by changing the common law rule. Although there is no language in s. 196(1) specifically limiting the scope of the exemption from creditors' claims, because the insurance money is payable to the designated beneficiary when the life insured dies as a matter of contract, the precondition contained in the opening words of s. 196(1) that a beneficiary be designated not only triggers the exemption from creditors' claims, it also restricts the scope of the exemption to insurance money payable to a designated beneficiary.
[33] In the context of an annuity contract, there may be successive recipients of the annuity payments, whose identity is unrelated to "the event upon which the insurance money becomes payable". Unlike the case with traditional life insurance, there is [page195] no independent link between the precondition that a beneficiary be designated and the identity of the party to whom the insurance money will become payable. Further, there is no language in s. 196(1) that specifies that the precondition acts as more than a trigger.
[34] In my view, it strains the broad language of s. 196(1) to suggest that, in the context of an annuity contract, the phrase "where a beneficiary is designated" somehow limits the scope of the exemption from creditors' claims to moneys that are payable to a beneficiary. The plain meaning of "the happening of the event on which insurance money becomes payable" is simply the commencement date of the annuity payments; and the plain meaning of "insurance money" is all annuity payments that become payable under the contract.
[35] Had the legislature intended that, in the context of an annuity contract, the precondition that a beneficiary be designated would limit the scope of the exemption from creditors' claims in s. 196(1) to insurance money payable to a beneficiary, it could have said so explicitly, when it amended the definition of "life insurance" to clarify that it includes annuity contracts issued by an insurer. The legislature did not do so.
[36] I conclude that, in the context of an annuity contract, the plain meaning of s. 196(1) is that, where a beneficiary is designated, all annuity payments are exempt from creditors' claims.
[37] Third, this court has already rejected an argument, based on the opening words of s. 196(2), that the exemption from execution contained in that section should be limited to insurance money that is payable to a member of the class stipulated in the precondition: Whalley v. Harris Steel Ltd. [See Note 7 at end of document] I see no reason to interpret s. 196(1) differently than s. 196(2).
[38] Fourth, recent decisions in appellate courts of other provinces have taken a broad view of the purpose of the amendment to their respective Insurance Act(s) that clarified that annuities are included in the definition of life insurance, holding that the legislature(s) intended to protect the interests of insured as well as beneficiaries, and that the purpose of protecting insured is to safeguard retirement savings.
[39] In M.N.R. v. Anthony (1995), 1995 5595 (NL CA), 124 D.L.R. (4th) 575, 402 A.P.R. 91 (C.A.), the Newfoundland Court of Appeal said, at paras. 37, 39 and 77:
It is worthy to note that this extended definition of life insurance was added to the Act by an amendment in 1978 (1978 S.N. cap. 19) . . . [page196]
The amendment also may be viewed as accentuating a concern that all contributions to an insurer for annuities, whether already made or future payments, with a view to providing for the contributor and his dependants during the former's advancing years, or to his or her beneficiary at his or her death, would benefit from the protection afforded under the Life Insurance Act.
It appears axiomatic that the fostering and nurturing of pension plans, and the encouragement of persons to make provision for their retirement during their productive working years, can be regarded as a desirable objective in today's society. The insurance annuity is one of the vehicles for the self-employed to make such provision for themselves, and their families on retirement. To encourage the accumulation of savings for pension type provision on retirement, and for the protection of the security of people in their advancing years, the laws have seen fit to place these funds beyond the reach of creditors.
[40] Kerans J.A. agreed with the portion of para. 77 of Anthony noted above in Christensen (Trustee of) v. Christensen (1996), 1996 ABCA 179, 39 Alta. L.R. (3d) 101, 41 C.B.R. (3d) 11 (C.A.), leave to appeal refused [1996] S.C.C.A. No. 323.
[41] In Sykes (Re) (1998), 1998 4597 (BC CA), 156 D.L.R. (4th) 105, 2 C.B.R. (4th) 79 (B.C.C.A.), the British Columbia Court of Appeal quoted the whole of para. 39 of Anthony with approval.
[42] Fifth, statements made in the Ontario legislature at the time the definition of "life insurance" was amended to include annuity contracts issued by insurers are consistent with the view that the legislature had a broader purpose in mind than protection of beneficiaries alone. When the amending bill was introduced, the chair of the Select Committee on Company Law quoted two paragraphs from the committee's fourth report on life insurance.
[43] Although those two paragraphs do not express a clear intention to protect annuity payments to an insured, they acknowledge the importance of life annuities in the retirement and pension income system, a sentiment that is consistent with the approach adopted in other provinces. They also demonstrate that the Select Committee recommended that the legislature make its intentions obvious if it considered that particular portions of the life insurance provisions of the Insurance Act should not apply to annuity contracts. The two paragraphs are as follows:
The Committee has reviewed the annuity business of life insurance companies in this province and is concerned about the lack of explicit reference in the Insurance Act to this increasingly important component of the overall life insurance market. The Committee's concern is magnified by the important role that annuities, particularly life annuities, play in the retirement and pension income system in this country. Accordingly, [page197]
5.1 The Committee recommends that immediate attention be given to amending the Insurance Act in Ontario to include annuity contracts explicitly within the scope of the insurance business governed by the Act. Attention should be given in the Act to defining both a life annuity and an annuity certain in a practical and non-ambiguous manner. Amendments to the Act should further ensure that the provisions of the Insurance Act which apply to life insurance apply uniformly to annuities, except where specifically excluded for reasons of inappropriateness. [See Note 8 at end of document]
(Emphasis added)
[44] Taking all of these factors into account, I would hold that, where a beneficiary is designated, s. 196(1) exempts all annuity payments from creditors' claims and that the appellant triggered this exemption when he designated the respondent as the recipient of annuity payments payable after his death.
[45] At this stage, the respondent asserts her claims solely as a creditor, and not in her capacity as a beneficiary. I would accordingly set aside the motion judge's declaration that the respondent is entitled to proceed with her claims against the income stream arising from the annuities.
[46] Before this court, the appellant pointed out that the Pension Benefits Act, R.S.O. 1980, c. P.8, contains a more limited exemption for annuity payments under a contract purchased with pension funds than the exemption contained in s. 196(1) of the Insurance Act. The issue of how these provisions interact was not before the motion judge and the evidence concerning the funds used to purchase the annuity contracts forming the subject matter of the application may not be complete. Further, in my view, depending on the proper interpretation of s. 196(1), there may be additional issues concerning what steps the respondent may take to exercise her remedies under s. 196(2). I would reserve all of these issues to the application judge.
[47] Finally, I note that this appeal proceeded on the basis that the respondent's application is a claim by her, personally, for enforcement of a spousal support order. These reasons do not accordingly address any of the following matters: (i) the effect of s. 196(1) of the Insurance Act on the power of the court under s. 34(1) of the Family Law Act, R.S.O. 1990, c. F.3, to order that property be transferred or charged when making or varying a support order; (ii) any right that the respondent may have to compel the Family Responsibility Office to obtain information concerning the appellant's whereabouts or to enforce [page198] her support order; [See Note 9 at end of document] or, (iii) any right that the respondent may have to seek a review of any decision of the Director of the Family Responsibility Office.
(ii) Did the motion judge err in failing to find that a former spouse is "a spouse" within the meaning of s. 196(2) of the Insurance Act?
[48] I will repeat s. 196(2) for ease of reference:
196(2) While a designation in favour of a spouse, same-sex partner, child, grandchild or parent of a person whose life is insured, or any of them, is in effect, the rights and interests of the insured in the insurance money and in the contract are exempt from execution or seizure.
[49] The appellant claims that s. 196(2) protects his interest in the annuity contracts and the annuity payments because he designated his former spouse as the beneficiary of both annuity contracts. He submits that s. 196(2) protects both an annuity contract and all payments under the contract from creditors' claims so long as a designation from amongst the specified class of persons is in place and that, in this case, the motion judge erred by failing to interpret "spouse" as including a former spouse.
[50] The appellant points out that the class of persons listed in the opening words of s. 196(2) consists of dependants of the insured. He contends that although the direct protection afforded by the subsection is in favour of the insured, an obvious reason for protecting the interests of the insured is to protect the interests of the insured's dependants. The appellant submits that because former spouses are often equally dependent, and sometimes in need of greater protection than spouses, it is absurd to interpret the class of persons listed in s. 196(2) as excluding former spouses.
[51] I reject these submissions for three reasons.
[52] First, I find no support for the appellant's submissions in the caselaw or the legislative history relating to the section. [page199]
[53] Second, I note that a definition of "spouse" was added to the Insurance Act, for the first time, in 1999. [See Note 10 at end of document] "Former spouse" is not included as part of the definition. Had the legislature intended the protection of s. 196(2) to extend to former spouses, it had a clear opportunity to say so. It did not.
[54] Finally, I note that, as part of the definition of persons with an "insurable interest" in a life insured, in addition to a person's child or grandchild, and a person's spouse or same-sex partner, s. 179 of the Insurance Act specifies that "a person has an insurable interest in the person's own life and in the life of . . . any person upon whom the person is wholly or in part dependent, for, or from whom the person is receiving, support or education". This section makes it clear that the legislature is aware that there are persons aside from those listed in the opening words of s. 196(2) who may be dependent on a life insured. I conclude that the legislature made a deliberate choice in not including an expanded class of dependants in the opening words of s. 196(2).
[55] Based on these factors, I see no error in the motion judge's conclusion that "spouse" in s. 196(2) does not include a former spouse, and I would not interfere with the motion judge's conclusion that s. 196(2) does not protect the appellant's interest in the annuity contracts or the annuity payments.
Disposition
[56] For the reasons given, I would allow the appeal to the extent of setting aside the motion judge's declarations that s. 196 is not a bar to the respondent's claims and that the respondent is entitled to proceed with her claims against the income stream arising from the annuities. I would not interfere with the motion judge's declaration that the respondent is entitled to proceed with her claims against the annuity contracts. I would reserve any issues concerning the impact of exemption provisions of the Pension Benefits Act, and concerning what steps are available to the respondent in exercising her remedies under s. 196(2) to the application judge.
[57] Given that the appellant made no effort to vary the outstanding support order, that he is in arrears of support payments, and that success on this appeal is divided, I would award costs of the appeal to the respondent on a partial indemnity basis fixed at $4,000 inclusive of GST and disbursements.
Appeal allowed in part. [page200]
Notes
Note 1: For example, Gray v. Kerslake (1957), 1957 21 (SCC), [1958] S.C.R. 3, [1957] I.L.R. 1-279, 11 D.L.R. (2d) 225, revg 1956 106 (ON CA), [1956] O.R. 899, [1956] I.L.R. 1-240, 6 D.L.R. (2d) 320 (C.A.), revg [1956] O.W.N. 594 (H.C.J.).
Note 2: The Insurance Amending Act, 1980, S.O. 1980, c. 55, s. 1, effective November 14, 1980.
Note 3: Although not directly relevant to the outcome of this appeal, it is worth noting that s. 196(2) does not actually require that a beneficiary be designated to trigger the exemption contained in the section. Rather, it requires a designation from amongst a specified class. The significance of this distinction is that the "insured" is not excluded from the class of persons who may be designated under s. 196(2).
Note 4: Although not identical in every respect, the life insurance provisions contained in the insurance statutes of all of the common law provinces are very similar, as they have their roots in a draft Uniform Act prepared in 1921 and later revised in 1962: see B.R. McDonald, Life Insurance Laws of Canada (Common Law Provinces) (Don Mills: Life Underwriters Association of Canada, 1995). Accordingly, decisions from other provinces, concerning the interpretation of their statutes, may be relevant when interpreting the life insurance provisions of the Ontario Insurance Act.
Note 5: In fact, the Manufacturer's Life contract refers to the "Estate of the Second to Die" as the beneficiary.
Note 6: D. Norwood and J.P. Weir, Norwood on Life Insurance Law in Canada (Toronto: Carswell, 2000) at p. 278.
Note 7: (1994), 20 O.R. (3d) 740, 29 C.B.R. (3d) 168 (Gen. Div.), affd (1997), 1997 1318 (ON CA), 46 C.C.L.I. (2d) 250 (C.A.).
Note 8: Ontario, Legislative Assembly, Select Committee on Company Law"The Insurance Industry: Fourth Report on Life Insurance" at p. 167 (Chair: J.R. Breithaupt).
Note 9: The motion judge found that the respondent's application would be moot had the Family Responsibility Office performed its duty, as s. 32 of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 would be a complete answer to the appellant's arguments if that office were involved. Section 32 provides that a support deduction order may be enforced (by the Director of Support Enforcement) "despite any provision in any other Act protecting any payment owed by an income source to a payor from attachment or other process for the enforcement of a judgment debt".
Note 10: Amendments Because of the Supreme Court of Canada Decision in M. v. H. Act, 1999, S.O. 1999, c. 6, s. 31(1), assented to October 28, 1999.