DIVISIONAL Court FILE NO.: 12860/02

DATE: 20030911

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

MCRAE, THEN AND JENNINGS JJ.

B E T W E E N:

JAY NATHAN GOODIS and JASON LORNE GOODIS, by their Litigation Guardian, ELLEN SANDLER

Kenneth C. Hill, for the Applicants (Respondents)

Applicants (Respondents in Appeal)

and -

LYNN GOODIS, in her capacity as Estate Trustee of the Estate of Gerald Goodis, Deceased

Lisbeth A. Hollaman, for the Respondent (Appellant)

Respondent (Appellant in Appeal)

Heard in Newmarket: September 9, 2003

REASONS FOR JUDGMENT

MCRAE J.:

[1] The sole issue in this appeal is the correctness of a finding that the proceeds of two life insurance policies having a total value of $1,500,000 form part of the estate of Gerald Goodis and were subject to a claim for dependants pursuant to s. 72 (1) F of the Succession Law Reform Act, R.S.O. 1990 c. S.26. The facts are not seriously in dispute.

[2] Lynn Goodis and Gerald Goodis were married September 16, 1998. Gerald died June 14, 2000. They had one daughter, Leah born November 5, 1994. Gerald had two sons born March 28, 1984 and February 18, 1987 by an earlier marriage. Both sons live with their mother.

[3] Lynn and Gerald operated a number of companies, among them 686171 Ontario Inc. and Gerlyn Enterprises Ltd. 686171 Ontario Inc. leased new and used motor vehicles. Gerlyn’s primary purpose was to fund 686171 Ontario Inc.

[4] Between 1986 and 1992, Lynn Goodis loaned Gerlyn Enterprises Ltd. a total of $1,814,000, which then advanced money to 686171 Ontario Inc. to finance it’s operations. From 1992 Gerald Goodis was the sole shareholder and officer of 686171 Ontario Inc.

[5] Gerald and Lynn each held 50% of the shares in Gerlyn. Lynn held the office of President, Gerald was Secretary-Treasurer. This continued until Gerald’s death.

[6] In 1988 and 1989, Gerlyn Enterprises purchased two insurance policies on the life of Gerald, each to pay a benefit of $750,000 in the event of Gerald’s death. The purpose of the policies, at least initially, was to secure Lynn’s loans to Gerlyn. The premiums were initially paid by 686171 Ontario Inc. After 686171 Ontario Inc. became insolvent, at no time did Lynn or Gerald personally pay the premiums. Gerlyn Enterprises Ltd. provided the funds to pay the premiums.

[7] In 1995, Gerlyn Enterprises Ltd. changed the named beneficiaries to Lynn Goodis personally. In April, 1999 Gerlyn changed the beneficiary on one of the policies to provide $25,000 to each of Gerald’s two sons.

[8] Lynn Goodis then became sole beneficiary of one $750,000 policy and the beneficiary of $700,000 under the second policy, each of the two sons were $25,000 beneficiaries on this policy as well.

[9] Gerald Goodis died on June 14, 2000. Lynn Goodis was named his sole Trustee and beneficiary. His Estate, except for insurance policies, was effectively insolvent.

[10] The issue before the Motion’s Judge was whether the proceeds of these two policies should be included in Gerald’s Estate for the purpose of a claim under Section 72 (1) of the Succession Law Reform Act, which reads:

Subject to Section 71, for purposes of this Part, the capital value of the following transactions effected by a deceased before his or her death, whether benefiting his or her dependent or any other person, shall be included as testamentary dispositions as of the date of death of the deceased and shall be deemed to be part of his or her net estate for purposes of ascertaining ;

a) gifts mortis causa;

b) money deposited, together with interest thereon, in an account in the name of the deceased in trust for another or others with any bank, savings office, credit union or trust corporation, and remaining, on deposit at the date of the death of the deceased;

c) money deposited, together with interest thereon, in an account in the name of the deceased and another person or persons and payable on death under the terms of the deposit or by operation of law to the survivor or survivors of those persons with any bank, savings office, credit union or trust corporation, and remaining on deposit at the date of the death of the deceased;

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;

e) any disposition of property made by the deceased in trust or otherwise, to the extent that the deceased at the date of his or her death retained, either alone or in conjunction with another person or persons by the express provisions of the disposing instrument, a power to revoke such disposition, or a power to consume, invoke or dispose of the principal thereof, but the provisions of this clause do not affect the right of any income beneficiary to the income accrued and undistributed at the date of the death of the deceased.

f) any amount payable under a policy of insurance effected on the life of the deceased and owned by him or her;

f.1 any amount payable on the death of the deceased under a policy of group insurance; and

g) any amount payable under a designation of beneficiary under Part III.

Subsection (2) is not relevant. Subsection (3) reads:

Dependents claiming under this part shall have the burden of establishing that the funds or property, or any portion thereof, belonged to the deceased.

[11] The applicants base their claim on subsection 72 (1) (f) – “any amount payable under policies of insurance effected on the life of the deceased and owned by him or her.” The issue here is whether the policies in question can be said to be owned by the deceased before his death although the policy holder in each case was a company, Gerlyn Enterprises Limited.

[12] The Motion’s Judge noted that the meaning of the word “owned” in Section 71 (1) (f) should be given a generous and purposive interpretation as was done in Dunn v Dunn Estate, 1993 8586 (ON SC), [1993], 12 O.R., (3d) 601. He also relied on the decision of Robins J. in Moores v. Hughes, (1981), 1981 1870 (ON SC), 37 O.R. (2d) 785 wherein the Court found that a group policy not directly owned by the deceased formed part of his Estate.

[13] He concluded that the deceased had a beneficial interest in the two policies and that he exercised a degree of control with respect to them. He then found that given the purpose of the legislation he be deemed to have owned them on his death.

[14] The Motion’s Judge also made the following specific findings:

[31] I find that Mr. Goodis had a clear and direct personal connection to these policies. They were treated after 1994 by both him and Ms. Goodis as policies controlled by him personally and no longer used for any corporate objective by them. Ms. Goodis received all that she was going to receive of the monies originally loaned by her. The only purpose for either company after 1992 appears to have been the use of 686171 to expense the premiums. Gerlyn ceased being the beneficial owner in 1995 as no proceeds would go to it once the beneficiary was changed.

[15] 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 policies ignores the interest of the Corporation and of the co-owner of the Corporation – Lynn Goodis.

[16] 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.

[17] The appeal is allowed. The decision of the Motion’s Judge is set aside. Judgment will issue declaring that proceeds of the two insurance policies on the life of Gerald Goodis do not form part of his estate for the purposes of s. 72 (1) (f) of the Succession Law Reform Act, R.S.O. 1990, c. 26 as amended.

[18] If the parties cannot agree as to costs, brief submissions as to costs may be made within 30 days of the release of these Reasons.

MCRAE J.

THEN J.

JENNINGS J.

Released: September 11, 2003

COURT FILE NO.: 12860/02

DATE: 20030911

ONTARIO

DIVISIONAL COURT