CITATION: Earl v. McAllister, 2021 ONSC 4050

DIVISIONAL COURT FILE NO.: 021/20

DATE: 20210604

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

MEW, KRISTJANSON and FAVREAU JJ.

BETWEEN:

TAMMY EARL

Appellant

– and –

BARBARA McALLISTER, personally and in her capacity as ESTATE TRUSTEE OF THE ESTATE OF LEO McALLISTER, INTERNATIONAL UNION OF PAINTERS & ALLIED TRADES PROVINCE OF ONTARIO PENSION PLAN, PLAN REGISTRATION NUMBER 0391680, THE BOARD OF TRUSTEES OF THE INTERNATIONAL PAINTERS AND ALLIED TRADES INDUSTRY PENSION PLAN (CANADA)

Respondents

Kristine J. Anderson, for the Appellant

Barbara McAllister, Respondent, in person

HEARD at Toronto (by videoconference): 14 December 2020

MEW J.

REASONS FOR DECISION

(On appeal from the judgment of L.A. Pattillo J. dated 18 December 2019, with reasons reported at 2019 ONSC 7288)

[1] Leo McAllister (“Leo”) died on 3 May 2017 after a battle with cancer. He was 48 years old. He is survived by his wife, the respondent Barbara McAllister, and by his two sons – Cameron (aged 11 at the time of his father’s death) and Blake (aged 9 when his father died) - from his prior relationship with the applicant, Tammy Earl.

[2] When he learned that he was dying, Leo started to put his affairs in order. He executed a will, leaving his estate to his wife. Because of his illness, he had not worked for seven months before his death. His estate’s liabilities of $48,589.38 exceeded its assets, which were $35,662.56, leaving a shortfall of $12,926.82.

[3] On behalf of her sons, the appellant brought an application for their support pursuant to Part V of the Succession Law Reform Act, R.S.O. 1990, c. S.26 (“SLRA”). She argued that in calculating the value of Leo’s estate for the purposes of the application, the value of two pensions and a life insurance policy should be included. Doing so would have brought the value of the estate, for the purposes of the application, to $235,612.42, all of which, she submitted, should have been paid to the boys.

[4] The application judge agreed that one of the pensions and the life insurance policy should be included in the value of the estate for the purposes of the application. The resulting net value of the estate was determined to be $167,062.52. He ordered that sum split in two halves of $83,531.26 between the two boys, and the respondent Barbara McAllister, respectively. He directed that $30,000 of the boys’ half be paid into court, to ensure money was set aside for their future education. Each of the boys would then receive $15,000 when they turned 18. The balance was credited to the appellant for the boys’ benefit.

[5] Pursuant to section 76 of the SLRA, an appeal lies to the Divisional Court from any order made under Part V of that Act.

[6] The appellant argues that the application judge erred in law in failing to include both pensions in the valuation of the estate and that the exercise of his discretion to divide the estate was unreasonable and based on erroneous findings of fact or on facts that were not in evidence. She requests the orders that she sought on the application, namely that the estate should be valued at $235,612 for the purposes of s. 72 of the SLRA and the entire amount credited to the two boys. Furthermore, the appellant asks that the $30,000 which the application judge ordered paid into court should now be paid out to her now, for the benefit of the boys.

[7] For the reasons that follow, I would allow the appeal in part.

Facts

[8] Leo’s relationship with the applicant ended in 2009. However, he and the applicant continued to co-parent their sons and he was active in their lives. He gave the applicant $300 a week for the boys’ support up until his death.

[9] Leo married the respondent, Barbara McAllister, on 15 April 2015. They were, respectively, 46 and 57 years of age at the time. They had been married for just over two years at the time of his death.

[10] Leo worked as a glazier. Before he became ill, he was earning approximately $85,000 a year and was a member of the International Union of Painters & Allied Trades. He and the respondent Barbara McAllister jointly owned a house which they had purchased in 2016 for $290,000. At the time that the application was heard, it had a mortgage of approximately $247,000.

[11] Leo had two pensions through his union. The first was the Union’s Province of Ontario Pension Plan (“Pension One”), which provided for a death benefit (including accrued interest) of $126,950.78 and a further deferred amount of $14,748.48 which will be payable no later than 1 October 2022. Although Ms. McAllister was recorded as the designated beneficiary of that pension, the evidence was that before he died, Leo had signed the consents required to transfer the designated beneficiaries from Ms. McAllister to the boys. The forms were mailed to the pension administrator, but apparently, not received. The respondent does not challenge that this pension belongs to the boys in accordance with Leo’s wishes.

[12] The sum of $60,000, representing the bulk of the net lump sum payment of Pension One, has been paid into the appellant’s solicitors’ trust account pending the resolution of this dispute.

[13] The second pension was the Union’s “Canada” Pension Plan. Because it is administrated in the United States, it has been referred to in this litigation as the “US pension”. The US pension provided for a pre-retirement surviving spouse benefit under which the respondent Barbara McAllister, as Leo’s surviving spouse, was entitled to a lump sum payment of $88,117.40, which she elected to take by way of monthly payments of $376.00 for life.

[14] Leo also had a $100,000 life insurance policy of which Ms. McAllister was the designated beneficiary, an RRSP valued at $1,244.55, of which the boys were beneficiaries.

[15] Ms. McAllister’s income from employment in 2017 was approximately $100,000 a year.

[16] The application judge noted that the boys lived with the applicant in a basement apartment in the applicant mother’s home. The applicant’s financial situation was described as “not clear”. She has not been gainfully employed since 2014. Her combined income from social assistance, the CPP survivors’ pension directed to the boys and various tax credits amounts to $2,706 a month or approximately $32,000 a year. The applicant’s evidence was that her yearly expenses exceed her income.

[17] The application judge recorded that the applicant had received “significant financial contributions” from her father, which had been termed “loans”, and which had been used to purchase, among other things, a vacation trailer.

[18] Following Leo’s death, Ms. McAllister sent a cheque in the amount of $7,200 from her personal funds to the applicant for the support of the boys. This $7,200 is being held in trust by the applicant’s former lawyer. Ms. McAllister has commenced Small Claims Court proceedings to recover these monies which, according to the applicant, were to be offset against the accrued pension which the respondent had promised to give to the applicant.

[19] The parties agree that the boys, Cameron and Blake, are dependents of Leo’s, pursuant to s. 57(1) of the SLRA and, further, that Leo did not make adequate support for them in his will or otherwise.

Standard of Review

[20] The parties agree that the general appellate standards of review apply: correctness for errors of law, and palpable and overriding error for errors of fact: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.

[21] The standard of review of an issue over which the judge has discretion is also deferential. The question is whether the application judge reasonably exercised his or her discretion. Absent an error in principle, a failure to consider material evidence, or giving no or insufficient weight to relevant considerations, this court should not interfere: Morassut v. Jaczynski, 2015 ONSC 502 (Div. Ct.), 57 R.F.L. (7th) 38 at paras. 11-13, citing Cummings v. Cummings (2004), 2004 9339 (ON CA), 69 O.R. (3d) 398 (C.A.) at para. 56; Housen, supra; see also Quinn v. Carrigan, 2014 ONSC 5682 (Div. Ct.) at paras. 68-69.

Issues

[22] The following issues are raised on appeal:

i. Did the application judge err in finding that the US pension was not part of the assets of the estate for SLRA purposes?

ii. Did the application judge apply the wrong legal test in quantifying the dependants’ entitlement to support?

iii. Did the application judge improperly rely on the appellant’s social assistance and loans?

iv. Did the application judge unreasonably exercise his discretion when he ordered (a) that $30,000 of the judgment in favour of the two minor dependants should be paid into court; and (b) that 50% of the estate should be awarded to the respondent and the remaining 50% of the estate to be split between the two boys.

The US Pension

[23] The relevant description of the surviving spouse benefit conferred by the US pension states:

If you are vested and die before you retire, your spouse … is entitled to a pre-retirement spouse’s benefit. The benefit is payable as an immediate monthly pension for the lifetime of your spouse. The value of this monthly pension is equal to the lump sum value of the benefits you have earned to the date of your death.

[24] The surviving spouse benefit provided for in the US pension conforms with the pre-retirement death benefit provisions of s. 48 of the Pensions Benefit Act, R.S.O., 1990, c. P.8.

[25] Section 72(1)(g) of the SLRA provides that an amount payable from a pension plan under a designation of beneficiary shall be included as testamentary dispositions as of the date of the death of a deceased and shall be deemed to be part of his or her net estate for the purposes of ascertaining the value of that estate.

[26] In concluding that the US pension did not form part of Leo’s net estate, the application judge relied on Smallman v. Smallman Estate (1991), 35 C.C.E.L. 146, 41 E.T.R. 86 (Ont. Ct. G.D.), where it was held that a survivor benefit payable to a spouse accrued to the spouse not by designation, but because of marital status: Smallman, at para. 18.

[27] The appellant argues that the application judge was in error not to rely on the more recent decision of this court in Cotnam v. Rousseau, 2018 ONSC 216, where it was held that absent more explicit language, the spousal priority provided for in s. 48 of the Pensions Benefit Act would not shelter pre-retirement death benefits paid to a spouse from the “claw back” provisions of the SLRA.

[28] The application judge held, at para. 26 of his reasons for decision:

I do not agree with the conclusion in Cotnam. Section 72(1)(g) of the SLRA is clear in its wording and only includes amounts payable under a designation of beneficiary. The amount payable under the pre-retirement Surviving Spouse benefit in the US Pension is not pursuant to a designation of beneficiary but rather to the Respondent as the surviving spouse. Given the clear wording of s. 72(1)(g), an explicit exclusion of the surviving spouse benefit is not required.

[29] The appellant argues that the application judge failed, in interpreting remedial legislation such as SLRA, to give it “such fair, large and liberal construction and interpretation as best ensures the attainment of its objective” as required by the Legislation Act, 2006, S.O. 2006, c. 21, Sched. F, s. 64(1). According to the appellant, creating a distinction for a pre-retirement surviving spouse pension creates a spousal priority which does not support the purpose and objectives of the legislation.

[30] Furthermore, by finding that if the legislature had intended the spousal priority of a pension such as Leo’s to be sheltered, it would have expressly done so, the court in Cotnam had applied a modern approach to statutory interpretation that had only been in the early stages of its development when Smallman was decided in 1991.

[31] The issues raised are questions of law for which the standard of review is correctness.

[32] That said, I disagree with the appellant and agree with the reasons given by the application judge.

[33] I would add that the “modern approach” to statutory interpretation advocated by the appellant does not entitle the court to rewrite the plain meaning of words used in legislation. It was not open to Leo to designate someone other than his spouse to receive the pre-retirement benefit under the US pension. While the respondent, Barbara McAllister, could have waived her entitlement to the receipt of that benefit, the essential point is that she could not be deprived of that benefit without her agreement.

The Provision of Adequate Support to the Boys

[34] As already indicated, the parties agree that Leo did not make adequate provision for the support of the boys.

[35] Section 58 of the SLRA provides that where a deceased has not made adequate provision for the proper support of his dependants, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependants.

[36] Section 62 provides that the court “shall consider all the circumstances of the application,” and sets out a non-exhaustive list of the circumstances to be taken into account by a court on an application for support.

[37] The appropriate analysis to be undertaken in cases such as this is set out in Quinn v. Carrigan, 2014 ONSC 5682 (Div. Ct.) at para. 136 and consists of the following steps:

i. Identify all dependants who have a claim;

ii. Tentatively value those claims by considering the factors set out in the legislation and the legal and moral obligations of the estate;

iii. Identify the non-dependant persons who may have a legal or moral claim to the estate; and

iv. Balance the competing claims by taking into account the size of the estate, the strength of the claims, and the intentions of the deceased.

[38] This process involves the exercise of discretion on the part of a judge. The deference owed to a judge in the exercise of his or her discretion is high. Absent an error in principle, a failure to consider material evidence, or the giving of too much weight to one relevant consideration over others, this court should not interfere: Quinn at paras. 68-69.

[39] Having recognised that the two boys and the respondent Barbara McAllister were Leo’s dependants – which none of the parties disputed – the application judge moved on to consider the application of s. 62. The appellant argues that, in doing so, the application judge went from the first step to the fourth step without properly quantifying the claims of the boys and of Barbara McAllister respectively. As a result, he deprived himself of the opportunity to properly turn his mind to factors in s. 62(1) which would have informed his analysis and the ultimate result. The appellant thus argues that the application judge erred in law, in that he incorrectly identified or interpreted the governing law or legal standard.

[40] I agree with the appellant on this point. Although the application judge recited the amounts that the applicant was receiving, his reasons do not disclose consideration of factors such as: (a) the boys’ need for a stable environment in their formative teen years; (b) that their principal and perhaps sole source of financial support consisted of social assistance; or (c) that as the boys grew older, Leo might have made further contributions towards their education or special expenses.

[41] While the application judge did find that Leo’s death had been financially difficult for the respondent “particularly given the aggressive actions of the Applicant”, he did not elaborate on what brought him to this conclusion. In fact, the respondent was left with a house (albeit subject to a mortgage), she was earning more than Leo, she was a single person with no dependants, and she was in receipt of a monthly pension payment under the US pension.

[42] The appellant argues, in the alternative, that the application judge failed to balance the s. 62 factors reasonably. Specifically, he unduly emphasised that Leo had paid $300 per week in child support to the appellant before his death while ignoring that even with this sum, the appellant was perpetually in overdraft.

[43] In tentatively valuing the claims of the boys to support, the application judge appears to have taken into account the support received by the applicant, and through her, the boys, out of public money. Doing so runs contrary to subparagraph (s) of s. 61(1). Furthermore, the application judge made no finding that what the applicant characterised as “loans” were, in fact, gifts. Having not made such a finding, he should have considered the loans as debts. As a result, had these elements been correctly addressed, the application judge should have concluded that the appellant (and, hence, the boys) was in need of greater, rather than lesser support.

[44] In essence, by not adequately (or as the appellant would have it, at all) quantifying the respective legal entitlements of Leo’s dependants to support, essential elements of the steps set out in Quinn were missed. A failure to consider part of a legal test in applying that test means that the application judge applied the wrong law which, as indicated above, is reviewed on a standard of correctness.

Balancing the Competing Claims

[45] The application judge did not explain how or why he decided to split Leo’s net estate between the boys on the one hand, and the respondent, Barbara McAllister, on the other hand.

[46] At the risk of repeating what has been said previously in these reasons, the evidence established that the respondent was earning approximately $100,000 a year, had made provision for her own pension, was receiving the US pension, had no extraordinary expenses, and owned the matrimonial home, albeit with a mortgage of approximately $1400 a month. She and Leo had been married for little over two years. Theirs was not a marriage of intertwined, financial interdependence.

[47] The appellant’s alternative argument concerning the application of the Quinn criteria is that the application judge failed to balance the factors in s. 62 of the SLRA, as well as the legal and moral obligations of Leo in arriving at his decision. The appellant thus argues that the balancing exercise engaged in by the application judge resulted in an unreasonable exercise of his discretion.

[48] The treatment of income received by the appellant from public funds, the apparent assumption that monies received by the applicant from her father were gifts rather than loans, the absence of any discussion of the boys’ evolving needs, are all deficiencies which represent both an incomplete application of the Quinn criteria and a flawed starting-off point for the balancing exercise which the application judge was required to engage in as the final step in that process.

[49] The absence of reasons for the determination that there should be a 50/50 split of the net estate makes it challenging to determine the reasonableness of that apportionment.

[50] The appellant submitted to the application judge that the entirety of Leo’s estate should have gone to the boys. In the alternative, however, she had prepared a percentage list illustrating the effect of applying a range of percentages from 95 percent to 67 percent in favour of the boys.

[51] While it is not the role of appellate courts to second-guess the weight assigned to various pieces of evidence by a judge at first instance, the absence of reasons will have a bearing on appellate determination of the reasonableness of the application judge’s decision. In the present case, it is not possible to determine whether the application judge gave sufficient weight to all relevant considerations, and, as already canvassed, the exercise undertaken by him was, in any event, compromised by erroneous considerations.

[52] Section 134(1)(a) of the Courts of Justice Act, empowers an appellate court to make an order or decision that ought to or could have been made by the court or tribunal appeared from. Although, more typically, when an appellate court determines that an error had a bearing on the outcome of a lower court’s decision, the matter is remitted to that court for determination, in circumstances where the appellate court has a complete record, the final resolution of the dispute has already been delayed, and there is no special advantage in remitting the matter back to the court in first instance, it will be appropriate for the appellate court to finally determine the issues between the parties: Hollis v. Dell Corning Corp., 1995 55 (SCC), [1995] 4 S.C.R. 634, per Sopinka J. (dissenting on other issues), at para. 95.

[53] In my view, this is such a case.

[54] In finally determining the issues between the parties, the needs of the boys in the balancing exercise should be paramount. They live in precarious financial circumstances. There is very little income to support them apart from public finances and loans.

[55] The boys and their mother, the applicant, live with the applicant’s parents. Her affidavit provides information concerning monthly expenses as well as items such as back to school clothes for the boys, school trips and school related expenses, skate purchases, baseball training and other activities. Her affidavit also notes the loss of access to Leo’s group health benefits.

[56] By contrast, while the death of Leo has undoubtedly had an adverse economic impact on the respondent Barbara McAllister, she was, until a comparatively short time prior to Leo McAllister’s death, had not been financially dependant on him. At the time of the hearing of the application, she had a good income and had made some provision for her own pension. As previously noted, she will also continue to receive the benefit of Leo’s US pension.

[57] In Madore-Ogilvie v. Ogilvie Estate (2008), 2008 ONCA 39, 88 O.R. (3d) 481 (C.A.), the court concluded that where there are insufficient assets to adequately provide for any or all of a deceased’s dependants, the circumstances of the case may warrant the exercise of an application judge’s discretion to use the limited assets for the benefit only of the minor dependants, to the exclusion of his wife.

[58] In my view, the circumstances of this case warrant allocating the limited remaining assets of Leo’s estate for the benefit of his minor dependants. I would, accordingly, apportion 100 percent of the net estate to the boys and vary the order of the application judge accordingly.

Payment of Funds into Court

[59] The application judge ordered that $30,000 ($15,000 for each boy) should be paid into court, to be paid out to them with interest when they each reach 18 years of age. The application judge explained that his rationale for doing so was to ensure that some of the money is set aside for the boys’ future education.

[60] The appellant argues that the amount of $30,000 represented a substantial portion of the balance of the estate payable to the credit of the boys, given the allocation of 50/50 determined by the application judge. She says that if this money remains in court, there will be insufficient funds to adequately provide for the more immediate needs of the boys for support.

[61] I see no error of principle on the part of the application judge. It was prudent of him to reserve some of the boys’ interest in their late father’s estate until they reach the age of 18 and can determine for themselves how best to apply that support, whether for the purposes of education, training or otherwise. Accordingly, I would not interfere with the decision of the application judge concerning payment of monies into court.

[62] I would add that the appellant’s concerns about the amount paid into court for the credit of the boys will be ameliorated as a result of our determination that the boys should receive the benefit of 100 percent of the net value of the estate.

Other Matters

[63] There is a dispute over $7,200 which is being held in trust by the applicant’s former lawyer. This sum – of $7,200 – represents amounts which Ms. McAllister had agreed to pay towards the support of the boys. She was under no obligation to make such payments and the funds should either be released to her or, if they are to be released to the applicant, appropriate credit should be given.

Costs

[64] Although costs submissions were invited by the application judge, he made no disposition of the issue of costs of the application. He did, however, note that offers to settle had been exchanged.

[65] The appellant has filed a costs brief incorporating a bill of costs for appeal as well as the costs submissions and bills of costs filed by both the appellant (as applicant) and respondent in relation to the application.

[66] On 23 September 2019, the applicant made an offer to settle for $60,252 in addition to $60,000 which had been paid to the applicant’s lawyer in trust out of the Pension One lump sum.

[67] The respondent made a number of offers to settle, the most recent of which (prior to the hearing of the application), was on 30 September 2019, when she offered $65,000 together with the unfunded portion of Pension One, for a total of $79,748.48.

[68] In her costs submissions to the application judge, the respondent observed that her offer of $79,748.48 was very close to the 50% net asset value of Leo’s estate ($83,531.26) awarded to the applicant.

[69] The bill of costs provided by the applicant calculates costs of appeal, on a partial indemnity basis, of $36,273.30 plus disbursements and H.S.T. for a total of $48,992.76. However, the appellant’s claim for partial indemnity costs of the application is based on a contingency fee agreement under which the fee payable by her would have been substantially less than the actual fees incurred.

[70] Given the different outcome on appeal, the parties are encouraged to try to resolve the costs of the application and the appeal. If they are not able to do so, they are invited to resubmit bills of costs for the application and appeal with accompanying costs submissions not to exceed five pages. We should also be provided with any offers to settle which the parties wish us to take into account. The parties are to advise the court that they have resolved the issue of costs or send their submissions to the Divisional Court by email no later than 10 days after the release of this decision.

Mew J.

I agree _______________________________

Kristjanson J.

I agree _______________________________

Favreau J.

Released: 4 June 2021

CITATION: Earl v. McAllister, 2021 ONSC 4050

DIVISIONAL COURT FILE NO.: 021/20

DATE: 202105xx

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

MEW, KRISTJANSON and FAVREAU JJ.

BETWEEN:

TAMMY EARL

Appellant

– and –

BARBARA McALLISTER, personally and in her capacity as ESTATE TRUSTEE OF THE ESTATE OF LEO McALLISTER, INTERNATIONAL UNION OF PAINTERS & ALLIED TRADES PROVINCE OF ONTARIO PENSION PLAN, PLAN REGISTRATION NUMBER 0391680, THE BOARD OF TRUSTEES OF THE INTERNATIONAL PAINTERS AND ALLIED TRADES INDUSTRY PENSION PLAN (CANADA)

Respondents

REASONS FOR DECISION

MEW J.

Released: 4 June 2021