ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Valerie Mary Matthews
Applicant
– and –
Douglas Leonard Matthews, Deceased, Kevin Matthews, Estate Trustee with Will, Erica Matthews and Nichola Matthews
Respondents
William R. Clayton, for the Applicant
Edmund L. Wellhauser, for the Respondent Douglas Leonard Matthews, deceased
Kenneth Hanbidge for the Respondent Kevin Matthews, Estate Trustee with a Will
Gary Flaxbard for the Respondents Erica Matthews and Nichola Matthews
HEARD: May 5, May 26, May 27, June 1,
October 21, November 19, 2010;
February 2, April 27, June 29, 2011;
with further written submissions.
The Honourable Mr. Justice Patrick J. Flynn
reasons for judgment
Background
1The parties separated the beginning of February 2006 and this action was commenced in April 2006 as a typical Divorce Act/Family Law Act Application, seeking the usual gamut of relief, including a divorce, spousal and child support, child custody, exclusion possession of the matrimonial home and equalization of Net Family Property.
2By the time the trial commenced in May 2010, the only real issues remaining were claims for spousal support and equalization.
3I incorporate my endorsement of August 13, 2010 as part of the Reasons at this time. That endorsement dealt with matters up to and including the summer of 2010.
4But as is set out in that endorsement, the Respondent Douglas Leonard Matthews died on June 11, 2012, before I wrote that endorsement.
5On June 23, 2010, the Respondent’s brother, Kevin Matthews, was appointed the Estate Trustee with a Will. Thereafter the estate was represented in these proceedings by Kenneth Hanbidge. However, Mr. Hanbridge delegated Mr. Wellhauser to argue the issues of equalization and support.
6The parties appeared before me October 21, 2010 and adjourned the matter until November 19, 2010 for a further update.
7On November 19, 2010 there was a brief update on the current state of affairs and on consent there was a temporary order made to allow the Applicant access to the funds now held in her name in a bank account at CIBC and to permit her to immediately withdraw the sum of $16,974.00 on account of arrears of support under the order of Reilly J. made December 16, 2009 and thereafter, on or after the first of each and every month, commencing December 1, 2010, until further order of the court, permitting her to withdraw the sum of $2829.00 for her support in accordance with Reilly J.’s said order.
8I then ordered the parties to prepare and deliver before December 31, 2010, further written submissions and Net Family Property and Equalization calculations and to give notice by that date to the designated beneficiaries of the one million dollar insurance policy that had already been paid out to the Applicant in trust in accordance with an earlier order which I made.
9I required the said notice to advise all of the beneficiaries of that policy of the return date of this matter to be spoken to, namely on a date before me arranged by the Trial Coordinator sometime after January 24, 2011.
10The next appearance was February 2, 2011. The Applicant and her counsel, Mr. Wellhauser and Mr. Hanbidge for the Estate of the Respondent and the parties’ two daughters, Nichola and Erika Matthews, as beneficiaries of the million dollar insurance policy, appeared.
11Another one of the beneficiaries of that one million dollar insurance policy to the extent of $100,000 was the deceased Respondent’s sister Gwen Bromley who then resided in Australia. Thus, the daughters Nichola and Erika were the designated beneficiaries to the extent of $900, 000.
12The matter was then adjourned to Wednesday April 27, 2011.
13On April 27, 2011, the matter was put over for a full day hearing on June 29, 2011. By this time the daughters, Nichola and Erika Matthews, were represented by Gary Flaxbard. I ordered that the Applicant serve and file responding material to the factum delivered by Mr. Flaxbard on or before May 27, 2011, while I required the Respondent and the Estate to deliver a certified state of the estate account at that time.
14The first order of business on June 29, 2011, was an order adding Erika Matthews and Nichola Matthews as Respondents only in respect of the issues regarding the one million dollar insurance policy proceeds. I further ordered that, because Gwen Bromley had not responded in any fashion she have no further right, title or interest in the matter.
15While I reserved my ruling after that hearing, it should be noted that there were several exchanges of correspondence from the parties to the court, further expanding or clarifying the facts of the case. The last of this correspondence was delivered in November 2011 and dealt with the final disposition on the sale of the matrimonial home.
The Claims and Positions of the Parties
16At some time prior to the parties’ attendance before me on February 2, 2011, it had been determined that the Estate itself, subject to the sale of the house, was insolvent and it became clear to the parties that if there was to be any amount of spousal support awarded to the Applicant on an ongoing basis, whether by periodic payments or lump sum, the only potential source of funding was the proceeds of the million dollar insurance policy. And it was at this time that Mr. Clayton for the Applicant determined that he ought to be converting this matrimonial action into a claim under Part V of the Succession Law Reform Act on the basis that at Mr. Matthew’s death he hadn’t provided adequately for his dependant widow.
17Mr. Clayton made clear at that time that he was seeking retroactive support or support to the date of the hearing in a lump sum as well as ongoing support. Basically, Mr. Clayton argued that when all was taken into account, including the equalization payment, this case was about the amount of lump sum support that ought to provided to the Applicant and that the whole amount remaining of the million dollar policy ought to be paid out to the Applicant.
18Mr. Wellhauser, for the Respondent, argued that Mr. Clayton’s support figures are “off” and bear no real relationship to the action we are now trying, namely, one under the Succession Law Reform Act. He argued that Mr. Clayton had based his claim on the Spousal Support Advisory Guidelines. While Mr. Wellhauser concedes that the Applicant is a dependant, and entitled to adequate provision, the court must take into account what means and assets the Applicant has and what is available from the traditional assets of the estate to support her.
19Mr. Flaxbard, for the couple’s daughters, Nichola and Erika, understantds that a portion of the proceeds of the million dollar policy are at risk, but says that whatever determination I make as to the quantum of the widow’s lump sum support, I must go first to the traditional estate assets.
20The Applicant had not effected the sale of the matrimonial home in accordance with my earlier order in that regard and remained in it for approximately one extra year. The house only got listed for sale June of 2011. Because of this fact Mr. Wellhauser, for the Estate, pressed his argument that the Applicant ought to be responsible for occupation rent.
The Life Insurance Policy
21It soon became clear that the real contest between the parties was centred on the one million dollar insurance policy.
22The deceased, Matthews, had been the owner of that life insurance policy issued by the Canada Life Assurance Company.
23By a Life Insurance Declaration dated March 10, 2006, the Respondent Matthews revoked all previous requests, declarations or arrangements made by him in connection with the payment of the policy on his death and declared that the proceeds payable on his death be payable to Vern Coates, his Trustee in Trust, as the beneficiary and to transfer the Life Insurance proceeds to his sister, Gwen Bromley in the sum of $100,000 and the balance in two equal shares to his daughters Nichola and Erika Matthews.
24The Respondent had also named Erika Matthews and Nichola Matthews as the main beneficiaries of his Estate in his Will dated March 10, 2006. And he had designated them as the sole beneficiaries of a separate $500,000 life insurance policy. Neither of them will receive anything pursuant to the Respondent’s Will as the claims against his Estate exceed the assets.
25On July 10, 2009, Reilly J. had ordered that, upon the Respondent’s death, should he predecease the Applicant, the proceeds of the million dollar term life insurance policy be paid into court to be held for distribution pending further order of the court and the determination, if necessary, of the quantum or proportion of the proceeds of the policy necessary to satisfy any ongoing support entitlement of the Applicant Wife.
26On June 1, 2010, I ordered that ownership of the million dollar policy be vested in the Applicant making her responsible for paying all premiums and designating her sole beneficiary, in Trust, under that policy and to hold any proceeds of the policy paid before the court’s full Reasons are delivered in Trust pending the determination of the proceeds in said Reasons.
27Prior to the making of either those orders regarding the policy, Erika and Nichola Matthews had not been asked to make representations in their capacity as beneficiaries of the Life Insurance Policy as to the disposition of the policy or its proceeds.
28It was only on my own motion that I determined that they ought to be notified and given standing to make submissions as to what ought to happen to the balance of the million dollar policy proceeds, since that life insurance policy was being considered by the court to be used for payment of support to the dependant widow.
29The law is clear that, under the Succession Law Reform Act, life insurance policies owned by a spouse as in the case of this Respondent, even where another beneficiary is irrevocably designated, can be treated as part of the deceased spouse’s estate and available for the payment of support to a dependant.
30But I agree with Mr. Flaxbard that where this property, the proceeds of the policy that is normally not part of an estate, is brought into the Respondent’s Estate by virtue of the provisions of the Succession Law Reform Act to the detriment of Erika and Nichola Matthews, care must be taken to ensure that the burden of any support order in favour of the Applicant be borne by the traditional assets of the Respondent’s Estate before any encroachment is made upon the life insurance policy proceeds.
Net Family Property and Equalization
31Exhibit 15 is the operative Net Family Property Statement.
32However, as a result of evidence and submissions I am satisfied that the following changes to this Property Statement have been established:
The matrimonial home is shown in both columns on the original of Exhibit 15 as having a value of $280,000 on the valuation day. When the sale of the matrimonial finally occurred on October 28, 2011, after payouts for outstanding repair and cleaning invoices, municipal tax arrears, sale costs and other appropriate items, this $280,000 in each of the parties columns was amended to reflect the values set out in a letter to the court by Mr. Wellhauser on November 2, 2011. I am satisfied that the amount of the Applicant’s interest now is changed to $322,920.69; while the Respondent’s value is changed to $322,205.00.
The evidence or the agreement of the parties eliminated the values in General Household Items and Vehicles in their entirety and so the value of assets owned on the valuation date for the Applicant is decreased by $7,000 and for the Respondent is decreased by $15,000;
Under Part 4c: Bank Accounts and Savings etc., the evidence satisfies me that rather than an amount of $7383.03 finding its way into the columns of both parties the entire amount of $14,766.05 must be attributed to the Respondent as he had removed all of the funds from this TD Canada Trust account. So the value of those assets must be reflected in a $7383.03 deduction from the Applicant’s column and a $7383.03 addition to the Respondent’s column;
Under part 4e: Business Interests, the parties dealt with a 2004 Volvo SUV. The evidence showed that but for its actual registration, the dominion and control of this vehicle was in the hands of the Applicant, not the Respondent, and so I am satisfied that as of the valuation date those columns ought to be reversed, that is, an addition to the Applicant’s asset value of $45,825.00 and a deduction from the Respondent’s asset value of $45,825.00.
33In sum, then, I am satisfied that the value of the property owned on the valuation date by the Applicant changes from that shown on Exhibit 15 (753,764.03) to $828,127.00 and the value of property owned on valuation date by the Respondent changes from that shown on Exhibit 15 ($902,090.87) to $890,853.90
34That means that there is an equalization payment owing from the Applicant to the Respondent in the amount of $48,678.59.
35That also means that both the amount of that equalization payment ($48,678.59) and the value of the Respondent’s share in the matrimonial home outlined above ($322,205.00) must now be shown to increase the value of the estate assets.
36While counsel for the Estate made clear that the Estate was insolvent, the sale of the matrimonial home and the order that I have made on the equalization of Net Family Properties means that there is now an infusion of some $378,884 into the Estate.
37Exhibit 36 sets out a statement of the assets and liabilities of the Estate of Douglas L. Matthews, deceased, as at June 27, 2011. That document shows, subject to the sale of the house, assets of $17,526 and capital liabilities of $177,282.07. By my reckoning, that is a deficit of some $159,755.97. With the infusion of capital, as outlined above, subject to expenses for solicitors and the like, this means that there would be an amount of about $211, 127.62 available to the Estate Claimants.
38We must all remember in dealing with the million dollar insurance policy that the original designated beneficiaries, the daughters Erika and Nichola Matthews, were invited to make representations because they were potentially going to be stripped of the benefit of that policy.
39The Respondent clearly intended to confer a benefit on his daughters by naming them as beneficiaries of the life insurance policy. His intention should be respected as much as possible.
40Erika and Nichola Matthews were made parties to this proceeding because of their beneficiary status and so as to be able to make submissions on their own through their lawyer and respond to the submissions of other lawyers with respect to how the million dollar insurance policy ought be treated. Regardless of my final ruling in this matter I agree with Mr. Flaxbard that costs incurred by Erika Matthews and Nichola Matthews ought to be ordered to paid out of the life insurance policy proceeds before they are dealt with in respect to the Applicant’s claim for support and that those costs be on a full indemnification basis.
41I also agree with Mr. Flaxbard that where property not normally part of the Estate is brought into the Estate by virtue of the provisions of the Succession Law Reform Act to the detriment of those designated beneficiaries, care must be taken to insure that the burden of any support order in favour of the Applicant be borne by the traditional assets of the Respondent’s estate before any encroachment is made on the life insurance policy proceeds.
42So the court first looks to the assets of the deceased which form the residue of the estate. Only if the residue is not sufficient to meet the deceased’s obligations to a dependant does the court look to other assets which pass by right of survivorship or pass outside the will. It is also clear that without the proceeds from the sale of the matrimonial home and the equalization payment by Applicant, there would indeed be nothing but a deficit in the estate.
43Mr. Clayton for the Applicant makes a point that Erika and Nichola were not entitled to notice as beneficiaries under the Canada Life Assurance Policy because they were not irrevocable beneficiaries and because my order of June 1, 2010 had in fact changed the ownership of that policy from the Respondent to the Applicant and made the Applicant the beneficiary under that policy in trust for the court. In my view that is a moot point. It does not matter that the Respondent’s daughters were not named as irrevocable beneficiaries.
44In any event, notice was given to them of these proceedings and while they had no notice nor made any submissions with respect to the change of ownership of the policy, I agree with Mr. Flaxbard that although My June 1, 2012 order vested ownership of the policy in the Applicant and she was designated the sole beneficiary in trust under the policy, that order further provided that she hold any proceeds of the policy paid before my full reasons were delivered in trust pending the determination of such proceeds in those reasons.
45It ought to be clear from that endorsement that the final decision had not been made with respect to the ownership of the proceeds of the policy. It was part of a continuum initiated by Justice Reilly to preserve the policy on a contingent basis for the Applicant’s claim for spousal support. It is just one step to preserve an asset and is not an absolute vesting of ownership in the Applicant which would deprive the beneficiaries Erika and Nichola of their rights. Had I intended that the Applicant not only be the owner of the policy but also the sole beneficiary with no imposition of a trust I would have said so and this matter would be then at an end because the proceeds of the policy are more than enough to provide for the dependant’s claim.
46I am satisfied that the daughters were not present throughout the entire trial and they may not have been made fully aware of the changes that were made with respect to the insurance policy. I have no information as to whether or not they were present for or understood the implications of Justice Reilly’s order.
47What is important here is that the position of Erika and Nichola is not that they take issue with the Applicant’s claim to adequate provision as a dependant of the late Respondent, but rather that the life insurance policy of which they are the named beneficiaries should be encroached upon as little as possible and that the burden of any support order in favour of the Applicant should be borne first by the traditional assets of the Estate before any encroachment is made upon the insurance policy proceeds.
48Finally, with respect to their claim for costs Mr. Clayton’s opposition seems to come from his argument that his client has a legitimate claim to adequate provision on the death of the Respondent and that the daughters received $250,000 each under a separate life insurance policy not affected by any order of the court. Mr. Clayton argues that because the daughters chose to hire a lawyer and take issue with their mother’s just claim to adequate provision as dependant of their late father, the court ought not to award them costs from the proceeds available to make provision for their mother and should make no order as to costs with respect to them. Mr. Clayton argues that the court might even consider making an order against them after adding them as parties “for putting the Applicant through additional costs to defend against their claim to entitlement to the Estate and to entitlement with respect to the insurance proceeds in the face of the Applicant’s clear entitlement to relief in that regard.”
49In my view, this argument on behalf of the Applicant is wrong-headed. What Mr. Clayton and the Applicant fail to understand is that until their mother made this claim these two young women were entitled to believe that they were going to come into a further $900,000 because of the stated intention of their father in this other insurance policy and this court without notice to them transferred the ownership of the policy to their mother, albeit in trust. Another reason for that transfer was to make sure that the premiums on the policy were kept current. At the time in June 2010 when the trial started to wind down, it became clear that the Respondent had a terminal disease from which he would not survive very long. And since the ownership of the policy had been transferred to his wife there was very well the possibility that he had lost the incentive to pay those premiums.
Succession Law Reform Act Claim
50So this dispute is basically about the Applicant’s request that she receive all the remaining proceeds of the million dollar insurance policy. She argues that adequate lump sum support under the Succession Law Reform Act is made to her prospectively by the payment of $779,656, on the basis of the high end of the reasonable range in the Spousal Support Advisory Guidelines of $5,891 per month. In addition, the Applicant claims for support not paid to the date of trial in a lump sum amount of about $250,000. Plainly that would use up all the proceeds of the million dollar insurance policy. It is clear that that is what the Applicant wants.
Succession Law Reform Act R.S.O. 1990 Chapter S26, Part V, Section 58
(1) Where a deceased, whether testate or intestate, has not made adequate provision for the proper support of his dependants or any of them, 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 or any of them.
(4) The adequacy of provision of support under subsection 1 shall be determined as of the date of the hearing of the Application.
51The parties have agreed that this matter be continued as if an Application as contemplated under section under Section 58 had been brought.
52Section 62 of Succession Law Reform Act sets out the circumstances that the court must consider in determining the amount and duration of support. I agree that those considerations are essentially the same considerations that apply when the spouses are alive. But I also agree with counsel for the Respondents that the Spousal Support Advisory Guidelines do not have any relevance. That is because those guidelines are based on income sharing and the formulas in the Advisory Guidelines generate ranges of outcomes rather than precise figures for amount and duration. Here the Respondent is deceased and there is no income on his part to share. Secondly, the Applicant seeks a lump sum order which will provide make up the adequate provision for proper support of the Applicant.
Quantum of Spousal Support
Quantum of Spousal Support
53At the time of the trial the Applicant claimed to have monthly expenses of approximately $3,700.
54It seems to me that a base starting point for adequate provision is that those expenses ought to be covered. That would go a long way to meet the standard in section 58 for adequate provision of the proper support of dependants.
55The only admissible actuarial evidence comes from the expert Jeffery and Exhibit 16, and I accept this. So the present value of the monthly amount of $100 of support indexed over the Applicant’s life expectancy tax is $20,467. Accordingly, if I accept that the adequate provision is $3,700 per month as is set out in the Applicant’s expenses, then the monthly amount of support indexed over Valerie’s life expectancy has a present value after tax of $736,812.
56I agree that the evidence shows that the applicant’s employment circumstances remain uncertain. She is over 60 years old and works on a part time basis evaluating candidates for English as a second language training. She makes a very modest income. Too modest in fact for me to consider it for these purposes.
57The Applicant is already receiving a widow’s pension from CPP in the amount $433 per month.
58She now has her share of the net proceeds from the sale of the matrimonial home (or will as soon as these Reasons are released) in an amount exceeding $322,000. This amount going forward will provide for her adequate shelter whether by purchase of a modest house or rent. Indeed, it could provide a source of income.
59I agree with the Applicant’s submissions that she is unlikely to find remunerative full – time employment. Nor will she be able to establish a lucrative career. While the evidence indicates an above – average standard of living for the parties while together and alive, that was then and this is now. The moral necessity of providing adequately for a dependant spouse does not automatically produce a result that would mimic conditions prior to the parties’ separation.
60At age 65 (in her 62nd year now) the Applicant will receive Canada Pension Plan and Old Age Pension and in this regard I accept the arguments of counsel for the Respondent that:
a) the present lump sum value of the CPP monthly index after tax is $110,896;
b) the Old Age Security at age 65 after tax lump sum present value $83,582;
c) the after tax lump sum present value of the RRSP I find to be $225,253.
If these amounts ($110,896, $83,582, $225,253) which total $419,731 are deducted from the present value calculation I referred to earlier based on expenses of $3,700 per month ($736,812), the net result is an amount of $317,081. I am very mindful that these amounts are not yet in the Applicant’s hands.
61It is a fact that no support was paid from the date of separation February 6, 2006 to November 30, 2009. Reilly J. made an order for the Respondent to provide interim spousal support in the amount of $2,500 per month for December of 2009 and January and February of 2010 and thereafter in the amount of $2,029 from March 1, 2010.
62I made an order on November 19, 2010 which basically caught up the arrears of the Reilly J. support order and thereafter from that point ordered support paid in the amount of $2,829, so that leaves to be determined the amount of spousal support that ought to have been paid from February 2006 to November 2009. I find that that is a period of 46 months and that adequate monthly support for that period was $2,829 per month. That means that another $130,134 has to be added to the Applicant’s entitlement, resulting in an amount of $447,215.
63In accordance with the agreed statement of facts at Exhibit 1 dealing with the child support of Erika, I find that for the periods of time when Erika resided with the Applicant between 2006 and 2009, some 36 months, the amount that ought to have paid by the Applicant to the Respondent is $14,596. Of course, none was paid. I also find that for a period of seven months in 2006 and four months in 2009, Erika resided with the Applicant and that the Respondent ought to have paid to the Applicant for Erika’s support a total of $9,748. Accordingly, the net amount of basic formula child support payable by the Applicant wife to the respondent husband on account of Erika is $4,848. That amount must be set off against the amount that is payable to her for her support.
Occupation Rent
64Finally, there is the issue of occupation rent claimed in the Respondent’s amended Answer. Until it was sold, the parties were equal owners as tenants in common of the matrimonial home. The wife remained in the matrimonial home and ignored the Respondent’s position that the home be sold and the equity realized. That was formally advanced in this action in the Respondent’s Answer and Claim early in 2006. In spite of my order on June 1, 2012 that the matrimonial home be forthwith listed for sale and sold sometime after September 30, 2010, that did not happen. In fact the house was not listed for sale until June 17, 2011 and the sale was only completed in October 28, 2011.
65Contained within the Applicant’s Net Family Property Brief is the appraisal of Lohmer Real Estate and Appraisals Limited dated April 19, 2010 with respect to the matrimonial home. That appraisal sets out rental values for larger homes older and newer than that matrimonial home, and counsel for the Respondent making the claim for occupation rent suggests monthly rental values between $2,100 (starting in the year 2006) and $2,500 (for the year 2010). In my view it is fair to expect the Applicant to pay occupation rent, since there never was any attempt by her remove herself from the premises, even in spite of orders made by me regarding the sale. The Respondent is prepared to acknowledge that the Applicant paid approximately $31,000 of legitimate expenses, towards the maintenance, repair and upkeep of that matrimonial home, and that that amount ought to be deducted from any occupation rent owing. In my view, the Applicant has an obligation for occupation rent for 66 months. I am prepared to set that occupation rent at $2,000 per month and when the allowance for expenses aforesaid is made, that claim nets out at $100,000. Half of that amount would be payable as occupation rent to the Respondent, i.e. $50,000. If I deduct that $50,000 from the $447,215 as well as the $4,848 for child support owing, I arrive at a total amount of spousal support, pre-trial and post-trial, in a lump sum value of $392,367.
66Given all the circumstances that I am expected to consider under the provisions of section 62, and when one considers the previously owed charges and counter charges, in my view, a fair and reasonable provision of adequate support for the dependant widow is a lump sum present value of $430,000 and the Applicant is entitled to transfer that amount to herself for her own use.
67That means that whatever remains of the million dollar insurance policy belongs to the daughters Nichola and Erika, save for the amount of their costs on a fully indemnified basis that ought to come out of those policy proceeds.
Conclusion
Conclusion
68In sum, then, after taking account of the sale of the matrimonial home, the provision of child support and the equalization payment all set out above, together with the amounts already taken by her for her support and her entitlement to a further $430,000, the Applicant shall account for and pay out the balance of the proceeds of the Canada Life Assurance Company policy now held by her in trust to Nichola and Erika Matthews or as they may direct.
P. J. Flynn J.
Released: February 10, 2012
COURT FILE NO.: 39095-06
DATE: 2012-02-10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Valerie Mary Matthews
Applicant
And
Douglas Leonard Matthews, Deceased, Kevin Matthews, Estate Trustee with Will, Erica Matthews and Nichola Matthews
Respondents
REASONS FOR JUDGMENT
P. J. Flynn J.
Released: February 10, 2012