ONTARIO SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 12-34793
DATE: 2013/02/06
IN THE MATTER OF THE ESTATE OF PATRICK HENRY
B E T W E E N:
ADRIENNE TELFER
Robert Charko, Counsel for the Applicant
Applicant
- and -
ESTATE OF PATRICK ELWOOD HENRY, ANNA-MARIE HENRY (EXECUTRIX)
Larry S. Humenik, Counsel for the Respondent
Respondent
HEARD: January 7, 2013 and reserved
CRANE J.
[1] The applicant, Adrienne Telfer, brings this application against the estate of her former husband and his widow, for payment of monies in lieu of insurance proceeds upon breach of a separation agreement made in November 1997 between Ms. Telfer and Mr. Henry, the deceased. The application is for interpretation and enforcement of the obligations of that separation agreement.
THE WILL
[2] The late Mr. Henry made his last will and testament on 30 December 2010. Prior, on that same day, he married his common law spouse of about 10 years, the respondent Anna-Marie Henry, making her both his wife and his executrix to the aforesaid last will and testament. He died two days later.
[3] Under the late Mr. Henry’s will, dated December 30, 2010, he bequeaths his estate to the respondent with a contingent bequest of 60% of his estate, share and share-alike, to his three natural children to the effect that the children of his union with Ms. Telford, namely Gillian Henry born 31 May 1989 and Alison Henry born 14 January 1993, would each receive 20% of the net estate. Counsel advise that the value of the estate is limited to approximately $42,000.00. The respondent having survived the testator would take all of the net estate.
THE SEPARATION AGREEMENT
[4] The separation agreement provides in paragraph 12 that there be no spousal support with the express declaration by each of the parties to the agreement that they are respectively financially independent and do not require financial assistance from the other party. They provide a full release of all potential claims in that regard.
[5] Paragraph 13 is titled “Child Support” and reads as follows:
- CHILD SUPPORT
(a) Commencing October 1, 1997 and on the 1st day of each month thereafter, Pat will pay to Adrienne for the support of the children the sum of $575.00 each month in advance until one or more of the following occurs:
(1) the children cease to reside full time with Adrienne. “Reside full time with” includes the situation in which the children live away from home to attend an educational institution, pursue summer employment, or enjoy a vacation, but otherwise maintain residence with Adrienne, or
(2) the children cease to be dependent within the meaning of the Act.
(b) On or before October 1st of each year, Pat will provide to Adrienne twelve post-dated cheques for the child support payments for the year.
[6] Paragraph 16 of the separation agreement is closely related to paragraph 13 and it reads as follows:
- LIFE INSURANCE
(a) Pat acknowledges that he has life insurance coverage through his employment, providing that in the event of his death, the beneficiary will receive the sum of $90,000.00. Upon execution of this agreement Pat will deliver to Adrienne a certified copy of the policy of insurance through employment.
(b) Pat will irrevocably designate Adrienne beneficiary of the insurance through his employment. Pat will maintain his designation for so long as the children are entitled to be supported by him, and the insurance is available to him through his employment, including any other employment Pat secures, should his employment change.
(c) If Pat dies during the period he is obliged to pay child support pursuant to this agreement, the life insurance proceeds will be used by Adrienne for the benefit of the children.
(d) If Pat dies without insurance, Pat’s obligation to pay child support pursuant to this Agreement will survive his death, unless satisfied by insurance or other means, notwithstanding Paragraph 22 of this Agreement, and will be a first charge on his estate.
(e) When Pat is no longer required to support the children pursuant to the provisions of this agreement, Pat may deal with the policy as he wishes free from any claim by Adrienne.
(f) Within fourteen (14) days of Adrienne requesting it, Pat will deliver proof to her that the designation is in place.
BREACH OF THE SEPARATION AGREEMENT
[7] The deceased, Mr. Henry, did provide the irrevocable designation to the applicant as required by paragraph 16 of their separation agreement of $90,000.00 in life insurance benefit.
[8] The late Mr. Henry thereafter changed his employment. His new employer provided to Mr. Henry the benefit of life insurance within the ambit of paragraph 16(b) of the separation agreement. Mr. Henry took up the insurance benefit in the sum of $120,000.00 in November 2003. However, Mr. Henry, in breach of his obligation to irrevocably designate the proceeds of that policy as to $90,000.00 to the applicant, named his then common-law spouse, the respondent herein, Anna-Marie Henry, as the beneficiary.
[9] Following the death of Mr. Henry, the insurance proceeds of $120,000.00 were paid to the named beneficiary, the respondent Mrs. Henry. Subsequently, on or about March, 2011, Mrs. Henry paid $20,000.00 to each of Gillian and Alison. It is unclear as to the source of the funds for these payments as Mrs. Henry is both the executrix and beneficiary of the respondent estate and the beneficiary of the insurance.
[10] The parties do not dispute that paragraph 13 of the separation agreement remains in effect as an obligation of the respondent estate. However, no monthly maintenance has been paid by the estate and accordingly there is now approximately 25 months of arrears at $575.00 per month, in the sum of $14,375.00 to 1 January 2013. Gillian is in her last year of university. Accordingly, she may now be no longer qualified for maintenance under the provisions of the separation agreement. Alison is now just commencing university. Should she continue for the next four years, the support obligation would be $27,600.00 for 48 months.
[11] The respondents do not oppose a judgment against the estate for $90,000.00 as a breach by the deceased of his obligation under the separation agreement, with credit to be given for the $40,000.00 paid by the respondent, for a net judgment of $50,000.00, plus interest and costs. This admission by the respondent estate implies that the $40,000.00 payment is to be deemed from the estate (and not the insurance proceeds). It is stipulated that there are now no funds in the estate of Mr. Henry. Hence, the estate is judgment proof.
[12] The issue, therefore, is whether the respondent, Anna-Marie Henry, in either her capacity as executrix or in her personal capacity is subject to the claim of the applicant pursuant to the breach in the separation agreement by the deceased.
INTENTION OF THE PARTIES TO THE SEPARATION AGREEMENT
[13] In interpreting the intention of the parties, paragraph 16 is to be read with the entire separation agreement, but in particular with paragraph 13, with which it is linked. In doing so, I conclude that the parties intended that the life insurance proceeds would stand as security for the father’s continuing obligation to pay child maintenance through his estate should he die during the children’s dependency.
[14] Should the children have become independent pursuant to the terms of the separation agreement during the father’s lifetime, the agreement provides at paragraph 16(e) that the late Mr. Henry would have been free of his life insurance obligation.
[15] From my analysis, I am of the opinion that the parties’ intention in their agreement was that the insurance proceeds would go to the mother only in her capacity as custodial parent in trust for the maintenance of the children or either of them. There was to be no ‘back-door’ spousal support. Paragraph 12 makes this clear.
[16] Further, although it is not clear from the wording, I conclude it is probable that given the deceased’s other support obligations to children other than Gillian and Alison, it was not intended that the latter two children would be paid more maintenance should the father die than should he live through their time of dependency.
[17] This, then, brings us to the present circumstances of this application. The evidence is that the entire sum of $90,000.00 is not required to meet the $575.00 per month per child maintenance obligation. There is, however, a continuing obligation to pay the maintenance of $575.00 so long as either child qualifies under the conditions of clause 13 of the agreement.
IRREVOCABLE BENEFICIARIES AND EQUITY
[18] I conclude that these parties are subject to the principles of equity. Authority is found in the decision of the Divisional Court in Britton Estate v. Britton, 1995 CarswellOnt 892; 1995 7348 (ON SC), 127 D.L.R. (4th) 375. In summary, I quote paragraph 16 of this decision:
16 If payment is made in accordance with the insurance contract Eileen will receive the proceeds that would have gone to Rose if Edward had complied with the judgment. Eileen will be the beneficiary of the wrongful act of Edward. Rose will be deprived of her expectations by reason of the judgment of Callon J. Such a result would be inconsistent with equity and good conscience. All the elements are here for the imposition of a constructive trust if the proceeds were to be paid to Eileen. In these circumstances it is appropriate that the proceeds be paid directly to Rose.
DECISION
[19] I have found that equity applies to this case. A declaration of trust will issue. Accordingly, the proceeds of the subject life insurance are impressed with a constructive trust requiring the recipient of the insurance funds, the respondent Anna-Marie Henry, to pay the applicant the sum of $575.00 per month until both children are no longer dependent pursuant to clause 13 of the separation agreement.
[20] The respondent, Mrs. Henry, did pay the sum of $20,000.00 to each of Gillian and Alison. I accept on all of the evidence that these payments were intended by Mrs. Henry to satisfy the support obligations of the deceased to the children of his marriage with the applicant. Unfortunately, the respondent’s payments were not to the applicant as required under the separation agreement.
[21] Alison may well be prejudiced by that breach. Gillian, the elder child, has had the benefit of her father’s maintenance in his lifetime, covering most of her four year university career. Alison has not. She has just commenced university.
[22] The respondent’s payments were, as stated, in March 2011. There is no evidence of whether any of these monies have been retained. Given the limited financial circumstances of the applicant family and the general costs of a university education, it is probable that Gillian has not retained any of the $20,000 given to her.
[23] The separation agreement provides for a single sum per month as maintenance for 2 children. It is for the applicant to apply for the benefit of both children in her discretion, the needs of each child for those payments may or may not be equal on a month to month basis.
[24] On the evidence of this record, I conclude that Gillian may have been over-paid by the $20,000 should her entitlement under the separation agreement have expired or is soon to expire.
[25] On the other hand, Alison, the younger child will have entitlement in excess of the $20,000 paid to her should she complete her present university intentions. The arrears as stated are $14,375. I divide this sum equally. The arithmetic is therefore:
[($14,375.00 / 2 = $7,187.50) + ($575.00 X 48 months = $27,600.00) = $34,787.50] – $20,000 = 14,787.50
[26] In my judgment the appropriate sum to impress with a constructive trust from the life insurance proceeds is $10,000. It is ordered that the respondent, Anna-Marie Henry will pay into court the sum of $10,000 to the credit of this application to be held against the ongoing obligation to pay the applicant monthly maintenance for Alison Henry in accordance with the separation agreement. Should Alison cease to qualify for maintenance pursuant to the terms of the separation agreement, the respondent may, on application to the Court, be paid out of court the residual of funds, if any.
[27] The parties to this action, through counsel, may apply at any time to the Court for payment out of Court of the aforesaid monies upon a Court approved trust management plan. Such an application may be made to any Justice of this Court.
Costs
[28] Counsel may exchange and deliver materials to me on the issue of costs within four weeks hereof.
Crane J.
Released: February 6, 2013
COURT FILE NO.: 12-34793
DATE: 2013/02/06
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE ESTATE OF PATRICK HENRY
B E T W E E N:
ADRIENNE TELFER
Applicant
- and –
ESTATE OF PATRICK ELWOOD HENRY, ANNA-MARIE HENRY (EXECUTRIX)
RESPONDENTS
REASONS FOR JUDGMENT
CRANE J.
DSC//dm
Released: February 6, 2013