CITATION: Hanson Estate, 2016 ONSC 2382 COURT FILE NO.: CV-15-86 DATE: 2016-04-07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
IN THE MATTER OF THE ESTATE OF YVETTE BLANCHE HANSON, deceased
Ms. Beth A. White for the Estate of Yvette Blanche Hanson
AND IN THE MATTER OF AN APPLICATION BY JOCELYN YVETTE HANSON-MAUTHE AS ESTATE TRUSTEE OF THE ESTATE OF YVETTE BLANCHE HANSON, deceased
No one appearing for Robert Linton, Kale Johnson, Amiel Houghton, Ashley Houghton, and Ryley Mauthe
HEARD: March 16, 2016, at Kenora, Ontario
BEFORE: Madam Justice H.M. Pierce
Reasons on Application
Introduction
[1] The applicant is the Estate Trustee without a Will for Yvette Blanche Hanson. The trustee seeks a declaration that the beneficiary designation naming Yvette Hanson as sole beneficiary on Gordon Hanson’s life insurance policy is valid and that the funds, which have been paid into court, be paid out to the credit of Yvette Hanson’s estate.
[2] Initially, the application was brought without notice. However, the court ordered the applicant to serve notice of the application on Robert Linton, Kale Johnson, Amiel Houghton, Ashley Houghton, and Ryley Mauthe. On the return of the application, these individuals did not appear to make submissions. All are adults.
[3] The question for consideration is whether the owner of a life insurance policy who is mentally competent but physically disabled can validly instruct another to change a beneficiary designation on his policy. In this case, the change in the beneficiary designation was effected by the policy-holder’s attorney for property, pursuant to instructions. The applicant submits beneficiary designations amount to testamentary dispositions which attorneys for property are not authorized by law to make.
[4] The life insurance company also challenged the beneficiary designation, indicating that the law was unclear whether an attorney for property can change the beneficiary designation. Consequently, the insurer paid the money into court, pursuant to court order, and washed its hands of the matter.
The Facts
[5] The facts are not in dispute. Gordon Hanson never married and had no children. In 1988, he purchased a life insurance policy for $100,000. Originally, he named his mother, Yvette Hanson, as the beneficiary.
[6] In February 1999, Mr. Hanson executed a continuing power of attorney for property, naming his mother and his brother, Richard Hanson, jointly and severally, as his attorneys for property. By 2005, Yvette Hanson had become mentally incompetent due to dementia.
[7] Mr. Hanson reconsidered the beneficiary designation on his life insurance in March 1999, and added Robert Linton, Kale Johnson, Amiel Houghton, Ashley Houghton, and Ryley Mauthe to the designation, in addition to his mother. The five additional individuals are two nieces, two nephews, and a friend.
[8] In May of 1999, he again reconsidered his beneficiary designation for the policy. He revised the beneficiary designation to name only his mother as the beneficiary.
[9] Unfortunately, Gordon Hanson was diagnosed with multiple sclerosis. By October 25, 2005, Gordon wished to change the beneficiary designation yet again, naming the five individuals and excluding his mother. He was still mentally competent; however, his disease had become so advanced that he was physically incapable of altering the beneficiary designation on his life insurance. He directed his attorney for property, Richard Hanson, to do so. As instructed, Richard Hanson amended the beneficiary designation naming the five individuals as the new beneficiaries.
[10] Then Richard Hanson sent the new beneficiary designation to the insurer, advising that he was designated as Gordon Hanson’s attorney for property. In fact, the insurer had a copy of the appointment on file. He also advised that he was handling the matter because Gordon Hanson was not able to complete the form because of advanced multiple sclerosis. The insurer made no objection at the time.
[11] Gordon Hanson died on March 27, 2010. On April 26, 2010, the insurer advised that the beneficiary designation was not valid “because the law was unclear regarding the authority of an Attorney for Property to change the beneficiary designation.” Despite having contact information on file, the insurer obtained an order without notice in July 2010 for payment of the insurance proceeds into court.
[12] Gordon Hanson’s will made no reference to the life insurance policy. His executor died in 2012 and the funds have remained in court.
[13] Yvette Hanson died intestate on May 2, 2013. Her trustee claims that the insurance proceeds belong to her estate.
Analysis
[14] The development of the law is always hindered when the court does not have the assistance of considered legal argument, developed by opposing parties who present competing considerations. Such is the case here. The applicant’s argument has not been challenged by those who are adverse in interest, giving the court an opportunity to weigh the arguments.
[15] In arguing this case, the applicant tendered several authorities to support her argument that a change in a beneficiary designation is a testamentary disposition. I will comment briefly on the cases to explain why, generally, they are not helpful.
[16] The case of Sosna v. Rickards, [1994] O.J. No. 1853 (Sup. Ct.), deals with the proof requirements under a group life insurance policy. The court held that an oral declaration was not sufficient to change the beneficiary designation. In the case before me, the beneficiary designation was made in writing, rather than orally.
[17] The case of Alainga Estate (Re), 1995 CanLII 18215 (NWT SC), [1995] N.W.T.J. No. 43 (Sup. Ct.), discusses an interpretation of the Dependants Relief Act, R.S.N.W.T. 1988, c. D-4, in circumstances where all of the deceased’s dependent children had not been provided for upon his death. The court clawed back the benefits paid under two life insurance policies in order to provide for all of the deceased’s children. This case is factually and legally different from the case at bar.
[18] In Desharnais v. Toronto Dominion Bank, 2001 BCSC 1695, [2001] B.C.J. No. 2547 (Sup. Ct.), Ms. Desharnais, acting as an attorney pursuant to her husband’s power of attorney, transferred his RSP account from the bank to the bank’s investment arm. In doing so, the beneficiary designation in her favour on the RSP did not transfer with the investment. The result was that the RSP proceeds were paid into her husband’s estate of which she was not a beneficiary. Ms. Desharnais sued the bank for negligence and obtained judgment.
[19] In finding the bank had been negligent, the British Columbia Supreme Court applied the Law and Equity Act, and the Wills Act. The court found that the change in beneficiary designation from Ms. Desharnais to the estate occurred when the investment was transferred without a beneficiary designation and was testamentary in nature. The court concluded that the bank had an obligation to hold the funds in the RSP until a legal transfer was authorized. The court also concluded that the bank had breached its fiduciary duty to Ms. Desharnais who did not receive the benefit of the RSP upon her husband’s death.
[20] The facts in Desharnais and the application of provincial statutes are significantly different than in the case at bar. Unlike in Desharnais, Gordon Hanson explicitly authorized his attorney to make the beneficiary designation, and his attorney carried out his wishes. There is no element of negligence or breach of fiduciary duty.
[21] Finally, In Re Moss (Bankrupt), [2010] M.J. No. 140 (C.A.), the trustee in bankruptcy appealed the judgment that declined to invalidate a beneficiary designation on life insurance policies. Before declaring bankruptcy, Mr. Moss altered his mother’s beneficiary designation, so that his daughter was named as beneficiary instead of him. When the mother died, the trustee challenged the new beneficiary designation in favour of Moss’ daughter.
[22] At trial, Mr. Moss maintained that he supported his mother’s limp hand as she altered the beneficiary designation or, alternatively, that he changed the beneficiary designation pursuant to his mother’s instruction or acting as her attorney. These latter defences were withdrawn at trial, yet the trial judge relied on them in granting Moss judgment.
[23] The Court of Appeal agreed that the trial judge had erred in relying on defences that had been withdrawn at trial. Accordingly, the court also held that the bankrupt did not have authority under a general power of attorney to alter the beneficiary designation. The court also concluded that under the province’s Insurance Act, the attorney did not have authority to sign the requisite forms changing the beneficiary designation.
[24] The Court of Appeal did not consider whether the policy owner must personally sign the beneficiary designation forms, and how this could be done if the policy owner was disabled. The notion of agency was not explored on appeal.
[25] Did Richard Hanson act as an attorney when he changed the beneficiary designation on Mr. Hanson’s life insurance policy?
[26] Section 7(2) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30, describes the scope of authority of an attorney under a continuing power of attorney. It states:
(2) The continuing power of attorney may authorize the person named as attorney to do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will. 1992, c. 30, s. 7 (2).
[27] The applicant argues that the beneficiary designation effected by Gordon Hanson’s attorney for property is invalid because it is contrary to s. 31(1) of the Substitute Decisions Act, 1992. Section 31(1) of the Act deals with property management. It states:
A guardian of property has power to do on the incapable person’s behalf anything in respect of property that the person could do if capable, except make a will.
[28] The purpose of having a substitute decision-maker is to protect the rights of incapable individuals, not to thwart the wishes of those who are capable of giving instructions but physically incapacitated from carrying them out.
[29] In my view, the Substitute Decisions Act has no application to this case because Richard Hanson was not acting as a substitute decision-maker pursuant to the power of attorney. The evidence confirms that Gordon Hanson was intellectually capable at the time the last beneficiary designation was made. There is no evidence to suggest that the beneficiary designation made on October 25, 2005, was not made pursuant to his direction.
[30] Respectfully, the applicant and the insurer have asked themselves the wrong question. In these circumstances, the beneficiary designation is contractual in nature. Instead of asking whether the beneficiary designation could be altered by an attorney as a testamentary disposition, they should have asked whether the beneficiary designation was a valid declaration pursuant to the requirements of the Insurance Act, R.S.O. 1990, c. I.8.
[31] Section 190(1) and (2) of the Insurance Act deal with beneficiary designations under a contract of life insurance. They state:
(1) An insured may in a contract or by a declaration designate the insured’s personal representative or a beneficiary to receive insurance money.
(2) Subject to section 191, the insured may from time to time alter or revoke the designation by a declaration.
Section 171(1) of the Act describes a “declaration” as follows:
"declaration" means an instrument signed by the insured,
(a) with respect to which an endorsement is made on the policy,
(b) that identifies the contract, or
(c) that describes the insurance or insurance fund or a part thereof,
in which the insured designates, or alters or revokes the designation of, the insured's personal representative or a beneficiary as one to whom or for whose benefit insurance money is to be payable.
[32] What does it mean that the declaration must be an instrument “signed by the insured”? Is it necessary for an insured to physically sign the declaration? The answer is no.
[33] Interestingly, the trial judge in Re Moss (Bankrupt), 2009 MBQB 21, considered this point. At para. 64 of the trial judgment, he explained:
The Trustee and BMO urge me to conclude that the foregoing provisions of the Insurance Act mandate (require) the named insured in a policy of life insurance to personally sign his or her name to a change of beneficiary form for the change to be valid. My review of the Insurance Act, the authorities referred to by counsel, and the submissions by counsel lead me to conclude otherwise. To interpret the words, “signed by the insured”, as urged by the Trustee and BMO, would lead to a result which, in my view, was not intended by the Legislature. Specifically it would mean that a mentally competent but otherwise physically disabled insured (one who could not sign his or her name) would not be able to change the beneficiary of his or her insurance policy by giving a power of attorney to someone or by otherwise authorizing someone to sign for her or him. It must be kept in mind that a policy of life insurance is simply a contract between an insurer and an insured, albeit it is always subject to whatever requirements may be legislated.
[34] The trial judge in Moss also noted the use of permissive language in the provisions of Manitoba’s Insurance Act, language that mirrors the relevant provisions in the Ontario Act.
[35] Whether a formal document must be personally signed was considered in London County Council v. Agricultural Food Products Ltd. (1955), (sub nom London County Council v. Vitamins Ltd.) [1955] 2 All E.R. 229 at 231, [1955] 2 Q.B. 218 (U.K. C.A.). In that case, Lord Denning explained:
In the ordinary way, when a formal document is required to be “signed” by a person, it can only be done by that person himself writing his own name on it, or affixing his own signature on it, with his own hand… But there are some cases where a man is allowed to sign by the hand of another who writes his name for him. Such a signature is called a signature by procuration, by proxy, “per pro”, or more shortly “p.p.” All of these expressions are derived from the Latin per procurationem, which means by the action of another. A simple illustration is when a man has broken his arm and cannot write his own name. In that case, he can get someone else to write his name for him; but the one who does the writing should add the letters “p.p.” to show that it is done by proxy, followed by his initials so as to indicate who he is.
[36] In the same case, at p. 232, Lord Romer analysed the action of signing for another in agency terms. He stated:
… as a general proposition that at common law a person sufficiently “signs” a document if it is signed in his name and with his authority by somebody else, and in such a case the agent’s signature is treated as being that of the principal.
See: Words and Phrases, Vol. 7, (1993) Thomson Canada Limited, Scarborough, Canada,
p. 7-905.
[37] In Banton v. Banton (1998), 1998 CanLII 14926 (ON SC), 164 D. L. R. (4th) 176 (Ont. Sup. Ct.), Mr. Justice Cullity considered when an attorney may act as agent in circumstances where the donor under a power of attorney is mentally capable. At para. 150, he highlighted the differences between an attorney for a donor who has mental capacity and a donor who has not:
An attorney for a donor who has mental capacity to deal with property is merely an agent and, notwithstanding the fact that the power may be conferred in general terms, the attorney's primary responsibility in such a case is to carry out the instructions of the donor as principal. As an agent, such an attorney owes fiduciary duties to the donor but these are pale in comparison with those of an attorney holding a continuing power when the donor has lost capacity to manage property.
[38] In this case, it is conceded that Gordon Hanson was mentally competent when he asked Richard Hanson to change the beneficiary designation on his life insurance policy. Gordon Hanson was then in advanced stages of multiple sclerosis, such that he was physically incapable of signing the insurance form himself. Richard Hanson acted as Gordon’s amanuensis.
[39] After changing the beneficiary designation for Gordon on October 25, 2005, pursuant to Gordon’s direction, Richard Hanson advised the insurer in writing that he had done so as his brother’s agent, in effect by procuration. This was a valid change in the beneficiary designation as contemplated by the terms of the Insurance Act, and I so find.
[40] Accordingly, the application for a declaration that the beneficiary designation form dated May 31, 1999, naming Yvette Blanche Hanson as a valid beneficiary is dismissed.
[41] Instead, a declaration will issue that Robert Linton, Kale Johnson, Amiel Houghton, Ashley Houghton, and Ryley Mauthe are entitled to the proceeds of Gordon Hanson’s Manufacturers Life Insurance policy Number RB4013030, now paid into court pursuant to the order of Mr. Justice Echlin dated July 21, 2010. Counsel for the applicant is ordered to provide these individuals with a true copy of these reasons and the order taken out in accordance with the reasons.
[42] In the circumstances, there will be no costs.
“Original signed by”___
The Hon. Madam Justice H.M. Pierce
Released: April 7, 2016
CITATION: Hanson Estate, 2016 ONSC 2382 COURT FILE NO.: CV-15-86 DATE: 2016-04-07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
IN THE MATTER OF THE ESTATE OF YVETTE BLANCHE HANSON, deceased
AND IN THE MATTER OF AN APPLICATION BY JOCELYN YVETTE HANSON-MAUTHE AS ESTATE TRUSTEE OF THE ESTATE OF YVETTE BLANCHE HANSON, deceased
REASONS ON APPLICATION
Pierce J.
Released: April 7, 2016
/cs