Court File and Parties

COURT FILE NO.: CV-18-070 DATE: 20180911

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SUSAN LARMER, acting as Estate Trustee of Michael Birnie and SUSAN LARMER, in her capacity and SUSAN LARMER as the parent of Noah Perron, Plaintiff

– and –

JANICE BIRNIE, Defendant

Counsel: Kim S. Kieller, for the Plaintiff. William Abbott, for the Defendant.

HEARD: August 22, 2018

R. D. Gordon, R.S.J.

Overview

[1] Michael Birnie (“Michael”) passed away on August 8, 2017 while married to Susan Larmer (“Susan”). Michael had previously been married to Janice Birnie (“Janice”) and had certain obligations to her under a separation agreement dated October 19, 2004.

[2] The competing claims of Janice and Susan have been case managed by Justice Varpio and it is anticipated that he will continue in that role. Susan brought this motion for directions on how to proceed to have the respective claims of the parties determined.

Background

Michael and Janice

[3] Michael and Janice began living together on September 15, 1986. They married on February 6, 1987 and separated on July 29, 2002. They have no children together.

[4] Following their separation they negotiated a separation which was executed on October 19, 2004 and which purported to settle all outstanding issues between them. Of concern in these proceedings are the provisions of the separation agreement dealing with spousal support:

5. SPOUSAL SUPPORT

a) The Husband shall pay to the Wife spousal support for the Wife in the amount of $6,250.00 per month commencing on January 1, 2004 and on the first day of each and every month thereafter.

b) The said spousal support required to be paid by the Husband to the Wife in the amount of $6,250.00 per month shall be subject to an automatic increase annually by the indexing factor equivalent to the change in the consumer price index established by Statistics Canada for the month of December of each year; with the first such automatic increase in spousal support to take effect on January 1, 2005 and on the first day of January of each and every year thereafter.

c) The aforementioned periodic spousal support payable by the Husband to the Wife shall be tax deductible by the Husband for the purposes of calculating the Husband’s income tax liability each and every year; while the Wife will be required to include the support payments received as income for the purposes of calculating the Wife’s income tax for each and every year.

d) The spousal support payable by the Husband to the Wife shall be subject to variation upon a material change in circumstances affecting either Party. The Parties agree that if a material change in circumstances should occur in the future then the Parties are at liberty to discuss the change in any variation that is required as between them with a view to settling any such issue. Alternatively, the parties acknowledge and agree that either spouse is at liberty at any time in the future to have any required variation determined by any Court having jurisdiction to deal with such an issue upon the appropriate application being brought by either Party.

e) The spousal support has been assessed on the basis that the Wife presently has no income and is not employed. The Husband is a lawyer practising law in the City of North Bay with his firm known as Birnie Associates. The Husband’s present net income from his law practice has been assessed by the Parties in the amount of $248,000.00 per annum.

f) By January 1st of each year the husband shall provide to the wife post-dated cheques for her spousal support (including the increase in support pursuant to paragraph 2(b) above) for each month of that calendar year. For example, by January 1, 2005 the husband shall provide the wife with post-dated cheques for her support for …(indecipherable).

g) The Husband undertakes and agrees to obtain a life insurance policy on his life in the amount of $500,000.00. The Husband will designate the Wife as the irrevocable beneficiary under the terms of the aforementioned life insurance policy; with the beneficiary designation to continue for so long as the Husband is required to pay spousal support to the Wife. Upon the execution of the Separation Agreement by both Parties, the Husband will forthwith provide documentation to the Wife confirming the details of the life insurance coverage, confirmation of the face amount of the policy, and confirmation that the Wife is designated as the beneficiary under the terms of the said policy. In addition, the Husband shall provide a direction and authorization to the Wife addressed to the life insurer allowing the Wife to obtain any and all information that she may require directly from the life insurance company with regard to the details of the life insurance designation outlined herein.

[5] The amount of spousal support payable by Michael was never adjusted to reflect increases in the consumer price index.

[6] Michael’s support obligation had not been varied or terminated when he died. Although Michael’s life was insured under various policies of insurance for amounts totaling almost $1,885,000.00, no policy designated Janice as beneficiary.

[7] Janice has an application before this court brought under the Family Law Rules (FS-05-1264) seeking various relief. On the hearing of this motion, her counsel clarified what is being sought:

(1) Payment of $500,000.00 in accordance with the requirement to designate her as beneficiary under paragraph 5(g) of the separation agreement;

(2) In the event Janice is unsuccessful in obtaining judgment for $500,000.00, an order that spousal support continue under the terms of the separation agreement, but with an increase to reflect Michael’s alleged increase in income prior to his death.

(3) In the event it is determined that the separation agreement provides for no support following the death of Michael, for dependant’s relief under the Succession Law Reform Act, seeking a lump sum amount or ongoing monthly payment of support.

(4) In any event, judgment against the estate for $121,963 representing retroactive adjustments to support to reflect increases in the consumer price index.

(5) Costs.

Michael and Susan

[8] Michael and Susan began living together in December of 2002 and were married in December of 2009. They remained together until Michael’s death.

[9] Susan has a son, Noah, who was five years of age when Michael and Susan began living together. He is now 20 years of age and attends university.

[10] Susan is the estate trustee appointed pursuant to Michael’s will. The will provides Susan with a life interest in the Estate with the right to encroach upon the capital with the remainder, on Susan’s death, to be paid to Noah.

[11] Although Susan has made several claims in her Statement of Claim, her counsel explained that her position is essentially as follows: That there are insufficient funds in the estate to satisfy the claims of all dependants and that in assessing what, if any, relief Janice is entitled to, the court must also consider and determine the entitlement of her and Noah as dependants.

[12] Susan is of the view that Janice’s claim is restricted to dependant’s relief, with resort to the life insurance proceeds only as security for the payment of that relief as and when it is payable.

[13] Susan took the somewhat unusual step of asserting her claims by way of a Statement of Claim (CV 18-070) under the Rules of Civil Procedure in which Janice is named as the sole Defendant. It is within that action that the motion for directions has come before me. In a motion record dated February 13, 2018 and a supplementary motion record dated June 28, 2018 Susan has asked for directions with respect to several matters.

The Potential Motion for Summary Judgment

[14] Janice has indicated her intention to bring a motion for summary judgment on the issues of her entitlement to payment of $500,000 pursuant to the terms of the life insurance provision of the separation agreement and her entitlement to a retroactive increase in support to reflect increases in the consumer price index since the separation agreement was entered into.

[15] The motion for summary judgment has three potential outcomes.

[16] Firstly, if Janice is entirely successful, the issues among the parties will have been resolved. She will receive the appropriate funds. She will not need to pursue the estate for support. There will be an order made for costs. The balance of the estate will be available to meet Susan’s and Noah’s claims for dependant’s relief should she decide to pursue them.

[17] Secondly, if Susan is successful in persuading the court that Janice has no entitlement to the insurance proceeds except as security for any support obligation owed to her, litigation will continue to determine whether and to what extent Janice has a claim for support against the estate under the terms of the separation agreement or under the dependant’s relief provisions of the Succession Law Reform Act (“SLRA”).

[18] Thirdly, if the issue of Janice’s entitlement to the insurance proceeds cannot be determined one way or another on the motion for summary judgment, that will remain a live issue, as will her claims for support under the separation agreement or SLRA.

Analysis

[19] As indicated above, Janice intends to bring a motion for summary judgment seeking interpretation of the separation agreement. That motion has the potential to effectively end the litigation and should be heard as soon as is reasonably possible. In accordance with my discussions with counsel about potential timelines for the motion, Janice shall deliver her Motion for Summary Judgment and supporting materials not later than September 30, 2018. Susan shall deliver her responding materials not later than October 31, 2018. The parties shall contact the trial coordinator to set a date for the hearing of the motion as soon after October 31, 2018 as is available to them and the court. The parties shall each file a factum not less than one week in advance of the hearing date.

[20] The motion for summary judgment is based entirely on the interpretation of the separation agreement. Rule 1(2)(b) of the Family Law Rules provides that those rules apply to cases in the Superior Court of Justice for the interpretation of a separation agreement. Accordingly, Janice’s motion shall be brought within File No.FS-05-1264 and shall be governed by the Family Law Rules.

[21] As has been noted, success by Janice on her motion for summary judgment will effectively end her involvement in Michael’s estate. Susan’s civil action may then be dismissed or discontinued insofar as relief against Janice is concerned and Susan may pursue her rights against the estate as she deems appropriate.

[22] In the event Susan is successful on the motion for summary judgment or it is determined that the claims made in the summary judgment motion ought to proceed to trial, then the court will be facing conflicting dependant relief claims against the estate. It is appropriate to now set out how those claims should proceed, and to that end, address the various questions posed by Susan in her motion for directions.

The Issues to be Decided

[23] In the event Janice’s claims are not granted on summary judgment and remitted to trial for determination, the issues will be:

1. Is Janice entitled to the payment of $500,000 from the estate because of Michael’s failure to designate her as beneficiary of life insurance as contemplated by their separation agreement?
2. Is Janice entitled to a claim against the estate for the retroactive application of the cost of living increases prescribed in the separation agreement? If so, for how many years and in what amount?
3. If Janice is not entitled to the payment of $500,000 from the estate, is she entitled to the payment of ongoing support from the estate?
4. If Janice is entitled to ongoing support from the estate is it payable pursuant to the terms of the separation agreement and in the amount prescribed by the separation agreement or some other amount? Is it to be secured by proceeds of life insurance in the amount of $500,000?
5. If Janice is not entitled to ongoing support pursuant to the terms of the separation agreement, is she entitled to dependant’s relief under the SLRA?
6. Is Susan entitled to dependant’s relief under the SLRA?
7. Is Noah entitled to dependant’s relief under the SLRA?
8. Of those who are entitled to dependant’s relief under the SLRA, what is the amount of their entitlement and should it be paid by way of lump sum or periodic payment?
9. Costs.

Is Susan in a Position of Conflict?

[24] There is no good reason why Susan should not continue to act as Estate Trustee through the determination of Janice’s summary judgment motion.

[25] Thereafter, however, Janice is of the view that Susan is in a clear position of conflict because Susan is asserting a dependant’s relief claim against the estate. It is suggested that it is entirely inappropriate for her to be a plaintiff in such a claim while at the same time acting on behalf of the estate to defend that same claim.

[26] In my view, this position ignores the true essence of the dispute before the court. Susan’s interest is in preserving the estate assets for the benefit of herself and her son Noah. It is that interest which drives her to defend the claims being made by Janice. It is that same interest that drives her to assert her claim for dependant’s relief. Although simultaneously asserting a claim against the estate while acting to defend it on behalf of the estate could, theoretically, result in preferential treatment of her as a creditor, it is unlikely to happen in this case. The competing dependant’s relief claims asserted by Janice and Susan will be litigated together, with the participation of each of them ensuring the other gets no more than that to which she is entitled. Furthermore, there is an order preserving assets of the estate which are sufficient to satisfy the claims being made by Janice. In short, Susan’s continued representation of the estate in the determination of the competing claims against it result in no conflict of interest that would have any bearing on Janice.

[27] If the objection to Susan’s acting for the estate was being made by Noah, the residuary beneficiary of the estate, my decision may be different. Noah would be able to argue a clear conflict of interest because of the obvious risk that Susan would prefer her own interests as a potential creditor of the estate over his interests as a residuary beneficiary without any independent assessment of the validity of her claim. At this stage, Noah has not indicated any such concern.

Who are the Parties?

[28] For the purposes of the motion for summary judgment being brought by Janice the parties are fairly simple. The Applicant is Janice. The Respondent is Susan Larmer as Estate Trustee for the Estate of Michael Birnie. The motion is to be within Janice’s application.

[29] In the event the matter proceeds on to trial, there will effectively be two concurrent proceedings: (1) Janice Birnie asserting her claims with the Respondent being Susan Larmer as Estate Trustee for the Estate of Michael Birnie. (2) Susan Larmer asserting her claims (and those of Noah) with the Defendant being Susan Larmer as Estate Trustee for the Estate of Michael Birnie.

Is There a Need for Security to be Provided by the Estate?

[30] At the hearing of this motion all parties agreed that given the other interim orders currently in place there is no need for further security to be provided by the Estate.

The Best Process to Determine the Issues

[31] As noted above, Janice’s motion for summary judgment should proceed as soon as is reasonably possible.

[32] In the event the motion for summary judgment does not resolve the claims of Janice, the litigation shall proceed as follows:

1. The Civil Action brought by Susan and the Family Application brought by Janice shall be combined and heard together pursuant to Rule 12(5) of the Family Law Rules. The issues to be determined in the combined action are as set out above.
2. Given that the main issues concern support for dependants and the interpretation of a separation agreement, it is appropriate that the combined proceeding be governed by the Family Law Rules.
3. Although the issues for determination are to be limited to the issues set out above, and the parties shall be as hereinbefore set out, the issues shall be framed in the trial record for each proceeding. In FS-05-1264 the trial record shall contain as pleadings Janice’s amended Application at Tab 17 of the continuing record and the Answer of the Estate. My examination indicates that there has been no Answer filed to the amended Application and it is ordered that the Answer be filed within 30 days of this endorsement. In CV18-070 the trial record shall include as pleadings Susan’s Statement of Claim and Janice’s Statement of Defence.
4. Janice shall deliver an up-to-date financial statement within thirty days of the issuance of the summary judgment motion decision. Susan shall be entitled to a copy of the financial statement.
5. Susan shall deliver an up-to-date financial statement within thirty days of the issuance of the summary judgment motion decision. Janice shall be entitled to a copy of the financial statement.
6. Susan, on behalf of the Estate, shall deliver an accounting of the estate for the period from Michael’s death to December 31, 2018 by January 31, 2019.
7. The issues in this case are essentially between Susan and Janice. As such, each shall be entitled to challenge the other’s case and shall be entitled: (a) to documentary production from the other (to be completed within 30 days of issuance of the summary judgment motion decision); (b) to question the other (to be completed within 45 days of the delivery of the up-to-date financial statements); and (c) to cross-examine the other and to call evidence of relevance to the other’s case at trial. In the event Janice takes the position that her illness prevents her from being questioned, the parties are directed to schedule a teleconference with the case management judge to address the issue.
8. Janice’s claim was filed first. It is therefore appropriate that she be the first to lead evidence at trial.
9. If it is Janice’s position that she is unable to contribute to her own support due to illness, she shall be required to provide to Susan, at least sixty days in advance of trial, the medical documentation she relies upon in support of her position. Unless Janice intends to lead expert evidence on the issue at trial, Susan shall not be entitled to have Janice submit to an independent medical assessment without order of the court. In the event such an order is sought, the parties are directed to first canvas the issue by teleconference with the case management judge.
10. Each party shall file their Trial Record by February 28, 2019. Upon filing of the trial records, the parties shall arrange a teleconference with the case management judge to discuss what, if anything, is required to make the matter trial ready and to set a date for trial.
11. It is important that these issues be determined as quickly and inexpensively as possible. Aside from the motion for summary judgment to be brought by Janice, further motions shall not be brought without first having canvassed the issue with the case management judge by way of conference call.

[33] If the parties are unable to agree on costs relative to this motion they may make written submissions to me, not to exceed three pages plus attachments each, within 45 days.

R. D. Gordon, R.S.J. Released: September 11, 2018