Court File and Parties

Court File No.: FS-19-00010451-0000 Date: 2024-04-16 Ontario Superior Court of Justice

Between: LAURA ANN YOUNG, Applicant And: ALAN NEIL YOUNG, Respondent

Counsel: Steven Bookman and David Eddenden, for the Applicant Eli Antel, for the Respondent

Heard: February 20, 2024

Before: Vella J.

Reasons for Decision

Introduction

[1] This motion revolves around the interpretation of a Separation Agreement, and in particular whether the Respondent is intentionally undermining the security provisions of this Agreement by removing assets from the residue of his eventual estate to their son.

[2] The parties were married on August 10, 2003. They separated on May 31, 2018.

[3] They have one child of the marriage (“Justin”), who is approximately 19 years old and attending full time university.

[4] After an acrimonious divorce proceeding was initiated in 2019, the parties signed a comprehensive Separation Agreement dated June 6, 2020 (the “Separation Agreement”).

[5] The Respondent was subsequently diagnosed with terminal cancer in the spring of 2023.

[6] The Applicant seeks various orders from this court to prevent the Respondent from what she alleges is an intentional systematic depletion of his assets reducing her beneficial interest in his estate. She seeks an order to restore those assets she claims have been removed from the future residue of the estate. She also alleges that, contrary to the terms of the Separation Agreement, the Respondent terminated a family trust and gave the proceeds to Justin. This is important to her since the subject provisions in the Separation Agreement constitute the security for future spousal support payments. This is particularly critical in light of the Respondent’s terminal illness and the unfortunate likelihood that his time may be short.

[7] The Respondent vehemently denies that he is depleting his estate to favour Justin and deprive the Applicant of her entitlement. He asserts that he is entitled to spend his money as he wishes, including to pay his living and medical expenses and enjoy his remaining time.

[8] Interpretating the relevant provisions of the Separation Agreement within the context of the whole agreement in order to determine the parties’ mutual intention when they entered into it is central to resolving this motion. The provisions must also be measured against the Respondent’s actions since the signing of the Separation Agreement. These actions include transferring funds to Justin that were formerly held in a trust and making Justin a joint holder of certain bank accounts. The latter action has the effect of removing those bank accounts from the residue of the Respondent’s estate, thereby arguably shrinking the future estate’s value. This analysis is informed by the family law context, as relates to the resolution of all matters arising from the breakdown of the marriage, including ongoing spousal support obligations.

[9] Neither party seeks to set aside the Separation Agreement. Rather, both wish to have it properly enforced.

The parties’ positions and evidence

[10] Following the execution of the Separation Agreement, the Respondent fulfilled many of his contractual obligations. He designated the Applicant as the beneficiary of his RRSP account and his TFSA. He also amended his last will and testament to make the Applicant a 30 percent beneficiary of the residue of his estate. Since then, he has made a new will and made the Applicant a one-third beneficiary of the residue of his estate. There is no suggestion that the Respondent altered his employment pension to deprive the Applicant of a survivor’s benefit as per the Separation Agreement. He has been paying monthly spousal support pursuant to the Separation Agreement.

[11] The problem giving rise to this motion arose when the Applicant discovered that a trust, called the Young Family Trust, which was created prior to the execution of the Separation Agreement and designated Justin as beneficiary, had been wound up. The Respondent gave the resulting funds of approximately $300,000 to Justin. This was contrary to s. 12.c of the Separation Agreement, stating that the Applicant was to be designated as beneficiary for 30 percent of any pre-existing (and future) trusts created by the Respondent.

[12] The Applicant also discovered that the Respondent added Justin as a joint owner of certain bank accounts not explicitly addressed in the Separation Agreement. Those accounts are an investment account totalling $98,185.95 (the “small investment account”), a savings account, a chequing account and an “apartment account” [also a chequing account]. Altogether, these accounts total approximately $253,358.62. The effect of adding Justin to these accounts is that they will devolve to him upon the Respondent’s death by way of survivorship and will no longer constitute an asset of the Respondent’s estate. This will deprive the Applicant of 30 percent of whatever balances may be left in these accounts as of the date of the Respondent’s death.

[13] Furthermore, the Applicant became aware that the Respondent withdrew approximately $80,000 from what the parties have called the “large investment account” (CIBC Wood Gundy account 41*-1***2).

[14] The Applicant also deposed that the Respondent told her after his cancer diagnosis that he would be transferring assets to Justin and/or depleting his assets, which would have the effect of undermining the security she bargained for in the Separation Agreement.

[15] The Respondent denies these allegations.

[16] He does, however, admit that he “inadvertently” breached the Separation Agreement when he terminated the Young Family Trust and transferred the proceeds to Justin. He noted that he had fully funded the Young Family Trust during the marriage to provide for Justin’s education and that the Applicant was always aware of the purpose of the trust. He funded this trust with stock options he was paid when working as a lawyer. The stock options vested and converted into approximately $330,000. The trust executed a promissory demand note for this sum in his favour. He ultimately transferred approximately $300,000 to Justin upon termination of the trust.

[17] He also deposed that after receiving his cancer diagnosis, and in light of Justin’s maturity, he wanted to give Justin this money. This would allow the Respondent “to watch Justin enjoy this money if an appropriate opportunity came to him, and, most importantly in [his] mind, it would provide Justin comfort knowing that he has immediate access and [his] blessing to pursue what he wanted even if [he] was no longer here”.

[18] The Respondent explained the following regarding the accounts to which he added Justin:

(a) Regarding the small investment account totalling $98,185.95, this account consists of laddered GICs which have or will mature between 2023 and 2026. These were purchased during the marriage, and the Applicant was aware that the funds were always designated for Justin’s education. These funds have been used to pay for Justin’s tuition and education costs at the University of Waterloo, where Justin presently attends. He always considered these to be Justin’s funds in any event. There was a balance of $90,000 at the date of separation.

(b) Regarding the Respondent’s chequing account, savings account, and “apartment account”, totalling approximately $155,172.67, the Respondent explained that he is using these accounts to pay his expenses, including his growing medical and home care expenses. He has added Justin in the event he cannot handle his own finances to ensure his expenses can be paid. He also deposed that he prefers Justin to receive any balance remaining at his death so they will not form part of the estate.

[19] The Respondent emphasized that the main asset he owns, which will form the bulk of his estate, is the large investment account. This investment account was entirely funded by an inheritance he received from his parents. The value of this account is about $3,500,000. Currently, he takes between $4,500 and $7,500 a month from the earnings generated by this account. It is his intention, and was at the time of the Separation Agreement’s execution, that this would be the residue of his estate. It will be divided between the Applicant and Justin on a one-third, two-thirds basis, per his new Will. This percentage is an increase beyond the 30 percent beneficiary designation for the Applicant stipulated in the Separation Agreement.

[20] With respect to the removal of $80,000 from his large investment account, the Respondent explained that the withdrawal occurred in 2022 as a result of a forced sale of his shares in Rogers, caused when Rogers sold some of its assets. He deposited these proceeds into his savings account to help fund his growing medical and care expenses.

[21] The Respondent has equalized his employment pension. The Applicant received the matrimonial home free of encumbrances since the Respondent paid those off per the Separation Agreement.

[22] The Respondent disclosed a list of his current assets with updated balances, with the related bank and investment statements. This list consists of the various bank accounts: TFSA, RRSP, the small investment account, and the large investment account. The accounts total approximately $4,027,021.75, of which the large investment account comprises the largest component by far, at $3,548,194.29 (roughly 88 percent of the Respondent’s current assets).

[23] The Respondent also disclosed his current monthly expenses, a significant portion of which go to personal support workers (“PSW”), an individual who provides driving and shopping services (as PSWs are not allowed to drive on the job), medical supplies, and occupation health and safety items. He warns that depending on the success of his cancer treatments, there could be additional significant medical expenses in the future.

[24] The Applicant does not dispute the legitimacy of the Respondent’s personal expenses. She also agrees that the Respondent is entitled full access to all his money for his personal needs, whatever they may be or become. Her concern is that the Respondent has shown a pattern of depleting the eventual residue of his estate by transferring assets to Justin or adding Justin as co-account holder. This frustrates the security provisions of the Separation Agreement and jeopardizes her entitlement to ongoing spousal support upon the Respondent’s death. She seeks replenishment of the $300,000 given to Justin from the terminated Young Family Trust and removal of Justin from some of the subject bank accounts. She also seeks measures in place to prevent any further depletion of the future estate’s assets and to ensure she receives 30 percent, or now one-third, of the estate residue. (It is anticipated by both parties that, barring a medical breakthrough, the Respondent will not survive past January 1, 2030, after which date the percentage of the residue to the Applicant drops to 15 percent.).

[25] The Respondent currently pays the Applicant $5,666.66 a month in spousal support. This translates to $67,999.92 a year.

Principles of Contractual Interpretation

[26] The principles of contractual interpretation are the same for Separation Agreements as for other contracts, with the caveat that the family law context and dynamics relating to domestic contracts must be taken into consideration.

[27] Sattva Capital Corp v. Creston Moly Corporation, 2014 SCC 53, [2014] 2 S.C.R. 633[^sattva], is a seminal case setting out the framework for interpreting contracts. It also clarified the role of the surrounding circumstances as an interpretative aid when determining the parties’ intentions at the time they entered into the contract.

[28] The court in Sattva[^sattva] stated the following, at para. 47: “ [T]he interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine ‘the intent of the parties and the scope of their understanding’”.

[29] Therefore, “the decision-maker must read the contract as a whole giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of the formation of the contact”: Sattva[^sattva], at para. 47.

[30] The court observed that a contract is not developed in a vacuum. Rather the meaning of the words used by the parties will be “derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement”: Sattva[^sattva], at para. 48. This latter observation is most apt when interpreting domestic contracts.

[31] The court in Sattva[^sattva] cautions that courts must not allow surrounding circumstances to “overwhelm the words of the agreement”. The words of the text always prevail. The surrounding circumstances that may be used as an interpretative tool consist only of “objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting”: at para. 58.

[32] In MacDougall v. MacDougall (2005), 262 D.L.R. (4th) 120 (Ont. CA)[^macdougall], the Court of Appeal adopted the principles of contractual interpretation set out in Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888[^consolidated] and B.G. Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12[^checo], (and reflected in the subsequent case of Sattva[^sattva]) to domestic contracts: see also Turner v. DiDonato, 2009 ONCA 235, 95 O.R. (3d) 147[^turner]. The court in MacDougall[^macdougall] stated the following, at para. 22:

Applying that principle to domestic contacts, a court must search for an interpretation that is in accordance with the parties’ intention at the time they entered into the contract. Where two interpretations are possible, the court should reject the one that would produce a result that the parties would not have reasonably expected at the time they entered into the contract. Instead, the court should favour an interpretation that promotes the reasonable expectations of the parties and that provides a sensible result in the family law context. To arrive at such an interpretation, the court must interpret the provision in the context of the entire contract, including the entirety of the section at issue, to discern the likely intention of the parties.

[33] Guided by the principles set out by the Supreme Court of Canada and applied to domestic contracts by the Court of Appeal, the principles of contractual interpretation may thus be summarized as follows:

(a) The court must adopt an interpretation of the domestic contract that reflects the parties’ mutual intentions at the time of entry, based on the wording of the subject provisions and understood within the context of the domestic contract as a whole;

(b) The court may consider the surrounding circumstances leading the parties to enter into the domestic contract as an interpretative aid;

(c) The court must determine whether the language of the domestic contract is unambiguous within the contract as a whole. If there is no ambiguity, effect must be given to the clear language;

(d) However, if the contractual language at issue is ambiguous, the court must apply the general principles of contractual interpretation to resolve that ambiguity;

(e) An ambiguity only exists if there are two or more reasonable interpretations of the domestic contract;

(f) In the end:

(i) the interpretation should be consistent with the reasonable expectations of the parties so long as that interpretation is supported by the language of the domestic contract; and

(ii) the interpretation should not give rise to results that are unrealistic or that the parties would not reasonably have contemplated when resolving their family law entitlements and obligations.

[34] In addition, there is an organizing principle of good faith that “parties must generally perform their contractual duties honestly and reasonably and not capriciously or arbitrarily”: Bhasin v. Hyrnew, 2014 SCC 71, [2014] 3 S.C.R. 494[^bhasin], at para. 63. While this duty of good faith performance is not elevated to that of a fiduciary, it does require that a contracting party, in performance of the contract, have appropriate regard to the legitimate contractual interests of the contracting party and not undermine those interests: Bhasin[^bhasin], at paras. 65, 73.

[35] The purpose of a separation agreement is generally to resolve all issues arising from the breakdown of the marriage. The organizing principle of good faith takes into account the parties’ reasonable expectations in providing for future spousal support obligations in the event that the Respondent predeceases the Applicant. These provisions include designating the Applicant as a beneficiary of 30 percent of the residue of his estate, and Justin as the beneficiary of the remaining 70 percent.

Material Provisions of the Separation Agreement

[36] At issue in this case is a series of contractual provisions under the heading “Security for Child and Spousal Support”. This section must be read in harmony with the rest of the Separation Agreement, including, notably, the subsections under the heading “Spousal Support”. The Separation Agreement also includes a provision that its terms will be binding upon the parties’ respective estates, as well as a general comprehensive mutual release provision (reserving the parties’ right to bring claims in relation to the Separation Agreement itself).

[37] The parties agree that the Separation Agreement is a domestic contract pursuant to Part IV of the Family Law Act, R.S.O. 1990, c. F.3[^fla], and “is to be construed and shall take effect as a SEPARATION AGREEMENT pursuant to section 54 of the Act ”.

[38] Section 7 of the Separation Agreement states as follows, in material part,

7. SPOUSAL SUPPORT

7.1 Commencing May 1, 2020, and on the first day of each month thereafter, the Husband shall pay the Wife spousal support in the amount of Five Thousand Five Hundred ($5500) Dollars which said payments shall be taxable to the Wife and tax deductible to the Husband.

7.4 Spousal support set out in 7.1 above shall continue without alteration until May 31, 2025, unless either party seeks a change based on a material change in circumstances only….For clarity, the parties agree spousal support may be reviewed by either party after May 31, 2025.

7.6 Neither the Wife nor the Husband has any obligation to inform the other of changes in either party’s financial position unless and until requested. Such request shall not be made more than once annually and shall be responded to within 30 days.

7.11 With respect to the indexing of spousal support, indexing shall be based on what the CPI is in each year, commencing June 2022. The amount shall be paid as additional monthly spousal support and shall be capped at $1,000 per year.

[39] Section 12 of the Separation Agreement provides in material part,

12. SECURITY FOR CHILD AND SPOUSAL SUPPORT

12.1 The Husband does not have any life insurance policies and it is not financially viable for either party to obtain a policy on his life. As such, in or to [sic] provide security for the Husband’s support obligations under this agreement, the parties agree that:

a. The Husband shall designate Laura as the beneficiary of his CIBC RRSP account number ***-***79 and his Investor’s Edge Tax Free Savings Account number ***-***28;

b. The Husband shall amend his Last Will and Testament to leave 30% of the residue of his estate to the Wife until January 1, 2030 after which it shall drop to 15%. If the Husband does not amend his Last Will and Testament as per this paragraph, he shall authorize a first charge against his estate in the Wife’s favour in accordance with these percentages;

c. In the event the Husband has created or will create any trusts to allow funds to flow to an individual other than the Wife and not form part of the Husband’s estate, the Wife shall be a beneficiary of at least 30% of such trust until January 1, 2030 after which it shall drop to 15%;

d. The parties agree the intention is that the Wife shall be entitled to a survivor benefit under the Husband’s pension plan. To this end, neither party shall take steps to amend or alter the Husband’s pension with York University in any way.

e. All of the Wife’s rights and remedies against the Husband’s estate are preserved, should she believe the quantum of funds received by virtue of this section is less then her spousal or child support entitlement.

f. The Husband will provide the Wife with a copy of his Will, as amended in accordance with this Agreement along with a copy of his instructions to the Trustees which will be appended to his amended Will.

Issues

[40] The issues to be determined are:

(a) Does the Separation Agreement prevent the Respondent from transferring assets, either directly or through survivorship, to Justin, with the result that the estate’s residue will be reduced? Related to this is the question of whether the Separation Agreement imposes any restrictions on how the Respondent may spend or deal with his money.

(b) If so, has the Respondent acted in a way that undermines the Applicant’s security under the Separation Agreement?

(c) If so, what is the Applicant’s remedy?

Analysis

[41] The terms of the Separation Agreement are not ambiguous. Neither party suggests otherwise. Accordingly, I will proceed to interpret the impugned provisions, based on the plain language used and within the context of the entire agreement, in a manner that reflects the parties’ intentions when they entered into this agreement.

[42] The Separation Agreement does not indicate how long spousal support will be payable. It also does not indicate a specific or finite amount of money intended to be secured.

[43] Rather, the Separation Agreement specifies the amount to be paid by way of spousal support on a monthly basis. It is apparent that spousal support is for an indefinite period unless and until changed by way of court order or agreement. This is based on s. 7.4, which provides that the specified monthly amount, subject to indexing, is not to be varied until at least May 31, 2025, and then only if by court order or agreement of the parties.

[44] Importantly, the Separation Agreement specifically references the unviability of obtaining a life insurance policy for the Respondent. On a plain reading of s. 12.1, it is clear that the security prescribed is in lieu of a life insurance policy.

[45] This is important for determining the parties’ intentions when they entered into this Separation Agreement. The security provisions put into place in lieu of a life insurance policy aimed, in part at least, at securing the Respondent’s future spousal support obligations. However, as in Turner[^turner], the security provisions are also stand-alone obligations of the Respondent. This is because, while the agreement specifically states that the security obligations are “to provide security for the Husband’s support obligations under this agreement”, the main form of security is the designation of the Applicant as a 30 percent beneficiary of the Respondent’s estate. That percentage drops to 15 percent if the Respondent lives beyond January 1, 2030.

[46] Hence, while the Respondent’s security commitment decreases after January 1, 2030, it is not altogether eliminated, irrespective of the duration of spousal support. Furthermore, the Applicant is entitled to the survivor benefit under the Respondent’s pension plan, and the Respondent agrees to designating the Applicant as the beneficiary of his RRSP and TFSA accounts. These too are stand-alone obligations relating to support obligations. They continue notwithstanding that the child support obligations under this agreement have terminated.

[47] As stated, Applicant will be entitled to a specified percentage of the residue of the Respondent’s estate, irrespective of what the outstanding spousal support may be at the date of the Respondent’s death. In other words, there is a risk that she may be overpaid, and there is a risk that she might be underpaid. It depends on which assets ultimately comprise the residue of the Respondent’s estate. For example, if the Applicant were to die 45 days after the Respondent but before January 1, 2030, she would still be entitled to 30 percent of the residue under the terms of the Separation Agreement.

[48] I will divide the impugned transactions into two categories: The Young Family Trust funds and the day-to-day bank accounts to which Justin has been added as a joint bank account holder.

The Young Family Trust

[49] Section 12.1.c is unambiguous on its face. The provision provides that if there are any pre-existing trusts that allow funds to flow to an individual other than the Applicant, and therefore will not form a part of the Respondent’s estate, the Applicant is to be designated as a 30 percent beneficiary of those trusts until January 1, 2030, after which her percentage drops to 15 percent beneficiary. This is consistent and harmonious with s. 12.1.b.

[50] The Young Family Trust was established prior to the execution of the Separation Agreement.

[51] It is uncontested that the Respondent did not designate the Applicant as a beneficiary of the Young Family Trust. Instead, the Respondent terminated the trust and gifted $300,000 from the proceeds to Justin after the Respondent received his diagnosis in 2023.

[52] It is clear that the parties’ intention when they entered into the Separation Agreement, based on a plain reading of s. 12.1.c, was that the Applicant was to have been made a beneficiary of the Young Family Trust in or around June 2020 or as soon as practicable thereafter. The Respondent did not do this.

[53] The Respondent submits that this is a moot issue because there is no longer a trust.

[54] I do not agree with the Respondent’s position.

[55] The Respondent clearly breached the Separation Agreement by failing to designate the Applicant as a beneficiary to the Young Family Trust. The Separation Agreement clearly identifies trusts as assets that are beyond the reach of the Respondent’s estate but a portion of which is to be preserved for the benefit of the Applicant. The Applicant was to receive 30 percent of the Young Family Trust’s assets for distribution when it terminated.

[56] The Applicant is entitled to a remedy for this breach. She is entitled to be put in the position she would have been in had the Separation Agreement been performed: Turner[^turner], at para. 18.

[57] In this case, it is not possible to put the Applicant in the position she would have been as a beneficiary because the trust no longer exists.

[58] Considering the family law context and the parties’ intention to provide the Applicant with security in the form of a beneficiary designation to any trusts created or to be created by the Respondent, the appropriate remedy is damages in the amount of this liquidated debt as a charge against the Respondent’s estate. Thus, 30 percent of the $300,000 distributed to Justin will be a first charge debt against the estate of the Respondent, which will rank ahead of the distribution of any bequests and the residue. This means that the Applicant will be compensated for her 30 percent entitlement, which should have crystallized but for the breach.

The Respondent’s Bank Accounts Jointly Held with Justin

[59] Section 12 of the Separation Agreement does not address the subject of jointly held bank accounts.

[60] I must determine whether it was the parties’ intention when they entered into the Separation Agreement that all the Respondent’s assets at the time were to fall into the residue of his estate and thus are captured by s. 12 of the Separation Agreement, based on the plain wording of the material provisions.

[61] The Separation Agreement specifies the Respondent is to designate the Applicant as the beneficiary of his CIBC RRSP account and his Investor’s Edge TSFA. He has done so. This provision demonstrates an intention to capture at least some of the Respondent’s assets that will not fall to the estate as security.

[62] The provision relating to existing or future trusts also reflects the parties’ intention to include at least the existing trusts as security, whether or not they would form a part of the residue of the estate. The Separation Agreement also does not stipulate a restriction in terms of the source of funding for any pre-existing or future trusts. In other words, if the Respondent were to create a trust in the future, comprised of his bank accounts or investment accounts, and designated someone other than the Applicant as a beneficiary, the Applicant would have to be added as a beneficiary of 30 percent of the trust’s assets and proceeds.

[63] However, other than the requirement to amend his last will and testament to designate the Applicant as a beneficiary with a fixed percentage entitlement to the residue, there is no mention of any of the other assets owned by the Respondent. This includes the impugned jointly held bank accounts and the large investment account.

[64] It is clear on a plain reading of s. 12, within the context of the Separation Agreement as a whole, that the parties’ intention was to provide security for the (now terminated) child support and (ongoing) spousal support, in part by designating the Applicant as a beneficiary of the Respondent’s estate.

[65] I find that the surrounding circumstances that existed at the time the parties executed the Separation Agreement included the fact that the parties knew the extent of the Respondent’s various bank accounts and investment accounts and the intention that Justin would be the other beneficiary of the estate.

[66] However, it is equally clear that the parties knew that the Respondent’s eventual residue was uncertain and that he would have living expenses which would erode the potential value of his estate. It must be remembered also that at the time the parties executed the Separation Agreement, the Respondent had not been diagnosed with a terminal illness.

[67] There is nothing in the Separation Agreement that requires the Respondent to maintain a minimum balance for estate purposes. There is no statement of expectation in that regard either.

[68] Furthermore, the agreement does not place restrictions on how the Respondent might choose to spend his money in the days and years following the execution of the Separation Agreement, provided he continues to make the monthly spousal support payments and implemented the appropriate designations of the Applicant as a 30 percent beneficiary to the estate and other specified assets.

[69] On the other hand, the parties’ mutual reasonable expectation, at the time of entry into the Separation Agreement, was that the large investment account would likely be the primary asset of the estate given its worth relative to the Respondent’s remaining assets. The evidence bears this out. As stated, the large investment account comprises about 88 percent of the Respondent’s current assets (excluding his income). It was also the parties’ reasonable expectation that all the Respondent’s remaining assets at the time of his death would form the residue of his estate, other than those assets which the Separation Agreement specifically addressed, i.e.: trusts, the RRSP, the TFSA, and the survivor’s pension benefit. In the case of trusts, the percentage to which the Applicant is entitled is the same percentage as stipulated for her status as a beneficiary of the estate. This is not coincidental.

[70] That said, and as stated, there is nothing in the Separation Agreement that binds the Respondent to structure his spending habits to ensure that the Applicant is guaranteed a minimum amount from the residue of his estate.

[71] However, the Respondent is bound by the duty of good faith performance of the Separation Agreement. He cannot intentionally deplete or remove the assets that would otherwise have formed a portion of the residue in the normal course if the result is to undermine the Applicant’s security entitlement, or otherwise frustrate s. 12.1.b, by inordinately reducing or eliminating the value of the residue of his eventual estate by gifting large sums of money to Justin, or structuring his assets so that they pass to Justin by survivorship.

[72] The notion that it was the parties’ mutual intention that the Respondent could undermine the contracted security by transferring the majority of his wealth – resting in his collective bank accounts and investment accounts (and notably the large investment account known to both parties) – to Justin in advance of his death is not reasonable when considered in the context of the purpose of the Separation Agreement. The purpose of the agreement was to resolve all matters arising from the marriage breakdown. This includes the Applicant’s entitlement to spousal support, as the Respondent acknowledged. If the Respondent was entitled to divert his wealth from the estate for reasons other than his personal living, medical, and care expenses, the Applicant would have bargained away her entitlement to spousal support in exchange for the RRSP, TFSA, and pensions survivor’s benefit. Neither of the parties suggest that this was their intention.

[73] The Respondent has already admitted that he added Justin to some of his smaller bank accounts, in part to remove the assets from the residue of the estate. This is an improper purpose and runs counter to his duty to perform the Separation Agreement in good faith. The fact that he terminated a trust contrary to the terms of the Separation Agreement, with the effect of reducing the Applicant’s entitlement to a percentage of those funds, also runs counter to his duty of good faith performance.

[74] The Respondent has explained these decisions within the context of his recent terminal cancer diagnosis and confirms that he will not take steps to remove the large investment account from the residue of the estate, nor will he deplete the capital of this account except as a last resort if he requires for living, care, and medical expenses. He currently draws a limited monthly amount from his large investment account for his personal expenses, as he is entitled.

[75] The Respondent deposes that he will voluntarily undertake some measures to “comfort” the Applicant and reassure her that he will not further deplete the assets available for the residue of the estate. These measures are as follows:

(a) He will immediately roll over his RRSP to the Applicant;

(b) If possible, he will make the Applicant’s beneficiary status on his TFSA irrevocable;

(c) He will undertake not to access the existing principal of his large investment account without the Applicant’s prior written consent or court order or unless there is a forced share of holdings or major medical expenses; and

(d) He would, if necessary, remove Justin’s name from his other relatively small bank accounts so that whatever amount is left at the time of his death will form part of the residue of his estate.

[76] However, in his affidavit, the Respondent prefaces these concessions with the caveat that he is not prepared to restrict his ability to spend his own money as he sees fit, “which includes giving money to Justin”.

[77] The current amounts in the now jointly held bank accounts with Justin are:

(a) The savings account: $115,920.71

(b) The small investment account: $98,185.95

(c) The chequing and apartment account: $8,520.36 and $30,731.60

Total: $253,358.62

[78] The current amount in the TFSA is $104,468.84.

[79] The current amount in the RRSP is $121,000.

[80] The current amount in the large investment account is $3,548,194.29.

[81] The Applicant’s response is that she does not object to the funds in the small investment account passing directly to Justin by right of survivorship provided that 30 percent of the value of that account outstanding at date of the Respondent’s death be either attributed to the estate or re-deposited to his estate. Thus, she submits, she would still receive her 30 percent entitlement.

[82] The Applicant also believes that the Respondent sold Rogers shares from his large investment account of his own volition, that he sold them for more than the $80,000 he claimed, and he placed the proceeds into a joint account held with Justin. However, she deposed that if the Respondent’s characterization of this transaction in his affidavit is true and these proceeds have been used for his own expenses, she does not object. She wishes to ensure that the funds in the large investment account remaining at the date of the Respondent’s death be fully included in the estate and therefore subject to her 30 percent entitlement under the Separation Agreement.

[83] She does not address the fact that the Respondent has recently executed a new will that designates her as a one-third beneficiary of the residue of his estate which is slightly greater than her entitlement under the Separation Agreement.

[84] It seems clear that the Applicant’s main concern is that the large investment account not be depleted for the improper purpose of reducing her security under the Separation Agreement, such as by gifting funds to Justin or making him a co-account holder.

[85] The Applicant’s concern is understandable in light of the Respondent terminating the Young Family Trust and adding Justin as joint account holder to his smaller bank and investment accounts, combined with the Respondent’s admissions that he wishes to exclude these assets from the residue of his estate as one of the reasons for his actions.

[86] The difficulty with the Applicant’s submission is that, with respect to the impugned bank account and small investment account, she is only entitled to 30 percent of what is remaining in those accounts as at the date of the Respondent’s death – not today’s value.

[87] The Respondent, however, is prepared to make voluntary concessions which will protect the Applicant’s security interest in the residue of his estate. Furthermore, his explanations are understandable in light of his recent terminal cancer diagnosis, even if they do not provide a lawful excuse for departing from the Separation Agreement.

[88] The Separation Agreement was silent on the issue of any minimum guaranteed monetary entitlement for the Applicant upon the Respondent’s death. By framing the security entitlement in terms of percentage of the residue owed to the Applicant as a beneficiary of the estate, combined with transparency in the Respondent’s last will and testament, the Applicant and Respondent bargained that the Applicant may have an upside or suffer a downside to her future spousal support payments. Simply put, there is no guarantee provided in the Separation Agreement as to what the value of the Respondent’s estate will be upon his decease.

[89] It is worth repeating that when the parties entered the Separation Agreement, the Respondent had not been diagnosed with terminal cancer.

[90] That said, the surrounding circumstances at the time of execution were that the Applicant had knowledge of the Respondent’s assets, including the large investment account that derived from the Respondent’s inheritance. The parties’ common intention was for there to be adequate value in the estate to meet spousal support obligations should the Respondent predecease the Applicant. The parties also knew, at the time of entry into the Separation Agreement, that Justin would be the other beneficiary of the Respondent’s estate. This was confirmed through the production of the Respondent’s last will and testament designating Justin as a 70 percent (now 2/3rds) beneficiary.

[91] The Applicant’s financial risk in this type of structure was hedged by the commitment to make her a 30 percent beneficiary of the Young Family Trust (and/or any future trusts) and her entitlement to the survivor’s benefit in the Respondent’s pension. In addition, she is the sole beneficiary of the Respondent’s RRSP and TFSA, though there was no guarantee as to what balances in those accounts, if any, would remain at the time of the Respondent’s death.

[92] Her risk is further mitigated by the provision in the Separation Agreement under s. 12 reserving her right to sue the estate in the event she believes that the Respondent did not meet his spousal support obligations under the Separation Agreement. [^1] Were she to do this and receive a judgment in her favour, it would constitute a debt against the estate that would take preference over the bequests. If she provided timely notice of her claim to the trustee (now Justin), then he could not dissipate the estate assets without attracting personal liability. He is the only other beneficiary of the estate.

[93] Furthermore, the Separation Agreement makes it clear that the security provisions are in lieu of a life insurance policy. One common purpose of insurance policies in these types of marital breakdown situations is to provide a form of security for future spousal support. As discussed above, an insurance policy can also be a stand-alone obligation not tied to only providing security for whatever spousal support obligations are owed as of the time of the payor (former) spouse’s death. The Separation Agreement’s security provisions reflect stand-alone obligations that are not limited or reduced to a mathematical calculation of the spousal support owing to the Applicant at the time of the Respondent’s death, notwithstanding the fact it has specified the monthly indexed amount of such payments. This is because the Separation Agreement does not provide a specific duration for payment and caps the Applicant’s entitlement to a percentage of the residue, whatever that residue may be at the time of death.

[94] Interpreting the security measures as stand-alone obligations is supported by the fact that all the obligations are fixed, or in the case of the residue, reduced from 30 percent to 15 percent after January 1, 2030. The latter form of security remains a fixed obligation but reflects the reality that by this date, the Respondent would have paid additional spousal support. The parties always understood that Justin would be the other beneficiary and that his proportionate share would increase when the Applicant’s share decreased.

[95] The Applicant has demonstrated that the Respondent has engaged in conduct which compromises her security entitlement at his death by, in effect, crediting Justin with a larger percentage of the Respondent’s wealth than was reasonably expected at the time of entry into the Separation Agreement. She has also taken the position that the Respondent should be able to give money to Justin as he sees fit while he is alive provided her position is the not compromised. Accordingly, the Applicant is entitled to a remedy to deal with the past transgressions and protect her legitimate security entitlement in the future, while recognizing the Respondent’s right to spend his own money in a way that does not frustrate the security provisions of the Separation Agreement.

[96] The Applicant’s concerns arose because of the Respondent’s lack of transparency about the transactions he performed for Justin’s benefit and to the detriment of the Applicant (contrary to the contractual obligations in the Separation Agreement). With this in mind, and having regard to the measures the Respondent has volunteered to undertake as well as the Applicant’s concessions, I turn to the appropriate remedy.

Remedy

[97] The Applicant has proven that the Respondent has improperly and unwarrantedly depleted the Young Family Trust. The Respondent improperly added Justin as a co-holder of three of his accounts – the chequing, the savings account, and the apartment account, and designated the small investment account as being held by him in trust for Justin – thus removing them from the residue of his eventual estate. However, I am not satisfied that the Respondent has transferred funds from those accounts to Justin or otherwise made disbursements from those accounts with the intent or effect of depleting the assets available at the time of his death. I am also not satisfied that the Respondent has withdrawn, removed, or transferred funds from his RRSP, TFSA, or his large investment account for improper purposes.

[98] In my view, a pragmatic approach is warranted. This approach must provide safeguards for the Applicant without placing undue restrictions on the Respondent’s ability to spend his money legitimately and for proper purposes. The approach is somewhat along the lines that the Respondent has suggested and reflects the need for certainty of the terms of the Separation Agreement within the context of the family dynamics engaging the interests of the parties and their son.

[99] It is clear that the Applicant’s main concern, aside from the Young Family Trust, was the preservation of the capital of the large investment account. It is also clear that it was the parties’ mutual intention that the large investment account be the most significant asset, by far, of the Respondent’s estate, even though the Separation Agreement does not reference it by name, and that Justin will ultimately benefit from a large percentage of the Respondent’s estate as both parties knew when they entered into the Separation Agreement.

[100] More transparency by the Respondent is required, as is a clear direction that he cannot continue to transfer assets to Justin to reduce the ultimate residue of his estate, to the detriment of the Applicant.

[101] However, in light of my ruling that damages in an amount equivalent to 30 percent of the Young Family Trust’s proceeds be a first charge on the residue of the estate in favour of the Applicant, it is not necessary to require Justin to return any of those funds. The Applicant’s 30 percent share of those disbursed trust proceeds will constitute a debt on the estate, payable before the satisfaction of the bequests (and distribution of the residue) under the will. That way, the Applicant is made whole, and the Respondent can have the satisfaction of Justin enjoying the benefit of those funds now (somewhat akin to, but not, an advance on his inheritance). This result should help achieve family harmony.

[102] I am satisfied under s. 40 of the Family Law Act[^fla] that there should be an order restraining the depletion of the Respondent’s property in a manner that would impair or defeat the Applicant’s spousal support and security claim under Part III of that Act by transferring by right of survivorship or otherwise, or gifting, funds and assets to Justin. The Respondent has demonstrated that he feels entitled to act, and has acted, in a way that will favour Justin and improperly reduce the asset base that would otherwise constitute the residue of his estate. The parties’ intention was not for the Respondent’s assets to be transferred to Justin by way of survivorship or gift to remove them from the residue of the estate. This is not to be confused with the legitimate right of the Respondent to spend his money on his own personal expenses and does not mean that some of the assets will have been fully spent by the Respondent for his own legitimate personal expenses by the time of his death.

[103] As such, the Applicant has persuaded me that there is a real risk that the Respondent will continue to remove assets from the reach of his estate by gifting them to Justin or otherwise designating Justin as co-owner of various accounts or a trust beneficiary to the exclusion of the Applicant. This risk is based on the Respondent’s past conduct and his evidence that he feels he should be able to give money to Justin as he sees fit: Hekmati v. Oliver, 2012 ONSC 3932[^hekmati], at paras. 12-13.

[104] Accordingly, the following orders are made:

(a) The equivalent of 30 percent of the funds distributed to Justin from the termination of the Young Family Trust shall constitute a first charge and debt on the Respondent’s estate in favour of the Applicant, to be paid before the distribution of the estate’s residue to the beneficiaries (the Applicant and Justin).

(b) The Respondent is enjoined from accessing the existing principal of his large investment account without the Applicant’s prior written consent or court order or unless there is a forced share of holdings or major medical or other personal living expenses. The Respondent will provide the Applicant with a minimum of ten days written notice of his intention to access his principal. He will advise the purpose of accessing it and the amount to be withdrawn. This is to permit the Applicant to exercise any remedies she may deem appropriate. This order does not restrain the Respondent from accessing the revenue generated by the large investment account.

(c) The Respondent will transfer his RRSP to the Applicant by way of spousal rollover should she request this.

(d) The Respondent will make the Applicant the irrevocable beneficiary of his TFSA if that designation is possible.

(e) The Respondent will immediately remove Justin as a joint account holder from all the Respondent’s accounts but need not remove Justin as the beneficiary of the small investment account or as a joint holder. Any amount that remains in the small investment account as of the date of the Respondent’s death, however, will be attributed to the value of the residue of the estate for purposes of calculating the Applicant’s percentage share of the residue. [^2]

Costs

[105] In light of the outcome of this motion, I would entertain an order of no costs. However, if the parties do not agree, I will accept a cost outline and submissions from the Applicant within ten days, and a cost outline and responding submissions from the Respondent within ten days thereafter, to be sent by email to my judicial assistant. The submissions shall not exceed three pages double spaced from each party.

Justice S. Vella

Released: April 16, 2024

Footnotes

[^1]: See Dagg v. Cameron Estate, 2017 ONCA 366, 136 O.R. (3d) 1[^dagg], regarding the status of a former spouse as a creditor of the estate of the payor spouse under s. 72 of the Succession Law Reform Act, R.S.O. 1990, c. S.26[^slra], to claw back assets into an estate to satisfy spousal support obligations and to structure their security for support obligations as a standalone benefit under a separation agreement. [^2]: The orders pronounced at paragraph 104 (b) to (d) were offered by the Respondent in his affidavit sworn February 12, 2024 at paragraph 49, save for the additional requirement of written notice in paragraph 104(b), and, with respect to 104(e), the Applicant’s concession regarding the small investment account at paragraph 27 of her affidavit sworn February 14, 2024.

[^sattva]: Sattva Capital Corp v. Creston Moly Corporation, 2014 SCC 53, [2014] 2 S.C.R. 633 [^macdougall]: MacDougall v. MacDougall (2005), 262 D.L.R. (4th) 120 (Ont. CA) [^consolidated]: Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888 [^checo]: B.G. Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12 [^turner]: Turner v. DiDonato, 2009 ONCA 235, 95 O.R. (3d) 147 [^bhasin]: Bhasin v. Hyrnew, 2014 SCC 71, [2014] 3 S.C.R. 494 [^fla]: Family Law Act, R.S.O. 1990, c. F.3 [^hekmati]: Hekmati v. Oliver, 2012 ONSC 3932 [^dagg]: Dagg v. Cameron Estate, 2017 ONCA 366, 136 O.R. (3d) 1 [^slra]: Succession Law Reform Act, R.S.O. 1990, c. S.26