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DEPENDANTS' RELIEF LEGISLATION - Legal and moral obligations of deceased

Tuesday, June 06, 2017 @ 8:36 AM  

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Appeal by the deceased’s former wife, Anastasia, from the dismissal of her appeal from a decision that the proceeds of an insurance policy were included in the deceased’s estate and available to satisfy dependants’ claims. Anastasia married the deceased, Stephen, in 2003. They had two children. During the marriage, Stephen took out a life insurance policy and listed Anastasia as the beneficiary. After Stephen and Anastasia separated, a consent order was made which provided that Stephen was to pay interim child and spousal support and maintain Anastasia as the irrevocable beneficiary on any life insurance policy. Following separation, Stephen began another relationship. A child was born of that relationship three months after Stephen’s death. Prior to his death, he executed a will and an insurance title form. In each document, the beneficiary designation provided for 10 per cent to Anastasia, 17 per cent to his son, 19.4 per cent to his daughter and 53.6 per cent to his new girlfriend. When Anastasia learned of the change in designation, she successfully brought a motion to restore her designation under the policy. Following Stephen’s death, his new partner applied under the Succession Law Reform Act (SLRA) for dependant’s relief. Included in her application was a request for a declaration that s. 72 of the SLRA applied to the insurance proceeds such that they formed part of the estate. The trial judge concluded that Stephen "owned" the policy, that Anastasia did not have "creditor rights" within the meaning of the SLRA and that the consent underlying the order did not entitle her to an amount equal to the death benefit under the law of contract. The Divisional court dismissed Anastasia’s appeal, concluding that the trial judge correctly determined that Stephen owned the policy and that Anastasia’s irrevocable beneficiary designation did not give her creditor rights because she had not established a security interest in the policy.

HELD: Appeal allowed. The Divisional Court erred in holding that Anastasia did not fall within s. 72(7) of the SLRA unless she was a secured creditor with a security interest in the policy. Nothing in the language of s. 72(7) applied only to claims by secured creditors. Where, at the time of his death, a spousal or child support payor owned a policy of insurance that was the subject of a court order requiring the designation of the support recipient as the irrevocable beneficiary of the policy, s. 72(7) protected from the claw back of s. 72(1) that part of a policy’s proceeds needed to satisfy the deceased’s obligations to the spousal and child support recipients. As a result, Anastasia was entitled to the policy’s proceeds to the extent of Stephen’s support obligations, past and future, existing at the time of his death.

Dagg v. Cameron Estate, [2017] O.J. No. 2259, Ontario Court of Appeal, D.H. Doherty, D.M. Brown and B. Miller JJ.A., May 5, 2017. Digest No. TLD-June52017004