



COURT OF APPEAL FOR ONTARIO

CITATION: Dagg v. Cameron Estate, 2017 ONCA 366

DATE: 20170505

DOCKET: C62425

Doherty, Brown and Miller JJ.A.

BETWEEN

Laquita K. Evangeline Dagg and James Stephen
    Cameron, by his Litigation Guardian, Laquita K. Evangeline Dagg

Applicants

(Respondents)

and

Andrew Felker, in his capacity as Litigation
    Administrator for the Estate of Stephen Douglas Cameron,
Kimberley Anastasia
    Cameron, Derek Alexander Hollinger Cameron, by his Litigation Guardian
    Kimberley Anastasia Cameron, and Meaghen Elizabeth Hollinger Cameron, by her
    Litigation Guardian, Kimberley Anastasia Cameron


Respondents

(
Appellants
)

Philip M. Epstein, Q.C., Aaron M. Franks and Michael H.
    Tweyman, for the appellants

C. David Freedman, for the respondents

Heard: January 23, 2017

On
    appeal from the order of the Divisional Court (Justices David Aston, Katherine
    E. Swinton and Lawrence A. Pattillo), dated March 31, 2016, with reasons
    reported 2016 ONSC 1892, affirming the order of Justice Peter A. Douglas of the
    Superior Court of Justice, dated October 2, 2015, with reasons reported at 2015
    ONSC 6134.

Brown
    J.A.:

I.

Overview

[1]

At issue on this appeal is the interpretation of the so-called claw back
    provision found in s. 72 of the Part V of the
Succession Law Reform Act
,
    R.S.O. 1990, c. S.26 (the 
SLRA
), a provision designed to expand the
    capital value of a deceaseds estate available to satisfy any dependants
    support order made under Part V. In particular, s. 72(1)(f) of the
SLRA
operates to claw back into the net estate of a deceased any amount payable
    under a policy of insurance effected on the life of the deceased and owned by
    him or her.

[2]

Section 72(1)(f) has implications for other dependants of a deceased
    who, at the time of his death, were receiving spousal or child support pursuant
    to orders made under family law legislation. This is because both the
Family
    Law Act
, R.S.O. 1990, c. F.3 and
Divorce Act
, R.S.C. 1985, c. 3
    (2nd Supp.) authorize a court to require a payor of spousal and child support
    to designate a support recipient as the irrevocable beneficiary of a policy of
    insurance on his life.

[3]

As a result, upon the death of a support payor, competing claims may arise
    to the proceeds of a life insurance policy he owned: a claim asserted by a
    spousal or child support recipient who, by court order, was designated the
    irrevocable beneficiary of the policy; and a claim advanced by a different dependant
    under Part V of the
SLRA
.

[4]

The single issue raised by this appeal concerns the rights of a spousal
    or child support recipient to a life insurance policys proceeds under s. 72(7)
    of the
SLRA
as a creditor of the deceased in any transaction with respect
    to which a creditor has rights. How s. 72(7) operates in combination with the
    claw back in s. 72(1)(f) lies at the heart of this appeal. Those sub-sections
    state:

Value of certain transactions
    deemed part of estate

72.
(1) Subject
    to section 71, for the purpose of this Part, the capital value of the following
    transactions effected by a deceased before his or her death, whether
    benefitting his or her dependant or any other person, shall be included as
    testamentary dispositions as of the date of the death of the deceased and shall
    be deemed to be part of his or her net estate for purposes of ascertaining the
    value of his or her estate, and being available to be charged for payment by an
    order under clause 63 (2) (f),



(f) any amount payable under a
    policy of insurance effected on the life of the deceased and owned by him or
    her;



Rights of Creditor

72. (7) This section does not affect
    the rights of creditors of the deceased in any transaction with respect to
    which a creditor has rights.

[5]

The novel issue raised by this appeal can be stated in the following
    way:

Where a support payor owns a life insurance policy and has been
    required by court order to name the spousal or child support recipient as the
    irrevocable beneficiary of the policy, upon the payors death what rights does
    the support recipient have to the policys proceeds in the face of a competing
    claim by another dependant of the deceased brought under Part V of the
SLRA
?


[6]

I conclude that s. 72(7) of the
SLRA
excludes from the claw back
    of s. 72(1)(f) the amount of policys proceeds required to satisfy the
    deceaseds court-ordered spousal or child support obligations  past and future
     existing at the time of his death where, by court order, the support
    recipient has been designated as the irrevocable beneficiary under the policy.

II.

Facts

The relationship between Stephen and Anastasia

[7]

The appellant, Anastasia Cameron, and Stephen Cameron married in
    September 2003. They had two children  Derek, born in 2005, and Meaghan, born
    in 2007.

[8]

In 2010, Stephen took out a $1 million policy of insurance on his life from
    Canada Life Assurance Co. (the Policy) in which he named Anastasia as the
    beneficiary. Stephen was the owner of the Policy.

[9]

Stephen and Anastasia separated on January 13, 2012. That September,
    Anastasia commenced a matrimonial proceeding against Stephen.

[10]

Both parties attended a case conference on February 27, 2013 before
    Rowsell J., who made a consent order requiring Stephen to pay interim monthly
    child support of $2,230 and interim monthly spousal support of $3,000.
    Paragraph 15 of the Rowsell Order stated: Stephen shall maintain Anastasia as
    irrevocable beneficiary on any life insurance policy.

[11]

The amounts of interim support were varied by a July 5, 2013 consent
    order made by McCarthy J. so that Stephen was required to pay monthly child
    support of $2,000 and monthly spousal support of $2,500. Paragraph 10 of the
    McCarthy Order stated: All other terms of the order of Justice Rowsell dated
    February 27, 2013 shall remain in full force and effect.

The relationship between Stephen and Evangeline

[12]

Stephen had known the respondent, Evangeline Dagg, before his marriage
    to Anastasia. He resumed contact with her following his January 2012
    separation.

[13]

At that time, Evangeline was living in Bellingham, Washington. In July 2012,
    Stephen moved to British Columbia and frequently travelled to Bellingham to be
    with Evangeline.

[14]

By the time of the McCarthy Order in July 2013, Evangeline had told
    Stephen she was pregnant. James was born in February 2014, about three months
    after Stephens death.

Stephen's last months

[15]

In early November 2013 Stephen was diagnosed with cancer.

[16]

On November 11, 2013 Stephen executed a Last Will and Testament and a
    Canada Life Title form. Each document amended the beneficiary designation on
    the Policy as follows: (i) Anastasia, 10%; (ii) Derek Cameron, 17%; (iii)
    Meaghan Cameron, 19.4%; and (iv) Evangeline, 53.6%.

[17]

Anastasia learned of Stephens change of beneficiary. While Stephen was
    in the hospital, Anastasia brought a motion seeking to restore her designation
    as sole beneficiary under the Policy. In her affidavit in support of the
    motion, Anastasia deposed that Stephen was close to $18,000 in arrears on his
    support obligations. She also stated:

In or around 2010, while the parties were still together, I
    started looking for life insurance options. We had a policy in place but the
    face value was not for very much. I decided that, to ensure both the children
    and I were looked after in case anything happened to Mr. Cameron, we should
    obtain a policy with a much higher value.

Attached as Exhibit A is the policy we ended up purchasing

For a long time, I maintained this policy in force, by paying
    the premiums and ensuring it was kept current. This policy was specifically
    meant for me and the children, not for anyone else. It was meant to secure our
    financial future in the event Mr. Cameron could not provide financially due to
    death.

I should observe that the
    agreed statement of facts filed by the parties at
the
trial
    did not stipulate Anastasia had paid the premiums. Nor did it include
    Anastasias evidence about the Policys purpose.

[18]

Nelson J. heard Anastasias motion on November 20, 2013. He found that
    Stephen was in breach of the Rowsell Order. His order provided, in part:

1. The Canada Life Assurance Company is directed to amend the
    beneficiary designation
nunc pro tunc
to the date of any recent
    beneficiary change  for insurance on the life of the Respondent, Stephen D.
    Cameron, such that the Applicant, Kimberley Anastasia Cameron aka Kimberley
    Anastasia Smith  is named sole (100%) and irrevocable beneficiary on said
    policy.



3. Stephen D. Cameron shall maintain the above policy of
    insurance in force and shall not allow it to lapse.

[19]

Canada Life made the ordered change, effective November 20, 2013.

[20]

Stephen died three days later, on November 23, 2013, at the age of 48.
    He left an insolvent estate.

Evangeline's
SLRA
application

[21]

In March 2014, Evangeline applied under Part V of the
SLRA
for
    dependants relief. Included in her application was a request for a declaration
    that s. 72 of the
SLRA
applied to the $1 million in proceeds from the
    Policy, the value of which form part of the Estate and is available to satisfy
    the claim for support.

[22]

The application ultimately proceeded as a trial of issues. Anastasia
    asserted a counter-claim seeking: (i) judgment of $1 million against Stephens
    estate pursuant to both the contracts underlying the Rowsell and McCarthy
    Orders, as well as the Orders themselves; (ii) a declaration the Policy not
    form part of Stephens net estate under s. 72 of the
SLRA
; or,
    alternatively (iii) a declaration that Anastasia was a creditor of the estate
    with respect to the Policy and therefore its proceeds should not form part of
    Stephens estate by operation of s. 72(7) of the
SLRA
.

[23]

The parties agreed that Anastasia, Derek, Meaghan, and James were
    dependants of Stephens estate and he did not make adequate provision for their
    support. Whether Evangeline was a dependant of his estate was an issue for
    trial.

[24]

No witnesses were called at the trial. It proceeded upon the basis of an
    Agreed Statement of Facts and a Joint Compendium of Documents.

The trial decision

[25]

The trial judge determined Evangeline was a spouse of Stephen within
    the meaning of s. 57 of the
SLRA
; he could not determine whether
    Evangeline was a dependant given the state of the record.

[26]

The trial judge concluded the Policy formed part of Stephens estate,
    finding that Stephen was the owner of the Policy at the time of his death. He
    went on to find that since Anastasia had no security interest in the life
    insurance policy, she cannot be characterized as a creditor within the
    meaning of section 72(7) of the
SLRA
.

The decision of the Divisional Court

[27]

The Divisional Court dismissed Anastasias appeal, concluding the trial
    judge correctly determined Stephen owned the Policy. The court went on to hold
    that Anastasias irrevocable beneficiary designation did not give her  creditor
    rights in a transaction within the meaning of s. 72(7) of the
SLRA
notwithstanding the consent orders because she had not demonstrated she had a
    security interest in the Policy.

III.

Positions of the parties on appeal

[28]

Anastasias position is that the entire $1 million in life insurance
    proceeds belong to her, irrespective of her actual entitlement to support under
    the Rowsell and McCarthy Orders at the time of Stephens death. She argues, in
    effect, that the beneficiary designation term contained in the Rowsell Order ousts
    the operation of the dependants support provisions in Part V of the
SLRA
,
    in particular s. 72(1)(f).

[29]

Evangeline argues that a proper interpretation of s. 72(7) of the
SLRA
would see Anastasia receive an amount of the Policys proceeds sufficient to
    satisfy Stephens support obligations under the Rowsell and McCarthy Orders,
    subject to the ability of his estate trustee to move to reduce the amount of
    those support obligations.

IV.

The mootness issue

[30]

After Anastasia was granted leave to appeal from the Divisional Court
    order, the parties settled this appeal. Nonetheless, the parties urge this
    court to allow the appeal to proceed, arguing the Divisional Courts decision
    has broad implications for family and estates law in Ontario. At the hearing,
    we reserved our decision on whether to deal with the appeal notwithstanding its
    mootness.

The general principles

[31]

Where, as here, the dispute between the parties has disappeared, the
    court still retains the discretion to proceed to hear the merits of the appeal:
Borowski v. Attorney General for Canada
, [1989] 1 S.C.R. 342, at p. 353.

[32]

The exercise of that discretion is guided by a consideration of the
    presence or absence of the three rationales underpinning the mootness doctrine:
    (i) whether the issues can be well and fully argued by parties who have a stake
    in the outcome; (ii) the concern for judicial economy; and (iii) the need for
    the court to remain alive to the proper limits of its law-making function in
    order to avoid intrusions into the role of the legislative branch:
Borowski
,
    at pp. 358-63;
Ontario Provincial Police Commissioner v. Mosher
, 2015
    ONCA 722, 330 C.C.C. (3d) 149,

at paras. 31-32. The
    interplay amongst the three rationales was described in
Borowski
at p.
    363:

In exercising its discretion in
    an appeal which is moot, the Court should consider the extent to which each of
    the three basic rationalia for enforcement of the mootness doctrine is present.
    This is not to suggest that it is a mechanical process. The principles
    identified above may not all support the same conclusion. The presence of one
    or two of the factors may be overborne by the absence of the third, and vice
    versa.

Application of the principles

[33]

Applying these criteria to this appeal, I have no concern about the
    absence of an adversarial relationship. Counsel for both parties argued the
    appeal with the same vigour as if the matter were not moot.

[34]

Regarding the factor of judicial economy, I am persuaded that although this
    is a case capable of repetition, it is one that could be evasive of review by
    this court given the costly three-stage appeal process involved:
Borowski
,
    at pp. 360, 364;
Mosher
, at para. 34.

[35]

As well, there exists a strong public interest in the resolution of the
    legal issues raised by this appeal:
Tamil Co-operative Homes Inc. v.
    Arulappah
(2000), 49 O.R. (3d) 566 (C.A.), at paras. 25 and 26. The
    parties point to the long-standing practice in this province of including in
    separation agreements and court spousal and child support orders provisions requiring
    a payor spouse to maintain life insurance coverage and name the recipient
    spouse and children as beneficiaries under the policy. The effect of the
    Divisional Courts decision is to expose such life insurance proceeds to
    competing claims under the
SLRA
from other children and former or
    subsequent spouses of the deceased payor. The implications of the Divisional
    Court decision will be felt well beyond the boundaries of this case.

[36]

Finally, the parties are not asking the court to decide an abstract
    question and thereby intrude improperly into the legislative sphere:
Borowski
,
    at p. 365. The issues raised by the parties are grounded in the specific facts
    in the record. The appeal was fully argued by interested parties based on a
    complete record, which puts the court in a position to make a fully informed
    decision on the issues of public importance raised by the appeals.

[37]

For these reasons, I would exercise our discretion to determine the
    issues raised in the appeal despite its mootness.

V.

Structure of the analysis

[38]

As mentioned, this appeal raises a single issue: Where a support payor
    owns a life insurance policy and has been required by court order to name the spousal
    or child support recipient as the irrevocable beneficiary of the policy, upon
    the payors death what rights does the support recipient have to the policys
    proceeds in the face of a competing claim by another dependant of the deceased
    brought under Part V of the
SLRA
?
More specifically, what rights does the support recipient have to the policys
    proceeds under s. 72(7) of the
SLRA
as a creditor of the deceased in
    any transaction with respect to which a creditor has rights?

[39]

The modern approach to statutory interpretation requires the court to
    read the words of a provision in their entire context and in their grammatical
    and ordinary sense, harmoniously with the scheme of the Act, the object of the
    Act, and the intention of Parliament:
Bell ExpressVu Limited Partnership v.
    Rex
, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26. Since it is the
    combined operation of sections 72(1)(f) and 72(7) of the
SLRA
that lies
    at the heart of this appeal, I will begin with an analysis of those two
    sections in the context of the scheme of the
SLRA
as a whole. Next, I
    will review the operation of the provisions of the
Family Law Act
and
Divorce
    Act
that enable a court to deal with a payors insurance policies when making
    spousal and child support orders. I will then review existing case law on s.72
    of the

SLRA
,

before applying all of these considerations
    to the facts of this case.

VI.

The statutory scheme

[40]

Where a deceased person has not made adequate provision for the proper
    support of his dependants, Part V of the
SLRA
enables a dependant to
    apply to court for an order that such provision as it considers adequate be
    made out of the estate of the deceased for the proper support of the
    dependants: s. 58(1). In addition to identifying who qualifies as a
    dependant (s. 57(1)) and how a court should determine the amount and duration
    of any dependants support order (s. 62), Part V also stipulates that a
    dependant can look beyond the assets of the deceaseds immediate estate to
    secure any support order she might obtain.

[41]

Section 72 of the
SLRA
creates a mechanism by which certain
    assets dealt with by a deceased before his death can be clawed back into his
    estate and be made available to be charged for payment of a dependants
    support order. Section 72(1) states:

72.
(1) Subject
    to section 71, for the purpose of this Part, the capital value of the following
    transactions effected by a deceased before his or her death, whether
    benefitting his or her dependant or any other person, shall be included as
    testamentary dispositions as of the date of the death of the deceased and shall
    be deemed to be part of his or her net estate for purposes of ascertaining the
    value of his or her estate, and being available to be charged for payment by an
    order under clause 63 (2) (f),

(a) gifts mortis causa;

(b) money deposited, together with
    interest thereon, in an account in the name of the deceased in trust for
    another or others with any bank, savings office, credit union or trust
    corporation, and remaining on deposit at the date of the death of the deceased;

(c) money deposited, together with
    interest thereon, in an account in the name of the deceased and another person
    or persons and payable on death under the terms of the deposit or by operation
    of law to the survivor or survivors of those persons with any bank, savings
    office, credit union or trust corporation, and remaining on deposit at the date
    of the death of the deceased;

(d) any disposition of property made
    by a deceased whereby property is held at the date of his or her death by the
    deceased and another as joint tenants;

(e) any disposition of property made
    by the deceased in trust or otherwise, to the extent that the deceased at the
    date of his or her death retained, either alone or in conjunction with another
    person or persons by the express provisions of the disposing instrument, a
    power to revoke such disposition, or a power to consume, invoke or dispose of
    the principal thereof, but the provisions of this clause do not affect the
    right of any income beneficiary to the income accrued and undistributed at the
    date of the death of the deceased;

(f)
any amount payable under a
    policy of insurance effected on the life of the deceased and owned by him or
    her
;

(f.1) any amount payable on the
    death of the deceased under a policy of group insurance; and

(g) any amount payable under a
    designation of beneficiary under Part III. [Emphasis added.]

[42]

Commentators have described s. 72 as an extremely powerful provision
    containing Draconian measures: Robert M. Halpern,
Property Rights and
    Obligations under Ontario Family Law (Canada Law Book)
(Toronto: Thomson
    Reuters Canada Ltd., 2012), at p. 161; A. H. Oosterhoff, Reform of the Law of
    Succession in Ontario (1976-77) 3 E. & T.Q. 191, at p. 277. The sections
    reach is broad. Professor Oosterhoff observed, at pp. 227-8, that [m]any of
    the [transactions]may have been made for very excellent reasons not at all
    related to an attempt to denude oneself of ones estate during ones lifetime
    for the purpose of avoiding ones obligations to ones dependants.

[43]

The facially broad scope of s. 72(1) is subject to several statutory
    limitations:

(i)

any dependant claiming
    under Part V of the
SLRA
bears the burden of establishing that the funds
    or property, or any portion thereof, belonged to the deceased: s. 72(3);

(ii)

the capital value of the
    transactions referred to in ss. 72(1) (b), (c) and (d) are included in the net
    estate of the deceased only to the extent that the funds on deposit were the
    property of the deceased immediately before the deposit or the consideration
    for the property held as joint tenants was furnished by the deceased: s.
    72(2); and,

(iii)

section 71 provides
that [w]here a deceased, (a) has, in his or
    her lifetime, in good faith and for valuable consideration, entered into a
    contract to devise or bequeath any property, and (b) has by his or her will
    devised or bequeathed that property in accordance with the provisions of the
    contract, the property is not liable to the provisions of an order made under
    this Part except to the extent that the value of the property in the opinion of
    the court exceeds the consideration therefor.

[44]

Finally, there is s. 72(7), which is central to this appeal. It states:
    
This section does not affect the rights of creditors of the
    deceased in any transaction with respect to which a creditor has rights.

VII.

The purpose and effect of s. 72 of the
SLRA

The section's legislative history

[45]

What mischief is s. 72 designed to address? The section traces its
    origins to discussions in the 1960s and 1970s by the Conference of
    Commissioners on Uniformity of Legislation in Canada (the Conference). The
    Conference developed model uniform dependants relief legislation.

[46]

The Proceedings of the Conferences 48
th
annual meeting in
    1966 identified a problem with the then existing dependants relief statutes,
    at p. 103: [U]nder this legislation there is no obstacle to a testator
    denuding himself of all or the bulk of his assets so that there is at his death
    no estate out of which an order made under [dependants relief legislation] can
    be satisfied. A solution to this problem lay in recapturing all or part of the
    testators estate disposed of by pre-death transactions. To that end, the Conference
    proposed legislative language similar to s. 72(1) of the
SLRA
.

[47]

The 1967 Proceedings of the Conferences 49
th
annual meeting
    observed, at p. 219:

It seems clear that the principle of recapturing assets and
    deeming them to be part of the estate of the testator at his death should be
    limited to those assets in which the testator had an interest or over which he
    exercised control up to the moment of his death. This would eliminate all
    transactions involving
bona fide
purchasers and the donees of absolute
    gifts.

[48]

The 1967 Proceedings recommended the uniform Act be amended to include
    sections similar to those now found in ss. 72(1) to (6) of the
SLRA
.
    Also recommended was the inclusion of language similar to that in s. 72(7).

[49]

A draft model Family Relief Act was presented at the 1969 Conference.
    The following year, the Commissioners considered a report on the draft model
    act prepared by the Alberta Institute of Law Research and Reform. The report described
    mechanisms such as those now found in
SLRA
s. 72 as ones designed to
    prevent evasions. It identified the problem in the following terms, at p. 127:

It is possible for a husband to circumvent the policy of the
    Act by getting rid of his assets in his lifetimeThis can be done either by
    outright disposition (including irrevocable trust) or by various devices short
    of outright disposition whereby the husband retains control of the assets but
    yet has dealt with them in such a way that they are not part of his estate at
    death.

[50]

In 1972, the Conference tabled a revised model act, which it called the
    Dependants Relief Act. The precise language now found in s. 72(7) of the
SLRA
appeared in this draft, unfortunately without any commentary. The 1973 Conference
    amended that draft, and at the 1974 Conference the Commissioners recommended
    the amended draft for enactment.

[51]

The language of the uniform act found its way into Bill 60,
An Act
    to Reform the Law respecting Succession to the Estates of Deceased Persons
,
    which was assented to on November 4, 1977 (S.O. 1977, c. 40).

[52]

Little detailed debate of the
SLRA
was undertaken by the
    Legislature, which seemed content to adopt the work of the Commissioners.
    However, during the debate in committee of the whole House on Bill 60 on
    November 1, 1977, MPP Lawlor made the following comments on what is now s. 72:

This section is worth its weight in gold. For years lawyers, in
    their peculiar ingenuity, have set up all kinds of devices whereby to frustrate
    the operations of the Devolution of Estates Act and the Dependants Relief Act,
    but particularly the Devolution of Estates Act, as to cutting people out to
    whom they owe obligations during their lifetime. They set up trusts and then
    they make designations under pension plans, and they make designations under
    the Insurance Act  theres a whole host of measures which we, in our backward
    way, always plumed ourselves upon knowing about and on occasion using.

It has now got through to the Law Reform Commission and to the
    Attorney Generals department that these dreadful things were going on out
    there, and the door is being closed on a host of these machinations to defeat
    people who would otherwise have a claim upon an estate. I commend the Attorney
    General on this section.

Judicial consideration of s. 72's purpose

[53]

The most frequently cited judicial statements about the purpose of s. 72
    of the
SLRA
are those found in
Modopoulos v. Breen Estate

(1996)
,
15
    E.T.R. (2d) 128 (Gen. Div.) and
Moores v. Hughes et al.
(1981), 37
    O.R. (2d) 785 (H.C.). The court in
Modopoulos
considered the remedial
    intent of the legislation as preventing a testator from frustrating an
    outstanding support obligation by transferring assets out of his own name: at
    para. 24. In
Moores
, Robins J., as he then was, stated, at p. 789:

Manifestly, the section was intended to ensure that the
    maintenance of a dependant is not jeopardized by arrangements made,
    intentionally or otherwise, by a person obligated to provide support in the
    eventuality of his death. It is designed to alleviate the hardship that can be
    visited on a dependant by causing money or property to pass directly to a
    beneficiary (donee or joint tenant) and not as part of the estate.

[54]

As the court in
Moores
points out, s. 72(1) captures
    transactions even if they are not made by a testator with the specific
    intention of evading obligations to support dependants. However, the
    legislative history of s. 72 certainly identifies preventing the evasion of
    support obligations on death as the mischief the section seeks to address. Or,
    as this court described the sections purpose in
Madore-Ogilvie (Litigation
    Guardian of) v. Ogilvie Estate
, 2008 ONCA 39, 88 O.R. (3d) 481,

at para. 39, it operates to prevent arrangements that
    jeopardise the maintenance of the deceaseds dependants.

The operation of s. 72(7) of the
SLRA

[55]

Unfortunately, the legislative record sheds little light on the intended
    practical operation of the creditors rights language contained in s. 72(7) of
    the
SLRA
. Academic and practitioner commentators also offer little
    assistance. Professor Oosterhoff observes simply that the rights of creditors
    in such transactions are also expressly preserved:
Succession Law Reform
    in Ontario

(Toronto: Canada Law Book Limited, 1979), at p. 119. See
    also: Rodney Hull, Q.C., Dependants Relief in LSUC,
The Succession Law
    Reform Act
, 1977
(Toronto: LSUC, February/March 1978), at p. 22.

VIII.

Insurance policies and support orders under the
Family Law Act
and
Divorce Act

[56]

The
Family Law Reform Act
, S.O. 1978, c. 2 (
FLRA
), was
    enacted on March 16, 1978, four months after the
SLRA
came into force.
    Section 19(1)(j) of the
FLRA
provided that on an application for
    support, a court may order that a spouse who has a policy of life insurance as
    defined in Part V of
The Insurance Act
designate the other spouse or
    child as the beneficiary irrevocably. Section 19(1)(k) also empowered a court
    to order the securing of payment under the order, by a charge on property or
    otherwise.

[57]

Those provisions have been carried forward, in slightly modified form,
    as ss. 34(1)(i) and (k) of the
Family Law Act
(the 
FLA
):

34.
(1) In an
    application under section 33, the court may make an interim or final order,



(i) requiring that a spouse who has
    a policy of life insurance as defined under the
Insurance Act
designate
    the other spouse or a child as the beneficiary irrevocably;



(k) requiring the securing of
    payment under the order, by a charge on property or otherwise.

[58]

The jurisprudence commonly treats the purpose of a
    beneficiary-designation order under s. 34(1)(i) of the
FLA
as securing
    the support obligation of a spouse in the event of his or her death:
Smylie
    v. Smylie
, 2006 CarswellOnt 7456 (S.C.), at para. 77;
Thomas v. Thomas
,
    [2003] O.J. No. 5401 (S.C.), at para. 96.

[59]

As to s. 34(1)(k), in
Katz v. Katz
, 2014 ONCA 606, 377 D.L.R.
    (4th) 264,

this court held, at para. 69, that the sub-section is
    broad enough to permit a court to order a spouse to obtain an insurance policy
    to secure payment of the order following the payor spouses death. The
    concluding words or otherwise in s. 34(1)(k) afford the court broad scope for
    securing the payment of a support order. The court continued, at para. 70:

Because a support payors estate is bound by a support order
    following the payors death, the court making a support order is entitled to
    secure the payments to be made in the event of the payors death by requiring
    the payor to obtain and maintain life insurance for a specified beneficiary
    while the support order is in force and to give directions concerning the
    extent to which the payout of the insurance proceeds will discharge the support
    obligation: see
Laczko v. Laczko
(1999), 176 D.L.R. (4th) 507 (Ont.
    S.C.), at pp. 511-12.

[60]

The
Divorce Act
does not contain provisions similar to those
    found in the
FLA
. However, the court is given broad discretion under
    ss. 15.1 and 15.2 of the
Divorce Act
, in relation to both child and
    spousal support, to include such terms, conditions or restrictions in the order
    as it thinks fit and just, as set out below:

15.1
(4)
The
    court
may
    make a
[final or interim child support order]
for a
    definite or indefinite period or until a specified event occurs, and
may impose terms, conditions or restrictions in connection with
    the order or interim order as it thinks fit and just.



15.2 (3)
The court
may make a
[final or interim
    spousal support order]
for a definite or indefinite period or until a specified event
    occurs, and
may impose terms, conditions or
    restrictions in connection with the order as it thinks fit and just.

[Emphasis
    added.]

[61]

In
Linton v. Linto
n
(1990), [1991] 1 O.R. (3d) 1 (C.A.),
    this court remarked, at p. 32, on the practice of ordering a payor to designate
    a support recipient as the beneficiary of a life insurance policy:

I note that s.34(4) of the
Family Law Act
, 1986 provides
    that a support order is binding on the payors estate, if no order to the
    contrary is made. The practice of the family law bar, with which I am familiar,
    in both
Family Law Act, 1986
and
Divorce Act
matters in which
    support is in issue, and in matters which are settled, is to provide for the
    continued payment of support by the estate of the payer, or the payment of a
    capital sum, usually through life insurance, as a substitute. It can thus be
    said that the approach taken by the trial judge on this issue [namely, to
    direct that the support obligation be binding on the husbands estate] accords
    with both the
Family Law Act, 1986
and prevailing practice.

[62]

Similarly, in
Katz
this court observed that under ss. 15.1 and
    15.2 of the
Divorce Act
, the court is given broad discretion to
    include terms, conditions or restrictions in the order or interim order as it
    thinks fit and just and, as part of that discretionary power, a court may
    impose terms aimed at securing payment of a support order: at para. 71. The
    court continued, at paras. 73-74:

In my view, therefore, the same power that exists under the
Family Law Act
to
    order a spouse to obtain insurance to secure payment of support payments that
    are binding on the payors estate also exists under the
Divorce Act
.

That said, where there is no existing policy in place, a court
    should proceed carefully in requiring a payor spouse to obtain insurance

[63]

In
Muggah v. Nova Scotia (Workers Compensation Appeals Tribunal)
,
    2015 NSCA 63, 387 D.L.R. (4th) 334, the Nova Scotia Court of Appeal observed,
    at para. 59, that a life insurance provision is a common term of corollary
    relief judgments after divorce. In support of that observation, the court cited
    Julien D. Payne & Marilyn A. Payne,
Canadian Family Law
, 5th ed.
    (Toronto: Irwin Law Inc., 2013), at p. 222:

For the purpose of providing security for arrears and future
    payments of spousal support, the court may exercise its discretionary statutory
    jurisdiction to order the obligor to designate the obligee as the beneficiary
    under the obligors life insurance policy. Orders of this nature have begun to
    be granted on a routine basis, even though no specific mention of life
    insurance policies is found in the provisions of sections 15.2(1), (2), and
    (3), and 17(3) of the
Divorce Act
, which relate to the courts
    jurisdiction to order security for spousal support payments.

[64]

Accordingly, whether operating under the
FLA
or the
Divorce
    Act
, a court can order a support payor to designate the support recipient
    as the irrevocable beneficiary of a life insurance policy to ensure funds exist
    at the time of the payors death sufficient to satisfy his support obligations
    specified in the support order.

IX.

Application to the present case

[65]

There is no dispute between the parties that the Policy is a
    transaction effected by the deceased before his  death within the meaning of
    s. 72(1) of the
SLRA
. As a result, the proceeds are deemed to form
    part of Stephens net estate. What is in dispute is the extent of Anastasias
    rights as a creditor of the deceased under s. 72(7) of the
SLRA
to the
    Policys proceeds.

Whether Anastasia is a creditor of the deceased for the purposes of s.
    72(7) of the
SLRA

[66]

Courts have recognized that the obligation to make a support payment
    under the
Divorce Act
or the
FLA
creates a debtor-creditor
    relationship:
Bukvic v. Bukvic
(2007), 86 O.R. (3d) 297 (S.C.), at
    para. 79. As well, ss. 121(4) and 178(1)(b) of the
Bankruptcy and
    Insolvency Act
, R.S.C., 1985, c. B-3, recognize family support claims as debts
    provable as claims in bankruptcy.
[1]

[67]

Depending on the terms and duration of the support order, the estate of
    a support payor may be liable for both past and future support obligations
    calculated in accordance with the support orders in place at the time of the
    payors death  that is, both any arrears of support payments and the present
    value of future support payments. However, the legal basis for such claims by
    support recipients differs according to the act under which the support order
    is made.

[68]

An order for child or spousal support made under the
FLA
binds
    the estate of the person having the support obligation, unless the order provides
    otherwise: s. 34(4). The personal representative of a support payor can apply
    to vary a support order: s. 37(1)(c).

[69]

As to the position of the recipient of spousal support under the
Divorce
    Act
, in
Katz
this court stated at para. 72:

There is, however, no provision in the
Divorce Act
similar to
s. 34(4)
of the
Family Law Act
,
    making a support order binding on a payors estate. On the contrary, it has
    long been held that a support or maintenance obligation under divorce
    legislation ends when the payor dies unless there is a specific agreement to
    the contraryThere are conflicting authorities across Canada concerning whether
    a court may order that support payments under divorce legislation are binding
    on the payors estateNonetheless, the prevailing view in Ontario has long been
    that the court has that power, but that explicit language in the order is
    required to make that intention clear [Citations omitted.]

[70]

In the courts below, Evangeline conceded Anastasia is a general,
    unsecured creditor of Stephens estate. However, both the trial judge and the
    Divisional Court held Anastasia was not a creditor of Stephen for the purposes
    of s. 72(7) of the
SLRA
.

[71]

Anastasia submits the courts below erred in interpreting s. 72(7) of the
SLRA
as applying only to secured creditors. She points out the
    sub-section speaks of creditors, not of secured creditors. She argues the
    courts below committed an error of law by ignoring that plain language of the
    statute. Anastasia contends her claim to the Policys proceeds as an unsecured
    creditor is sufficient to qualify her for the protection of s. 72(7).

[72]

While Evangeline contends s. 72(7) is oriented towards protecting the
    conventional security interests of third party creditors, in her factum she
    acknowledges that Anastasias support claim should be paid out of the Policys
    proceeds. However, Evangeline argues s. 72(7) should not be interpreted to
    permit Anastasia to retain any portion of the Policys proceeds in excess of
    the amount of her support claim.

[73]

I accept Anastasias submission that the Divisional Court erred in
    holding she did not fall within s. 72(7) of the
SLRA
unless she was a
    secured creditor with a security interest in the Policy. Such an interpretation
    runs counter to the plain language of s. 72(7), which extends its reach to any
    creditor of the deceased in any transaction with respect to which a creditor
    has rights. Nor does any other language in Part V of the
SLRA
suggest
    that s. 72(7) applies only to claims by secured creditors. On the contrary, the
    statutory language clearly indicates s. 72(7) makes its protection available to
    any person who is a creditor of the deceased in respect of a transaction
    identified in s. 72(1) with respect to which the creditor has rights.

[74]

One such transaction is a policy of insurance effected on the life of
    the deceased and owned by him, such as the Policy. Accordingly, in the present
    case the proper question to ask is: what rights as a creditor of Stephen did
    Anastasia have in respect of the Policy?

The nature and extent of Anastasia's creditor rights under s. 72(7) of the
SLRA

[75]

I conclude that where, at the time of his death, a spousal or child support
    payor owns a policy of insurance that is subject to a court order requiring the
    designation of the support recipient as the irrevocable beneficiary of the
    policy, s. 72(7) protects from the claw back of s. 72(1) that part of a
    policys proceeds needed to satisfy the deceaseds obligations to the spousal
    and child support recipients, calculated in accordance with the support orders
    in place at the time of his death. I reach this conclusion in the following
    way.

[76]

Under both the
FLA
and the
Divorce Act
, a court can
    secure the payment of support obligations by formally granting a charge against
    property. However, the jurisprudence discloses that the more common practice is
    for a court to order a support payor to designate the support recipient as the
    irrevocable beneficiary under a life insurance policy. While colloquially such
    an order is described as one that secures payment of the support obligations
    in the event of the payors death, it would be more accurate to say that such
    an order makes available a pool of money  the proceeds of the life insurance
    policy  to satisfy the support payors obligations calculated in accordance
    with the support orders in place at the time of his death.

[77]

Where such a beneficiary-designation order is made ancillary to a spousal
    or child support order, the support recipient is a creditor of the deceased in
    a transaction with respect to which a creditor has rights. The transaction is
    the purchase or maintenance by the deceased of a policy of insurance on his life,
    which stands available, by operation of court orders, to satisfy the deceaseds
    spousal or child support obligations on his death by designating the support
    recipient as the beneficiary of the policy. For the purposes of s. 72(7), the
    support recipient is a creditor of the deceased because, as the court-ordered
    designated beneficiary under the policy of insurance, the support recipient has
    the legal right to look to the policys proceeds to satisfy the deceaseds
    support obligations calculated as at the time of his death. Those obligations
    can include (i) any existing arrears and (ii) the present value of any future
    support obligations, calculated by reference to the terms and duration of the
    support order in place at the time of his death.

[78]

Such an interpretation of s. 72(7) is faithful to the scheme and object
    of Part V of the
SLRA
, which places limits on the reach of the claw
    backs contained in s. 72(1). It also harmonizes the operation of Part V of the
SLRA
with the insurance beneficiary-designation powers granted to courts under family
    law legislation: Ruth Sullivan,
Sullivan on the Construction of Statutes
,
    6th ed. (Toronto: LexisNexis Canada Inc., 2014), at §11.2  11.5. The
    interpretation recognizes that although a policy of insurance ordered to stand
    available to satisfy a deceaseds family law support obligations may fall
    within the language of s. 72(1)(f), it is not a transaction by the deceased
    designed to avoid his responsibilities to his dependants. On the contrary, it
    is a transaction intended to provide for family law support-order dependants. By
    clawing back into the deceaseds net estate only that portion of the proceeds
    of a life insurance policy in excess of the amount required to satisfy the
    deceaseds family law support obligations, funds may be made available to
    support his other dependants while, at the same time, discharging his existing
    family law support obligations.

[79]

An interpretation of s. 72(7) that limits the claw back to amounts in
    excess of existing legal obligations to third parties echoes the approach taken
    to creditors rights elsewhere in Part V of the
SLRA
. Like s. 72(7),
    s. 71 of the
SLRA
places a limit on the property of the deceased made available
    to satisfy a Part V dependants support order. Section 71 states:

Where a deceased,

(a) has, in his or her lifetime, in
    good faith and for valuable consideration, entered into a contract to devise or
    bequeath any property; and

(b) has by his or her will devised
    or bequeathed that property in accordance with the provisions of the contract,

the property is not liable to the
    provisions of an order made under this Part except to the extent that the value
    of the property in the opinion of the court exceeds the consideration therefor.

[80]

Like s. 72(7), s. 71 protects the rights of a certain class of estate
    creditor in the face of claims made under Part V of the
SLRA
.
In the case of a party to a contract to devise property, the creditors rights
    are protected to the extent of the consideration given prior to the deceaseds
    death.

[81]

From the interpretation of s. 72(7) I have adopted, it follows that I do
    not accept the appellants submission that where a court order uses language,
    such as that contained in the Rowsell Order, which requires a support payor to
    maintain the support recipient as a policys irrevocable beneficiary, the full
    amount of the policys proceeds is automatically excluded from the claw back
    in s. 72(1) of the
SLRA
. I reach this conclusion for several reasons.

[82]

First, under the interpretation of s. 72(7) that I have adopted, the
    support recipient obtains the benefit of the protection ordered by the court 
    the availability of a pool of funds to satisfy the payors support obligations
    in the event of his death.

[83]

Second, Anastasias rights as a creditor of the deceased in respect of
    the Policy for the purposes of s. 72(7) flow from court orders. Those rights
    can be no greater than what the courts could confer under such orders. Under
    the
FLA
and
Divorce Act
, courts only have the jurisdiction to
    order life insurance beneficiary designations to the extent needed to satisfy
    support obligations. Such orders can provide no greater protection in the face
    of a competing claim to the policys proceeds by a claimant under Part V of the
SLRA
. Should parties intend a life insurance policy to operate as a
    kind of stand alone benefit upon the payors death, not linked to his
    obligation to pay child or spousal support, it is open to them to strike such a
    bargain and memorialize it in a separation agreement:
Turner v. DiDonato
,
    2009 ONCA 235, 95 O.R. (3d) 147,

at para. 38.

[84]

Finally, it is always open to parties to matrimonial disputes to
    structure their affairs to avoid the effect of s. 72(1) of the
SLRA
.
    In appropriate cases, parties can request a court to include in support orders
    provisions dealing with the effect of the payors death on support obligations
    then outstanding or due:
Decean v. Decean
, 2013 ONCA 218, 303 O.A.C.
    261, at paras. 70, 77. Further, as the Divisional Court stated at para. 19 of
    its reasons:

Spouses who wish to exclude life
    insurance proceeds from the reach of the
SLRA
can do so by transferring ownership to the
    dependent spouse or to a trustee. They can also transfer the ownership into
    their joint names with a right of survivorship. On the death of one of them,
    the ownership would then either revert to the life insured or vest in the
    survivor beneficiary. In the latter circumstance, the policy proceeds would be
    excluded from
SLRA
claims because the policy would be owned by the
    beneficiary, not the deceased. [Citation omitted.]

As this court held in
Ogilvie Estate
, at
    para. 27, s. 72(1)(f) of the
SLRA
does not capture a jointly-owned
    policy of insurance.

[85]

Consequently, should Stephens support obligations to Anastasia and
    their children, calculated by reference to the support order in effect at the
    time of his death, equal or exceed the Policys proceeds, Anastasias rights as
    a creditor under s. 72(7) would see the entire proceeds paid to her. If the
    support obligations are less than the Policys proceeds, Anastasia would
    receive the amount needed to satisfy Stephens support obligations, and the
    balance would be available as part of Stephens net estate to satisfy any
    support granted to Evangeline and James under Part V of the
SLRA
.

[86]

Finally, the respondent submits it should be
    open to a support payors estate to move after the payors death to vary the
    amount of the support orders made under family law legislation for the purpose
    of calculating the rights of a support recipient under s. 72(7) of the
SLRA
. It is not necessary to address that submission. That issue is not
    relevant to the question of the proper interpretation of s. 72(7) of the
SLRA
. As well, the parties have settled their dispute, so the prospect
    of an application to vary a support order does not arise on the facts of this
    case.


Summary

[87]

In the present case, the Rowsell and McCarthy Orders operated to make
    the proceeds of the Policy available to Anastasia, as a spousal and child support
    recipient and the Policys designated beneficiary, to satisfy the support
    obligations of Stephen existing at, and calculated in accordance with the terms
    of the support orders in place at, the time of his death. Anastasia thereby
    became a creditor of Stephen for the purposes of s. 72(7) of the
SLRA
with
    the right to look to the Policys proceeds to satisfy those support
    obligations. Section 72(7) operates to remove from the claw back of s. 72(1) the
    amount of the Policys proceeds required to satisfy those support obligations
    of Stephen to Anastasia and their children.

X.

Disposition

[88]

For the reasons set out above, I would allow the appeal. I would grant
    an order declaring that Anastasia is entitled to payment of the Policys
    proceeds to the extent of Stephens support obligations, past and future,
    existing at the time of his death, and calculated in accordance with the terms
    and duration of the support orders in effect at the date of his death.

[89]

The parties agree there should be no costs of this appeal.

Released: May 5, 2017 (DD)

David
    Brown J.A.

I
    agree. David Doherty J.A.

I
    agree. B.W. Miller J.A.





[1]

Section 121(4) provides:

A claim in respect of a debt or liability referred to
    in paragraph 178(1)(b) or (c) payable under an order or agreement made before
    the date of the initial bankruptcy event in respect of the bankrupt and at a
    time when the spouse, former spouse, former common-law partner or child was
    living apart from the bankrupt, whether the order or agreement provides for
    periodic amounts or lump sum amounts, is a claim provable under this Act.


