Originally published in our June 2017 Newsletter
Dagg v. Cameron Estate, 2017 ONCA 366, 2017 CarswellOnt 6557
We have previously written about the Superior Court of Ontario and the Divisional Court’s judgments in this matter, which the Court of Appeal recently reversed.
(http://welpartners.com/blog/2015/08/the-slra-the-gift-that-keeps-on-giving/ & http://welpartners.com/blog/2016/04/irrevocable-beneficiary-designation-is-not-a-trust/)
What happens when a support payor owns a life insurance policy and has been required by court order to name the recipient of spousal or child support as the irrevocable beneficiary of the policy and upon the payor’s death, the policy becomes the subject of a competing claim, pursuant to Part V of the Succession Law Reform Act (“SLRA”), by another dependant of the deceased? Justice Brown of the Ontario Court of Appeal (“ONCA”) recently addressed this issue in Dagg v Cameron Estate (“Cameron Estate”), specifically inquiring into how section 72(7) of the SLRA operates in conjunction with section 72(1)(f).
The appellant and the deceased were married in September 2003. They had two children together. In 2010, the deceased took out a $1 million policy of insurance (the “Policy”) on his life, in which he named the appellant as the beneficiary. In January 2012, the appellant and the deceased separated and shortly thereafter, the appellant commenced a matrimonial proceeding against the deceased.
In February 2013, Justice Rowsell made a consent order requiring the deceased to pay interim child support and spousal support payments.  Justice Roswell’s order further stated that the deceased would maintain the appellant as the irrevocable beneficiary on any life insurance policy. In July 2013, the Order was varied to adjust the amounts that the deceased was required to pay in terms of child and spousal support, while “All other terms of the order of Justice Rowsell dated February 27, 2013 shall remain in full force and effect.”
Following the separation with his wife, the deceased became involved with the respondent. In July 2013, the respondent told the deceased that she was pregnant with his child. Their son was born in February 2014, three months after the deceased passed away.
Shortly after having been diagnosed with cancer in November 2013, the deceased executed his Last Will and Testament and a Canada Life Title form. These documents amended the beneficiary designation on the Policy to include the respondent and his son and daughter from his marriage with the appellant. Upon learning of the deceased’s beneficiary changes under the Policy, while the deceased was in the hospital, the appellant brought a motion seeking to restore her designation as the sole beneficiary. Justice Nelson, who heard the motion on November 20, 2013, found that the deceased breached the Rowsell Order, and ordered that the insurance company amend the beneficiary designation such that the appellant be named the sole and irrevocable beneficiary on the Policy. Three days later, the deceased died and left an insolvent estate.
In March 2014, the respondent applied under Part V of the SLRA for dependant’s relief. Incorporated in her application was a request for a determination that section 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.”
In reviewing the relevant jurisprudence, the ONCA found that courts have recognized that the obligation to make a support payment under the Divorce Act or the Family Law Act creates a debtor-creditor relationship. Thus, when a support payor dies their estate may be liable for past and future support obligations, depending on the terms and duration of the support order and the act under which the order is made.
Justice Brown went on to find that the Divisional Court erred in finding that the appellant did not fall under section 72(7) of the SLRA because she was not a secured creditor with a secured interest in the Policy. He reasoned that a proper interpretation of section 72(7) encompasses any creditor of the deceased so long as the transaction falls under those described in section 72(1), including “a policy of insurance effected on the life of the deceased and owned by him.”
The ONCA concluded that in a situation where the deceased owns a life insurance policy in which he or she was previously ordered by a court to designate a support recipient as the irrevocable beneficiary of the policy, the support recipient’s rights to the policy are protected through section 72(7) from being deemed part of the deceased’s estate through the operation of section 72(1). In other words, upon the death of the support payor, the support recipient becomes a creditor of the deceased by virtue of the court order which vests a legal right in the recipient to satisfy the deceased’s support obligations as calculated at the time of his or her death through the policy’s proceeds.
The judgment of the ONCA in Cameron Estate reverses the lower courts’ decisions which held that a court-ordered irrevocable designation on a life insurance policy was subject to section 72 of the SLRA, to the extent that a life insurance policy’s proceeds may be used to satisfy an award for support under the SLRA.
This decision arguably affords greater protection for support recipients who previously may not have been aware of the powerful effect that a SLRA claim could have on their incoming support payments. Moreover, this case highlights the need for parties to structure their affairs appropriately in the event of a matrimonial dispute if the parties wish to exclude life insurance policy proceeds from the grasp of the SLRA.
 Succession Law Reform Act, RSO 1990, c S26 [SLRA].
 Dagg v Cameron Estate, 2017 ONCA 366, 2017 CarswellOnt 6557 at para 5 [Cameron Estate].
 SLRA, s 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.”
 SLRA, s 72(1)(f): “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…”.
 Ibid at para 4.
 Ibid at para
 Ibid at para 10.
 Ibid at para 11.
 Ibid at paras 12-14.
 Ibid at paras 15-16.
 Ibid at para 17.
 Ibid at para 18.
 Ibid at para 20.
 Ibid at para 21.
 Ibid at para 66.
 Ibid at para 67.
 Ibid at para 73.
 Ibid at para 74; SLRA at s 72(1)(f).
 Ibid at para 75,77.
 Ibid at para 84.