The recent decision of Dagg v. Cameron Estate[1] is an interesting one for trusts & estates and family law practitioners alike in respect of two issues: who is a “spouse” for the purposes of dependants’ support, and how are insurance proceeds to be dealt with when proceeds are claimed by competing “spouses”. This case is novel in that it considers whether two individuals are "spouses" as defined in the Succession Law Reform Act[2] (“SLRA”) by virtue of having a child in utero together at the time of the father’s death.

The applicant, Evangeline Dagg, was living in a conjugal relationship with Stephen Cameron at the time of his death. Evangeline was eight months pregnant. When Stephen died, he had not finished matrimonial proceedings with his wife, Anastasia Cameron. Anastasia and Stephen had two children, both minors.  Evangeline and Stephen had not been in continuous cohabitation for 3 years at Stephen’s death, although they were in a committed relationship and intended to marry.

In the matrimonial proceedings, Anastasia obtained a temporary order (on consent) which included the provision that “Stephen shall maintain Anastasia as irrevocable beneficiary on any life insurance policy” for the purposes of child and spousal support.

After Stephen was diagnosed with terminal cancer, he changed the designated beneficiary of his insurance policy (breaching the temporary order) to a divided designation under which Evangeline was to receive 53.6% of the $1M insurance proceeds, and the two minor children of Stephen with Anastasia were to receive a total of 46.3%. Anastasia discovered the change and obtained an order compelling the insurer to restore the prior designation. Stephen passed away and his son with Evangeline, James, was born shortly thereafter.

A dependants’ support application was initiated by Evangeline on behalf of herself and her son, James, against Stephen’s estate for support under Part V of the SLRA. The Court’s decision in Dagg v. CameronEstate dealt with a motion by Evangeline for interim support pending final resolution. The decision dealt with two issues:  (1) whether Evangeline is a “dependant” as defined in section 57 of the SLRA, and (2) whether life insurance money is available to satisfy Evangeline’s claim.

Statutory Interpretation“Spouse”

Pursuant to section 58 of the SLRA, where a deceased has not made adequate provision for the proper support of his dependants, the Court may order that adequate provision be made out of the deceased’s estate. The term “dependant” is defined in section 57 to include: “the spouse of the deceased… (and) a child of a deceased…to whom the deceased was providing support or was under a legal obligation to provide support immediately before his or her death.” “Spouse” is defined to include either of two persons who “are not married to each other and have cohabited… in a relationship of some permanence, if they are the natural or adoptive parents of a child.”  

Anastasia opposes the interim support motion for the same reasons that she opposed the overall application, namely, that: (i) Evangeline was not a “dependant” as defined in Part V of the SLRA; (ii) the proceeds of a life insurance policy were not available to satisfy Evangeline’s support claim; and, (iii) Anastasia was a creditor of the deceased for the purposes of section 72(7) of the SLRA.  The Court dismissed each of Anastasia’s arguments and ultimately granted Evangeline the interim relief. 

Anastasia’s arguments focused on the fact that James was born after Stephen’s death. Since James was not born until after Stephen’s death and Evangeline and Stephen had not continuously cohabited for 3 years, Anastasia argued that Evangeline was not Stephen’s “spouse” and that he owed her no obligation of support at his death.

In taking a purposive approach to the interpretation of the statute, the Court found that although Stephen and Evangeline were not statutory spouses under the SLRA, “they were common law spouses in the commonly understood sense of the word.”  The Court held that:

“… There is nothing absurd in interpreting the Act to attach a support obligation to a common law relationship, based upon the birth of a child following the death of one of the common law spouses. Rather, to interpret the Act in the way that Anastasia suggests would mean that if a child was born, for example, the day before the death of one parent, the surviving parent would be a spouse, but not if the child was born two days later – clearly an inequitable result.  …”

The Court also referred to the definition of “child” under the SLRA, which includes “a child conceived before and born alive after the parent’s death.” Based on this definition, Stephen and Evangeline did have a child together at the time of his death. Nevertheless,  Stephen’s legal obligation to provide support did not arise until James was born live after Stephen’s death. This is because, as found by the Court, James’ status as a dependent child and Evangeline’s status as a dependant spouse, and their resulting respective entitlement to support, were contingent on James’ live birth.

The Use of Life Insurance to Secure Support

Dagg v. Cameron Estate calls into question the practice in the family law Bar of securing support obligations by requiring the payor spouse to purchase life insurance and to designate the ex-spouse as the irrevocable beneficiary.  

Under section 72(1)(f) of the SLRA, “any amount payable under a policy of insurance effected on the life of the deceased, and owned by him or her,” is available for satisfaction of dependant support claims. Anastasia argued that Stephen did not “own” the policy on his date of death by virtue of her designation as the irrevocable beneficiary. The Court rejected this argument, quoting Justice O’Flynn in Matthews v. Matthews Estate[3]:

“The law is clear that, under the Succession Law Reform Act, life insurance policies owned by a spouse as in the case of this Respondent, even where another beneficiary is irrevocably designated, can be treated as part of the deceased spouse’s estate and available for the payment of support to a dependant.”

The Court held that an order under section 34(1)(i) of the Family Law Act[4] (which states that the court, in an application for support, may make an interim or final order requiring a spouse who has a policy of life insurance to designate the other spouse or a child as the beneficiary irrevocably), does not give the support recipient realizable security on a life insurance policy. Conversely, the Court affirmed that while such a policy provides an alternate source for the payment of support in the event of the support payor’s death, it is a source available to all dependants.

Conclusion

As the case at hand was an interim motion for support, it will be interesting to see whether similar conclusions are found in the final hearing of the application.

In any event, this case demonstrates that family law counsel would be wise to determine another means to guarantee the spousal and child support for their clients beyond the use of irrevocable beneficiary designations under payor-owned life insurance policies.

Furthermore, for similar reasons, estate lawyers would be prudent to carefully consider whether a client’s personal circumstances may expose their insurance policy to competing dependant support claims when assisting them with their estate plan.