January 2013 Family Law Section Case Comment: Carrigan v. Carrigan Estate- Changing the Face of Pension Beneficiaries Malerie Rose* On October 31, 2012, the Ontario Court of Appeal released its decision in Carrigan v. Carrigan Estate, 2012 ONCA 736 ( Carrigan ), reversing the decision of Justice Mary J. Nolan of the Superior Court of Justice, dated January 24, 2011, with reasons reported at 2011 ONSC 585. The Court of Appeal decision was split 2-1. Justice Juriansz wrote the majority decision and Justice LaForme wrote a persuasive and arguably correct dissent. On its face, the issue before the Court of Appeal was the interpretation of the Pensions Benefit Act 1 ( PBA ). In particular, the Court addressed the interpretation of the definition of spouse in the PBA, and the issue of whether under the PBA a pension holder could have more than one spouse concurrently for the purposes of receiving a death benefit. If one looks beneath the surface of the Court of Appeal decision, it appears that the facts of the case bore heavily on the Courts interpretation of the relevant sections of the PBA. The facts of the case, briefly, are as follows: Ronald Carrigan (Mr. Carrigan) died unexpectedly at age 57 on June 4, 2008. At the time of this death he was Vice-president of Finance of the Electrozad group of companies. In some of the years leading up to his death, his income tax returns disclosed that Mr. Carrigan earned in excess of $1,000,000.00. When Mr. Carrigan died, he was legally married to Mary Carrigan (Mrs. Carrigan), from whom he had been living separate and apart for approximately 12 years. The Carrigans were married in 1973, and had two daughters. Mrs. Carrigan was named in Mr. Carrigan s will, made in 1986, as the estate trustee as well as the sole beneficiary of the residue of his estate after two small bequests to his daughters. Ms. Carrigan remained living in the jointly owned matrimonial home and all of her expenses were paid by Mr. Carrigan up to the day he died. Jennifer Quinn and Mr. Carrigan began living together in a conjugal relationship no later than January 2000. They resided together in a condominium jointly owned by Mr. Carrigan and Mrs. Carrigan as joint tenants. She is the woman with whom he was living on the day he died. 1 R.S.O. 1990, c. P.8.
2 Although Mrs. Carrigan was the sole beneficiary of the residue of his estate, the sole beneficiary of all his life insurance policies and became the sole owner by right of survivorship of both the matrimonial home and condominium, the size of the estate was significantly diminished by the outstanding debts left by Mr. Carrigan, debts about which neither Mrs. Carrigan nor Ms. Quinn were aware. Nevertheless, Mrs. Carrigan also assumed that since she had been named, along with their daughters, by Mr. Carrigan as a beneficiary of his pension, she would be receiving one-third of the death benefit. It had always been Mrs. Carrigan s understanding from what Mr. Carrigan told her, that she would inherit everything he owned when he died. In or about 2006 Mr. Carrigan talked with Mrs. Carrigan and their daughters about making some financial provision for Ms. Quinn in the event of his death. Mr. Carrigan proposed that Mrs. Carrigan would transfer her interest in the condominium to him and that, as sole owner, he could leave ownership of the condominium to Ms. Quinn. In addition, Mr. Carrigan would designate Ms. Quinn as the beneficiary of a $100,000.00 life insurance policy. Mrs. Carrigan agreed with this plan. At around the same time, Mr. Carrigan talked with Ms. Quinn in what seems to have been more general terms about somewhat similar plans to provide some financial security to her in the event of his death. Mr. Carrigan took no action to give effect to these plans. Even though he consulted a family law lawyer in 2006 with a view to formalizing the plans, he never followed through and there was no formally executed Agreement. After Mr. Carrigan s funeral, Ms. Quinn and Ms. Carrigan entered into negotiations regarding the settlement of Mr. Carrigan s estate but were unable to come to terms. Of particular note, and likely the determining fact in this case is that Mr. Carrigan designated Mrs. Carrigan and their daughters as beneficiaries of the death benefit under his pension plan in 2002, two years after he commenced residing with Ms. Quinn. Ultimately, the issue became which of Ms. Quinn or Mrs. Carrigan was entitled to receive the death benefit in relation to the pension of Mr. Carrigan. The court of first instance determined that while both Mrs. Carrigan and Ms. Quinn met the statutory definition of spouse under section 48 of the PBA there could only be one spouse for the purposes of the Act. As Ms. Quinn was living with Mr. Carrigan at the time of his death, the trial judge held Ms. Quinn was the spouse who was entitled to his death benefit. The Court of Appeal did not agree. 2
3 Pensions Benefit Act ( PBA ) Section 48 of the Ontario PBA, which governs the payment of pre-retirement death benefits, provides, in part, as follows: The term spouse is defined as follows: spouse means, except where otherwise indicated in this Act, either of two persons who, (a) are married to each other, or (b) are not married to each other and are living together in a conjugal relationship, (i) continuously for a period of not less than three years, or (ii) in a relationship of some permanence, if they are the natural or adoptive parents of a child, both as defined in the Family Law Act; ( conjoint ) 48.(1) If a member or former member of a pension plan who is entitled under the pension plan to a deferred pension described in section 37 (entitlement to deferred pension) dies before commencement of payment of the deferred pension, the person who is the spouse of the member or former member on the date of death is entitled, [Emphasis added] (a) to receive a lump sum payment equal to the commuted value of the deferred pension; or (b) to an immediate or deferred pension the commuted value of which is at least equal to the commuted value of the deferred pension. (2) If a member of a pension plan continues in employment after the normal retirement date under the pension plan and dies before commencement of payment of pension benefits referred to in section 37, the person who is the spouse of the member or former member on the date of death is entitled, (a) to receive a lump sum payment equal to the commuted value of the pension benefit; or (b) to an immediate or deferred pension the commuted value of which is at least equal to the commuted value of the pension benefit. (3) Subsections (1) and (2) do not apply where the member or former member and his or her spouse are living separate and apart on the date of the death of the member or former member. [Emphasis added]. (6) A member or former member of a pension plan may designate a beneficiary and the beneficiary is entitled to be paid an amount equal to the commuted value of the deferred pension mentioned in subsection (1) or (2) if, (a) the member or former member does not have a spouse on the date of death; or 3
4 (b) the member or former member is living separate and apart from his or her spouse on that date. (7) The personal representative of the member or former member is entitled to receive payment of the commuted value mentioned in subsection (1) or (2) as the property of the member or former member, if the member or former member has not designated a beneficiary under subsection (6) and, (a) does not have a spouse on the date of the member or former member s death; or (b) is living separate and apart from his or her spouse on that date. The court of first instance found that the definition of spouse under the PBA applied to both Mrs. Carrigan and Ms. Quinn. The court found that Ms. Carrigan was disentitled under the PBA to receive the pension benefit under section 48 (3) as a spouse, and, although she was designated as a beneficiary under subsection 48 (6), she was disentitled to receive the benefit as a beneficiary under that section, as Ms. Quinn was a qualified spouse and entitled to the benefit. The Court of Appeal disagreed and Justice Juriansz engaged in a very complex statutory interpretation exercise to arrive at this decision. In the majority s view, there could only be one spouse for the purposes of section 48; that is, the married spouse, therefore, as Mrs. Carrigan was that spouse, Ms. Quinn could not be considered a spouse under section 48. The reasoning was that since under the definition of spouse, a member could only be living separate and apart from a spouse to whom the member was legally married, and ss. 48(3) states that the section does not apply if the member or former member and his or her spouse are living separate and apart on the date of death, then the only person who could be considered a spouse under this sections is a married spouse. Therefore Ms. Quinn could not be considered a spouse to whom s. 48 applies. Based on this reasoning, the Court of Appeal decided that in the absence of a spouse entitled to the death benefit, it was payable to the named beneficiary pursuant to ss. 48(6). Ms. Carrigan was therefore was entitled to receive a portion of the death benefit as a beneficiary under the plan but not as a spouse. Dissent- Justice LaForme The dissent judgment is consistent with the widely held view of the pension industry. In his dissent, Justice LaForme stressed that the approach to the interpretation of a statute is to be principled, and that the words of an Act are to be read 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. 2 Accordingly, Justice LaForme agreed with the trial judge and found that the PBA allows that a member may have two spouses with equal rights of entitlement to the death benefit. Mrs. Carrigan was held to be a spouse under section 1 of the PBA. However, pursuant to ss. 48(3) of the PBA, she was not entitled to the death benefit under ss. 48(1) because she was living separate and apart from Mr. Carrigan at the date of his death. Justice LaForme held that Ms. Quinn was also Mr. Carrigan's spouse under the PBA. 2 Bell Expressvu v. Rex [2002] 2 S.C.R. 559, at para. 26. 4
5 He determined, however, that she was entitled to the death benefit under ss. 48(1) because ss. 48(3) did not apply to her. Justice LaForme also found that ss. 48(1) gives priority to the member's spouse at the date of death, provided that the spouse is not disentitled to the benefit in accordance with ss. 48(3). Accordingly as a spouse, Ms. Quinn's spousal entitlement under ss. 48(1) took priority over the entitlements of Ms. Carrigan as a beneficiary under ss. 48(6). Author s Commentary The OBA Pension and Benefits Section has expressed serious concerns about this decision. Essentially, it is thought that the decision is antithetical to the current practice in the industry most plans would have, in this circumstance, paid the death benefit to the current common-law spouse in accordance with section 48 of the Pension Benefits Act, rather than to the designated beneficiary. The industry is concerned about the ramifications of this decision, particularly in respect of situations in which payments have already been made to a common-law spouse either, as in Carrigan, a death benefit payment for a current non-retired plan member pursuant to section 48 of the PBA or payment of a survivor benefit to the spouse of a retired member under the similarly-worded section 44 of the PBA). The narrow interpretation of the PBA by the Court of Appeal seems to have been undertaken with a view to fulfilling what the Court must have seen as the intention of Mr. Carrigan- that is, to allow Mrs. Carrigan and the children to receive the pension death benefit under the Act. Otherwise, it is inconceivable that such a narrow interpretation would issue. Of course, this reasoning is not set out explicitly in Justice Juriansz decision, but upon an analysis of the decision and a close view of the facts, this is the most logical explanation. From a statutory interpretation standpoint, beyond the the purposive approach outlined by Justice LaForme, there is further reason to reject the majority decision. As stated, the statute sets out two definitions of the term spouse. It does not state that if a person has a spouse to whom he or she is married, he or she may not have another spouse. So, for the purposes of ss 48(6), if the drafters of the legislation meant to indicate that only the married spouse could receive the death benefit in priority to any beneficiaries, they would not have included 48(6) (a) [no spouse] and would simply have included 48(6) (b) [separated from spouse]. That subsection alone would have had the effect of ruling out the spouse under either definition in the Act if there had been a separation. The fact that 48(6) (a) was included, means that the drafters intended that both categories of spouse would be eligible for the death benefit in priority to a beneficiary. If this is not the case, then the statute suffers from a tautological excess, as there is a presumption against tautology when interpreting a statute. The presumption is described by Ruth Sullivan in, Driedger on the Construction of Statutes, 3d ed. (Toronto: Butterworths, 1994) at 159 and 162: It is presumed that the legislature avoids superfluous or meaningless words, that it does not pointlessly repeat itself or speak in vain. Every word in a statute is presumed to make sense and to have a specific role to play in advancing the legislative purpose. 3 3 Wormell v. Insurance Corp. of British Columbia, 2011 CarswellBC 791 at para 19. 5
6 The respondents in Carrigan are seeking leave to appeal to the Supreme Court of Canada ( SCC ). The Canadian Bar Association is expected to seek intervenor status on the appeal to the SCC and the OBA pensions and family sections support this. Why Should Family Lawyers Care about Carrigan? The Family Law Section of the OBA discussed Carrigan at a recent meeting of the executive. We were fortunate to have Ari N. Kaplan, a partner with Koskie Minsky LLP, who is a pensions expert, come and speak with us. Some of the discussion points that arose with respect to the decision are as follows: It is important to remember that this case applies only to very specific facts-where a pension plan member dies and has both a spouse he or she is legally married to and separated from, and an unmarried spouse with whom he or she resides. The fact that Mrs. Carrigan received the death benefit was not related to her relationship with the deceased as a spouse, it had solely to do with the fact that she was one of the named beneficiaries of the death benefit. Under the PBA, as interpreted by the Court of Appeal, neither spouse was entitled to the death benefit. The decision could have implications with respect to post-retirement joint and survivor benefits when a pension is already in pay, as the language in that part of the PBA is similar (see subsections 44 (1) to 44(4). Please also note that Carrigan applies only to pension plans administered in Ontario. Federally administered pension plans, such those with Air Canada and with banks, are not affected. The good news, however, is that the Federal Pension Benefits Standards Act 4 ( PBSA ) already contains language that specifically contemplates the situation as set out in Carrigan: In the PBSA, the term survivor, in relation to a member or former member means (a) if there is no person described in paragraph (b), the spouse of the member or former member at the time of the member s or former member s death, or (b) a person who was the common-law partner of the member or former member at the time of the member s or former member s death. Subsection 23(1) then provides as follows with respect to pre-retirement death benefits: If member dies before retirement 23. (1) In the case of the death of a member or former member of a pension plan who is entitled to a deferred pension benefit under section 17, or, in the case of a member, would be entitled to that benefit if the member ceased membership in the plan, the member s or former member s survivor is entitled to the pension benefit credit, calculated in accordance with section 21, to which the member or former member would have been entitled on the day of death if they had terminated employment on that day and had not died. [Emphasis added]. 4 1985 RSC 1985 c 32 (2nd Supp). 6
7 No survivor (1.1) If a member or former member dies without leaving a survivor, the pension benefit credit referred to in subsection (1) is to be paid to the member s or former member s designated beneficiary or, if there is none, to their estate or succession. There are significant policy issues that are raised by the decision: The underlying policy with respect to the PBA is to allow a spouse who is residing with the pension member upon the member s death to receive his or her retirement death benefits. This decision has altered the administration of the PBA and moved it away from its underlying intentions. It is arguable that the decision relegates common law spouses to second class in relation to married spouses. Carrigan means that the mere existence of a married spouse of a member, no matter how long they have been separated, is held to void the entitlement of the common law spouse to the survivor benefit, no matter how long the common law spouse has resided with the deceased pension holder. Potentially, a member could have married, lived with his or her spouse briefly, then separated but not legally divorced, then had a common law spouse for 30 years and upon the member s death; the mere existence of the married spouse would disentitle the common law spouse to the survivor benefit. Promoting "freedom of choice" for a pension member in naming a beneficiary could result in neither spouse receiving the pre-retirement death benefit. Clients must be made aware of the potential effect of the decision in his or her life with respect to the choosing of a beneficiary, obtaining a timely divorce, etc. *Malerie Rose, Associate with Starr Family Law 7