Law Times

Page 9 Law Times • August 19, 2013 Focus On Pensions Law Carrigan ruling prompts push for clarification on beneficiary status BY CHARLOTTE SANTRY Law Times T he Ontario government is reviewing a legal decision that handed a deceased millionaire's pension benefits to his legally married wife over his common law spouse. Carrigan v. Carrigan Estate reversed the commonly understood interpretation of s. 48 of the Ontario Pension Benefits Act, in cases where the deceased member is married but also has a common law spouse. The provincial government announced in the 2013 Ontario budget that it is reviewing the case, and has been speaking with interested parties over the summer. The decision considered the pre-retirement benefits of Ronald Leo Anthony Carrigan, who died of a heart attack at the age of 57 on June 4, 2008. In some of his later years, Carrigan earned more than $1 million from his job as vice president of finance for Electrozad Supply Co. Inc., which calls itself the largest independently owned electrical distributor in Southwestern Ontario. In 1973 he married Mary Melodee Dianne Sawyer Carrigan, and the couple had two daughters. The couple later separated, but never divorced, and in 2000 Carrigan started living with Jennifer Quinn, in a relationship that lasted until his death. In 2002, Carrigan designated his wife and their daughters as the beneficiaries of the death benefit in his pension plan. A trial judge decided in January 2011 that Quinn was entitled to the pre-retirement benefits, believed to be worth $1.5 million. This conformed with the generally accepted interpretation of the act that benefits are awarded to the spouse living with the plan member at the time of their death. But the decision was overturned in a controversial Ontario Court of Appeal ruling released in October 2012. Appeal court Justice Russell Juriansz found that s. 48 of the law, as it is currently worded, did not automatically favour either of the spouses. Section 48(1) of the act gives statutory priority to the member's spouse, he explained. But s. 48(3) says this does not apply where the member "and his or her spouse are living separate and apart on the date of death of the member." The trial judge had interpreted s. 48(3) as imposing a "requirement" that a spouse could not receive a benefit if he or she was living apart from the member at the time of his or her death. But Juriansz argued that "it made no sense to conceive 'The industry interpretation is that it was a bit of a harsh decision,' says Karen Yolevski. of a common law spouse living separate and apart from the member." Therefore, he said, the word "spouse" in s. 48(3) "must always refer to the legally married spouse." Since Carrigan's spouse was living apart from him when he died, there is no spousal entitlement to the benefit, meaning the money would go to Carrigan's named beneficiary. In this case, the named beneficiary was his wife. It's hard to dispute Juriansz's logic, says Benjamin Arkin, lawyer at Whaley Estate Litigation. "Reading the decision, even if you don't agree that the outcome was fair, it's very elegant," he adds. The decision could affect a significant number of people. "Statistics show there are a growing number of complex families in Ontario, in that they have multiple spouses," Arkin says, adding: "It took a creative lawyer and a risk-tolerant client to actually mount a challenge." In March 2013, the Supreme Court of Canada denied leave to appeal the decision. This, added to the Ontario Court of Appeal decision, "surprised a lot of people in the industry and the Financial Services Commission of Ontario," says Karen Yolevski, a lawyer at Basman Smith LLP. "The industry interpretation is that it was a bit of a harsh decision. The court could have split the payments between the spouses but didn't," she adds, acknowledging that Quinn has the option of claiming for dependency support. Even if the Carrigan ruling made sense in that particular case, "it may have created unintended consequences for other people in [a similar] situation," she says. There has been a push from lawyers, pension plans, and FSCO to clarify the situation. In May, the Ontario government's 2013 budget revealed it planned to "review the Ontario Court of Appeal's recent ruling regarding spousal entitlements in the case of Carrigan v. Carrigan Estate, propose amendments to the Pension Benefits Act and, if necessary, amend the regulations under the PBA." Changing the effect of the legislation could potentially be relatively simple. For example, the dissenting appeal court judge, Justice Harry LaForme, argued the "evident purpose" of s. 48 is "to provide a priority scheme for death benefits . . . to spouses, as broadly defined under the Pension Benefits Act, who are not living separate and apart on the date of death, unless the spouse has made a choice to waive the death benefit." Countering this, Juriansz said if the legislators had wanted this to be the interpretation, they could have just added the phrase "and living with" to s. 48(1). This would read: "If a member . . . dies before commencement of payment of the deferred pension, the person who is the spouse of and living with the member . . . on the date of death is entitled to . . . [the death benefit]." Even if tweaking the legislation turns out to be more complex than Juriansz's suggested addition, it may still be simpler than retaining the status quo, warns Arkin. This is because the appeal ruling could encourage an increase in the number of "subordinated" common law spouses seeking dependence relief or unjust enrichment claims, he says. "These kinds of claims are complex and need a significant evidential basis. They're expensive, long, and [it's] hard to advise a client about the likely outcomes." This could lead to access to justice issues, if it widened the gap between the opportunities available to relatively affluent common law spouses and those of more limited means. A 2012 Supreme Court of Canada case, Kerr v. Baranow, concluded common law spouses were entitled to each other's accumulated net family worth if they were involved in a joint family venture. The decision, while helpful for some common law spouses, has also added to the complexity of the law and created less predictable outcomes, says Arkin. In a written statement, the spokeswoman for Finance Minister Charles Sousa said: "The government is currently reviewing the implications of the Carrigan decision along with various submissions that have been received from stakeholders. We will be holding further discussions over the summer with interested parties." LT REACH ONE OF THE LARGEST LEGAL AND BUSINESS MARKETS IN CANADA! ENCHANCE YOUR LISTING TODAY! Get noticed by the lawyers, judges, corporate counsel, finance professionals and other blue chip cilents and prospects who find the contacts they need for Canadian legal expertise at canadianlawlist.com with an annual Gold or Silver Enhanced listing package. With more than 218,000 page views and 51,000 unique visitors monthly canadianlawlist.com captures your market. FOR MORE INFORMATION CONTACT Colleen Austin T: 416.649.9327 | E: colleen.austin@thomsonreuters.com AVAILABLE ONLINE AND IN PRINT Untitled-3 1 www.canadianlawlist.com www.lawtimesnews.com 13-07-12 10:17 AM

• Cover