Stewart v. Nash (1988), 65 O.R. (2d) 218 (H.C.J.)

  • Document:
  • Date: 2018

Stewart v. Nash et al.

Indexed as: Stewart v. Nash (H.C.J.)

65 O.R. (2d) 218

[1988] O.J. No. 960

ONTARIO

High Court of Justice

Steele J.

July 7, 1988.

 

Evidence — Burden of proof — Burden of proving capacity rests on proponent of change of beneficiary designation in life insurance policy and death benefit under pension plan — Burden of proving undue influence rests on opponent.

Insurance — Life insurance — Beneficiaries — Insured living common law and changing beneficiary designation to common law wife — Evidence showed capacity and lack of undue influence — Change of designation valid — Relevant principles.

Pensions — Owner of retirement pension plan living common law and changing beneficiary designation of death benefit to common law wife — Evidence showed capacity and lack of undue influence — Change of designation valid — Relevant principles.

The deceased and the plaintiff were married for 10 years when they separated and the deceased went to live with the defendant, N. He returned to live with his wife for about a year to assist in the raising of their son, but returned to N. thereafter. Except for two periods in 1976 and 1983, the deceased and N. lived together as husband and wife. On those

two occasions, he became engaged to other women and the two separated. The deceased continued to have a good relationship with his wife and son. He supported the son until 1983 but did not support his wife. He left part of his estate to his son, made some provision for his wife, and named his son executor. In 1980 he signed a designation of beneficiary under an insurance policy on his life in favour of his wife, and he named his wife as beneficiary of the death benefit under his retirement pension plan in 1983. In 1985 the deceased was hospitalized because of cirrhosis of the liver and he died of that condition in that year. While in the hospital, he changed both beneficiary designations into N.’s name. He also instructed two solicitors to draw different wills for him without telling either of them of the other instructions.

Ultimately, it turned out that his estate had very little money and the plaintiff brought an action against N., the son, the insurance company and the trustee of the pension plan for a declaration that the two change of beneficiary designations were invalid for lack of capacity and undue influence.

 

Held, the action should be dismissed.

 

(1)  Since the two designations only took effect on death, the test for capacity was the same as that applicable to testamentary capacity and placed the onus of proof on the defendant as proponent of the change in designation. She met the onus. The evidence of the attending doctor, who was aware of the potential debilitating effect of the deceased’s disease on his capacity, testified that he had the necessary capacity and his evidence was confirmed by that of the solicitors and other independent witnesses.

 

(2)  The onus of proving the allegation of undue influence rested upon the plaintiff. There was no evidence that N. exerted any undue influence on the deceased, but rather that he had a natural affection for her and wished to benefit her.

 

Banks v. Goodfellow (1870), L.R. 5 Q.B. 549; Tamblyn v. Leach; Public Trustee of Manitoba v. Leach (1981), 13 Man. R. (2d) 398, 10 E.T.R. 178; Fontana v. Fontana (1987), 28

C.C.L.I. 232; Re Brocklehurst (deceased); Hall v. Roberts, [1978] 1 All E.R. 767, folld

Brydon v. Hawkins, [1949] O.R. 393, [1949] 3 D.L.R. 252, not folld

 

Other cases referred to

 

Re Rogers; Rogers v. Rogers (1963), 39 D.L.R. (2d) 141, 42

W.W.R. 200

 

ACTION for a declaration that a change of beneficiary designation under a life insurance policy and of a death benefit under a retirement pension plan were invalid.

 

Anne Barrett, for plaintiff.

 

B.G. Marta, for defendant, Vicki Nash.

 

STEELE J.:– This action is for a declaration that the change of beneficiary designation on a life insurance policy and the beneficiary of a death benefit under a retirement pension plan are invalid and to set them aside. Changes were made by the deceased, Brian Ronald Stewart (the husband), from the plaintiff, Sandra Stewart (the wife), to the defendant, Vicki Nash (Nash). The grounds are that the insured husband lacked the proper mental capacity to understand what he did, or in the alternative that he had been unduly influenced by Nash.

 

The plaintiff wife is the lawful wife of the husband, and I find Nash to be the husband’s common law wife.

 

The original designations were made in 1980 and 1983. The changes were made in August and September, 1985.

 

In 1972, after the husband and wife had been married about ten years, they separated and the husband went to live with Nash. After six months, he returned to his wife to assist in

the raising of their son. In October, 1974, the husband again left his wife and returned to live with Nash. Since then, with two exceptions, the husband and Nash have lived together as man and wife.

It was the normal custom for the husband and Nash to use

their condominium in Florida regularly during the winter months with Nash spending the winter there and the husband flying down each week-end. He also stayed there for two weeks at Christmas plus another week or two in the winter. During this time, Nash would occasionally return to Toronto for short intervals. In the summer, they both lived on the yacht owned by the husband in Toronto harbour, or in the husband’s house in Toronto.

While the husband lived with his wife, or with Nash, there were numerous other women in his life. In July, 1976, the husband became engaged to another woman and Nash moved out of the house owned by the husband but in which Nash and he had lived permanently. This engagement fell through and, in the fall of 1977, Nash returned to live with the husband. In 1983, while Nash was in Florida, the husband met Ann Ritchie and stated his intention to marry her. Nash did not learn of Ritchie’s existence until her return to Toronto in April, 1984. Even then she did not learn of the engagement. When Nash confronted the husband about Ritchie, he told her that he would not see Ritchie any more. During the summer of 1984, the husband and Nash lived together in normal fashion. Nash considered Ritchie to be merely another one of the husband’s women while she was absent. In November, 1984, Nash returned to Florida but the husband put off coming down on week-ends. When the husband indicated that he would not go to Florida for Christmas, Nash returned to Toronto and learned he was seeing Ritchie regularly and in fact had given Ritchie an engagement ring at Christmas. There was a confrontation between Nash and the husband, and both saw lawyers to consider a separation and settlement.

For most of January and February, 1985, the husband lived with Ritchie at her apartment, although occasionally returning to his own home. He commenced divorce proceedings against his wife, but shortly thereafter he told her to forget about them

and he discontinued the proceedings. No settlement was reached with Nash. By March, the husband had returned to live with Nash as he had always done before. By May, Ritchie discontinued seeing the husband. She felt that the husband preferred Nash to herself. Obviously, the husband had made his choice to return to live with Nash.

From May 3, 1985, until he died on November 2, 1985, the husband was in hospital for 145 of the 178 days. While there, he was out on some week-end passes and frequently left the hospital during the day. While the wife often visited the husband in hospital, it was Nash who was almost constantly with him and looked after him and as much of his affairs as he made her aware of. The husband, when not in hospital, lived at home with Nash. Throughout the entire period, from 1977 until the husband died, Nash did not work but was fully supported by the husband. As one witness said, Nash was the only form of stability in the husband’s life.

The husband had a good relationship with his wife and their son Richard. While the husband may have assisted his wife financially from time to time in a small way, he did not support her. On their separation in 1972, the husband turned over the then matrimonial home to the wife and gave up any claim thereto. Some years subsequently, the wife sold the home and kept all the proceeds for herself. The husband assisted in the support of his son until the son was 18 or 19 years old, which would have been in 1983. Thereafter, he gave money to his son from time to time and he felt an obligation towards him.

In 1980 and 1983, when the original insurance designations were signed, he was still supporting his son, who was at that time living with the wife. At no time was the son mentioned as a beneficiary under the policies in question. It may be that at that time, until 1983, he wanted the wife to have the insurance money for the benefit of his son, but he did not say so, either orally or in writing.

The husband worked hard, earned a lot of money and obviously spent it on lavish living. He drank excessively and ultimately became an alcoholic and died of cirrhosis of the liver. I find

that the husband wanted to be the centre of attraction and, at least as far as the important women in his life were concerned, he did not follow through with his promises to them.

With the husband’s spending habits, and the amount of his debts, it is obvious that, even when he was in perfect health, he had no proper appreciation of his net assets and likely did not know the extent thereof. He probably did not care because he lived a high, fast life and always assumed that there would be lots of money. He lied to numerous people about his assets and other matters, such as being divorced from his wife, when in fact he was not. Whether he believed that these were lies is not certain. At any given time it would be difficult to know whether or not he was telling the truth.

The husband was a friendly, generous, impulsive and erratic person. With this total scenario, his actions cannot be assessed in an impartial, logical manner. To do so would be to consider him as a different person than he actually was.

Apart from the two changes in beneficiaries under consideration in this action, the husband, while in hospital, gave a direction to have a $45,000 commission cheque paid to Nash. He also gave Nash a power of attorney to sell his home. He signed two wills without telling the two different lawyers that he was having the other will prepared. He revoked the power of attorney to Nash with respect to the house. All independent witnesses relating to these items indicate that he was in apparent good mental health at the respective times.

There was conflicting evidence from relatives and friends as to the state of his mental health while he was in hospital. He obviously had good days and some very erratic days. I find that his mental capacity was good at all relevant times, including those times when he signed both changes of designation of the beneficiary. In this respect, I rely primarily on the evidence of Dr. Blendis who treated him while in hospital. Dr. Blendis was fully aware of the effect upon the mind of the liver condition and directed his mind to the very issue of the mental effects that could be incurred. As a result of tests, Dr.

Blendis was of the opinion, on September 18, 1985, that there was no concern with respect to the husband’s mental capacity.

He also witnessed one of the new beneficiary designations on September 20, 1985, and gave evidence that the husband was mentally perfectly normal.

I have been unable to find any decided cases relating to the onus in relationship to an attack on the designation of a death beneficiary under a pension plan. However, I believe that the principle involved is the same as that of a designation of a beneficiary under a life insurance policy. I will refer only to an insurance policy hereafter with the intent that my reasons apply, with equal force, to both the pension plan and insurance policy.

I believe that an insurance policy designation takes effect only upon death and therefore that the test is that applicable to testamentary capacity and not the test applicable to inter vivos gifts: see Re Rogers; Rogers v. Rogers (1963), 39 D.L.R. (2d) 141, 42 W.W.R. 200. That test puts the onus on the proponent of the new designation form to show that the insured had the necessary mental capacity to understand what he was signing. In this respect, I disagree with the comments relating to the test as set out in Brydon v. Hawkins, [1949] O.R. 393, [1949] 3 D.L.R. 252. The classic test of testamentary

capacity is set out in Banks v. Goodfellow (1870), L.R. 5 Q.B.

549 at p. 565, as follows:

 

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties — that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.

In my opinion, Nash has satisfied this test. From the independent evidence of the various solicitors and others, the husband was aware of his assets and, although he may not have

been totally aware of the extent of his liabilities at any particular time, he was in no worse position with respect to that knowledge of liabilities than he was at any other time of his life. In this respect, I do not regard the evidence of Robert Stewart, one of the former solicitors of the husband, as being reliable. He obviously has problems himself and, where there was any conflict between his evidence and that of Nash, I accept the evidence of Nash. I found Nash to be a very credible witness.

I turn now to the issue of whether Nash or others exerted undue influence on the husband with respect to the new designations.

The onus is upon the wife who attacks these designations to show that they were signed while the husband was under the undue influence of Nash. I am supported in this view of onus by the decision in Tamblyn v. Leach; Public Trustee of Manitoba v. Leach (1981), 13 Man. R. (2d) 398, 10 E.T.R. 178, and in

Fontana v. Fontana (B.C.S.C., per Callaghan J., March 18, 1987, unreported [since reported 28 C.C.L.I. 232]).

 

Common law spouses would each be under some degree of influence from the other, just as any normal husband and wife who are residing together would be under some degree of influence in their relationship, but this does not automatically presume undue influence. However, the facts of a particular case could show undue influence. The onus is upon the person attacking the designation to prove this undue influence. To establish undue influence there must be force or coercion destroying the free agency of the person involved.

Normal influence or affection or attachment, or the mere desire of gratifying a beneficiary’s wishes, does not establish undue influence.

The following reference to an ordinary man in Re Brocklehurst (deceased); Hall v. Roberts, [1978] 1 All E.R. 767 at pp.

782-3, is applicable to the present case:

I cannot find in this sentence any warrant for the adoption by Blackett-Ord V-C of an objective test of motivation by

putting a hypothetical ordinary man in place of the testator and asking how he would have been expected to act. If the question to be investigated is whether the testator acted spontaneously and independently or in response to undue influence, then it seems to me to be quite artificial not to take full account of all that we know of his character and attitudes.

I will not encumber this judgment with a citation of the numerous judicial attempts to define the nature of the relationship between the donor and the donee out of which a presumption of undue influence is apt to arise. It is more helpful to examine the underlying principles. Undue influence as such has never been judicially defined, but wherein it consists in those cases where it is proved by express evidence is well understood. What must be shown is —

“… some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by a donee placed in some close and confidential relation to the donor.”

In the present case, the husband was not an ordinary man. At all times in his life he was an impetuous free agent, and I find that at the appropriate times, when he was in hospital, he was still an impetuous free agent.

The following are my findings of fact and expressions of opinion relating to the issue of whether Nash exerted undue influence on the husband. Nash was not in any special fiduciary relationship to the husband. She was his common law wife. I find that neither she nor anyone else exerted any force or coercion or undue influence on him with respect to the new designations of insurance, the two wills that the husband drew, the power of attorney, or the direction with respect to the $45,000. The husband had an affection for Nash. I accept the evidence of Nash that she did not ask the husband to designate her on the policies, but even if she had and the husband had done so to gratify her wish it would not be undue influence within the meaning of the law. The husband’s wills show that

his principal concern was Nash, while also recognizing his obligation to his son and his desire to leave something to his wife. In discussing his wills with the separate solicitors, he was aware of at least the insurance policy, if not the pension benefit policy, and chose not to include it in his estate. He therefore was aware that the insurance policies could be treated separately from the assets of his estate.

Considering the respective relationships, the wills were not unreasonable. His prime concern was the welfare of Nash. The fact that his estate is apparently without assets does not detract from his intentions. The lack of assets in his estate may be due in part to mismanagement after his death.

I accept the evidence of Nash that the husband, on his own volition, designated her the beneficiary. There was no special reason for the husband to wish to have his wife to continue as the beneficiary. While it may appear strange that he told Nash to insert her mother as the alternative beneficiary, this cannot detract from the primary beneficiary of Nash. It might have been more logical to designate his own mother or his son as the alternative beneficiary, but he may have felt that he was adequately looking after his son under his will. Also, as I have said, the husband cannot be looked upon as a logical person. He was impetuous, and I do not doubt that, once having decided that he wanted Nash as the primary beneficiary, he did not care who the second beneficiary was. From an over-all point of view in recent years, the husband had a far greater affection for, connection with and obligation to Nash than he had for, with or to his wife. His son is not a party to this action and does not appear to have any claim against the insurance policies.

I find there is no cause of action shown against the estate in this proceeding and the action against it is dismissed without costs. The action against Nash is also dismissed.

Unless there is special need for me to be spoken to with respect to costs, Nash is entitled to her costs of the action.

The money paid into court by the Manufacturers Life Insurance Company, together with interest thereon, is to be paid out to

Nash, and the money held in trust for this action by Excelsior Life Insurance Company is also to be paid to Nash.

 

Judgment accordingly.