The recent Ontario Court of Appeal decision in Carrigan v. Carrigan Estate has caught the administrators of pension plans governed by the Pension Benefits Act (Ontario) by surprise. The decision is under appeal. Before the decision of a higher court is rendered, the Ontario Court of Appeal decision has resulted in some uncertainty in the administration of pension benefits on the death of a member.
Mr. Carrigan was a deferred vested member of a pension plan. He died before the commencement of pension payments. He was survived by a common law spouse with whom he resided in a conjugal relationship at the time of death and by a legally married spouse from whom he was separated. He had designated the legally married spouse, from whom he was separated, and his 2 daughters as the beneficiaries of his pension benefits.
The issue before the court was who was entitled to the pre-retirement death benefit: the common law spouse, the legally married spouse in her capacity as "spouse" or the legally married spouse (in her capacity as a designated beneficiary) and the 2 daughters (as the other designated beneficiaries).
The decision depends on the proper interpretation of section 48 of the Pension Benefits Act (Ontario). Section 48 requires the payment of the pre-retirement death benefit to the person who is the member's spouse at the time of the member's death, unless the spouse is living separate and apart from the member on the date of the member's death. If there is no such spouse, the pre-retirement death benefit will be payable to the designated beneficiary or the estate of the member (if there is no designated beneficiary).
Both the trial judge and the Court of Appeal looked at section 48 but came to different conclusions. The trial judge ruled that the common law spouse was entitled to the pre-retirement death benefit as she was living with the member in a conjugal relationship at the time of the member's death.
The Court of Appeal also looked at section 48. However, the court decided that since the member lived separate and apart from the married spouse at the time of death, the pre-retirement death benefit was payable to the designated beneficiaries who happened to be the married spouse and the two daughters.
Although the decision relates to the interpretation of the pre-retirement death benefit provision in the Pension Benefits Act (Ontario), it may have an impact on the interpretation of the provisions governing post-retirement death benefits (which also depends on whether the member has a "spouse" and whether the "spouse" is living separate and apart from the member at the relevant time) and similar death benefit provisions in other provincial pension legislation. Until the uncertainty is resolved by the decision of a higher court, plan administrators need to take extra caution in administering the pension benefits of a member who has died.
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