Co-written by: Kim Gale and Palak Mahajan
As we discussed in the first article in this two-part series, the decision of Alger v. Crumb, 2023 ONCA 209 (Alger), by the Ontario Court of Appeal addressed the issue of whether a general revocation clause in a will revokes designated beneficiaries.
In this case the court was faced with two issues:
- Whether the application judge was correct in law by finding that the general revocation clause in the will did not revoke the beneficiary designations as it failed to expressly refer to the prior designations; and
- Whether the decision in Ashton Estate v. South Muskoka Memorial Hospital Foundation, 2008 J. No. 1805 on whether the general revocation clause in a will can revoke a designated beneficiary is correct.
On issue (a), the Court of Appeal observed that it is imperative to understand that a designation must specifically relate to a plan and a revocation must relate expressly to the designation. The court summarized the following propositions of interpretation:
The Succession Law Reform Act (SLRA) prescribes statutory requirements for the designation of a beneficiary by will and for the revocation of the designation by will, which varies from the requirements of revocation and designation by instrument. Specifically, a designation of a beneficiary by will relate expressly, whether generally or specifically, to the plan, while a revocation by will of the designation made by an instrument must relate specifically to the designation (s. 51(1) and s. 52(1) of SLRA).
Firstly, the court interpreted the general revocation clause to determine whether the designation is testamentary in nature. The answer is yes – the designations of beneficiaries by instruments of the RRIF and TFSA plans are testamentary dispositions.
Secondly, the court analyzed whether the revocation was made expressly.
The court noted the following:
- Section 51 of the SLRA sets out the approach to designations in Ontario. Under section 51(1), a participant is able to designate a beneficiary of a benefit payable under a plan on the participant’s death through two mechanisms: (a) a signed instrument, or (b) by will. Where party elects to designate a beneficiary by will, the designation is only effective “if it relates expressly to a plan, either generally or specifically”: SLRA, at s. 51(2). A later designation will revoke an earlier designation where there is inconsistency: SLRA, at s. 52(2).
- Section 52 of the SLRA sets out the approach to revocations in Ontario. Participants may revoke a designation of a beneficiary through the two mechanisms set out above for designations: SLRA, at s. 51(1). However, a revocation in a will is only effective to revoke a designation made by instrument where it relates “expressly to the designation, either generally or specifically”….
At paragraph 25, the court states the following:
- The remaining question is whether the revocation of “all … testamentary dispositions of every nature and kind whatsoever” relates “expressly to the designation, either generally or specifically”. This statutory requirement has two components for the revocation to be effective:
1) it must relate to the designation, as opposed to the plan; and 2) it must relate to the designation “expressly … either generally or specifically”.
At paragraph 25, the court states that the revocation must relate to the designation and not the plan. However, this stance is unclear as at paragraph 16 the court states:
Whereas s. 51(2) requires that a designation by will relate expressly to a plan, s. 52(1) requires that a revocation in a will relate expressly to the designation.
A bare reading of the remarks in paragraph 16 indicates that the revocation clause needs to mention both the designation and plan. However, paragraph 25 states that a revocation clause must include the designation and not the plan. This aspect of the judgment is ambiguous and needs clarification.
The Court of Appeal considered that “expressly” must mean something beyond a general category. Justice Kathryn Feldman referred to the thesaurus feature of Microsoft Word to support her conclusion and lay down the synonyms of “expressly.” All the synonyms support the conclusion that reference to a general category that includes the thing to be referred to is not an express reference to that thing.
After due deliberation, it was held that as the general revocation clause in the testator’s will does not relate expressly to the beneficiary designations made by the testator for her RRIF and TFSA plans, it does not comply with s. 52(1) of SLRA. As such, the general revocation clause was held to be not effective to revoke the designations of beneficiaries by instrument(s) of the RRIF and TFSA plans.
Issue (b): The second issue before Court of Appeal was whether the decision in Ashton Estate regarding the effectiveness of a general revocation clause in a will is correct.
The application judge chose to not rely upon the decision in Ashton Estate on the basis that the decision is “plainly wrong” (R v. Scarlett, 2013 ONSC 562, at para. 43).
The Court of Appeal in the decision of Alger held that court in Ashton Estate erred in finding that the clause in that case constituted an effective revocation of the earlier designation by instrument. It was observed that the application judge in Ashton Estate did not discuss the requirement that the revocation clause must relate expressly to the designation, whether generally or specifically.
Resultantly, the application judge in Alger was correct in finding that the interpretation of the general revocation clause in Ashton Estate should not be followed.
The Court of Appeal did, however, give a caveat that the result in Ashton Estate nevertheless appears to be correct under the provisions of SLRA, in the facts and circumstances of the case.
The decision in Alger has reaffirmed and reinstated the statutory requirements for designation and revocation by way of will and instrument. The judgment functions as a code to be followed in the contentious issues that might arise before the other courts from time to time.
This is the second in a two-part series. Read the first article: General revocation clauses and designated beneficiaries, part one.
This article was originally published by Law360 Canada part of LexisNexis Canada Inc.