Com. Union Life v. Ingle Ins., (2002) 162 O.A.C. 203 (CA)

• Judge: Weiler, Abella and Goudge, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: August 22, 2002
• Jurisdiction: Ontario
• Citations: (2002), 162 O.A.C. 203 (CA)

Com. Union Life v. Ingle Ins. (2002), 162 O.A.C. 203 (CA)

MLB headnote and full text

Temp. Cite: [2002] O.A.C. TBEd. AU.032

Commercial Union Life Assurance Company of Canada (plaintiff/respondent/appellant by cross-appeal) v. John Ingle Insurance Group Inc., JIIG Holdings Inc. , Ingle Insurance Brokers Inc., HSP Direct Health Insurance Brokers Inc., M.H.I. Brokers Ltd., Insurance Claims Management Systems Inc. , John Dwight Ingle, Steven Michael Overgaard and ICMS Canada Inc. (defendants/appellants/respondents by cross-appeal)

(C35761)

Indexed As: Commercial Union Life Assurance Co. of Canada v. Ingle (John) Insurance Group Inc. et al.

Ontario Court of Appeal

Weiler, Abella and Goudge, JJ.A.

August 22, 2002.

Summary:

The plaintiff underwrote insurance policies associated with the defendants. The plaintiff sued the defendants seeking, inter alia, a declaration that the defendants held premiums and recoveries in trust for the plaintiff. The defendants counterclaimed for funds allegedly owing to them by the plaintiff.

The Ontario Superior Court, in a decision reported at [2000] O.T.C. 650, allowed the action against certain defendants and awarded damages, including $50,000 punitive damages. The court dismissed the counterclaim and awarded costs. The unsuccessful defendants appealed. The plaintiff sought leave to cross-appeal the trial judge's refusal to make a Sanderson or Bullock award respecting the costs awarded against the plaintiff to one successful defendant.

The Ontario Court of Appeal dismissed the appeal and refused leave to cross-appeal.

Company Law - Topic 4187

Directors - Liability of directors - For breach of trust - The Ontario Court of Appeal stated that "For a director of a company to be held personally liable as a 'stranger' under the 'knowing assistance' head of liability, three elements are required: there must be an express trust, a sufficiently grave breach of that trust and knowledge by the stranger that the trust has been breached. The trust may be created by statute or by contract. If the trust is imposed by statute, the director will be deemed to know that a trust existed. If the trust was created by contract, then whether the director knew of the trust will depend on his or her familiarity or involvement with the contract. In addition to actual knowledge of a breach of trust, recklessness or wilful blindness will also suffice ... Constructive knowledge will not suffice ..." - See paragraph 2.

Company Law - Topic 4187

Directors - Liability of directors - For breach of trust - The plaintiff underwrote insurance policies associated with the defendants - The plaintiff sued the defendants seeking, inter alia, a declaration that the defendants held premiums and recoveries in trust for the plaintiff - The trial judge held, inter alia, that the corporate defendant JIIG had committed a breach of trust - Further, the defendant Overgaard, a director of JIIG who had acquired majority, voting and operational control, was personally liable for permitting JIIG to take a "knowingly wrongful risk" that resulted in prejudice to the plaintiff - The Ontario Court of Appeal affirmed the decision - See paragraphs 67 to 75.

Insurance - Topic 402

Agents - General principles - Agent - What constitutes - Section 402(1) of the Ontario Insurance Act provided that "An agent or broker who acts in negotiating, or renewing or continuing a contract of insurance, other than life insurance, with a licensed insurer and who receives any money or substitute for money as a premium for such a contract from the insured, shall be deemed to hold such premium in trust for the insurer ..." - The Ontario Court of Appeal held that, as used in s. 402, "agent" encompassed both licensed and unlicensed agents - Thus, s. 402 deemed premiums to be trust funds in the hands of both licensed and unlicensed agents - See paragraphs 27 to 42.

Insurance - Topic 402

Agents - General principles - Agent - What constitutes - The plaintiff underwrote insurance policies associated with the defendants - The plaintiff sued the defendants seeking, inter alia, a declaration that the defendants held premiums and recoveries in trust for the plaintiff - One defendant, JIIG, which was not a licenced agent, disputed that it fell within the definition of agent under the Ontario Insurance Act - The trial judge found that JIIG performed functions which brought it within the definition of "agent" in the Insurance Act - He found that JIIG had not always used a licenced intermediary, but had itself acted as an agent, by soliciting (through a website), transmitting and negotiating insurance - The Ontario Court of Appeal upheld the decision - See paragraphs 43 to 54.

Insurance - Topic 402

Agents - General principles - Agent - What constitutes - The Ontario Court of Appeal held that, for the purposes of the definition of agent in s. 1(1) of the Insurance Act, R.S.O. 1990, c. I-8, the word "negotiate" meant to agree through communication or discussion and no element of exchange or bargaining was required - See paragraph 52.

Insurance - Topic 1207

The insurance contract - The premium - General - Trusts - [See first Insurance - Topic 402 ].

Insurance - Topic 1207

The insurance contract - The premium - General - Trusts - The plaintiff underwrote insurance policies associated with the defendants - The plaintiff sued the defendants seeking, inter alia, a declaration that the defendants held premiums and recoveries in trust for the plaintiff - On appeal, the defendants argued that the trial judge erred in finding the certainty of intention required for an express trust - The Ontario Court of Appeal dismissed the appeal - The court held that in ascertaining the parties' intention, the trial judge was entitled to take into account evidence of industry practice that premiums were trust funds, the agency relationship and the parties' conduct - The absence of a written confirmation of a trust arrangement in the signed documents was not conclusive - See paragraphs 57 to 65.

Practice - Topic 7155

Costs - Party and party costs - Liability for party and party costs - Bullock order or Sanderson order - Where success divided - The plaintiff obtained judgment for breach of trust and other relief against several members of a group of companies as well as a director of one company - The trial judge, however, declined to make a Sanderson or Bullock award requiring some or all of the unsuccessful defendants to pay the plaintiff's costs respecting MHI, a successful defendant - The trial judge found that, in light of the knowledge that the plaintiff had beforehand, it was not reasonable for it to sue MHI - The Ontario Court of Appeal held that the trial judge did not err in making the order that he did - See paragraph 79.

Trusts - Topic 354

Creation of trust - Intention - Certainty of intention - [See second Insurance - Topic 1207 ].

Trusts - Topic 6153

The trustee - Breach of trust - Liability of stranger to trust - [See both Company Law - Topic 4187 ].

Words and Phrases

Negotiate - The Ontario Court of Appeal held that, for the purposes of the definition of agent in s. 1(1) of the Insurance Act, R.S.O. 1990, c. I-8, the word "negotiate" meant to agree through communication or discussion and no element of exchange or bargaining was required - See paragraph 52.

Cases Noticed:

Air Canada v. M & L Travel Ltd., Martin and Valliant, [1993] 3 S.C.R. 787; 159 N.R. 1; 67 O.A.C. 1, appld. [para. 2].

Citadel General Life Assurance Co. et al. v. Lloyd's Bank of Canada et al., [1997] 3 S.C.R. 805; 219 N.R. 323; 206 A.R. 321; 156 W.A.C. 321, refd to. [para. 2].

MacDonald v. Hauer (1976), 72 D.L.R.(3d) 110 (Sask. C.A.), refd to. [para. 3].

Trilec Installations Ltd. v. Bastion Construction Ltd. (1982), 135 D.L.R.(3d) 766 (B.C.C.A.), refd to. [para. 3].

Transamerica Occidental Life Insurance Co. et al. v. Toronto-Dominion Bank (1998), 60 O.T.C. 11 (Gen. Div.), revd. in part (1999), 118 O.A.C. 149; 44 O.R.(3d) 97 (C.A.), dist. [paras. 30, 32].

Twinsectra Ltd. v. Yardley et al. (2002), 287 N.R. 33 (H.L.), refd to. [para. 73].

Wawanesa Mutual Insurance Co. v. J.A. (Fred) Chalmers & Co. Ltd. et al. (1969), 7 D.L.R.(3d) 283 (Sask. Q.B.), refd to. [para. 74].

Statutes Noticed:

Insurance Act, R.S.O. 1990, c. I-8, sect. 402(1) [para. 27].

Counsel:

Sandra Antoniani, R. Nairn Waterman and Clive Elkin, for the appellant/respondent/appellant by cross-appeal;

Alan J. Lenczner, Q.C., for the defendant/appellants/respondents by cross-appeal, JIIG Holdings Inc., Steven Michael Overgaard and ICMS Canada Inc.

This appeal was heard on May 6 and 7, 2002, by Weiler, Abella and Goudge, JJ.A., of the Ontario Court of Appeal. Weiler, J.A., delivered the following decision for the Court of Appeal on August 22, 2002.