London Life Insurance Co. v. Minister of National Revenue

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Court of Appeal (Canada)
• Judge: Blais, C.J., Gauthier and Mainville, JJ.A.
• Citation: (2014), 461 N.R. 138 (FCA),2014 FCA 106
• Date: 29 April 2014

London Life v. MNR (2014), 461 N.R. 138 (FCA)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2014] N.R. TBEd. MY.004

London Life, Compagnie d'assurance-vie (appelante) v. Sa Majesté la Reine du Chef du Canada (intimée) et Projexia Conseil Inc. (tierce partie)

(A-84-13; 2014 FCA 106; 2014 CAF 106)

Indexed As: London Life Insurance Co. v. Minister of National Revenue

Federal Court of Appeal

Blais, C.J., Gauthier and Mainville, JJ.A.

April 29, 2014.

Summary:

A company (Projexia) owed Revenue Canada over $1.25 million plus interest. The Minister of National Revenue filed a certificate under s. 223 of the Income Tax Act, creating a judgment debt. Projexia's sole director and shareholder was Bologna. Projexia's only assets were 11 life insurance policies on Bologna's life naming Projexia the beneficiary. The Minister obtained interim and final garnishment orders from a Prothonotary, which required the insurer (London Life) to pay the cash surrender value of the 11 policies to the Minister. The insurer appealed under rule 51 of the Federal Court Rules. The insurer argued, alternatively, that a new order be made such that any amount due became due only when the insured risk materialized (Bologna died) or when Projexia requested the cash surrender value of the policies. A preliminary issue arose as to the insurer's standing to challenge the Prothonotary's order, where Projexia was not challenging the order to surrender the policies.

The Federal Court, in a judgment reported (2013), 424 F.T.R. 295, dismissed the appeal. The insurer had no standing to appeal the order requiring it to pay the surrender value of the policies. In any event, on the merits, the Minister was entitled to the cash surrender value of the 11 policies. The insurer appealed.

The Federal Court of Appeal dismissed the appeal. Notwithstanding that the insurer had standing to challenge the garnishment on the grounds of the absence of indebtedness and absence of a creditor-debtor relationship between it and Projexia or the Minister, the trial judge did not err in finding that the Minister was entitled to the cash surrender value of the policies.

Income Tax - Topic 9233

Enforcement - Collection - Garnishment - Third party demand - Property affected - A Quebec company (Projexia) owed Revenue Canada over $1.25 million plus interest - The Minister of National Revenue filed a certificate under s. 223 of the Income Tax Act, creating a judgment debt - Projexia's sole director and shareholder was Bologna - Projexia's only assets were 11 life insurance policies on Bologna's life naming Projexia the beneficiary - The Minister obtained interim and final garnishment orders from a Prothonotary, requiring the insurer to pay out the cash surrender value of the policies to it - The insurer appealed the garnishment orders - The Federal Court, considering the matter de novo, dismissed the appeal - All rights under the insurance policy were seizable and the Minister, as judgment creditor, was entitled to enforce the surrender rights under the policy - The Minister was not required to physically seize the policies as a precondition to requesting payment of the cash surrender value - The court rejected the insurer's argument that Federal Courts Rule 449(1)(a)(i) could not be relied on where Projexia did not yet have a debt owing or accruing from the insurer (i.e., nothing to be garnisheed) - Service of the garnishment demand was equivalent to a request to pay out the cash surrender value, creating a debt payable on demand which was immediately due - The garnishment was justified - The court also rejected the insurer's argument that "the consequences for the life insurance industry in Quebec will be disastrous, in that all life insurance policies will have to be reviewed and amended" - This argument did not bar the Minister from using garnishment to recover its debt from Projexia - The Federal Court of Appeal affirmed that the Minister was entitled, upon written request, to the surrender value of the insurance policies, as a creditor was entitled to garnish the cash surrender value of a life insurance policy that was seizable under the Civil Code of Quebec - See paragraphs 27 to 72.

Insurance - Topic 7190

Life insurance - Cash surrender value - Seizure or garnishment - [See Income Tax - Topic 9233 ].

Practice - Topic 8893

Appeals - Parties - Standing to appeal - A company (Projexia) owed Revenue Canada over $1.25 million plus interest - The Minister of National Revenue filed a certificate under s. 223 of the Income Tax Act, creating a judgment debt - Projexia's sole director and shareholder was Bologna - Projexia's only assets were 11 life insurance policies on Bologna's life naming Projexia the beneficiary - The Minister obtained interim and final garnishment orders from a Prothonotary, which required the insurer (London Life) to pay the surrender value of the 11 policies to the Minister - The insurer appealed under rule 51 of the Federal Courts Rules - Projexia did not appeal - A preliminary issue arose as to the insurer's standing to challenge the Prothonotary's order - The Federal Court held that the insurer lacked standing to appeal the garnishment orders - The court stated that "whether it is the judgment debtor (Projexia) or the judgment creditor [MNR] who requests the surrender of the insurance policies, for [the insurer], the outcome is the same; surrender is requested and the policies are cancelled. [The insurer] therefore cannot submit that it will suffer damage, because in either case, it must pay out the surrender value. ... Finally, as regards [the insurer's] written submission that payment of the surrender value will result in the cancellation of the insurance policies, which will have significant financial consequences for the insured person by preventing her from taking out similar insurance policies in the future, the court is of the opinion that [the insurer] is pleading in another's name and does not have the required standing to make this argument" - The insurer lacked a sufficient interest in the case for it to have standing - The Federal Court of Appeal held that the insurer had standing to appeal the garnishment orders - See paragraphs 22 to 26.

Quebec Nominate Contracts - Topic 4605

Insurance - Life insurance - Exemption from seizure - [See Income Tax - Topic 9233 ].

Cases Noticed:

Perron-Malenfant v. Poliquin, [1999] 3 S.C.R. 375; 244 N.R. 350, refd to. [para. 10].

Minister of National Revenue v. Steckmar Corp. (2004), 260 F.T.R. 209; 2004 FC 581, refd to. [para. 11].

Crown Life Insurance Co. v. Perras, [1953] B.R. 659 (Que. Q.B.), refd to. [para. 14].

Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425; 149 N.R. 273 (F.C.A.), refd to. [para. 16].

Merck & Co. et al. v. Apotex Inc. (2004), 315 N.R. 175; 2003 FCA 488, refd to. [para. 16].

Canada v. Bidner, [1984] F.C.J. No. 1114 (C.A.), refd to. [para. 19].

Pompey (Z.I.) Industrie et al. v. Ecu-Line N.V. et al., [2003] 1 S.C.R. 450; 303 N.R. 201; 2003 SCC 27, refd to. [para. 21].

Apotex Inc. v. Bristol-Myers Squibb Co. et al. (2011), 414 N.R. 162; 2011 FCA 34, refd to. [para. 21].

Ministre du Revenu national v. Millette, [2002] F.T.R. Uned. 324; 2002 FCT 433 (T.D.), refd to. [para. 26].

Canada v. Mauro, [1984] F.C.J. No. 141, refd to. [para. 26].

Borden Ladner Gervais v. Lamarche, 2002 CanLII 27580 (Que. C.Q.), refd to. [para. 48].

Langlois v. Jean, 2002 CanLII 35234 (Que. C.S.), refd to. [para. 51].

F.S. v. J.B., [1995] J.Q. No. 335 (F.S.), refd to. [para. 52].

Ministre du Revenu national v. Waldteufel (1995), 118 F.T.R. 133 (T.D.), refd to. [para. 52].

Edward v. Reinblatt, [1996] J.Q. No. 4416, refd to. [para. 52].

Investissements Étrusques Inc. v. Frato Construction Inc., [1988] R.D.J. 44 (Que. C.A.), refd to. [para. 59].

Ministre du Revenu national v. Gadbois et al. (2002), 298 N.R. 374; 2002 FCA 228, refd to. [para. 62].

Minister of National Revenue v. Maritime Life Assurance Co. (1999), 258 N.R. 139 (F.C.A.), dist. [para. 66].

Bel-Fran Investments Ltd. v. Pantuity Holdings Ltd. (1975), 62 D.L.R.(3d) 140 (B.C.S.C.), refd to. [para. 68].

Authors and Works Noticed:

Belleau, Charles, Précis de procédure civile due Québec (4th Ed. 2003), vol. 2, p. 263 [para. 60].

Jobin, Pierre-Gabriel, Vézina, Nathalie, Les Obligations (7th Ed. 2013), pp. 1093 [para. 35]; 1094, para. 887 [para. 31]; 1095 [para. 35].

Karim, Vincent, Les obligations (2nd Ed. 2002), vol. 2, p. 573 [para. 31].

Lafond, Pierre-Claude, Précis de droit des biens (2nd Ed. 2007), p. 35, para. 72 [para. 58].

Norwood, David, and Weir, John P., Norwood on Insurance Law (3rd Ed. 2002), generally [para. 33].

Counsel:

Denis A. Lapierre, Élizabeth Robichaud and Isabelle Tremblay, for the appellant;

Louis Sébastien, for the respondent;

No one appearing for the third party, Projexia Conseil Inc.

Solicitors of Record:

Sweibel Novek L.L.P., Montreal, Quebec, for the appellant;

William F. Pentney, Deputy Attorney General of Canada, for the respondent.

This appeal was heard on March 19, 2014, at Montreal, Quebec, before Blais, C.J., Gauthier and Mainville, JJ.A., of the Federal Court of Appeal.

On April 29, 2014, Gauthier, J.A., delivered the following judgment for the Court of Appeal.