London Life Insurance Co. v. Minister of National Revenue, 2013 FC 93

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Federal Court (Canada)
• Judge: Beaudry, J.
• Citation: 2013 FC 93,(2013), 424 F.T.R. 295 (FC)
• Date: 24 January 2013

London Life v. MNR (2013), 424 F.T.R. 295 (FC)

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: [2013] F.T.R. TBEd. FE.017

In The Matter Of the Income Tax Act;

And In The Matter Of an Assessment or Assessments by the Minister of National Revenue under one or more of the Income Tax Act, the Canada Pension Plan, the Employment Insurance Act.

London Life Insurance Company (moving party/garnishee) v. Her Majesty The Queen (respondent/judgment creditor) and Projexia Conseils Inc. (judgment debtor)

(ITA-7879-11; 2013 CF 93; 2013 FC 93)

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

Federal Court

Beaudry, J.

January 30, 2013.

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 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.

Courts - Topic 2583

Registrars and prothonotaries - Appeals from - Scope of review - An insurer appealed garnishment orders made by a Prothonotary which required it to pay out the cash surrender value of 11 insurance policies to the Minister of National Revenue as a judgment creditor of the beneficiary of the policies - The Federal Court set out the standard of review of a Prothonotary's decision: "Discretionary orders of prothonotaries ought not be disturbed on appeal to a judge unless: (a) the questions raised in the motion are vital to the final issue of the case, or (b) the orders are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts" - The court stated that "in the present case, the impugned orders are clearly determinative of any final issue in the case because, unless they were appealed, there would be no further litigation between the parties: [the insurer] would be obliged to pay out the insurance policies' surrender value to the [Minister]. The court must therefore conduct an analysis de novo." - See paragraphs 31 to 36.

Income Tax - Topic 9233

Enforcement - Collection - Garnishment - Third party demand - Property affected - 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, 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 - See paragraphs 37 to 87.

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 - See paragraphs 19 to 30.

Cases Noticed:

Perron-Malenfant v. Poliquin, [1999] 3 S.C.R. 375; 244 N.R. 350, refd to. [para. 12].

Minister of National Revenue v. Steckmar Corp. (2004), 260 F.T.R. 209; 2004 FC 581, refd to. [para. 13].

Crown Life Insurance Co. v. Perras, [1953] B.R. 659, refd to. [para. 19].

Bel-Fran Investments Ltd. v. Pantuity Holdings Ltd., [1975] B.C.J. No. 1150 (S.C.), refd to. [para. 20].

Ramgotra (Bankrupt), Re, [1996] 1 S.C.R. 325; 193 N.R. 186; 141 Sask.R. 88; 114 W.A.C. 88, refd to. [para. 22].

Royal Bank of Canada v. North American Life Insurance Co. - see Ramgotra (Bankrupt), Re.

Minister of National Revenue v. National Trust Co. (1998), 229 N.R. 3 (F.C.A.), refd to. [para. 22].

DeConinck v. Royal Trust Corp. of Canada, [1989] 1 C.T.C. 179; 90 N.B.R.(2d) 321; 228 A.P.R. 321 (C.A.), refd to. [para. 22].

Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425; 149 N.R. 273 (F.C.A.), refd to. [para. 31].

Merck & Co. et al. v. Apotex Inc. (2004), 315 N.R. 175; 2003 FCA 488, refd to. [para. 31].

White (Peter G.) Management Ltd. v. Canada (2007), 314 F.T.R. 284; 2007 FC 686, refd to. [para. 34].

Ridgeview Restaurant Ltd. v. Canada (Attorney General) et al. (2010), 368 F.T.R. 255; 2010 FC 506, refd to. [para. 35].

Maritime Life Assurance Co. v. Minister of National Revenue, [1997] 3 C.T.C. 2561, refd to. [para. 56].

Delaire v. Delaire (1996), 147 Sask.R. 161(Q.B.), refd to. [para. 56].

Bliss, Kirsh and Doyle et al., Re, [1983] O.J. No. 3247, refd to. [para. 56].

Choken v. Lake St. Martin Indian Band (2004), 324 N.R. 384; 2004 FCA 248, refd to. [para. 58].

Bank of Nova Scotia v. Robson, [1987] O.J. No. 1693, refd to. [para. 60].

Ministre du Revenu national v. Entreprises forestières P.S. Inc. et al. (2004), 326 N.R. 152; 2004 FCA 91, refd to. [para. 61].

Piccott v. Minister of National Revenue (2004), 326 N.R. 177; 2004 FCA 291, refd to. [para. 61].

Canada (Procureur général) v. Caisse populaire d'Amos et al. (2004), 324 N.R. 31; 2004 FCA 92, refd to. [para. 61].

Canada v. Bidner, 1984 FCA 1114, refd to. [para. 62].

Alberta (Provincial Treasurer) v. Minister of National Revenue and Hutterian Brethren Church of Smoky Lake et al. (1980), 22 A.R. 317; 80 D.T.C. 6228 (C.A.), refd to. [para. 63].

Gero, Re (1979), 79 D.T.C. 5228 (F.C.T.D.), refd to. [para. 65].

Robitaille v. Hins-Dion and New York Life Insurance Co., [1979] 1 S.C.R. 359; 30 N.R. 66, refd to. [para. 69].

Minister of National Revenue v. Steckmar Corp. (2004), 280 F.T.R. 10; 2004 FC 1568, refd to. [para. 76].

Authors and Works Noticed:

Norwood, David, and Weir, John P., Norwood on Insurance Law (3rd Ed. 2002), generally [para. 59].

Counsel:

Louis Sébastien and Dominique Castagne, for the judgment creditor;

Denis A. Lapierre and Isabelle N. Tremblay, for the garnishee, London Life.

Solicitors of Record:

William F. Pentney, Deputy Attorney General of Canada, Montreal, Quebec, for the judgment creditor;

Sweibel Novek LLP, Montreal, Quebec, for the garnishee, London Life.

This appeal was heard on January 24, 2013, at Montreal, Quebec, before Beaudry, J., of the Federal Court, who delivered the following judgment in both official languages on January 30, 2013.