[1994] 3 .F.C. 361
T-3105-92
The Sovereign Life Insurance Company (Appellant)
v.
Her Majesty the Queen and The Minister of Finance and Superintendent of Financial Institutions (Respondents)
Indexed as: Sovereign Life Insurance Co. (The) v. Canada (T.D.)
Trial Division, Joyal J.—Calgary, December 14, 1993; Ottawa, April 18, 1994.
Practice — Pleadings — Motion to strike — Appeal under Insurance Companies Act, s. 702 from Minister of Finance’s order charging Office of Superintendent of Financial Institutions to take control of appellant — First time s. 702 appeal used — Company wound up, insurance policy liabilities, assets transferred to other companies — Although moot, Court exercising discretion to allow appeal to continue — May resolve issues as to proper steps to take before Minister can issue control order — Appellant may also have claim for damages after determination of appeal — If struck, would render moot any appeal under Insurance Companies Act, given market realities.
Practice — Discovery — Examination for discovery — Motion to compel attendance of witnesses not party to appeal under Insurance Companies Act, s. 702 from Minister of Finance’s order charging Office of Superintendent of Financial Institutions to take control of appellant — Procedural fairness requiring opportunity to examine witnesses even if Rules not permitting examination in statutory appeal — S. 702 appeal first opportunity, like trial, to gather relevant information.
Practice — Discovery — Production of documents — Appeal under Insurance Companies Act, s. 702 from Minister of Finance’s order charging Office of Superintendent of Financial Institutions to take control of appellant — Appellant submitting appeal case not including all relevant documents pursuant to R. 1305 — Appellant having right to all material which will help to prepare its case — If documents listed exist, should be disclosed to assure requirements of R. 1305 met.
Insurance — Motions to strike appeal under Insurance Companies Act, s. 702 from Minister of Finance’s order charging Office of Superintendent of Financial Institutions to take control of appellant — First time s. 702 appeal used — Company wound up, all insurance policy liabilities, assets transferred to other companies — Although moot, Court exercising discretion to allow appeal to continue as may resolve issues as to proper steps before Minister issuing control order.
This was a motion by the appellant for directions, for permission to produce documents, to examine certain witnesses, and to compel the attendance of a witness who was not a party to the proceedings. The respondents sought to have the appeal struck on the ground that the issue between the parties was moot. The appellant appealed under the Insurance Companies Act, section 702 from an order of the Minister of Finance charging the Office of the Superintendent of Financial Institutions to take control of the appellant company because its assets were not sufficient to give adequate protection to its policy holders and creditors, and it would be unable to pay its liabilities as they became due and payable. The Court of Queen’s Bench of Alberta subsequently issued an order declaring the appellant insolvent and ordering its winding-up. It appointed the Superintendent of Financial Institutions provisional liquidator of the appellant’s estate and effects. The Alberta Court later constituted a committee of five former directors of the appellant with power to provide instructions, advice and information for the prosecution of this appeal. All of the insurance policy liabilities and all of the appellant’s assets have been transferred to other insurance companies. The respondents submitted that the issues were academic as there is no insurance business on which the Minister can make a redetermination, since the Superintendent no longer has control of the appellant and the company is in the final stages of being wound-up. The appellant submitted that to declare the appeal moot would give no effect to the appeal provisions of the Insurance Companies Act. It argued that the appeal was not moot because if successful it will allow policy holders, employees and creditors to commence proceedings for potential damage claims. The Minister should not evade review since these types of procedures, in which the appeal cannot be determined until after the winding-up of the company, are bound to arise again.
The appellant submitted that the appeal case did not include all the relevant documents pursuant to Rule 1305. It argued that documents which a party believes to be relevant should be disclosed if there is a reasonable opportunity that it will impair one from answering all issues of its case. The appellant believes that the documents for which it was seeking disclosure were relevant to establish what was relied upon by the Minister before making a decision.
Held, the appeal should not be struck; the motions for disclosure and for discovery of witnesses should be allowed.
If a court determines that the required tangible and concrete dispute has disappeared and the issues have become academic, the case is moot but it may still exercise its discretion to hear the case if the circumstances warrant. Although the matter was moot, the appeal should not be struck. The Alberta Court’s view, that the appeal warranted the appointment of representatives to direct the appeal under the application of the provisional liquidator, should be respected. The appeal may resolve certain issues as to what proper steps must be taken before the Minister can issue a control order. The appellant may also have a claim for damages once the determination of this appeal is made.
Should the appeal be struck, it would render moot any appeal under the Insurance Companies Act. Perhaps the market realities respecting the financial security of policy holders or others were not contemplated by the legislator when an appeal to the Federal Court was provided. These realities dictate that once a control order is issued, damage control be instituted quickly and winding-up follow immediately. As a result, there is no time to perfect the appeal procedure before any challenge becomes moot. A statutory right of appeal should not be abrogated in that fashion.
The appellant had a right to all material which will help to prepare its case. If the documents listed exist, they should be disclosed to assure that the requirements of Rule 1305 have been met.
Procedural fairness required that the appellant have a chance to examine the witnesses. The appeal before this Court was not a regular appeal where a prior trial has occurred. It is the first opportunity, as is the case in a trial, to gather all the relevant information. Considering that no trial has occurred and that this type of appeal pursuant to section 702 is a first, discovery of witnesses as requested by the appellant should be allowed.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Alberta Rules of Court, Alta. Reg. 390/68.
Bank Act, S.C. 1991, c. 46.
Canada Evidence Act, R.S.C., 1985, c. C-5, s. 39.
Cooperative Credit Associations Act, S.C. 1991, c. 48.
Federal Court Rules, C.R.C., c. 663, RR. 2, 5, 457 (as am. by SOR/90-846, s. 15), 1305.
Insurance Companies Act, S.C. 1991, c. 47, ss. 680, 684, 702 (as am. by S.C. 1991, c. 47, s. 702(4)).
Investment Companies Act, R.S.C., 1985, c. I-22.
Office of the Superintendent of Financial Institutions Act, being Part I of the Financial Institutions and Deposit Insurance System Amendment Act, R.S.C., 1985 (3rd Supp.), c. 18.
Trust and Loan Companies Act, S.C. 1991, c. 45.
Winding-up Act, R.S.C., 1985, c. W-11, ss. 160(1) (as am. by S.C. 1991, c. 47, s. 748), 162(3).
CASES JUDICIALLY CONSIDERED
APPLIED:
Palmer et al. v. The Queen, [1980] 1 S.C.R. 759; (1979), 106 D.L.R. (3d) 212; 50 C.C.C. (2d) 193; 30 N.R. 181; Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342; (1989), 57 D.L.R. (4th) 231; [1989] 3 W.W.R. 97; 75 Sask. R. 82; 47 C.C.C. (3d) 1; 33 C.P.C. (2d) 105; 38 C.R.R. 232; 92 N.R. 110; R. v. Werry (1976), 13 N.R. 20 (F.C.A.).
CONSIDERED:
R. v. Stinchcombe, [1991] 3 S.C.R. 326; (1991), 120 A.R. 161; [1992] 1 W.W.R. 97; 83 Alta. L.R. (2d) 193; 68 C.C.C. (3d) 1; 8 C.R. (4th) 277; 130 N.R. 277; 8 W.A.C. 161; Sun Life Assurance Co. of Canada v. Jervis, [1944] 1 All E.R. 469 (H.L.); CTV Television Network Ltd. v. Kostenuk et al., [1972] 3 O.R. 388 (1972), 28 D.L.R. (3d) 180 (C.A.).
MOTION by respondents to strike the appeal under Insurance Companies Act, section 702 as moot, and motions by the appellant for the disclosure of documents and examination of witnesses. Motion to strike dismissed; motions for disclosure and for examination of witnesses allowed.
COUNSEL:
Thomas H. Ferguson and Timothy S. Ellam for appellant.
Terrence Joyce for respondents.
SOLICITORS:
McCarthy Tétrault, Calgary, for appellant.
Deputy Attorney General of Canada for respondents.
The following are the reasons for order rendered in English by
Joyal J.: The matters before me are a series of motions filed on November 4, 1993 and December 6, 1993 on behalf of the appellant, and on November 22, 1993 on behalf of the respondents. The appellant is asking the Court for advice and directions, for permission to produce documents, and to examine certain witnesses, including an individual on behalf of the Minister. It is also requesting the Court to compel the attendance of a witness who is not a party to the proceedings. The respondents on the other hand are praying that the appeal be struck on the grounds that the issue between the parties is moot.
BACKGROUND
On December 23, 1992, the appellant filed an appeal pursuant to section 702 of the Insurance Companies Act, S.C. 1991, c. 47 [as am. by S.C. 1991, c. 47, s. 702(4)], from an order or direction of the Minister of Finance dated December 21, 1992, charging the Office of the Superintendent of Financial Institutions (OSFI) to take control of the appellant company pursuant to section 680 of the Act. The facts which seem to have brought about the appeal are as follows.
The Superintendent of Financial Institutions, is appointed under the Office of the Superintendent of Financial Institutions Act, being Part I of the Financial Institutions and Deposit Insurance System Amendment Act, R.S.C., 1985 (3rd Supp.), c. 18, as amended, with the responsibility for the administration and enforcement of the Insurance Companies Act, the Bank Act [S.C. 1991, c. 46], the Trust and Loan Companies Act [S.C. 1991, c. 45], the Cooperative Credit Associations Act [S.C. 1991, c. 48] and the Investment Companies Act [R.S.C., 1985, c. I-22].
On November 18, 1992 the Superintendent reported to the Minister of Finance, who presides over the OSFI, under subsection 680(1) of the Insurance Companies Act, that the circumstances described in subparagraphs 680(1)(b)(vii) and (ix) existed. Mainly the Superintendent was concerned that the assets of the appellant were not sufficient to give adequate protection to its policy holders and creditors and that Sovereign would not be able to pay its liabilities as they became due and payable.
After many exchanges by correspondence, the Minister directed the Superintendent to take control of the appellant pursuant to paragraph 680(2)(c) of the Insurance Companies Act. The Minister also requested, pursuant to section 684 of the same Act, that the Attorney General apply to the Court of Queen’s Bench of Alberta for an order under the Winding-up Act, R.S.C., 1985, c. W-11, to wind-up the appellant.
On December 23, 1992, the appellant filed the within notice of appeal from the direction of the Minister that the Superintendent take control of the appellant. A supplementary notice of appeal was filed January 8, 1993.
On January 25, 1993, the Court of Queen’s Bench of Alberta issued an order declaring the appellant insolvent pursuant to subsection 160(1) [as am. by S.C. 1991, c. 47, s. 748] of the Winding-up Act and ordered the winding-up of the appellant. The Superintendent of Financial Institutions was appointed provisional liquidator of the estate and effects of the appellant. He was authorized to retain the services of Peat Marwick Thorne Inc. to act as his agent in administering the liquidation of the appellant.
By order dated April 14, 1993, the Court of Queen’s Bench of Alberta, upon an application of the provisional liquidator, constituted a committee composed of five former directors of the appellant with power to provide legal instructions, advice, information and direction to McCarthy, Tétrault for the purpose of prosecuting the within appeal.
On July 15, 1993, pursuant to subsection 162(3) of the Winding-up Act, the Court of Queen’s Bench of Alberta approved the transaction for the proportional reinsurance of the insurance policies of the appellant pursuant to an agreement between Sovereign and Standard Life Assurance Company. Leave to appeal from the order was dismissed by the Alberta Court of Appeal. These transactions were approved by Treasury Board pursuant to section 162 of the Winding-up Act.
The reinsurance transaction with Standard closed on July 31, 1993, effective as of December 21, 1992 and the insurance policies were transferred to Standard. These policies constituted approximately 97% of the appellant’s total policy liabilities.
By order dated July 14, 1993, the Circuit Court for the County of Ingham in the State of Michigan ordered the liquidation of the appellant’s assets in the U.S. and appointed a liquidator. The U.S. insurance policies of Sovereign have been reinsured with Franklin Life Insurance Company.
On December 2, 1993 an agreement was closed between the appellant and Seabord Life Insurance Company for the Canadian policies excluded from the Standard transaction. All of the insurance policy liabilities and all of the assets of the appellant have therefore been transferred to other insurance companies.
ISSUES
The questions before me relate to the production of documents, to the examination of witnesses, and to leave to compel a witness to testify even if he or she is not a party to this claim. The other issue before me is whether this appeal should be struck as it has become moot. I believe that the most logical way to deal with the issues is to start with the motion filed by the respondent as to whether this appeal should be struck. If this is so, there will be no reason to examine the other issues.
FINDINGS
1) Motion to strike as the appeal has become moot
The appellant is seeking to set aside the direction of the Minister of Finance to the Superintendent which reads:
I hereby direct you, pursuant to paragraph 680(2)(c) of the Insurance Companies Act, to take control of the Sovereign Life Insurance Company.
Under an appeal of such direction, the Court has the following powers pursuant to section 702 of the Insurance Companies Act:
702. …
(2) The Federal Court may, in an appeal under subsection (1),
(a) dismiss the appeal;
(b) set aside the direction or decision; or
(c) set aside the direction or decision and refer the matter back for redetermination.
The respondents first of all raise the issue of functus. They argue that the Superintendent, who took control under section 680 of the Insurance Companies Act, lost control when the two orders were made on January 25, 1993 under the Winding-up Act by the Court of Queen’s Bench of Alberta. These orders permitted the Superintendent to take control of the appellant in his capacity as liquidator for the purpose of winding-up the company. The respondents submit therefore that the Superintendent no longer had control of the appellant as a Superintendent under the Insurance Companies Act once the winding-up order was made. Therefore the direction of the Minister, under paragraph 680(2)(c) of the Insurance Companies Act, has been spent so that there is nothing to refer back to the Minister. Setting aside the decision will serve no useful purpose. The appellant is no longer operating as an insurance company since all its insurance policies have been divested.
The respondents rely more on the doctrine of mootness as grounds to quash the appeal. The respondents argue, as stated in Sun Life Assurance Co. of Canada v. Jervis, [1944] 1 All E.R. 469 (H.L.) and CTV Television Network Ltd. v. Kostenuk et al., [1972] 3 O.R. 338 (C.A.), that there has to exist, between parties, actual controversy which the Court undertakes to resolve.
The doctrine of mootness was described by the Supreme Court of Canada in Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, at page 353:
The doctrine of mootness is an aspect of a general policy or practice that a court may decline to decide a case which raises merely a hypothetical or abstract question. The general principle applies when the decision of the court will not have the effect of resolving some controversy which affects or may affect the rights of the parties. If the decision of the court will have no practical effect on such rights, the court will decline to decide the case. This essential ingredient must be present not only when the action or proceeding is commenced but at the time when the court is called upon to reach a decision. Accordingly if, subsequent to the initiation of the action or proceeding, events occur which affect the relationship of the parties so that no present live controversy exists which affects the rights of the parties, the case is said to be moot. The general policy or practice is enforced in moot cases unless the court exercises its discretion to depart from its policy or practice.
The criteria for exercise of the Court’s discretion in moot cases involves a two-step analysis, again, at page 353:
First it is necessary to determine whether the required tangible and concrete dispute has disappeared and the issues have become academic. Second, if the response to the first question is affirmative, it is necessary to decide if the court should exercise its discretion to hear the case. The cases do not always make it clear whether the term “moot” applies to cases that do not present a concrete controversy or whether the term applies only to such of those cases as the court declines to hear. In the interest of clarity, I consider that a case is moot if it fails to meet the “live controversy” test. A court may nonetheless elect to address a moot issue if the circumstances warrant.
The respondents suggest that the issues have become academic as there is no insurance business on which the Minister can make a re-determination, since the Superintendent no longer has control of the appellant and the company is in the final stages of being wound-up.
The appellant’s position is that the appeal is not moot, and submits that the Alberta Court properly appointed a provisional liquidator to control assets of the appellant which include this appeal. The provisional liquidator, who is in fact the OSFI, recommended to the Court of Queen’s Bench that the within appeal proceed. Furthermore, counsel for the Attorney General of Canada did not oppose the order of the Alberta Court which appointed ex-directors to advise counsel for this appeal.
The appellant submits that to declare the appeal moot would give no effect to the appeal provisions of the Insurance Companies Act. Once the control order is issued, all parties will often conclude that it is in the best interest of all parties concerned that winding-up procedures commence. The appeal is not moot since if it is successful, it will allow for policy holders, employees, creditors and others to commence proceedings for potential damage claims.
The appellant suggests that even if the Court should conclude the appeal to be moot, the Court should exercise its discretion to allow the appeal to be heard. It is public interest that a control order be issued in a proper manner. The Minister should not evade review since these types of procedures, in which the appeal cannot be determined until after the winding-up of the company, are bound to re-surface. The appellant acknowledges that the only remedy available to it will be to set aside the decision, but it argues that it will help to determine how the powers under the Act are to be exercised by the Minister and this may open an avenue for a claim in damages.
Although I tend to conclude that this matter in reality is moot, I can not come to the conclusion that the appeal should be struck. The Court of Queen’s Bench of Alberta felt it necessary to appoint representatives to direct this appeal, under the application of the provisional liquidator. I feel I should respect the view that the appeal may resolve certain issues as to what proper steps must be taken before the Minister can issue a control order. The appellant, as it submits, may also have a claim for damages through CompCorp, once the determination of this appeal is made.
Should this appeal be struck, it would render moot, if I may use the term, any appeal under the Insurance Companies Act. Perhaps the market realities respecting the financial security of policy holders or others was not contemplated by the legislator when an appeal to the Federal Court was provided. These realities impose that once a control order is issued, damage control must be instituted quickly and winding-up will follow immediately. As a result, there is no time to perfect the appeal procedure before, as the respondents have put it themselves, any challenge becomes moot. I should not think that a statutory right of appeal should be struck in that fashion.
I will therefore submit my findings on the other issues before me.
2) Production of Documents & Examination of [ho]Witnesses
The appellant submits that the appeal case filed by the respondents does not include all the relevant documents pursuant to Rule 1305 of the Federal Court Rules [C.R.C., c. 663] which provides:
Rule 1305. The appeal shall be upon a case that shall consist (unless, in any case, the interested persons otherwise agree or the Court otherwise orders upon the application of an interested person, the Deputy Attorney General of Canada, or counsel specially appointed to apply on behalf of the tribunal) of
(a) the order or decision appealed from and any reasons given therefor;
(b) all papers relevant to the matter before the tribunal whose order or decision is the subject of the appeal (hereinafter referred to as “the tribunal”) that are in the possession or control of the tribunal;
(c) a transcript of any verbal testimony given during the hearing, if any, giving rise to the order or decision appealed from;
(d) any affidavits, documentary exhibits or other documents filed during any such hearing;
(e) any physical exhibits filed during any such hearing.
The appellant is seeking to have disclosure of the following documents which I transcribe from the annex of the affidavit of Mr. John White:
1. Times and records of all meetings, discussions, phone calls, and comments of the substance thereof including any notes and memos concerning Sovereign Life Insurance Company (“Sovereign”) between the Office of the Superintendent of Financial Institutions (“OSFI”), Department of Justice (“Justice”) and Department of Finance Personnel (“Finance”), The Minister of State (Finance), the Minister of Finance or their exempt staff, the Prime Minister’s Office (“PMO”) or Privy Counsels Office (“PCO”) with members or representatives of:
(a) Canadian Life and Health Insurance Association (“CLHIA”)
(b) CompCorp
(c) Standard Life Assurance
(d) Sun Life Insurance
(e) Sovereign staff
(f) Sovereign Board members or former Board Members
(g) William M. Mercer Ltd.
(h) Peat Marwick Thorne Inc. as Agents of the Provisional Liquidator
(i) Eckler Partners Ltd.
in 1992 and up to including 21 December 1992.
2. Preparatory notes, minutes, and records of any OSFI, CompCorp, Finance, Justice, or Ministerial staff concerning the two meetings with Sovereign Board members and OSFI representatives in Ottawa and Toronto in October and November, 1992.
3. Details of all studies, analyses, and notes prepared by OSFI staff on the issue of commercial mortgage default incidence and severity.
4. Details of all notes to file and attendance at meetings and phone calls of OSFI staff or representatives in connection with the preparation and publication of the CIA/CLHIA and Society of Actuaries commercial mortgage default studies.
5. Details of all studies, analyses, and notes prepared by OSFI, Finance, Justice staff on Sovereign or its representatives which were presented to the Minister of State, and in particular any actuarial opinion or analysis.
6. Production or true copies of all material relating to Sovereign provided to OSFI from Eckler Partners and notes, memos, analyses thereon.
7. Times, records of all meetings, discussions and phone calls between OSFI staff or representatives and the Minister of Finance, Minister of State or findings of the Minister of State, including records of any staff seconded from OSFI to provide advice to either Minister, their staffs or advisors in 1992 on or before 21 December 1992.
8. The monthly status reports provided to the Minister of State by OSFI.
The position of the appellant is that documents which a party believes to be relevant should be disclosed if there is a reasonable opportunity that it will impair one from fully answering all issues of its particular case. This was the test elaborated by the Supreme Court of Canada in R. v. Stinchcombe, [1991] 3 S.C.R. 326. The appellant believes that the documents enumerated above are relevant to establish what was relied upon by the Minister before he made his decision.
The respondents’ position on this issue is that they have already given copies of the relevant documents and have certified this at the end of their appeal case. Except for a few pages inadvertently missing which the respondents have consented to produce, they submit that “there is nothing of substance” to be added.
As to the witnesses, the appellant concedes that the Federal Court Rules may not allow for their examinations in statutory appeals, but submits that this is a unique kind of appeal and the Court should provide for the widest possible latitude to ensure that proper evidence be brought before the Court. The appellant refers to the Rule 5 of the Federal Court Rules for authority that the Court may adopt provincial procedure: the Rules of the Alberta Rules of Court [Alta. Reg. 390/68] allow for the examination of witnesses and production of documents in all proceedings.
The respondents argue that Rule 400 to Rule 507 of the Federal Court Rules, dealing with production of documents and examination for discovery do not apply to appeals but to ordinary actions. For example, Rule 457 [as am. by SOR/90-846, s. 15] provides that a party may examine an adverse party for discovery where “pleadings” are closed. Such “pleading”, defined in Rule 2, means any document whereby an “action” was initiated. The respondents submit that an “action” does not include an appeal.
I believe the appellant has a right to all material which will help to prepare its case. If the documents which are listed above exist, which the respondents have not denied, I believe they should be disclosed to the appellant. This is to assure that the requirements of Rule 1305 have been met. The respondents mentioned that some of the information contained in the documents are subject to solicitor-client privilege or Cabinet confidence or privilege under section 39 of the Canada Evidence Act, R.S.C., 1985, c. C-5. I do not know to which documents the respondents refer and I will grant in any event the motion for disclosure. If the respondents feel that some information should not be produced due to confidence or privilege, they should bring a further motion to this Court to better explain their position.
As to the witnesses, procedural fairness requires that the appellant have a chance to examine them. The appeal before this Court is not a regular appeal where a prior trial has occurred. This appeal is the first opportunity, as is the case in a trial, to gather all the relevant information. Following the principles enunciated in Palmer et al. v. The Queen, [1980] 1 S.C.R. 759 and in R. v. Werry (1976), 13 N.R. 20 (F.C.A.), considering that no trial per se has occurred, and not forgetting that this type of appeal pursuant to section 702 of the Insurance Companies Act is a first, I will allow for the discovery of the witnesses as requested by the appellant.
I would ask counsel to prepare and submit a draft order for my endorsement. Should counsel not come to terms on it, I may be spoken to. In the meantime, I remain seized of the case.