Foresters Life Insurance Company v Alberta (Superintendent of Insurance), 2016 ABQB 25

Court of Queen ’ s Bench of Alberta Citation: Foresters Life Insurance Company v Alberta (Superintendent of Insurance), 2016 ABQB 25 Date: 20160114 Docket: 1401 12104 Registry: Calgary Between: Foresters Life Insurance Company Applicant - and - Alberta Superintendent of Insurance, Alberta Treasury Board and Finance, Her Majesty the Queen In Right of Alberta and the Minister of Finance Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J. Strekaf _______________________________________________________ I.

Introduction [ 1 ] Foresters Life Insurance Company (formerly Unity Life of Canada ) (“Foresters”) is applying for judicial review of a May 14, 2014 decision by the Superintendent of Insurance to issue a Notice of Administrative Penalty No. 14.35-2014-004 requiring Foresters to pay an administrative penalty of $50,000 (“Notice”).

The Notice was in relation to compensation paid by Foresters to Varion Capital Corporation (“Varion”) for insurance sales by Varion when it did not have a valid and subsisting certificate of authority between July 1, 2007 and October 7, 2009 and between October 10, 2009 and February 10, 2010. Foresters submits that the Superintendent lacked jurisdiction to issue the Notice and that the Notice is statute-barred. [ 2 ] The Superintendent is participating in this application for the limited purpose of making submissions on the standard of review, the

interpretation of the legislation to address whether he had jurisdiction to issue the Notice and the application of the limitation provisions. The Superintendent takes no position on this Court’s review of the merits of his decision. II. Relevant Facts [ 3 ] The following facts are taken from the Agreed Statement of Facts. [ 4 ] The Insurance Act , RSA 2000, c I-3, as amended, includes provisions (ss 791, 498(

m) and 494) with respect to which powers, duties or functions of the Minister may be delegated.

[ 5 ] The Alberta Insurance Council (the “AIC”) was delegated specified powers, duties and functions of the Minister in the Insurance Councils Regulation , Alta Reg 126/2001, s 10, including inter alia , the powers, duties and functions: • To investigate complaints from persons with respect to insurance companies and to come to a resolution or disposition of those complaints; and • To investigate complaints on behalf of councils from any persons regarding alleged contraventions of the Insurance Act or the regulations by holders of certificates of authority and to come to a resolution or disposition of those complaints. [ 6 ] On September 1, 2001, two directives from the Minister came into effect: Minister of Finance directive 05/01 (the “05/01 Directive”) and Minister of Finance Directive 06/01 (the “06/01 Directive”).

Pursuant to the 05/01 Directive, the Minister delegated specified powers, duties and functions to the AIC, including those set out in the Insurance Councils Regulation . Pursuant to the 06/01 Directive, the Minister delegated all of the powers, duties and functions conferred or imposed on her under the Insurance Act and its regulations to the Superintendent, except for, inter alia , the powers, duties and functions delegated to insurance councils. [ 7 ] Effective April 1, 2011, the AIC’s power to investigate complaints from persons with respect to insurance companies was repealed.

This was accompanied by the repeal of s. 10(1) (

i) of the Insurance Councils Regulation by the Insurance Councils Amending Regulation , Alta Reg 148/2011, s 2. [ 8 ] Additionally, a protocol agreement was entered into between the Superintendent and AIC on March 10, 2011 (the “Protocol Agreement”), which included provisions, inter alia , • allowing the AIC to continue to handle existing complaints opened prior to April 1, 2011 and come to a resolution of those complaints, and • stating that where either party determines during the handling of an inquiry or complaint that the inquiry or complaint involves a matter within the authority of the other party, the party handling the inquiry or complaint will immediately cease its involvement in that portion of the inquiry or complaint and immediately take steps to refer that matter, including relevant information and documentation, to the other party. [ 9 ] On or about August 9, 2009, the AIC received an undated and unsigned letter advising it “… that Lease Link does not maintain an active Restricted Permit while offering creditors group insurance plans of Unity Life”. [ 10 ] After receipt of that letter, the AIC opened case #65906 against Bingham Group Services Corp., Lease Link and Varion.

It was subsequently determined that Varion, not Lease Link, was selling credit-related insurance policies offered by Unity Life. [ 11 ] On March 29, 2011, the AIC wrote to Unity Life requesting information and clarification on who was selling Unity Life’s policies and receiving compensation for such, “with a view to ensuring compliance with the Act and/or Regulations by Unity Life and the above parties”. [ 12 ] On March 30, 2011, the AIC opened case #66766 against Unity Life, summarized as “compensated unlicensed agency from July 1/07 to October 7/09”. [ 13 ] In a letter dated April 14, 2011 from Unity Life to the AIC, Unity Life confirmed that Varion had been compensated by it for sales of Unity Life’s credit-related policies in Alberta. [ 14 ] On April 16, 2012, the AIC issued a decision against Varion in case #65906 (the “AIC Decision”), finding breach of s. 452(1) of the Insurance Act by Varion through insurance sales when it did not have a valid and subsisting certificate of authority, and imposing a penalty. [ 15 ] On May 15, 2012, the AIC transferred to the Superintendent “the complete file #66766” regarding compensation of an unlicensed restricted agent by Unity Life. [ 16 ] Between September and November of 2012, the Superintendent and Foresters exchanged emails regarding, inter alia , the commissions paid to Varion by Unity Life between 2007 and 2010 when Varion did not possess a valid and subsisting certificate of authority and what measures Foresters had taken to prevent similar situations in the future. [ 17 ] On April 9, 2014, the Superintendent provided notice to Foresters that it was considering whether Unity Life had contravened ss. 452(5) and 499(1) of the Insurance Act by payment of commissions to Varion during the periods July 1, 2007 to October 7, 2009 and October 8, 2009 to February 01, 2010 while Varion did not have a proper certificate of authority to conduct insurance business (the “Alleged Breaches”), and invited Foresters to make written submissions regarding same. [ 18 ] On April 25, 2014, Foresters provided its written submissions to the Superintendent regarding the Alleged Breaches. [ 19 ] On May 8, 2014, the Superintendent issued the Notice to Foresters.

III. Issues [ 20 ] There are two issues to be determined on this application: 1. Did the Superintendent have the delegated authority from the Minister to issue the Notice to Foresters? 2. Was the Notice issued within the limitation period contemplated in s. 789(3) of the Insurance Act ?

IV. Standard of Review [21] The parties agree that the standard of review is correctness on the first issue and reasonableness on the second issue. V. Analysis 1. Did the Superintendent have the delegated authority from the Minister to issuethe Notice to Foresters? [22] Foresters submits that the AIC, rather than the Superintendent, had jurisdiction to deal with this issue.

The Superintendentsubmits that the power to issue administrative penalties has been delegated to it since 2001 as the legislation does not permit thedelegation of this jurisdiction to the AIC. [23] Section 789(1) of the Insurance Act deals with administrative penalties. It provides: 789(1) Where the Minister is of the opinion that a person has contravened a prescribed provision of this Act or the regulations or hascontravened a written procedure established by the Superintendent under

section 604 or an order under section 610(2), the Minister mayby notice in writing given to that person require that person to pay to the Government an administrative penalty by a date specified in thenotice in the amount set out in the notice for each day or part of a day the contravention occurs or continues. [24]

Section 791 of the Insurance Act, which permits the Minister to delegate any of his powers or function to any person,expressly provides in subs. 791(3) that “the only powers, duties and functions that the Minister may delegate to an insurance council arespecified under

section 498(m)”.

Section 498(

m) states: 498 The Lieutenant Governor in Council may make regulations …(

m) authorizing the Minister to delegate any of the Minister’s powers,duties or functions under this Part or the regulations under this Part and sections 794 and 795 to any of the insurance councils,establishing the restrictions on and limitations of any such delegation and otherwise respecting any such delegated powers, duties andfunctions; [25]

Section 498 is contained in

Part 3 of the Insurance Act, which deals with Insurance Agents and Adjusters.

Sections 794 and795 deal with the Insurance Register. [26] As there is no statutory jurisdiction to delegate the power to impose administrative penalties to the AIC and as the Minister byDirective No 06/01 delegated to the Superintendent all powers except those delegated to the AIC, the Life Insurance Council and theInsurance Adjusters’ Council (plus some other exceptions not relevant to this issue), the jurisdiction to impose administrative penaltieswas granted to the Superintendent. [27] The scope of the delegation to the AIC in Directive 05/01 must be interpreted in the context of legislative framework.

As aresult, the delegation to the AIC of the power “To investigate complaints from persons with respect to insurance companies and to cometo a resolution or disposition of those complaints” should not be viewed as including the ability to impose administrative penalties. Onlythe Superintendent had the jurisdiction to issue a Notice of Administrative Penalty under the Insurance Act. 2.

Was the Notice issued within the limitation period contemplated in s. 789(3) ofthe Insurance Act? [28] Moldaver J described the purpose of limitation periods in McLean v BC (Securities Commission), 2013 SCC 67, 3 SCR 895at para 63: … Limitations periods exist for good reasons, two of which deserve mention here. First, "[t]here comes a time ... when a potentialdefendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations" (M. (K.)v. M. (H.), (SCC), [1992] 3 S.C.R. 6, at p. 29).

Second, at some point "[i]t is better that the negligent [plaintiff], who hasomitted to assert his right within the prescribed period, should lose his right, than that an opening should be given to interminablelitigation" (Cholmondeley v. Clinton (1820), 2 Jac. & W. 1, 37 E.R. 527, at p. 577; see also M. (K.), at p. 30). [29] Section 789(3) of the Insurance Act states: A notice of an administrative penalty must not be issued after 2 years from the later of (

a) the date on which the contravention to which the notice relates occurred, and (

b) the date on which evidence of the contravention first came to the attention of the Minister. [30] Foresters submits that the issuance of the Notice of Administrative Penalty on May 8, 2014 is statute-barred as it was issuedmore than two years after the date on which the contravention occurred (July 1, 2007 – February 1, 2010) and the date on whichevidence of the contravention first came to the attention of the Minister. Foresters submits that evidence of its alleged breach came to theattention of the Minister, through her statutory delegate the AIC: 1.

On or about August 2007, when the anonymous complaint was made to the AIC that “Lease Link does not maintain an activeRestricted Permit while offering creditors group insurance plans of Unity Life”;

2. At some point in the course of its investigation, at least by April 14, 2011 when Unity Life responded to the AIC’s letter dated March 29, 2011, acknowledging that it was compensating Varion during the relevant time period; or 3.

At the very latest, on April 16, 2012, when the AIC issued a decision against Varion, finding that it had breached s. 452(1) of the Insurance Act based on insurance sales by Varion when it did not have a valid and subsisting certificate of authority and stating that Brock Campbell, Unity Life’s Vice President Marketing confirmed in a letter dated April 14, 2011 that Varion was selling credit-related policies and was compensated by Unity Life for acting in this capacity. [ 31 ] The Superintendent does not take the position that the Minister must personally have actual knowledge of the contravention having regard to what has come to be known as “the Carltona principle”, that is, that matters entrusted by statute to a Minister of the Crown can be done by the Minister’s duly authorized representatives: Carltona Ltd v Commissioners of Works et al , [1943] 2 All ER 560 .

Instead, he submits that it must be established that the Superintendent, who was delegated the authority to issue a Notice by the Minister, had knowledge of the contravention.

The Superintendent submits that knowledge of a contravention by the AIC is not sufficient and that his office received evidence of the contravention only on May 15, 2012 when the AIC transferred its file to the Superintendent. [ 32 ] For the purpose of this decision, I need not decide precisely when the Minister can be viewed as having received evidence of the contravention as I am satisfied that the Minister had that information at least by April 12, 2012 when the AIC issued its decision.

It is not the fact that the decision was issued publicly that leads to my conclusion that the Minister should be viewed as having that information. Rather, it is the fact that the AIC, in issuing a decision in its capacity as a delegate on behalf of the Minister, clearly outlines evidence in its possession of a contravention of the Insurance Act by Foresters. [ 33 ] This is not a situation where evidence of the contravention had come to the attention of someone to whom the Minister had delegated authority to do an entirely unrelated activity, for example, someone in the Department of Health under the Health Act .

In this case, the Minister elected in 2001 to delegate his authority under the Insurance Act to deal with complaints partly to the AIC and partly to the Superintendent and, in 2011, to modify how that authority was divided. There would clearly be some areas of overlap, as expressly acknowledged in the Protocol Agreement. [ 34 ] The AIC did not refer the matter to the Superintendent until May 15, 2012, almost three years after it received the original complaint that gave rise to the investigation and more than a year after it received correspondence from Unity Life essentially admitting the contravention.

The Notice was issued on May 12, 2014, almost two years later. Under the Superintendent’s

interpretation that the limitation period would not start to run until the file was referred to his office, this was three days before the limitation period expired. Under this

interpretation, the limitation period could be extended indefinitely if there was delay in referring the matter to the Superintendent despite a full investigation having been conducted into the matter by the AIC (to which the Minister had delegated authority to look into complaints against insurance companies). [ 35 ] I conclude that the Notice was issued more than two years after notice of the contravention came to the attention of the Minister, through notice to her delegate the AIC, beyond the limitation period contemplated in s. 789(3) of the Insurance Act . [ 36 ] Conclusion [ 37 ] The application for judicial review is granted.

The Notice is set aside and the amount of $50,000 made payable to the Superintendent is to be returned forthwith. [ 38 ] If the parties are unable to agree on how costs should be addressed, they are at liberty to provide me with their written submissions within 45 days. Heard on the 4 th day of November, 2015. Dated at the City of Calgary, Alberta this 14 th day of January, 2016. J. Strekaf J.C.Q.B.A. Appearances: Bruce Churchill-Smith, Q.C., Borden Ladner Gervais LLP for the Applicant

Jo-Ann Burgess, Alberta Justice and Solicitor General for the Respondents