COURT OF APPEAL FOR ONTARIO
McMURTRY, C.J.O., CATZMAN and ROSENBERG JJ.A.
B E T W E E N :
GEORGE ZICHERMAN
Paul J. Pape for the appellant
Plaintiff (Appellant)
- and -
THE EQUITABLE LIFE INSURANCE COMPANY OF CANADA
Defendants
Marc J. Somerville, Q.C. Ross F. Earnshaw and Sherry A. Currie for the respondent
(Respondents)
Heard: November 5 & 6, 2002
On appeal from the Order of the Divisional Court (McRae, Then and Day JJ.), dated December 14, 2001, dismissing the appeal of the appellant from the Order of Ferrier J. dated October 25, 2000.
1This is one of two appeals heard by this court that raise issues concerning the certification of class proceedings where the claim is principally based upon allegations of negligent misrepresentation in the marketing of insurance policies. As in the companion appeal, Kumar v. The Mutual Life Assurance Company and Prudential Assurance Company Limited, the appellant claims that he was misled as to the nature of so-called vanishing premium or premium offset feature of his whole life policy.
2Ferrier J. refused to certify the action as a class proceeding under the Class Proceedings Act, 1992, S.O. 1992, c.6. He. relied in part on the decision of Cummings J. in the Kumar case. The appeals from these orders were heard together by the Divisional Court. McRae J. writing for the Divisional Court in reasons reported at (2001), 2001 62770 (ON SCDC), 17 C.P.C. (5th) 103 dismissed the appeals. For the following reasons I would dismiss the appeal.
THE FACTS
3The appellant Dr. George Zicherman is the proposed representative plaintiff. He is a dentist with a practice in Toronto. He is married and has three children. In March 1988, at the age of 33, he purchased a $300,000 whole life insurance policy from an agent for the respondent Equitable Life Insurance Company of Canada.
4Before purchasing the policy, the appellant met with Equitable agent Tibor Izsak. The appellant alleges that during the sales presentation, Izsak assured him that after he paid premiums for 10 to 12 years, no further annual premiums would be required. Thereafter, the premiums would be paid automatically through the policy paid dividends. I have described the nature of this premium offset or vanishing premium feature of whole life policies in the reasons in Kumar that are being released with these reasons.
5The appellant claims that Izsak presented him with computer-generated charts demonstrating how the premium offset would operate. Izsak further assured the appellant that while the dividends were not guaranteed, Equitable had an impeccable track record and would have no problem meeting or surpassing the projected dividends. The appellant submits that this was a core misrepresentation.
6Relying on the evidence given by the appellant on cross-examination, the respondent alleges that the appellant was fully aware that the dividend amounts and the cross-over dates were not guaranteed. It says that the appellant knew the document was an illustration of what might happen given certain assumptions about dividends, that dividends would be based on the current scale and were subject to change, that depending on these changes it may have been necessary to make additional cash deposits in the future to cover premiums, and finally, that premium offset was not an automatic option.
7By contrast, the appellant maintains that he was not explicitly made aware of these risks. The appellant alleges that he would not have entered into the policy of insurance had he been made aware of the fact that the illustrations were not a accurate reflection of the date upon which the premiums would be offset.
8In June 1996, Equitable told the appellant that he would have to pay premiums for a total of 23 years. Later, in October 1997, as the tenth year of the policy was drawing to a close, the appellant asked to see a new illustration. Upon reviewing the updated chart, he learned that the premium on his policy would not offset for another 10 years. In response to this, he commenced this class action against Equitable.
9The agent that dealt with the appellant, Mr. Izsak passed away in 1996.
ANALYSIS
10In the companion case, Kumar, I have dealt with the submissions made by the appellant concerning the reasons of the Divisional Court. I have also discussed why I found that there was no common issue in Kumar and that, in any event, why a class proceeding would not be the preferable procedure. There are differences between this case and Kumar, and the appellant argues that irrespective of the result in Kumar, this is a proper case for certification as a class proceeding. I am not persuaded that those differences should lead to a different result and I will explain why after setting them out. For that purpose I adopt the findings of the motions judge. He found the following major differences between this case and the Kumar case [referred to by the motion judge as Prudential]:
In Prudential, the evidence did not support the allegation that Prudential engaged in any organized and systemic marketing of premium offset insurance policies. Agents seldom used premium offset illustrations. The contrary is the case with Equitable. The defendant admits this to be the case in its statement of defence; further, Equitable admits that illustrations were used extensively and that when an illustration was requested by an agent (for a period of the time at issue in this action) a "script" was sent out with the illustration. The "script" is identified at p. 469 of the defendant's motion record. "Script" is a misnomer. It was not a text followed by the agent, but rather a one-page explanation sheet about the premium offset feature, which was sent to agents and passed on, in some cases apparently, to purchasers. Shortly put, in the case of Equitable there was an organized and systemic [sic] marketing of the premium offset policies, as well, of course, its other whole life policies. Based on the documentation produced by Equitable, it would appear however, that the agents were universally cautioned by head office that the dividend rates were not guaranteed and that lower rates might result in further cash deposits to be paid.
The documentary evidence establishes that while policy holders over the years were told in numerical terms about dividend rates when those rates were good, the written information given to policy holders about the rates was "soft" and not precise when rates were not good. In the latter instances however, a 1-800 number was available for any policy holder who had inquiries. The impact of this point would have to be determined at a trial. Suffice it to say that it is a factual feature that can be argued by a claimant in this case as part of the merits of the cause of action. There is no reference in the Prudential decision to factors of this nature.
Contrary to the situation in Prudential, it is possible to identify which Equitable policies were sold with the premium offset feature, by going to the head office files. Although these files will not necessarily establish which policy holders received printed illustrations, the files will at least indicate which files were sold with the feature. Thus, in effect, tracking down the members of the class would be a much easier proposition in the case at bar and there is much greater likelihood of a high percentage of potential class members receiving notice of proceedings.
In the case of Equitable, the dividend scale allegedly was sensitive, resulting in volatility in the premium offset calculations for the cross-over point. This factor was not mentioned by Cumming J. in his reasons in Prudential. I would think it fair to assume that the senior managers and officers of an insurance company would be as aware as Equitable was of the volatility of the scale and therefore the cross-over dates. There is nothing in Cumming J.'s decision that would indicate that the volatility in the case at bar is any greater than it was in the case of Prudential.
In the case of Prudential, an extensive ADR program was established to deal with the claims. The particulars are referred to in the reasons of Cumming J. In the case at bar however, the evidence is that Equitable has received very few complaints, described by Mr. Courtepatte as "negligible". An examination of the 500 files sampled in conjunction with this motion, would appear to support that as a fair adjective. In these circumstances, it is argued by Equitable, and I agree, that there is simply no evidence to justify the establishment of an extensive ADR program.
11In his reasons, the motion judge found that none of the factual distinctions justified a different result from that reached by Cumming J. in Kumar. He held that the claim did not raise a common issue and that, in any event, the proposed class proceeding is not the preferable procedure for the resolution of the common issues.
12The differences between this case and Kumar do not reach the central problem that makes both these proceedings unsuitable for certification. The reasons of the motion judge in this case suggest that there was a systematic marketing of premium offset policies, a matter more hotly disputed by the Kumar defendants. In both cases, however, the policy holders dealt with individual agents and the class members would still have to show that the agents with whom they dealt made misleading representations about the premium offset feature, and that the prospective policyholder reasonably relied upon the representation. The action would ultimately break down into individual proceedings: Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R. 184 at para. 29. As I said in Kumar, establishing that the respondent was negligent in any of the ways suggested by the appellant would not represent a substantial ingredient in each of the class members’ claims.
13Further, my reasons in Kumar concerning preferable procedure apply equally to this case. The factual distinctions noted by the motion judge do not affect that finding, which turned on the importance of the individual issues in relation to the proposed common issue. The appellant’s affidavit submitted on the application for certification demonstrates the difficulties in allowing this matter to go forward as a class proceeding. The core of the appellant’s complaints concern the verbal and written representations made by the agent that, in effect, told the appellant to ignore the warnings set out in the illustrations provided by the respondent. For example, the appellant states as follows:
In response [to the warning], Izsak indicated that I was not to worry about the language on the back of the illustration since, even in a worst case scenario, I would only be required to pay for 12 years of premiums. Izsak emphasized that my maximum payment period of premiums would be from 10 to 12 years.
14In my view, it has not been shown that the motion judge or the Divisional Court erred in concluding that the appellant had not satisfied the common issues and preferable procedure requirements in s. 5 of the Class Proceedings Act, 1992, S.O. 1992, c. 6.
15The motion judge also held that there was no identifiable class of two or more persons that would be represented by the representative plaintiff. He said:
There is no evidence that anyone other than Mr. Zicherman has raised a cause of action. There is no evidence of anyone other than Mr. Zicherman being willing to engage the courts or assert a cause of action.
It may be that other class members do exist but that has not been established on this motion. I note that partners, associates, and a family member of Mr. Zicherman purchased similar policies and none of them have been identified in the evidence as asserting a claim or even having a complaint.
I recognize that it is not fatal to be unable to identify every member of the class such a requirement would be unrealistic. On the other hand,
A class proceeding cannot be created by simply shrouding an individual action with a proposed class. That is to say, it is not sufficient to make a bald assertion that a class exists. The record before the court must contain a sufficient evidentiary basis to establish the existence of the class.
Lau v. Bayview Landmark Inc., [1999] O.J. No. 4060 at para. 23.
16I have addressed a similar issue in the Kumar reasons for judgment. The proposed class definition in this case is essentially the same as that in Kumar and therefore shares the same difficulties I have noted in the Kumar reasons. Nevertheless, as in that case, I will assume that there is an identifiable class. The respondent concedes that it has had 87 complaints with respect to the premium offset feature. In view of my conclusions on common issues and preferable procedure, however, I would dismiss this appeal.
DISPOSITION
17Accordingly, I would dismiss the appeal. The respondent shall have ten days from release of these reasons to provide the Senior Legal Officer with submissions on costs and its bill of costs. The appellant may file his submissions as to costs within seven days after receipt of the respondent’s submissions. The respondent may respond within 7 days thereafter.
Signed: “M. Rosenberg J.A.”
“I agree R. Roy McMurtry C.J.O.”
“I agree M.A. Catzman J.A.”
RELEASED: “RRM” APRIL 8, 2003
