CITATION: Granite Insurance Company v. Pembridge Insurance Company et al., 2015 ONSC 1251
DIVISIONAL COURT FILE NO.: DC-14-479
DATE: 20150226
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO A.C.J.S.C.
BETWEEN:
GRANITE INSURANCE COMPANY
Respondent/Plaintiff
– and –
PEMBRIDGE INSURANCE COMPANY, PEMBRIDGE COMPAGNIE D’ASSURANCE AND RBC DEXIA INVESTOR SERVICES TRUST
Applicants/Defendants
Sean N. Zeitz, for the Plaintiff
Calie Adamson, for the Defendants
HEARD: December 17, 2014
MARROCCO A.C.J.S.C.:
[1] Pembridge Insurance Company seeks leave to appeal to the Divisional Court the order of Newbould J. in which he overturned Master Jean’s decision that Granite Insurance Company was to pay into court security for costs pursuant to Rule 56.01(1)(a) and (d).
[2] Pafco Financial Holdings Ltd. (later known as Goran Capital Inc.) owned, among other things, two insurance companies: Symons General Insurance Company (later known as Pafco International Insurance Company and still later known as Granite Insurance Company) and Pafco Insurance Company Limited (later known as Pembridge Insurance Company).
[3] In 1990 Pafco Financial Holdings Ltd. (Goran Capital Inc.) sold its interest in Pafco Insurance Company Limited (Pembridge Insurance Company) to a third-party purchaser.
[4] Up until 1989 Granite Insurance Company wrote general commercial insurance policies which were partially reinsured by Pembridge Insurance Company. After 1989 Granite Insurance Company stopped writing new insurance policies and only maintained the policies that it had already issued. Granite Insurance Company then contracted with Pembridge Insurance Company to administer the runoff of Granite’s insurance business. The runoff of Granite’s insurance business consisted of administering and paying claims to insured persons and obtaining proceeds for those claims from Granite Insurance Company’s reinsurers. By 2005 the runoff of Granite’s insurance business was complete.
[5] RBC Dexia mistakenly transferred approximately $1,115,000 at the request of Granite Insurance Company from an account held as part of an agreement with Pembridge Insurance Company. Granite has refused to return the money.
[6] RBC Dexia commenced an application which was later converted to an action seeking repayment of the money from Granite Insurance Company.
[7] Pembridge Insurance Company then commenced an application also later converted to an action seeking an order that RBC Dexia return $1,115,000 into the Pembridge account and pay its legal and other costs incurred as a result of RBC Dexia’s mistake.
[8] Granite Insurance Company commenced a third application later converted to an action alleging that Pembridge Insurance Company had breached an Administrative Agreement and as a result owed Granite Insurance Company approximately $2,300,000. It was within this action that Pembridge Insurance Company brought a motion for security for costs under Rule 56.01(1)(a) and (d). That motion was temporarily settled. When the settlement broke down, Pembridge Insurance Company brought the motion before the Master which resulted in the $175,000 security for costs order with which we are concerned.
[9] A judge of this court consolidated all three actions.
[10] In the matter in which Granite Insurance Company is the applicant/plaintiff, Pembridge Insurance Company moves for leave to appeal to the Divisional Court from a decision of a Superior Court judge overturning the Master’s order that Granite Insurance Company pay $175,000 into court as security for costs.
[11] The Master concluded that Granite Insurance Company was ordinarily resident outside Ontario.
[12] The Master also concluded that there was good reason to believe that Granite Insurance Company had insufficient assets in Ontario to pay Pembridge Insurance Company’s costs.
The Master’s conclusion that Granite Insurance Company is ordinarily resident outside of Ontario
[13] The Master determined that residence was determined by the test set out in Pet Milk Canada Ltd. v. Olympian & York Developments Ltd. (1974) O.R. (2d) 640, at paras. 15-16. Specifically, the Master was of the view that residence was determined by “where one keeps home and does business” and that “real business is carried on where the central management and control actually abides.”
[14] The Master concluded that Granite Insurance Company did not keep house or do business in Ontario. The Master relied upon the fact that:
• All of the affiants in the consolidated proceedings reside in the United States.
• Granite Insurance Company is a subsidiary of Goran Capital Inc. which was not resident in Ontario.
• Granite Insurance Company did not do business in Ontario which was obviously true because Granite’s runoff from its insurance business was complete in 2005.
• No financial information for Granite Insurance Company was reported in 2011 by the Financial Services Commission of Ontario in its Annual Report.
• The Ontario addresses for Granite Insurance Company offered by Robert Symons in his May 15, 2014 affidavit were mailing addresses only.
The decision on appeal concerning residency
[15] The Superior Court judge who heard the appeal from the Master’s decision concluded that the Master had erred in law and fact on the question of residency. The Superior Court judge concluded that the Master had also misapprehended evidence and overlooked evidence that was central to the corporate residency question.
[16] The Superior Court judge commented that the “where one keeps home and does business” residency test for a corporation could not be the test in this factual context because by 2005 Granite Insurance Company’s entire business had ended. The Superior Court judge stated in his endorsement that the mere fact Granite Insurance Company was not doing business in Ontario did not in this factual context permit the conclusion that it was carrying on business somewhere else. In this factual context it was impossible to conclude that Granite Insurance Company was conducting business anywhere. Accordingly, the Superior Court judge was of the view that a better way of determining residency in this context was to look at where the directors and management of the company reside. The Superior Court judge concluded that there was uncontradicted affidavit evidence that the directors and officers of Granite Insurance Company resided in Ontario and that therefore management of the company was in Ontario.
[17] The Superior Court judge determined that the fact that the affiants in the consolidated proceedings resided outside of Ontario was irrelevant because neither affiant was an officer or director of Granite Insurance Company.
[18] The Superior Court judge rejected the Master’s conclusion that the mailing addresses provided were Granite Insurance Company only connection to Ontario. He found that the Master had overlooked or ignored the uncontradicted evidence that the directors and officers of Granite Insurance Company resided in Ontario.
The Master’s conclusion that there is good reason to believe that Granite Insurance Company has insufficient assets in Ontario to pay costs in the action in which it is the plaintiff
[19] The Master was aware that Granite Insurance Company had a capital account at RBC Dexia which contained approximately $1.2 million. The Master was of the view that the capital account had been created for a particular purpose that had not been conclusively exhausted. The Master also relied upon the fact that those funds were required to be held in that account by Granite’s regulator (OFSI) and Granite did not therefore have unfettered control over them. Specifically, the Master referred to OFSI’s insistence that Granite provide audited financial statements which had not yet been prepared despite the fact that Granite paid its last claim in 2005.
[20] The Master also made reference to the fact that the Superintendent could direct vesting of this asset in the Receiver General.
[21] Finally the Master noted in passing that there was no evidence concerning the whereabouts of or what happened to the $1.1 million that RBC Dexia had paid to Granite by mistake in 2008.
[22] The Master indicated that these considerations led to the conclusion that there was good reason to believe that Granite Insurance Company had insufficient assets in Ontario to pay costs in the action in which it was the plaintiff.
The decision on appeal concerning the sufficiency of Granite Insurance Company’s assets in Ontario
[23] The Superior Court judge pointed out that the $1.2 million was held in trust according to the Trust Agreement among Granite Insurance Company, RBC Dexia and the Minister of Finance under the supervision of OSFI and existed to pay outstanding liabilities of Granite Insurance Company to its policyholders. He commented that since 2005 there have been no policyholders. He interpreted the terms of the Trust Agreement and concluded that it appeared that the purpose of the trust was spent. Interpreting agreements is a matter well within the expertise of a Superior Court judge.
[24] The judge commented on the affidavit of Robert Symons who deposed at para. 29 that OFSI was prepared to release funds upon the provision of updated financials. Mr. Symons was not cross-examined on his affidavit and as a result there was in the opinion of the judge no basis for ignoring or overlooking Mr. Symons’ statement.
[25] The Superior Court judge also concluded that OFSI could not, pursuant to the terms of the Trust Agreement, insist on audited financial statements as a condition precedent to giving its consent to release the money. The judge viewed this requirement as a matter of administrative convenience on OFSI’s part rather than an obligation flowing from the terms of the trust.
[26] The judge concluded that the provision in the Trust Agreement permitting OFSI to direct that the funds be vested in the Receiver General was irrelevant because if that direction were made the funds were to be held by the Receiver General in trust for Granite Insurance Company and as a result this provision could not support a suggestion that the funds would not remain the property of Granite Insurance Company. The Superior Court judge also concluded that because there were no liabilities to policyholders there would be no basis for OFSI directing that these funds be transferred to the Receiver General.
[27] Finally be Superior Court judge described as speculative a comment by the Master that there might be other claimants to the money.
The test for leave to appeal
[28] The test for leave to appeal an interlocutory order of a Superior Court judge is found in Rule 62.02(4), which reads:
- Leave to appeal shall not be granted unless,
(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or
(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted. R.R.O. 1990, Reg. 194, r. 62.02 (4).
[29] The applicant asserts that the test for corporate residency has somehow been altered by the Superior Court judge. I reject this submission.
[30] The applicant referred the court to Pet Milk Canada Ltd. and Numilk Co. Ltd.v. Olympian & York Developments (1974), 4 O.R. (2d) 640 as the decision setting out in Ontario the accepted test for corporate residency. The Pet Milk decision relied upon the decision of the House of Lords in DeBeers Consolidated Mines, Ltd. v. Howe, [1906] A.C. 455. Specifically, reference was made to the following at p. 458 of DeBeers: “The decision of Kelly C. B. and Huddleston B. in the Calcutta Jute Mills vs. Nicholson and the Cesena Sulfur Co. vs. Nicholson, now 30 years ago, involved the principle that a company resides for purposes of income tax where its real business is carried on. Those decisions have been acted upon ever since. I regard that as the true rule and the real business is carried on where the central management and control actually abides.” In Pet Milk itself, the court found that a company did not “reside” in Ontario in part because “the majority control of both companies is in persons living abroad” (at para. 16).
[31] The Superior Court judge hearing the appeal from the Master stated: “the test of residency of the company is normally were the directors and management of the company reside.” This is not a different test. The judge’s determination that the directors resided in Ontario is obviously correct. His determination that management resided in Ontario is consistent with the fact that the directors and officers reside in Ontario. Deciding on a factual basis that Granite Insurance Company is actually managed by its directors and officers is not an unusual conclusion or one which changes the test for determining where management and control of the corporation actually resides. The judge’s observation that little assistance will be gained by trying to determine where Granite Insurance Company carries on its business because Granite Insurance Company is not carrying on business is an accurate common-sense observation about the facts of this matter. Finally the judge’s observation that the Master overlooked the fact that Douglas Symons, who resides in Indiana was no longer the CEO of Granite Insurance Company as of October 30, 2013, is not open to dispute.
[32] This is a case in which the Superior Court judge on appeal found palpable and overriding factual error in the decision below and then decided the matter of residency based upon facts which were not in dispute. If it was the applicant’s position that the directors and officers are not actually managing and controlling Granite Insurance Company it was necessary to establish that in the evidence placed before the Master. The Superior Court Judge’s decision that they had not done so flowed from his review of the uncontradicted evidence before the Master.
[33] Even if this interpretation of the evidence was wrong, and I am not suggesting it was, this case would not involve a matter of such importance that leave to appeal should be granted. In Feldman v. Ford, 2014 ONSC 7466, at para. 14, the court explained that a “matter of such importance” should be understood in the following way:
… the reference to “importance” means that leave shall only be granted regarding matters of “public importance and matters relevant to the development of the law and the administration of justice”: Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.) at para. 7. The matter must “transcend the interests of the parties”: Rankin v. McLeod, Young, Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.).
[34] In the present case, the question of whether Granite Insurance Company was resident in Ontario involves findings of fact specific to the parties themselves, and is not generally relevant to the development of law and the administration of justice.
[35] Similarly even if the Superior Court Judge’s interpretation of the Trust Agreement was wrong, and I am not suggesting it was, neither his interpretation of the Agreement nor his conclusion that Granite Insurance Company has assets in Ontario sufficient to meet its costs obligations raise a matter of such importance that leave to appeal ought to be granted. In Rankin v. McLeod, Young, Weir Ltd., (1986), 57 O.R. (2d) 569 (H.C.), the judge granting the order in question applied existing propositions of law to the circumstances before him. The reviewing judge held that this did not give rise to an issue of broad significance or general application and raised no question of principle. Similarly, the Superior Court judge in the present case interpreted the terms of an Agreement made between the parties within the factual context of the case before him, and from that interpretation determined that Granite Insurance Company had sufficient assets in Ontario. This fact-specific analysis does not rise to the level of a matter of public importance to the legal system as a whole.
[36] Leave to appeal is refused. The parties have agreed that costs should be fixed at $12,000 inclusive of disbursements and applicable taxes. This seems reasonable and accordingly the respondent is awarded costs in that amount.
MARROCCO A.C.J.S.C.
Released: 20150226
CITATION: Granite Insurance Company v. Pembridge Insurance Company et al., 2015 ONSC 1251
DIVISIONAL COURT FILE NO.: DC-14-479
DATE: 20150226
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
GRANITE INSURANCE COMPANY
Respondent/Plaintiff
BETWEEN:
PEMBRIDGE INSURANCE COMPANY, PEMBRIDGE COMPAGNIE D’ASSURANCE AND RBC DEXIA INVESTOR SERVICES TRUST
Applicants/Defendants
leave to appeal endorsement
Released: 20150226