ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 02-CV-228252CM1
DATE: 20121015

BETWEEN:

Jacques Andre Thibault Plaintiff – and – The Empire Life Insurance Company Defendant – and – The Empire Life Insurance Company Plaintiff by Counterclaim – and – Jacques Andre Thibault, Majella Thibault, Clifford Oliver and Wayne Slimmon Defendants by Counterclaim

Lucie Gaucher, for the Plaintiff

David Roebuck and Samuel Robinson, for the Defendant, The Empire Life Insurance Company

HEARD: February 13 to 17, 21 to 24, 27 to 29, March 1 and 2, and March 5 to 9, 2012

THORBURN J.

REASONS FOR JUDGMENT

Part I. Overview

[ 1 ] Thibault seeks a declaration that he is entitled to $18,916,481.17 as of December 19, 2001. He says this is the amount he earned from his two Colspol insurance policies. [1] He claims that if monies were not deposited to his account, they were misappropriated by Clifford Oliver. Oliver had ostensible authority to act on behalf of Colonia before it was acquired by Empire.

[ 2 ] Empire claims Thibault is not entitled to any money. Empire says Thibault withdrew more than he deposited and was engaged in perpetrating a fraud with Oliver. Empire claims Policy 106815 had a cash value of minus $11,202,240.00 as at October 1, 2001, and Policy 39320 had a cash value of minus $2,054,884 as at September 18, 2001. Empire claims damages from Thibault resulting from the fraud, breach of trust and consequent withdrawal of funds.

Part II. The Parties to this Proceeding

[ 3 ] Jacques Andre Thibault is an insurance agent. He sold sixteen Colspol insurance policies. He is the owner of two Colspol insurance policies issued by Empire’s predecessor, Colonia.

[ 4 ] Thibault purchased Colspol Policy 39415 in the name of his wife Majella Thibault.

[ 5 ] Colonia was a life insurance company. Colonia changed its name to Concordia in December 1998, and Concordia and Empire were amalgamated on January 1, 2002, under the name The Empire Life Insurance Company.

[ 6 ] Clifford Oliver was Vice President and Chief Actuary of Colonia. In 1980, he designed and developed the Colspol policy and was responsible for valuation, underwriting and reserve valuation. Oliver left the company on December 31, 1997, after Colonia was acquired by Empire Life.

[ 7 ] Wayne Slimmon assisted Oliver in the administration of Thibault’s policies and took over more administration of Thibault’s policies after Oliver left Colonia. Slimmon was fired by Empire effective February 1, 2002.

Part III. Defining Colspol Policies

The Concept

[ 8 ] In or about 1980, Colonia’s vice-president and actuary, Clifford Oliver, conceived, designed and developed the Colspol insurance policy.

[ 9 ] Colspol insurance policies were single premium whole life insurance policies. They provided a tax advantage much like an RRSP. Any increase in the money invested in Colspol policies was accumulated tax-free as long as it remained in the policy. The Colspol policy also served as a life insurance policy and an annuity was paid upon reaching a certain age.

[ 10 ] Colspol policies ceased to be sold in 1982 after the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.) was changed to remove their tax-exempt status. Colspol policies sold between 1980 and 1982 were grandfathered provided the money remained in the policy.

The Standard Terms Found in Colspol Policies

[ 11 ] Premiums were calculated using interest and mortality assumptions. Actual mortality and interest earnings were reflected in the policy via an excess premium refund guaranteed every five years.

[ 12 ] Premiums paid into the policy earned interest based on the sum of two rates:

a. interest based on a 4% rate guaranteed for the life of the policy; and

b. excess premium refunds set at the policy’s inception and revisited every five years thereafter.

[ 13 ] If the five year interest rate exceeded 4% for the five ensuing years, Colspol policy holders would receive this excess interest as an additional credit to their policy. For example, the interest rate in 1981 was 16.5%. Therefore, Colspol policies issued in 1981 received excess interest of 12.5% for five years based on a guaranteed 16.5% interest rate, which was 12.5% higher than the long term guaranteed rate of 4%.

[ 14 ] The rate was based on the market rates for five year new money investments and guaranteed for the five year period.

[ 15 ] At the end of each five year period, a further five year period would commence automatically. Each excess premium refund could be paid in cash or applied to purchase additional amounts of insurance payable on the death of the insured.

[ 16 ] Any interest left to accumulate within the policy was added to the policy as paid up additions to the insurance.

[ 17 ] The cash surrender value of the policy is the money the policy owner can withdraw from the policy. It is a function of the premium and interest earned on the money in the policy.

[ 18 ] The cash surrender value of the policy could be withdrawn at any time. When the cash surrender value was reduced to zero, the policy was terminated.

Part IV. Thibault and Empire’s Claims

Thibault’s Claim

[ 19 ] Thibault claims he negotiated special terms for his Colspol policies with Oliver and sent large sums to Colonia to the attention of Clifford Oliver. He understood those sums were deposited to his accounts at high interest rates. He says that due to these preferential rates, the deposits he made into his policies and the investments made with the money in these policies, his Colspol policies were worth $18,916,481.16 as at December 19, 2001.

[ 20 ] In the alternative, he says that if the money he sent to the “attention Cliff Oliver” was not in fact deposited to his policies, it was wrongfully appropriated by Oliver. As Oliver was a senior employee of Empire, Empire is vicariously liable for the monies wrongfully appropriated by Oliver and interest lost as a result thereof.

[ 21 ] Thibault claims, “Les individus ne sont pas tenus non plus de garder leurs documents si longtemps alors il est difficile de prouver les dépôts par les documents. Colonia, par contre, devrait avoir des écritures dans ses livres.” [2]

[ 22 ] Thibault does not have receipts for most of the deposits he says he made into his Colspol policies. However, he states that Empire provided him with written confirmation of the value of his policies by providing him with illustrations over a period of years. He testified that he relied on the illustrations to confirm the value of his policies and once he received a new illustration, he destroyed the old one.

[ 23 ] Thibault seeks a declaration from the Empire Life Insurance Company that,

a) his Life Insurance policies, 106815 and 393320 issued by The Empire Life Insurance Company, contained certain special terms as described below;

b) on December 19, 2001, the cash surrender value of Policy 106815 was $15,537,662.66; and

c) on December 19, 2001, the cash surrender value of Policy 39320 was $3,378,818.51.

[ 24 ] Thibault also seeks damages in the amount of $100 million for breach of the terms of the insurance policies and exemplary, punitive and aggravated damages in the amount of $1 million for the defendant’s breach of its duty of good faith and malice in refusing to pay him the monies he claims he is owed.

Empire’s Claims

[ 25 ] Empire claims Thibault is not entitled to any monies because:

a) Thibault took out far more money than he deposited into the Colspol policies (according to Empire’s records) and

b) Thibault bribed two of Colonia’s employees in exchange for their agreement to create false documents to inflate the value of Thibault’s policies by millions of dollars.

[ 26 ] Empire seeks damages in the amount of $13,257,124.00 as of October 1, 2001 for fraud and inducing Oliver to breach his fiduciary duty. Empire also seeks punitive damages as against Thibault.

[ 27 ] The only relief sought against Majella Thibault is a declaration that the policies are void. Majella Thibault takes no position in these proceedings and Empire therefore seeks no costs as against her.

[ 28 ] Empire has brought an action against Oliver and another of its former employees, Slimmon, for fraud and breach of fiduciary duty. The action against Oliver was settled and Oliver agreed to testify on behalf of Empire.

[ 29 ] Oliver admits he falsified company documents to inflate the value of Thibault’s policies so Thibault could borrow money from the bank using his Colspol policies as collateral. Empire claims that after Oliver left the company, Slimmon did the same.

[ 30 ] In order to assess these claims, there must be an analysis of two key issues:

a) what is the value of Thibault’s policies as evidenced by the sums deposited into and withdrawn from Thibault’s Colspol policies from 1981 to 2001? and

b) did Clifford Oliver and/or Wayne Slimmon engage in fraudulent activities, if so, was it with the knowledge and involvement of Thibault, and what are the damages that resulted?

(continued exactly as in the source text…)

Thorburn J.

Released: October 15, 2012