COURT FILE AND PARTIES
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WILLIAM ALGUIRE
Applicant
– and –
THE MANUFACTURERS LIFE INSURANCE COMPANY c.o.b. as MANULIFE FINANCIAL
Respondent
Warren S. Rapoport, Counsel for the Applicant
R.S. Harrison and Vaso Maric, Co-Counsel for the Respondent
HEARD: DECEMBER 6, 2013
ENDORSEMENT: GREER J.:
1In this proceeding, I heard an Application by the Applicant and a Cross-Application by the Respondent. The parties agreed to this procedure and filed a Joint Application Record.
I: The Alguire Application
1. The relief sought
2The Applicant, William Alguire (”Alguire”), brings on this Application for the following relief against the Respondent, The Manufacturers Life Insurance Company, which carries on business as Manulife Financial (“Manulife”):
(a) an Order that Manulife honour the original terms of the life insurance policy issued to him on July 21, 1982, and as amended February 17, 1989 and May 1, 1989 (the “Policy”);
(b) a Declaration that the paid-up values listed on p.3 of the Policy are the correct values as agreed upon between him and Manulife at the time when the Policy was purchased by him;
(c) a Declaration that the paid-up values supplied by the Respondent on July 13, 2010 are incorrect by a factor of 5 (i.e. 20% of the proper values in the Policy) and form no part of the Policy issued to him, except as may be amended (by a multiplication of 5) to be consistent with the Policy as issued;
(d) a Declaration that the Policy was not issued in error to him by Manulife; and
(e) in the alternative, if the Court should find that the paid-up values listed on p.3 of the Policy were included in error by Manulife, a declaration that Manulife has made the error unilaterally and is not entitled to seek rectification of the Policy such that the paid-up value is as stated in the Policy.
2. Some background facts
3Alguire and Manulife agree on most of the background facts. They agree that Alguire is the owner of the Policy, which was a unique policy devised and customized to suit Alguire and meet his needs. He says he needed immediate multimillion dollar coverage and inflation protection for the future. Alguire dealt with Alan Elias (“Elias”) as his Agent, who worked on the Policy and presented it to him. Alguire says it was drafted to suit his needs.
4The Policy had a face value of $5,000,000, in 1982, when Alguire purchased it at the age of 31. The Policy was a life insurance policy with specialized terms to suit Alguire’s needs. The Policy is structured to have a paid-up value at certain dates. Alguire says this was done to provide inflation protection on the condition that Alguire continue to pay the premium after 15 years. He has continued to pay premiums since that 15-year date and is not in arrears of those payments.
5Alguire says he only contacted Manulife three times between 1982 and 2009. The first contact was on February 17, 1989, when Alguire decided to transfer the ownership of the Policy from his corporation, Montrebec Developments Ltd., to himself in his personal capacity. Then, in May of that year, he designated his wife, Linda, as the primary beneficiary of the Policy. The third contact was in April of 1995, when Alguire asked Manulife to provide him with a duplicate of his Policy, since he had misplaced his copy.
6At no time during those years did Manulife raise the issue that there had been an error made in the table of paid-up values on p.3 of the Policy. At no time during those years did Manulife increase the premium payment under the Policy, although such an increase was permitted every 5 years under the terms of the Policy.
7In 2010, Alguire contacted Manulife to obtain information regarding the gap years in the table of values on the face of the Policy. He also inquired what the paid-up value figure would be after the 34th year of the Policy. Alguire says that Manulife provided a table that did not correspond with the table in the Policy itself. Manulife provided a table, which had values that were only 1/5 of the values on the face of the Policy itself. It was then that Manulife said there had been an error in the Policy issued 28 years before.
8When the Policy was purchased, Alguire paid $80,000 in premiums during its first three years. He dealt with Elias, an agent recommended by his Accountant. Alguire says he was told that Elias was said to be a person who was able to provide unique insurance policies for specific needs of his clients. Elias then orchestrated the terms of this unique policy.
9In his Affidavit sworn July 31, 2012, Alguire says that he told Elias that he was looking for a very distinct key man life insurance policy that would provide immediate multimillion dollar coverage and would also increase in value to provide inflation protection in the future, as he was about to get married. He says he did not need a policy that had a cash surrender value. He later met with Elias shortly after July 30, 1982, when Alguire returned from a trip. By then, Manulife had drawn up the Policy, a copy of which is attached as an Exhibit to Alguire’s first Affidavit.
3. Alguire’s position on the Policy
10It is at this point that the parties’ positions on Alguire’s evidence about his discussions with Elias and Manulife’s position are not convergent. They are at odds with one another. Elias had died prior to 2010 when Alguire requested that Manulife provide him with the figures as to the value of the policy after the 20th year. There was a calculation that in the 20th year the Policy had a face value of $7,500,000. There was no valuation on the Policy after that date, so thus Alguire’s request.
11Manulife was carrying the Policy in what it called its “Guaranteed Renewable Insurance Policy” database. When Alguire inquired of Kim Schlitt (“Schlitt”), a representative of Manulife, what the value of the Policy would be in the gap years after the 20th year, including the 28th year, being the year he called for this information. Schlitt said she would get back to him. Alguire, using the formula on the face of the Policy itself, calculated that the paid-up value on the 34th year would be $13,400,000.
12On March 15, 2011, Alguire received a “without prejudice letter”, from Christopher Runstedler of Manulife, telling him that there had been an error in the non-forfeiture paid-up values listed in the original policy. The issue of whether the Limitations Act applied or not to this situation was also raised. Alguire’s position is that Manulife is “…simply trying to renege from its obligations under the Policy.”
II: The Manulife Cross-Application
1. The relief being sought
13Manulife says that this is not a legal matter, which can be dealt with by way of a simple Application taking on the guise of a Summary Judgment Motion. Manulife originally asked the Court for the following relief in its own Application issued after Alguire’s Application before it was Amended by Alguire:
(a) an Order that the whole Application between Alguire and Manulife in court file number CV-12-0046174, proceed to trial;
(b) in the alternative, an order that this Application and the Alguire one be heard together on Friday, December 5, 2013, (sic) or such other time as may be scheduled by the Court;
(c) in the latter event, a declaration rectifying the Policy (as that term is defined in the Alguire application) by amending p. 3 of the Policy and, in particular, by dividing each of the numbers appearing in the column under the heading “Paid-Up” by the number 5.
The parties then agreed to the alternate relief set out in (b) and filed the Joint Application Record, with the matter being heard by me on December 6, 2013.
2. The Policy 3, 337, 319-2 dated June 5, 1982
14Manulife dated the Policy as June 5, 1982, and issued it on July 21, 1982, in the name of WILLIAM GEORGE ALGUIRE. It is labelled “Guaranteed Renewable Insurance Protection policy”, with premiums payable during the insured’s lifetime. It is a Non-participating policy. The face of the policy reads:
Subject to this policy’s provisions, the death benefit proceeds under the policy will be paid to the beneficiary immediately upon receipt by the Company of due proof of the life insured’s death. Such proceeds will included the policy’s face amount together with any other benefit payable under the policy’s terms because of such death.
It also says in bold print and set out in a box on the face of the policy:
Every five years, on policy anniversaries, the premium may change, up or down.
See the “Payment of premiums” provision.
This policy has no cash, loan, or surrender value.
15On p. 3 of the Policy, it sets out the name of the Owner of the Policy and the Beneficiary. At that point, the Owner was Alguire’s numbered company, which was later amended to show him personally as the owner. It shows that the premium in the first year in 1982 is $40,000, the second and third years at $20,000 each such year, and the fourth and fifth year 1986, as $2,400 each. It states that the premiums each year thereafter will be $2,400 per year.
16The Table of Forfeiture Values, being the paid-up values “are per $1,000 of face amount”, which is $5,000,000. The amount for years 1 and 2 is zero. From years 3 to 10 the amount increases from $125 to $450 in year 10. It then says year 15 is $1010, year 20 is $1,500, and year 34 is $2,680. The paid-up values are based on the formula. The intervals between these years shown is referred to by Alguire as the “gap years.” These are the years he was asking Manulife to provide the figures for.
17As was noted earlier, Alguire said that the paid-up value in year 34 was, according to the calculation under the Policy, $13,400,000. Under “General Provisions” of the Policy, Manulife points to the clause which states:
Company will not be bound by any promise or representation heretofore or hereafter made by or to any agent or person other than as specified above. (those specified are the President or Vice-President of the Company.)
Alguire points to paragraph (4) of the clause respecting payment of premiums that any change in the premiums paid under the Policy, “…will not affect the table of values on page 3.” Under the Policy there has been no change in the premiums being paid over the past 30 years, and Alguire has never been in default on his payments.
18The NONFORFEITURE clause on p.7 of the Policy reads:
At the end of the grace period of a premium in default, if the premium remains unpaid, this policy will be continued as paid-up whole life insurance, if it has been in force long enough to have a paid-up insurance value.
The company has determined, as of the policy year date, a set of paid-up insurance values, from which the amount of paid-up insurance will be calculated. As of every fifth policy anniversary, the Company will review the paid-up insurance values and may change them; they are guaranteed only until the next five-yearly review. However:
(a) The values will never be lower than those shown in the table of nonforfeiture values on page 3.
(b) The amount of the paid-up insurance will remain fixed from the date when it takes effect.
The policy has no cash or loan or surrender value at any time.
On p.8 of the Policy, it sets out Optional Methods of Settlement, which can be exercised “from time to time during the insured’s lifetime” or at death by the beneficiary.
19On July 13, 2010, Schlitt, a Client Service Specialist, sent Alguire a letter enclosing a table which Manulife had just prepared for Alguire for the years 2010 forward showing guaranteed paid-up values. In 2010, Manulife said the value was $2,390,000. By 2016, being the 34th year mentioned in the Policy, the guaranteed paid-up value is shown as $2,680,000. That is the year in which Alguire turns 65 years of age. The table goes on to say that only in the year 2051, would the guaranteed paid-up value at age 100 be $5,000,000.
3. The conflicting Affidavits
20Since Elias is not alive to present his side of the story, Manulife’s representative, Steve Krupicz (“Krupicz”), swore an Affidavit on October 31, 2012 in support of Manulife’s Application (now Cross-Application). He is Assistant Vice President, Special Case Markets, in Canada. He is also an Actuary.
21In para. 6, of his Affidavit, Krupicz says that whoever prepared the actual contract pages for the Policy, made a “…material and obvious error, such that the Table of Nonforfeiture Values and Paid-Up values are grossly overstated and on their face are incorrect.” He explains, in his 44 paragraph Affidavit, why he believes this to be so. The Exhibits attached to that Affidavit include Manulife’s file on this Policy, and other insurance documents used by it.
22James C. Bullock (“Bullock”) swore an Affidavit on December 9, 2012. He is a life insurance agent and insurance educator in the area of life insurance agent duties. He has worked continuously in the life insurance industry since 1972. His evidence supports Alguire’s reading of the Policy.
23Michael Kavanagh (“Kavanagh”) swore an Affidavit on February 28, 2013. He is an Actuary retained by Manulife. He read the Affidavits of Krupicz, Alguire and Bullock. He disagrees with Alguire’s interpretation of the Policy and with Bullock’s opinion on how the Policy was not in error. Kavanagh is Manulife’s expert witness and has signed an Acknowledgement of Expert Duty, in contemplation of the litigation going forward.
24Alguire swore a Supplementary Affidavit on December 12, 2012, clarifying his earlier evidence after he read Krupicz’s Affidavit. It sets out Alguire’s position regarding the interpretation of the 15th year date and the on-going payment of premiums under the Policy. Krupicz then swore a Supplementary Affidavit on March 1, 2013 in response to Alguire’s Supplementary Affidavit and Bullock’s Affidavit. He, of course, disputes what they say in their Affidavits and refers to the Alguire Policy as having an “aberrant premium payment” provision.
25Bullock then swears a Supplementary Affidavit on March 20, 2013, in response to all these other Supplementary Affidavits.
4. The Rectification Issue
26It is Manulife’s position that on the basis of the current record, and in the context of the specific relief sought by Alguire, the Court should declare that the paid-up values on p.3 of the Policy were issued in error by Manulife. Manulife says it is entitled to rectification on the basis that, “Alguire’s story is demonstrably false and unworthy of belief.” If his story is rejected, says Manulife, then the Policy he intended to purchase was a $5,000,000 whole life, non-participating insurance for the premium stated and that is what he got.
27Manulife says that, in the alternative, the paid-up values are “…a unilateral mistake on the part of Manulife that should be rectified.” It relies on the Court’s findings in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., [2002] S.C.J. No. 20, 2000 SCC 19, in support of its position.
28While rectification permits courts to amend a written document, which purports to reflect a common and agreed intention, Alguire says that on the face of the Policy, it reflects his understanding of what they agreed to. Since the Policy was written by Manulife in 1982, some 30 years ago, Alguire says that Laches should apply. Alguire says that this is too late to now claim that the Court should apply rectification. He says that Manulife, even if a mistake was made 30 years ago, it ought to have been discovered long before this. He also says that the guaranteed paid-up value of the Policy, as set out on the face of the Policy given to him 30 years ago, speaks from the date of the issuance of the Policy and should not now be ignored.
5. The issue of the Limitations Act
29While Manulife says that Alguire, in his pleadings, did not raise the limitations issue, he has done so in his Factum, on this Joint Application, and Manulife has responded to the issue in its Factum. The parties obviously discussed the issue of whether the provisions of the Limitations Act applies, since Runstedler, in his letter of April 25, 2011 to Alguire’s counsel, said:
I confirm our agreement that the limitation period in connection with the disputed non-forfeiture values for the above cited policy [William G. Alguire Policy 3337319-2] shall be calculated from March 15, 2011.
Alguire, however, disagrees with Runstedler’s understanding of what was agreed to. He says that they agreed that the date of March 15, 2011, would run only as the date when the new p.3 of the table was provided by Manulife.
30Alguire’s position has always been that the current limitation of 2 years would apply. Even if that were not the case, and used earlier limitations’ legislation, Alguire says that Manulife’s new interpretation of p.3 is beyond any limitation date.
III: Analysis
31An Order shall go that this matter shall proceed to Trial. I find myself unable to make the Declarations and Order asked for by Alguire in his Amended Application. In addition, I cannot grant any of the relief requested by Manulife in its Cross-Application for Rectification. Further, even the Limitation issue cannot be determined without a Trial.
32Each party produced excellent Facta and provided extensive Affidavits and supporting documentation. Extensive cross-examinations of affiants took place. In the end, after carefully examining the issues, in my view a Trial is the only way that the Court can sort out the conflicting positions of the parties and come to a Judgment on the matter.
33I have outlined the positions of the parties in some detail in this Endorsement. I have referred to the key documents, the interpretation of which the parties cannot agree on. I have summarized the contents of all the Affidavits to show how far apart their evidence is about the facts and how the Policy, as drafted, came about. Alguire is saying that the Policy should be read as it appears on its face, while Manulife says that an “error” was made in the calculation of how the paid-up values should be calculated in the table on p.3. It simply produced a whole new table and said Alguire should accept that.
34There is also the issue of the expert opinions and evidence of the affiants about how the Policy should be read and how the insurance industry operates and how it would judge the Policy. Even though there have been extensive cross-examinations on the various Affidavits, only in a Trial, where there are oral examinations of witnesses, will a Judge be able to determine the credibility of witnesses and be able to judge the opinions given about the Policy. There is clearly conflicting evidence in the positions taken by these expert witnesses.
35In my view, it will take a Trial for the Court to assess the position of both parties, through the evidence of Alguire and the representatives of Manulife put forth to present its position. Elias is deceased, and someone from Manulife has to introduce the documents in Manulife’s file. There are material facts in dispute between them. Only with a trial will the Court be able to determine what weight should be given to which facts and what documentary evidence supports which position each party has taken.
36The issue of rectification of the Policy must be examined in light of the case law in that area. In my view, it cannot be dealt with as an isolated issue without a trial. The Supreme Court of Canada, in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] S.C.J. No. 20, analyzed what evidence is required to establish rectification. The issue there was the rectification of a contract for a real estate development. There was a trial in the court of first instance, on the issue of rectification.
37In para. 31, of the Supreme Court’s decision, Mr. Justice Binnie said that rectification is available for unilateral mistake, provided certain demanding preconditions are met. He then went on to say:
Rectification is predicated on the existence of a prior oral contract whose terms are definite and ascertainable. The plaintiff must establish that the terms agreed to orally were not written down properly. The error may be fraudulent, or it may be innocent. What is essential is that at the time of the execution of the written document the defendant knew or ought to have known of the error and the plaintiff did not. Moreover, the attempt of the defendant to rely on the erroneous written document must amount to “fraud or the equivalent of fraud.” The court’s task in a rectification case is corrective, not speculative.
He also analyzes, in paras. 35 to 41, the various factual and evidentiary hurdles, which must be met by the party seeking rectification. A trial is necessary for such an examination to take place.
38The limitation issue must also be dealt with as part of the overall legal analysis, which took place between 1982, when the insurance contract was executed and when Alguire first contacted Manulife or when Manulife responded in writing to the queries made.
39In Allied Systems (Canada) Co. v. Honda Canada Inc., [2012] O.J. No. 2352 (S.C.J.), Mr. Justice Perell in para. 20, said that where there is a dispute with respect to facts material to the issues to be resolved, an application is not appropriate and a trial should be ordered. He referred to a number of other cases on that point and then said, “An order directing a trial is discretionary and is typically granted where there is conflicting evidence and complex and disputed questions of fact or credibility where oral evidence is required.” That is the case before me and I adopt his reasoning.
Conclusion
40An Order shall go that an expedited Trial take place. Counsel shall forthwith contact the Civil Trial Office to obtain an early short trial date. Counsel shall advise me of the date and include it in my formal Order for signature. Counsel shall have 30 days from the date of my Order, within which to draft and serve and file pleadings clearly setting out the issues to be tried, as generally outlined by me. The Affidavits already filed in this Application and Cross-Application shall form part of the pleadings. The parties, however, may conduct further discovery, if needed, within 60 days of this Order, to complete all discoveries. They shall serve Affidavits of Documents containing all documents, not privileged, in order to make full disclosure, including any evidence not already in the court file.
41The issue of Costs of the Application and Cross-Application shall be left to the Judge hearing the Trial.
Greer J.
Released: February 11, 2014
COURT FILE NO.: CV-12-00-461724
DATE: 20140211
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WILLIAM ALGUIRE
Applicant
– and –
THE MANUFACTURERS LIFE INSURANCE COMPANY c.o.b. as MANULIFE FINANCIAL
Respondent
ENDORSEMENT
Greer J.
Released: February 11, 2014