COURT FILE NO.: CV-20-00646411
DATE: 20201210
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HUB INTERNATIONAL HKMB LIMITED
Plaintiff
– and –
NFM LIMITED
Defendant
David Outerbridge and Alicja Puchta, for the Plaintiff
Michael Simaan, for the Defendant
HEARD: October 22, 2020
J. steele J.
The Motion
[1] The plaintiff, HUB International HKMB (“HUB”), moves for partial summary judgment, by way of declaratory relief, under Rule 20.01 and 40.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[2] HUB asks, among other things, for a declaration that HUB (either on its own behalf or as agent for RSA (defined below)), is the beneficial owner of all premiums received or receivable by the defendant, NFM Limited (“NFM”), under two automobile insurance policies based either on a statutory trust under section 402 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Insurance Act”), an express trust, an implied trust, or a constructive trust.
[3] HUB also seeks an order that NFM produce a full accounting and an order requiring that all the premiums received by NFM in respect of the two insurance policies be paid to HUB.
[4] HUB further seeks an interim, interlocutory, and permanent injunction restraining NFM from directly or indirectly disposing of, dissipating, transferring, or otherwise dealing with any current or future premiums, money or substitute money received or receivable by NFM with respect to the two automobile insurance contracts in issue.
[5] HUB brings the motion on an urgent basis alleging a concern about dissipation of trust assets by NFM. However, there was no evidence before the court regarding potential dissipation of trust assets. HUB may have other concerns driving their request to have these monies declared as trust funds.
[6] For the reasons set out below, I am granting HUB’s motion as it relates to the RSA Contract. I am denying HUB’s motion for partial summary judgment as it relates to the FA Contract. NFM is, however, required to pay into court to the credit of this action any and all insurance premiums that it received or receives in respect of the FA Contract.
Background
[7] HUB is a licensed insurance brokerage operating in Ontario. It helps clients source and purchase automobile insurance.
[8] NFM is a taxi management company that provides managerial services to the members of a taxi fleet. NFM does not own or operate taxis. NFM’s taxi fleet members pay a monthly fee to NFM, for NFM’s services. The monthly fee includes the automobile insurance premium, which historically NFM paid directly to the insurer, Royal & Sun Alliance Insurance Company of Canada (“RSA”).
[9] When an agreement is reached for insurance for the NFM taxi fleet, NFM’s members execute an agreement with NFM for the term of the insurance (the “NFM Management Agreement”).
[10] NFM has used the services of HUB as its broker to assist with sourcing and buying automobile insurance for its taxi fleet for several years.
[11] This action arises out of two contracts for automobile insurance: (i) the contract of automobile insurance written by RSA with policy number CAP048801920 for the period from January 16, 2020 to March 16, 2020 (the “RSA Contract”); and (ii) the contract of automobile insurance written by RSA as servicing carrier for Facility Association with policy number RCF05967192 for the period from March 16, 2020 to August 3, 2020 (the “FA Contract”). HUB was the broker that assisted NFM in respect of these 2 contracts.
[12] This is a motion for partial summary judgment, as opposed to summary judgment (which would dispose of the entire action). Rule 20.04 requires that the Court grant summary judgment if “the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence”.
[13] In Hryniak v. Mauldin, 2014 SCC 7, [2014]1 S.C.R. 87 (“Hryniak”), the Supreme Court of Canada outlines where it is appropriate for the Court to determine that there is no genuine issue for a trial in a summary judgment motion (in paragraph 49):
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[14] On motions for summary judgment, partial or otherwise, “great care” must be taken in assessing whether the court “is able to reach a fair and just determination on the merits.” In Bayview Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at paragraph 44, the Ontario Court of Appeal states:
“Evidence by affidavit, prepared by a party’s legal counsel, which may include voluminous exhibits, can obscure the affiant’s authentic voice. This makes the motion judge’s task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.”
[15] Additionally, partial summary judgment is appropriate only in rare cases where the issue, upon which partial judgment is sought, is independent, and does not have the potential to impact other issues at trial. The Court in Butera v. Chown, Cairns LLP (“Butera”), 2017 ONCA 783, 137 O.R. (3d) 561 states at paragraph 34 that “[a] motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner.”
[16] In Joroga Real Estate Ltd. v. State Farm and Casualty Company, 2019 ONSC 2730, Justice Sanfilippo canvassed recent case law where partial summary judgment has been held to be appropriate, and states (at paragraph 34):
The cases where partial summary judgments have been upheld have all shared common elements. First, the partial summary judgment resolved a discrete, standalone issue that could be severed from the other claims or parties in the surviving case. Second, the motion was capable of being adjudicated on factual findings that did not intersect or overlap with the factual findings required to determine the issues left for trial, on an evidentiary record that reflected the evidence expected at trial, such that there was no risk of duplication or inconsistent findings. Third, the summary motion could be dealt with expeditiously and in a cost effective manner and, fourth, the motion served the overarching objective of advancing the litigation as a whole.
[17] Finally, in Hryniak, the Supreme Court of Canada provides further guidance on partial summary judgments (at paragraph 60):
“The ‘interest of justice’ inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.”
[18] HUB takes the position that NFM is in possession of certain trust funds, and that on this partial summary judgment motion a declaration should be made declaring HUB (on its own behalf or as agent for RSA) as the beneficial owner. In this regard, HUB argues that a trust arose either under statute or common law.
[19] HUB argues that partial summary judgment, though rarely granted, is appropriate in this straightforward trust claim. This is because the many other issues raised by NFM are unrelated to the trust issues, and the trust claim can be easily severed and determined separately from the contract claims, punitive damages, and NFM’s counterclaim.
[20] Because of the complexity of the issues, NFM argues that this is not a case for partial summary judgment. NFM argues that it is premature for the trust issue to be argued, given the other issues, including how much is owed by NFM under both the RSA and FA Contract, if anything, pleadings are not closed, and the parties have not had discovery. I disagree.
[21] I am satisfied that the RSA Contract trust issue, at the very least, can be resolved clearly and justly on the material before me. The FA Contract issue requires a slightly different disposition upon which I will touch shortly.
[22] I have considered the various potential concerns with granting partial summary judgment raised in Butera and am of the view that none apply here to preclude a finding for partial summary judgment (re the RSA Contract). This motion was not brought as a delay tactic. It was brought on an urgent basis to try to protect the trust funds. The time and expense expended to bring the partial summary motion, to protect these trust funds, is fully justified. The present record may not be as expansive as a trial record, but it is certainly sufficient to enable the fair and just determination on the RSA Contract trust issue.
[23] HUB’s request that a declaration that certain monies collected by NFM from its fleet members for automobile insurance and not yet paid to HUB or the insurer are held in trust is not a complex request. Any auto insurance premium monies collected by NFM from its fleet members do not belong to NFM and NFM is holding those monies for the benefit of another party. And, to the extent that NFM is holding the funds as trustee, NFM would have a duty to account.
[24] The plaintiff argues that straightforward trust cases are well suited to summary judgment. I agree. In my view the statutory trust with regard to the RSA Contract is clear, ie. to the extent that NFM has collected monies from its fleet members for auto insurance premiums, but has not remitted such premiums to the insurer, a statutory deemed trust arises under the Insurance Act. Partial summary judgment is, therefore, appropriate in respect of the RSA Contract.
[25] However, partial summary judgment is not appropriate for the FA Contract, because of the other inter-related complexities. I will amplify these below.
Analysis
The RSA Contract
[26] The RSA Contract was a two-month extension to the prior one-year contract with RSA. This extension had been requested by NFM as it wished to change the policy period for its fleet members by moving the renewal date away from the holidays. The RSA Contract was renewed through to March 16, 2020 on the same terms as the RSA agreement that had been in place for the prior 12 months.
[27] RSA billed NFM directly for the initial 12 months of the contract. However, for the RSA Contract (two-month extension), HUB understood that it was to collect the premiums on RSA’s behalf from NFM. NFM understood that it was to continue to pay RSA directly.
[28] NFM argues that HUB is suing on a contract to which they are not party. However, as discussed below, HUB, as agent for RSA under section 394 of the Insurance Act, is attempting to collect the premiums owing on behalf of the insurer (RSA).
[29] The RSA Contract terminated on or about March 16, 2020. During the term of the contract, RSA provided the insurance coverage to NFM’s fleet members pursuant to the RSA Contract.
[30] On or about August 14, 2020, HUB sent an invoice to NFM for $841,110 for the premiums it had determined NFM owed for the RSA Contract. This invoice amount was subsequently re-calculated to be $717,344. There have been issues on the calculation of the total amount owing under the RSA Contract. HUB has made written demand to NFM for payment under the RSA Contract.
[31] NFM does not dispute the existence of this contract but does dispute the quantum owed to RSA under this contract. NFM also takes the position that it is entitled to a performance bonus of up to $200,000. These are contractual issues as between NFM and RSA (and potentially HUB) that can be resolved in the main action. However, whatever funds NFM has collected as premiums from its fleet members in respect of the RSA Contract are subject to the statutory trust, as further discussed below.
Statutory Trust: Section 402 of the Insurance Act
[32] HUB argues that the premiums collected by NFM in respect of the RSA Contract and the FA Contract are subject to a statutory trust under section 402 of the Insurance Act, which provides:
402 (1) An agent or broker who acts in negotiating, or renewing or continuing a contract of insurance, other than life insurance, with a licensed insurer, and who receives any money or substitute for money as a premium for such a contract from the insured, shall be deemed to hold such premium in trust for the insurer, and, if the agent or broker fails to pay the premium over to the insurer within fifteen days after written demand made upon the agent or broker therefor, less the commission of the agent or broker and any deductions to which, by the written consent of the company, the agent or broker is entitled, such failure is proof, in the absence of evidence to the contrary, that the agent or broker has used or applied the premium for a purpose other than paying it over to the insurer.
(2) An agent or broker who acts in negotiating or renewing or continuing a contract of insurance with a licensed insurer, and who receives any money or substitute for money for payment to a person in respect of the contract of insurance shall be deemed to hold such money in trust for the person entitled thereto, and, if the agent or broker fails to pay the money over to such person within fifteen days after written demand made upon the agent or broker therefor, less the commission of the agent or broker and any deductions to which the agent or broker is entitled, such failure is proof, in the absence of evidence to the contrary, that the agent or broker has used or applied the money for a purpose other than paying it over to the person entitled.
[33] The Court of Appeal of Ontario explains the legislative intent of these provisions in Commercial Union Life Assurance Co. of Canada v. John Ingle Insurance Group Inc. (2002), 2002 CanLII 45028 (ON CA), 61 OR (3d) 296 (C.A.) (“Commercial Union”), at paragraphs 41 and 42:
“I agree with these comments of Stinson J. The legislative intent of the trust provisions in the Insurance Act is to protect the public. Agents and brokers are required, primarily because they handle premiums to hold them as trust funds. Premiums are for the ultimate benefit of the policyholders. Section 394 aims to prevent parties from contracting out of the statutory deeming provision. In essence, the licensing regime was designed to prevent exactly what happened here – the failure of the premiums to flow from the insured policyholders to the insurer who is on risk. To interpret this section as referring only to licensed agents would be unduly restrict the ambit of a section that is remedial and is meant to protect the public.
I therefore conclude that, as used in s. 402, “agent” encompasses both licensed and unlicensed agents.” [emphasis added]
[34] The legislation is aimed at protecting the public and imposes a statutory deemed trust on insurance premiums collected. Arguably the legislation is aimed at exactly the type of scenario we have in this case – where a party collects premiums from insureds in respect of auto insurance but does not remit the collected premiums to the insurer or the broker.
[35] For section 402 of the Insurance Act to apply, such that the statutory trust would be deemed to apply, the following factors must be present:
(i) NFM had to be an agent or broker;
(ii) NFM must have acted in negotiating or renewing or continuing a contract of insurance with a licensed insurer; and
(iii) NFM must have received money as a premium for the insurance contract from the insured.
[36] I address each of these in turn below.
(i) Was NFM an agent or broker for purposes of section 402 of the Insurance Act?
[37] HUB argues that NFM is an agent for purposes of section 402 of the Insurance Act. “Agent” is broadly defined under section 1 of the Insurance Act, as follows:
“agent” means a person who, for compensation, commission or any other thing of value,
(b) Solicits insurance on behalf of an insurer or transmits, for a person other than himself, herself or itself, an application for, or a policy of insurance to or from such insurer, or offers or assumes to act in the negotiation of such insurance or in negotiating its continuance or renewal with such insurer,
... [emphasis added]
[38] NFM argues that they were not an agent or broker of insurance but were a taxi fleet manager that provided a wide array of services, including assisting fleet members with auto insurance. Their argument is based in part on the fact that NFM did not have direct contact with the insurer (NFM’s relationship was with HUB) and that NFM is not registered as a broker under the Registered Insurance Brokers Act.
[39] Based on the record before me, on the balance of probabilities, NFM was an “agent” for purposes of the Insurance Act. On a plain reading of the definition of “agent” in the Insurance Act, and based on the record before me, NFM acted in this capacity. NFM, for compensation, applied for policies of auto insurance, through HUB, for its fleet members, and negotiated, through HUB, auto insurance and renewals for its fleet members. NFM was the party between the licensed broker (HUB) and the end user (NFM’s fleet) who secured insurance on behalf of the fleet.
[40] The broad definition of “agent” under the Insurance Act is much more expansive than the meaning of “agent” at law generally. As set out above, the court in Commercial Union determined that “agent” in section 402 encompasses both licensed and unlicensed agents. And further, as stated in Granite Insurance Co. v. Toronto Dominion Bank, [2006] O.J. No. 5148 (S.C.), at paragraph 100, the definition of agent under the Insurance Act is “wide”. As section 402 of the Insurance Act is intended to protect the public, it makes sense that “agent” for purposes of this provision should be broadly interpreted.
(ii) Did NFM act in negotiating or renewing or continuing a contract of insurance with a licensed insurer?
[41] NFM does not deal directly with the insurance providers during the application and obtaining of insurance. However, NFM does transmit applications for insurance and negotiates insurance on behalf of the fleet members. There is another intermediary (HUB), but this does not change NFM’s function.
[42] In the affidavit of Bill Chantzis, an officer of NFM (the “Chantzis Affidavit”), he states:
“NFM assists the Members of the NFM Fleet by providing managerial services which include, but are not limited to: (a) advocating for its Members in dealing with the insurance brokerage (e.g. HUB), to arrange automobile insurance coverage for the NFM Fleet Members; (b) dealing with the day-to-day logistics of updating changes under the NFM Fleet insurance policy (i.e. vehicle additions/vehicle removals/plate changes etc.) – again, at all material times for this motion and matter, being done through HUB; (c) distributing insurance coverage details, including delivery of the actual pink slips to Members”…(e) handling and coordinating vehicle repairs and processing with respect to any claims being made under the insurance coverage in place for any given term”.
[43] There was also affidavit evidence from Suman “Sandy” Sethi (the “Sethi Affidavit”), a taxi operator, who is married to the owner of “Muskoka Taxi” and who assists with administrative tasks in relation to the business. Until very recently, Muskoka Taxi used NFM’s services for their six taxis – they were part of the NFM fleet. The Sethi Affidavit provides that NFM’s services included obtaining automobile insurance for fleet members. In this regard, “NFM acted on behalf of Muskoka Taxi to seek out, negotiate the terms of, apply for, obtain, and renew automobile insurance”. It further provides that NFM renewed and continued existing insurance contracts on their behalf. Her affidavit provides that “it was NFM, rather than the insurer or the broker, that communicated to Muskoka Taxi the terms of each automobile insurance policy NFM had arranged on behalf of Muskoka Taxi. It was NFM that advised Muskoka Taxi of the amount of premiums owing and when”. To the extent that Muskoka Taxi had questions about their auto insurance policy, they would contact NFM with their questions.
[44] The NFM Management Agreement also contains provisions related to the relationship between NFM, the taxi owners and the insurer, including the following:
• “As part of this application for insurance, I consent to NFM and the “Broker” collecting, using and disclosing personal information required for purposes of considering my application for new or renewal automobile insurance coverage”.
• “…the member acknowledges that NFM is making available this insurance and risk management program in conjunction with the Insurance Broker of Record. NFM is not acting in the capacity of an insurance brokerage or insurance company in making this program available to the members”.
• “It is strictly understood that NFM is acting in the capacity of a payment agent on behalf of the Insurance Broker of Record and that all monies paid to NFM in respect of this program will be deposited into a segregated account called “NFM account””.
• “The member grants NFM a limited power of attorney over the member’s policy of insurance for the following restricted purposes. In the event that…NFM will have the authority to instruct the Insurance Broker of Record to cancel the existing insurance policy covering the member”. [emphasis added]
[45] Based on the record before me, NFM acted in renewing or negotiating or continuing a contract of insurance with a licensed insurer. As set out above, the terms of the NFM Management Agreement include terms that give NFM the power to, among other things, cancel an insurance policy. As stated in the affidavit evidence of one of NFM’s taxi members (in the Sethi Affidavit): “NFM acted on behalf of Muskoka Taxi to seek out, negotiate the terms of, apply for, obtain, and renew automobile insurance”. The NFM members understood that they were paying NFM to act on their behalf in negotiating and renewing automobile insurance. This is important. The individual insureds understood that they were paying NFM as their agent to negotiate or renew auto insurance contracts for them. The NFM fleet members were handing over the insurance premiums to NFM for this purpose.
(iii) Did NFM receive money as a premium for the insurance contract from the insured?
[46] It is also clear that NFM collected fees from the taxi members for, among other things, their insurance coverage. The Chantzis Affidavit provides:
“[…] the payment schedules circulated to Members were inclusive of dues owed to NFM for the NFM Limited Management Agreement operating at the time. The amounts owed were with respect to NFM’s fees for its services, administrative fees, and in part to pay for the proportional insurance premium for each Member, which was remitted from the NFM segregated account to the insurer.
Collection of payment, issuance of credits on cancelations and managing payment to the insurer was all part of NFM’s fleet management services to its Members.”
[47] With regard to the payment of insurance premiums, the Sethi Affidavit provides:
“Muskoka Taxi did not remit premiums owed under its automobile policy either to the insurer or to HUB. Instead, Muskoka Taxi remitted the insurance premiums to NFM on the understanding that these funds would be remitted either to HUB to in turn pay the insurer, or directly to the insurer itself.
NFM set a payment schedule for the remittance to NFM of the premiums due under the governing insurance policy. NFM typically required an initial down payment at the start of a new policy’s term, followed by regular payment in monthly installments. […]
Under the payment arrangement Muskoka Taxi had with NFM, NFM automatically withdrew from Muskoka Taxi’s bank account the insurance premiums due under the payment plan for the applicable automobile insurance policy. […]
Based on these payments schedules and bank statements, both Muskoka Taxi and NFM always knew the exact amount of premiums Muskoka Taxi paid to NFM or that we still owed to NFM.”
[48] The only evidence of an NFM fleet member was the Sethi Affidavit. Based on the record before me, NFM received money for insurance premiums from the insured driver members. The money collected by NFM included both insurance premiums and their fees. The onus was on NFM to divide out its fees from the insurance premium money it was to deposit in the segregated account.
[49] I am satisfied that under section 402 of the Insurance Act a statutory trust arises in respect of any of the insurance premiums received by NFM from the fleet members in respect of the RSA Contract.
[50] This conclusion is consistent with the jurisprudence. In M. B. Kouri Insurance Brokers Ltd. v. R.L. Gougeon Ltd., 2010 ONCA 889, 103 O.R. (3d) 216, the Ontario Court of Appeal relies on section 402 of the Insurance Act in holding that certain premium monies received by a sub-broker and paid to a subsequent insurer were in fact monies in trust for the prior insurer. In this case the sub-broker had sent out certificates of insurance to its clientele renewing the coverage provided by the prior insurer for another year. Even though the sub-broker could not bind the insurer, the sub-broker held itself out to the insureds – and this was enough. In effect, the sub-broker was acting as agent, as that is what the insureds were led to believe through the sub-broker’s actions. Similar to NFM in the matter before me, the sub-broker in Kouri had no direct dealings with the insurer. In Kouri, the Court of Appeal stated (at paragraphs 15 and 16):
“[…] Even if Kouri [the sub-broker] were allowed to advance a position inconsistent with its pleadings, I would take the view that its ostensible authority was sufficient to create binding contracts of insurance on behalf of Ecclesiastical [the prior insurer].
Both avenues lead to the conclusion that Kouri received money as premium payments for a contract of insurance with Ecclesiastical, and instead of holding that money in trust and paying it over to the insurer, it paid the money to Grain [the subsequent insurer]. I add the observation that s. 402 applies to an agent or broker who does nothing more than act ‘in negotiating’ a contract of insurance.”
[51] I conclude therefore that section 402 of the Insurance Act imposes a statutory trust on the premiums collected by NFM in respect of the RSA Contract. In these circumstances, while it may not be necessary to consider whether there was also an express or implied trust at common law, my view is that the record would support such a finding.
Status of HUB
[52] NFM argues that any trust determination, whether under section 402 of the Insurance Act or otherwise, only provides protection to the insurance provider, as trust beneficiary. Their position is that HUB, the plaintiff, is not the insurance provider, and accordingly does not have standing to advance this claim.
[53] NFM also argues that the only agency relationship is between NFM and its broker (HUB); HUB is not the agent of the insurer.
[54] In support of its argument, NFM relies on Adams-Eden Furniture Ltd. v. Kansa General Insurance, 1996 CanLII 12473 (Man. C.A.) (leave to appeal to S.C.C. refused). In Kansa the insurer claimed that the broker who negotiated the insurance coverage was negligent and sought indemnification from the broker. The court considers whether the insurance broker had a special relationship with the insurer and determines that it did not. The court notes (at para. 56) that “[t]he insurer and the insured are antagonists in the purchase/sale of an insurance contract. Just as the buyer owes no duty of care to a vendor, so too, the buyer’s agent owes no duty of care to the vendor”.
[55] HUB relies on section 394 of the Insurance Act, which states that “an agent or broker shall, for the purpose of receiving any premium for a contract of insurance, be deemed to be the agent of the insurer despite any conditions or stipulations to the contrary”. I am satisfied that this provision provides HUB the authority to take action on behalf of the insurer to collect the premiums owed to the insurers.
[56] NFM also argues that HUB could not be an agent of the insurer in the collection of the premiums, because HUB acted as NFM’s broker. The jurisprudence supports that an agent may act for both the insured and the insurer (see Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202, 140 O.R. (3d) 1).
[57] With regard to the RSA Contract funds, I therefore conclude that there is a statutory deemed trust under section 402 of the Insurance Act under which NFM holds the funds, and that HUB in its role as agent for the insurance provider has standing to bring the action.
The FA Contract
[58] The RSA Contract expired March 16, 2020. RSA refused to continue offering coverage. Consequently, NFM asked HUB to arrange for insurance for its fleet to commence March 16, 2020, after the expiry of the RSA Contract.
[59] HUB informed NFM that they were unable to locate other insurance providers in the general market willing to insure the NFM fleet. Accordingly, HUB informed NFM that their only option was to obtain insurance from the Facility Association (“FA”). FA serves as an insurer of last resort to cover drivers who cannot otherwise obtain coverage. HUB and NFM both understood that insurance coverage through FA would be (at least slightly) more costly than in the general market. Due to the relatively tight timeline, NFM gave the go-ahead to apply for the FA Contract. However, when the pricing from FA ultimately came back, NFM indicated that the pricing was unreasonable and not something they would have agreed to.
[60] The FA policy number RCF 05967192 was written by RSA as servicing carrier for FA.
[61] There are considerable facts in dispute regarding the FA Contract, including:
• Whether HUB represented to NFM that the FA insurance would have a “fleet rating” (experience rating), which would result in a discount on the premium;
• Whether HUB represented to NFM that it could expect the maximum fleet rating of “3”, which would discount the price by greater than 50%;
• What FA did, if anything, with regard to the fleet rating; and
• Whether NFM agreed to the FA Contract policy amount of May 12, 2020.
[62] Unlike the RSA Contract, the FA Contract provides that the premiums are to be paid to HUB (for the insurer). However, NFM’s position is that the FA Contract was not valid. HUB argues that once the FA application was completed, NFM was bound.
[63] There is ample evidence that, notwithstanding the fact that NFM disputes the FA Contract, NFM collected premiums from fleet members in respect of this policy. The Sethi Affidavit includes as exhibits copies of bank statements showing direct debits from the Muskoka Taxi bank account in relation to the FA policy, withdrawn on March 20, April 15, April 27 June 2, and June 29, 2020. Further, the Sethi Affidavit includes as exhibits copies of the insurance “pink slips” for the FA policy (insurer being RSA), with an effective date of March 16, 2020. I am satisfied that premiums were paid by NFM fleet members for insurance coverage under this policy.
[64] There are many issues as between HUB, NFM and FA with regard to the FA Contract. However, NFM still collected insurance premiums in respect of this policy from their fleet members. In the Sethi Affidavit she states that “Muskoka Taxi remitted the insurance premiums to NFM on the understanding that these funds would be remitted either to HUB to in turn pay the insurer, or directly to the insurer itself.”
[65] HUB has demanded payment in respect of the FA Contract in the amount of $1,269,091. However, HUB has also advised NFM in an email dated September 8, 2020 that it is still “proactively negotiate (sic) down the premium with Facility Association and [that they] have submitted a formal appeal”. The email goes on to state that “when you are ready to meet, we can discuss the status of this effort as well as NFM’s remittance of premiums collected”.
[66] Partial summary judgment is not appropriate in respect of the FA Contract. There are numerous issues related to this contract to be addressed at trial, including whether the contract was valid and enforceable as against NFM. When considered in the context of the litigation as a whole, partial summary judgment is not appropriate.
[67] I would, however, caution NFM that any premiums paid by fleet members for the automobile insurance are trust funds. The precise nature of the trust will have to be determined. In all likelihood, the funds will either be held in trust for RSA/HUB under section 402 of the Insurance Act (similar to the RSA Contract analysis above), or they will be subject to a resulting trust to the fleet members. These funds are not NFM’s funds and should not be dissipated or transferred.
Disposition
[68] In the result, therefore, partial summary judgment with regard to the RSA Contract shall issue as follows:
i. A declaration shall issue that RSA is the beneficial owner of all premiums, money or substitute for money received or receivable by NFM with respect to the RSA Contract on the basis of a statutory trust under section 402 of the Insurance Act;
ii. NFM shall produce a full accounting of all premiums, money or substitute for money received or receivable by NFM, directly or indirectly, with respect to the RSA Contract;
iii. NFM shall pay all the premiums, money or substitute for money received or receivable by NFM with respect to the RSA Contract to RSA;
iv. An equitable tracing of the premiums, money or substitute for money received by NFM with respect to the RSA Contract into the assets, property, and interests of NFM and its officers, directors, servants, agents, representatives, employees, and any other person; and
v. An interlocutory injunction restraining NFM, and its officers, directors, servants, agents, representatives, employees, and any and all persons acting on behalf of or in conjunction with NFM, from directly or indirectly, by any means whatsoever, disposing of, dissipating, transferring, or otherwise dealing with any current or future premiums, money or substitute for money received or receivable by NFM with respect to the RSA Contract.
[69] The plaintiff’s motion for partial summary judgment with regard to the FA Contract is denied, subject to the following: NFM is ordered to pay into court to the credit of this action any and all insurance premiums that it received or receives in respect of the FA Contract.
Costs
Success is divided. If the parties are unable to agree on costs by December 18, 2020 they may deliver written submissions on costs by delivery to my judicial assistant and by uploading to Caselines, according to the following schedule: (i) any party seeking costs, shall, on or by January 5, 2021, serve and file their Cost Outline, together with any supporting material and their written submissions of no more than 3 pages with authorities hyperlinked; (ii) any party against whom costs are sought shall, on or by January 12, 2021, serve and file their responding written submissions of no more than 3 pages with authorities hyperlinked.
J. steele J.
Released: December 10, 2020
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HUB INTERNATIONAL HKMB LIMITED
Plaintiff
– and –
NFM LIMITED
Defendant
REASONS FOR JUDGMENT
Steele J.
Released: December 10, 2020