Attorney-General for Ontario v. Policyholders of Wentworth Insurance et al.

Attorney-General for Ontario v. Policyholders of Wentworth Insurance et al.
Collection
Supreme Court Judgments
Date
1969-06-30
Report
[1969] SCR 779
Judges
Cartwright, John Robert; Fauteux, Joseph Honoré Gérald; Abbott, Douglas Charles; Martland, Ronald; Judson, Wilfred; Ritchie, Roland Almon; Hall, Emmett Matthew; Spence, Wishart Flett; Pigeon, Louis-Philippe
On appeal from
Ontario
Subjects
Insurance
Decision Content
Supreme Court of Canada
Attorney-General for Ontario v. Policyholders of Wentworth Insurance et al., [1969] S.C.R. 779
Date: 1969-06-30
The Attorney General for Ontario (Plaintiff) Appellant;
and
Policyholders of Wentworth Insurance Company and others Claiming for Losses, Policyholders of Wentworth Insurance Claiming for Refund of Unearned Premiums, The Clarkson Company Limited as Liquidator of Wentworth Insurance Company (Defendants) Respondents.
1968: November 28, 29; 1969: June 30.
Present: Cartwright C.J. and Fauteux, Abbott, Martland, Judson, Ritchie, Hall, Spence and Pigeon JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Insurance—Constitutional law—Ontario insurance company licenced to do business in Ontario ordered to be wound-up under federal statute—Administration of deposit whether governed by provincial or federal legislation—Winding-up Act, R.S.C. 1952, c. 296. ss. 33, 165(1), 173—”Charge” in s. 173—Insurance Act, R.S.O. 1960, c. 190, ss. 41, 42(5), 48—Whether deposit must be transferred to liquidator.
The Ontario Insurance Act provides, inter alia, that every insurer carrying on business in Ontario shall be required to deposit with the Minister a defined amount of approved securities which are vested in the Minister for the protection of the insured. The Insurance Act further provides that, should a claim be made against the fund, the order of priority shall favour those who have suffered losses and that those who have claims for unearned premiums should come second. The order of priority provided for in the Winding-up Act ranks both claims for losses and claims for unearned premiums on an equal footing. On December 13, 1966, The Wentworth Insurance Company which had been incorporated under the laws of the Province of Ontario and had carried out business in that province with its head office in Toronto, was ordered to be wound-up and a provisional liquidator was appointed. The appointment of a permanent liquidator was made on January 27, 1967. In the meantime, by order dated December 19, 1966, the provisional liquidator was appointed receiver so to administer the deposit pursuant to the provisions of The Insurance Act without prejudice to the right of the provisional and of the permanent liquidator to administer the fund under the Winding-up Act. The Master’s interim report required the liquidator to administer the fund in accordance with The Insurance Act. Upon appeal by these policyholders who had claims for refund of unearned premiums the Court of first instance confirmed the report. Upon further appeal, the Court of Appeal unanimously held that the interim report should be varied and that the fund and securities be deposited in the manner provided for in the Winding-up Act. Leave to appeal to this Court was granted.
Held (Ritchie, Hall, Spence and Pigeon JJ. dissenting): The appeal should be dismissed.
Per Cartwright C.J. and Fauteux, Abbott, Martland and Judson JJ.: The words of s. 165(1) of the Winding-up Act regarding the transfer to the liquidator of all funds and securities that may be on deposit with any government in Canada or with trustees for the benefit of policyholders are plain and cannot mean anything else than that the fund deposited had to be distributed according to the provisions of that Act. Furthermore, the provisions of The Insurance Act which purports to lay down a scheme of distribution upon insolvency were invalid per se or, in any event, were certainly overborne by the distribution provisions of the Winding-up Act with which they cannot be compatibly administered.
Section 173 of the Winding-up Act, which provides that “the priority of any mortgage, lien or charge on the property of the company” shall not be prejudiced by reason of the winding‑up, is not applicable to the present case. The word “charge” does not include any type of interest created by the alleged statutory trust and refers to an interest in existence, whereas the policyholders acquired no interest except perhaps, at the very most, a prospective one, prior to the administrative order which was, in fact, made at a date subsequent to the winding-up.
Per Hall, Ritchie, Spence and Pigeon JJ., dissenting: The power granted to the Minister under The Insurance Act of Ontario to require a deposit as a condition precedent to the granting of a licence must include as a necessary consequence the power to administer it if such power is not to become, to a great extent, illusory. The vital question is, therefore, not the exclusive jurisdiction of the Parliament of Canada on matters of bankruptcy and insolvency but whether Parliament, by enacting section 165(1) of the Winding up Act, in fact, intruded in a field of legislation, namely insurance, which by virtue of section 92 of the B.N.A. Act and of a succession of decisions in the Privy Council and in this Court, has been held as exclusively subject to provincial law. The Insurance Act is in “pith and substance” insurance legislation and consequently its disputed sections, in so far as they relate to the administration of a deposit, deal with bankruptcy and insolvency only as incidental to the right to legislate regarding insurance. It follows that section 165(1) of the Winding-up Act, by attempting to divert the deposit of its true purpose was ultra vires of Parliament.
Assurances—Droit constitutionnel—Compagnie opérant en vertu d’un’permis de la province d’Ontario mise en liquidation sous l’autorité d’une loi fédérale—Argents et titres déposés auprès du ministre devaient-ils être gérés aux termes de la loi provinciale ou de la loi fédérale—Loi sur les liquidations, S.R.C. 1952, c. 296, art. S3, 165(1), 173—Sens du mot “charge” clans l’art. 173—Insurance Act, R.S.O. 1960, c. 190, art. 41, 42(5), 48—Argents et titres déposés auprès du ministre doivent-ils être confiés au liquidateur. La loi d’Ontario sur les assurances stipule, entre autres choses, que tout assureur avant de se livrer au commerce d’assurance doit déposer auprès du ministre un certain montant en titres agréés dont le ministre est saisi pour la protection des assurés. La Loi sur les assurances prévoit en outre que, dans le cas d’une réclamation contre ce dépôt, les créances de ceux qui ont droit à une indemnité contre les pertes sont préférées aux créances de ceux qui ont droit à un remboursement de primes. L’ordre de préférence établi par la Loi sur les liquidations place sur un pied d’égalité les réclamations contre les pertes et celles portant sur un remboursement de primes. La compagnie Wentworth Insurance, dont le siège social était à Toronto, qui avait été constituée suivant les lois de la province d’Ontario et avait exercé le commerce d’assurance dans cette province, fut mise en liquidation le 13 décembre 1966 conformément aux termes de la Loi sur les liquidations. Un liquidateur provisoire fut désigné. La nomination d’un liquidateur permanent fut faite le 27 janvier 1967. Précédemment, par une ordonnance, datée le 19 décembre 1966, le liquidateur provisoire avait été nommé receveur aux fins de gérer le dépôt suivant les exigences de la Loi sur les assurances et sans préjudice aux droits du liquidateur provisoire et du liquidateur permanent désignés en vertu des dispositions de la Loi sur les liquidations. Le conseiller-maître à la Cour suprême de l’Ontario’ a, dans son rapport provisoire, exigé que le liquidateur administre le dépôt suivant les dispositions de la Loi sur les assurances. La Cour de première instance, qui a entendu les appels des détenteurs de police qui réclamaient un remboursement de primes, a confirmé le rapport. La Cour d’appel, à l’unanimité, a jugé que le rapport provisoire devait être modifié et que les argents et les titres devaient être déposés en la manière prescrite par la Loi sur les liquidations. L’autorisation d’interjeter appel à cette Cour a été accordée.
Arrêt: L’appel doit être rejeté, les Juges Ritchie, Hall, Spence et Pigeon étant dissidents.
Le Juge en Chef Cartwright et les Juges Fauteux, Abbott, Martland et Judson: Les termes de l’art. 165(1) de la Loi sur les liquidations concernant le transfert au liquidateur des fonds et valeurs dont peut être dépositaire tout gouvernement au Canada ou pouvant être en dépôt chez des fiduciaires pour protéger les porteurs de polices d’assurance sont clairs et ne peuvent pas signifier autre chose que ces fonds et valeurs doivent être répartis en la manière prescrite par cette loi. De plus, les dispositions de la Loi sur les assurances qui prétendent imposer un autre ordre de distribution au cas d’insolvabilité sont nulles de plein droit ou, à tout le moins, sont devenues inopérantes par l’effet des dispositions de la Loi sur les liquidations régissant l’ordre de distribution, avec lesquelles elles ne sont plus compatibles.
L’article 173 de la Loi sur les liquidations aux termes de laquelle la liquidation ne doit pas porter préjudice à «la priorité de toute hypothèque, privilège ou charge» ne s’applique pas à la présente cause. Le mot «charge» ne comprend aucun des droits accordés par cette prétendue fiducie et ne s’applique qu’à un droit existant, tandis que les détenteurs de polices d’assurance n’avaient tout au plus qu’un droit éventuel avant la date de l’ordonnance administrative qui, de fait, fut postérieure à la liquidation.
Les Juges Ritchie, Hall, Spence et Pigeon, dissidents: Les pouvoirs conférés au ministre aux termes de la Loi d’Ontario sur les assurances d’exiger un dépôt avant qu’un permis ne puisse être accordé doit avoir pour conséquence nécessaire la faculté de l’administrer, sans quoi ces pouvoirs, dans une large mesure, risquent de devenir illusoires. La question essentielle n’est donc pas celle de la compétence exclusive du Parlement du Canada en matière de faillite ou d’insolvabilité, mais celle de savoir si le Parlement fédéral, en introduisant l’art. 165(1) dans la Loi sur les liquidations n’a pas, en fait, empiété sur un domaine législatif, à savoir l’assurance, qui en vertu des dispositions de l’art. 92 de l’ A.A.N.B. et suivant les décisions répétées du Conseil Privé, fait partie du domaine exclusif des législatures provinciales. La Loi sur les assurances est dans son essence et dans sa réalité objective une législation régissant l’assurance et, en conséquence, les articles en litige, dans la mesure où ils se rapportent à l’administration du dépôt, ne traitent de faillite et d’insolvabilité que d’une façon accessoire inséparable du droit de légiférer en matière d’assurance. Il s’ensuit que l’art. 165(1) de la Loi sur les liquidations, parce qu’il cherche à détourner le dépôt de son véritable sens, est ultra vires.
APPEL d’un jugement de la Cour d’Appel de la province d’Ontario[1], infirmant un jugement du Juge Hartt portant sur la validité des articles de la Loi d’Ontario sur l’Assurance prévoyant un ordre de distribution au cas d’insolvabilité. Appel rejeté, les Juges Ritchie, Hall, Spence et Pigeon étant dissidents.
APPEAL from a judgment of the Court of Appeal for Ontario1, reversing the judgment of Hartt J. on the issue of the validity of the distribution provisions upon insolvency as found in The Insurance Act of Ontario. Appeal dismissed, Ritchie, Hall, Spence and Pigeon JJ. dissenting.
F.W. Callaghan, Q.C., and R. Scott, for the appellant.
H.H. Siegal, Q.C., for Policyholders of Wentworth Ins. and others claiming for losses.
Fred M. Catzman, Q.C., and Marvin A. Catzman, for Policyholders of Wentworth Ins. and others claiming for refund of unearned premiums.
Carl H. Morawetz, Q.C., for the Clarkson Co., liquidator.
N.A. Chalmers, Q.C., and S.F. Weislo, for the Attorney General of Canada.
Claude Gagnon, Q.C., for the Attorney General of Quebec.
S. Friedman, Q.C., for the Attorney General of Alberta. The judgment of Cartwright C.J. and Fauteux, Abbott, Martland and Judson JJ. was delivered by
JUDSON J.:—Under the provisions of The Ontario Insurance Act, R.S.O. 1960, c. 190, s. 41, every insurer carrying on business in Ontario is required to deposit with the Minister approved securities in certain defined amounts. While these securities are on deposit the property is vested in the Minister without any formal transfer (s. 42(5)). Nevertheless, the insurer is entitled to receive the interest on the deposits as long as it satisfies the conditions of the Act and no notice of any final judgment against the insurer or order for its winding-up or for the distribution of its assets or for the administration of its deposit is given to the Minister.
By order dated December 13, 1966, Wentworth Insurance Company was ordered to be wound up under the Winding-up Act, R.S.C. 1952, c. 296. A provisional liquidator was appointed the same day and a permanent liquidator on January 27, 1967. In the meantime, by order dated December 19, 1966, the company’s deposit of securities under s. 41 of The Insurance Act was ordered to be administered pursuant to the provisions of that Act, and the provisional liquidator was appointed receiver so to administer the deposit. This order was made without prejudice to the rights of the provisional liquidator and the permanent liquidator under the Winding-up Act and, particularly, s. 165 of that Act.
It is apparent that the issue with which we are concerned was recognized very early in the proceedings. The Ontario Insurance Act provides for a certain order of priorities for claimants against this fund. Briefly, those insured persons who have suffered losses come first. Those who have claims for unearned premiums come second. Under the Winding-up Act these two classes of creditors rank pari passu.
In the winding-up proceedings, in his interim report, dated September 19, 1967, the Master found that the liquidator was required to administer the fund in the manner provided by ss. 58 and 59 of The Insurance Act. There was an appeal from this report by those policyholders who had claims for refunds of unearned premiums. The judge of first instance, by order dated February 21, 1968, dismissed the appeal and confirmed the report. An appeal to the Court of Appeal followed. That Court unanimously held that the appeal should be allowed and the interim report of the Master varied and an order made that the liquidator administer the funds and securities deposited as above mentioned in the manner provided by the Winding‑up Act. Leave to appeal was granted by this Court on July 4,1968.
The Master held that the legislation relating to the deposit was in “pith and substance” insurance legislation and that the deposit was vested in the Minister in trust for the benefit of the policyholders and that he should be free to deal with it according to the provisions of the Insurance Act. In his view, the deposit was a “charge” within the meaning of that word in s. 173 of the Winding-up Act, which reads as follows:
173. Nothing in this Part prejudices or affects the priority of any mortgage, lien or charge upon the property of the company.
Mr. Justice Hartt, while affirming the decision of the Master, did so for different reasons. In his view, the effect of s. 41 of The Insurance Act was to vest the deposit in the Minister in trust for the policyholders. Therefore, on ordinary principles of the law of trusts, the deposit was not the property of the company and could not be distributed on insolvency according to the Winding-up Act. He did not agree with the Master that s. 173 was applicable. This section only applied where there was a charge upon the company’s property. He rested his judgment on the statutory trust which took the deposit out of the classification of “property of the company”.
The Court of Appeal unanimously reversed this decision. Mr. Justice Laskin, speaking for the Court, conceded that Hartt J.’s reasoning would be most convincing if one had to rely solely upon s. 33 of the Winding-up Act. Section 33 reads:
33. The liquidator, upon his appointment, shall take into his custody or under his control, all the property, effects and choses in action to which the company is or appears to be entitled, and he shall perform such duties in reference to winding up the business of the company as are imposed by the court or by this Act.
However, there was s. 165(1) which was enacted to deal with this very situation. Section 165(1) reads:
165. (1) The funds and securities of the company in Canada that may be on deposit with any government in Canada or with trustees or otherwise held for the company or for the protection of the policyholders of the company of the class or classes that are affected by the winding-up order shall, on order of the court having jurisdiction, be transferred to the liquidator.
He could not see how the plain words of this section could mean anything else than that the fund deposited had to be distributed according to the provisions of the Winding-up Act. Furthermore, he was of opinion that the provisions of The Insurance Act purporting to provide for a scheme of distribution upon insolvency were invalid per se or, in any event, were certainly overborne by the distribution provisions of the Winding-up Act.
And finally, there were in his view at least three reasons why s. 173 was not applicable. First, on an ejusdem generis construction, the word “charge” did not include the type of interest created by the alleged statutory trust. Secondly, the term “charge” refers to an interest in existence at the time of the winding-up order. Here the policyholders acquired no interest until an administration order was made. Their interest was at the very most prospective until the advent of the order. Thirdly, the winding-up order was made before the administration order. Therefore, the deposit was subject to the transfer order under s. 165(1) before the creation of any beneficial interest in the loss claimants.
I agree with the reasons of the Court of Appeal in their entirety and have nothing to add. I would dismiss the appeal and make the same order as to costs in this Court, namely, that the permanent liquidator and the competing classes of policyholders should have their costs of the appeal out of the deposit on a solicitor and own client basis. There will be no costs to or against the Attorney-General for Ontario and the Intervenants.
The judgment of Ritchie, Hall, Spence and Pigeon JJ. was delivered by
HALL J. (dissenting):—The Wentworth Insurance Company was incorporated under the laws of the Province of Ontario and carried on the business of insurance in Ontario, with head office at Toronto. A succession of decisions in the Privy Council and in this Court have held that the business of insurance is exclusively subject to provincial law and that by s. 92 of the B.N.A. Act the provinces have exclusive jurisdiction to prescribe the way in which insurance business shall be carried on in the province. Dominion legislation which encroaches upon or intermeddles with such exclusive provincial jurisdiction is ultra vires of the Dominion Parliament. Citizens Ins. Co. v. Parsons[2]; A.-G. Canada v. A.-G. Alta[3]; Re Reciprocal Ins. Legislation[4]; In Re The Insurance Act of Canada[5], Re Home Assurance Co.[6]
Acting within its exclusive right to legislate regarding insurance, the Province of Ontario enacted The Insurance Act R.S.O. 1960, c. 190. This Act is a lengthy statute with XVI Parts, 353 sections, and deals with all phases and modes of insurance, other than those specifically excluded by s. 21(4). This Act and Part VI of The Corporations Act, R.S.O. 1960, c. 71, was intended by the Legislature to cover the entire field of insurance and to provide a complete and comprehensive code respecting the law of insurance in the Province of Ontario. Martin J.A., as he then was, in Crown Bakery v. Preferred Accident Insurance Company[7] said:
A perusal of The Saskatchewan Insurance Act, as it was enacted in 1915 and again in 1924-25, convinces me that the Legislature intended to cover the entire field of insurance, and to enact a complete code of law to govern all insurance contracts in the province,…
The Saskatchewan Insurance Act and The Ontario Insurance Act are almost identical in scope and this observation would apply equally to the Ontario legislation.
Part I of The Insurance Act provides for a Superintendent of Insurance by s. 2(1) which reads:
2. (1) A Superintendent of Insurance shall be appointed who shall exercise the powers and perform the duties vested or imposed upon him by this or any other Act, shall have the general supervision of the business of insurance in Ontario and shall see that the laws relating to the conduct thereof are enforced and obeyed.
Part II of The Act applies to insurance undertaken in Ontario and to all insurers carrying on business in Ontario (s. 20(1)). S. 21(1) and (2) read:
21. (1) Every insurer undertaking insurance in Ontario or carrying on business in Ontario shall obtain from the Minister and hold a licence under this Act.
(2) Every insurer undertaking insurance or carrying on business in Ontario without having obtained a licence as required by this section is guilty of an offence. and prohibit anyone undertaking insurance or carrying on the business of insurance in Ontario unless licenced to do so. A licence issued under s. 21(1) authorizes, as stated in s. 23:
23. (1) Upon due application and upon proof of compliance with this Act, the Minister may issue a licence to undertake contracts of insurance and carry on business in Ontario to any insurer coming within one of the following classes:
1. Joint stock insurance companies.
2. Mutual insurance corporations.
3. Cash-mutual insurance corporations.
4. Fraternal societies.
5. Mutual benefit societies.
6. Companies duly incorporated to undertake insurance contracts and not within classes 1 to 5.
7. Reciprocal or inter-insurance exchanges.
8. Underwriters or syndicates of underwriters operating on the plan known as Lloyds.
9. Pension fund associations.
(2) A licence issued under this Act authorizes the insurer named therein to exercise in Ontario all rights and powers reasonably incidental to the carrying on of the business of insurance named therein that are not inconsistent with this Act or with its act or instrument of incorporation or organization.
Certain conditions precedent to the issuing of a licence are set out in s. 32.
S. 41 and 42 which read:
41. (1) Every insurer carrying on the business of insurance in Ontario shall, before receiving a licence under this Act, deposit approved securities with the Minister in the following amounts: (emphasis added)
1. Where the insurer undertakes life insurance—$50,000.
2. Where the insurer undertakes any one or more classes of insurance other than life,
i. in Ontario only—$25,000.
ii. in Ontario and elsewhere—$50,000.
(2) The Superintendent may require the deposit referred to in subsection 1 to be increased, either before or after granting the licence, to such amount as he considers necessary.
(3) An insurer may voluntarily make a deposit in excess of the amount prescribed by this section, but no part of a voluntary deposit shall be withdrawn without the sanction of the Minister.
42. (1) The value of such securities shall be estimated at their market value, not exceeding par, at the time they are deposited.
(2) If any other than approved securities are offered as a deposit, the Minister may accept them on such valuation and on such conditions as he deems proper.
(3) If the market value of any securities that have been deposited by an insurer declines below that at which they were deposited, the Minister may notify the insurer to make such further deposit as will ensure the accepted value of all the securities deposited by the insure being equal to the amount that is required by this Act to be deposited.
(4) On failure by the insurer to make such further deposit within sixty days after being called upon so to do, the Minister may suspend or cancel the licence of the insurer.
(5) The property in any stock, bonds or debentures deposited with the Minister under this Act or any predecessor thereof is vested in the Minister by virtue of his office without any formal transfer while such stock, bonds or debentures form the whole or any part of the deposit required by this Act. (emphasis added)
(6) So long as the conditions of this Act are satisfied and no notice of any final judgment against the insurer or order for its winding-up or for the distribution of its assets or for administration of its deposit is given to the Minister, the insurer is entitled to receive the interest upon the securities forming the deposit.
are the sections which provide for the deposit, and it will be observed that the deposit called for by section 41 is made a condition precedent to receiving a licence under the Act.
In sections 46 to 73 the Act provides for the administration of the deposit required by s. 41. Specifically, sections 48 to 52 provide as follows:
48. (1) The deposit made by an insurer under this Act is subject to administration in the manner hereinafter provided.
(2) Subject to sections 69 and 70, the deposit shall be held and administered for the benefit of all insured persons under Ontario contracts and they are entitled to share in the proceeds of the deposit. (emphasis added)
(3) An insured person under an Ontario contract is entitled to share in the proceeds of the deposit in respect of,
(a) a claim for a loss that is covered by the contract and that occurred before the termination date fixed under section 53 of this Act or section 233 of The Corporations Act; or
(b) a claim for refund of unearned premiums, except in the case of life insurance; or
(c) a claim for payment of the legal reserve in respect of the contract in the case of life insurance; or
(d) claims under both clauses a and b.
49. (1) An application for administration of a deposit shall be made by originating notice of motion to a judge of the Supreme Court.
(2) The application shall be made in the county or district,
(a) in which the head office of the insurer is situate; or
(b) in which the chief office of the insurer in Ontario is situate if its head office is out of Ontario.
50. (1) With the approval of the Minister, the Superintendent may make application for administration at any time when, in his opinion, it is necessary or desirable for the protection of the insured person entitled to share in the proceeds of the deposit.
(2) In the case of a reciprocal deposit held in Ontario, the superintendent of insurance of a reciprocating province may make application for administration of the deposit. (3) An insured person entitled to share in the proceeds of a deposit may make application for administration of the deposit upon producing evidence,
(a) that he has served the Superintendent with a notice in writing of his intention to make application if the Superintendent or the superintendent of insurance of a reciprocating province does not apply; and
(b) that sixty days have elapsed since the service of the notice and that no application for administration of the deposit has been made.
(4) In the case of a reciprocal deposit, if the Superintendent is served with a notice as provided in subsection 3, he shall forthwith notify the superintendent of insurance of each reciprocating province that he has been so served.
51. (1) The applicant for administration of the deposit shall serve the originating notice of motion at least ten days before the date specified in the notice for the making of the application,
(a) upon the insurer or, where the insurer is in liquidation, upon the liquidator of the insurer; and
(b) upon the Superintendent; and
(c) in the case of a reciprocal deposit, upon the superintendent of insurance of each reciprocating province.
(2) An applicant for administration is entitled to an order for administration upon proof,
(a) that the licence of the insurer has been cancelled, and that its assets are insufficient to discharge its outstanding liabilities; or
(b) that an order has been made for the winding up of the insurer, or
(c) that the insurer has failed to pay,
(i) an undisputed claim for sixty days after it has been admitted, or
(ii) a disputed claim after final judgment and tender of a valid discharge,
if the claim arose under a contract of insurance in respect of which the deposit is subject to administration.
52. (1) Upon granting an order for administration, the court shall appoint a receiver to administer the deposit.
(2) Where a provisional liquidator or a liquidator has been appointed under this Act or The Corporations Act or a liquidator has been appointed under the Winding-up Act (Canada) to wind up a company that has made a deposit under this Act, the court may appoint the provisional liquidator or the liquidator as the receiver to administer the deposit.
(3) Thereupon the provisional liquidator or the liquidator shall administer the deposit for the benefit of the insured persons entitled to share in the proceeds thereof in accordance with the provisions of and the priorities set out in this Act.
Sections 58 and 59 read:
58. The proceeds of the deposit are payable,
(a) first, in payment of the receiver and of all costs and expenses incurred by him in the administration of the deposit and in payment of the remuneration, costs and expenses of the provisional liquidator as ordered by the Minister under section 229 of The Corporations Act; (b) second, in payment of the insured persons who are entitled to share in the proceeds of the deposit in accordance with the priorities set out in section 59.
59. (1) Except in the case of life insurance, each insured person who claims in respect of a loss covered by the contract that occurred before the termination date fixed under section 53 of this Act or section 233 of The Corporations Act is entitled to receive payment of his approved or settled claim in full in priority to the insured persons who claim in respect of refunds of unearned premiums.
(2) Subject to subsection 1, an insured person who claims in respect of a refund of unearned premiums may claim such part of the premium paid as is proportionate to the period of his contract unexpired,
(a) at the termination date fixed by the receiver under section 53 or fixed by the provisional liquidator or the liquidator under section 233 of The Corporations Act; or
(b) at the date the insured person cancelled the contract, whichever is the earlier date.
(3) In the case of life insurance, each insured person who has a claim for a loss covered by the contract that occurred before the termination date fixed under section 53 of this Act or section 233 of The Corporations Act ranks in the distribution of the proceeds of the deposit for the approved or settled amount of the claim pari passu with insured persons under unmatured life insurance contracts.
(4) An insured person under an unmatured life insurance contract is entitled to the full amount of the legal reserve in respect of his contract determined by the receiver according to the valuation thereof approved by the Superintendent under this Act.
These sections must be read in conjunction with sections 231 and 232 of Part VI of The Corporations Act, respecting insurance corporations. These sections provide:
231. (1) The provisional liquidator or the liquidator, before any order granting administration of the deposit and before the fixing of a termination date pursuant to section 233, may arrange for the reinsurance of the subsisting contracts of insurance of the insurer with some other insurer licensed in Ontario.
(2) For the purpose of securing the reinsurance, the following funds shall be available:.
1. The entire assets of the insurer in Ontario other than the deposit except the amount, reasonably estimated by the provisional liquidator or the liquidator as being required to pay,
(a) the costs of the liquidation or winding up;
(b) all claims for losses covered by the insurer’s contracts of insurance of which notice has been received by the insurer or provisional liquidator or liquidator before the date on which the reinsurance is effected;
(c) the claims of the preferred creditors who are the persons paid in priority to other creditors under the winding up provisions of this Act,
all of which shall be a first charge on the assets of the insurer, other than the deposit.
2. All or such portion, if any, of the deposit as is agreed upon pursuant to subsection 3. (3) If it appears necessary or desirable to secure reinsurance for the protection of insured persons entitled to share in the proceeds of the deposit, the Minister, on the recommendation of the Superintendent, or, in the case of a reciprocal deposit, the superintendents of insurance of the reciprocating provinces, may enter into an agreement with the provisional liquidator or the liquidator, whereby, pursuant to section 47 or 71 of The Insurance Act, all or any part of the securities in the deposit may be used for the purpose of securing the reinsurance.
(4) The creditors of the insurer, other than the insured persons and the said preferred creditors, are entitled to receive a payment on their claims only if provision has been made for the payments mentioned in subsection 2 and for the reinsurance.
(5) If, after providing for the payments mentioned in subsection 2, the balance of the assets of the insurer, together with all or such portion, if any, of the deposit as is agreed upon under subsection 3, is insufficient to secure the reinsurance of the contracts of the insured persons in full, the reinsurance may be effected for such portion of the full amount of the contracts as is possible.
(6) No contract of reinsurance shall be entered into under this section until it is approved by the Supreme Court.
232. (1) In the winding up of an insurer that has made a deposit pursuant to The Insurance Act, if the person appointed as receiver to administer the deposit pursuant to section 52 of The Insurance Act is not the person appointed as the provisional liquidator or the liquidator under The Insurance Act or this Act or appointed as the liquidator under the Winding-up Act (Canada), as the case may be, the Supreme Court at any time in its discretion may order that the deposit and the administration thereof be transferred from the receiver to the provisional liquidator or the liquidator.
(2) Upon the making of an order under subsection 1, the provisional liquidator or the liquidator shall administer the deposit for the benefit of the persons entitled to share in the proceeds thereof in accordance with the provisions of and the priorities set out in this Act.
(3) The amount payable to the provisional liquidator or the liquidator for administering the deposit and all costs and expenses incurred by him in administering the deposit shall be paid out of the deposit in accordance with the priorities fixed by clause a of section 58 of The Insurance Act, but the amount payable to the provisional liquidator or the liquidator and all costs and expenses incurred by him in the winding up of the insurer shall not be paid out of the deposit but shall be paid out of and are a first charge on the assets of the insurer except as provided in subsection 3 of section 229.
It will be seen that the provisions of section 232 above correspond to those in s. 52 of The Insurance Act.
Wentworth Insurance Company became insolvent and was ordered to be wound up under the Winding‑up Act R.S.C. 1952, c. 296. Clarkson Company Limited was appointed provisional liquidator on December 13, 1966 (later confirmed as permanent liquidator). On December 19, 1966, the following order was made respecting the deposit which Wentworth Insurance Company had been required to put up as a condition of being licenced to do business in Ontario:
UPON the application of counsel on behalf of the Superintendent of Insurance, in the presence of counsel for The Clarkson Company Limited, Provisional Liquidator of Wentworth Insurance Company under The Winding-Up Act, R.S.C. 1952, Chapter 296, upon reading the affidavit of Cecil Richards, the consent of The Clarkson Company Limited to act as receiver to administer the deposit of Wentworth Insurance Company under the said Insurance Act and the consent of the said Provisional Liquidator through its solicitors, filed, and upon hearing what was alleged by counsel aforesaid,
1. IT IS ORDERED that the deposit of securities deposited by Wentworth Insurance Company pursuant to Section 41 of the said Insurance Act with the Minister, as denned by the said Act, be administered pursuant to the provisions of the said Act.
2. IT IS FURTHER ORDERED that The Clarkson Company Limited be and is hereby appointed receiver to administer the said deposit pursuant to the said Act.
3. IT IS FURTHER ORDERED that The Clarkson Company Limited be and is hereby authorized to exercise in respect of the ‘account of the insurer all or any of the powers that the Master of the Supreme Court would have if he were taking an account of the claims against the said deposit.
4. IT IS FURTHER ORDERED that The Clarkson Company Limited be and is hereby authorized to sell or realize upon bank deposit receipts in the aggregate sum of approximately $60,000.00 comprising part of the said deposit.
5. IT IS FURTHER ORDERED that this matter be and is hereby referred to the Master at Toronto to give such further directions or advice pertaining to any matter arising in the administration of the deposit as may be necessary from time to time and that the said Master be and is hereby conferred with all the powers conferred upon the Court by the said Insurance Act in and about the administration of the said deposit, passing the accounts of the said receiver, approving the accounts and discharging the said receiver.
6. IT IS FURTHER ORDERED that all the above provisions of this order be without prejudice to the rights of The Provisional Liquidator and The Permanent Liquidator, or either of them of Wentworth Insurance Company appointed under The Winding-Up Act, R.S.C. 1952, Chapter 296 and in particular Section 165 thereof.
7. AND IT IS FURTHER ORDERED that the costs of this application be taxed and paid to the applicant and to the said Provisional Liquidator out of the said deposit.
On July 14, 1967, an application was made to the Master for advice and direction of the Court as to the manner in which the deposit under s. 41 of The Insurance Act in the hands of the Liquidator was to be administered, whether Under The Insurance Act, or as a general asset of the company under the Winding-up Act. On this application counsellor the Attorney General for Canada submitted that the provisions of The Insurance Act respecting the administration of the deposit were legislation relating to insolvency and ultra vires Ontario.
The Master directed the Liquidator to deal with the deposit in the manner provided by sections 58 and 59 of The Insurance Act. An appeal was taken to Hartt J., who upheld the Master and ordered insofar as is relevant here, as follows:
2. AND THIS COURT DOTH FURTHER ORDER that The Clarkson Company Limited, Permanent Liquidator of Wentworth Insurance Company, do administer the funds and securities deposited pursuant to the provisions of The Insurance Act, R.S.O. 1960, Chapter 190, in the manner provided by Sections 58 and 59 of the said Insurance Act.
The Policyholders entitled to claim for refunds of unearned premiums appealed to the Court of Appeal and that Court allowed the appeal and ordered:
2. AND THIS COURT DOTH FURTHER ORDER that The Clarkson Company Limited, Permanent Liquidator of Wentworth Insurance Company, do administer the funds and securities depo