Mosten Investments LP v The Manufacturers Life Insurance Company (Manulife Financial)

Court of Appeal for Saskatchewan

Citation: Mosten Investments LP v The

Manufacturers Life Insurance Company

(Manulife Financial), 2021 SKCA 36

Date: 2021-03-10

Docket: CACV3407

Between:

Mosten Investment LP

Appellant/Respondent on Cross-Appeal

(Applicant)

And

The Manufacturers Life Insurance Company o/a Manulife Financial

Respondent/Appellant on Cross-Appeal

(Respondent)

Docket: CACV3408

Between:

Atwater Investment LP

Appellant/Respondent on Cross-Appeal

(Applicant)

And

BMO Life Assurance Company

Respondent/Appellant on Cross-Appeal

(Respondent)

Docket: CACV3409

Between:

Ituna Investment LP

Appellant/Respondent on Cross-Appeal

(Applicant)

And

Industrial Alliance Insurance and Financial Services Inc.

Respondent/Appellant on Cross-Appeal

(Respondent)

Before:

Caldwell, Barrington-Foote and Tholl JJ.A.

Disposition:

Appeals allowed in CACV3407 and CACV3408; Appeal dismissed in

CACV3409; Cross-Appeals allowed in part

Written reasons by:

The Court

On appeal from:

Appeals heard:

2019 SKQB 75, 2019 SKQB 76, 2019 SKQB 77, Saskatoon

January 15, 16 and 17, 2020

Counsel:

Ronald Miller, Q.C. and Amanda Quayle, Q.C. for Mosten Investment LP

Linda Plumpton, Toshach Weyman and Winston Gee for The

Manufacturers Life Insurance Company o/a Manulife Financial

Gordon Kuski, Q.C., Amanda Quayle, Q.C. and William Lane for Atwater

Investment LP

Munaf Mohamed, Q.C. and Christine Viney for BMO Life Assurance

Company

Shaunt Parthev, Q.C. and Janelle Souter for Ituna Investment LP

Patricia Jackson, David Outerbridge, Lara Guest and Shalom Cumbo-

Steinmetz for Industrial Alliance Insurance and Financial Services Inc.

i

TABLE OF CONTENTS

I. INTRODUCTION .................................................................................................................. 1

II. INTERPRETATION............................................................................................................... 3

A. The Parties and their Appeals and Cross-appeals............................................................... 3

B. Reference Points ................................................................................................................. 3

C. The Nature of a ULP........................................................................................................... 5

D. The Dispute that Underpins the Appeals ............................................................................ 7

III.

ISSUES ............................................................................................................................... 8

A. CACV3407 – Mosten Appeal............................................................................................. 8

B. CACV3407 – Manulife Cross-appeal................................................................................. 8

C. CACV3408 – Atwater Appeal............................................................................................ 9

D. CACV3408 – BMO Life Cross-appeal............................................................................... 9

E. CACV3409 – Ituna Appeal................................................................................................. 9

F. CACV3409 – Industrial Alliance Cross-appeal................................................................ 10

IV.

STANDARDS OF REVIEW............................................................................................ 10

A. In General.......................................................................................................................... 10

B. In Contract Interpretation.................................................................................................. 11

1.

2.

3.

The Parties’ Positions................................................................................................. 11

The Supreme Court Jurisprudence ............................................................................. 12

Precedential Value...................................................................................................... 14

C. In the Exercise of Judicial Discretion ............................................................................... 24

D. In Evidentiary Matters ...................................................................................................... 25

V. THE SATTVA APPROACH.................................................................................................. 25

A. Consensus Ad Idem........................................................................................................... 25

B. The Factual Matrix............................................................................................................ 30

C. Legislation and Terms of Art............................................................................................ 35

VI.

ANALYSIS....................................................................................................................... 40

A. Introduction....................................................................................................................... 40

B. Issues Common to All Three Matters ............................................................................... 41

1.

2.

3.

4.

Evidentiary Issues....................................................................................................... 41

Case Law Interpreting ULPs ...................................................................................... 43

Terms of Art: Premium and Payment of Premiums ................................................... 48

The Sattva Approach and Insurance Law Principles.................................................. 54

C. Application of the Law in Each Appeal............................................................................ 55

1. CACV3407 – Mosten v Manulife............................................................................... 55

ii

a.

b.

c.

d.

e.

f.

Relief Sought at the Court of Queen’s Bench......................................................... 55

Relief Denied by the Judge..................................................................................... 57

The de Bruin ULP................................................................................................... 62

Interpretation of the de Bruin ULP ......................................................................... 63

Interpretation as a Harmonious Whole ................................................................... 71

Declarations Granted by this Court......................................................................... 76

CACV3408 – Atwater v BMO Life............................................................................. 77

Relief Sought at the Court of Queen’s Bench......................................................... 77

Relief Denied by the Judge..................................................................................... 79

The Walkom ULP................................................................................................... 81

Interpretation of the Walkom ULP ......................................................................... 92

Declarations Granted by this Court......................................................................... 94

CACV3409 – Ituna v Industrial Alliance................................................................... 95

Relief Sought at the Court of Queen’s Bench......................................................... 95

The Term Allocation Contravention....................................................................... 97

The Zinkhan ULP and its Interpretation ............................................................... 101

Disposition by this Court ...................................................................................... 114

2.

3.

a.

b.

c.

d.

e.

a.

b.

c.

d.

D. The Cross-Appeals on the Regulation ............................................................................ 114

1.

Background............................................................................................................... 114

Context.................................................................................................................. 114

The Regulation, Insurance Act and Interpretation Legislation............................. 119

Principles of Statutory Interpretation.................................................................... 120

Decisions............................................................................................................... 123

Common Error in the Decisions............................................................................... 125

Vires...................................................................................................................... 125

Interpretation......................................................................................................... 127

Interpretation of the 2018 Regulation....................................................................... 131

Not Declaratory..................................................................................................... 133

Not Retroactive or Retrospective.......................................................................... 135

Interpretation......................................................................................................... 135

Statement of Interpretation—2018 Regulation..................................................... 152

Interpretation of the 2020 Regulation....................................................................... 152

Consequential Amendments ................................................................................. 153

Interpretation......................................................................................................... 153

Statement of Interpretation—2020 Regulation..................................................... 156

a.

b.

c.

d.

2.

3.

a.

b.

a.

b.

c.

d.

4.

a.

b.

c.

VII. CONCLUSION............................................................................................................... 156

ii

Page 1

The Court

I.

INTRODUCTION

[1]

This judgment addresses appeals and cross-appeals brought in respect of decisions of a

Court of Queen’s Bench judge [Judge] in three separate Chambers applications in which he

interpreted both a universal life insurance policy [ULP] and The Saskatchewan Insurance (Licence

Condition) Amendment Regulations, 2018, Sask Reg 75/2018 [2018 Regulation]. In each case, an

appellant brought an originating application pursuant to s. 11 of The Queen’s Bench Act, 1998,

SS 1998, c Q-1.01, and Rule 3-49(1)(d) of The Queen’s Bench Rules, seeking a determination of

the rights of the insured under a ULP issued or assumed by one of the respondent insurance

companies.

[2]

The Judge heard the applications consecutively and rendered three separate but similar

decisions: Ituna Investment LP v Industrial Alliance Insurance and Financial Services Inc.,

2019 SKQB 75 [Ituna Decision]; Mosten Investment LP v The Manufacturers Life Insurance

Company o/a Manulife Financial, 2019 SKQB 76 [Mosten Decision]; and Atwater Investment LP

v BMO Life Assurance Company, 2019 SKQB 77 [Atwater Decision]. In each, the Judge dismissed

the insured’s application for declaratory relief because the declarations sought were not supported

on his interpretation of the insurer’s ULP. The Judge also interpreted the 2018 Regulation as

having “only prospective effect”, from which it may be inferred that the Judge found the 2018

Regulation did not interfere with the insured’s rights under a contract for life insurance that had

been entered into prior to its enactment.

[3]

Each appellant appealed against the interpretation of their ULP and each respondent cross-

appealed against the interpretation of the 2018 Regulation. Broadly speaking, the primary issue

raised in the appeals relates to whether the Judge erred when he found the ULPs did not “provide

for unlimited stand-alone investment opportunities within [a side account]” (Mosten Decision at

para 357; Atwater Decision at para 356; and Ituna Decision at para 299). There are secondary

issues in each appeal, some relating to whether an insurer is entitled, on its own initiative, to refund

or reject monies tendered by an insured for investment under the ULP in question. These issues

also give rise to allegations in the appeals and cross-appeals that the Judge erroneously ruled

Page 2

certain evidence was or was not relevant to the interpretation of a ULP. The principal issue in the

cross-appeals is whether the Judge erred when he found the 2018 Regulation did not affect the

ULPs at issue because they had been entered into prior to its enactment.

[4]

The appeals also raise fundamental questions as to the proper way to approach the

interpretation of a contract and as to the standard of appellate review applicable in such cases.

While acknowledging that the law in this regard is not without its controversy, we find the Supreme

Court of Canada jurisprudence sets forth a single, comprehensive approach to contract

interpretation and identifies discernable principles for selecting the applicable standards of

appellate review in cases of contract interpretation. On that basis, we find that the correctness

standard of appellate review applies to the issues of contract interpretation raised in these appeals.

[5]

Applying the appropriate standards of review, having reviewed the record of each

application in the Court of Queen’s Bench and the Judge’s reasons for judgment in each

application, and having considered the parties’ submissions in each of the appeals and cross-

appeals, we:

(a)

allow the appeal under CACV3407 between Mosten Investment LP [Mosten] and

The Manufacturers Life Insurance Company o/a Manulife Financial [Manulife], set

aside the Judge’s interpretation of the ULP in that case, and interpret it as permitting

unlimited, stand-alone investment within the side account;

(b)

allow the appeal under CACV3408 between Atwater Investment LP [Atwater] and

BMO Life Assurance Company [BMO Life], set aside the Judge’s interpretation of

the ULP in that case, and interpret it as permitting unlimited, stand-alone

investment within the side account;

(c)

(d)

dismiss the appeal under CACV3409 between Ituna Investment LP [Ituna] and

Industrial Alliance Insurance and Financial Services Inc. [Industrial Alliance];

allow the cross-appeals in part, set aside the Judge’s interpretation of the 2018

Regulation, and interpret and construe the 2018 Regulation, as well as s. 2-5.1

[2020 Regulation] of The Insurance Regulations, RRS c I-9.11 Reg 1 [Insurance

Page 3

Regulations], as prospective legislation that is universally applicable to all licensed

insurers in Saskatchewan from the date of its enactment;

(e)

(f)

make no order as to costs in either this Court or in the Court of Queen’s Bench in

the appeals and cross-appeals under CACV3407 and CACV3408; and

order Ituna to pay Industrial Alliance’s costs in the Court of Queen’s Bench and on

the appeal and cross-appeal under CACV3409.

II.

INTERPRETATION

A.

The Parties and their Appeals and Cross-appeals

[6]

The appellants (cross-respondents) are Mosten in CACV3407, Atwater in CACV3408 and

Ituna in CACV3409. When we refer to the Appellants in these reasons, it is a collective reference

to Mosten, Atwater and Ituna, regardless of whether we are referring to an appeal or cross-appeal.

[7]

The respondents (cross-appellants) are Manulife in CACV3407, BMO Life in CACV3408

and Industrial Alliance in CACV3409. A reference to the Respondents is a collective reference to

Manulife, BMO Life and Industrial Alliance.

[8]

When referring collectively to the Appellants and the Respondents, e.g., when all of them

agree on some point, we use the word parties; however, we also use that word generically to refer

to the parties to a contract, relying on context to indicate usage. When addressing the appeals, we

refer to a specific appeal by the name of the Appellant, i.e., the Mosten Appeal, the Atwater Appeal

or the Ituna Appeal. We refer to all of the appeals and cross-appeals collectively as these matters.

B.

Reference Points

[9]

We refer to the Lieutenant Governor in Council for the Province of Saskatchewan as the

Lieutenant Governor. Where there is no need to differentiate between the two regulations at issue

in the cross-appeals, we use the word Regulation to refer to both the 2018 Regulation and the 2020

Regulation.

Page 4

[10] As noted, each appeal pertains to the interpretation of a specific ULP, namely:

(a)

In the Mosten Appeal, a ULP issued by Aetna Life Insurance Company of Canada

[Aetna Life] on November 19, 1997, as Policy No. F 2239527, insuring the life of

Walter de Bruin and recording Dr. de Bruin as the applicant, insured and

beneficiary and to which Mosten later added Michael Hawkins as an insured life

after acquiring Dr. de Bruin’s interests under the ULP [de Bruin ULP]. Manulife

acquired the rights, liabilities and obligations of Aetna Life under the de Bruin ULP

in 2004.

(b)

In the Atwater Appeal, two identical ULPs issued by AIG Life Insurance Company

of Canada [AIG] (which was BMO Life’s corporate name prior to April 1, 2009),

both issued on February 18, 2002, recording the applicant, the insured and the

beneficiary as 605945 Saskatchewan Ltd. [605945] (whose sole shareholder and

officer was Conrad Walkom) and insuring the lives of Mr. Walkom and his

daughter, Brittany Walkom, under Policy 16551, and insuring the lives of

Mr. Walkom and his daughter, Shayla Walkom, under Policy 13468 [because they

are, for relevant purposes, identical, we refer to these two ULPs in the singular, as

the Walkom ULP]. 605945 assigned its interests under the Walkom ULP to Atwater

on December 31, 2008. Atwater then added Mr. Hawkins as the life insured under

the Walkom ULP.

(c)

In the Ituna Appeal, a “Flex Account” or “Special Flex 5” ULP issued by The

National Life Assurance Company of Canada [National Life], a subsidiary of

Industrial Alliance, on August 20, 1999, as Policy 4005565, recording the

applicant, the insured and the life insured as Fred Zinkhan and the beneficiary as

Karen Zinkhan [Zinkhan ULP]. National Life transferred its business and assets,

including the Zinkhan ULP, to Industrial Alliance in 2005. Mr. Zinkhan assigned

the Zinkhan ULP to Ituna on March 19, 2009. Ituna substituted Mr. Hawkins as the

life insured under the Zinkhan ULP, effective September 11, 2011.

Page 5

C.

The Nature of a ULP

[11] A ULP is a contract for life insurance that allows the insured to take advantage of

accrual-tax exemption provisions under the Income Tax Act, RSC 1985, c 1 (5th Supp), and the

Income Tax Regulations, CRC, c 945 [together, Tax Rules]. Typically, an insured obtains a tax

advantage on investment income by means of an account where the return on investment is exempt

from accrual tax, provided sums in the account do not exceed limits established under the Tax

Rules [exempt account]. Separate and apart from this, the insurer may receive, hold and invest

sums on behalf of an insured in an account that is not exempt from accrual tax under the Tax Rules

[side account].¹In these reasons, exempt account refers to: (i) the “Investment Accounts” under

the de Bruin ULP; (ii) the “Investment Accounts” under the Walkom ULP; and (iii) the “Flex

Account” under the Zinkhan ULP; and, side account refers to: (i) the “Carrier Fund” under the

de Bruin ULP; (ii) the “Side Account” under the Walkom ULP; and (iii) the “Express Account”

under the Zinkhan ULP.

[12] As is evident, every ULP is a life insurance contract. However, a ULP that provides for a

side account also has a non-insurance aspect; that is, it is an investment contract. It is at once both

of these things and neither of them as a whole. In our view, such a ULP is not Janus-faced; it is an

amalgam of its two faces. An understanding of its general nature as a contract is important because,

in certain respects, the law applies different rules to the interpretation of insurance contracts and

consumer contracts than to the contracts that lack those characteristics. This is so despite the fact

that, as we explain below, all contracts must be interpreted in accordance with the same basic

analytical framework, which we, like the Judge, describe as the Sattva approach, in reference to

that articulated by Rothstein J. in Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, [2014]

2 SCR 633 [Sattva].

[13] The law approaches the interpretation of an insurance contract differently than other types

of contracts for several reasons. Insurance contracts serve the interests of society as a whole by

spreading the risk of fortuitous loss broadly. They are generally contracts of adhesion. The parties

1

The term side account is defined under s 3.1(1)(c) of the 2018 Regulation and under s. 2-5.1(1) of the 2020

Regulation as “an account associated with a life insurance policy that holds amounts in excess of the maximum amount

permitted to be held in a life insurance policy that is exempt from accrual taxation pursuant to the Income Tax Act

(Canada)”.

Page 6

to them are, for the most part, significantly disparate in their knowledge of the relevant law and

insurance practices and, conversely, in their knowledge of facts relevant to the assessment of risks.

For these and other reasons, Parliament and the provincial legislatures have passed laws governing

the content of insurance contracts and setting out the rights and obligations of the parties to them

(see, generally, the Insurance Companies Act, SC 1991, c 47, The Insurance Act, SS 2015, c I-9.11

[The Insurance Act, 2015], and the Insurance Regulations). In some respects, the relevant

legislation reflects public policy decisions taken to ensure that insurance contracts comport with

community values.

[14] For similar reasons, the courts have developed what is known as the doctrine of utmost

good faith (uberrima fides; see Carter v Boehm (1766), 97 ER 1162; Coronation Insurance Co. v

Taku Air Transport Ltd., [1991] 3 SCR 622; Whiten v Pilot Insurance Co., 2002 SCC 18, [2002]

1 SCR 595; and Fidler v Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 SCR 3),

recognising the near fiduciary aspect of an insurance contract. As the Judge observed, the courts

have also developed special principles of interpretation for insurance contracts (see Geoff R. Hall,

Canadian Contractual Interpretation Law, 3d ed (Toronto: LexisNexis, 2016) at 241–255 [Hall

Text]).

[15] A pivotal question in these matters is whether all of this “insurance law” applies when

interpreting the contracts at issue here because, as we have noted, the ULPs are at once both life

insurance contracts and investment contracts. In our view, it is unnecessary, and would be

incorrect, to interpret these ULPs in a manner that ignores this fundamental characteristic. Rather,

when it exists, the interpreting court should focus on the specific issues of contract interpretation

raised by the parties and ask whether those issues engage any of the specialised principles of

contract interpretation that apply to insurance contracts and to life insurance contracts in particular.

[16] That is the approach we have taken in these appeals. The ULPs at issue here all have these

two aspects of insurance and investment, albeit their texts differ. Clearly, the principles of

interpretation that apply to life insurance contracts apply to certain aspects of ULPs. However, we

conclude that they do not apply to significant parts of these ULPs and, in particular, do not apply

to the issues of interpretation raised by the parties in these appeals. Further, as both the insurance

and investment aspects of the ULPs strongly indicate that a ULP is a consumer contract, as opposed

Page 7

to a commercial contract or a contract between participants in a given industry, we have interpreted

them in a manner that takes account of that characteristic (see Hall Text at 217–221).

D.

The Dispute that Underpins the Appeals

[17] As noted, the amount an insured may invest within an exempt account is limited by the Tax

Rules. The Tax Rules do not limit the amount an insured may invest within a side account. The

common dispute, which underpins each appeal, is whether there is a contractual limit on the

amount an insured may invest in a side account.

[18] One reason the answer to that question is important to the parties is that some of the

investment opportunities made available under the ULPs in question are guaranteed investment

products with fixed rates of return that were established years ago, at the time of contract

formation. At that time, interest rates were much higher than today. In the result, the rates of return

under these ULP investment products well-exceed what is currently available under comparable

investment products. The ULPs also contain investment bonus provisions that, if exercised by an

insured, further enhance the insured’s rate of return and increase the cost to the insurers who agreed

to provide them.

[19] In their applications, the Appellants asked the Judge to declare that they had a contractual

right to invest unlimited amounts within a side account. The Respondents argued the ULPs ought

to be interpreted as establishing a contractual limit on the amount that may be invested or held in

a side account. The Judge found the ULPs did not “provide for unlimited stand-alone investment

opportunities” within a side account. The various issues raised in the appeals all relate to whether

the Judge erred in that regard.

[20] With that background in mind, we turn to consider the issues arising in these matters.

Page 8

III. ISSUES

[21] The Appellants and the Respondents have put several issues before the Court.

A.

CACV3407 – Mosten Appeal

[22] Mosten asks the Court to determine whether the Judge erred:

(a)

(b)

by finding the purpose of the de Bruin ULP was both protection and investment but

that the general economic purpose of insurance does not include investment;

when interpreting the word premium in the de Bruin ULP by (i) treating it as a legal

term of art instead of using its plain and ordinary meaning, (ii) finding an insured

is an insurance industry participant, (iii) finding Manulife could restrict the amount

of premiums paid under the ULP, and (iv) finding Manulife could refund excess

premiums without having received a request therefor;

(c)

by declining to exercise his jurisdiction to address (i) Mosten’s request for a

declaration regarding an investment bonus, and (ii) the way in which an investment

bonus is calculated and credited under the de Bruin ULP; and

(d)

by striking evidence adduced by Mr. Hawkins, a principal of Mosten², and when

he considered evidence adduced by Greg Cerar, an affiant of Manulife.

B.

CACV3407 – Manulife Cross-appeal

[23] Manulife cross-appeals against the Mosten Decision alleging the Judge erred by

considering an overly narrow factual matrix and by excluding evidence on grounds of

inadmissibility or irrelevance. Manulife also asserts the Judge erred by finding the Regulation is

not declaratory and, if not, Manulife asserts the Regulation has retroactive effect or, in the further

alternative, retrospective effect.

²Mr. Hawkins is also a principal of Atwater and Ituna.

Page 9

C.

CACV3408 – Atwater Appeal

[24] Atwater asks the Court to determine whether the Judge erred:

(a)

when defining the word premium in the Walkom ULP by (i) attributing an

expectation to an insured that is not supported by the words of the ULP, (ii) failing

to use the plain and ordinary meaning of the payment of premiums provision in the

ULP, (iii) finding an insured is an insurance industry participant, and (iv) placing

undue emphasis on the tax-exempt investment aspect of the ULP while ignoring its

taxable investment aspect;

(b)

by relying on an industry publication to determine the purpose of ULPs generally

and by holding that an ordinary insured would know the niceties of insurance

taxation; and

(c)

by admitting what is known as the Dietrich Affidavit, which it says is hearsay.

CACV3408 – BMO Life Cross-appeal

D.

[25] BMO Life’s cross-appeal against the Atwater Decision alleges the Judge erred by

considering an overly narrow factual matrix and by excluding evidence on grounds of

inadmissibility or irrelevance. BMO Life also asserts the Judge erred by finding the Regulation is

(i) not declaratory, (ii) ultra vires the Lieutenant Governor, (iii) not retroactive, and (iv) not

retrospective.

E.

CACV3409 – Ituna Appeal

[26] Ituna asks the Court to find that the Judge erred:

(a)

(b)

(c)

when defining the word premium under the Zinkhan ULP;

in applying the principles of interpretation to standard form insurance contracts;

in his approach to and use of context in the interpretation of a standard form

contract;

Page 10

(d)

by conflating the first two stages of interpretation under Ledcor Construction Ltd.

v Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 SCR 23 [Ledcor];

(e)

(f)

(g)

by erroneously basing his analysis on a faulty understanding of a ULP;

by finding premium is a legal term of art;

by finding an ordinary insured would have understood the niceties of the insurance

and investment interaction under a ULP;

(h)

(i)

(j)

by ignoring and rewriting provisions of the Zinkhan ULP, leading to absurdities;

by striking portions of Mr. Hawkins’s affidavit and reply affidavit; and

by declining to exercise his jurisdiction to grant the declarations it sought thereby

failing to address what it describes as the Term Allocation Contravention.

F.

CACV3409 – Industrial Alliance Cross-appeal

[27] In its cross-appeal against the Ituna Decision, Industrial Alliance alleges the Judge erred

by considering an overly narrow factual matrix and by excluding evidence on grounds of

inadmissibility or irrelevance. Industrial Alliance asserts the Judge erred by finding the Regulation

is (i) not declaratory, (ii) ultra vires the Lieutenant Governor, and (iii) not retrospective.

IV. STANDARDS OF REVIEW

A.

In General

[28] The appellate standard of palpable and overriding error applies to all questions of fact

(Housen v Nikolaisen, 2002 SCC 33 at para 10, [2002] 2 SCR 235 [Housen]; and H.L. v Canada

(Attorney General), 2005 SCC 25 at para 53, [2005] 1 SCR 401). Absent an “extricable question

of law”, the standard of palpable and overriding error also applies to questions of mixed fact and

law (Housen at paras 31 and 33; and Sattva at paras 52–53). The standard of correctness applies

to questions of law (Housen at paras 8–9 and 33). The interpretation of a statutory instrument is a

question of law (TELUS Communications Inc. v Wellman, 2019 SCC 19 at para 30, [2019] 2 SCR

144; Heritage Capital Corp. v Equitable Trust Co., 2016 SCC 19 at para 23, [2016] 1 SCR 306

Page 11

[Heritage Capital]; and Canadian National Railway Co. v Canada (Attorney General), 2014 SCC

40 at para 33, [2014] 2 SCR 135; see also Canada (Minister of Citizenship and Immigration) v

Vavilov, 2019 SCC 65 at para 37, 441 DLR (4th) 1).

B.

In Contract Interpretation

1. The Parties’ Positions

[29] The parties agree that the ULP at issue in their respective appeals is a standard form

contract. For the most part, they also agree that the interpretation of their respective ULP, qua

standard form contract, raises questions of law that are subject to appellate review on the standard

of correctness. In this regard, they rely on the majority reasons in Ledcor, where Wagner J. (as he

then was) wrote:

[24]

I would recognize an exception to this Court’s holding in Sattva that contractual

interpretation is a question of mixed fact and law subject to deferential review on appeal.

In my view, where an appeal involves the interpretation of a standard form contract, the

interpretation at issue is of precedential value, and there is no meaningful factual matrix

that is specific to the parties to assist the interpretation process, this interpretation is better

characterized as a question of law subject to correctness review.

[30] While BMO Life agrees that the correctness standard applies to the interpretation of the

Walkom ULP, it submits some issues of interpretation could still give rise to a question of mixed

fact and law because extrinsic evidence exists to assist the court. BMO Life also characterises the

interpretation of the Walkom ULP as having low precedential value to anyone other than insurers

and hedge fund investors. In its cross-appeal, BMO Life argues the Judge erred by adopting an

overly narrow view of the evidence that is admissible in the interpretation of a standard form

insurance contract under the first of the three stages of the approach outlined in Ledcor. If the

Judge should have considered a broader factual matrix, BMO Life says the appropriate standard

of review would be palpable and overriding error (Ledcor at para 48; and Sattva). Even so, BMO

Life submits the identification of the correct legal test to be applied is a question of law that attracts

the standard of correctness (Sattva at para 49).

Page 12

2.

The Supreme Court Jurisprudence

[31] While the parties have, in most respects, agreed that correctness is the standard of review

applicable in these appeals, we acknowledge that the law relating to this issue is not without

controversy. However, we do not subscribe to the view, espoused by some, that the Supreme Court

of Canada dicta on this issue is inconsistent or conflicting. As we see it, the Supreme Court of

Canada jurisprudence sets forth a single, comprehensive approach to contract interpretation and

identifies discernable principles for selecting the applicable standards of appellate review in cases

of contract interpretation. Based on that jurisprudence, as we explain below, we agree that the

correctness standard of appellate review applies to the issues of contract interpretation raised in

these appeals.

[32] As noted, academic criticism has been leveled at Supreme Court of Canada jurisprudence

on contract interpretation in recent years and, particularly, its dicta on the applicable standard of

appellate review; see: Angela Swan, Jakub Adamski & Annie Y. Na, Canadian Contract Law, 4th

ed (Toronto: LexisNexis, 2018) at 733–735 [Swan Text]; Hall Text at 146–153; John D. McCamus,

The Law of Contracts, 3d ed (Toronto: Irwin Law, 2020) at 853–860 [McCamus Text]; Sandra L.

Corbett and Ryan P. Krushelnitzky, “Through the Scratched Looking Glass: Sattva, Ledcor, Teal

and Developments in the Law of Contract” (2017) 1 Ann Rev Civ Lit 379; Earl A. Cherniak,

“Sattva Revisited” (2015) 34:2 Adv J 6 at 7; Andrea M. Bolieiro, “Ledcor and the Trouble with

Taking a Categorial Approach to Standards of Review” (2017) 35:4 Adv J 35; and Daniele

Bertolini, “Unmixing the Mixed Questions: A Framework for Distinguishing Between Questions

of Fact and Questions of Law in Contractual Interpretation” (2019) 52 UBC L Rev 345. In the

Swan Text at pages 723–724, the authors comment on Sattva, Ledcor and Sabean v Portage La

Prairie Mutual Insurance Co., 2017 SCC 7, [2017] 1 SCR 121 [Sabean], which the parties placed

at the core of these appeals, querying:

8.100 Where do we go from here? The Supreme Court has made so many inconsistent

and conflicting statements in such an amazingly short time that the law on contractual

interpretation could be anything—blinding flash (except where ambiguous), intention of

the parties or even the protection of their reasonable expectations. No single comprehensive

approach to contractual interpretation that covers all contracts exists. But if that is the case,

should not the court have expressly stated it? Moreover, is that approach consistent with

the court’s recent view, affirming the existence of a unifying principle, the “general

organizing principle” of good faith performance, underlying all contractual relations?

(Footnotes omitted)

Page 13

[33] As to the standard of review, the Swan Text also suggests that “[t]he problem... is that the

issues that decide whether one or the other standard [of review] is applicable also go to establishing

the surrounding circumstances used to interpret a contract and, hence, the two issues get hopelessly

tangled up” (Swan Text at 724, footnote 193). In our view, the opposite is true, at least in relation

to standard form contracts. The factors relevant to whether the correctness standard applies do not

establish whether there are surrounding circumstances relevant to the interpretation of such a

contract. It is the reverse; the existence or non-existence of a factual matrix or of circumstances

surrounding contract formation specific to the parties to such a contract determines the standard

of review. As we will explain, this is not to say that circumstances that are not specific to the

contracting parties are irrelevant to issues of standard form contract interpretation. But, if the

contract is in a standard form and there are no such surrounding circumstances, its interpretation

may have precedential value and, therefore, the correctness standard of appellate review applies.

If the contract is not in a standard form or there are circumstances surrounding its formation

particular to the parties and that are relevant to the issue of interpretation, the standard of review—

absent an “extricable” question of law—–is palpable and overriding error.

[34] Although we have referred here to a standard form contract, we would emphasise that it is

misleading to speak as if the question as to the applicable standard of review relates to the contract

as a whole. The question is the applicability of a standard of review to the issue or issues of

interpretation put before the appellate court. An issue may relate to the contract as a whole. It may

relate only to a single clause that is itself in a standard form and that is not affected by the

circumstances surrounding contract formation specific to the parties. The interpreting court may

be faced with issues of interpretation that, on appeal, attract the correctness standard along with

issues that attract the palpable and overriding error standard. With these considerations in mind,

we have chosen to use the phrase issue of standard form contract interpretation in these reasons

when speaking about the interpretation of standard form contract language in the absence of a

meaningful factual matrix that is specific to the parties. To be clear, the terms of the contract as a

whole, which must always be considered, may still affect an issue of standard form contract

interpretation.

[35] Approached in this manner, the question of whether there are factual circumstances of

contract formation specific to the contracting parties that are probative of the meaning of contested

Page 14

contractual language is properly understood as key to determining whether the interpretation of

that language is an issue of standard form contract interpretation and, as such, is subject to

appellate review on the correctness standard. That is a different question than whether there are

any surrounding circumstances relevant to the interpretation of a contract as a whole.

[36] In Sattva, Rothstein J. described surrounding circumstances as “knowledge that was or

reasonably ought to have been within the knowledge of both parties at or before the date of

contracting” (at para 58). Where an issue of standard form contract interpretation is engaged, such

circumstances will exist. However, they are, by definition, limited to what was or reasonably ought

to have been known to the parties in all instances where that standard form contract exists. The

proper scope of evidence of surrounding circumstances in relation to these ULPs is very much at

issue in these appeals.

[37] The law relating to these issues is addressed in more detail below.

3.

Precedential Value

[38] It is often said, based on Sattva, that the presumptive standard of review relating to contract

interpretation is palpable and overriding error, as contract interpretation is generally a question of

mixed fact and law. However, this idea speaks most directly to commercial contracts. Standard

form contracts are now pervasive, evermore so in the context of online consumer transactions. For

these latter types of contract, which certainly outnumber commercial ones, the presumptive

standard of appellate review is correctness, as we will explain.

[39] It is our view that the application of the correctness standard of review to issues of standard

form contract interpretation is doctrinally consistent with Sattva. That is so because the principal

factor that indicates whether an issue of contract interpretation gives rise to a question of law is its

precedential value (Canada (Director of Investigation and Research) v Southam Inc., [1997] 1

SCR 748 [Southam]; Housen; Sattva; the majority reasons in Ledcor³; Canada (Attorney General)

v Fontaine, 2017 SCC 47 at para 35, [2017] 2 SCR 205 [Fontaine]; Churchill Falls (Labrador)

³See also the dissenting reasons of Cromwell J. in Ledcor, where he observed that “precedential value” is the critical

issue when determining whether a correctness review is appropriate but also found that this was just a “different way”

of posing the “key question”, which he saw as “the degree of generality” of the legal principle at issue (at para 117),

invoking the Southam spectrum of generality.

Page 15

Corp. v Hydro-Québec, 2018 SCC 46 at para 49, [2018] 3 SCR 101; J.W. v Canada (Attorney

General), 2019 SCC 20 at paras 110–112, [2019] 2 SCR 224; and Trenchard v Westsea

Construction Ltd., 2020 BCCA 152 at paras 41–43, 37 BCLR (6th) 103; see also MSI Methylation

Sciences, Inc. v Quark Venture Inc., 2019 BCCA 448 at paras 64–68, 31 BCLR (6th) 264).

[40] On one gauge, the precedential value of an interpretation is related to the repeated use of

the contract language in question. We use the example of a standard form real estate contract, as

was at issue in Vallieres v Vozniak, 2014 ABCA 290, 377 DLR (4th) 80 [Vozniak], where the bulk

of the clauses are identical under each contract, underscoring the precedent-setting nature of their

interpretation.

[41] In contextual terms, even though in a standard form, each contract for the sale of real estate

would necessarily contain unique or uncommon, and possibly handwritten, clauses—e.g., “the

drapes stay but the dishwasher is excluded”—the interpretation of which has no precedential value.

The mutual intention of the parties as to whether drapes includes curtains and blinds in the context

of that contract is better gleaned from the circumstances surrounding contract formation. Such a

question is, for the reasons explained in Sattva, a question of mixed fact and law. Whereas, the

interpretation of a standard form clause in that same contract is a question of law precisely because

how it is interpreted has value to multiple other users of the same—and, potentially, other—

standard form contracts. On this gauge, the precedential value of an interpretation lies in the

potential for multiple, subsequent uses of the same contract language by different or even the same

parties.

[42] On a related measure, the precedential value of an interpretation lies in its importance as

law. Precedential value is a normative term that invokes a number of legal principles. These

principles are themselves expressions or aspects of the rule of law. Here, we speak of principles

such as stare decisis as it manifests under the objectives of attaining consistency in the application

of the law, certainty and predictability of legal results, judicial accountability, and justified

decision-making. These and other aspects of the rule of law underpin Rothstein J.’s analysis of the

standards of review in Sattva and that of Wagner J. in Ledcor (see also Southam and Housen).

[43] The Supreme Court has ruled that where an issue of contract interpretation is more akin to

a “dispute…over a general proposition that might qualify as a principle of law” (Southam at

Page 16

para 37) or over the “correct legal test” (Ledcor at para 43) than it is to “a very particular set of

circumstances that is not apt to be of much interest to judges and lawyers in the future” (Southam

at para 37; and Ledcor at para 48) the interpretation of the contract language at issue is of general

importance to the law. Where an issue of interpretation transcends the four corners of the dispute

between the parties to it, as Cromwell J. observed in Ledcor (at para 117), the interpretation has

precedential value.

[44] Where an issue of standard form contract interpretation has been decided, certainty in the

law and consistency in its application should be central objectives for every subsequent

interpreting court. The prior interpretation is the law relating to that issue. It would be untenable

if this law differed when different courts considered the same issue in subsequent matters (Vozniak

at para 13; see also Canadian Imperial Bank of Commerce v Urbancorp (Leslieville) Developments

Inc., 2020 ONCA 449 at para 27). Consistency in the law is advanced by appellate review of such

an interpretation for its correctness (Ledcor at para 39), within the framework of stare decisis and

comity.

[45] Justice Rothstein suggested in Sattva that “extricable” questions of law would arise rarely

in the context of contract interpretation (at para 55). However, as Wagner J. observed in Ledcor,

Rothstein J. was not speaking about all types of contracts when he made that remark. He was

speaking about the uniqueness of a negotiated commercial contract where a meaningful factual

matrix exists to assist with its interpretation, which, as a category, does not cover the full breadth

of the contracts courts are asked to interpret.

[46] As appellate judges, we find the word extricable guides the determination of the

appropriate standard of review. It tells us to look for a sometimes elusive bright line that

demarcates pure questions of law from questions of mixed fact and law. Notwithstanding

Rothstein J.’s cautious view, the post-Sattva jurisprudence reflects the fact that appellate courts

have found questions of law to have arisen in the review of contract interpretation where the lower

court had, for example:

(a)

read a term in a contract in isolation or otherwise failed to read the contract as a

whole (1298417 Ontario Ltd. v Lakeshore (Town), 2014 ONCA 802 at para 7, 122

OR (3d) 401, leave to appeal to SCC refused, 2015 CanLII 38344 [Lakeshore

Page 17

(Town)]; Richcraft Homes Ltd. v Urbandale Corporation, 2016 ONCA 622 at para

69, 406 DLR (4th) 507 [Richcraft Homes]; Whirlpool Canada Co. v Chavila

Holdings Limited, 2017 ONCA 81 at para 72, 134 OR (3d) 161; 911502 Alberta

Ltd. v Elephant Enterprises Inc., 2014 ABCA 437 at para 12, 588 AR 296 [Elephant

Enterprises]; Directcash ATM Management Partnership v Maurice’s Gas &

Convenience Inc., 2015 NBCA 36 at para 23, 437 NBR (2d) 292 [Directcash]; and

Amberber v IBM Canada Ltd., 2018 ONCA 571 at paras 59–64, 424 DLR (4th) 169

[Amberber]);

(b)

failed to consider a material part of the contract (Havenlee Farms Inc. v HZPC

Americas, 2017 PECA 20 at paras 35–36 [Havenlee Farms]; and Sanofi Pasteur

Limited v UPS SCS, Inc., 2015 ONCA 88 at para 37, 382 DLR (4th) 54);

(c)

(d)

adopted an interpretation that rendered meaningless a provision of the contract

(Richcraft Homes at para 69);

failed to give effect to important words in the contract (Thunder Bay (City) v

Canadian National Railway Company, 2018 ONCA 517 at paras 46 and 60, 424

DLR (4th) 588, leave to appeal to SCC refused, 2019 CanLII 23877 [Thunder Bay

(City)]; Jesan Real Estate Ltd. v Doyle, 2020 ONCA 714 at para 35; and Fuller v

Aphria Inc., 2020 ONCA 403 at para 50);

(e)

failed to consider the factual matrix (IFP Technologies (Canada) Inc. v EnCana

Midstream and Marketing, 2017 ABCA 157 at para 58, [2017] 12 WWR 261, leave

to appeal to SCC refused, 2018 CanLII 28111 [IFP Technologies], citing British

Columbia (Minister of Technology Innovation and Citizens’ Services) v Columbus

Real Estate Inc., 2016 BCCA 283 at paras 40 and 51, 402 DLR (4th) 117; and

Starrcoll Inc. v 2281927 Ontario Ltd., 2016 ONCA 275 at paras 16–17, 68 RPR

(5th) 173); or failed to consider a material part of a relevant factual matrix (Jeffrie

v Hendriksen, 2015 NSCA 49 at para 28, 360 NSR (2d) 65 [Jeffrie]; and Puri

Consulting Limited v Kim Orr Barristers PC, 2015 ONCA 727 at paras 18 and 33,

128 OR (3d) 14 [Puri Consulting]);

Page 18

(f)

failed to recognise that a legal term of art has a certain meaning at law (IFP

Technologies at para 62, citing Sattva at para 53; and Deslaurier Custom Cabinets

Inc. v 1728106 Ontario Inc., 2017 ONCA 293 at paras 65–68, 135 OR (3d) 241);

(g)

(h)

strained to create ambiguity where none existed (Amberber at paras 63 and 65);

allowed the factual matrix to overwhelm the text of the contract (Kilitzoglou v Curé,

2018 ONCA 891 at para 41, 143 OR (3d) 385 [Kilitzoglou]; Havenlee Farms at

paras 35–36; and British Columbia (Ministry of Forests) v Teal Cedar Products

Ltd., 2015 BCCA 263 at para 57, 386 DLR (4th) 40 [Teal Cedar CA], but, in Teal

Cedar Products Ltd. v British Columbia, 2017 SCC 32 at para 4, [2017] 1 SCR 688

[Teal Cedar SCC], Gascon J. for the majority held:

Second, there is a question of contractual interpretation: whether the

arbitrator let the factual matrix overwhelm the words of the contract when

he interpreted an amended settlement agreement between the parties in

light of the factual matrix of their failed negotiations. This question may

be formulated in two ways: (1) whether the arbitrator allocated excessive

weight to the factual matrix; or (2) whether the arbitrator’s interpretation

of the factual matrix was isolated from the words of the contract. The

former formulation is a question of mixed fact and law and thus falls

outside the scope of appellate review permitted under the Arbitration Act.

The latter formulation, while it raises a question of law, lacks arguable

merit in this case because the arbitrator’s interpretation was clearly

anchored in the words of the contract, which he interpreted in light of the

factual matrix. Without arguable merit, this formulation also fails to confer

appellate review jurisdiction under the Arbitration Act.

(i)

(j)

(k)

(l)

based an interpretation on the subsequent conduct of the parties even though the

text of the contract was not ambiguous (Thunder Bay (City) at paras 61 and 65);

relied on subsequent conduct evidence to create an ambiguity (Wade v Duck, 2018

BCCA 176 at para 32, 422 DLR (4th) 423);

relied on subsequently arising circumstances to construe a contract (Kilitzoglou at

para 40);

relied on its own assessment of what was “fair or reasonable”, rather than giving

the words of a contract their ordinary and grammatical meaning in the context of

the contract as a whole (Kilitzoglou at paras 57–58);

Page 19

(m)

(n)

failed to correctly apply contract law (Elephant Enterprises at para 10; Jeffrie at

para 26; and Moulton Contracting Ltd. v British Columbia, 2015 BCCA 89 at

paras 5 and 78, 381 DLR (4th) 263);

resorted to the doctrine of contra proferentem too early in the interpretive process

(Puri Consulting at para 33; and Pepin v Telecommunications Workers Union, 2017

BCCA 194 at para 6, 97 BCLR (5th) 345 [Pepin]), or without first finding an

ambiguity (Directcash at paras 25–26), or without resolving how the doctrine was

applicable where both parties had had a meaningful opportunity to negotiate the

contract (Pepin at para 7); and

(o)

breached the rules of natural justice by finding an implied term where that issue

had not been joined between the parties and was not the subject of submissions

(Servus Credit Union Ltd. v Crelogix Acceptance Corporation, 2020 ABCA 220,

[2020] 10 WWR 67).

[47] Quite apart from the foregoing specific errors of law, the general application of the

correctness standard in appeals involving issues of standard form contract interpretation does not

result from the identification of an extricable question of law. In Ledcor, Wagner J. described the

precedential value of standard form contracts as being an exception to the Court’s holding in Sattva

that the presumptive standard of review is palpable and overriding error (Ledcor at paras 33–45).

As we see it, it is better described as the application in a different context of the principles that

underpin that holding. More specifically, Wagner J. affirmed that the interpretation of a standard

form contract has precedential value where “there is no meaningful factual matrix that is specific

to the particular parties to assist the interpretation process” (Ledcor at paras 4 and 24, emphasis

added).

[48] In this way, Wagner J.’s reasons reconcile the holding in Sattva with the precedential value

of the interpretation of a standard form contract by explaining that, where such an interpretation

has precedential value, it has a sufficient degree of generality on the “spectrum of particularity”

described in Housen (at para 28) to be concerned with a general proposition. As the Court there

remarked, this issue was earlier addressed by Iacobucci J. in Southam:

Page 20

[37]

… [T]he matrices of facts at issue in some cases are so particular, indeed so unique,

that decisions about whether they satisfy legal tests do not have any great precedential

value. If a court were to decide that driving at a certain speed on a certain road under certain

conditions was negligent, its decision would not have any great value as a precedent. In

short, as the level of generality of the challenged proposition approaches utter particularity,

the matter approaches pure application, and hence draws nigh to being an unqualified

question of mixed law and fact. See R. P. Kerans, Standards of Review Employed by

Appellate Courts (1994), at pp. 103-108. Of course, it is not easy to say precisely where

the line should be drawn; though in most cases it should be sufficiently clear whether the

dispute is over a general proposition that might qualify as a principle of law or over a very

particular set of circumstances that is not apt to be of much interest to judges and lawyers

in the future.

[49] Cast in Southam’s terms, the answer to an issue of contract interpretation is neither

particular nor unique if it involves the same issue of interpretation and the same or substantially

the same contract language as is used in other contracts and there is no meaningful factual matrix

specific to the parties that is relevant to the issue. Rather, the answer is a general rule or general

proposition on the spectrum of particularity and, therefore, the issue of interpretation falls on the

question of law side of that spectrum. Viewed in this way, the standard of appellate review relating

to issues of standard form contract interpretation—which arises only when the foregoing

conditions have been met—is not an exception to the rule that the palpable and overriding error

standard is generally applicable but is an application of the principles espoused in Southam,

Housen, Sattva and Ledcor.

[50] Justice Rothstein himself drew on Southam and Housen to observe that the precedential

value of an interpretation often dictates whether the issue of interpretation gives rise to a question

of law (Sattva):

[50]

…Contractual interpretation involves issues of mixed fact and law as it is an

exercise in which the principles of contractual interpretation are applied to the words of the

written contract, considered in light of the factual matrix.

[51]

The purpose of the distinction between questions of law and those of mixed fact

and law further supports this conclusion. One central purpose of drawing a distinction

between questions of law and those of mixed fact and law is to limit the intervention of

appellate courts to cases where the results can be expected to have an impact beyond the

parties to the particular dispute. It reflects the role of courts of appeal in ensuring the

consistency of the law, rather than in providing a new forum for parties to continue their

private litigation. For this reason, Southam identified the degree of generality (or

“precedential value”) as the key difference between a question of law and a question of

mixed fact and law. The more narrow the rule, the less useful will be the intervention of

the court of appeal:

If a court were to decide that driving at a certain speed on a certain road

under certain conditions was negligent, its decision would not have any

Page 21

great value as a precedent. In short, as the level of generality of the

challenged proposition approaches utter particularity, the matter

approaches pure application, and hence draws nigh to being an unqualified

question of mixed law and fact. See R. P. Kerans, Standards of Review

Employed by Appellate Courts (1994), at pp. 103-108. Of course, it is not

easy to say precisely where the line should be drawn; though in most cases

it should be sufficiently clear whether the dispute is over a general

proposition that might qualify as a principle of law or over a very

particular set of circumstances that is not apt to be of much interest to

judges and lawyers in the future. [para. 37]

[52]

Similarly, this Court in Housen found that deference to fact-finders promoted the

goals of limiting the number, length, and cost of appeals, and of promoting the autonomy

and integrity of trial proceedings (paras. 16-17). These principles also weigh in favour of

deference to first instance decision-makers on points of contractual interpretation. The

legal obligations arising from a contract are, in most cases, limited to the interest of the

particular parties. Given that our legal system leaves broad scope to tribunals of first

instance to resolve issues of limited application, this supports treating contractual

interpretation as a question of mixed fact and law.

(Emphasis added)

[51] As we read the decision of the majority in Ledcor on this point, Wagner J. affirmed this

reasoning that the precedential value of an interpretation has a determinative effect on the nature

of the question arising at both the interpretive stage and the appellate stage. Justice Wagner also

remarked that the fact a contract is a standard form contract and the fact there is no relevant factual

matrix specific to the parties similarly indicate its interpretation may give rise to a question of law

(at paras 4 and 24).

[52] As we have explained, we would put the matter differently but to the same end. A contract

(or issue) is a standard form contract (or an issue of standard form contract interpretation) for the

purposes of appellate review only if three conditions are met. First, there must be an identical or a

substantially identical form of contract language capable of standardised use by multiple, different

parties. In the overwhelming majority of cases, that means the standard form contractual language

at issue will have been entirely reduced to writing. The assertion of an oral, handwritten or typed

term or condition or other deviation from standard form text relevant to the issue of interpretation

in question connotes the existence of a meaningful factual matrix specific to the contracting parties,

such that the issue of interpretation is a question of mixed fact and law—i.e., being unique, it lacks

precedential value (for example, see Albo v The Winnipeg Free Press, 2020 MBCA 50 at para 18,

[2020] 6 WWR 187).

Page 22

[53] Second, there must be no factual matrix that is specific to the parties to the contract and

that is probative of the issue of contract interpretation. In the McCamus Text, the author describes

standard form contracts as follows (at 202–203):

In these kinds of situations, the document put forward will typically constitute a standard

printed form that the party proffering the document invariably uses when entering

transactions of this kind. The form will often be offered on a “take it or leave it” basis. In

the typical case, the other party, then, will have no choice but either to agree to the terms

of the standard form or to decline to enter the transaction altogether. Standard form

agreements are a pervasive and indispensable feature of modern commercial life. It is

simply not feasible to negotiate, in any meaningful sense, the terms of many of the

transactions entered into in the course of daily life. …

See also MacDonald v Chicago Title Insurance Company of Canada, 2015 ONCA 842 at para 33,

127 OR (3d) 663; and Corydon Village Mall Ltd. v TEL Management Inc., 2017 MBCA 8 at

paras 30–48, 407 DLR (4th) 263.

[54] Third, the standard form contract must be one that has been or will be repeatedly entered

into.

[55] These three factors are characteristic of a contract, the interpretation of which will have

precedential value. The interpretation of a standard form contract or of a standard form clause is

always a question of law because the answer has precedential value. That is so because the law

and the facts are the same each time the standard form contract language is interpreted. The

interpretation is, accordingly, a finding of law that is subject to appellate review for its correctness.

[56] This analytical framework is consistent with the reasoning in Ledcor. There, Wagner J.

concluded that correctness was the applicable appellate standard in that case based on these three

factors; that is, the appeal involved the interpretation of a standard form contract, the interpretation

was of precedential value, and there was no meaningful factual matrix specific to the parties to

assist the interpretation process. It is also consistent with the following reasoning in Ledcor, which

suggests that appeals relating to aspects of standard form contracts may nonetheless give rise to

mixed questions of fact and law:

[48]

Depending on the circumstances, however, the interpretation of a standard form

contract may be a question of mixed fact and law, subject to deferential review on appeal.

For instance, deference will be warranted if the factual matrix of a standard form contract

that is specific to the particular parties assists in the interpretation. Deference will also be

warranted if the parties negotiated and modified what was initially a standard form

contract, because the interpretation will likely be of little or no precedential value. There

Page 23

may be other cases where deferential review remains appropriate. As Iacobucci J.

recognized in Southam, the line between questions of law and those of mixed fact and law

is not always easily drawn. Appellate courts should consider whether “the dispute is over

a general proposition” or “a very particular set of circumstances that is not apt to be of

much interest to judges and lawyers in the future” (para. 37).

[57] On first impression, the foregoing passage appears to differ from the framework that we

propose and that is reflected at paragraph 46 of Ledcor. There is, however, no difference in

substance. Rather, the seeming difference results from the fact that, in the foregoing passage,

Wagner J. refers to “standard form contracts” as including contracts that may be in or based on a

standard form but where there is also a factual framework relating to the parties to assist with

interpretation or where there have been modifications to the contract. In our respectful opinion,

referring to such contracts as “standard form contracts” for purposes of interpretation and

determining the standard of review may be the source of some of the confusion referred to in the

academic commentary. In our view, it is both preferable and more accurate to use the term

“standard form contracts” in reference only to those contracts that, in their entirety, meet all three

conditions described above. More specifically, it is preferable and more accurate to address

contract interpretation on an issue-by-issue basis to determine whether each issue is an issue of

standard form contract interpretation. Approached in this manner, a contract or contractual

provision that has been modified or that is subject to interpretation based on a meaningful factual

matrix specific to the parties to it is not a standard form contract at all and does not involve an

issue of standard form contract interpretation.

[58] We would emphasize that, for the first judge who decides an issue of standard form contract

interpretation, the classification of such an issue as a question of law for standard of review

purposes is irrelevant. The usual process of contract interpretation applies. The interpreting judge

is obliged to apply the principles of contract interpretation to the facts. The facts include the written

contract and the surrounding circumstances, which would be limited in the manner described

above. The interpretive process differs only where the issue of standard form contract

interpretation has already been decided by another court. In that case, the earlier interpretation

would constitute law relating to that issue. In such a case, comity and stare decisis would come

into play in the usual way.

Page 24

[59] We would finally note that we have concluded that the three factors that signal the existence

of an issue of standard form contract interpretation are present in relation to the issues of

interpretation raised in these appeals. Each of the appeals involves the interpretation of a contract

that uses standard form language. The interpretation of each ULP is, at the very least, of

precedential value to the insurer and insureds who have contracted and may in the future contract

under the same or a similar standard form ULP. There is no suggestion that there is a meaningful

factual matrix specific to the parties that would assist with the interpretation of any of the issues

of contract interpretation before the Court. Our reasons for these conclusions are explained below.

C.

In the Exercise of Judicial Discretion

[60] The standard of review of an exercise of judicial discretion is deferential, meaning an

appellate court is not entitled to substitute its own discretion for that of the judge vested with the

authority merely because it would have exercised the authority differently (Friends of the Oldman

River Society v Canada (Minister of Transport), [1992] 1 SCR 3 at 76–77).

[61] The Court’s decision in Rimmer v Adshead, 2002 SKCA 12 at para 58, [2002] 4 WWR 119

[Rimmer], is the most commonly referenced case in Saskatchewan for the standard of appellate

review of the discretionary decisions of judges. Building on the principles that underpin the rule

of law and recognising that no discretionary power is completely unfettered or unlimited,

Cameron J.A. said, “the powers in issue are discretionary and therefore fall to be exercised as the

judge vested with them thinks fit, having regard for such criteria as bear upon their proper

exercise”. The criteria that bear upon the proper exercise of judicial discretion “are legal criteria,

and their definition as well as a failure to apply them or a misapplication of them raise questions

of law” (British Columbia (Minister of Forests) v Okanagan Indian Band, 2003 SCC 71 at para 43,

[2003] 3 SCR 371 [Okanagan]). As such, these questions of law are subject to appellate review

on the standard of correctness (Housen at paras 8–9 and 33).

[62] An appellate court may also intervene where a judge who is vested with a discretionary

authority has failed to give any or sufficient weight to a consideration that is relevant to its exercise

(Penner v Niagara (Regional Police Services Board), 2013 SCC 19 at para 27, [2013] 2 SCR 125;

MiningWatch Canada v Canada (Fisheries and Oceans), 2010 SCC 2 at para 43, [2010] 1 SCR 6;

Strom v Saskatchewan Registered Nurses’ Association, 2020 SKCA 112 at para 60, [2020] 12

Page 25

WWR 396 [Strom]; Kot v Kot, 2021 SKCA 4 at paras 15–19 [Kot]; and Fontaine at para 36) or

where the judge has made a palpable and overriding error when assessing the evidence (Okanagan

at para 43; Strom at paras 60–63; Rimmer at para 58 refers to such errors as “disregard [of] a

material matter of fact”).

[63] The Court recently summarised the foregoing in Kot:

[20]

In summary, these cases confirm that appellate intervention in a discretionary

decision is appropriate where the judge made a palpable and overriding error in their

assessment of the facts, including as a result of misapprehending or failing to consider

material evidence. Appellate intervention is also appropriate where the judge failed to

correctly identify the legal criteria which governed the exercise of their discretion or

misapplied those criteria, thereby committing an error of law. Such errors may include a

failure to give any or sufficient weight to a relevant consideration.

D.

In Evidentiary Matters

[64] In each appeal and cross-appeal, the parties have raised questions as to the admissibility of

evidence, the relevance of evidence, or the application of exclusionary rules of evidence. Although

the standard of review relating to the admission of evidence depends on the nature of the question,

questions of the nature raised in these matters are typically questions of law and, therefore, would

be subject to the standard of correctness: Southam at para 41; Hess v Thomas Estate, 2019 SKCA

26 at para 30, 433 DLR (4th) 60; and Donald J.M. Brown, Civil Appeals, loose-leaf (Rel 2020-4)

vol 2 (Toronto: Thomson Reuters, 2019) at para 12:5320. However, we find no need to address

the standard of review relating to these evidentiary issues any further. Given our conclusions as to

the proper scope of admissible evidence about the circumstances surrounding contract formation

in relation to issues of standard form contract interpretation, the evidence proffered by the parties

is by and large irrelevant and inadmissible.

V.

THE SATTVA APPROACH

A. Consensus Ad Idem

[65] In the language of appellate review, these appeals are about determining whether the Judge

erred in his interpretations of the ULPs. Cast in terms of the standard of review, the question is

whether the Judge correctly identified the applicable law—which, in these matters, is limited to

the principles of contract interpretation—and correctly applied the law to the facts.

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[66] To answer those questions, we must first identify the Judge’s target, which may be simply

done. The goal of all contract interpretation is to ascertain consensus ad idem. Consensus ad

idem—a phrase that, like many Latin phrases, has largely fallen into disuse by Canadian courts—

is the “meeting of the minds” between or among the parties to a contract. Consensus ad idem arises

when all parties understand and accept the contractual commitments each party has made to the

others (Jedfro Investments (U.S.A.) Ltd. v Jacyk, 2007 SCC 55 at para 17, [2017] 3 SCR 679, citing

with approval Paal Wilson & Co. A/S v Partenreederei Hannah Blumenthal (1982), [1983] 1 All

ER 34 (HL) [Paal Wilson]). In Paal Wilson, Lord Diplock wrote (at 48–49):

… To create a contract by exchange of promises between two parties where the promise of

each party constitutes the consideration for the promise of the other what is necessary is

that the intention of each as it has been communicated to and understood by the other (even

though that which has been communicated does not represent the actual state of mind of

the communicator) should coincide. That is what English lawyers mean when they resort

to the latin phrase consensus ad idem and the words that I have italicised are essential to

the concept of consensus ad idem, the lack of which prevents the formation of a binding

contract in English law.

(Emphasis in original)

[67] There can be no enforceable contract without consensus ad idem. The concept it expresses

underpins the fundamental requirements of contract formation, namely, offer, acceptance,

consideration and communication. It holds that every party to an enforceable contract must have

the same understanding as to the content of each of its fundamental requirements. For an

enforceable contract to come into existence, the parties must reach consensus ad idem as to what

has been offered and accepted and as to the consideration therefor. This can only occur where

those promises have been communicated to, and understood by, all of the parties. Consensus ad

idem is essential to contract formation and enforcement and it is, therefore, the object of contract

interpretation.

[68] In the appellate jurisprudence, the phrase consensus ad idem is now generally described in

terms of the intentions or true intentions or mutual intentions or objective intentions of the parties

at the time they entered into the contract (Teal Cedar SCC at para 57; Ledcor at paras 33 and 38;

Sattva at paras 55 and 57; Jesuit Fathers of Upper Canada v Guardian Insurance Co. of Canada,

2006 SCC 21 at para 27, [2006] 1 SCR 744; Eli Lilly & Co. v Novopharm Ltd., [1998] 2 SCR 129

at paras 54 and 56 [Eli Lilly]; Consolidated-Bathurst Export Ltd. v Mutual Boiler and Machinery

Insurance Co., [1980] 1 SCR 888 at 901 [Consolidated-Bathurst]; Gilchrist v Western Star Trucks

Page 27

Inc., 2000 BCCA 70 at para 17, 73 BCLR (3d) 102 [Gilchrist]; Davidson v Allelix Inc. (1991), 86

DLR (4th) 542 (Ont CA) at 547; Swan Text at 259; Hall Text at 9–13; McCamus Text at 801–803;

Gerald H.L. Fridman, The Law of Contract in Canada, 6th ed (Toronto: Carswell, 2011) at 13–17

[Fridman Text]; and S.M. Waddams, The Law of Contracts, 7th ed (Toronto: Thomson Reuters,

2017) at 97–103).

[69] However, and this must be kept front of mind at all times, the issue is not what the parties

subjectively understood or intended, or later came to think the agreement was (see, for example,

Halifax (Regional Municipality) v Canadian National Railway Company, 2014 NSCA 104 at

paras 57 and 63, 353 NSR (2d) 18; see also Eli-Lilly at para 54). Unlike statutes⁴or constitutional

documents⁵, the meaning of a contract is fixed at the time of its formation—it does not come to

mean something else over time. As the learned author states in the Hall Text (at 50–51):

It is a fundamental precept of the law of contractual interpretation that the exercise is

objective rather than subjective. “The goal in interpreting an agreement is to discover,

objectively, the parties’ intention at the time the contract was made.” [Emphasis added.]

The objective approach applies to both the words of the contract and their context.

Therefore, the exercise is not to determine what the parties subjectively intended but what

a reasonable person would objectively have understood from the words of the document

read as a whole and from the factual matrix. “Bearing in mind the relevant background, the

purpose of the document, and considering the entirety of the document, what would the

parties to the document reasonably have understood the contested words to mean?”

[Emphasis added.] Put another way, “[i]n interpreting a contract, what is relevant is the

parties’ outward manifestations…”.

…

The objective nature of the endeavour affects the entire interpretive exercise. It defines the

perspective for interpretation—the words in their context mean not what the parties

subjectively believe them to mean but rather what a reasonable third party would take them

to mean—and renders evidence of subjective intention absolutely inadmissible.

(Footnotes omitted; emphasis in original, italics emphasis added)

[70] Similarly, in the Fridman Text, the learned professor states (at 15–16):

… The law is concerned not with the parties’ intentions but with their manifested

intentions. It is not what an individual party believed or understood was the meaning of

what the other party said or did that is the criterion of agreement; it is whether a reasonable

man in the situation of that party would have believed and understood that the other party

was consenting to the identical terms. As Fraser C.J.A. said in Ron Ghitter Property

Consultants Ltd. v. Beaver Lumber Co. [(2003), 17 Alta LR (4th) 243 at 249 (CA)]:

⁴See R v Perka, [1984] 2 SCR 232 at 265.

⁵See Reference re Same-Sex Marriage, 2004 SCC 79 at para 22, [2004] 3 SCR 698, and Edwards v Attorney-General

for Canada (1929), [1930] AC 124 (PC).

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…the parties will be found to have reached a meeting of the minds, in other

words be ad idem, where it is clear to the objective reasonable bystander,

in light of all the material facts, that the parties intended to contract and

the essential terms of that contract can be determined with a reasonable

degree of certainty.

Sometimes it is a simple matter to decide what the parties have manifested to each other,

and consequently, whether they have agreed, and if so, upon what. This is especially true

where a document containing their agreement has been prepared and signed by the parties.

If the plain wording of the document reveals a clear and unambiguous intent, it is not

necessary to go further. Indeed, once that has been done, it may not be possible to have

recourse outside such document, either to other written material or to parol evidence from

the parties or anyone else, in order to explain, or otherwise clarify what is contained in the

document.

(Footnotes omitted, emphasis added)

[71] Regardless of nomenclature, “the role of courts in interpreting contracts is to give effect to

the bargain by which the parties intended to be bound”: Ruth Sullivan, Contract Interpretation in

Practice and Theory (2000), 13 SCLR (2d) 369 (QL) at para 24. As such, when asked to interpret

a contract, the court’s principal objectives are to determine whether there was consensus ad idem

at the time the parties purportedly made their contract and, if so, what it entailed.

[72] In every case, contract interpretation begins with the words of the contract, whether

reduced to writing or not. To give meaningful effect to consensus ad idem, the interpretive process

must remain firmly grounded in the language chosen by the parties to govern their relationship.

Contextual factors are used to assist with achieving an accurate interpretation of the contract.

Contextual assistance is gleaned from the contract itself and from the circumstances surrounding

its formation, i.e., the factual matrix (Prenn v Simmonds, [1971] 3 All ER 237 (HL) at 239–240

[Prenn]; and Sattva). However, because contract interpretation involves the examination of both

text and context, interpretive friction may arise between the ordinary meaning of the text of a

contract and the meaning suggested by the factual matrix.

[73] The first principle of contract interpretation is that the parties to a contract are presumed to

have intended what the text of the contract actually says (Eli Lilly at para 56; Heritage Capital at

para 47; Fischbach & Moore of Canada Ltd. v Noranda Mines Limited, Potash Division (1971),

19 DLR (3d) 329 (Sask CA); UMA/B&V Ltd. v SaskPower International Inc., 2007 SKCA 40 at

para 26, [2007] 6 WWR 277, leave to appeal to SCC refused, 2007 CanLII 40508; Salah v

Timothy’s Coffees of the World Inc., 2010 ONCA 673 at para 16, 268 OAC 279; Goodlife Fitness

Page 29

Centres Inc. v Rock Developments Inc., 2019 ONCA 58 at para 15; Fridman Text at 436–438; and

Hugh G. Beale, ed, Chitty on Contracts, 31st ed, vol 1 (London: Sweet and Maxwell, 2012) at

932). This is the cardinal presumption of contract interpretation and it places the written agreement

of the parties at the core of the interpretive process.

[74] Under a strict textualist approach, the words of the contract is where interpretation starts

and ends. Strict textualism is not the law in Canada. The proper approach to contract interpretation

is that outlined by Rothstein J. in Sattva. It is our view that the Sattva approach—with the caveat

set out below—establishes the general framework for the interpretation of all contracts under

Canadian law.⁶

[75] Under the approach outlined in Sattva, this cardinal presumption remains and the

interpreting court also looks outside the text of the contract to objective evidence of the mutual

intention of the parties to assist with the interpretation of the text. This is the approach consistently

taken by Canadian courts (see, for examples, Sattva at para 57; Eli Lilly at paras 54–56⁷; BG Checo

International Ltd. v British Columbia Hydro and Power Authority, [1993] 1 SCR 12 at 23–24 [BG

Checo]; Pacific National Investments Ltd. v Victoria (City), 2004 SCC 75 at para 31, [2004] 3

SCR 575; Spencer Health Network Inc. v Co-operators Life Insurance Company, 2018 SKQB 244

at paras 73–79; Swan Text at 259; Hall Text at 9–13; and McCamus Text at 805–808). We note

that this approach was most recently affirmed by the Supreme Court in the context of

post-incorporation contracts in Owners, Strata Plan LMS 3905 v Crystal Square Parking Corp.,

2020 SCC 29, 450 DLR (4th) 105, where Côté J. said:

[37]

To conclude, the applicable test for finding that a post-incorporation contract exists

is the same as the one for finding that any other agreement exists at common law. The test

is objective, and the offer, acceptance, consideration and terms may be inferred from the

parties’ conduct and from the surrounding circumstances.

⁶In the United Kingdom, all contracts “must be interpreted objectively by asking what a reasonable person, with all

the background knowledge which would reasonably have been available to the parties when they entered the contract,

would have understood the language of the contract to mean” (The Financial Conduct Authority and others v Arch

Insurance (UK) Ltd. and others, [2021] UKSC 1 at para 47; see also: Wood v Capita Insurance Services, [2017] UKSC

24).

⁷The decision in Eli-Lilly states the current law on the inadmissibility of extrinsic evidence of intent, but the holding

in Eli-Lilly to the effect that a factual matrix is not relevant unless the court first finds ambiguity in the contract text

has been overruled by Tercon Contractors Ltd. v British Columbia (Transportation and Highways), 2010 SCC 4 at

paras 65–66, [2010] 1 SCR 69 [Tercon], and Sattva.

Page 30

[76] Finally, we are aware that, in Ledcor, Wagner J. affirmed the existence of and applied the

“governing principles of interpretation applicable to insurance policies…summarized by

Rothstein J. in Progressive Homes” (at para 49). Similarly, we recognise that there are special

principles for interpreting certain other categories of contract, including employment contracts,

performance bonds, guarantees and releases, etc. If we are correct in holding that there is a single,

general framework for the interpretation of all contracts, these specialised principles, including

those summarised in Progressive Homes Ltd. v Lombard General Insurance Co. of Canada, 2010

SCC 33, [2010] 2 SCR 245 [Progressive Homes], which received great attention from the parties

in these matters, must be reconciled with the dicta in Sattva. It is our view such a reconciliation is

possible, as we agree with the statement in the Hall Text that apparent exceptions to Sattva can

generally be explained as resulting from a principled application of the Sattva approach in the

context of the type of contract in question.

[77] However, it is not necessary to deal further with the Progressive Homes framework

because, as we have noted above and will more fully explain below, the issues of standard form

contract interpretation before us in these matters do not engage with those principles and, in

particular, do not relate to a commercial insurance contract of the kind considered in Ledcor.

B.

The Factual Matrix

[78] In addition to the contested aspects of the text of the contract, the contract as a whole,

ordinary dictionaries, style guides and the rules of grammar (which are interpretive aids under a

textualist approach), the interpreting court must examine the relevant factual matrix, i.e., the

circumstances surrounding contract formation. When describing this aspect of the analysis in

Sattva, Rothstein J. wrote:

[47]

…[T]he interpretation of contracts has evolved towards a practical, common-sense

approach not dominated by technical rules of construction. The overriding concern is to

determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers

of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R.

744, at para. 27, per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia

(Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per

Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the

words used their ordinary and grammatical meaning, consistent with the surrounding

circumstances known to the parties at the time of formation of the contract. Consideration

of the surrounding circumstances recognizes that ascertaining contractual intention can be

difficult when looking at words on their own, because words alone do not have an

immutable or absolute meaning:

Page 31

No contracts are made in a vacuum: there is always a setting in which they

have to be placed. ...In a commercial contract it is certainly right that the

court should know the commercial purpose of the contract and this in turn

presupposes knowledge of the genesis of the transaction, the background,

the context, the market in which the parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[48]

The meaning of words is often derived from a number of contextual factors,

including the purpose of the agreement and the nature of the relationship created by the

agreement (see Moore Realty Inc. v. Manitoba Motor League, 2003 MBCA 71, 173 Man.

R. (2d) 300, at para. 15, per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at

pp. 749-50). As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West

Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.):

The meaning which a document (or any other utterance) would convey to

a reasonable man is not the same thing as the meaning of its words. The

meaning of words is a matter of dictionaries and grammars; the meaning

of the document is what the parties using those words against the relevant

background would reasonably have been understood to mean. [p. 115]

[79] See also Prenn, where Lord Wilberforce wrote (at 239–240):

In order for the agreement of 6th July 1960 to be understood, it must be placed in its

context. The time has long passed when agreements, even those under seal, were isolated

from the matrix of facts in which they were set and interpreted purely on internal linguistic

considerations. ...We must ...enquire beyond the language and see what the circumstances

were with reference to which the words were used, and the object, appearing from those

circumstances, which the person using them had in view. …

[80] The House of Lords more recently addressed the breadth of evidence relevant to contract

interpretation in Investors Compensation Scheme Ltd. v West Bromwich Building Society, [1998]

1 WLR 896 (HL) at 913 [Investors Compensation], where Lord Hoffman described the factual

matrix as including “absolutely anything which would have affected the way in which the language

of the document would have been understood by a reasonable man” (at 913). However,

Lord Hoffman also confirmed that “absolutely anything” does not include evidence of previous

negotiations between the parties and evidence of the parties’ subjective intentions. Critically, he

observed that background facts must have been reasonably available to all parties at the time of

contracting (at 913).

[81] Drawing on this, Rothstein J. described in Sattva similar conceptual limits on the breadth

of relevant surrounding circumstances:

[58]

The nature of the evidence that can be relied upon under the rubric of “surrounding

circumstances” will necessarily vary from case to case. It does, however, have its limits. It

should consist only of objective evidence of the background facts at the time of the

execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or

Page 32

reasonably ought to have been within the knowledge of both parties at or before the date

of contracting. Subject to these requirements and the parol evidence rule discussed below,

this includes, in the words of Lord Hoffmann, “absolutely anything which would have

affected the way in which the language of the document would have been understood by a

reasonable man” (Investors Compensation Scheme, at p. 114). Whether something was or

reasonably ought to have been within the common knowledge of the parties at the time of

execution of the contract is a question of fact.

[82] In short, extrinsic evidence of the circumstances surrounding contract formation is relevant

and material if it assists with or is probative of the accurate interpretation of contested contract

text. That evidence may be particularly useful where the text of the contract appears to be unclear,

ambiguous, or fails to deal expressly with the matter in dispute. Nonetheless, and in keeping with

the cardinal presumption, the interpreting court’s goal is always to discern and give effect to the

meaning of the disputed text. In Sattva, Rothstein J. put it in these terms:

[57]

While the surrounding circumstances will be considered in interpreting the terms

of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes

Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to

deepen a decision-maker’s understanding of the mutual and objective intentions of the

parties as expressed in the words of the contract. The interpretation of a written contractual

provision must always be grounded in the text and read in light of the entire contract (Hall,

at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the

interpretive process, courts cannot use them to deviate from the text such that the court

effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility

Cellular Inc. (1997), 101 B.C.A.C. 62).

(Emphasis added)

[83] The Supreme Court has since confirmed these principles and given guidance as to what

type of extrinsic evidence is generally relevant and material:

(a)

The factual matrix “assists in discerning the meaning of the words that the parties

chose to express their agreement; it is not a means by which to change the words

of the contract in a manner that would modify the rights and obligations that the

parties assumed thereunder” (Resolute FP Canada Inc. v Ontario (Attorney

General), 2019 SCC 60 at para 78, 444 DLR (4th) 77, Côté and Brown JJ. (Rowe J.

concurring), citing Hall Text, at 33–34).

(b)

Extrinsic evidence of surrounding circumstance is not to be used “to change or

overrule the meaning of [the] words [of a contract]” (Sattva at para 60).

Page 33

(c)

(d)

The use of a factual matrix “is limited by the legal principle that contractual

interpretation must remain grounded in the text of the contract so as to avoid

effectively creating a new agreement between the parties” (Teal Cedar SCC at

para 63).

“Interpretation of written contractual provisions must be grounded in the text and

read in light of the entire contract” and “[s]urrounding circumstances, including

‘knowledge that was or reasonably ought to have been within the knowledge of

both parties at or before the date of contracting’, may be considered in interpreting

the terms of a contract, although they may not overwhelm the contract’s express

words” (Fontaine at para 37).

(e)

(f)

The “purpose behind” a contract may inform the interpreting court of the parties’

reasonable expectations as to the meaning of a contested term (Ledcor at para 66).

“Evidence of one party’s subjective intention therefore ‘has no independent place’

when considering the circumstances surrounding the formation of a contract” (S.A.

v Metro Vancouver Housing Corp., 2019 SCC 4 at para 30, [2019] 1 SCR 99, citing

Eli Lilly at para 54).

(g)

The nature of the evidence upon which an interpreting court may rely consists “only

of objective evidence of the background facts at the time of the execution of the

contract” (Sattva at para 58, citing King v Operating Engineers Training Institute

of Manitoba Inc., 2011 MBCA 80 at paras 66 and 70, 270 Man R (2d) 63), namely,

“knowledge that was or reasonably ought to have been within the knowledge of

both parties at or before the date of contracting” (Sattva at para 58).⁸

[84] Aggregating this guidance in the most encompassing of terms, relevant extrinsic evidence

will include anything that tends to establish the facts known, or facts that reasonably ought to have

been known, to all parties at or before the date of contracting and that deepens the interpreting

court’s understanding of the mutual and objective intention of the parties as expressed by the words

⁸For the purposes of appellate review, Sattva also stands for the proposition that questions as to whether something

was or ought to have been within the common knowledge of the parties at the time of execution of the contract is a

question of fact (at para 58).

Page 34

of the contract (Sattva at paras 57, 58 and 60). Broadly stated, the proper approach to contract

interpretation involves the determination of consensus ad idem on the basis of the text of the

contract as a whole together with a matrix of extrinsic evidence that objectively manifests what

the parties understood the contested contract text to mean at the time of contract formation.

[85] In Ledcor, Wagner J. also observed that an interpreting court must consider “factors such

as the purpose of the contract, the nature of the relationship it creates, and the market or industry

in which it operates” (at para 31; see also Sattva at para 48). In a commercial context, these three

factors allow an interpreting court to take a more expansive approach to determining the parties’

common intentions in relation to an issue of standard form contract interpretation (Sattva at

para 118; and McCamus Text at 805–808). This has long been the case. In Hillas & Co., Ltd. v

Arcos, Ltd., [1932] All ER 494 (HL) at 503–504, Lord Wright wrote:

… Business men often record the most important agreements in crude and summary

fashion; modes of expression sufficient and clear to them in the course of their business

may appear to those unfamiliar with the business far from complete or precise. It is,

accordingly, the duty of the court to construe such documents fairly and broadly, without

being too astute or subtle in finding defects; but, on the contrary, the court should seek to

apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam

pereat [i.e., “words are to be understood that the object may be carried out and not fail”⁹].

That maxim, however, does not mean that the court is to make a contract for the parties, or

to go outside the words they have used, except in so far as there are appropriate implications

of law, as, for instance, the implication of what is just and reasonable to be ascertained by

the court as matter of machinery where the contractual intention is clear but the contract is

silent on some detail. …

[86] A court has less scope to consider evidence of surrounding circumstances of this kind

where the issue of standard form contract interpretation relates to a consumer contract rather than

a commercial contract. However, as we have indicated above, the fact that an issue before the court

is one of standard form contract interpretation does not mean that no evidence of surrounding

circumstances is admissible in relation to it. A factual matrix may still exist, but it must—given it

is only where there is no meaningful factual matrix specific to the parties that such an issue arises—

be the same for all who use the same standard form contract language to govern their contractual

relationship.

⁹As translated in Canada Square Corp. v Versafood Services Ltd. (1981), 130 DLR (3d) 205 (WL) (Ont CA) at

para 32, and Sherry v CIBC Mortgages Inc., 2016 BCCA 240 at para 61, 88 BCLR (5th) 105.

Page 35

[87] We note, for example, that in the case of a consumer insurance contract, the insured’s

knowledge is taken to be that of the average person applying for insurance and not a person “versed

in the niceties of insurance law” (Sabean at para 13; National Bank of Greece (Canada) v

Katsikonouris, [1990] 2 SCR 1029 at 1043; and Co-operators Life Insurance Co. v Gibbens, 2009

SCC 59 at para 21, [2009] 3 SCR 605 [Gibbens]). Knowledge of that kind, lacking specificity as

it does, will often be of little use in determining the meaning of contested contract language. In the

result, an issue of standard form contract interpretation will often turn entirely on the disputed

contract language, considered in the context of the contract as a whole, or by taking into account

broader societal interests, or under the blunt instrument of contra proferentem (Hall Text at 218–

221). Extrinsic evidence, including as to purpose, relationship and the market or industry, will

often add little or nothing to the analysis.

C.

Legislation and Terms of Art

[88] The parties have raised issues of standard form contract interpretation that the Respondents

submit are informed by legislation and substantive common law. By substantive common law, we

mean common law other than the law of contract interpretation. In particular, the Respondents say

the Court’s interpretation of the word premium or the term payment of premiums, which are used

in each of the ULPs to describe monies paid by the insured to the insurer, must recognise the

statutory definition of premium under The Saskatchewan Insurance Act, RSS 1978, c S-26 [The

Insurance Act, 1978], as well as the meaning courts have attributed to premium in previous cases.

These factors were central to the conclusion reached by the Judge that the word premium is a legal

term of art, meaning an amount paid for insurance.

[89] As noted, issues of contract interpretation may also raise questions as to the effect of statute

law¹⁰or common law on the interpretation of a disputed contract provision. For example, for public

policy reasons, a legislature may have interfered with the freedom to contract by statutorily

imposing contractual terms and conditions on contracting parties.¹¹Legislated rules of contract of

¹⁰See also Fontaine v Canada (Attorney General), 2020 ONCA 688, in respect of the application of court protocols

in the context of the interpretation of a residential school settlement agreement.

¹¹See, for example, The Insurance Act, 2015, ss 8-28, 8-41, 8-95 and 8-166. Pursuant to s. 7-27(1)(n)(i) of The

Insurance Act, 2015, the Lieutenant Governor in Council may make regulations respecting life insurance policies that

provide for “either or both of the form and contents of” a life insurance policy, an application therefor, and an

endorsement or rider thereon, etc. See also Hart Stores Inc. v 3409 Rue Principale Inc., 2020 NBCA 49 at para 45.

Page 36

this or any other kind must be applied when identifying and interpreting the contract or provision

at issue. In such cases, the interpreting court must approach interpretation of the

statutorily-imposed term or condition as a question of law.¹²This factor is not mentioned in Sattva

or Ledcor.

[90] Statutory provisions that fall within this category are those that impose or prohibit

contractual conditions or speak directly to the interpretation of a contract in some other way. In

the latter respect, using Saskatchewan insurance contracts as the example, ss. 8-121(3) and

8-178(3) of The Insurance Act, 2015 each provide: “A designation in favour of the ‘heirs’, ‘next

of kin’ or ‘estate’ of an insured, or the use of words having similar meaning in a designation, is

deemed to be a designation of the personal representative of the insured”. Under these provisions,

the Legislature has expressly fixed the meaning of certain words and phrases when used in a

Saskatchewan insurance contract. An interpreting court must follow that legislated interpretation.

[91] A legislature may also prescribe the circumstances under which a contractual term or

condition is unenforceable, invalid or void. Again, using Saskatchewan insurance contracts as the

example, s. 8-8(9) of The Insurance Act, 2015 states that the “question of materiality in any

contract of insurance is a question of fact”. The provision then goes on to provide that “no

admission, term, condition, stipulation, warranty or proviso to the contrary contained in the

application for insurance or in the policy or in any agreement or document relating to the contract

has any force or validity” (emphasis added).

[92] A legislature may even deem certain evidence inadmissible for the purposes of contract

interpretation, thereby interfering with the interpreting court’s broad discretion on matters of

evidence and supplanting the Sattva approach. See, for example, s. 8-8(1) of The Insurance Act,

2015, which provides:

All the terms and conditions of a contract of insurance must be set out in full in the policy

or in writing securely attached to the policy when it is issued, and unless so set out no term

of the contract or condition, stipulation, warranty or proviso modifying or impairing its

effect is valid or admissible in evidence to the prejudice of the insured or a person to whom

insurance money is payable under the contract of insurance.

12

For example, see Metropolitan Toronto Condominium Corporation No. 590 v The Registered Owners and

Mortgagees of Metropolitan Toronto Condominium Corporation No. 590, 2020 ONCA 471 at paras 13–15.

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[93] In our opinion, however, this principle does not extend to statutory provisions that deal

with the subject matter of a contract, such as insurance, as opposed to the contract itself. As a rule,

the mere fact that an enactment defines or uses a word or phrase also found in a contract does not

affect the interpretation of that word or phrase as used in that contract. This reflects the application

of the cardinal presumption under the Sattva approach; that is, the parties intended the legal

consequences of the words they chose to use, which is determined by the ordinary meaning of

those words and the way in which they are used in the contract, interpreted in light of the

surrounding circumstances. If the contract or extrinsic evidence does not disclose that the

contracting parties intended the meaning of a word in their contract to accord with the definition

or usage of that word in legislation, the legislated meaning would not apply.

[94] Where the contract is a commercial contract, rather than a consumer contract, the Sattva

approach can lead to a different result due to the probative value of industry-specific language,

knowledge and practices that are specific to an industry or a commercial setting. This is reflected

in the concept of legal “terms of art”. This, too, is a concept that was not specifically considered

in either Sattva or Ledcor. It was, however, relied on by the Judge in determining the meaning of

premium. In each of his decisions, the Judge defined the word premium or the phrase payment of

premiums by looking outside the text of the contract. He concluded that, when premium is used in

the “insurance context”, it is understood to have “such a status and specific meaning that it has

become a legal term of art that must be adhered to when interpreting an insurance policy” (Mosten

Decision at para 119; Atwater Decision at para 129; and Ituna Decision at para 117).

[95] The dissenting reasons of L’Heureux-Dubé J. in Manulife Bank of Canada v Conlin, [1996]

3 SCR 415 at para 44 [Conlin], are of interest in this context. In that case, where she was the only

judge to write on this point, L’Heureux-Dubé J. framed her reasons by first quoting the following

passage from Lord Diplock in Sydall v Castings Ltd., [1967] 1 QB 302 (CA) at 313–314 (at

para 42):

Documents which are intended to give rise to legally enforceable rights and duties

contemplate enforcement by due process of law which involves their being interpreted by

courts composed of judges, each one of whom has his personal idiosyncrasies of sentiment

and upbringing, not to speak of age. Such documents would fail in their object if the rights

and duties which could be enforced depended upon the personal idiosyncrasies of the

individual judge or judges upon whom the task of construing them chanced to fall. It is to

avoid this that lawyers, whose profession it is to draft and to construe such documents,

have been compelled to evolve an English language, of which the constituent words and

Page 38

phrases are more precise in their meaning than they are in the language of Shakespeare or

of any of the passengers on the Clapham omnibus this morning. These words and phrases

to which a more precise meaning is so ascribed are called by lawyers “terms of art” but

are in popular parlance known as “legal jargon”. …

(Emphasis added by L’Heureux-Dubé J.)

[96] Justice L’Heureux-Dubé went on to define legal term of art in the context of contract

interpretation:

[43]

After having specified the nature of “legal terms of art”, Lord Diplock stated the

basic rule of judicial interpretation, as well as the methodology, that are applicable in that

context (at p. 314):

The words and phrases...which are “terms of art” must therefore be given

the meaning which attaches to them as terms of art;...

The lexicon of terms of art is to be found in the decided cases and in the textbooks consulted

by legal practitioners.

[44]

It is quite obvious that where courts expound judicial interpretations of “legal

terms of art” using such external aids as legal textbooks, the resulting outcome cannot

appropriately be labelled a “plain meaning” definition.

[45]

Where an instrument uses a legal term of art, there is a presumption that the term

of art is used in its correct legal sense: Inland Revenue Commissioners v. Williams, [1969]

1 W.L.R. 1197 (Ch.; Megarry J.).

[46]

This is the presumption that is resorted to by my colleague Iacobucci J. when he

makes use of admissible external aids—i.e.: McGuinness, supra,—in determining the

correct meaning of the phrase “to give time”. As McGuinness reviews extensive case-law

authority that establishes the generally accepted “meaning in law” of these “legal terms of

art”, it is an admissible external aid to judicial interpretation: see Driedger, supra, at

pp. 428, 468 and 474; see also P.-A. Côté, The Interpretation of Legislation in Canada

(2nd ed. 1991), at pp. 449-53 and 457-58.

[97] This reasoning fits comfortably with Sattva, Ledcor and our approach to issues of standard

form contract interpretation. The reference to legal terms of art, like the reference to boilerplate

clauses, is a reference to contractual terms that may be used in a fashion such that they have the

three characteristics that make them standard form contract language. That being so, they have

precedential value. In Ledcor, Wagner J. spoke tangentially to this point when he preferred an

interpretation of a term of the contract in question because it was “consistent with previous

interpretations of similar clauses in the jurisprudence” (at para 63).

[98] The decision in IFP Technologies, which was relied on by the Judge, illustrates this

principle. As the Judge noted, the Alberta Court of Appeal there held that the term working interest

was a legal term of art that had an accepted meaning and usage in the oil and gas industry and,

Page 39

therefore, the Court interpreted the contracts in question using that accepted meaning and usage.

The Judge adopted the following reasoning in IFP Technologies, where Fraser C.J.A. characterised

this approach as analogous to the reasoning relating to standard form contracts:

[60]

Where a standard form contract is involved, the standard of review that applies to

its interpretation is usually correctness: [Ledcor at paras 4, 24, 46, 48]. As the Supreme

Court noted, these are highly specialized contracts typically sold widely to customers

without negotiation of their terms and their interpretation could affect a large number of

people. As a result, it would be undesirable for courts to interpret identical standard form

provisions inconsistently.

[61]

By analogy, this reasoning applies with equal force to legal terms of art which have

a common meaning to participants in a given industry. In such event, there is no identified

need to define what such terms mean. Participants in the oil and gas industry rely on the

commonly accepted usage of many terms: see, for example, the Glossary of Land Terms

published by the Canadian Association of Petroleum Land Administration (CAPLA):

CAPLA, “Glossary of Land Terms 2016”, NEXUS (September 2016) 9 at 15. “Working

interest” is one of them. Since this term has an accepted meaning and usage in this sector,

and its interpretation has precedential value, it must therefore be interpreted consistently.

Thus, where the issue involves the meaning of a legal term of art — in this case, “working

interest” as used in the oil and gas industry — the standard of review with respect to the

meaning of that term is correctness. [Footnote omitted]

[62]

While a legal term of art may be modified by the parties to an agreement, that does

not permit a trial judge to ignore the meaning attributable to it in the absence of such

modification. To do so is tantamount to failing to take into account a key term of a contract

or relevant factor or ignoring applicable principles and governing authorities. That, in turn,

is a question of law reviewable for correctness: Sattva, supra at para 53; Deslaurier Custom

Cabinets Inc. v 1728106 Ontario Inc., 2017 ONCA 293 at paras 65-68. …

[99] As we have said, we do not see this as analogous reasoning but as an application of the

same principles of precedential value to terms of art, as they would apply to any other standard

form contract language. Cast in the terms we have adopted, the interpretation of a legal term of art

is—if the three defining characteristics exist—an issue of standard form contract interpretation. A

term of art is standard form contract language, repeatedly used without a meaningful factual matrix

specific to the parties. As Fraser C.J.A. explained, it is a term of art precisely because it has a

known and accepted meaning and usage in a given industry. Where participants in that industry

have used such standard form contract language and there is no meaningful factual matrix specific

to the parties in relation to that language, the accepted meaning and usage constitutes a part of the

factual matrix because it is known or ought to be known by industry participants.

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[100] The issue in these matters is whether the use of the word premium or the phrase payment

of premiums meets this standard and is, accordingly, an issue of standard form contract

interpretation. That issue is addressed below.

VI. ANALYSIS

A.

Introduction

[101] These matters raise two broad questions for the Court to answer: (a) did the Judge err in

his interpretation of any of the ULPs; and (b) did the Judge err in his interpretation of the 2018

Regulation? As to the first of these, the principal issue of contract interpretation before the Judge

in each case was whether the ULP in question allowed for an insured to invest an unlimited amount

in the side account.

[102] The parties submit the Judge correctly identified Ledcor as outlining the basic framework

for interpreting the ULPs qua standard form insurance contracts, but they disagree as to how it

should be applied. With respect, we have a different opinion. For the reasons explained above, we

agree that Ledcor governs the choice of appellate standard of review in relation to the issues of

interpretation raised by the parties. These issues relate to the interpretation of a contract that is

entirely in a standard form. For reasons that we explain below, we find there is no meaningful

factual matrix relating to contract formation that is specific to the parties to any of the ULPs. Each

of the ULPs has been entered into repeatedly and, more specifically, the contested language has

been used repeatedly. As such, the three characteristics that identify an issue of standard form

contract interpretation exist and the correctness standard applies on appellate review, as it did in

Ledcor.

[103] We do not agree, however, that Ledcor outlines the legal framework for interpreting the

ULPs. That is so for two reasons. First, Ledcor was concerned with the interpretation of a

commercial insurance contract. The ULPs are not contracts of that kind. The fact they are not

commercial contracts is a crucial distinction in determining what evidence of surrounding

circumstances is admissible. Second, the fact they are both life insurance contracts and investment

contracts is also a crucial distinction. We have concluded that the principles of interpretation that

apply to insurance contracts, and particularly to commercial insurance contracts, such as those

Page 41

related to exclusion clauses, etc., do not apply to the issues of standard form contract interpretation

arising in respect of the ULPs. The reasons for this and our conclusion are set out below.

[104] We have described the Sattva approach as the correct approach to all issues of contract

interpretation, including issues of standard form contract interpretation. We must, accordingly,

determine whether the Judge interpreted the contested portions of the ULPs in a manner that,

however he described the process, was consistent with the Sattva approach as we see it. If we

decide he did not do so, we must interpret the contested contract language anew.

B.

Issues Common to All Three Matters

[105] Certain issues, including the evidentiary issues, are common to all three of these matters.

We have decided to dispose of these issues first. Similarly, the cross-appeals all question the

correctness of the Judge’s conclusions about the same statutory instrument, being the 2018

Regulation. For that reason, the cross-appeals will be addressed separately but together, after we

apply the principles of interpretation to the ULPs.

1.

Evidentiary Issues

[106] As may be apparent by now, our analysis of the standard of review and the framework for

interpreting a contract resolves the parties’ allegations that the Judge erred in his assessment of the

admissibility and relevance of the evidence proffered by the parties.

[107] For evidence to be admissible it must be relevant. Evidence that tends to make the existence

of a fact more or less probable is probative of that fact. A fact is material if it is or tends to prove

or disprove an element of a cause of action or of a defence or any other fact that must exist for the

court to rule in favour of one side or the other in an action. Justice Watt precisely defined factual

relevancy, materiality and admissibility in these terms in R v Candir, 2009 ONCA 915, 250 CCC

(3d) 139:

[47]

Relevance is not an inherent characteristic of an item of evidence. Relevance exists

as a relation between an item of evidence and a proposition of fact that the party adducing

the evidence seeks to prove or disprove by the introduction of the evidence. Relevance is

relative, not absolute, a function of and dependent on the circumstances of the case in which

it is offered, including, but not only, the positions of the parties: R. v. Pilon (2009), 243

C.C.C. (3d) 109 (Ont. C.A.), at para. 33.

Page 42

[48]

The threshold for relevance is not high. To determine whether an item of evidence

is relevant, a judge must decide whether, as a matter of human experience and logic, the

existence of a particular fact, directly or indirectly, makes the existence of a material fact

more probable than it would be otherwise: see R. v. Cloutier, [1979] 2 S.C.R. 709, at

pp. 730-32. The exclusivity or cogency of the inferences that may be drawn from the item

of evidence have no place in the inquiry into relevance: see R. v. Underwood (2002) 170

C.C.C. (3d) 500 (Alta. C.A.), at para. 25.

[49]

Materiality is a legal concept. Materiality defines the status of the proposition a

party seeks to establish by the introduction of (relevant) evidence to the case at large. What

is material is determined by the governing substantive and procedural law and the

allegations contained in the indictment. Evidence is material if what it is offered to prove

is in issue according to the governing substantive and procedural law and the allegations

contained in the indictment. Evidence is immaterial if what it is offered to prove is not in

issue under the governing substantive and procedural law and the allegations contained in

the indictment.

[50]

Admissibility is wholly and exclusively a creature of the law. The rules of

admissibility, for the most part negative, exclude evidence that is both relevant and

material. A rule of admissibility need not be invoked when an item of evidence is either

irrelevant or immaterial. Evidence is admissible if it satisfies all applicable exclusionary

rules.

[108] These principles are equally applicable in a civil context. In brief, relevant evidence is

anything that has some tendency to show that a material fact is true. Evidence that is irrelevant or

immaterial is not admissible.

[109] The issues put to the Judge in these matters were issues of standard form contract

interpretation. That is so in part because there was no meaningful factual matrix specific to the

parties to the ULPs that would assist with their interpretation. That conclusion is clear from both

the evidence proffered and the absence of evidence regarding Dr. de Bruin, Mr. Walkom and

Mr. Zinkhan. The evidence tendered by the Respondents was fact and opinion evidence known to

industry participants and experts. Nothing suggests that the disputed evidence that was rejected,

or that was admitted, was known to Dr. de Bruin, Mr. Walkom or Mr. Zinkhan. Nor is there any

basis to infer that it ought to have been known to them. Broadly speaking, we are of the same view

as the Judge, who had this to say in Mosten:

[250] In the context of a summary proceeding, where the primary task is to interpret an

insurance contract and where the parties are all agreed that the permissible factual matrix

evidence does not include evidence of a contracting party’s subjective intention and

consists only of objective facts known by the parties at or before the date of contracting,

the Court was faced with in excess of 5,000 pages of sworn evidence, expert reports and

exhibits. It is obvious, simply from the statistical summary provided above, that the

evidence tendered goes light years beyond the evidence of objective facts known by both

parties at or before the date of contract.

Page 43

[251] The attempts of the insurers/respondents Manulife, Industrial Alliance and BMO

in the related proceedings to place into the evidentiary record comprehensive information

and views they had related to Universal Life policies was, in my respectful opinion,

misguided. It failed to focus on what was permissible and admissible evidence when

interpreting a standard form contract. The result of their approach was to overwhelm the

court with detail and failure to provide much needed focus. This was compounded on all

sides by a similar lack of focus in the thousands of pages of written argument and

submissions.

[110] In terms of the parties’ allegations of error, this means there is no evidence extrinsic to any

of the ULPs that is relevant to the issues of standard form contract interpretation that they have put

before the Court. Accordingly, where the Judge excluded such evidence as irrelevant, immaterial

or inadmissible, he did so correctly. Where he admitted it, he erred.

2.

Case Law Interpreting ULPs

[111] The Judge properly concluded that case law precedents were relevant to the issues of

interpretation before him. In his decisions, he wrote:

The only Canadian decisions relating to a universal life insurance policy that counsel cited

or that I have been able to identify are Fehr v Sun Life Assurance Company of Canada,

2018 ONCA 718, 84 CCLI (5th) 124 [Fehr], and Kang v Sun Life Assurance Company of

Canada, 2013 ONCA 118, 19 CCLI (5th) 171 [Kang], and the trial level decisions that

preceded them. The Kang decision is not instructive to any measure.

The Fehr case related to a proposed $2.5 billion class action concerning more than 230,000

life insurance policies sold by Metropolitan Life Insurance Company of Canada between

1985 and 1998 and allegations of misrepresentation in the sale of the policies and breach

of contractual and other duties relating to premiums and fees charged to the policyholders.

There is nothing in the reported decisions that provides any indication as to whether these

policies had Side Accounts similar to those in the subject policies or the contractual

language relied upon by [the Appellant] in this action.

The decision of the Court of Appeal does contain a discussion of the nature or

characteristics of the universal life insurance policies there in question. In that respect, the

reasons for judgment state the following:

[19]

This action involves four variations of “universal life” insurance

policies sold by MetLife in Canada. The four policies had different

features, catering to different consumer preferences.

[20]

A traditional “whole life” insurance policy charges fixed

premiums to fund a death benefit and an investment account. A universal

life policy offers more choice and flexibility to the insured. Like a whole

life policy, it has a cash accumulation feature. But it permits the insured to

pay premiums in variable amounts on a flexible schedule, to take

advantage of different investment options for surplus funds and to vary the

death benefit. Premiums paid by the insured are paid into an

“accumulation fund”. Cash in the accumulation fund is paid out from time

to time to cover: the cost of the insurance (“COI”), that is the cost of

Page 44

insuring the death benefit; the costs of administration; and the acquisition

of investments. Income on the investments is added to the policyholder’s

accumulation fund.

[21]

Thus, in addition to providing life insurance, the policy serves as

an investment vehicle. It has tax advantages, because income in the

investment fund accrues on a tax-deferred basis. The policy’s cash value

may enable the policyholder to borrow money from the policy.

Alternatively, surplus funds can be used to pay future premiums from time

to time (a so-called “premium holiday”) or for the remaining life of the

policy (sometimes referred to as a “vanishing premium”).

[22]

But universal life insurance is not without risks. Because

premiums are not fixed, poor investment returns, due to low interest rates

or market declines, can cause premiums to increase and reduce the value

of the accumulation fund. If the accumulation fund is depleted, the insured

will have to pay increased premiums or see the entire policy lapse.

[23]

It is unnecessary to provide a detailed description of the terms of

the various policies in order to address most of the issues on this appeal. I

will discuss some of the pertinent provisions of the policies when I

examine the motions judge’s analysis of the common issues.

[24]

These policies were fairly complex financial instruments. The

manner in which they operated was not obvious from the policy language.

It is not surprising, therefore, that MetLife’s sales agents frequently used

standard sales pitches and illustrations to demonstrate the operation of the

policies to their clients.

[25]

Many of these policies were sold during times of high interest

rates. Most projections given to prospective policyholders were based on

those rates continuing. Everything was rosy when interest rates were high.

Premiums were low, accumulation funds grew, and policyholders were

happy. But when interest rates began to fall in the mid-1990s and into the

2000s, MetLife’s profits also fell. As did the income on policyholders’

accumulation funds. Correspondingly, premiums and administration costs

charged by MetLife and its successors went up. Some of these increased

charges were paid out of policyholders’ accumulation funds.

…

[64] I have noted that the policies are relatively complex financial

instruments. They are also relatively complex contracts. The language is

technical and legalistic, and important terms are undefined. For example,

there is no definition of “minimum premium” or “maximum premium”.

The actual meaning of those terms is a matter of controversy. According

to Sun Life, “minimum premium” does not mean the lowest premium that

a policyholder is required to pay in order to keep the policy in good

standing. And “maximum premium” does not mean the highest premium

that can ever be charged to a policyholder. Some technical terms, such as

“non-rated classification”, are undefined. Other terms, such as “premium”,

“monthly cost of insurance” and “monthly insurance charge”, are

confusing. Key provisions, such as the manner in which Sun Life could

adjust the COI from time to time, are opaque.

Page 45

[65]

The motions judge himself required extensive additional

evidence, including expert evidence, before he could determine whether

Sun Life had breached the policy by adjusting the COI based on factors

not enumerated in the policy. He was unable to do so by simply

interpreting the policy and comparing it to what Sun Life claimed it was

entitled to do. This was a key breach of contract issue, to which I now turn.

These reasons demonstrated that complexity appears to be endemic to universal life

insurance policies and that, in addition to providing life insurance, universal life insurance

policies serve as investment vehicles with tax advantages. There is nothing in the Fehr

decision which provides precedential guidance that assists me in the interpretation of the

subject policies on the issue of whether the policies were intended to provide investment

options beyond the tax‑advantaged investment options within the exempt policy criteria of

the Income Tax Act.

In the trial level decision of Perell J. (Fehr v Sun Life Assurance Co. of Canada, 2015

ONSC 6931, 56 CCLI (5th) 15), he said the following at paragraph 91:

[91]

Under a universal life insurance policy, the premiums pay for:

(a) insurance (a death benefit), for which there are COI [Cost of Insurance]

and Administrative Fees; and (b) an investment that earns income. Under

a universal life policy, the insured’s premiums are paid into an account

that is called an Accumulation Fund. The money in the Fund is used to pay

the COI and an Administrative Fee and to purchase the investment. The

earnings form the investment are added to the Accumulation Fund.

Perell J.’s statement that the earnings form the investment and are added to the

Accumulation Fund provides no guidance to me. His decision did not address the specific

issues before me. Nonetheless, there is nothing in his interpretation of the universal life

insurance policy before him that suggested it included investment options beyond those

permitted under the tax-exempt criteria.

(Mosten Decision at paras 149–153; Atwater Decision at paras 156–160; and Ituna

Decision at paras 145–149)¹³

[112] In addition to the two cases cited in the Judge’s reasons, we have identified the following

cases as involving the interpretation of a ULP:

(a)

(b)

R v Bilodeau, 2009 TCC 315 at para 4;

Bellaire v Independent Order of Foresters (2004), 5 CPC (6th) 68 (WL) (Ont Sup

Ct), particularly paras 7–11 and 19;

(c)

Lee v Transamerica Life Canada, 2017 BCSC 843 at paras 11–12, [2017] 11 WWR

146;

¹³The quoted text is from the Atwater Decision and the Mosten Decision. We acknowledge there are minor differences

in the language the Judge used in the relevant paragraphs of the Ituna Decision, but the differences are not material to

the issues in these appeals.

Page 46

(d)

Kerr v CIBC World Markets Inc., 2017 ONSC 777 at paras 33, 140–142, 150, 153–

154 and 156, 64 BLR (5th) 115;

(e)

(f)

Lamarche v Teolis, 2006 QCCS 2317 at paras 26–29; and

Cardinal Morello v BMO Nesbitt Burns Financial Services Inc., 2013 QCCS 3991

at paras 11–12, 23, and 46–47.

[113] The decision in Louisméus c Manufacturers Life Insurance Company (Manulife

Financial), 2017 QCCS 3614 [Louisméus], appeal dismissed, 2017 QCCA 1710, is of potential

value. There, the Courts of Québec were called upon to interpret the standard form ULP called the

de Bruin ULP in these reasons. In that case, insureds had applied for a class action representing all

people who had taken out a “L’Architecte”-type universal life insurance policy between 1989 and

1993 with the death benefit option “fixe plus valeur du fonds” or “indexé”. The issue was that the

cost of the insurance had increased at a faster rate than the minimum premium to be paid and,

therefore, the amount deposited into the side account had decreased each year. In rejecting the

application at the superior court level, Hamilton J. interpreted the de Bruin ULP as follows:

2.

Le contexte plus général

[13]

La police «L’Architecte» est une police d’assurance vie universelle lancée par

Aetna le 15 mai 1989. Elle demeure sur le marché jusqu’au 31 décembre 1993.

[14] Elle est distribuée exclusivement par le biais de représentants en assurance qui ont

l’obligation de décrire le produit proposé au client.

[15] Elle inclut trois options pour le capital-décès : «fixe», «fixe plus valeur du fonds»

et «indexé».

[16]

La police-type est modifiée à plusieurs reprises entre 1989 et 1993. En particulier,

la clause «Critères de provisionnement minimal» dont il est question dans le présent litige

est modifiée de façon importante le 1^eravril 1990:

The current Minimum Fund Value Test provision in The Architect policy

has created some confusion for some agents. We are pleased to announce

a major revision and simplification to this provision. The provision has

been substantially improved. The contract wording is now much easier to

read and understand and you can illustrate the minimum fund values using

The Architect software.

[17]

Mme Louisméus souscrit sa première police «L’Architecte» le 9 août 1993 et sa

police inclut donc la nouvelle clause de provisionnement minimal simplifiée et améliorée.

La clause en vigueur en 1989-1990 n’est pas en preuve.

[18]

Selon les termes de la police, le critère de provisionnement minimal doit être

évalué après 10 ans. Dans les faits, l’assureur commence à effectuer le test en mai 2001 et

applique le critère d’une façon qui est moins onéreuse que ce que prévoit la police.

Page 47

L’assureur décide aussi à cette même période de ne pas appliquer le critère de

provisionnement minimal aux polices avec l’option capital-décès «indexé».

[19]

L’assureur évalue à cette période le nombre de polices «L’Architecte» qui seront

affectées par le test de provisionnement minimal:

Compte tenu de nos toutes dernières prévisions, plus de 50 % de tous les

contrats originaux l’Architecte souscrits au cours de cette période [entre

avril 1990 et décembre 1993] sont financés adéquatement parce que les

clients ont profité des occasions de croissance offertes par ce produit,

lequel bénéficiait d’un abri fiscal. Ensuite, 30 % des contrats ne sont pas

en danger dans l’immédiat mais pourraient avoir besoin de primes

additionnelles à l’avenir pour satisfaire aux exigences de financement

minimal en ce qui a trait à l’assurance vie et 20 % des contrats sont

financés au minimum et devront faire l’objet d’une intervention rapide

pour satisfaire au test.

[20]

Mme Louisméus allègue dans sa demande que Gauthier lui a dit que plusieurs

dizaines de milliers de polices «L’Architecte» sont vendues à travers le Canada entre 1989

et 1993.

[21]

Gauthier témoigne qu’il a vendu 44 polices «L’Architecte» entre 1989 et 1993,

dont celui de Mme Louisméus et son conjoint. Il témoigne qu’à date, aucun de ses autres

clients n’ont reçu une augmentation de leur prime en application du test du

provisionnement minimum.

(Footnotes omitted)

[114] None of the prior cases consider or reach a conclusion in relation to an issue of standard

form contract interpretation that is the same or similar to those arising in these matters. That said,

in the Mosten Appeal, we will take high-level guidance from the general comments of Hamilton J.

in Louisméus because he addressed the same standard form ULP. The general background

comments cited above in Fehr are also of interest, because they comment on the investment aspect

of the ULP in a manner consistent with our analysis and conclusion; that is, as providing for funds

held in the side account to be used for premiums or as an investment. Beyond that, like the Judge,

we find there are no precedents to which to refer in our interpretation of the ULPs.

[115] We will deal separately with the interpretation of the word premium and the phrase

payment of premiums below, despite the fact that—as we have explained above—interpretation of

terms of that kind engages the same fundamental legal principles as any issue of standard form

contract interpretation.

Page 48

3.

Terms of Art: Premium and Payment of Premiums

[116] In each of the decisions in the court below, the Judge found the ULP was unambiguous in

relation to the question of whether the Appellant could invest an unlimited amount in the side

account. To do so, he defined the word premium and the phrase payment of premiums as they are

used in each ULP. The Judge looked outside the text of the contracts themselves and concluded

premium has a singular and established meaning in the context of insurance that “everyone

understands precisely” (Mosten Decision at para 119; Atwater Decision at para 129; and Ituna

Decision at para 117). Given his finding of an established, precise meaning in the insurance

context, the Judge concluded that premium is understood to have “such a status and specific

meaning that it has become a legal term of art that must be adhered to when interpreting an

insurance policy” (Mosten Decision at para 119; Atwater Decision at para 129; and Ituna Decision

at para 117). Critically, the Judge extrapolated from these conclusions by finding:

This meaning and understanding of “premiums” necessarily gets modified when

purchasing a life insurance policy where the Income Tax Act permits there to be an accrual

tax‑exempt element to the policy. Here, the ordinary purchaser of the life insurance would

understand that the term “premiums” relates not only to the cost of the life insurance per

se, but also the amount permitted to be paid for the permitted and associated tax‑exempt

investment. Given the universally understood meaning of “premiums” in the insurance

context generally, the ordinary insured, purchasing life insurance, would not interpret or

understand premium or premiums to include investment in opportunities not associated

with or tied to the prerequisite life insurance purpose or requirements of the policy.

(Mosten Decision at para 120; Atwater Decision at para 130; and Ituna Decision at

para 118)

[117] Taking guidance from IFP Technologies, the Judge then found that “[a]n ordinary insured

must be taken to know and understand the word ‘premiums’ in its insurance context as defined in

dictionaries and indeed by [The Insurance Act, 1978]” (Mosten Decision at para 126; Atwater

Decision at para 136; and Ituna Decision at para 124).

[118] The finding that an ordinary insured must be taken to know what premium means when

used in an insurance context lies at the core of the Judge’s interpretation of the ULPs, as is evident

from the following passages:

The ordinary person entering into an insurance contract in Canada that provided for both

an insurance amount on the life insured and for connected or associated accrual tax‑exempt

savings payable on the death of the life insured would understand “premiums” to mean the

monies he or she would be paying for that insurance and the additional death benefits

thereby provided by the tax‑exempt savings provisions. Given this understanding of the

word “premiums”, it follows that an ordinary insured would not understand a phrase stating

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that an insured may “make additional premiums at any time” as giving him or her the right

to invest unlimited amounts in a fund or accounts that did not have a life insurance purpose.

Proceeding from the premise that the word “premiums” has the meaning ascribed to it in

[The Insurance Act, 1978] and in conventional dictionary definitions, it logically follows

that premiums would not include monies paid solely for the purpose of accessing those

interest rate investment returns provided by the Guaranteed Interest Accounts within the

[side account]. The reasonable person would thus understand that the purpose of the

accounts in the [side account] was to maintain the tax‑exempt status while [accumulating—

Mosten Decision] accommodating [Atwater Decision] the prepayment of future premiums

earning the same rate of return as funds invested within the [exempt account].

Payments of monies whose intended purpose is not to fund the provision of the policies’

death benefits (the sine qua non of a life insurance policy) are not premiums and the insurer

has no obligation to accept them unless a contract between the insurer and the insured

creates such an obligation as a distinct topic of agreement.

[The Appellant] argues that since the contract specifies minimum premiums and does not

specify maximum premiums that can be paid, coupled with the statement the insured may

make additional premium payments at any time, informs the meaning of “premiums” in

this contract as being any monies paid to the insurer and creates a contractual right to pay

monies for investment outside the accrual tax‑exempt provisions of the policy. It argues

that the absence of limiting language may be and should be considered in interpreting a

contract and that the insurer having not specified a maximum premium that can be paid,

coupled with the express provision that additional premiums may be paid at any time, has

created a contractual right.

Apart from the fact that this argument ignores the insurance industry meaning of

“premiums”, [IFP Technologies] addresses the argument that the absence of words limiting

the amount of premiums should be considered in the interpretation of the contract. At

paragraph 138 of [IFP Technologies], the Court states it is an improper leap of logic for a

court to conclude that because something has not been expressly forbidden under a

contract, it follows it is permitted.

(Mosten Decision at paras 127–131 and Atwater Decision at paras 136–140)¹⁴

[119] The Appellants take issue with the Judge’s conclusions that premium is a legal term of art

and that the average insured would understand it to have the meaning he ascribed to it. They say

his latter conclusion is in error because he considered the average insured to be an insurance

industry participant, who would understand the industry meanings of legal terms of art—i.e., the

niceties of the insurance industry.

[120] As we have explained, the interpretation of a legal term of art can be characterised as an

issue of standard form contract language if the three characteristics arise on the facts. As such,

case law defining those terms may have precedential value. All of that makes good sense from a

14

Again, the Judge used different language in the Ituna Decision (at paras 125–127), reordering the first three

paragraphs and omitting the last two paragraphs. The language also differs slightly but not materially as between the

Mosten Decision and the Atwater Decision.

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pragmatic perspective because it informs the development of the common law. The existence of

standard and commonly understood terms and clauses and consistency in their interpretation,

which may be fairly seen as a virtuous cycle, promotes certainty in the formation and performance

of contracts and the settlement of disputes. Parties negotiating contracts, and their solicitors,

commonly choose standard form language for that very reason.

[121] As we have explained, however, legal terms of art achieve that status because they have a

commonly known and accepted meaning and are used by participants in an industry. In IFP

Technologies, the contracting parties were participants in such an industry who would either know

or ought to know the meaning of the terms of art that they chose to use when contracting to carry

on their businesses. The fact that the contracting parties are participants in an industry that

commonly uses the same terms is the reason the meaning specified in the case law is part of the

factual matrix. Some terms of art are widely used in the course of commerce and are not restricted

to a particular industry.

[122] These factors do not exist in any of these matters. None of Dr. de Bruin, Mr. Walkom or

Mr. Zinkhan can reasonably be described as participants in the insurance industry or, for that

matter, in the investment industry—just as the average smartphone owner who downloads an

application cannot be described as a participant in the software or telecom industries. Such persons

may use an industry service or product but do not thereby acquire knowledge of terms of art.

[123] With respect, the Respondents’ suggestion that these individuals and others who entered

into ULPs with insurers are sophisticated consumers who would understand the ULPs in the way

put forward by the Respondents stretches beyond recognition the notion of an industry participant

as a basis for finding a relevant factual matrix. Further, the argument lacks an evidentiary

foundation because the original consumer parties to these ULPs are only three of the many who

entered into such contractual relationships under standard form contracts (see Louisméus and

Fehr).

[124] In light of all of this, the fact that courts or the authors of legal textbooks may have

interpreted premium and payment of premiums in a certain way adds no more to the interpretive

process than the industry and expert evidence tendered by the Respondents. The interpretive

process is concerned with discovering common intention or consensus ad idem by “giving the

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words used their ordinary and grammatical meaning, consistent with the surrounding

circumstances known to the parties at the time of formation of the contract” (Sattva at para 47).

Case law, like evidence of industry jargon, industry practice or industry intentions, does not assist

in that voyage of discovery in these matters. There is no evidence to suggest that Dr. de Bruin,

Mr. Walkom or Mr. Zinkhan¹⁵knew nor ought to have known of that case law or those textbooks.

[125] Further, and as L’Heureux-Dubé J. observed, a word or phrase may take on the status of a

legal term of art only when “extensive case-law authority…establishes the generally accepted

‘meaning in law’ of these ‘legal terms of art’” (Conlin at para 46). Having reviewed the

jurisprudence, we are not persuaded that premium and payment of premiums are legal terms of art

with the meaning asserted by the Respondents in the context of a ULP.

[126] In any event, we must also keep the fundamental point made at the outset of these reasons

squarely in mind; that is, ULPs are not just insurance contracts. They are both life insurance

contracts and investment contracts. The meaning of premium must be determined having regard

for that fundamental characteristic. More precisely stated, the question of whether a word or phrase

that is commonly understood as having a certain meaning in a life insurance contract has that same

meaning in a ULP depends on the text of the ULP. It is beyond dispute that the word premium is

used in relation to investment under both the exempt accounts and the side accounts in the ULPs.

Why then would questions as to the nature of the investment aspect or purpose be ignored in the

analysis of its meaning? As we see it, it would beg the question to interpret a ULP on the basis that

it is merely an insurance contract because that approach effectively assumes the correctness of the

meaning of premium propounded by one party without considering the validity of its arguments.

[127] It is clear that the Judge understood the significance of characterising ULPs as insurance

contracts. His characterisation of ULPs as “primarily insurance-type policies”, which was based

on opinion evidence relating to the genesis of the tax legislation that exempts income under such

policies from taxation on an accrual basis, was fundamental to his reasoning (Mosten Decision at

paras 94 and 133; Atwater Decision at para 105; and Ituna Decision at para 93). As he put it,

“[g]iven that the subject contract is clearly intended to access the accrual tax exemptions permitted

¹⁵The Court well knows that Mr. Zinkhan, who appeared as counsel in many appeals throughout his career, is a retired

lawyer and we do not suggest that he was not learned in the law of insurance. We simply observe there was no evidence

before the Judge to suggest that Mr. Zinkhan had the knowledge the Respondents would attribute to him.

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by the Income Tax Act, it logically follows that the policy falls within the category of being a

primarily insurance-type policy” (Mosten Decision at para 94; and Atwater Decision at para 105;

this text is not in the Ituna Decision).

[128] That characterisation was central not only to his conclusion as to the meaning of premium,

but to his decision—which, for reasons we have explained, we find to be incorrect—to apply the

three-stage analytical framework for the interpretation of commercial insurance contracts drawn

from Progressive Homes.

[129] For these reasons, we find the Judge erred when he interpreted the word premium and the

phrase payment of premiums as legal terms of art. As the meaning of premium was fundamental to

the Judge’s interpretation of the contested provisions of the ULPs, we will in each case disregard

those interpretations and interpret the contested provisions afresh. Moreover, we find that the

standard dictionary definitions of premium does not capture the full meaning of that word as it is

used in the context of two of the ULPs. We address these conclusions in terms of each ULP in

more detail below.

[130] We should note that the Judge, despite having found that the meaning of premium was

unambiguous, nonetheless chose to conduct the second stage analysis under Progressive Homes

just in case he had reached an incorrect conclusion about the absence of ambiguity in the ULPs.

At stage two, the Judge considered a narrower factual matrix in his interpretation of a standard

form contract than would be the case for a commercial contract. Drawing on the reasoning in

Ledcor and Sabean, the Judge found the focus of stage two of the Progressive Homes analysis in

the circumstances of these cases ought to be on: (a) the language of the contract within its permitted

context; (b) extant decisions relating to the standard form contract in question; (c) reliable legal or

other academic analysis of the form of standard form contract in question; (d) any relevant

legislation; and (e) what the ordinary person entering into such a contract would know, or should

be taken to know, about life insurance contracts.

[131] The Judge correctly ruled that he could not consider most of the extrinsic evidence the

parties had attempted to adduce before him in each application. He properly rejected much of it

because it was not objective evidence confined to facts known or reasonably capable of being

known by the original insured and the original insurer at the date of contract formation or because

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it was unrelated to the purpose of the ULP in question, the relationship it created, and the market

or industry in which it operated (Mosten Decision at paras 82–86; Atwater Decision at paras 93–

97; and Ituna Decision at paras 79–83). The Judge concluded that, for the most part, stage two of

the Progressive Homes framework involved a narrow matrix of relevant contextual evidence

(Mosten Decision at paras 136–137; Atwater Decision at paras 144–145; and Ituna Decision at

paras 133–134).

[132] However, the Judge had not been called upon to reconcile the Supreme Court jurisprudence

as we have done in these reasons. In all fairness to the Judge, that process has led us to reach

different conclusions on the law of contract interpretation than he did. We find that, in the

circumstances of each of the applications before the Judge, there was no meaningful factual matrix

specific to the original parties to the ULP that could assist with its interpretation. Axiomatically,

the Judge therefore erred when he found otherwise.

[133] As we have found no meaningful factual matrix exists, we must disregard the Judge’s

conclusions about the reasonable expectations of the parties. The Judge’s findings in this regard

are also subject to reversal because he concluded that his analysis of the meaning of premium in

the insurance context under stage one of Progressive Homes applied equally under stage two and

was indicative of the reasonable expectations of the original parties to the ULPs when entering

into those contracts (Mosten Decision at para 139; Atwater Decision at para 147; and Ituna

Decision at para 136).

[134] Further, when determining the reasonable expectations of the original parties to a ULP, the

Judge erroneously considered the subsequent conduct of those parties and of successor parties to

the ULP. The Judge also engaged with the “special principles” for interpreting insurance policies,

as addressed in the Hall Text at 241–255. An aspect of that analysis led him to consider the

Respondents’ argument that the Appellants’ interpretations of the ULPs would render them illegal

under s. 467 of the Insurance Companies Act, which states that “[an insurance] company shall not

accept deposits”. While the Judge rejected this argument, he found the provisions of the Insurance

Companies Act were contextual evidence he could consider at stage two of Progressive Homes

and that, while not determinative, they weighed against the Appellants’ interpretation of premium.

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[135] With all respect due to the Judge, who undertook a thorough and careful analysis of the

law and of each ULP, all of this analysis was irrelevant and immaterial to the issues of standard

form contract interpretation before him. As such, we may also disregard the Judge’s assessment of

the reasonable expectations of the parties to each of the ULPs when interpreting them afresh.

4.

The Sattva Approach and Insurance Law Principles

[136] For emphasis, we reiterate that the goal of a court when interpreting a contract is to

ascertain the consensus ad idem of the parties—their objective intention. To do that, the court must

correctly identify and apply the relevant principles of contract interpretation. The court must apply

those principles to the contested language, “giving the words used their ordinary and grammatical

meaning, consistent with the surrounding circumstances known to the parties at the time of

formation of the contract” (Sattva at para 47).

[137] As we have explained, it is our view that this approach applies in every case. Differences

in the analysis should be understood as resulting from the nature of the contract, the issues of

interpretation arising, and the surrounding circumstances that not only can but must be taken into

account, including whether the contract is a commercial contract between industry participants.

The court must, of course, take account of applicable substantive law, be it legislation that relates

to the contract (as explained above), other relevant substantive legislation or common law, and

law that has precedential value in relation to an issue of standard form contract interpretation.

[138] The Judge interpreted the ULPs on the basis that they were standard form insurance

contracts. The primary interpretive principle in insurance cases is almost invariably stated in terms

similar to this: Where, reading the contract as a whole, the language of the contract is

unambiguous, then the court should give effect to its clear language. See: Sabean at para 12;

Ledcor at para 49; Progressive Homes at para 22; Gibbens at paras 20–28; Non-Marine

Underwriters, Lloyd’s of London v Scalera, 2000 SCC 24 at para 71, [2000] 1 SCR 551 [Scalera];

Brissette Estate v Westbury Life Insurance Co., [1992] 3 SCR 87 at 92; and Parsons v The

Standard Fire Insurance Co. (1880), 5 SCR 233. In Sabean and Ledcor, both of which were

concerned with commercial fortuity insurance contracts, the Supreme Court identified a three-

stage analytical framework, drawn from Progressive Homes, with the primary interpretive

principle being employed at stage one:

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(a)

(b)

Stage One – Where the language of the contract is unambiguous, the court should

give effect to that clear language, reading the contract as a whole (Progressive

Homes at para 22; and Scalera at para 71).

Stage Two – Where the language of the contract is ambiguous, the court should

employ the general rules of contract construction to resolve the ambiguity

(Progressive Homes at para 23; Scalera at para 71; Gibbens at paras 26–27; and

Consolidated‑Bathurst at 900–902).

(c)

Stage Three – Where the language of the contract remains ambiguous after Stage

Two, the court should apply the contra proferentem rule and construe the contract

against its drafter (Progressive Homes at para 24; Scalera at para 70; Gibbens at

para 25; and Consolidated-Bathurst at 899–901).

[139] The Judge applied this framework to the issues identified by the parties. The question is

whether by doing so he correctly identified the applicable principles of contract interpretation. The

answer to that question turns on the nature of the ULPs and the issues of standard form contract

interpretation that he had to decide.

C.

Application of the Law in Each Appeal

1. CACV3407 – Mosten v Manulife

a. Relief Sought at the Court of Queen’s Bench

[140] On November 23, 2016, Mosten applied for the following declarations pursuant to s. 11 of

The Queen’s Bench Act, 1998 under an originating application filed pursuant to Rule 3-49 of The

Queen’s Bench Rules:

1.

The applicant, Mosten Investment LP (“Mosten”), seeks:

(a) An order determining and declaring that Mosten has the following rights

and privileges under Architect Classic IIe universal life insurance contract, Policy

Number F 2239527 (the “Contract”):

(i)

that Mosten may make additional premium payments to the

Contract in such amounts and at such times as Mosten determines;

(ii) that there is no limit on the amount that can be held by or for

Mosten in the Carrier Fund forming part of the Contract; and

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(iii)

that the respondent, The Manufacturers Life Insurance Company

operating as Manulife Financial (“Manulife”) is not entitled to refund

premiums or funds held in the Contract, either from the Investment

Accounts or the Carrier Fund, in the absence of a request by Mosten[.]

[141] On October 6, 2017, Mosten filed a second originating application [Second Mosten

Application], which was amended on August 2, 2018, to claim the following relief:

2.

The Applicant, Mosten Investment LP (“Mosten”), seeks:

(a) An order determining and declaring that Mosten has the following rights

and privileges under Architect Classic IIe universal life insurance contract, Policy

Number F 2239527 (the “Contract”):

(i)

That Mosten is entitled to have the Investment Bonus payable

under the Contract calculated and credited on November 18 of each

calendar year;

(ii)

That all funds paid to Manulife under the Contract are and shall

be held in the Investment Accounts that comprise the Fund Value under

the Contract and that Manulife is not entitled to transfer any funds, whether

currently held or subsequently paid under the Contract, to the Carrier

Fund;

(iii)

With no balance in the Carrier Fund, that Mosten is entitled to

have the Investment Bonus payable under the Contract calculated on the

Fund Value which shall represent all funds under the Contract;

(iv)

Manulife shall not be entitled to effect Additional Sum Insured

and, as such, shall not be entitled to increase the amount of life insurance

coverage under the Contract by up to eight percent each year (or by any

percent) unless expressly instructed to do so by Mosten; and

(v)

That the Exempt Status and Carrier Fund provisions of the

Contract cease to have any application to the Contract and that the

Contract otherwise continues unaffected.

[142] By an order dated April 12, 2018, the Judge consolidated the two proceedings under the

first, identifying the consolidated proceeding as QB 1597 of 2016.

[143] In the Mosten Decision, the Judge declined to grant the declaratory relief sought under the

Second Mosten Application. Although Mosten initially appealed against the whole of the Judge’s

decision to decline granting that relief, it abandoned all but its appeal in respect of the declaratory

relief it had requested concerning the “Investment Bonus” provision of the de Bruin ULP.

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b.

Relief Denied by the Judge

[144] Before turning to the issue of whether the Judge correctly identified and applied the

principles of contract interpretation, we will first deal with the question as to whether the Judge

erred in the exercise of his discretion by deciding not to grant the declaratory relief requested by

Mosten under the Second Mosten Application. This question does not turn on the interpretation of

the de Bruin ULP. Whether the Judge erred in that respect need not be decided to deal with this

question and the answer to it neither supports nor impugns the Judge’s interpretation of the

de Bruin ULP. Rather, it is strictly a matter of examining the Judge’s reasons under the standard

of appellate review of discretionary judicial decisions.

[145] The granting of declaratory relief by a judge is a discretionary remedy. In the Mosten

Decision, the Judge helpfully observed that Lazar Sarna in The Law of Declaratory Judgments,

4th ed (Toronto: Thomson Reuters, 2016) at 22–23 [Sarna Text], described the judicial discretion

associated with declaratory relief in these terms:

… the court is subject to few restraints in deciding whether or not to issue relief, the main

and possibly only restraint being that judicial discretion cannot be used to assume

jurisdiction where none exists. For example, the court cannot grant a declaration upon

proceedings which have been presented by way of motion instead of action as required by

statute. It is as well a question of law and not discretion that no declaration issue where the

fundamental elements of a proceeding are absent or irregular, such as service upon the

parties and jurisdiction to deal with the subject‑matter, and where a statutory privative

clause or the private agreement of the parties prohibits judicial relief. The power to issue

declarations without consequential relief does not enable the court to create its own powers;

but within the apparent scope of the declaratory jurisdiction judicial discretion is the sole

determinant of the life of the recourse, even in the face of strong indication that the

applicant has or has not standing or legal interest to sue. However, the discretionary power

of the court to grant declaratory relief should be exercised with circumspection, but not

with suspicion.

(Footnotes omitted)

[146] The Judge exercised his discretion to deny Mosten the relief it sought under the Second

Mosten Application in two ways. First, he declined jurisdiction insofar as it related to matters that

required the interpretation of the Tax Rules or their application in a context necessary to grant the

declaratory relief sought. Second, he ruled that the Second Mosten Application was premature

because the issues it raised had not been tested with Canada Revenue Agency [CRA]. While

Mosten has entirely abandoned its appeal against the first of these discretionary decisions, the

Judge’s reasoning in that regard remains relevant to the appellate examination of the second.

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[147] As to the first of these decisions, in respect of the relief sought that required an

interpretation of the Tax Rules as applied to hypothetical scenarios, the Judge wrote:

[191] While this Court has jurisdiction to interpret and apply the provisions of the Income

Tax Act as those issues arise in course of proceedings before it, the Tax Court of Canada,

also a superior court of record, has exclusive jurisdiction over a wide variety of tax‑related

matters, including, as provided in s. 12(1) of the Tax Court of Canada Act, RSC 1985,

c T‑2, the “exclusive original jurisdiction to hear and determine references and appeals to

the Court on matters arising under ... the Income Tax Act ….”

[192] Tax returns of taxpayers are examined by the Minister of National Revenue and

assessed with Notices of Assessment sent to the taxpayer. The assessments are binding and

valid unless they are varied or vacated through an objection or appeal to the Tax Court.

(Sections 152 and 169 of the Income Tax Act.) Tax assessment references and appeals are

matters within the exclusive jurisdiction of the Tax Court.

[193] Mosten is a limited partnership. As such, it is not itself subject to taxation. Any

taxable income arising under the subject policies flows through to and become the income

of the limited partners and is there taxed. See Lyle Hepburn, Limited Partnerships,

loose‑leaf (2019‑Rel 1) (Toronto: Thomson Reuters, 2018) at Chapter 5 (1.A.). As such,

Manulife takes the position that Mosten “has no real interest” in having the Policy’s

investment income declared taxable in this proceeding. The status of the Policy as taxable

or tax‑exempt impacts the limited partners, not the limited partnership, Mosten. When

deciding whether or not to exercise the discretion this Court has, this is a significant

consideration to be borne in mind.

[148] After referring to Sheila Holmes Spousal Trust v Canada (Attorney General), 2013 ABQB

489, 568 AR 364, Scotia Mortgage Corporation v Gladu, 2017 BCSC 1182, and Cook v Canada

(Attorney General) (1998), 164 Sask R 246 (QB), as well as the Sarna Text at page 92, the Judge

concluded he had the discretion to defer to the concurrent jurisdiction of the Tax Court of Canada

by reason of its expertise and focus on the Tax Rules. He found the declarations sought would

directly impact CRA’s assessment of Mosten’s tax filings and, if he were to grant the relief sought,

it would indirectly affect the tax assessments of all other taxpayers who were insured under the

standard form de Bruin ULP (Mosten Decision at para 200). The Judge summarised his reasoning

and his decision in this regard as follows:

[201] I find the logic of Sheila Holmes, Gladu and Cook compelling and applicable to

the Mosten 2 situation. Given the Tax Court’s jurisdiction and the fact that it is a specialty

court with exclusive income tax responsibilities and expertise beyond those of this Court,

it is appropriate that it be the Court to decide the income tax issues raised by Mosten in

Mosten 2.

[202] The application in Mosten 2 is dismissed, as a discretionary decision to decline

jurisdiction. I am of the view that the declarations sought could impact on the integrity and

efficiency of the specific system of tax assessment and appeal procedures established by

Parliament. As such, it is appropriate to defer to the jurisdiction of the Tax Court of Canada.

[203] Influencing me are the following considerations:

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(a)

The requested relief, and the interpretive grounds on which it is based,

would put into question more than 20 years of apparent acceptance by CRA of the

exempt tests performed by Manulife and other life insurers issuing universal life

insurance policies.

(b)

There has been no evidence presented that the CRA has ever taken the

position that similar Manulife policies or, indeed, any other universal life insurance

policies, are treated as not exempt based on:

(i)

issues relating to the proper date to conduct exempt tests;

(ii)

making adjusting entries with retroactive effect to maintain

exempt status; or

(iii)

that taxpayers have been assessed for taxes owing on the basis that

their policy has failed to maintain tax‑exempt status.

(c)

Mosten’s position is based on complex and technical interpretations of a

complex regulatory regime within the factual context relating to one specific

insurance policy.

(d)

The requested relief and basis for that relief involves interpretation of

legislation with significant and broad‑ranging public policy considerations without

the CRA or other representatives of the Crown or representatives of the taxpaying

public having been given an opportunity to make submissions to this Court.

(e)

An interpretation of the Income Tax Act and the Income Tax Regulations,

based only on the facts of this case and arguments presented here would have

potential impact on tens of thousands or more individuals who have filed their tax

returns on the basis that their policies meet the exempt status criteria[.]

(f)

If I were to accept Mosten’s interpretive arguments, then persons with

universal life insurance policies, the same or similar to the subject policy, would

be left in a situation where the accrual tax‑exempt basis on which they have filed

their income tax returns in the past and into the future may no longer be valid

unless and until my interpretation decision was overturned by a higher court.

(g)

Were the CRA to not agree with my interpretation and not make taxpayer

assessments consistent with it, there would effectively be different treatment for

different taxpayers.

(h)

The court with the express and specialized jurisdiction to interpret the

Income Tax Act and the Income Tax Regulations is the Tax Court. Given the

potential impact of a statutory interpretation on tens of thousands of taxpayers and

the lack of the CRA’s participation here, coupled with this Court’s inferior

expertise, it is preferable to defer to the Tax Court of Canada.

[204] My discretionary decision to decline jurisdiction leaves it open to Mosten to pursue

either directly, or with the cooperation of one of its limited partners, its Mosten 2 position

in applications to the Tax Court. I so state, recognizing it is highly unlikely that other

taxpayers insured under the same form of policy as Mosten holds would wish to challenge

or appeal the CRA’s assessment on the grounds that their policy did not qualify as tax

exempt and, therefore, they should be assessed more tax than they were. This contributes

to my view that Mosten’s application for declaratory relief in Mosten 2 may be described

as premature.

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[205] On the basis of the evidence available to me, the interpretive position being

advanced by Mosten is singular within the Canadian experience with the exception of its

ally Atwater. Unless and until the CRA, which has the responsibility to, in the first instance,

administer the Income Tax Act and the policies applicable thereto, or the Tax Court of

Canada makes a determination as to whether the subject policy or any other universal life

insurance policy is or is not in compliance with the exempt policy criteria of the Income

Tax Act, it ill behooves Mosten to advance the complex interpretive argument it here

makes. In my opinion they should, in the first instance, have taken this interpretation and

assessment matter to the CRA for a decision and then appealed that decision if they saw fit

to the Tax Court of Canada.

[206] In the circumstances of this case, I have concerns, independent of the reasons given

above, that are grounded in the general law of declaratory relief, as to whether or not it is

appropriate in the circumstances of this case to grant the declaratory relief sought. To use

a biology metaphor, there is a cross‑pollination of concerns, which supports the decision

to decline jurisdiction and not grant the declaratory relief sought for the reasons above

given.

[149] As can be seen, the Judge carefully and thoroughly considered whether he should intercede

in an arena he found was more properly that of the Tax Court of Canada. His reasoning speaks for

itself and ably withstands the standard of appellate review of discretionary decisions.

[150] The Judge’s reasons for the second of his discretionary decisions to decline granting the

relief sought by Mosten are brief but to the point. His reasoning in this regard, however, draws

heavily on his earlier reasons for deferring to the Tax Court of Canada as well as the Sarna Text.

He wrote (Mosten Decision):

[207] In The Law of Declaratory Judgment, the author, at page 21, says:

… At least one simple “rule” has received wide and basic acceptance: the

discretion of the court is almost unlimited and should not be continually

used to deny declaratory relief. …

At page 22 under the heading of “Justification”, the author says the following:

The justification for exercising discretion to grant or not to grant

declaratory relief is based on variegated and non‑exhaustive factors:

When an action is brought by a plaintiff seeking a

declaration, the court may deny relief on several

discretionary grounds, including standing, delay,

mootness, the availability of more appropriate

procedures, the absence of affected parties, the theoretical

or hypothetical nature of the issue, the inadequacy of the

arguments presented, or the fact that the declaration

sought is of merely academic importance and has no

utility. I do not suggest that this list is exhaustive.

What it does reveal is that the court is subject to few restraints in deciding

whether or not to issue relief, the main and possibly only restraint being

that judicial discretion cannot be used to assume jurisdiction where none

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exists. For example, the court cannot grant a declaration upon proceedings

which have been presented by way of motion instead of action as required

by statute. It is as well a question of law and not discretion that no

declaration issue where the fundamental elements of a proceeding are

absent or irregular, such as service upon the parties and jurisdiction to deal

with the subject‑matter, and where a statutory private clause or the private

agreement of the parties prohibits judicial relief. The power to issue

declarations without consequential relief does not enable the court to

create its own powers; but within the apparent scope of the declaratory

jurisdiction judicial discretion is the sole determinant of the life of the

recourse, even in the face of strong indication that the applicant has or has

not standing or legal interest to sue. However, the discretionary power of

the court to grant declaratory relief should be exercised with

circumspection, but not with suspicion.

[208] Among the considerations a court needs to weigh when deciding whether or not to

grant the declarations sought (even when it is not encumbered by the issue of the

declaration sought encroaching on being consequential relief) are:

(a)

(b)

the availability of more appropriate alternate procedures; and

the absence of affected parties.

[209] On the topic of the availability of alternate procedures, in The Law of Declaratory

Judgments, the author says at page 53:

…To determine that a litigant should have the right to choose a declaratory

route over all other equally suitable routes is in some manner to permit the

use of a general tool for a specialized function and ultimately to permit the

abandonment of the special tools available.

I view Mosten 2 as essentially doing that.

[210] Mosten 2 is based upon Mosten’s position that their interpretation of both the

contract and the Income Tax Act and the Income Tax Regulations are the correct ones. It

resorts to seeking declaratory relief from this Court without involving the CRA for a

determination of its position. As the taxing authority, the CRA’s position and interpretation

of the legislation are of significant interest to the court.

[211] It was open to Mosten to raise the issue with the CRA and by doing so obtain an

assessment one way or the other; which could then have been subject to appeal or other

proceedings in either the Tax Court or Federal Court of Appeal. In my opinion, the

application in Mosten 2 has, at a minimum, a serious problem of being premature since no

position has been taken thereon by the responsible taxing and regulatory authority.

[212] For these reasons, in conjunction with the more detailed and specific Income Tax

Act considerations outlined above, I decline jurisdiction to grant the declaratory relief

sought in Mosten 2. This declining of jurisdiction shall in no way be interpreted as limiting

Mosten’s rights to pursue alternative remedies.

[151] Given the standard of appellate review for discretionary decisions, we see no basis to

interfere with the Judge’s decision not to grant the relief sought under the Second Mosten

Application. We agree with the Judge that the relief sought was in respect of hypothetical

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scenarios. We find the Judge was well within his discretion to decline to grant it on that basis

alone.

c.

The de Bruin ULP

[152] For purposes of interpretation, it is important to understand that the word policy, as it is

used throughout the contract document that sets forth the provisions governing the relationship

between the parties, is the name the original parties gave that document (de Bruin ULP at 1.1).

The complete contract between Dr. de Bruin and Manulife consists of “this policy, the application

for this policy, any application for reinstatement of this policy and any written policy amendments

agreed upon in writing after this policy has been issued” (de Bruin ULP at 1.1). In other words,

references to “this policy” or “Your policy” in the de Bruin ULP connote nothing more than a

reference to the policy document itself. To be clear, when referencing the de Bruin ULP in these

reasons, we are referring to the complete contract. The contract text reproduced below is cited to

the de Bruin ULP, referencing the page numbers of the policy document.

[153] Given that the meaning of premium is central to the issues of interpretation in this appeal,

we begin by emphasising that the contract does not define the word. As such, we must ascertain

its contractual meaning from the text of the contract through the application of the canons of

construction. Although often referred to as principles, rules or maxims, canons of construction “are

not rules in any meaningful sense” but rather are “guidelines or aids to interpretation” (McCamus

Text at 819). Under the Sattva approach, an interpreting court should first employ those canons of

construction that aid in the understanding of the text of the contract followed by those canons that

resolve interpretive ambiguity.

[154] The principal interpretive canon, which guides our analysis, states that a contract must be

construed as a harmonious whole. In Tercon, Cromwell J. identified the “key principle” of contract

interpretation as being “that the words of one provision must not be read in isolation but should be

considered in harmony with the rest of the contract” (at para 64). In BG Checo, La Forest J. and

McLachlin J. (as she then was) said (at 23–24):

It is a cardinal rule of the construction of contracts that the various parts of the contract are

to be interpreted in the context of the intentions of the parties as evident from the contract

as a whole...Where there are apparent inconsistencies between different terms of a contract,

the court should attempt to find an interpretation which can reasonably give meaning to

each of the terms in question. …

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[155] In the McCamus Text (at 819–821), the author describes the Supreme Court of Canada as

offering the following additional guidance to an interpreting court on the application of this

principal canon:

(a)

Individual contractual terms are to be construed in the light of their relationship to

other parts of the contract and the overall objectives of the contract (BG Checo).

(b)

Each term must be interpreted, to the extent that it may bear the appropriate

meaning, harmoniously with the other terms of the contract (McClelland & Stewart

Ltd. v Mutual Life, [1981] 2 SCR 6).

(c)

A contractual term that appears to have a plain and ordinary meaning may, when

read in the context of the entire contract, be rendered ambiguous (Hillis Oil & Sales

Ltd. v Wynn’s Canada Ltd., [1986] 1 SCR 57 at 66).

d.

Interpretation of the de Bruin ULP

i. Premium

[156] Like the Judge and the parties, we find that ascertaining the meaning of the word premium,

as it is used in the de Bruin ULP, is key to the issues of standard form contract interpretation arising

in this appeal and is, therefore, fundamental to answering Mosten’s prayer for relief. The Judge

set out an industry meaning of the word premium. For the reasons given above, that industry

meaning is of no assistance in interpreting the de Bruin ULP because it is neither a contract

between industry participants nor a commercial contract, either of which would call for an

interpreting court to consider the broader factual matrix available where those factors exist.

[157] Dictionary meanings can be of assistance in determining the ordinary meaning of contract

text. The word premium has the following dictionary definitions, among others:

premium /’pri:miƏm / n. & adj. ● n. 1 an amount to be paid for a contract of insurance. 2

a a sum added to interest, wages, etc.; a bonus. b a sum added to ordinary charges. 3 a

reward or prize. ● attrib. adj. (of a commodity) of best quality and therefore more

expensive. □ at a premium 1 highly valued; above the usual or nominal price. 2 scarce

and in demand. put a premium on 1 provide or act as an incentive to. 2 attach special

value to. [Latin praemium booty, reward (as PRAE-, emere buy, take)]

The Canadian Oxford Dictionary (Toronto: Oxford University Press,

1998)

Page 64

premium n. 1. The single or periodical payment to be made for insurance and includes

dues and assessments. 2. Any goods, services, rebate or other benefit offered or given at

the time of the sale of goods or the lease of services, which may be granted or obtained

immediately or in a deferred manner, from the merchant, manufacturer or advertiser, either

gratuitously or on conditions explicitly or implicitly presented as advantageous. 3. Where

used in relation to a commodity futures option, means the consideration for which the

option is acquired.

The Dictionary of Canadian Law, 4th ed (Toronto: Carswell, 2011)

[158] It is our view that the word premium is used in the de Bruin ULP in a manner that is broader

in meaning than the relevant dictionary definition of an amount paid for insurance. We refer first

to the provisions that are set out under the heading Explanation of Contract in the ULP:

You have purchased a universal life insurance policy. Because Your policy is designed to

be flexible, it can also seem very complex. For Your convenience, We have divided the

policy into sections.

 An Index of defined terms can be found at the back of the policy. These terms are

capitalized when referred to in the policy. Please refer to these meanings as You review

the policy.

 Section 1 provides general information concerning Your policy. This section contains

a Table of Contents, which lists where each provision may be found. The Schedule on

pages 1.3 and 1.4 contains values such as the initial planned premium, Premium

Allocation and amounts payable for each type of coverage.

 Section 2 provides Introductory Definitions.

 Section 3 contains the Life Insurance Provisions. We will pay the Death Benefit to the

Beneficiary if the Insured dies while this policy is in force. Note the limitation for

Suicide and Self-Inflicted Injury. The Exempt Status provision describes the action We

will take to maintain the policy’s tax exempt status. This section also describes the

Proof of Claim required when death occurs.

 Section 4 contains the Cost of Insurance Guarantee.

 Section 5 relates to the Fund Value, which is the money held on deposit within the

policy on Your behalf. Your premium payments are directed towards one or more

Investment Accounts. Monthly Deductions are subtracted from these accounts. Policy

Loans may be available or You may make Cash Withdrawals, subject to Withdrawal

Charges and/or Market Value Adjustment.

 Section 6 contains General Provisions, including the very important Lapse and

Disclosure provisions.

 Any riders You may have purchased would be found in Section 7.

 The appendices contain the Cost of Insurance rates.

We recommend that You review the provisions of this policy and ask Your insurance

advisor for any explanation or clarification needed.

(de Bruin ULP at 1.5, emphasis added)

Page 65

While the Explanation of Contract provisions are merely descriptive of the general content of the

de Bruin ULP, and are not its operative provisions, the section is nonetheless a summary indication

of what the parties intended to accomplish under the contract.

[159] In that regard, s. 5 of the de Bruin ULP is said to pertain to the Fund Value, where that

term itself is summarised as “the money held on deposit within the policy on Your behalf”. This

is a neutral description as it could pertain to either or both of the insurance and investment aspects

of the contract. The summary next states that “premium payments” will be directed towards one

or more Investment Accounts, which term is later defined as referring to a single exempt account

under which different investment products are made available. The fact that “Policy Loans may be

available or You may make Cash Withdrawals, subject to Withdrawal Charges and/or Market

Value Adjustment” indicates that deposits held within the exempt account are treated as

fluctuating, withdrawable and securable investments or assets, which suggests that premiums are

not earmarked only for payment of the cost of the life insurance coverage or to be invested for that

purpose.

[160] Given the contractual framework described under the heading Explanation of Contract and

the limits imposed by the provisions relating to the exemption of accrued income from taxation,

the word premium or the term premium payments sometimes had to be and is used in the de Bruin

ULP in a manner that refers only to payments relating to its insurance aspect. However, where this

occurs, the word premium is often preceded by qualifying language that serves to narrow its

broader meaning or it is part of a defined term having a specific insurance purpose, such as in the

case of Architect Minimum Premium or Total Annual Minimum Premium. In other cases, the

undefined terms insurance charges or rates are also used where the word premium, under its

dictionary definition, might have served. Although there are many examples of this, we note the

following:

Architect Minimum Premium

The Architect Minimum Premium is the sum of the Annual Minimum Premium(s) for the

Architect coverage(s) plus twelve times the monthly administration fee shown in the

Schedule. Annual Minimum Premium is a factor of the Cost of Insurance rate multiplied

by the Sum Insured. The Architect Minimum Premium increases if the Sum Insured is

increased.

Page 66

Total Annual Minimum Premium

The Total Annual Minimum Premium is shown in the Schedule. The Total Annual

Minimum Premium changes if a policy change is made that affects the Monthly Deduction,

such as a request to increase or decrease the Sum Insured. The cumulative Total Annual

Minimum Premium is the sum of the Total Annual Minimum Premiums for each year

(including fractions) that has elapsed since the Policy Date.

(de Bruin ULP at 2.1)

Cost of Insurance Guarantee

Cost of Insurance

Cost of Insurance is the amount We charge You for the Basic Amount at Risk. Cost of

Insurance is included in the Monthly Deduction. The following Cost of Insurance options

are available. The option You have chosen is shown in the Schedule. The Cost of Insurance

option may not be changed after the Policy Date except as described below in the Term

Cost Switch provision.

If the Insurance Age is less than 20, refer to the Juvenile Cost of Insurance provision.

Otherwise, the Cost of Insurance is determined as follows.

1.

Level Guaranteed Cost of Insurance

Level Guaranteed Cost of Insurance rates are shown in Appendix A. With this

option, the Cost of Insurance rate that applies to each Architect coverage shown in

the Schedule will not change. We use the rate shown in Appendix A that

corresponds to the Insurance Age, Smoker Status, Sum Insured and sex.

2.

Current Cost of Insurance

The maximum rates for the Current Cost of Insurance are shown in Appendix B.

This option uses current cost of insurance assumptions, which results in lower

initial insurance charges. The Cost of Insurance for each Architect coverage shown

in the Schedule is based on the rate shown in Appendix B that corresponds to the

Insurance Age, Smoker Status, Sum Insured and sex.

The initial cost of insurance rates are 80% of the guaranteed maximum rates shown

in Appendix B. These lower rates remain in effect for the first five Policy Years.

On the fifth Policy Anniversary and every year thereafter, We will review Our

insurance assumptions. As a result of this review, the Current Cost of Insurance

rates may increase or decrease. Any change in the rates will apply to all persons of

the Insured’s Insurance Age, Smoker Status and sex. We will advise You when a

change occurs.

3.

Term Guaranteed Cost of Insurance

Term Guaranteed Cost of Insurance rates are shown in Appendix C. For each

Architect coverage shown in the Schedule, for the first 15 years, We use the rate

shown in Appendix C that corresponds to the Insurance Age, Smoker, [sic] Status,

Sum Insured, sex and the number of years since the coverage became effective.

After 15 years, We use the rate that corresponds to the Attained Insurance Age.

The monthly rates are one-twelfth of the annual rates shown.

After the Attained Insurance Age reaches 100, the cost of insurance is zero.

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Juvenile Cost of Insurance Guarantee

The Juvenile Cost of Insurance Guarantee applies if the Insurance Age is less than 20.

The Smoker Status is considered juvenile while the Attained Insurance Age is less than 20.

This means the initial rates do not depend on the Smoker Status. After age 20, the Smoker

Status is changed to smoker. If We then receive satisfactory evidence that the insured is a

non-smoker, We will use the applicable non-smoker rates to calculate the Monthly

Deduction.

(de Bruin ULP at 4.1)

Monthly Deduction

Subject to the Cost of Insurance Guarantee, We will calculate a Monthly Deduction equal

to the sum of the following beginning on the Policy Date and once each month thereafter:

(1) the monthly administration fee shown in the Schedule;

(2) the monthly Cost of Insurance, which is equal to the Basic Amount at Risk multiplied

by the monthly Cost of Insurance rate divided by 1,000 for each Architect coverage shown

in the Schedule;

(3) any Additional Sum Insured multiplied by 90% of the rate shown in Appendix C for a

Sum Insured less than $100,000 that corresponds to the Attained Insurance Age, Smoker

Status and sex, divided by twelve; and

(4) the total of the monthly costs for any riders or substandard extras shown in the Schedule,

where the initial monthly cost is one-twelfth of the respective annual premium. The cost

for some riders may change as described in the provisions of the rider.

(de Bruin ULP at 5.3)

[161] However, the undefined word premium is itself more often used in a way that could

encompass any payment made to the insurer under the contract, not just those required to maintain

the life insurance coverage. This is particularly the case in the provisions that address the

investment of funds under the contract. While also used in association with qualifying descriptors,

such as Net Premium, the word premium itself maintains a broad, non-specific meaning, for

example:

Fund Value Provisions

Net Premiums

The Net Premium is the premium received less any applicable Federal and Provincial sales

tax, premium tax and any other Federal and Provincial levy or similar charge on premiums

paid by You.

Premium Allocation

Premium Allocation is the portion of the Net Premium directed toward a particular

Investment Account. You can change the Premium Allocation from time to time. The

minimum portion that can be allocated to an Investment Account is ten percent of the Net

Premium. The Advisor Fund is an automatic allocation of 100% of the Net Premium.

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Investment Account

Investment Accounts are savings pools within Our general funds to which Your premiums

are directed and from which charges are deducted. They provide different levels of risk,

liquidity and expected rates of return. While Your policy is in force, We will offer various

Investment Accounts which may change from time to time. We reserve the right to

discontinue at any time any Investment Account except the Guaranteed Interest Accounts

which We guarantee will always be available to You. When an Investment Account is no

longer being offered, We reserve the right to transfer the Account Value to another

Investment Account then being offered by Us. There will be no charge when We make

such a transfer. Any such transfer will only take effect after We have advised You that a

transfer is occurring.

(de Bruin ULP at 5.1, emphasis added)

[162] Indeed, premium is sometimes used within the same paragraph of the de Bruin ULP in an

insurance context and as a non-specific reference to payments made by the insured to the insurer,

as in the following example:

Payment of Premiums

The initial planned premium, as shown in the Schedule, is due on the Policy Date and must

be paid before any coverage becomes effective. You may then pay premiums annually, or

by a monthly automatic payment system. You may make additional premium payments at

any time while this policy is in force. We will not refuse any premium payment required

to prevent the policy from terminating as described in the Lapse provision.

All premiums after the first will be payable on premium due dates determined from the

Policy Date and the premium frequency. Premiums are payable at Our head office or any

Canadian chartered bank. You must advice Us in writing of a change in address for

premium notification.

(de Bruin ULP at 6.2)

ii.

Side Account

[163] Being a tax-driven vehicle that is part life insurance contract and part investment contract,

the de Bruin ULP is understandably structured around the exempt account (Investment Account)

and the side account (Carrier Fund). As Manulife asserts, the contractual references to premium

cannot be interpreted properly without taking into account the provisions relating to the side

account. On this basis, Manulife asserts that the word premium must be interpreted as a reference

to amounts paid by the insured to maintain the life insurance coverage. Under its interpretation,

premium would include the income accrued on sums invested under the de Bruin ULP that are

used to pay the future cost of the insurance coverage. This interpretation rests on the provisions of

the de Bruin ULP that address transfers between the exempt account and the side account:

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Exempt Status

Exempt Status means this policy is exempt from accrual taxation under the provisions of

the Income Tax Act of Canada in effect on the Policy Date. We guarantee to take the

required action to maintain the Exempt Status. An exempt test is done each Policy

Anniversary. Should the definition of an exempt policy change, We will administer the

next exempt test under the terms of the amendment.

When an adjustment is required to maintain the Exempt Status of this policy, We will take

action in the following order:

1.

We will increase the amount of life insurance coverage by up to eight percent each

year, as permitted under the current Income Tax Act. Any such increase is referred

to in this contract as Additional Sum Insured. This option only applies if the

Insured is living when the exempt test is done. The Additional Sum Insured is

effective for one year and the amount will be recalculated on the next Policy

Anniversary.

2.

We will transfer the excess funds to the Carrier Fund, as described below.

Carrier Fund

The Carrier Fund investment return is a special account that holds funds in excess of the

maximum allowable tax exempt value calculated by the annual exempt test. During the

first Policy Year, We will also credit to the Carrier Fund any premiums that exceed the

maximum premium determined by Us on the Policy Date. You may base the Carrier Fund

on any one of the available Investment Accounts. The Money Market Account will be the

default basis. You may change the basis for the Carrier Fund up to twice each year at no

charge. However, a Market Value Adjustment may apply if you change the Carrier Fund

from a Guaranteed Interest Account basis.

The Carrier Fund investment return is as described in the corresponding Investment

Account section, subject to the same guarantees. However, the Carrier Fund will not be

entitled to any Investment Bonus. Account Deductions will not be made from the Carrier

Fund. The Carrier Fund is not included in the calculation of the Fund Value. The Carrier

Fund will be paid to You or Your estate when the contract terminates.

The investment income of the Carrier Fund is subject to annual accrual taxation.

Cash Withdrawals may be made from the Carrier Fund, subject to Market Value

Adjustment if the Carrier Fund has a Guaranteed Interest Account basis. Withdrawal

Charges do not apply.

Each year, the exempt test is redone as described in the Exempt Status provision. Transfers

are made from or to the Carrier Fund as required to keep the maximum amount in the tax

exempt Investment Accounts. Transfers to the Carrier Fund will be subtracted from the

Investment Accounts in proportion to the Account Values. Transfers from the Carrier Fund

will be in proportion to the Premium Allocation. Transfer fees will not apply. Market Value

Adjustment may apply to transfers involving a Guaranteed Interest Account.

(de Bruin ULP at 3.2–3.3)

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iii.

Premium Refunds

[164] In addition to the foregoing, the declaratory relief sought by Mosten raises an issue of

standard form contract interpretation as to whether the insurer under the de Bruin ULP is entitled

to refund (or to reject) amounts held on behalf of an insured in the absence of a request from the

insured to do so.

[165] The only refund-related provision of the de Bruin ULP pertains to Cash Withdrawals and

it reads as follows:

Cash Withdrawal

You may request a Cash Withdrawal at any time the Net Cash Value is greater than

$1,000.The minimum amount that can be withdrawn is $500 and the minimum remaining

Net Cash Value must be $500.The effective date of withdrawal will be within five business

days after Your written request is received at Our head office. Cash Withdrawals will first

be made from the Carrier Fund if applicable. You must indicate the Investment Account(s)

from which the remaining funds are to be withdrawn. Otherwise, We will make

withdrawals in proportion to the current Account Values. Each Account Value will be

reduced by the money withdrawn by You plus the proportionate Withdrawal Charge. The

Market Value Adjustment will also apply if funds are withdrawn from a Guaranteed

Interest Account. An administrative charge will be deducted from each Cash Withdrawal

except that this charge will be waived for the first two withdrawals in each Policy Year.

For withdrawals of amounts over $200,000, We reserve the right to delay the processing

by up to 30 days.

We will make withdrawals from the Advisor Fund in proportion to the current Account

Values.

The Basic Amount at Risk immediately after a withdrawal will equal the Basic Amount at

Risk immediately before the withdrawal. This means that if the Death Benefit Option is

“Sum Insured”, the Sum Insured will be reduced by the amount withdrawn from the Fund

Value.

(de Bruin ULP at 5.5)

[166] As is evident, the insured has a contractual right, exercisable in writing, to request a refund

of amounts paid to the insurer, as well as accrued investment returns on those amounts. The

provision further contemplates that the amount of such a request for withdrawal could exceed

$200,000. Refunds are withdrawn first from the side account and, in the absence of instructions

from the insured, are taken rateably from each of the investment products held by the insured.

However, the de Bruin ULP says nothing about the insurer refunding amounts on its own initiative.

Page 71

[167] On the other hand, under the Payment of Premiums provision, the insurer covenants that

“We will not refuse any premium payment required to prevent the policy from terminating as

described in the Lapse provision” (at 6.2). The Lapse provision reads:

Lapse

This policy will terminate without value after a grace period of 120 days if either of the

following lapse conditions is met.

(1)

On any of the first five Policy Anniversaries, lapse will occur if the total premium

paid less any Cash Withdrawals is less than the cumulative Total Annual Minimum

Premium.

(2)

Lapse will occur on any date on which the Net Fund Value is equal to or less than

zero.

The policy will continue in force during the grace period. If sufficient premium is paid

during the grace period, the coverage will remain in force.

(de Bruin ULP at 6.1)

[168] For reference, the definition for the term Total Annual Minimum Premium is set out earlier

in these reasons at paragraph 160 (de Bruin ULP at 2.1).

e.

Interpretation as a Harmonious Whole

[169] We have already observed that the provisions cited above do not use the word premium in

a way that is expressly limited to the insurance aspects of the de Bruin ULP, except where the

word premium is itself part of a term defined in the contract, such as Total Annual Minimum

Premium. As a more general statement, the de Bruin ULP contains no language that expressly

purports to confine the meaning of premium to the current or future cost of the life insurance

coverage available under the contract or to the amount that can be held in the exempt account

under the Tax Rules. Accordingly, such an interpretation, which was adopted by the Judge and is

defended by Manulife, can only be justified by considering extrinsic evidence in a broader context.

[170] The question, then, is what in the context would support that interpretation? The key

contextual factor that led the Judge in his interpretation of the de Bruin ULP was his

characterisation of it as primarily an “insurance-type policy”. He drew that characterisation not

only from the language of the contract, but from evidence external to the contract, including

evidence of the history of the Tax Rules and the objectives of insurance industry participants. He

also considered insurance legislation and insurance law jurisprudence.

Page 72

[171] For the reasons we explored above, the external industry evidence that the Judge took into

account was inadmissible. Factors such as the purpose of the contract, the nature of the relationship

it creates, and the market or industry in which it operates, should have been gleaned solely from

the text of the contract as a whole, as that text would be understood by a consumer (i.e., a

non-industry participant). Similarly, insurance legislation and insurance law were not relevant to

the issues of standard form contract interpretation that were before the Judge. This law and industry

knowledge generally lies outside the understanding of the average consumer. Yet, it weighed

heavily in the balance in the Judge’s characterisation of the de Bruin ULP as primarily an

insurance-type policy, which became the interpretive lens that led him to conclude that the

“ordinary insured person” would understand “the policy to be providing life insurance and tax-

exempt investment opportunities; but not the extended opportunities [Mosten] says the policy

provides” (Mosten Decision at para 112).

[172] With respect, we do not agree with the Judge’s conclusion that the de Bruin ULP is

primarily an insurance-type policy. The de Bruin ULP, like the other ULPs at issue here, is at once

both an insurance and an investment contract and neither of them as a whole. That finding does

not, in and of itself, preclude the interpretation reached by the Judge, i.e., that the investment and

insurance aspects of the contract are inextricably linked. However, it means that the contract as a

whole and the issues of standard form contract interpretation at issue here should not be interpreted

through an insurance-contract lens—a lens that would effectively predetermine the issues of

interpretation the analysis must address.

[173] Given that the Court must interpret premium in the light of the whole of the text of the

de Bruin ULP, the question then is what other elements of the ULP, in addition to how it uses the

word premium, lend to the meaning of that word? In answer, Manulife points to the provisions

relating to transfers between the exempt account and the side account, submitting they confirm

that the investment aspect of the contract is inextricably linked to its insurance purpose.

[174] We do not read the transfer provisions as weighing in favour of that interpretation. On the

face of it, they state the circumstances when amounts paid into or earned in the exempt account

must be transferred to the side account so as to maintain the accrual-tax exempt status of

investment income earned in the exempt account. The provisions also detail the circumstances

Page 73

when the insurer will transfer amounts from the side account to the exempt account so as to

maximise the accrual-tax exempt benefit available under the Tax Rules. To that extent, we agree

that there is a link between the two aspects of the contract but we find it does not preclude Mosten’s

interpretation of the meaning of premium or its contention that there is no contractual limit on the

amount an insured may deposit into the side account.

[175] There is no express language in the de Bruin ULP that addresses the question of whether

there is a limit to the amount that can be deposited into, transferred into, or held within the side

account. Nothing speaks directly or indirectly to that issue. Nothing directly or indirectly limits

amounts an insured may contribute to the aggregated future cost of the insurance coverage or any

other marker. Manulife’s position is simply not supported on the plain language of the contract as

a whole.

[176] Although the side account provisions contemplate transfers to and from the exempt

account, they do not preclude an insured from utilising the side account for a stand-alone

investment purpose. We find nothing inconsistent or contradictory about an interpretation that

permits the insured to invest in the side account, in amounts that may far exceed the future cost of

insurance coverage, and that also requires that the insurer transfer funds between the exempt

account and the side account to maintain the accrual-tax exempt benefit under the Tax Rules. At

best, we might say that Manulife’s interpretation calls for the Court to draw an inference from the

text of the contract. However, it is better characterised as asking the Court to read words into the

contract based on a context of insurance industry intentions and law, which cannot properly be

taken into consideration.

[177] The interpretation preferred by Manulife avoids consideration of the provision of the

de Bruin ULP that expressly permits insureds to make additional premium payments at any time,

without being tied to the current or future cost of insurance, without reference to the exempt

account limits under the Tax Rules, and without any mention of a limit on the amount that an

insured may contribute to the side account. Indeed, the ULP expressly and by necessary

implication provides that the insurer must invest the additional premium payments in the side

account (de Bruin ULP at 3.2–3.3). Further, there is no express provision in the ULP permitting

Page 74

the insurer to return amounts contributed to the side account, as might be expected if Manulife’s

interpretation were correct.

[178] Manulife’s interpretation also requires the Court to read into the ULP provisions explaining

how the insurer would calculate the limit on the amounts contributable to the side account, and the

amount it could refuse or return to the insured. There is simply no contractual reference to the basis

upon which such sums might be determined or even what variables might be relevant. Nothing in

the ULP directly ties the cost of insurance to the side account other than in respect of the

maintenance of the accrual-tax exempt aspects of the ULP. In that regard, investments in the side

account, which “holds funds in excess of the maximum allowable tax exempt value” (emphasis

added), are expressly “not included in the calculation of the Fund Value” under the insurance side

of the contract (de Bruin ULP at 3.3). As such, had the original parties intended to limit the amount

that could be held in the side account, one might reasonably have expected to see an express limit

set on that excess. For these reasons, the insured’s right under the Payment of Premiums provision

to contribute additional premiums at any time weighs heavily in the whole in favour of the

interpretation proposed by Mosten.

[179] In addition, the Payment of Premiums provision provides that the insurer “will not refuse

any premium payment required to prevent the policy from terminating as described in the Lapse

provision” (de Bruin ULP at 6.2). Manulife submits that, since it says that the insurer cannot refuse

a premium payment only in a specific circumstance, the clause means that the insurer can refuse

or return premium payments in any other circumstances. While this may be an arguable

proposition, the ordinary and grammatical meaning of the clause is exactly and only what it says.

And, it does not say that, since only payments of the kind identified must be accepted, all other

payments can be refused. That interpretation would conflict with the immediately preceding

sentence, which affords insureds the right to “make additional premium payments at any time

while this policy is in force”. We do not agree that the reasonable person would objectively

understand these two provisions, read side-by-side and in the context of the contract as a whole,

in the manner proposed by Manulife. We note that interpreting the clause to mean what it expressly

says self-evidently does not render it meaningless. It might, at most, be described as redundant or

duplicative; however, redundancy is not unusual (McCamus Text at 821).

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[180] We remark finally that the fact Manulife’s interpretation of the Payment of Premiums

provision is arguable does not itself give rise to ambiguity. The principles of interpretation that

apply where ambiguity exists—such as the ability to admit evidence of subsequent conduct

(Hanson v Hanson, 2019 SKCA 102 at para 36, 32 RFL (8th) 257; and Shewchuk v Blackmont

Capital Inc., 2016 ONCA 912 at paras 40–48, 404 DLR (4th) 512)—are inapplicable here. Justice

Sopinka said in United Brotherhood of Carpenters and Joiners of America, Local 579 v Bradco

Construction Ltd., [1993] 2 SCR 316 at 342 [Bradco], that:

… Some authorities have held that there must be more than the arguability of different

constructions of the agreement (Re Milk & Bread Drivers, Local 647, and Silverwood

Dairies Ltd. (1969), 20 L.A.C. 406), while others suggest that the appropriate test is a lack

of clear preponderance of meaning stemming from the words and structure of the

agreement (Re Int’l Ass'n of Machinists, Local 1740, and John Bertram & Sons Co. (1967),

18 L.A.C. 362). An ambiguity is to be distinguished from an inaccuracy, a novel result or

a mere difficulty in construction. …

(Emphasis added)

[181] The standard for ambiguity is more than the mere articulation of an alternative

interpretation. For ambiguity to arise in this case, the interpreting court must find two or more

plausible alternative interpretations based on the ordinary meaning of the language of the contract

read as a whole and as it would be objectively understood by the reasonable person. On that basis,

a word, phrase, term or condition in a contract may be ambiguous only if the text can be plausibly

interpreted in accordance with each of the contending interpretations advanced by the parties

(Gilchrist at para 17). If the contested language reasonably bears only one of those interpretations,

it is not ambiguous. Moreover, if ambiguity had arisen in the circumstances of this appeal, the

blunt instrument of contra proferentem would have hammered the last nail into the coffin for

Manulife’s interpretation.

[182] For all of these reasons, we are unable to conclude, based on the intention of the parties as

expressed in the contract as a whole, that the meaning of the word premium is, as Manulife submits,

limited to payments for the present and future cost of insurance together and inextricably linked to

the exempt account limits under the Tax Rules and the status of the de Bruin ULP as an accrual-

tax exempt life insurance policy. In our assessment, the word premium in the de Bruin ULP simply

means an amount paid by the insured to the insurer.

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[183] The reasonable person who contracted with the insurer under the de Bruin ULP would not,

as the Judge found, have objectively understood “the policy to be providing life insurance and

tax-exempt investment opportunities; but not the extended opportunities [Mosten] says the policy

provides” (Mosten Decision at para 112). Such an interpretation, like the interpretation of premium

proposed by Manulife, is not founded on the language of the ULP, interpreted in light of the

relevant surrounding circumstances. It is founded as well on insurance legislation, related

jurisprudence and the knowledge and objectives of insurance industry participants, which could

not properly be taken into account in addressing the issues of standard form contract interpretation

at issue here. It is not enough to show that the de Bruin ULP provides for accrual-tax exempt

investments and for the transfer of funds between the side account and the exempt account. It also

and independently provides for investments in the side account through the payment of premiums

without language that limits the amount that may be so paid or invested.

f.

Declarations Granted by this Court

[184] In terms of the declaratory relief sought by Mosten, we do not interpret the de Bruin ULP

as placing any limit on the amount of premiums that an insured may pay to the insurer.

Furthermore, we interpret the relevant provisions of the de Bruin ULP, in their entire context, as

prohibiting the insurer from declining or refusing to accept premium payments, regardless of

amount, and from refunding amounts so received from the insured in excess of amounts required

to prevent termination of the life insurance policy.

[185] Based on our interpretation of the de Bruin ULP, we allow the Mosten Appeal and set aside

the findings of the Judge such as are necessary to hereby declare:

(a)

(b)

(c)

THAT the de Bruin ULP does not limit the amount an insured may pay to the

insurer as premiums.

THAT the de Bruin ULP does not limit when or how often the insured may pay

premiums to the insurer.

THAT the de Bruin ULP does not limit the premiums an insured may contribute to

the side account.

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(d)

AND THAT the de Bruin ULP does not authorise the insurer to refund or reject

premiums paid by an insured.

2.

CACV3408 – Atwater v BMO Life

a. Relief Sought at the Court of Queen’s Bench

[186] On February 1, 2017, Atwater sought to obtain the following declaratory relief from the

Court of Queen’s Bench by commencing proceedings under an originating application filed

pursuant to Rule 3-49 of The Queen’s Bench Rules and s. 11 of The Queen’s Bench Act, 1998:

1.

In this application, the applicant, Atwater Investment LP (“Atwater”), seeks:

(a) An order determining and declaring that Atwater has the following rights

and privileges under two Life Dimensions – Investor Maximizer universal life

insurance contracts, Policy Numbers 000013468 (the “13468 Contract”) and

000016551 (the “16551 Contract”, and, together with the 13468 Contract,

collectively referred to herein as the “Contracts”):

(i)

that Atwater may make additional premium payments to the

Contracts in such amounts and at such times as Atwater determines;

(ii) that there is no limit on the amount that can be held by or for

Atwater in the Side Account forming part of the Contracts; and

(iii) that the respondent, BMO Life Assurance Company (“BMO”), is

not entitled to refund premiums or funds held in the Contracts, either from

the Investment Accounts or the Side Account, in the absence of a request

by Atwater[.]

This application is referred to as Atwater 1 by the Judge and in the materials before this Court.

[187] Atwater filed a second originating application on October 24, 2017, and amended it on

August 2, 2018 and October 16, 2018, to claim the following declaratory relief:

2.

The applicant, Atwater Investment LP (“Atwater”), seeks:

(a) An order determining and declaring that Atwater has the following rights

and privileges under two Life Dimensions – Investor Maximizer universal life

insurance contracts, Policy Numbers 000013468 (the “13468 Contract”) and

000016551 (the “16551 Contract”, and, together with the 13468 Contract,

collectively referred to herein as the “Contracts”) under which Atwater is insured

by the respondent, BMO Life Assurance Company (“BMO”):

(i)

That any Investment Bonus payable under the Contracts to

Atwater shall be credited on February 18 of each calendar year;

(ii) That any Cumulative Fund Bonus payable under the Contracts to

Atwater shall be credited on February 17 of each calendar year;

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(b)

Following a decision that the Contracts are not exempt policies under the

provisions of the Income Tax Act of Canada, a further order determining and

declaring that Atwater has the following rights and privileges under the Contracts:

(iii)

That all funds paid to BMO under the Contracts are and shall be

held in the Investment Accounts that comprise the Fund Value under each

contract and that BMO is not entitled to transfer any funds, whether

currently held or subsequently paid under either contract, to the Side

Account of the Contracts;

(iv)

With no balance in the Side Account of the Contracts, that any

Investment Bonus payable under the Contracts to Atwater shall be

calculated on each of the Investment Accounts that comprises the Fund

Value which shall, with respect to each contract, represent all funds held

under each contract;

(v)

With no balance in the Side Account of the Contracts, that any

Cumulative Fund Bonus payable under the Contracts to Atwater shall be

calculated on the Fund Value which shall, with respect to each contract,

represent all funds held under each contract;

(vi)

That BMO shall not be entitled to effect the provision with respect

to Additional Sum Insured under the Contracts and, as such, shall not be

entitled to increase the amount of the life insurance coverage under either

contract by up to the maximum amount permitted under the Income Tax

Act of Canada (or by any amount including the lesser of $3,000,000.00 or

four times the original Sum Insured) unless expressly instructed to do so

by Atwater; and

(vii)

That the Exempt Status, Side Account and Investor Maximizer

provisions of the Contracts cease to have any application to the Contracts

and that the Contracts otherwise continue unaffected.

…

This second application is referred to as Atwater 2 by the Judge and in the materials before this

Court.

[188] In the Atwater Decision, the Judge dismissed Atwater’s requests for declaratory relief in

both Atwater 1 and Atwater 2. His decision to deny the relief requested in Atwater 1 was predicated

on his interpretation of the Walkom ULP. His decision to dismiss Atwater 2 resulted from the

exercise of judicial discretion. In Atwater’s amended notice of appeal filed July 25, 2019, it takes

issue with both of these aspects of the Atwater Decision:

2.

The following parts of the Order are being appealed:

(a) that portion of the Order wherein the learned Chambers Judge dismissed

Atwater’s Originating Application issued February 1, 2017, QBG 1775 of 2017 in

the Judicial Centre of Saskatoon (the “Atwater 1 Application”) for declarations

as to Atwater’s rights and privileges under two substantively identical and standard

form universal life insurance contracts bearing policy numbers 000013468 and

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000016551 (the “Contracts”) , of which the Respondent, BMO Life Assurance

Company (“BMO”), is the insurer, including a declaration that Atwater may make

additional premium payments to the Contracts in such amounts and at such times

as Atwater determines (the “Atwater 1 Decision”) ;

(b)

that portion of the Order wherein the learned Chambers Judge declined

jurisdiction and (in obiter dicta) dismissed Atwater’s Amended Originating

Application dated August 2 , 2018, QBG 1823 of 2017 in the Judicial Centre of

Saskatoon (the “Atwater 2 Application”) for declarations as to Atwater’s rights

and privileges under the Contracts, including a finding that the Contracts had not

lost their tax-exempt status under the Income Tax Act (Canada) (the “Atwater 2

Decision”); and

(c)

that portion of the Order wherein the learned Chambers Judge ruled the

Affidavit of Terry Dietrich sworn August 31, 2018 admissible (the “Evidence

Decision”).

b.

Relief Denied by the Judge

i. The Limitations Act

[189] We must first tie off a thread in the Atwater Appeal concerning The Limitations Act,

SS 2004, c L-16.1. A question unique to the Atwater Appeal is whether Atwater’s application was

time-barred. The Judge considered whether Atwater 2 was time-barred, suggesting he might agree

with BMO Life’s position on this issue. However, the Judge did not decide the issue. Rather, he

declined jurisdiction to make the declarations sought in Atwater 2 (Atwater Decision at paras 227–

228). The Judge did not say whether Atwater 1 might be time-barred.

[190] BMO Life’s respondent factum addresses the limitation issue in the context of the

admissibility of what is known as the Dietrich Affidavit, which it submits was admissible to address

the limitations issue (at paras 121–128). BMO Life’s argument focuses on why the Judge correctly

found the Dietrich Affidavit admissible, not whether Atwater 1 or 2 was time-barred. We have

already addressed in broad terms the grounds of appeal and cross-appeal that involve evidentiary

rulings made by the Judge (at paras 106–110). We do not address those grounds further in these

reasons.

[191] In its cross-appellant factum, BMO Life states that, if Atwater is successful in its appeal

and if we find the Regulation does not have retrospective effect, then Atwater will be “limitation-

barred” from its only potential remedy of damages for past investment opportunities lost (at

para 23). BMO Life did not, however, advance any substantive argument on the limitations issue.

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[192] Given that the Judge did not rule on a limitations issue and the issue has not been developed

by BMO Life or Atwater before us, we decline to address it any further.

ii.

Dismissal of Atwater 2

[193] As noted in our reasons under the Mosten Appeal, even though we approach the

interpretation of the ULPs differently than did the Judge, that has no bearing on the question of

whether the Judge erred in the exercise of his discretion when deciding not to grant declaratory

relief. The Atwater Appeal impugns the Judge’s obiter dicta interpretation of the Walkom ULP

only if this Court finds the Judge erred when he dismissed Atwater 2. Accordingly, the primary

issue calls for an examination of the Judge’s reasons for dismissing Atwater 2 under the standard

of appellate review of discretionary decisions and we have, under the Mosten Appeal, set out the

background for that examination. As the relief requested is similar to the Second Mosten

Application and because the Judge’s reasons for dismissing the application in Atwater 2 mirror his

reasons for dismissing the Second Mosten Application, we adopt our reasoning in that regard.

[194] To summarise, the granting of declaratory relief by a judge is a discretionary remedy,

subject to few restraints or criteria. As an appellate court, we are not entitled to interfere with the

Judge’s decisions in that regard unless it can be established that he erred within the meaning of the

standard of review for judicial discretionary decisions described above. We see none of those

errors in the Atwater Decision.

[195] As he did in the Mosten Decision, the Judge exercised his discretion in the Atwater

Decision to deny Atwater the relief it sought in Atwater 2 by declining to exercise the jurisdiction

to address matters that related to the Tax Rules or their application and by ruling that the application

was premature.

[196] In reviewing the Judge’s reasons, we find he carefully and thoroughly considered the

factors and criteria that bore upon the exercise of judicial discretion reposed in him under Rule 3-

49 of The Queen’s Bench Rules and under s. 11 of The Queen’s Bench Act, 1998. This led him to

decline to take jurisdiction that he found was more properly that of the Tax Court of Canada. His

reasoning in this regard speaks for itself and ably withstands the appellate standard of review for

discretionary decisions.

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[197] We similarly find no reversible error in the Judge’s other reasons for dismissing the

Atwater 2 application, given the standard of appellate review. We agree with the Judge that the

relief was sought in respect of hypothetical scenarios. Indeed, the relief sought was something in

the nature of an injunction to forestall a particular course of conduct on the part of BMO Life,

which Atwater saw as breaching the Walkom ULP under its interpretation of that contract. In the

circumstances, we find it was well within the Judge’s discretion to decline to grant the relief

sought.

[198] In short, there is no basis to interfere with the Judge’s discretionary decision to decline to

grant the declaratory relief requested under the Atwater 2 application, including as it relates to the

investment bonus payable under the Walkom ULP.

[199] In obiter dicta, the Judge stated his conclusions as to the interpretation of the Investment

Bonus and Cumulative Fund Bonus provisions of the Walkom ULP, interpreting them as BMO

Life had argued. Given that we have found no basis to overturn the Judge’s discretionary decision

not to grant the declaratory relief requested, we see no constructive purpose in reviewing the

Judge’s alternative and obiter reasoning for error. Furthermore, Atwater did not return to these

grounds in its factum and BMO Life proceeded with its response on the assumption that that aspect

of the Atwater Appeal had been abandoned.

c.

The Walkom ULP

[200] For purposes of interpretation, it is important to first understand that the word policy, as it

is used throughout the contract document that sets forth the provisions governing the relationship

between the parties, is the name the original parties gave that document (Walkom ULP at 1.1). The

complete contract between AIG and 605945 consists of “this policy, the application for this policy,

any application for reinstatement of this policy and any written policy amendments and/or policy

endorsements agreed upon in writing after this policy has been issued” (Walkom ULP at 1.1). In

other words, references to “this policy” or “Your policy” in the Walkom ULP are nothing more

than references to the policy document itself. To be clear, when referencing the Walkom ULP in

these reasons, we are referring to the complete contract. The contract text reproduced below is

cited to the Walkom ULP, referencing the page numbers of the policy document.

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[201] Whether the Court can make the declarations sought by Atwater depends on how we

interpret the Walkom ULP. The Walkom ULP is quite similar to the de Bruin ULP in terms of its

language and its structure and, of course, “the purpose of the contract, the nature of the relationship

it creates, and the market or industry in which it operates” is the same for the de Bruin ULP, the

Walkom ULP and the Zinkhan ULP (Ledcor at para 31). As we have found that the interpretation

of standard form contract language has precedential value, the interpretation we have given to the

contract language in the de Bruin ULP is relevant to the interpretation to be given to the same or

sufficiently similar contract language in the Walkom ULP (or vice versa, as it matters not which

interpretation comes first in the context of these matters). Nonetheless, independent of the de Bruin

ULP, like the Judge and the parties, we find that ascertaining the meaning of the word premium,

as it is used in the Walkom ULP, is key to the interpretation of the issues of standard form contract

interpretation arising in the Atwater Appeal and is, therefore, fundamental to answering Atwater’s

prayer for relief.

[202] We find that the word premium is used in the Walkom ULP in a manner that is broader in

meaning than the relevant dictionary definition of an amount paid for insurance. Helpfully, the

Walkom ULP contains a section called Explanation of Contract, which is all but identical to the

Explanation of Contract provisions in the de Bruin ULP at 1.5:

You have purchased a universal life insurance policy. Because Your policy is designed to

be flexible, it can also seem very complex. For Your convenience, We have divided the

policy into sections.

 Section 1 provides general information concerning Your policy. This section contains

a Table of Contents, which lists where each provision may be found. The Policy

Information Pages contain values such as the amounts payable for each type of

coverage.

 Section 2 provides Definitions.

 Section 3 contains the insurance Provisions. Subject to the terms and conditions of this

policy We will pay the Death Benefit to the Beneficiary as described in the Insurance

Provisions if the Life Insured dies while this policy is in force. Note the limitation for

Suicide. This section also describes the Proof of Claim required when death occurs.

The Exempt Status provision describes the action We will take to maintain the policy’s

tax exempt status.

 Section 4 contains the Cost of Insurance Guarantee.

 Section 5 relates to the Fund Value, which is the money held on deposit within the

policy on Your behalf. Your premium payments are directed towards one or more

Investment Accounts. Monthly Deductions are subtracted from these accounts. Policy

Loans may be available, subject to the Policy Loan provisions, or You may make Cash

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Withdrawals, subject to Withdrawal Charges, Market Value Adjustments, and any

other applicable provisions.

 Section 6 contains General Provisions, including the very important Lapse and

Disclosure provisions.

 Section 7 contains an Index of defined terms. These terms are capitalized when referred

to in the policy. Please refer to these definitions as You review the policy.

 Section 8 contains any riders You have purchased.

 The Policy Information Pages contain the Cost of Insurance rates.

We recommend that You review the provisions of this policy and ask Your insurance

advisor for any explanation or clarification needed.

(Walkom ULP at 1.5)

While these provisions are only descriptive of the general content of the ULP, they nonetheless

summarise what the parties intended to accomplish under the contract, which aids in its overall

interpretation.

[203] Section 5 of the Walkom ULP is said to pertain to the Fund Value, “which is the money

held on deposit within the policy on Your behalf” (Walkom ULP at 1.5). This neutral statement

could describe either or both the insurance and investment aspects of the contract. The summary

then advises that “premium payments” will be directed towards one or more Investment Accounts

(i.e., the exempt account) under which the insurer will make different investment products

available. The remainder of the description of s. 5 suggests that deposits held within the exempt

account are treated as fluctuating, withdrawable and securable investments or assets, indicating

that premiums are not earmarked only for payment of the cost of the life insurance coverage or are

only to be invested for that purpose.

i.

Premium

[204] Turning to the word premium, the Judge relied upon the same industry meaning of the word

when interpreting the Walkom ULP as he had when interpreting the de Bruin ULP. We refer again

to the dictionary definitions of the word premium and to the industry meaning attributed to it by

the Judge. We confirm that an industry meaning of that word is of no assistance when interpreting

the Walkom ULP because Mr. Walkom is not an industry participant and the ULP is not a

commercial contract. Regardless, we find the word premium in the Walkom ULP has an

unmistakably broader meaning than its dictionary definition or industry meaning. Nowhere is this

more apparent than under the following excerpts from the provisions relating to the accrual-tax

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exemption (Exempt Status), the side account (Side Account) and the Fund Value Provisions

(exempt account):

Exempt Status

Exempt Status means this policy is exempt from accrual taxation under the provisions of

the Income Tax Act of Canada in effect on the Policy Effective Date. An exempt test is

done each Policy Anniversary. Should the definition of an exempt policy be amended, We

will administer the next exempt test under the terms of the amendment.

When an adjustment is required to maintain the Exempt Status of this policy, We will take

action in the following order:

1.

We will increase the amount of life insurance coverage by up to the maximum each

year, as permitted under the current Income Tax Act and subject to an overall maximum

increase of the lesser of four times the original Sum Insured or $3,000,000. Any such

increase is referred to in this contract as Additional Sum Insured. This will only apply if

the Life Insureds are living when the exempt test is done.

2.

We will transfer the excess funds to the Side Account, as described below.

Side Account

The Side Account is a special account that holds funds in excess of the maximum allowable

tax exempt value calculated by the annual exempt test. During the first Policy Year, We

will also credit to the Side Account any premiums that exceed the maximum premium

determined by Us on the Policy Effective Date. You may Elect to have funds in the Side

Account accumulate under either the Daily Interest Account, Guaranteed Interest Account

or Market Indexed Account as determined by You.

However, the Side Account will not be entitled to any Investment Bonus, Cumulative Fund

Bonus or Investor Advantage. Account Deductions will not be made from the Side

Account. The Side Account is not included in the calculation of the Fund Value. The Side

Account will be paid to You or Your estate in addition to the Death Benefit when the

contract terminates. The investment income of the Side Account is subject to annual

accrual taxation.

Cash Withdrawals may be made from the Side Account and no administrative charges shall

apply.

If it appears to Us that this policy may lapse, We will transfer funds from the Side Account

into the policy’s tax exempt Investment Accounts.

Each year, the exempt test is redone as described in the Exempt Status provision. Transfers

are made from or to the Side Account as required to keep the maximum amount in the tax

exempt Investment Accounts, or if it appears to Us that this policy may lapse. Transfer fees

will not apply to transfers to and from the Side Account. A Market Value Adjustment will

apply to transfers from a Guaranteed Interest Account to an Investment Account other than

a Guaranteed Interest Account of the same remaining term. Any transfer from the Side

Account into the Investment Accounts will be treated as premiums and will therefore attract

premium taxes as described in the Net Premiums provision.

(Walkom ULP at 3.3–3.4)

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Fund Value Provisions

Net Premium

The Net Premium is the premium received by Us less any applicable Federal and Provincial

taxes, levies or similar charges on premiums paid by You.

Premium Allocation

Premium Allocation is the portion of the Net Premium directed toward a particular

investment Account. You can change the Premium Allocation by notifying Us in writing.

The $30 fee charged for each change in Premium Allocation will be waived for the first

three Premium Allocation changes in each Policy Year. The effective date of any Premium

Allocation change will be the business day Your written request is received at Our head

office, or later if so indicated.

Investment Accounts

Investment Accounts are savings pools to which Your premiums are directed and from

which charges are deducted. They provide different levels of risk, liquidity and rates of

return. We will offer a number of Investment Accounts from time to time. We guarantee

that at least four Market Indexed Accounts, the Daily Interest Account and Guaranteed

Interest Accounts will always be available to You. When an Investment Account is no

longer being offered, We reserve the right to transfer the Account Value to another

Investment Account then being offered by Us. There will be no charge when We make

such a transfer. Any such transfer from a Guaranteed Interest Account will take effect only

at the end of the selected term. Any such transfer will only take effect after We have advised

You that a transfer is occurring.

The following Investment Accounts are available at the Policy Effective Date.

…

Account Value

The Account Value for the Daily Interest and Guaranteed Interest Accounts on the Policy

Effective Date is the Premium Allocation less the corresponding Account Deduction. On

each Policy Monthly Anniversary following the Policy Effective Date, interest earned

during the previous month will be credited and We will deduct the applicable Account

Deduction. After the Policy Effective Date, the Account Value will reflect the sum of the

Premium Allocations, interest and transfers deposited to the account less the sum of

Account Deductions, Cash Withdrawals and transfers from the account.

The Account Value for an Market Indexed Account on the Policy Effective Date is the

Premium Allocation less the corresponding Account Deduction. The Account Value will

increase or decrease based on the change in value of the respective index. On each Policy

Monthly Anniversary following the Policy Effective Date, We will deduct the applicable

Account Deduction. After the Policy Effective Date, the Account Value will reflect the

sum of all the Premium Allocations, interest credited or debited, and transfers deposited in

the account less the sum of Account Deductions, Cash Withdrawals and transfers from the

account.

The Account Value for a Managed Indexed Account, Managed Portfolio Indexed Account

or Custom Portfolio Indexed Account on the Policy Effective Date is the Premium

Allocation less the corresponding Account Deduction. The Account Value will increase or

decrease based on the net rate of return of a designated fund or portfolio of designated

funds. On each Policy Monthly Anniversary following the Policy Effective Date, We will

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deduct the applicable Account Deduction. After the Policy Effective Date, the Account

Value will reflect the sum of all the Premium Allocations, interest credited or debited, and

transfers deposited to the account less the sum of Account Deductions, Cash Withdrawals

and transfers from the account.

Fund Value

The Fund Value for this policy equals the sum of the Account Values of the Investment

Accounts.

Allocated Fund Value

For each Life Insured, the Allocated Fund Value is the portion of the Fund Value

determined by multiplying the Fund Value by the ratio of the Life Insured’s Sum Insured

to the total of all the Sums Insured.

(Walkom ULP at 5.1–5.3)

[205] In the Walkom ULP, the word premium is sometimes used in the way that conforms to its

dictionary definition or to an industry meaning but, more often, the defined term Cost of Insurance

is used where an industry meaning or dictionary definition of premium would be appropriate, for

example:

Total Annual Minimum Premium

The Total Annual Minimum Premium is shown in the Policy Information Pages. The Total

Annual Minimum Premium changes if a policy change is made that affects the Monthly

Deduction, such as a request to increase or decrease the Sum Insured. The cumulative Total

Annual Minimum Premium is the sum of the Total Annual Minimum Premiums for each

Policy Year (including fractions) that has elapsed since the Policy Effective Date.

Provincial premium tax based on the province of residence will apply to all premiums. The

premium tax charged will be changed if the respective provincial premium tax rates

change.

(Walkom ULP at 2.1–2.2)

Survivor Option

The Survivor Option is available if the Plan Type of a Basic Coverage is Joint First-to-Die.

Within 90 days of the first death of the Joint Life Insureds, the surviving Joint Life

Insured(s) may purchase additional insurance coverage on themselves without providing

evidence of insurability, provided that the oldest of the surviving Life Insured(s) is age 80

or less. If there is one survivor, a Single Life policy may be purchased. If there is more

than one survivor, a Joint First-to-Die policy may be purchased on the remaining lives. The

maximum amount of coverage will be the Sum Insured in effect immediately prior to the

death of the first Life Insured to die.

The new policy may be any eligible permanent plan, regularly offered by Us. The cost of

insurance rates will be based on the attained age of the remaining Life Insured(s) and the

rates in effect when the new policy is purchased.

(Walkom ULP at 3.2)

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Cost of Insurance Guarantee

Cost of Insurance

Cost of Insurance (COI) is the amount We charge You for the Basic Amount at Risk. Cost

of Insurance is included in the Monthly Deduction. The Cost of Insurance Option You have

chosen is shown in the Policy Information Pages. The Cost of Insurance Option may not

be changed after the Policy Effective Date except as described below in the Cost of

Insurance Switch provision.

The following Cost of Insurance options are available.

1) Series I Level Guaranteed Cost of Insurance (Series I Level COI)

The Level Guaranteed Cost of Insurance rates are shown in the Policy Information

Pages. With this option, the Cost of Insurance rate that applies to the corresponding

Basic Coverage will not change. The Investor Advantage is included.

2) Series I Yearly Renewable Term Guaranteed Cost of Insurance (Series I YRT

COI)

The Yearly Renewable Term Guaranteed Cost of Insurance rates are shown in the

Policy Information Pages for each corresponding Basic Coverage. We use the rate

that corresponds to the Attained Insurance Age.

3) Series I Juvenile Cost of Insurance (Series I Juvenile COI)

Juvenile Cost of Insurance applies if the Insurance Age is less than 18.

The Smoker Status is considered juvenile while the Attained Insurance Age is less

than 18. This means the initial rates do not depend on the Smoker Status. After

Attained Insurance Age 18, the Smoker Status is changed to smoker. If We then

receive a request to change the Smoker Status, We will take action as stated in the

Smoker Status provision.

Juvenile Yearly Renewable Term Guaranteed Cost of Insurance rates are shown in

the Policy Information Pages for each corresponding Basic Coverage shown in the

Policy Information Pages. We use the rate that corresponds to the Attained

Insurance Age.

4) Series II Level Guaranteed Cost of Insurance (Series II Level COI)

The Level Guaranteed Cost of Insurance rates are shown in the Policy Information

Pages. With this option, the Cost of Insurance rate that applies to the corresponding

Basic Coverage will not change.

5) Series III Blended Guaranteed Cost of Insurance (Series III Blended COI)

The Blended Cost of Insurance offers a combination of Yearly Renewable Term

Guaranteed and Level Guaranteed Cost of Insurance. The Blended Cost of

Insurance rates are shown in the Policy Information Pages for each corresponding

Basic Coverage.

The monthly rates are one-twelfth of the annual rates shown in the Policy

Information Pages.

After the Attained Insurance Age reaches 105, the Cost of Insurance is zero.

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Investor Maximizer

Investor Maximizer, if selected with Series I YRT COI, will be invoked on the start date

shown in the Policy Information Pages, but no sooner than the fifth Policy Anniversary. In

each year thereafter, the Sum Insured will be calculated as the minimum amount necessary,

as permitted by the Canadian Income Tax Act and Regulations, to maintain the exempt

status of the Policy according to the tax rules then in effect.

If selected with Series III Blended COI), Investor Maximizer will be invoked on the start

date shown in the Policy Information Pages, but no sooner than the fifth Policy

Anniversary. In each year thereafter the portion of the Sum Insured which is based on the

YRT COI will be calculated at the minimum amount necessary, as permitted by the

Canadian Income Tax Act and Regulations to maintain the exempt status of the Policy

according to the tax rules then in effect.

In order to make these adjustments, We will take into consideration the amount and timing

of premiums paid to date, the interest rate history of the Policy for the particular Investment

Account(s) selected, and a projection of interest rates in the future. The adjustment may

result in either an increase, up to the maximum allowed, or a decrease in the Sum Insured

in the future. However, the Sum Insured will not decrease below the Minimum Sum

Insured shown in the Policy Information Pages.

Cost of Insurance Switch

You may change a Basic Coverage from Series I YRT COI to Series I Level COI or from

the YRT portion of Series III Blended COI to the Level portion of Series III Blended COI

on any Policy Anniversary up to Attained Insurance Age 80, by sending Us written notice.

The Cost of Insurance rate for that coverage will be the respective Level Cost of Insurance

rate in use at the time of the Switch that applies to the Life Insured’s Attained Insurance

Age.

You may switch from Series I Level COI to Series I YRT COI or from the Level portion

of Series III Blended COI to the YRT portion of Series III Blended COI on any Policy

Anniversary up to Attained Insurance Age 80 subject to providing us with satisfactory

evidence of insurability. The YRT rates for that coverage will be the YRT rates in use at

the time of the Switch that apply to the Life Insured’s Attained Insurance Age. You may

not change from one Level Cost of Insurance to another Level Cost of Insurance.

(Walkom ULP at 4.1–4.2)

Monthly Deduction

On each Policy Monthly Anniversary starting on the Policy Effective Date, We will

calculate a Monthly Deduction equal to the sum of the following:

1) the monthly administration fee shown in the Policy Information Pages (and guaranteed

for the duration of the policy);

2) the monthly Cost of Insurance, which is equal to the Basic Amount at Risk multiplied

by the Cost of Insurance rate divided by 1,000 for each Basic coverage shown in the Policy

Information Pages, divided by twelve;

3) any Additional Sum Insured multiplied by the rate shown in Policy Information Pages

that corresponds to the Attained Insurance Age, Smoker Status and sex, divided by twelve;

and

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4) the total of the monthly costs for any riders or substandard extras shown in the Policy

Information Pages, where the initial monthly cost is one-twelfth of the respective annual

premium. The cost for some riders may change as described in the provisions of the rider.

(Walkom ULP at 5.3)

Payment of Premiums

The initial planned premium, as shown in the Policy Information Pages, is due on the Policy

Effective Date and must be paid before any coverage becomes effective. You may then pay

premiums annually, or by a monthly automatic payment system. You may make additional

premium payments at any time while this policy is in force. We will not refuse any

premium payment required to prevent the policy from terminating as described in the Lapse

provision.

(Walkom ULP at 6.1)

Substitution of Life Insured

You may request that a new person be substituted for an existing Life Insured by sending

Us your written request. We must receive satisfactory evidence of insurability of the new

Life Insured and payment by You for any incurred administrative expenses. On approval

of the request for substitution, coverage on the existing Life Insured will cease. The

Monthly Deduction will be adjusted to reflect the Smoker Status, Insurance Age and sex

of the new Life Insured. The Cost of Insurance rates applicable to the new Life Insured will

be Our rates in use on the substitution date.

Addition of Life Insured

You may request that coverage for a new person be added during the lifetime of an existing

Life Insured.

We must receive satisfactory evidence of insurability of the new Life Insured and payment

by You for any incurred administrative expenses. The Monthly Deduction will be increased

to reflect the additional coverage, based on the Sum Insured, Smoker Status, Insurance Age

and sex of the new Life Insured. The Cost of Insurance rates applicable to the new Life

Insured will be Our rates in use on the addition date.

(Walkom ULP at 6.2)

[206] On the whole of it, the word premium is chiefly used in the Walkom ULP in a way that

encompasses any payment by the insured to the insurer not just as may be required to maintain the

life insurance aspect of the ULP. For examples of this, we refer back to the previously quoted Fund

Value Provisions and Payment of Premiums provision, and the internal definitions in the ULP for

Net Premium, Premium Allocation and Investment Accounts, among other provisions.

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ii.

Premium Refund

[207] The declaratory relief Atwater seeks also raises an issue of standard form contract

interpretation as to whether the insurer under the Walkom ULP is entitled to refund or reject

amounts held on behalf of an insured in the absence of a request from the insured to do so. The

refunds-related provisions of the Walkom ULP read as follows:

Death Benefit Options

The following Death Benefit Options are available at the Policy Effective Date. The option

You have chosen is shown in the Policy Information Pages. We may offer other Death

Benefit Options from time to time.

The Death Benefit Option must be the same for each Basic Coverage. The Sum Insured

plus Multi Fund Value Death Benefit Option is only available on Multi-Coverage policies.

1. Sum Insured

The Death Benefit is equal to the greater of the Sum Insured and the Allocated Fund Value

as of the date of death. If the Plan Type is Joint Last-to- Die, You can elect to have the

Allocated Fund Value, less any outstanding Policy Loan and one Monthly Deduction, paid

to the Beneficiary at every prior death of a Life Insured. This payment will reduce Your

Fund Value accordingly. Any premiums received by Us after the date of death will be

refunded without interest.

2. Sum Insured Plus Fund Value

If the Plan Type is Single Life, the Death Benefit is equal to the Sum Insured plus the

Allocated Fund Value as of the date of death. Any premiums received by Us after the date

of death of the Life Insured will be refunded without interest.

If the Plan Type is Joint First-to-Die, the Death Benefit is equal to the Sum Insured plus

the Allocated Fund Value as of the date of death. Any premiums received by Us after the

date of death of the first Joint Life Insured will be refunded without interest.

If the Plan Type is Joint Last-to-Die, the Death Benefit is equal to the Sum Insured plus

the Allocated Fund Value, and is payable on the last death. At every prior death of a Life

Insured You can elect to have the Allocated Fund Value, less any outstanding Policy Loan

and one Monthly Deduction, paid to the Beneficiary. This payment will reduce Your Fund

Value accordingly. Any premiums received by Us after the date of death of the last Joint

Life Insured will be refunded without interest.

3. Sum Insured Plus Multi Fund Value

If the Plan Type is Single Life, the Death Benefit is equal to the Sum Insured plus the Fund

Value as of the date of death. Any premiums received by Us after the date of death will be

refunded without interest.

If the Plan Type is Joint First-to-Die, the Death Benefit is equal to the Sum Insured plus

the Fund Value, and is payable on the first death. Any premiums received by Us after the

date of death will be refunded without interest.

If the Plan Type is Joint Last-to-Die, the Death Benefit is equal to the Sum Insured plus

the Fund Value, and is payable on the last death. At every prior death of a Life Insured You

can elect to have the Fund Value, less any outstanding Policy Loan and one Monthly

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Deduction, paid to the Beneficiary. This payment will reduce Your Fund Value

accordingly. Any premiums received by Us after the date of death of the last Joint Life

Insured will be refunded without interest.

If there is an outstanding Policy Loan, the amount owing will be deducted from the

proceeds on death.

(Walkom ULP at 3.1–3.2, emphasis added)

Cash Withdrawal

You may request a Cash Withdrawal at any time, except during the first Policy Year,

provided the Cash Surrender Value is greater than $1,000. The minimum amount that can

be withdrawn is $500 and the minimum remaining Cash Surrender Value must be the

greater of $500 and the Monthly Deduction. The effective date of any Cash Withdrawal

will be the business day Your written request is received at Our head office, or later if so

indicated. Cash Withdrawals will first be made from the Side Account if applicable. You

must indicate the Investment Account(s) from which the remaining funds are to be

withdrawn. Otherwise, We will make withdrawals by first subtracting the maximum

possible amount from the Daily Interest Account, then proportionately from the Indexed

Accounts, and then from the Guaranteed Interest Accounts, starting with the deposit closest

to maturity. The money withdrawn by You will reduce each Account Value. The Market

Value Adjustment will also apply if funds are withdrawn from a Guaranteed Interest

Account. An administrative charge of $50 will be deducted from each Cash Withdrawal, if

a Cash Withdrawal is made from an Investment Account other than the Side Account. For

withdrawals of amounts over $200,000, We reserve the right to delay the processing by up

to 30 days.

If the Death Benefit Option is Sum Insured, the Sum Insured will be reduced by the amount

withdrawn from the Fund Value, except that no such reduction will occur while the

cumulative Cash Withdrawals to date are below $15,000. If the Death Benefit Option is

Sum Insured Plus Fund Value or Sum Insured Plus Multi Fund Value, the Basic Amount

at Risk immediately after a withdrawal will equal the Basic Amount at Risk immediately

before the withdrawal.

(Walkom ULP at 5.4–5.5, emphasis added)

[208] As is evident, the insurer may refund any premiums it has received after the date of death

of the last Joint Life Insured, without interest. The insured has a contractual right, exercisable in

writing, to request a refund of amounts it has paid to the insurer as well as accrued investment

returns on those amounts. In the latter case, refunds are withdrawn first from the side account and,

in the absence of instructions from the insured, are taken rateably from each of the investment

products held in that account. However, the Walkom ULP says nothing about the insurer refunding

amounts on its own initiative, except following the death of the last Joint Life Insured. On the other

hand, under the Payment of Premiums provision, the insurer covenants that it “will not refuse any

premium payment required to prevent the policy from terminating as described in the Lapse

provision” (at 6.1). In its entirety, the Lapse provision reads:

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Lapse

This policy will terminate without value after a grace period of 30 days if any one of the

following lapse conditions is met.

1) The Cash Value is less than zero, and the total premium paid less any Cash Withdrawals

is less than the cumulative Total Annual Minimum Premium.

2) The Net Cash Value is equal to or less than zero.

3) The Fund Value is less than the Monthly Deduction at a Policy Monthly Anniversary

date.

The policy will continue in force during the grace period. If sufficient premium is paid

during the grace period, the policy will remain in force. The amount in the Side Account,

if any, will be applied toward satisfying the sufficient premium payment for the policy to

remain in force.

(Walkom ULP at 6.1)

[209] For explanatory purposes, the terms Cash Value and Net Cash Value are internally defined:

Cash Value

The Cash Value equals the Fund Value reduced by any Surrender Charges. The Surrender

Charges are shown in the Policy Information Pages. The Cash Value equals the Fund Value

after the 9th Policy Anniversary for Series I Cost of Insurance policies and after the 10th

Policy Anniversary for Series II Cost of Insurance policies.

(Walkom ULP at 5.3)

Net Cash Value

The Net Cash Value is the Cash Value less the outstanding balance of all policy loans.

(Walkom ULP at 5.4)

d.

Interpretation of the Walkom ULP

[210] Our objective is to ascertain consensus ad idem on the basis of the words that were chosen

by BMO Life and agreed to by 605945. Given that the meaning of premium is central to the

interpretation of the Walkom ULP, the first question to be asked is what does the overall text of

the Walkom ULP tell us about its contractual meaning? If the mutual intention of the original

parties is plain and obvious on the text of the contract, then we must give effect to it.

[211] In that regard, by reading the whole of the text of the Walkom ULP in accordance with the

canons of construction, we find the meaning of premium is unambiguous. On our reading of it,

BMO chose to use the word premium in a way that encompasses any payment made by the insured

to the insurer under the ULP, not just payments to maintain its life insurance coverage. As we have

said about the other ULPs in issue, the Walkom ULP is at once both an insurance and an investment

contract and neither of them as a whole. 605945 entered the Walkom ULP on this basis. We

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acknowledge that the interpretation put forward by BMO Life is well-articulated and arguable, but

there must be more than mere articulation and “arguability” to constitute ambiguity (Bradco and

Sabean). The contractual provisions cited above clearly show the use of the word premium in a

way that is not limited to the insurance aspects of the Walkom ULP but that encompasses any

payment made by the insured to the insurer. No limit is expressed in the Walkom ULP to cap these

payments at the future cost of insurance or to the amount that can be held in an exempt account

under the Tax Rules.

[212] More specifically, reading the Walkom ULP as a whole, we are unable to find that BMO

Life’s position is a reasonable interpretation of the word premium in its context. It does not arise

on an ordinary understanding of the text of the Walkom ULP. Rather, that interpretation, which

was adopted by the Judge, is only justifiable by reference to a broader, industry context. It relied

not only on the language of the contract but also insurance legislation, related jurisprudence and

the knowledge and objectives of insurance industry participants. We have ruled industry-insider

evidence inadmissible in the context of interpreting a standard form contract involving a consumer

and, thus, that construction cannot stand.

[213] Absent the insurance policy characterisation, which we have found to be incorrect, the

contextual foundation for the Judge’s interpretation is fundamentally undermined. We further find

BMO Life’s interpretation is not a reasonable one, for the same reasons as we have set out when

interpreting the de Bruin ULP. Like the de Bruin ULP, the text of the Walkom ULP reproduced

above provides that an insured “may make additional premium payments at any time while this

policy is in force” (at 6.1), without those premiums being directly tied to the cost of insurance or

the Tax Rules. The Walkom ULP also requires the insurer to invest such additional premium

payments (i.e., the amount in excess of the cost of insurance—which is an indirect tie to that cost)

under the side account but places no limits or restrictions in that regard.

[214] In this context, the ordinary and grammatical meaning of the word premium is “an amount

contributed by the insured to the insurer”. We cannot reasonably interpret the contract as limiting

or placing a cap on an insured’s contributions to the investment products held in the side account

because there is no such limit or cap expressed in or implied by the language of the Walkom ULP.

The contract is unambiguous. It does not say that the insurer is only required to accept payments

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made up to the aggregate future cost of insurance and may refuse all other payments from an

insured. Such an interpretation conflicts with the text of the Walkom ULP because it grants

insureds the right to make additional premium payments at any time and without setting a limit.

We are unable to find that the reasonable person entering into the Walkom ULP would objectively

understand these provisions, read in the context of the contract as a whole, in the manner proposed

by BMO Life.

[215] We further interpret the relevant provisions of the Walkom ULP, in their entire context, as

prohibiting the insurer from declining or refusing to accept from the insured any funds required to

ensure that the total premium paid under the Walkom ULP less refunds is at least equal to the

cumulative Total Annual Minimum Premium, as is set out in the Policy Information Pages of the

ULP. The provisions of the Walkom ULP that speak directly to the refund of premiums do not

address the declaratory relief or the interpretation that Atwater seeks. However, we interpret the

Payment of Premiums provision as prohibiting the insurer not only from “refusing” any premium

payment required to prevent the policy from terminating in accordance with the Lapse provision,

but also as prohibiting the insurer from refunding premium payments required to prevent policy

termination. In our assessment, the Payment of Premiums provision would have no effect if it

permitted the insurer to accept but then immediately refund such premiums.

[216] In addition, we find there are no provisions in the Walkom ULP that provide that BMO

Life may return amounts held in the side account to an insured. Although argued to be connected

to the cost of insurance and accrual-tax exempt aspects of the ULP, there are no provisions in the

Walkom ULP that would explain how this would work. We are left to wonder, if this were the

case, how would BMO Life calculate the amount it could unilaterally refuse or return to an

insured? Given the absence of any other reference to the refund or rejection of premiums, it follows

that we are unable to interpret the Walkom ULP in a way that would permit the insurer to refund

or reject amounts received from an insured in excess of amounts required to prevent termination

of the life insurance policy.

e.

Declarations Granted by this Court

[217] In terms of the declaratory relief Atwater seeks, based on our interpretation of the word

premium in the context in which it is used, we are unable to infer that the Walkom ULP places any

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limit on the amount of premiums that an insured may pay to the insurer. Based on our interpretation

of the Walkom ULP as a whole, we allow the Atwater Appeal and set aside the findings of the

Judge such as are necessary to hereby declare:

(a)

(b)

(c)

(d)

THAT the Walkom ULP does not limit the amount an insured may pay to the

insurer as premiums.

THAT the Walkom ULP does not limit when or how often an insured may pay

premiums to the insurer.

THAT the Walkom ULP does not limit the amount that an insured may contribute

to the side account.

AND THAT the Walkom ULP does not authorise the insurer to refund or reject

premiums paid by an insured.

3.

CACV3409 – Ituna v Industrial Alliance

a. Relief Sought at the Court of Queen’s Bench

[218] On November 22, 2016, Ituna sought to obtain the following declaratory relief from the

Court of Queen’s Bench by commencing proceedings under an originating application, which was

amended on September 14, 2018, filed pursuant to Rules 3-2(1)(b) and 3-49 of The Queen’s Bench

Rules and s. 11 of The Queen’s Bench Act, 1998 [Ituna Application]:

1.

This Originating Application is brought pursuant to s. 11 of The Queen’s Bench

Act, 1998, SS 1998, c Q-1.01 and Queen’s Bench Rules 3-2(1)(b) and 3-49(1)(d) for the

determination of rights of the Applicant, Ituna Investment LP, (“Ituna”), pursuant to a

contract of life insurance bearing policy number 0490055657 (“Contract 657”) where the

Respondent, Industrial Alliance Insurance and Financial Services Inc. (“Industrial

Alliance”), is the insurer for said contract and Ituna is insured and beneficiary under said

contract. The Applicant seeks a declaratory order of those rights on terms that follow.

2.

In summary, the Applicant requests declaratory relief around two specific issues:

a. the ability of Ituna, as the insured, to allocate premiums when such

premiums are deposited to the Express Account (defined below) to the investment

option of its choosing and to likewise transfer account value within the Express

Account to the investment option of its choosing; and

b.

the ability of Industrial Alliance to reject premiums, and unilaterally

refund premiums on deposit in the Express Account.

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[219] The Ituna Application also contained requests for relief in respect of what Ituna defined

therein as the Term Allocation Contravention and the Rejection Contravention, which were

explained in the Ituna Application. On the whole of it, the Ituna Application sought the following

relief:

Relief Sought

50.

Ituna seeks the following relief from this Honorable Court:

a. a declaration on review of Contract 657 that:

(i) no clause therein prevents Ituna from continuing to contribute

premiums to Contract 657, as it has, for the purpose of obtaining rates of

return set out in Contract 657;

(ii)

there is no express or implied limit to the amount of premiums that

may be contributed under Contract 657 or on the amount that may be

accumulated in the Express Account, and Industrial Alliance may not

refuse to accept additional premiums, refund premiums, or refund amounts

that accumulate in the Express Account in absence of a request by the

insured;

(iii)

the GIA term lengths available in the Express Account for new

premiums are determine[d] according to the balance of the Express

Account immediately before the deposit (if there is value in the Express

Account immediately before the deposit, the GIA terms available are the

same as the most recent allocation; if there is no value in the Express

Account immediately before the deposit, the only GIA term available is

the 1 year term) as stated on p. 25 of Contract 657 and not, as asserted by

Industrial Alliance in its correspondence dated February 19, 2015, March

5, 2015, and April 10, 2015, determined by the fact that at some point the

balance in the Express Account was zero;

(iv)

Ituna may, within the Express Account, transfer account value

from one “Deposit Account” to another at the end of each policy month

and the GIA term lengths available are determined by dividing the then-

current Express Account Value by the then-current Maximum Premium as

stated on p. 25 of Contract 657 and not, as asserted by Industrial Alliance

in its correspondence dated February 19, 2015, March 5, 2015, and April

10, 2015, determined by the fact that at some point the balance in the

Express Account was zero;

(v)

for the policy year beginning August 20, 2016, the Maximum

Premium is equal to the amount transferred at the beginning of such policy

year from the Express Account to the Flex Account by Industrial Alliance

as reflected on the statement issued by Industrial Alliance on August 21,

2016, that is, $108.26;

(vi)

given the Express Account Value ($4,044,901.04) and Maximum

Premium ($108.26) as at August 20, 2016, Ituna had the ability to direct

premiums deposited to Contract 657’s Express Account and to transfer

account value in Contract 657’s Express Account to any and all of the 1,

2, 3, 4, 5 or 10 year GIAs; and

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(vii)

the insurer, Industrial Alliance, cannot read into the contract

and/or unilaterally impose its own rules as implied terms in Contract 657,

as it did in February of 2015, which fundamentally alter or derogate from

the obligations of the insurer or the rights of the insured under the

contract[.]

[220] Under the Ituna Decision, the Judge dismissed the whole of Ituna’s application for relief.

In its April 15, 2019, notice of appeal, Ituna appealed against only the following parts of the order

that resulted from the Ituna Decision:

2.

The following parts of the Judgment are being appealed:

(a) That portion of the Judgment where the learned Chambers judge found

that the investment opportunities in the standard form insurance contract, being a

Universal Life Insurance contract bearing policy number 0490055657 (“Contract

657”) issued by the Respondent, Industrial Alliance Insurance and Financial

Service Inc. (“Industrial Alliance”), including those in the Express Account, are

limited to investments to fund future possible payments of premiums, whereby

“premiums” means funds paid or invested to pay current and future costs of

insurance, related premium taxes, specified administration fees, and the permitted

accrual tax exempt savings destined for the Flex Account, and thereby concluding

that there is no Rejection Contravention as defined in the Amended Originating

Application;

(b)

That portion of the Judgment where the learned Chambers judge failed to

address the questions put to the Court with respect to the Term Allocation

Contravention, as defined in the Amended Originating Application, and in

concluding that there was no Term Allocation Contravention simply based on his

finding that there was no Rejection Contravention; and

(c)

That portion of the Judgment where the learned Chambers judge struck

those portions of the evidence (as set out in Schedule “A” to this Notice of Appeal)

of the life insured of Contract 657, Michael Hawkins, as appeared in his Affidavit

dated November 21, 2016, which accompanied the Originating Application, and

subsequent Reply Affidavit dated September 21, 2017.

b.

The Term Allocation Contravention

[221] Ituna says the Judge erred by refusing to consider what it calls the Term Allocation

Contravention and by declining to consider whether Ituna was entitled to have amounts held by

Industrial Alliance invested in a 10-year guaranteed interest account [GIA]. By Term Allocation

Contravention, Ituna refers to a period of time where it was making contributions under the

Zinkhan ULP and Industrial Alliance was depositing those funds into the side account. Ituna had

instructed Industrial Alliance to deposit its contributions in a 10-year GIA but, instead, Industrial

Alliance invested the funds in a 1-year GIA. The alleged “contravention” and Ituna’s position on

it are explained in detail in the Ituna Application:

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The Term Allocation Contravention

26. Ituna states that Industrial Alliance has refused to carry out the investment

allocation instructions with respect to the Express Account of Contract 657, and

unilaterally substituted its own instructions.

27.

Prior to February 19, 2015, Industrial Alliance followed the investment allocation

instructions of Ituna in relation to premiums deposited to the Express Account and transfer

requests in respect of amounts accumulated within the Express Account. The last

transaction that occurred without controversy was a January 5, 2015, premium of

$386,500.00, the bulk of which was allocated to the Express Account 10-year term GIA

pursuant to Ituna’s standing instructions.

28.

On February 19, 2015, Industrial Alliance advised Ituna that, in Industrial

Alliance’s view, Ituna was no longer entitled to direct payment of premiums into the 10-

year GIA within the Express Account on the basis that the only Express Account GIA

available to Ituna was the 1-year term GIA.

29.

Furthermore, by February 22, 2015, Industrial Alliance had unilaterally changed

Ituna’s previously issued automatic investment allocation instructions (namely, that

premiums deposited to the Express Account be made into the 10-year term GIA) such that

further premiums would conform with Industrial Alliance’s new and unilateral contract

amendment that, in Ituna’s view, is based on a flawed interpretation of Contract 657 and is

further contrary to s. 136(2) of The Saskatchewan Insurance Act.

30.

Industrial Alliance continued acting unilaterally in accordance with its

interpretation with respect to a February 26, 2015, contribution of premiums in the amount

of $65,000.00. Industrial Alliance refused to deposit this premium to the 10-year GIA on

the basis that the only Express Account GIA available to Ituna was the GIA bearing a term

of 1-year.

31.

Subsequent letters from Ituna dated March 5, 6, and 17, 2015, May 14, 2015, and

December 15, 17, 18, and 28, 2015, were unsuccessful in attempting to correct prior

investment allocations or transfer accumulated account value to the 10-year account, and

in attempting to reinstate Ituna’s original automatic investment instructions.

32.

Industrial Alliance’s refusal to carry out instructions and unilateral imposition of

its own instructions over those given by Ituna is referred to in this Application as the “Term

Allocation Contravention”.

…

Ituna’s Position

42.

Ituna states that Industrial Alliance’s unilateral actions as outlined above, being

the Term Allocation Contravention and the Rejection Contravention, are contrary to its

obligations to Ituna under Contract 657 as the insured and beneficiary. Ituna seeks a

declaration of its rights under Contract 657. Ituna states that it is proper for it to bring this

matter before the Court by Originating Application as it requires a determination of the

rights of the parties based solely on the interpretation of the contract of life insurance in

issue, being Contract 657. Section 11 of The Queen’s Bench Act, 1998, SS 1998, c Q-1.01,

provides jurisdiction to make a binding determination of such rights and obligations.

43.

Ituna states that Contract 657 on its face provides Ituna with rates of return for

investment funds that are advantageous relative to the same risk level in the current market

and which may be advantageous in the future. In addition to competitive rates, Contract

657 was acquired because of a number of features, including the absence of a maximum

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amount that could be invested at guaranteed rates, a permanent term for the operation of

such guarantees, and acceptable rights of withdrawal and liquidity.

44.

Ituna states further that Contract 657 is clear on its face as to the obligations of the

insurer. Industrial Alliance has now chosen not to honor those obligations.

45. Ituna states that nowhere in Contract 657 is there any limitation relating to the

“purpose” for which such policy is used. Contract 657 was a standard form contract of the

original insurer, National Life, and subsequently assumed by Industrial Alliance. Ituna

states that, at all material times from the date it became the insured under Contract 657 on

or about March 20, 2009, its actions were authorized under the contract and that, until the

Term Allocation Contravention and Rejection Contravention, Industrial Alliance had been

aware of and assented to such use by accepting the various premiums, investment

allocations, transfers and withdrawals in the ordinary course.

46.

Ituna states that Industrial Alliance’s position that the use of the policy for purposes

“other than insurance” is irrelevant and meaningless, given the clear and unambiguous

wording of Contract 657 as to what the product offers to its owner. Industrial Alliance’s

history of accepting large premiums and depositing them into the Express Account,

payment of significant returns, and dealings are testament to that.

47.

Ituna states that Industrial Alliance acted in contravention of its obligations

pursuant to Contract 657 by refusing to carry out instructions, namely, that Industrial

Alliance deposit amounts which Ituna was entitled to invest into the Express Account 10-

year GIA at that time and to later transfer amounts in the Express Account to the 10-year

GIA. Furthermore, Industrial Alliance’s subsequent and unilateral imposition of its own

automatic investment instructions over those given by Ituna, namely, to have premiums

allocated to the 10-year GIA, is in contravention of its obligations under Contract 657.

48.

Ituna states that, by its actions as articulated in the Torys Letter and otherwise,

Industrial Alliance has attempted to unilaterally alter the fundamental terms and obligations

of Contract 657.

49.

Ituna states that the facts relating to the dispute are not in issue, being: the wording

of Contract 657; the history of ownership, the premiums and the amounts deposited to the

Express Account; the Express Account Value; Industrial Alliance’s refusal to adhere to

Ituna’s allocation instructions for the Express Account and Industrial Alliance’s stated

reasons for doing so; Industrial Alliance’s refusal to accept further premiums, its refund of

deposited premiums and its unsolicited return of a large portion of the Express Account

Value.

The foregoing also refers to something called the Rejection Contravention, but the Judge’s

decision in that respect is not impugned by the Ituna Appeal.

[222] As noted, the Judge did not consider the Term Allocation Contravention but wrote (Ituna

Decision):

[232] Given my decision dismissing Ituna’s application for declarations as sought and

my underlying conclusion that the subject contract does not obligate Industrial Alliance to

accept payments from Ituna to access Express Account investment opportunities where

those payments do not have the essential character of being premiums as understood in the

context of the life insurance industry, it is not necessary for me to consider the submissions

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made by Ituna on these issues. Since Industrial Alliance is not required to do under the

contract what Ituna seeks to do, there has been neither rejection contraventions nor term

allocation contraventions as argued.

[223] In its Appeal, Ituna submits the Judge was required to address the Term Allocation

Contravention irrespective of his interpretation of the Zinkhan ULP. In its view, Industrial

Alliance’s position—i.e., that only a 1-year GIA was available—is contrary to the plain text of the

Zinkhan ULP. Even if the Zinkhan ULP is ambiguous in this regard, Ituna asserts the parties’

subsequent conduct under that contract is confirmatory of its position.

[224] For its part, Industrial Alliance says the Term Allocation Contravention issue became moot

once the Judge had decided that the Zinkhan ULP did not permit unlimited investment and,

therefore, the Judge properly declined to rule on the issue. Nonetheless, Industrial Alliance also

submits, irrespective of mootness, that the plain text of the Zinkhan ULP confirms that Ituna could

not invest under a 10-year GIA in the side account.

[225] As can be seen from all of this, the issues raised in respect of the so-called Term Allocation

Contravention, as framed under the Ituna Application and in Ituna’s notice of appeal, are more

akin to claims of breach of contract than they are to the “determination of rights that depend solely

on the interpretation of…a deed, will, contract or other instrument” (Rule 3-49(1)(d) of The

Queen’s Bench Rules, emphasis added). Had he not dismissed it outright, resolution of the Term

Allocation Contravention would have required the Judge to make findings of fact on the basis of

the evidence Ituna and Industrial Alliance had adduced and to interpret the Zinkhan ULP in light

of those findings of fact. For this reason, we decline to exercise the discretion reposed in the Court

pursuant to Rule 3-49 of The Queen’s Bench Rules in respect of the Term Allocation Contravention

on the basis that the relief sought is not truly declaratory in nature or because Ituna seeks relief

that is better addressed after a trial in proceedings commenced under a statement of claim. In our

assessment, and notwithstanding that both parties to this appeal suggest the Court may address the

Term Allocation Contravention solely on the basis of the terms of the Zinkhan ULP, we find the

Ituna Application is an attempt to claim breach of contract against Industrial Alliance, albeit Ituna

has had to foreswear its claim for damages to do so, and we decline to grant the declaratory relief

requested.

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c.

The Zinkhan ULP and its Interpretation

[226] In its appellant factum, Ituna submits:

… The Court must determine whether there is a limit on the total premiums that can be

deposited to the Express Account, or on the total value that can accumulate within the

Express Account and, if so, how each of those limits are calculated.

[227] While the Zinkhan ULP is similar to the de Bruin ULP and the Walkom ULP in terms of

its structure, its text differs more markedly from those other ULPs than they do from each other.

Accordingly, the purpose of the Zinkhan ULP, the nature of the relationship it creates, and the

market or industry in which it operates may differ from the de Bruin ULP and the Walkom ULP

because, in this case, those interpretive factors are derived from the text of the contract. Although

we have concluded that the interpretation of standard form contract language has precedential

value, we find that the language of the Zinkhan ULP is not the same or sufficiently similar to the

corresponding language in the de Bruin ULP or the Walkom ULP to be given the same

interpretation without examination.

[228] The parties have asserted, and we agree, that ascertaining the meaning of the word premium

as it is used in the Zinkhan ULP is key to its interpretation and is, therefore, fundamental to

answering the Ituna Appeal. In this regard, our objective is to ascertain consensus ad idem on the

basis of the words that were chosen by National Life and Mr. Zinkhan. We look first to the contract

text to determine its meaning. If the mutual intention of the original parties is plain and obvious

on the text of the contract, then we must give effect to it in our interpretation.

[229] In terms of its constituent parts, the Zinkhan ULP describes the contract between

Mr. Zinkhan and National Life as follows:

Contract:

The entire contract between the parties consists of the Illustration Supplement Page used

as part of the application, the application, and this policy, along with any endorsements or

riders attached to the policy. We are bound only by statements in the contract.

Only our President or a Vice-President may agree with a Policyowner to modify this policy.

Any such modification must be in writing.

(Zinkhan ULP at 4)

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i.

Premium

[230] We are again aware of the dictionary definitions of the word premium and the industry

meaning of that word as found by the Judge. We conclude an industry meaning of premium is of

no assistance because Mr. Zinkhan was not an industry participant and because the ULP is not a

commercial contract. If either of those factors had been present, they would have called for

consideration of a broader factual matrix that included things known or that ought to have been

known to participants in the insurance or financial services industries, or the industry to which the

insurance related.

[231] We find the word premium, as it is used throughout the Zinkhan ULP, has the ordinary

meaning given to it by its dictionary definition, namely, an amount paid for or to maintain a

contract of insurance. Our interpretation is based primarily on the following provisions:

Planned Premium:

This amount is shown in the Policy Schedule of the policy. It is the amount we will bill you

as a premium for this policy. You may change the Planned Premium at any time after the

first Policy Year.

Minimum Premium:

This amount is shown in the Table of Factors in the policy. During the first five Policy

Years, the sum of the premiums paid less withdrawals, Disability Benefit Payouts, and

outstanding Policy Loans and interest thereon, must equal or exceed the Cumulative

Minimum Premium. After the first five Policy Years, a premium is required only if the Total

Account Value is not sufficient to pay the Total Monthly Deduction at the beginning of any

Policy Month or if outstanding Policy Loans and interest thereon exceed the Loanable

Value of the Policy. If either condition is not met, this policy will lapse as described in the

Lapse provision. The Minimum Premium will be adjusted to reflect any future addition,

deletion or changes in any Benefits or Riders or any change in rate class, and any change

in Premium Tax as required by legislation.

Cumulative Minimum Premium:

The Cumulative Minimum Premium is the sum of the monthly Minimum Premiums since

the Policy Year Date.

Maximum Premium:

This is the maximum premium that can be deposited into this policy, during a Policy Year,

while maintaining the accrual tax exempt status of the policy. This amount will be

calculated by the Company at each Policy Anniversary for the upcoming policy year. For

the first Policy Year, this amount is shown in the Table of Factors.

(Zinkhan ULP at 2–3, emphasis added)

Premium Payments:

The first premium payment under this policy is due on the Policy Year Date. Subsequent

premium payments may be made at any time, while this policy is in force, as long as

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premium requirements are met. You may elect to have billing notices sent to you on an

annual, semi-annual or quarterly basis; alternatively, we will make monthly withdrawals

against a bank account as you designate and authorize.

…

Grace Period:

There will be a Grace Period of 30 days after the Lapse Date during which time the policy

continues in force. If death occurs during the Grace Period, the Death Benefit will be

reduced by the total of the Monthly Deductions which were due during the Grace Period.

After the Grace Period, the policy terminates, unless sufficient premium has been paid to

keep the policy in force.

(Zinkhan ULP at 5, emphasis added)

Reinstatement:

This policy may be reinstated any time within two years of the Lapse Date. Reinstatement

will be subject to the following requirements:

a) written application for reinstatement,

b) satisfactory evidence of insurability of the Life Insured, and

c) payment of a premium sufficient to cover:

i) if the Reinstatement Date is before or at the fifth Policy Anniversary, the

Minimum Premium divided by 12, then multiplied by the number of Policy

Months since the Lapse Date or, if the Reinstatement Date is after the fifth

Policy Anniversary, all the Monthly Deductions that would have been

taken during the period since the Lapse Date, plus

ii) the Monthly Deductions due in the Policy Month following the

Reinstatement Date, plus

iii) any outstanding policy loans, plus

iv) interest on these amounts at a rate to be determined by us.

The Account Value in any Investment Account as of the Reinstatement Date will be the

same as such balance at the Lapse Date.

The Reinstatement Date will be the end of the Policy Month coincident with or next

following our approval of the application for reinstatement.

(Zinkhan ULP at 6, emphasis added)

Limitations:

a) If you have elected the T100 Insurance Factor, the only Coverage Option available is

the Adjusted Cost Basis Option.

b) If you have elected the Minimized Sum Insured Pattern, the only Coverage Option

available is the Adjusted Cost Basis Option.

c) If you have elected the Increasing Sum Insured Pattern, you may not elect the Return of

Premium Option.

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Coverage Options:

a) Adjusted Cost Basis

The Option Amount will be the greater of zero or:

i) the total of all premiums paid up to the Maximum Premium for each Policy Year

from the Issue Date for this policy; less

ii) the sum of the Net Cost of Pure Insurance for each Policy Month since the Issue

Date.

The Net Cost of Pure Insurance for a Policy Month is the sum of the Net Amount at Risk,

as defined in the Monthly Deductions provision, plus the Sum Insured of the Flex 10

multiplied by the mortality factor for that Policy Year, as defined in the income Tax Act

and Regulations, divided by 12. If there are any Additional Life Flex 10 Riders, the Sum

Insured for each rider would also be multiplied by the mortality factor for that Policy Year,

divided by 12, and the Net Cost of Pure Insurance for each rider would be added.

b) Return of Premium

The Option Amount in the first effective Policy Month will be the initial premium paid for

the policy, up to the Maximum Premium. In any subsequent Policy Month, the Option

Amount will be the sum of all premiums paid for this policy up to the Maximum Premium

in each Policy Year since the Issue Date.

c) Indexed

There are two indexed options. For each of these, the Option Amount is determined at the

beginning of each Policy Year and will be level for that Policy Year. In the first effective

Policy Year the Option Amount is zero. In no case will the increase in Option Amount

from one Policy Year to the next be greater than 8% of the Sum Insured in the previous

year.

i) Consumer Price Index

In each Policy Year after the first effective Policy Year and until the Last Index

Date as shown in the Policy Schedule, the Option Amount will be the Initial Sum

Insured multiplied by one less than the ratio of the Consumer Price Index in effect

90 days prior to the first day of the current Policy Year divided by the Consumer

Price Index in effect 90 days prior to the Issue Date of this policy. In each Policy

Year after the Last Index Date the Option Amount will be level at the amount

determined at the Last Index Date. The Consumer Price Index referred to above is

the Consumer Price Index for Canada, as published by Statistics Canada under the

authority of the Statistics Act. If the Consumer Price Index is revised to a new

basis, any subsequent determination of the percentage change in the Consumer

Price Index under this Coverage Option shall be made with the applicable values

of the Consumer Price Index expressed on the new basis. That is, the calculation

will be as follows:

Option Amount = Initial Sum Insured x {(CPI, current year/CPI, Issue Date) – 1}

ii) Fixed

In each Policy Year after the first effective Policy Year and until the Last Index

Date as shown in the Policy Schedule, the Option Amount will be the Initial Sum

Insured multiplied by one less than one plus the Index Rate, as shown in the Policy

Schedule, raised to the exponent of the number of complete Policy Years since the

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Issue Date. In each Policy Year after the Last Index Date the Option Amount will

be level at the amount determined at the Last Index Date. That is, the calculation

will be as follows:

Option Amount = Initial Sum Insured x {(1 + Index Rate)^{(number of Years)}– 1}

(Zinkhan ULP at 9–10, emphasis added)

PREMIUMS, INVESTMENT ACCOUNTS AND PROCESSING

Premiums:

A Maximum Premium is set annually. Any premium received, over the Maximum Premium,

will be deposited to the Express Account. On the next Policy Anniversary it will be

transferred to the policy, if possible to do so while retaining the accrual tax exempt status

of the policy.

When a premium, up to the Maximum Premium, is either received from the Policyowner

or is transferred from the Express Account, the Premium Tax shown in the Table of Factors

is deducted. The Premium Tax rate will not change unless a change is required by

legislation.

The premium, less the applicable Premium Tax, is called the Net Premium. The Net

Premium is allocated to one or more Investment Accounts as per your specifications or,

lacking your instructions, per the specification within this contract.

The Net Premium required to maintain this Flex Account policy in force depends on: the

insurance coverage options chosen; the Minimum Premium; the amount of premium paid;

when premium is paid; the Investment Accounts chosen; and the interest earned by those

Investment Accounts.

For the first five Policy Years the premium paid, less the total of any

withdrawals, Disability Benefit Payouts, and outstanding Policy Loans

and interest thereon, must be at least equal to the Cumulative Minimum

Premium; and, if paid, the policy will remain in force during this period

despite any adverse interest returns. If the actual interest earned is less

than the interest assumed in your Flex Account Illustration, you may

need to increase premium payments and/or pay premiums for a longer

period than illustrated. This would be required if, at any time after the

first five Policy Years, the Total Account Value is not sufficient to pay

the Total Monthly Deductions required to keep this policy in force.

Investment Accounts:

There are currently 15 Investment Accounts available. There may be other Investment

Accounts made available from time to time. The initial allocation for Net Premiums among

these Investment Accounts is specified in the application. If you do not specify the

Investment Account Allocation, premiums will be allocated to the Daily Interest Account.

The initial allocation is shown in the Policy Schedule.

…

At the end of the guaranteed interest period, the amount in a Guaranteed Interest Account

plus interest accumulated will be reinvested in a Guaranteed Interest Account for the same

term.

You may change the allocation of new Net Premiums being credited to the policy or the

reinvestment amounts from any of the Guaranteed Interest Accounts, at any time, by

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providing written notification to the Company. This change will be effective from the date

notification is received at the Head Office.

You may transfer all or a portion of the Account Value from any Investment Account to

any other Investment Account at any time by notifying us in writing. The first four such

transfers in any Policy Year are free of any transfer fees. For each subsequent request, we

will deduct a $25 transfer fee from the amount requested to be transferred and credit the

balance to the specified Investment Account.

If an amount is transferred from a Guaranteed Interest Account prior to the end of the

guaranteed interest period of that Account, a Market Value Adjustment, as described under

the section on Policy Values, will apply.

(Zinkhan ULP at 13–14, emphasis added)

Lapse:

During the first five Policy Years, the policy remains in force only if the total of the

premiums paid for the policy, less the total of the withdrawals, Disability Benefit Payouts,

and outstanding Policy Loans and interest thereon, is at least equal to the Cumulative

Minimum Premium. During this period, the policy Account Value cannot be used to keep

the policy in force if the Minimum Premium condition has not been met. However, if the

Minimum Premium condition, as described above, has been met, the policy will remain in

force even if the Account Value is insufficient to cover monthly deductions.

During the first five Policy Years, the Lapse Date is the date at the end of the proportionate

part of the month that premiums paid less withdrawals, any Disability Benefit Payouts, and

Policy Loans, cover the Minimum Premium due to date. At the end of the fifth Policy Year,

additional premium may be required to settle outstanding Total Monthly Deduction

amounts from the first five Policy Years.

After the first five Policy Years, the policy is in force as long as, a) outstanding Policy

Loans and interest thereon do not exceed the Loanable Value of the Policy, and b) the Total

Account Value is sufficient to pay the Total Monthly Deduction at the beginning of each

Policy Month. If there is insufficient value to pay the deduction, or to restore the required

ratio of Policy Loan to Loanable Value, the policy will lapse. The Lapse Date is the date

at the end of the proportionate part of the month relative to the portion of the Total Monthly

Deduction that is covered by the Total Account Value or, if there are outstanding Policy

Loans, to the portion of the Total Monthly Deduction that is covered by the Total Loanable

Value. The policy will enter the 30-day Grace Period on the day after the Lapse Date.

(Zinkhan ULP at 20, emphasis added)

EXPRESS ACCOUNT

As indicated in the Premiums provision, any amounts received above the Maximum

Premium in effect for that Policy Year will be deposited to the Express Account. This is a

premiums on deposit account, from which transfers will be made to and from the Flex

Account policy.

Deposit Accounts:

At issue, Deposit Accounts with the same investment options as are available for the

Investment Accounts under the Flex Account policy, are available for the Express Account,

except that the term of the Guaranteed Investment Accounts available may be limited. The

maximum term will be determined by dividing the deposit being made into the Express

Account by the first year Maximum Premium; Guaranteed Interest Deposit Account terms

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available are those not longer than that result. Deposit Accounts are selected in the

application and shown in the Policy Schedule. If no Deposit Accounts are selected, deposits

will be made to the Daily Interest Account.

…

Transfer Premiums:

Transfer Premiums are amounts transferred from the Express Account to the Flex Account

policy.

At each Policy Anniversary, immediately after the Maximum Premium for the next Policy

Year is determined, a transfer will be made, if possible, from the Express Account to the

Flex Account. The amount of the Transfer Premium will be the lesser of the Express

Account Value, or the Maximum Premium for the next Policy Year.

The amount will be deducted pro-rata from all Deposit Accounts in the Express Account.

Transfer Deposits:

Transfer Deposits are amounts transferred from the Flex Account policy to the Express

Account at the end of the Policy Year. The amount will be determined as necessary to keep

the policy exempt from accrual taxation.

The Transfer Deposit will be allocated to the Deposit Accounts according to the most

recent allocation, including the limitations on the terms of the Guaranteed Interest Deposit

Accounts available.

…

Surrender:

If the Flex Account policy is surrendered, the Express Account will also be surrendered.

The value that you receive will be the Net Express Account Value.

Withdrawal:

Any withdrawals requested will be deducted first from the Net Express Account Value.

The same provisions apply on the number and order of withdrawals as are specified in Flex

Account Withdrawals. The Deposit Account Value in any particular account will be

reduced by the amount withdrawn from that Account, including any applicable Market

Value Adjustments and/or Surrender Charge. During the first two Policy Years, the Total

Sum Insured of the policy will be reduced by the total amount withdrawn from all Deposit

Accounts.

(Zinkhan ULP at 26–27, emphasis added)

[232] In addition, we observe that seven of the eight descriptions in the Zinkhan ULP of the types

of “Market Index Account” available for investment purposes, whether under the exempt account

or side account, contain identical wording to the following effect: “The interest rate will apply to

the Account Value at the last Rate Setting Date plus all net premiums allocated to the Account,

less all withdrawals and any Disability Benefit Payouts, since the last Rate Setting Date” (at 15–

17, emphasis added). The description of the eighth Market Index Account, called the “Balanced

Account”, contains different but similar wording: “The resulting weighted average rate will apply

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to the Account Value at the last Rate Setting Date plus all net premiums allocated to the account,

less all withdrawals and any Disability Benefit Payouts, since the last Rate Setting Date” (at 17,

emphasis added).

[233] In the context in which premium is used in all of the foregoing provisions of the Zinkhan

ULP, the word has no broader meaning than its ordinary dictionary definition. Throughout the

Zinkhan ULP, the word premium is most often used in the way that is consistent with its dictionary

definition. This interpretation is heavily influenced by the fact that the Zinkhan ULP uses defined

terms, such as Planned Premium, Net Premium, Maximum Premium, Monthly Deduction, Net Cost

of Pure Insurance, or Insurance Charge, that include the undefined word premium in a context

consistent with its dictionary definition as the cost of acquiring or maintaining a policy of

insurance. Important to this interpretation is how the word policy is used in the Zinhan ULP, which

refers to the policy of life insurance under the ULP; whereas, when the ULP refers to the full

contractual arrangement between the parties, it uses the defined term contract. Put another way,

on the basis of the whole of the text of the Zinkhan ULP, including its purpose, the nature of the

relationship it creates, and the market or industry in which it operates, we are unable to find or

infer any broader meaning of the word premium than its ordinary dictionary definition.

[234] Where the Zinkhan ULP speaks specifically to the side account investment aspects of the

ULP, it sometimes uses words other than premium to refer to funds, such as “deposits”, “amounts”,

“withdrawals” or Express Account Value. Critically, the undefined word premium is used in the

Zinkhan ULP in the context of the amounts being held or invested within the side account in a way

that is directly tied to its dictionary definition or consistent with a reference to the insurance aspect

of the contract.

[235] Of particular note, Planned Premium is the amount the insurer will “bill” the insured “as a

premium” for the life insurance policy (at 2). Unlike the other two ULPs, the Zinkhan ULP

describes payments in excess of the Planned Premium as a “subsequent premium payment” that

is payable at any time while the policy is in force, “as long as premium requirements are met” (at

5, emphasis added). Later, the ULP provides that “[a]ny premium received, over the Maximum

Premium, will be deposited to the Express Account [i.e., the side account]” and, on the next Policy

Anniversary, “it will be transferred to the policy, if possible to do so while retaining the accrual

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tax exempt status of the policy” (at 13, emphasis added). The ULP reiterates under the side account

provisions that “any amounts received above the Maximum Premium in effect for that Policy Year

will be deposited to the Express Account” (at 26, emphasis added). This statement is immediately

followed by the explicit qualification that “This [namely, the side account] is a premiums on

deposit account, from which transfers will be made to and from the Flex Account [i.e., the exempt

account] policy” (at 26).

[236] Taken together, all of this language in the Zinkhan ULP precludes an interpretation that

would plausibly allow for a stand-alone investment purpose. It expressly states that the side

account is a “premiums on deposit account” from which “transfers will be made to and from the

Flex Account policy” (at 26). The phrase “premiums on deposit” weighs heavily in the balance

when determining the contractual meaning of premium as it is used in the ULP. It supports the

conclusion that the side account is a depository for pre-paid premiums until they are transferred to

the exempt account. In our assessment, this cannot be characterised as a redundancy or superfluous

language given the context of the ULP as a whole. As noted, the clause in which these words are

found itself goes on to describe transfers to and from the side account in a way that is consistent

with the interpretation of premium as an amount paid to maintain the accrual-tax exempt status of

the insurance aspect of the contract. While there is an element of bilateral corroboration in this

analysis, the reasoning is not circular; it is a conclusion driven by the gestalt of the ULP.

[237] In terms of transfers to and from the side account, under the Transfer Premiums provision,

funds that flow from the side account to the express account are simply described as “amounts

transferred”, although the heading retains the word premium. The timing of the calculation of the

amount of a Transfer Premium is, however, undoubtedly tied to the insurance aspect of the

Zinkhan ULP because it is made on the Policy Anniversary, immediately after the insurer has

determined the Maximum Premium for the next Policy Year. The amount itself is calculated to be

the lesser of the value of the side account or the Maximum Premium for the next Policy Year. We

acknowledge there is room to argue that this language does not cap the amount an insured may

pay into the side account. But the shoe is on the other foot in that argument (given the overall

language of the Zinkhan ULP) and, at best, we might say that the argument calls for the Court to

draw an inference from the text of the contract that is not directly supported by it. Or, we would

have to read words into the Zinkhan ULP, which is not permitted.

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[238] On the other side of this transfer equation, Transfer Deposits are amounts transferred from

the exempt account to the side account. These amounts are also transferred at the end of the Policy

Year. For interpretational purposes, the amount of a Transfer Deposit is determined “as necessary

to keep the policy exempt from accrual taxation” (at 26).

[239] Overall, we conclude that the text of the Zinkhan ULP does not plausibly support the

existence of a free-standing investment opportunity under the side account—i.e., one that is

divorced from the insurance aspect of the ULP. To the contrary, the language of the whole of the

ULP compellingly supports an interpretation of the word premium that is consistent with its

ordinary dictionary definition and an interpretation of the side account function as being tied to

the insurance aspects of the contract.

[240] Furthermore, we see nothing in the Zinkhan ULP that would broaden the relationship

created under it beyond its insurance purpose. In terms of an investment purpose, nothing in the

Zinkhan ULP speaks directly or indirectly to an insured’s right to control amounts that may be

contributed to the insurer for investment purposes. The closest the Zinkhan ULP comes to this

concept is when it states that an insured “may change the Planned Premium at any time after the

first Policy Year” (at 2), thereby allowing an insured to prepay more quickly the cost of insurance.

While the additional amounts so paid would be invested in the side account, those investments are

earmarked under the ULP to pay the future cost of insurance and they, therefore, have an insurance

purpose.

[241] In short, on our reading of the Zinkhan ULP, National Life chose to use the word premium

in a way that means payments to be made by the insured to the insurer to maintain the life insurance

policy aspects of the ULP and Mr. Zinkhan entered the contract on that basis.

[242] As we have acknowledged, the interpretation of premium put forward by Ituna is arguable,

but we do not find it reasonable. We are unable to interpret the word to mean more than its ordinary

dictionary definition on the basis of the text of the Zinkhan ULP, its purpose, the nature of the

relationship it creates, and the market or industry in which it operates. To be clear, we find the

context in which premium is used in the text of the ULP itself, not from the application of the

industry-known meaning of that word or other industry knowledge in the interpretation of its text.

Page 111

[243] Furthermore, the factors that Ituna would have us bring to bear so as to broaden the

interpretation are external to the text of the Zinkhan ULP because they relate, chiefly, to matters

of the current parties’ post-contract conduct. To extend the meaning of premium in the way Ituna

proposes requires the admission and application of the evidence it sought to adduce regarding how

Industrial Alliance has treated investments made under the side account after the ULP had been

assigned to Ituna. The appeal before us does not, however, give rise to a circumstance where such

evidence might be relevant to or admissible in respect of the issues of standard form contract

interpretation before the Court. Ituna’s interpretation also requires some specialised knowledge of

the financial services industry and insurance industry and Mr. Zinkhan was not a participant in

either of those industries. But, even if all of this evidence was properly admissible and brought to

bear, it would give rise to interpretive friction of the nature Rothstein J. found unacceptable in

Sattva, where he said surrounding circumstances “must never be allowed to overwhelm the words

of [the] agreement” and that interpreting courts “cannot use [surrounding circumstances] to deviate

from the text such that the court effectively creates a new agreement” (at para 57).

[244] For these reasons, we find Ituna’s interpretation is not reasonable. We conclude there is no

true ambiguity in the contested language of the Zinkhan ULP in this respect. The word premium

in the ULP simply means amounts contributed by the insured to the insurer in respect of the life

insurance policy aspect of the ULP.

[245] In terms of the declaratory relief Ituna sought at the Court of Queen’s Bench, based on our

interpretation of the word premium and the ULP as a whole, although we differ in our approach to

the interpretation of the Zinkhan ULP, we agree with the Judge’s conclusion in that regard. We

are unable to declare that the Zinkhan ULP permits unlimited, stand-alone investment under the

side account.

ii.

Premium Refunds

[246] Under the second of the interpretational issues raised in the Ituna Appeal, Ituna submits

the Judge erred in law because he failed to consider whether Industrial Alliance could return

premiums it had previously accepted or could refund amounts invested in the side account. In this

regard, Ituna interprets the absence of permissive wording in the Zinkhan ULP as an implied

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prohibition against Industrial Alliance returning or refunding such amounts. Ituna submits that

subsequent conduct evidence supports this interpretation.

[247] In response, Industrial Alliance submits that the Judge’s failure to address this issue was

not a remediable oversight on his part but understandably resulted from his finding that Ituna had

no contractual right to “overfund” the side accounts in the first place. In other words, Industrial

Alliance says the Judge was not obliged to consider the issue and, therefore, did not err. Much of

Industrial Alliance’s response, if the Judge did err in this way, is focused on dispelling an

interpretation of the contract based on subsequent conduct evidence, which, as we have found, is

not admissible in the context of this issue of standard form contract interpretation.

[248] On the whole of it, the Zinkhan ULP is not ambiguous in relation to this issue and it does

not have the interpretation that Ituna would attribute to it. The ULP does not contain a provision

that permits the insurer to refund or return premiums to the insured; however, it also lacks a

provision that prohibits the insurer from doing so. The Zinkhan ULP does not deal with the receipt,

return or application of payments to the insurer that do not fall within the terms of the contract

whatsoever. There are contractual provisions that address the voluntary “withdrawal” of premiums

by the insured (Zinkhan ULP at 22 and 27). However, unlike the de Bruin ULP and the Walkom

ULP, there are no provisions in the Zinkhan ULP that even indirectly relate to the refund or return

of premiums initiated by the insurer.

[249] That said, one provision of the Zinkhan ULP is actually headed Return of Premium but the

text of the provision itself does not address the circumstance described in its heading or at issue in

this appeal:

b) Return of Premium:

The Option Amount in the first effective Policy Month will be the initial premium paid for

the policy, up to the Maximum Premium. In any subsequent Policy Month, the Option

Amount will be the sum of all premiums paid for this policy up to the Maximum Premium

in each Policy Year since the Issue Date.

(Zinkhan ULP at 9)

[250] In the narrow context of a request for declarations as to rights “that depend solely on the

interpretation of…[a] contract” pursuant to Rule 3-49(1)(d)(i) of The Queen’s Bench Rules, we are

simply not able to declare that the Zinkhan ULP may be interpreted as prohibiting the insurer from

refunding or returning premiums. Nor can we conclude that the original parties did not reach

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consensus ad idem on this point. Furthermore, the question asked of us has a narrow focus due to

the nature of a Rule 3-49(1)(d)(i) application, which precludes arguments made on the basis of

equitable remedies, such as forbearance or waiver, and, to be clear, no arguments of that nature

were put forward in this appeal.

[251] The Zinkhan ULP is a life insurance policy under which premiums are paid and may be

prepaid to satisfy the cost of the life insurance. At the point when the full cost of the life insurance

over the term of the policy has been prepaid by an insured, no provision of the Zinkhan ULP

confers a contractual right or imposes a contractual duty on the insured to make further premium

payments to Industrial Alliance. Conversely, no provision of the Zinkhan ULP gives Industrial

Alliance a contractual claim to further premiums or imposes a contractual duty on Industrial

Alliance to retain any further premiums it receives from an insured.

[252] In this appeal, Ituna has essentially asserted an interpretation of the Zinkhan ULP under

which Industrial Alliance must keep the excess funds it received and invest those funds in the side

account. However, at the point when the full cost of the life insurance over the term of the policy

has been prepaid by an insured, the insured can no more force an insurer to keep and apply excess

premiums in a specific way than the insurer could compel the insured to accept additional

insurance for the excess amounts so received. Rather, in the absence of a contractual provision

addressing the circumstance, the insured has a right to recover the excess premiums it has paid as

a debt owing to it by the insurer and the insurer has a right and duty to repay to the insured the

amount it received over and above the insured’s contractual obligations under the policy.

[253] We note that in Kropelyn v Federated Life Insurance Company (1984), 8 DLR (4th) 311

(BCSC), citing Poindexter v Equitable Life Assur. Soc. of U.S., 34 SE (2d) 340 (1945)

[Poindexter], the court concluded that an overpayment of premiums constituted a debt owing from

the insurer to the insured, signifying that such amounts falls outside the terms of the policy. Given

that the Zinkhan ULP does not contemplate overpayments, the rights and obligations of Ituna and

Industrial Alliance relating to such amounts are based on extra-contractual legal and equitable

principles. However, for the purpose of the question put to us, we need not decide whether the

parties’ respective rights and obligations are entirely akin to those that arise under a debtor-creditor

relationship.

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[254] It should be noted that, in some circumstances, the payment and receipt of excess premiums

may be seen as resulting from a mutual mistake, raising no blame against either party (Poindexter

at 346). While this issue under the Ituna Appeal cannot be said to have resulted from a mutually

mistaken interpretation of the Zinkhan ULP, that fact does not affect our analysis or our

conclusion.

[255] For these reasons, we conclude that the Zinkhan ULP does not preclude the refund or return

of premiums paid in excess of the total cost of the life insurance over the term of the policy.

d.

Disposition by this Court

[256] In sum, based on our interpretation of the Zinkhan ULP, and although we have approached

its interpretation differently than did the Judge, we reach substantially the same conclusions as the

Judge. Therefore, we dismiss the Ituna Appeal.

D.

The Cross-Appeals on the Regulation

1. Background

a. Context

[257] On October 26, 2018, about a month after the Judge had heard these matters and while he

still had them under reserve, the Lieutenant Governor executed Order in Council 517/2018,

enacting the 2018 Regulation pursuant to s. 467 of The Insurance Act, 1978, as an amendment to

The Saskatchewan Insurance Regulations, 2003, RRS c S-26 Reg 8 (now repealed). The 2018

Regulation states that “no licensed insurer shall receive or accept for deposit funds or payments in

excess of the amount required to pay the life insurance premium for the eligible period”. It

ostensibly prohibits licensed insurers from using a contract for life insurance as an investment

vehicle for insureds independent of its life insurance purpose. Given this, the Judge asked the

parties to make further submissions regarding the interpretation of the 2018 Regulation and its

application to the issues before him, which they did.

[258] In each of his decisions, the Judge found the 2018 Regulation was not declaratory of what

the law is and always has been but rather it was “only prospective”. He reached this conclusion

because he found the Lieutenant Governor did not have the authority under The Insurance Act,

Page 115

1978 to make retroactive or retrospective regulations. That is, if the 2018 Regulation were intended

to be retroactive or retrospective, then it would be ultra vires the Lieutenant Governor’s authority

to make regulations under The Insurance Act, 1978.

[259] Elmer A. Driedger, in “Statutes: Retroactive Retrospective Reflections” (1978) 56 Can Bar

Rev 264 at 268–269 [Driedger Article], described the differences among retroactive, retrospective

and prospective laws in these simple terms (adopted in Benner v Canada (Secretary of State),

[1997] 1 SCR 358 at para 39):

A retroactive statute is one that operates as of a time prior to its enactment. A retrospective

statute is one that operates for the future only. It is prospective, but it imposes new results

in respect of a past event. A retroactive statute operates backwards. A retrospective statute

operates forwards, but it looks backwards in that it attaches new consequences for the

future to an event that took place before the statute was enacted. A retroactive statute

changes the law from what it was; a retrospective statute changes the law from what it

otherwise would be with respect to a prior event.

(Emphasis in original)

[260] At the time of the Judge’s decisions in these matters, the 2018 Regulation read:

3.1(1) In this section:

(a)

‘eligible period’ means the period commencing on the day on which a

contract for life insurance takes effect and ending on the day on which the last

person whose life is insured by the contract reaches the age of 120;

(b)

‘life insurance premium’ means the premium under a contract for life

insurance but does not include any amount paid, transferred, credited or deposited

to a side account;

(c)

‘side account’ means an account associated with a life insurance policy

that holds amounts in excess of the maximum amount permitted to be held in a life

insurance policy that is exempt from accrual taxation pursuant to the Income Tax

Act (Canada);

(d)

‘variable insurance contract’ means:

(i) an annuity or a life insurance policy with respect to which all or

any part of the reserves vary in amount with the market value of a specified

group of assets segregated from the other assets of the insurer; or

(ii)

a life insurance policy that permits the holder to participate in the

profits of the insurer.

(2)

Subject to subsection (3), for the purposes of section 34 of the Act, with respect to

a contract for life insurance, during the eligible period:

(a)

no licensed insurer shall receive or accept for deposit funds or payments

in excess of the amount required to pay the life insurance premium for the eligible

period; and

Page 116

(b)

with respect to a contract for life insurance that is not exempt from accrual

taxation pursuant to the Income Tax Act (Canada), no licensed insurer shall receive

or accept for deposit funds or payments in excess of the life insurance premium

required to keep the contract for life insurance in force until the end of the eligible

period.

(3)

(4)

This section does not apply to a variable insurance contract.

Each contract for life insurance issued by a licensed insurer is deemed to contain

the restrictions set out in this section.

[261] However, between then and when this Court heard the cross-appeals, the Legislature

repealed The Insurance Act, 1978 and replaced it with The Insurance Act, 2015—effective

January 1, 2020. The Regulation remains in force under The Insurance Act, 2015 as s. 2-5.1 of the

Insurance Regulations, albeit with a few consequential amendments, such that the 2020 Regulation

reads:

Prohibited activity

2-5.1(1)In this section:

“eligible period” means the period commencing on the day on which a contract

of insurance for life insurance takes effect and ending on the day on which the last

person whose life is insured by the contract reaches the age of 120;

“life insurance premium” means the premium under a contract of insurance for

life insurance but does not include any amount paid, transferred, credited or

deposited to a side account;

“side account” means an account associated with a life insurance policy that holds

amounts in excess of the maximum amount permitted to be held in a life insurance

policy that is exempt from accrual taxation pursuant to the Income Tax Act

(Canada);

“variable insurance contract” means a variable insurance contract as defined in

section 3-8 of the Act.

(2)

Subject to subsection (3), for the purposes of clause 2-28(1)(e) of the Act, with

respect to a contract of insurance for life insurance, during the eligible period:

(a) no licensed insurer shall receive or accept for deposit funds or payments

in excess of the amount required to pay the life insurance premium for the eligible

period; and

(b)

with respect to a contract of insurance for life insurance that is not exempt

from accrual taxation pursuant to the Income Tax Act (Canada), no licensed insurer

shall receive or accept for deposit funds or payments in excess of the life insurance

premium required to keep the contract of insurance for life insurance in force until

the end of the eligible period.

(3)

(4)

This section does not apply to a variable insurance contract.

Each contract of insurance for life insurance issued by a licensed insurer is deemed

to contain the restrictions set out in this section.

Page 117

[262] In its most relevant part, the 2018 Regulation was expressed to have been made for the

purposes of s. 34 of The Insurance Act, 1978, which set standards that every licensed insurer had

to meet:

Certain standards to be met

34(1) Every insurer who is a licensee shall comply with the conditions, including

conditions respecting solvency, capital and other financial standards, prescribed in the

regulations.

(2)

No insurer who applies for a licence is entitled to be issued a licence unless it has

complied with the conditions, including conditions respecting solvency, capital and other

financial standards, prescribed in the regulations.

[263] That same part of the 2020 Regulation is now expressed to have been made for the purposes

of s. 2-28(1)(e) of The Insurance Act, 2015, which prohibits licensed insurers from engaging in

certain activities:

Prohibited activities

2‑28(1) Except as permitted pursuant to this Act and the regulations, no licensed insurer

shall:

(a)

carry on business as an information management corporation, except in

relation to the main business of an insurer;

(b)

(c)

(d)

carry on business as a financial leasing corporation;

accept deposits;

carry on the business of offering services to the public as or accepting or

executing the office of executor, administrator, trustee or guardian; or

(e) carry on any other prescribed activity.

Nothing in this section prevents a subsidiary of a licensed insurer from engaging

(2)

in the activities described in subsection (1).

[264] As to the source of the Lieutenant Governor’s authority to make the 2018 Regulation, The

Insurance Act, 1978 sets forth a broad regulation-making authority of which ss. 467(h) and (k) are

most relevant:

Power of Lieutenant Governor in Council

467

The Lieutenant Governor in Council may make regulations:

…

(h)

respecting any other matter that he considers necessary for carrying out

the purposes of this Act;

…

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(k)

prescribing conditions, including conditions respecting, solvency, capital

or other financial standards, for licensees or applicants for licences and requiring

those conditions to be complied with;

…

and upon the publication thereof in the Gazette all such regulations shall become effective

in all respects as if enacted in this Act.

[265] The authority of the Lieutenant Governor to make regulations under The Insurance Act,

2015 differs significantly in structure and content from The Insurance Act, 1978.¹⁶The 2020

Regulation itself refers to it having been made for the purpose of s. 2-28(1)(e) of The Insurance

Act, 2015, which falls under Part II of that Act, relating to the licensing of insurers. The authority

of the Lieutenant Governor to make regulations under Part II is set out in ss. 2-46 and 2-69:

Regulations for Division¹⁷

2‑46 The Lieutenant Governor in Council may make regulations:

(a)

(b)

(c)

(d)

(e)

(f)

prescribing insurers for the purposes of clause 2‑4(1)(j);

specifying an amount of base capital for the purposes of clause 2‑12(a);

prescribing an expiry date for the purposes of subsection 2‑16(1);

prescribing a date for the purposes of subsection 2‑18(2);

prescribing activities for the purposes of clause 2‑28(1)(e);

prescribing the method of valuing the assets of a provincial company for

the purposes of subsection 2‑33(5);

(g)

(h)

prescribing the records to be kept by a licensed insurer pursuant to

subsection 2‑39(1) and the length of time those records are to be retained

for the purposes of subsection 2‑39(2);

prescribing any matter or thing that is authorized or required by this

Division to be prescribed in the regulations.

…

Regulations for Part¹⁸

2‑69 The Lieutenant Governor in Council may make regulations:

(a)

prescribing licensing requirements for the purposes of section 2-5;

(a.1) prescribing the number of automobiles and limits for the purposes of

section 2-51;

¹⁶Unlike the single grant of authority covering a broad range of subjects under s. 467 of The Insurance Act, 1978, the

modernised Insurance Act (2015) contains multiple grants of regulation-making authority under at least 15 separate

sections, including ss. 2-46, 2-69, 3-166, 4-20, 5-88, 5-89, 6-21, 7-27, 8-34, 8-77, 8-154, 8-211, 8-212, 9-26 and 10-48.

17

Section 2-46 is the regulation-making authority for the purposes of Division 1—Licensing of Insurers, under

Part II—Licensing of Insurers, of The Insurance Act, 2015.

¹⁸Section 2-69 is the general regulation-making authority for the purposes of Part II—Licensing of Insurers of The

Insurance Act, 2015.

Page 119

(b)

(c)

(d)

(e)

(f)

prescribing the number of separate risks and the value of property for the

purposes of section 2‑52;

prescribing matters to be included in agreements for the purposes of

section 2‑57;

prescribing the manner of calculating reserve funds and guarantee funds

for the purposes of section 2‑61 or 2‑63;

prescribing any matter or thing that is required or authorized by this Part

to be prescribed in the regulations;

respecting any other matter or thing that the Lieutenant Governor in

Council considers necessary to carry out the intent of this Part.

[266] To narrow the facts at issue in the cross-appeals, the Judge found the ULPs were not

variable insurance contracts (Mosten Decision at para 321; Atwater Decision at para 320; and

Ituna Decision at para 263), which s. 3.1(3) of the 2018 Regulation exempted and s. 2-5(3) of the

2020 Regulation exempts from the application of the Regulation. Further, although he initially

declined to exercise jurisdiction in this regard, the Judge nonetheless found the ULPs had

maintained a tax exempt status (Mosten Decision at para 112; Atwater Decision at para 123; and

Ituna Decision at para 110). These findings, and the Judge’s interpretation of the 2018 Regulation

in this regard, are not challenged in the cross-appeals.

b.

The Regulation, Insurance Act and Interpretation Legislation

[267] Quite properly, the Judge interpreted the 2018 Regulation under The Insurance Act, 1978.

In the cross-appeals, the parties have, by and large, confined their arguments to alleging error in

the Judge’s interpretation of the 2018 Regulation and in the Judge’s interpretation of the Lieutenant

Governor’s regulation-making authority under The Insurance Act, 1978. However, this Court

heard these matters in January of 2020, after The Insurance Act, 1978 had been repealed and

replaced by The Insurance Act, 2015 and after the 2018 Regulation had been replaced by the 2020

Regulation. Questions as to which Regulation and which Insurance Act required interpretation by

this Court were raised in the course of the cross-appeals.

[268] Simplifying these questions, the Legislature repealed The Interpretation Act, 1995,

SS 1995, c I-11.2, and replaced it with The Legislation Act, SS 2019, c L-10.2, shortly after the

Judge had issued his decisions in these matters—effective May 15, 2019. Section 2-2 of The

Legislation Act provides that every provision of Part 2 of that Act, which is entitled Definitions,

Application and Effect of Legislation, “applies to every enactment, whenever enacted, unless a

Page 120

contrary intention appears in [Part 2] or in an enactment” (emphasis added). As such, this Court

must interpret The Insurance Act, 1978 and the 2018 Regulation as well as The Insurance Act,

2015 and the 2020 Regulation under the approach set forth in The Legislation Act.

[269] In some measure, the interpretation of the 2018 Regulation is a moot issue because the

tangible and concrete legal dispute about its interpretation has largely disappeared by reason that

the 2018 Regulation has been replaced and The Insurance Act, 1978 has been repealed. Moreover,

we are unaware of any allegations of breach during the time the 2018 Regulation was operative.

For that reason, an interpretation of the 2018 Regulation may appear academic (see Borowski v

Canada (Attorney General), [1989] 1 SCR 342 at 353; but see The Legislation Act, s. 2-15—No

implication from repeal, amendment, etc.).

[270] However, the live issues in the cross-appeals are whether the law prohibited and still

prohibits the Respondent insurers from receiving or accepting for deposit from the Appellants

funds in excess of the restrictions imposed under the Regulation. Thus, while the law of

Saskatchewan is now that which is set forth in The Insurance Act, 2015 and the 2020 Regulation,

the Judge’s reasoning when interpreting the 2018 Regulation is not moot and the parties’

allegations of error in that regard in the cross-appeals remain relevant. This Court’s interpretation

will have to account for consequential changes to the Regulation, the modernised language of the

Lieutenant Governor’s regulation-making authority under The Insurance Act, 2015, as well as any

changes in the interpretation law under The Legislation Act. The Judge’s decisions, the parties’

arguments and The Legislation Act have well-positioned the Court to assess allegations of error in

the interpretation of the 2018 Regulation in the context of The Insurance Act, 1978 and to interpret

the 2020 Regulation in the context of The Insurance Act, 2015.

c.

Principles of Statutory Interpretation

[271] In Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 SCR 27 [Re Rizzo], Iacobucci J., who spoke for

a unanimous Supreme Court, expressed a preference for the approach to statutory interpretation

set forth in Elmer A. Driedger, Construction of Statutes, 2d ed (Toronto: Butterworths, 1983) at 87

[Driedger Text], saying:

[21]

Although much has been written about the interpretation of legislation

(see, e.g., Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on

the Construction of Statutes (3rd ed. 1994) (hereinafter “Construction of Statutes”);

Page 121

Pierre-André Côté, The Interpretation of Legislation in Canada (2nd ed. 1991)), Elmer

Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach

upon which I prefer to rely. He recognizes that statutory interpretation cannot be

founded on the wording of the legislation alone. At p. 87 he states:

Today there is only one principle or approach, namely, the words of

an Act are to be read in their entire context and in their grammatical

and ordinary sense harmoniously with the scheme of the Act, the

object of the Act, and the intention of Parliament.

[272] As to the manner in which this modern principle of statutory interpretation should be

applied to a regulation, LeBel J. commented as follows in Amaratunga v Northwest Atlantic

Fisheries Organization, 2013 SCC 66, [2013] 3 SCR 866:

[36]

Regulations and orders in council must be interpreted in accordance with the

modern principle of statutory interpretation: Contino v. Leonelli-Contino, 2005 SCC 63,

[2005] 3 S.C.R. 217, at para. 19; Glykis v. Hydro-Québec, 2004 SCC 60, [2004] 3 S.C.R.

285, at para. 5; R. Sullivan, Sullivan on the Construction of Statutes (5th ed. 2008), at p.

368. As Binnie J. explained in Bristol-Myers Squibb Co. v. Canada (Attorney General),

2005 SCC 26, [2005] 1 S.C.R. 533, at para. 38, however, it is necessary, in interpreting a

regulation, to consider the words granting the authority to make the regulation in question

in addition to the other interpretive factors. In this regard, Binnie J. quoted the following

comment by E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 247:

It is not enough to ascertain the meaning of a regulation when read in light

of its own object and the facts surrounding its making; it is also necessary

to read the words conferring the power in the whole context of the

authorizing statute. The intent of the statute transcends and governs the

intent of the regulation.

[37]

The words “to such extent as may be required for the performance of its functions”

found in s. 3(1) of the NAFO Immunity Order must therefore be read in their entire context,

in their grammatical and ordinary sense, harmoniously with the scheme and object of the

FMIO Act, and in light of the grant of authority and the intention of Parliament: Rizzo &

Rizzo Shoes Ltd., Re, [1998] 1 S.C.R. 27, at para. 21; Bell ExpressVu Limited Partnership

v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559; E. A. Driedger, The Construction of Statutes

(1974), at p. 67.

[273] The Legislature has codified the modern principle of statutory interpretation in The

Legislation Act:

Acts and regulations remedial

2‑10(1) The words of an Act and regulations authorized pursuant to an Act are to be read

in their entire context, and in their grammatical and ordinary sense, harmoniously with the

scheme of the Act, the object of the Act and the intention of the Legislature.

…

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[274] In addition, the Legislature has provided courts with other direction on the interpretation

of an enactment¹⁹under The Legislation Act, the following of which are particularly relevant in

the cross-appeals:

Acts and regulations remedial

…

2-10(2) Every Act and regulation is to be construed as being remedial and is to be given

the fair, large and liberal interpretation that best ensures the attainment of its objects.

…

Enactments apply in the present

2‑11 An enactment is to be construed as applying to circumstances as they arise.

…

Regulation-making powers in Acts

3-5 If an Act provides that the Lieutenant Governor in Council or other person may make

regulations, the Lieutenant Governor in Council or other person may make regulations, for

the purpose of carrying out the Act according to its intent:

(a)

prescribing any matter or thing that the Lieutenant Governor in Council or

other person considers necessary and advisable in the public interest and not

inconsistent with the Act;

…

See also ss. 2-14 (Amending enactments), 2-15 (No implications from repeal, amendment, etc.),

2-22 (Included powers – generally), 2-25 (Power to differentiate), 2-30 (Rules of interpretation for

certain English and French words), and 2-44 (Power to act from time to time). An approach to

statutory interpretation that is inconsistent with the interpretive direction from the Legislature

would be in error.²⁰

[275] Putting the law of statutory interpretation into context, the Legislature has directed the

courts to read the words of s. 467 of The Insurance Act, 1978 and ss. 2-46 and 2-69 of The

Insurance Act, 2015 as authorising the Lieutenant Governor to make regulations prescribing “any

matter or thing” considered “necessary and advisable in the public interest” and not inconsistent

with The Insurance Act, 1978 (The Legislation Act, s. 3-5).

¹⁹Under s. 2-29 of The Legislation Act, the word enactment is defined to mean “an Act or a statutory instrument or a

portion of an Act or a statutory instrument”, where statutory instrument is itself defined as including a regulation

(s. 1-2).

²⁰In this regard, note that s. 3(3) of The Interpretation Act, 1995 provided, albeit somewhat obscurely, that “[t]his Act

does not exclude the application to an enactment of a rule of construction that is not inconsistent with this Act”. There

is no provision of corresponding effect in The Legislation Act.

Page 123

[276] Expressed in the protracted terms of the modern principle, the Court’s task in the

cross-appeals is to read the words of the 2018 Regulation in their entire context, and in their

grammatical and ordinary sense, harmoniously with the scheme of the 2018 Regulation and of The

Insurance Act, 1978 and the objects of those enactments, in light of the grant of authority to the

Lieutenant Governor and the intention of the Legislature, while recognising that statutory intent

transcends regulatory intent. We must interpret and construe the 2020 Regulation in the same way

under The Insurance Act, 2015. In both of their iterations, we must construe these statutes and

regulations as remedial and give each enactment the fair, large and liberal interpretation that best

ensures the attainment of its objects.

d.

Decisions

[277] In each of his Decisions, the Judge found the 2018 Regulation was not declaratory of what

the law is and always has been. Citing Western Minerals Ltd. v Gaumont, [1953] 1 SCR 345

[Gaumont], the Judge reached this conclusion because the so-called deeming provision in the 2018

Regulation did not expressly state that it was to have retroactive effect. To be clear, the deeming

provision was:

3.1(4) Each contract for life insurance issued by a licensed insurer is deemed to contain

the restrictions set out in this section.²¹

[278] The Judge interpreted s. 3.1(4) as allowing for either prospective or retroactive application

and concluded it was, therefore, necessary to consider whether it was within the power of the

Lieutenant Governor to pass retroactive or retrospective regulations, as well as to consider the

legislative intent that underpinned the passage of the 2018 Regulation, so as to determine its

temporal application (Mosten Decision at para 328; Atwater Decision at para 327; and Ituna

Decision at para 270).

[279] Relying on Merck Frosst Canada & Co. v Apotex Inc., 2011 FCA 329, 425 NR 279, leave

to appeal to SCC refused, 2012 CanLII 26697 [Merck Frosst], the Judge said he was unable to find

any language in The Insurance Act, 1978 that expressly contemplated the use of regulation-making

authority to enact regulations having retroactive or retrospective operation. He further concluded

²¹The language in s. 2-5.1(4) of the 2020 Regulation is identical.

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that such authority could not be found by reason of necessary implication (Mosten Decision at

para 332; Atwater Decision at para 331; and Ituna Decision at para 274).

[280] In argument before the Judge, Mosten and Atwater filed 56 statutes of Saskatchewan in

which the Legislature had expressly granted to the Lieutenant Governor the power to make

retroactive regulations. This led the Judge to remark that no one had provided an example of

regulations having retroactive effect being made outside those statutes. On this basis, the Judge

concluded the Lieutenant Governor did not have the authority under The Insurance Act, 1978 to

make the 2018 Regulation retroactive or retrospective in its operation (Mosten Decision at

paras 335–336; Atwater Decision at paras 334–335; and Ituna Decision at paras 277–278).

[281] Under a line of obiter reasoning, the Judge also considered whether the 2018 Regulation

had a retroactive or retrospective effect on the premise that the Lieutenant Governor had the

authority to pass such regulations. Here, he found the “most concrete indicia” of legislative intent

available to assist with interpretation was the record in Hansard of what the Honourable Joan H.

Duncan, then Minister of Consumer and Commercial Affairs, had said in 1985 during the second

reading of Bill No. 95, An Act to amend [The Insurance Act, 1978] (Mosten Decision at para 334;

Atwater Decision at para 333; and Ituna Decision at para 276). In respect of that amending statute,

the Minister had stated, “[t]here is no part of this Bill which give powers which interfere with the

civil rights of Saskatchewan citizens” (Mosten Decision at para 334; Atwater Decision at para 333;

and Ituna Decision at para 276). In addition, the Judge recognised he could infer purpose and intent

from The Insurance Act, 1978, the fact of the proceedings before him, the timing of the enactment

of the 2018 Regulation, and the text of the 2018 Regulation itself (Mosten Decision at para 346;

Atwater Decision at para 345; and Ituna Decision at para 288).

[282] In the result, the Judge rejected the Respondents’ argument that, by necessary implication,

the 2018 Regulation had retroactive or retrospective effect. He concluded the interpretive

presumptions against retroactivity and against interference with vested rights meant the 2018

Regulation could have “only prospective effect” (Mosten Decision at para 355; Atwater Decision

at para 354; and Ituna Decision at para 297).

[283] Although not express in the Judge’s reasons, the clear implication of his finding that the

2018 Regulation had “only prospective effect” is that the 2018 Regulation did not apply to the

Page 125

ULPs in question because they pre-dated its enactment. This inference follows necessarily from

his finding that the 2018 Regulation was not intended to interfere with vested rights and from his

conclusion that, if the Appellants were correct in their interpretation of the ULPs, then they would

have vested rights under those contracts:

Given the ambiguity I find, the applicable presumptions come into play to resolve the

ambiguity. Those presumptions include the strong presumption that the legislature did not

intend legislation to be applied retroactively or retrospectively and the presumption that

the legislature did not intend to interfere with vested rights. While I have already

concluded, within my interpretation of the insurance contracts involved, that Ituna, Mosten

and Atwater did not have the contractual rights which they claim. For the purposes of this

analysis, I necessarily conclude that the applicants’ interpretation of the contracts, if

correct, results in vested rights.

(Mosten Decision at para 352; Atwater Decision at para 351; and Ituna Decision at

para 294, emphasis added)

2.

Common Error in the Decisions

[284] In broad terms, we find the Judge erred when interpreting the temporal effect of the 2018

Regulation by failing to follow the approach adopted in Re Rizzo.²²This led him to incorrectly

conclude: (a) that it was necessary to determine whether the Lieutenant Governor had the power

to make retroactive or retrospective regulations; and (b) that the 2018 Regulation did not apply to

licensed insurers in respect of the prospective receipt or acceptance for deposit of funds or

payments under existing contracts. For the moment, we leave aside the question of whether

s. 3.1(4) of the 2018 Regulation retrospectively catches the ULPs in question so as to deem the

restrictions in s. 3.1(2) to be terms of those contracts. As we will explain, like the Judge, we do

not interpret any part of the 2018 Regulation as having retroactive or retrospective effect.

a.

Vires

[285] Turning first to the question of vires, the Judge approached the interpretation of the 2018

Regulation not by reading its words but by asking whether the Lieutenant Governor had statutory

authority to enact retroactive or retrospective regulations. That is, he sought first to determine

whether a retroactive or retrospective regulation would be ultra vires the authority of the

Lieutenant Governor under s. 467 of The Insurance Act, 1978 without determining whether this

was, indeed, a retroactive or retrospective regulation. With the greatest respect, this was an error

and it led to an incorrect interpretation of the 2018 Regulation.

²²The Judge’s decisions in these matters pre-date the enactment of s. 2-10 of The Legislation Act.

Page 126

[286] In his reasons, the Judge properly focused on the regulation-making powers of the

Lieutenant Governor under s. 467 of The Insurance Act, 1978. However, in interpreting s. 467, the

Judge was more concerned with what it did not say than what the Lieutenant Governor was actually

authorised and empowered to do. Rather than interpreting s. 467 and the 2018 Regulation under

Re Rizzo, the Judge searched for a statement of express authority to make retroactive or

retrospective regulations or, failing that, a statement from which such authority could be

necessarily inferred. Finding no such statements, he concluded the making of retroactive and

retrospective regulations was beyond the authority of the Lieutenant Governor and, therefore, that

the 2018 Regulation could not be retroactive or retrospective (Mosten Decision at para 336;

Atwater Decision at para 335; and Ituna Decision at para 278).

[287] This approach led the Judge to omit consideration of a number of factors relevant to the

interpretation of the 2018 Regulation and The Insurance Act, 1978, not least of which is the

wording of the 2018 Regulation itself. The Judge did not bring The Interpretation Act, 1995 to

bear in his interpretation. He made only one passing reference to s. 40 of that Act, which states that

regulations must be consistent with legislative intent, but he offered no acknowledgement of other

relevant provisions, such as s. 9(2) (“Law always speaking”), s. 10 (“Enactments remedial”), s. 11

(“Preambles”), and s. 25 (“Implied powers”), all of which had some bearing on the interpretation

and construction of s. 467 and the 2018 Regulation.

[288] He also overlooked jurisprudence to the effect that, while there is a well-established

presumption that enactments are not meant to operate retroactively, the presumption may be

rebutted if the language of the enactment expressly or by necessary implication requires the court

to construe it as applying retroactively (see Mercier v Saskatchewan Government Insurance, 2020

SKCA 136, and the case law cited at paragraph 51 of that decision; Gustavson Drilling (1964) Ltd.

v Canada (Minister of National Revenue), [1977] 1 SCR 271 at 279 [Gustavson]; and Ruth

Sullivan, Sullivan on the Construction of Statutes, 6th ed (Toronto: LexisNexis, 2014) at §25.24

[Sullivan Text]).

[289] While the Judge had regard for s. 467 of The Insurance Act, 1978, he overlooked key

provisions of that Act as well as the context within which the Legislature had granted

regulation-making power to the Lieutenant Governor under that Act. This led the Judge to fail to

Page 127

read the 2018 Regulation and the relevant provisions of s. 467 harmoniously with the licensing

scheme of The Insurance Act, 1978, the object of that Act and the intention of the Legislature.

Finally, in construing these enactments, the Judge failed to give each of the 2018 Regulation and

s. 467 “the fair, large and liberal construction and interpretation that best ensure the attainment of

its objects” (The Interpretation Act, 1995, s. 10).

[290] In general terms, a law-maker must clearly indicate when the authority to enact regulations

having retroactive or retrospective effect has been exercised. As we explain later in these reasons,

we find no indication that the Lieutenant Governor exercised such authority when enacting the

2018 Regulation. For that reason, we do not need to determine whether the Lieutenant Governor

had the authority under s. 467 of The Insurance Act, 1978 to enact regulations having retroactive

or retrospective effect.

[291] In short, we find error in the interpretation of the 2018 Regulation resulting from an

approach that focused on the question of vires to the exclusion of the words of the 2018 Regulation

in their entire context, in their grammatical and ordinary sense, harmoniously with the scheme of

The Insurance Act, 1978, the object of the Act and the intention of the Legislature.

b.

Interpretation

[292] As noted, in the event he had reached an incorrect conclusion on the question of vires, the

Judge interpreted the 2018 Regulation premised on the fact the Lieutenant Governor had the

authority to pass retroactive or retrospective regulations. In this regard, we respectfully find the

Judge overlooked a number of relevant rules of interpretation as well as the legislative context in

which the 2018 Regulation had been enacted. In the result, we find error in his interpretation of

the 2018 Regulation.

[293] Nonetheless, we find the Judge’s conclusion that the 2018 Regulation was prospective is

correct and unassailable. Section 2-11 of The Legislation Act provides that all enactments have

prospective effect. The question is, however, what does that mean in the context of this regulation?

Page 128

[294] It bears reiterating that the modern principle of statutory interpretation calls for a contextual

interpretation of the enactment in question. In this case, the Judge identified the relevant context

as including:

While theoretically there could be a much broader scope of context for me to consider

when interpreting this Regulation, in practical terms I have little context that guides me

other than:

(a)

(b)

(c)

(d)

the limited Hansard record referred to above;

what I can infer as the purpose and intent of the Act from the Act;

the fact of these proceedings;

the timing of the Regulation being passed in relation to the close of the

hearing of the applications in late September 2018; and

(e) my analysis of the text of the Regulation.

(Mosten Decision at para 346; Atwater Decision at para 345; and Ituna Decision at

para 288)

The Judge’s analysis of the first two of these contextual factors reveals errors in the interpretation

of the 2018 Regulation.

i.

Hansard

[295] The Judge relied on an excerpt from the Saskatchewan Legislative Assembly Debates and

Proceedings (Hansard) on the 1985 second reading of Bill 95 in the 4th Session of the 20th

Legislature [Bill 95], which was later enacted to amend The Insurance Act, 1978 (The

Saskatchewan Insurance Amendment Act, 1985, SS 1984-85-86, c 82). As noted, the Minister who

sponsored the Bill stated, “[t]here is no part of this Bill which give powers which interfere with

the civil rights of Saskatchewan citizens” (Saskatchewan, Legislative Assembly, Debates and

Proceedings (Hansard), 20th Leg, 4th Sess (3 June 1985) at 2842 (Ms. Duncan)) [Duncan

Debate]. After quoting just this statement, the Judge wrote:

…This is the most concrete indicia I have of the intention of the legislature as regards the

impact of The Saskatchewan Insurance Act, and by implication the authority intended to

be given to the Lieutenant Governor in Council. Changing the law to retroactively alter the

terms of contracts necessarily involves interfering with civil rights of Saskatchewan

citizens.

(Mosten Decision at para 334; Atwater Decision at para 333; and Ituna Decision at

para 276, emphasis added)

Page 129

However, the Judge’s reliance on this statement in Hansard led him to misapprehend the scheme

and object of The Insurance Act, 1978 as well as the object of the 2018 Regulation and, thereby,

to misapprehend the legislative intent that underpinned the enactment of both.

[296] Bill 95 involved a minor amendment to The Insurance Act, 1978 in 1985 that empowered

the Superintendent of Insurance to establish industry councils which would perform duties as

delegated by the superintendent. The amendment had nothing to do with the subject matter of the

2018 Regulation or, for that matter, the broader regulatory scheme of The Insurance Act, 1978.

While the declarative part of the Minister’s statement is framed quite broadly, it is also quite clearly

limited to the object of Bill 95 itself. The record of the Committee of the Whole provides the

context for Minister Duncan’s comment, which pertained specifically to the purpose of the

amendment to the regulation-making powers of the Lieutenant Governor by adding s. 467(g) to

The Insurance Act, 1978. In full context, the Minister said (Duncan Debate at 2842):

…

Mr. Speaker, hon. members will see from these amendments that there is no change in the

powers of the superintendent of insurance and, accordingly, no change in the level of public

protection under the Saskatchewan Insurance Act.

What is significant is that the Government of Saskatchewan is now showing a public vote

of confidence in the insurance industry. We are continuing to live up to our commitment

to reduce unnecessary government interference in business operations without

compromising consumer protection.

Mr. Speaker, reduced administrative and other costs will flow directly from the proposed

amendments. There is no part of this Bill which give powers which interfere with the civil

rights of Saskatchewan citizens. I would be pleased to go into further detail respecting

specific clauses of the Bill during committee of the whole, Mr. Speaker.

…

(Emphasis added)

[297] Later, Minister Duncan observed that the proposed amendment meant “that the

superintendent of insurance will only be able to delegate powers to the council if he is authorized

to do so by the Lieutenant Governor in Council” (Saskatchewan, Legislative Assembly, Debates

and Proceedings (Hansard), 20th Leg, 4th Sess (13 June 1985) at 3353)), which confirms that her

statement about non-interference with civil rights was aimed narrowly at the additional powers

given to the superintendent under the amendment. Bill 95 itself did not affect the civil rights of

any citizen; however, The Insurance Act, 1978 did and The Insurance Act, 2015 does.

Page 130

[298] Importantly, s. 467(k) of The Insurance Act, 1978, under which the Lieutenant Governor

made the 2018 Regulation, did not exist at the time of Minister Duncan’s statement about Bill 95.

The Legislature later amended The Insurance Act, 1978 in 1987 to add s. 467(k) (The

Saskatchewan Insurance Amendment Act, 1987, SS 1986-87-88, c 55, s 10). The amendment that

introduced s. 467(k) was apparently uncontroversial as there was no debate or discussion of it in

the Legislative Assembly, with second reading and consideration of the Bill in the Committee of

the Whole being waived (Saskatchewan, Legislative Assembly, Debates and Proceedings

(Hansard), 21st Leg, 1st Sess (3 November 1987) at 3845).

[299] The error in relying on Minister Duncan’s statement in respect of Bill 95 is evident because

The Insurance Act, 1978 undoubtedly interferes with the “civil rights” of Saskatchewan citizens.

The Insurance Act, 1978 intentionally and lawfully interferes with citizens’ and insurers’ rights to

freely enter contracts with each other and with insurers’ freedom to carry on their business, in

multifarious ways.²³Therefore, as an indicator of legislative intent, the Minister’s statement about

Bill 95 could have played but a very minor role in the interpretation of The Insurance Act, 1978,

and in divining the legislative intent thereof, and no role whatsoever in the interpretation and

construction of the 2018 Regulation.

ii.

Scheme and Object

[300] The Judge identified the relevant context as including what he could “infer as the purpose

and intent of the Act from the Act” (Mosten Decision at para 346(b); Atwater Decision at

para 345(b); and Ituna Decision at para 288(b)), but he did not address the scheme and object of

The Insurance Act, 1978 or derive legislative intent therefrom. Consequently, he did not interpret

the 2018 Regulation in its entire context or harmoniously with the scheme and object of that Act

and legislative intent (Re Rizzo). Rather, the Judge relied on secondary interpretive presumptions

as conclusive indication of legislative intent and, therefore, of the temporal effect of the 2018

Regulation:

Given the ambiguity I find, the applicable presumptions come into play to resolve the

ambiguity. Those presumptions include the strong presumption that the legislature did not

intend legislation to be applied retroactively or retrospectively and the presumption that

the legislature did not intend to interfere with vested rights. While I have already

²³The Legislature’s constitutional power in this regard is found under s. 92(13) of the Constitution Act, 1867, 30 &

31 Vict. c 3 (UK), reprinted in RSC 1985, Appendix II, No 5, regarding “Property and Civil Rights in the Province”.

See also The Citizens’ Ins. Co. v Parsons (1880), 4 SCR 215.

Page 131

concluded, within my interpretation of the insurance contracts involved, that Ituna, Mosten

and Atwater did not have the contractual rights which they claim. For the purposes of this

analysis, I necessarily conclude that the applicants’ interpretation of the contracts, if

correct, results in vested rights.

…

These decisions [referring to Gustavson; Dikranian v Québec (Attorney General), 2005

SCC 73, [2005] 3 SCR 530; and R v Dineley, 2012 SCC 58, [2012] 3 SCR 272, as discussed

in the Sullivan Text] make clear the presumption against retroactive application of

legislation can be rebutted by express words or by necessary implication. I find no basis to

conclude the presumptions against retroactive application or against the interference in

civil rights to have been so rebutted. In my opinion, the Regulation has only prospective

effect.

(Mosten Decision at paras 352 and 355; Atwater Decision at paras 351 and 354; and Ituna

Decision at paras 294 and 297)

[301] However, as we establish below, there are a number of indicators of legislative intent in

the scheme and objects of The Insurance Act, 1978 that were overlooked in this analysis.

3.

Interpretation of the 2018 Regulation

[302] Having found error in the Judge’s interpretation of the Regulation, we turn now to interpret

it afresh. In that regard, there is no true dispute as to what the 2018 Regulation prohibits. In the

provision most relevant, i.e., s. 3.1(2)(a), it plainly states that “no licensed insurer shall receive or

accept for deposit funds or payments in excess of the amount required to pay the life insurance

premium for the eligible period”. Interpreted and construed in accordance with the modern

principle of statutory interpretation, as remedial and by giving it the fair, large and liberal

interpretation that best ensures the attainment of its objects and those of The Insurance Act, 1978,

the prohibitions under s. 3.1(2) place a calculable upper limit on the amount an insurer may

lawfully receive under a contract for life insurance. The effect of this prohibition is to preclude

licensed insurers from using a contract for life insurance as an investment vehicle for insureds in

a way that is divorced from financing the cost of the life insurance coverage.

[303] The true issue of interpretation in these matters is the temporal effect of the Regulation. In

contextual terms, it is whether the prohibition under the Regulation applies to ongoing contracts

for life insurance that were entered into prior to its enactment.

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[304] The Judge interpreted the 2018 Regulation as having only prospective effect, which is the

position taken by the Appellants. As he saw it, that meant the Regulation would not apply to the

ULPs at issue in these matters because they had been entered into prior to its enactment. On the

other side, the Respondents argue that the 2018 Regulation is declaratory, meaning it speaks of

the law as it is and has always been, or, failing that, that it is retroactive or retrospective in its

effect. Under the Respondents’ interpretations, the Regulation would apply to every contract for

life insurance, including the ULPs at issue in these matters, backdated to the date of contract

formation. The parties maintained their respective arguments before us.

[305] Given the parties’ arguments, it is important to understand what the terms declaratory,

prospective, retroactive and retrospective mean. Earlier in these reasons, we set out the

explanations given by Professor Driedger (Driedger Article at 268–269). Although they may be

simply stated, the case law suggests it is difficult to achieve a full understanding of those concepts.

In the Sullivan Text, writing in respect of the temporal application of enactments and the

transitional rules, the learned author notes:

§25.46

Conclusion. To date, the Canadian attempt to establish clear common law

transitional rules has not proved successful. It has led to confusion, which in turn

breeds uncertainty. The distinction between retroactive and retrospective application,

in particular, is arguably of limited value. When legislation retrospectively regulates

the private law relationship between subjects, the presumption against interference

with vested rights applies and adequately controls unacceptable applications of the new

law. In contexts such as fiscal law or entitlement to periodic benefits, it is doubtful that

there is any cogent basis for presuming that a legislature does not intend new legislation

to apply retrospectively so as to change the tax or benefit regime for the future. The

one context in which the presumption against retrospective application has been taken

up and applied is criminal and penal law. However, in that context the presumption is

almost always rebutted. More importantly, in that context the distinction between

changing the past and future effects of the past act appears to be a red herring. What

matters is whether the subsequently enacted disadvantage is additional punishment for

a past act or a future disqualification owing to bad character.

(Footnote omitted)

[306] Citing Merck Frosst as a good example, the learned author of the Sullivan Text proposes a

principles-based approach to the analysis of the temporal application of enactments, which is

consistent with Re Rizzo:

§25.48

The principles underlying transitional rules are well-established and clear.

It is generally not difficult to assess in a given case the extent to which the application

of new law would be arbitrary, would take a party by surprise or would be unfair. We

presume that legislatures do not intend these bad effects; the more egregious the impact

of applying new legislation to a situation, the stronger the presumption against its

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application. The issue then becomes testing the presumption, weighted on the basis of

the underlying principles, against other evidence of legislative intent—express and

implied statements of intent, legislative purpose, other presumptions of intent,

legislative evolution, relevant extrinsic aids. On this approach, outcomes would not

depend on the fine distinctions reviewed above and the courts could return to the

vocabulary of stage 2, before “retrospective” was distinguished from “retroactive”.

[307] As we have noted, the approach to statutory interpretation in Re Rizzo has been codified

under s. 2-10 of The Legislation Act. Professor Sullivan’s description of it is insightful and might

be said to more fully accord with the codified modern principle. However, courts continue to apply

these presumptions. We note, for example, the following explanation of the presumption against

retrospectivity by Watt J.A. in R v Chouhan, 2020 ONCA 40, 384 CCC (3d) 215:

[184] To begin, absent transitional provisions, the courts must decide whether the new

legislation applies only to events or conduct occurring on or after the legislation comes into

effect (prospectively), or whether it applies as well to prior events or conduct which is the

subject of pending litigation when the new legislation comes into effect (retrospectively).

The common law developed several principles to inform decisions about the temporal

application of legislation which amended, repealed, or replaced legislation previously in

force without any transitional provisions to define its application. The Interpretation Act

also provides further direction.

[185] As a matter of first principle, the common law presumes legislation does not apply

retrospectively to events or conduct that took place before the legislation comes into force.

The terms or labels applied to this presumption vary but are, in their effect, the same:

British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 S.C.R. 473, at

para. 71; Gustavson Drilling (1964) Ltd. v. Minister of National Revenue, [1977] 1 S.C.R.

271, at p. 279; Tran v. Canada (Public Safety and Emergency Preparedness), 2017 SCC

50, [2017] 2 S.C.R. 289, at para. 43; R. v. Dineley, 2012 SCC 58, [2012] 3 S.C.R. 272, at

paras. 44-45, per Cromwell J. (dissenting, but not on this point); Cobb v. Long Estate, 2017

ONCA 717, 416 D.L.R. (4th) 222, at para. 80.

[186] The presumption against retrospectivity is a tool for determining the intended

temporal reach of legislation. Absent evidence that Parliament considered the potentially

unfair effects, legislation does not affect prior events or conduct in pending litigation. The

purpose of the presumption is to prevent a change in the law from looking to the past and

attaching new prejudicial consequences to a completed transaction. The presumption

bespeaks fairness and engages the rule of law. Its effect is that new legislation operates

from the date of its enactment and applies to what takes place going forward: Tran, at paras.

43-45, 48; Imperial Tobacco, at para. 71.

(Emphasis in original)

a.

Not Declaratory

[308] In Gaumont, the Court adopted the following from Blackstone’s Commentaries, vol 1 at

86 (at 367):

Statutes also are either declaratory of the common law, or remedial of some defects

therein. Declaratory, where the old custom of the Kingdom is almost fallen into disuse, or

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become disputable; in which case the Parliament has thought proper, in perpetuum rei

testimonium, and for avoiding all doubts and difficulties, to declare what the common law

is and ever has been.

(Emphasis in original)

i.

Interpretation

[309] Because the ULPs lack even the semblance of a contractual equivalent to s. 3.1(2) of the

2018 Regulation, an argument that the 2018 Regulation is declaratory of what the common law is

and ever has been rings rather hollow in the light of this dispute and the timing of the enactment.

Further, the logic of the argument requires the Respondents to assert that the ULPs each contain

implied terms consistent with s. 3.1(2), i.e., that limit the amount that may be paid as premiums;

whereas, they have studiously avoided raising that proposition and the law related to it, relying

instead on us to infer that as a fact.

[310] Contextually, the Lieutenant Governor enacted the 2018 Regulation on the heels of the

hearings of the Appellants’ applications in the Court of Queen’s Bench and while the Judge’s

decisions were still on reserve. This timing supports the conclusion that the Lieutenant Governor

did not intend the 2018 Regulation to have a declaratory effect. This is particularly so because, as

noted in Gaumont (at 367–368), enactments are either declaratory or remedial. Section 2-10(2) of

The Legislation Act expressly provides, in part, that “[e]very Act and regulation is to be construed

as being remedial”. As such, even if the 2018 Regulation were intended to be declaratory, it was

incumbent upon the Lieutenant Governor to say or otherwise indicate as much in no uncertain

terms (Gaumont). Absent such communication, the Legislature has directed the courts to interpret

the 2018 Regulation as being corrective or curative of some defect or gap in the law that existed

prior to its enactment. Simply put, as there is no indication of declaratory effect in the 2018

Regulation and nothing in the context that would support such a conclusion, we cannot interpret it

as being declaratory.

[311] In short, the 2018 Regulation cannot be interpreted as being declaratory of what the law is

and ever has been. Although the context and interpretive analysis differ, we find no basis to

interfere with the Judge’s overall conclusion that the 2018 Regulation is not declaratory.

Page 135

b.

Not Retroactive or Retrospective

[312] In Gustavson, Dickson J. (as he then was), for the majority, said the “general rule is that

statutes are not to be construed as having [retroactive or] retrospective operation unless such a

construction is expressly or by necessary implication required by the language of the Act” (at 279).

As this axiomatically implies, there is no general prohibition against an enactment having

retroactive or retrospective effect. Rather, and consistent with s. 2-10(1) of The Legislation Act,

an enactment may be found to have such effect where it is “clearly expressed” in the enactment

and, where that occurs, the enactment “is effective according to its terms” (Peter W. Hogg,

Constitutional Law of Canada, loose-leaf (2019 – Rel 1) 5th ed, vol 2 (Toronto: Thomson Reuters,

2019) at para 51.8, cited with approval in British Columbia v Imperial Tobacco Canada Ltd., 2005

SCC 49 at para 69, [2005] 2 SCR 473). Proceeding on this basis, we find the 2018 Regulation was

neither retroactive nor retrospective.

c.

Interpretation

[313] The 2018 Regulation does not contain any language expressly indicating that it is to apply

retroactively or retrospectively. Nonetheless, the Respondents submit the 2018 Regulation must

necessarily have retroactive or, alternatively, retrospective effect. This implication, they say,

follows from the wording of the 2018 Regulation and the statutory requirement that an enactment

must be interpreted in a manner that respects its efficacy. This presumably refers to the direction

in what is now s. 2-10(2) of The Legislation Act to give an enactment “the fair, large and liberal

interpretation that best ensures the attainment of its objects”. On this basis, citing to the Driedger

Article at page 269, BMO Life asserts the proper interpretive questions to be asked are:

… For retroactivity the question is: Is there anything in the statute to indicate that it must

be deemed to be the law as of a time prior to its enactment? For retrospectivity the question

is: Is there anything in the statute to indicate that the consequences of a prior event are

changed, not for the time before its enactment, but henceforth from the time of enactment,

or from the time of its commencement if that should be later.

While BMO Life would answer each question affirmatively, respectfully, we do not.

Page 136

i.

Words of the 2018 Regulation

[314] Under s. 2-10(1) of The Legislation Act, the analysis of temporal effect must begin with

the wording of the 2018 Regulation itself. In that regard, its operative part provides:

3.1(2) Subject to subsection (3), for the purposes of section 34 of the Act, with respect to

a contract for life insurance, during the eligible period:

(a)

no licensed insurer shall receive or accept for deposit funds or payments

in excess of the amount required to pay the life insurance premium for the eligible

period; and

(b)

with respect to a contract for life insurance that is not exempt from accrual

taxation pursuant to the Income Tax Act (Canada), no licensed insurer shall receive

or accept for deposit funds or payments in excess of the life insurance premium

required to keep the contract for life insurance in force until the end of the eligible

period.

(Emphasis indicating words or terms defined in an enactment)

[315] Section 3.1(4) also factors into the analysis because it expresses an intention to interfere

with freedom to contract in these words:

(4)

Each contract for life insurance issued by a licensed insurer is deemed to contain

the restrictions set out in this section.

(Emphasis indicating words or terms defined in an enactment)

[316] The foregoing are the two operative provisions of the 2018 Regulation, but they cannot be

interpreted without an understanding of the defined words and terms used therein (emphasised

above). In that regard, the term eligible period is defined in s. 3.1(1)(a) of the 2018 Regulation to

mean “the period commencing on the day on which a contract for life insurance takes effect and

ending on the day on which the last person whose life is insured by the contract reaches the age of

120”. The term life insurance premium is defined under s. 3.1(1)(b) as meaning “the premium

under a contract for life insurance but does not include any amount paid, transferred, credited or

deposited to a side account”. The terms side account and variable insurance contract are also

defined in s. 3.1(1), but their meanings lend nothing to the temporal analysis.

[317] The Legislature has defined contract, insurance, insurer, life insurance, and premium

under s. 2(1) of The Insurance Act, 1978 to mean:

…

(m)

“contract” means a contract of insurance and includes a policy, certificate, interim

receipt, renewal receipt or writing evidencing the contract, whether sealed or not, and a

binding oral agreement;

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…

(gg)

“insurance” means the undertaking by one person to indemnify another person

against loss or liability for loss in respect of a certain risk or peril to which the object of

the insurance may be exposed, or to pay a sum of money or other thing of value upon the

happening of a certain event and includes life insurance;

…

(jj)

“insurer” means a person who undertakes or agrees or offers to undertake a

contract;

(kk)

“life insurance” means insurance whereby an insurer undertakes to pay insurance

money:

(i)

on death;

(ii)

(iii)

(iv)

on the happening of an event or contingency dependent on human life;

at a fixed or determinable future time; or

for a term dependent on human life;

and, without limiting the generality of the foregoing, includes:

(v)

accidental death insurance;

(vi)

(vii)

disability insurance; and

an undertaking given by an insurer, whether before or after this section

comes into force, to provide an annuity or what would be an annuity except that

the periodic payments may be unequal in amount;

but does not include accident insurance;

…

(yy)

“premium” means the single or periodical payment under a contract for insurance,

and includes dues, assessments and other considerations[.]

[318] In respect of life insurance in particular, The Insurance Act, 1978 provides the following

definitions under s. 133:

…

(c)

…

(j)

“contract” means a contract of life insurance;

“insurance” means life insurance;

“insured”:

(k)

(i)

in the case of group insurance means, in the provisions of this Part relating

to the designation of beneficiaries and the rights and status of beneficiaries, the

group life insured; and

(ii)

in all other cases means the person who makes a contract with an insurer;

(l)

“life insurance” includes disability insurance and accidental death insurance.

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ii.

Words of the 2018 Regulation in their grammatical and

ordinary sense

[319] Consistent with the first step in the interpretive process, the temporal effect of the 2018

Regulation is to be found, if possible, by reading its words in their entire context and in their

grammatical and ordinary sense. As can be seen, there are few points at which the Lieutenant

Governor has, by the grammatical and ordinary sense of the words chosen, indicated an intention

as to the temporal effect of the 2018 Regulation.

[320] The Lieutenant Governor drafted the 2018 Regulation using the present tense, which is

consistent with The Insurance Act, 1978, but not much more can be made of that observation.

Section 9(1) of the repealed Interpretation Act, 1995 stated that “[e]very enactment shall be

interpreted as always speaking”. Although no similarly worded provision is to be found in The

Legislation Act, s. 2-11 provides that an enactment “is to be construed as applying to circumstances

as they arise”. As such, the decision to use present tense language is of relatively little import

interpretively because, regardless of its tense, the 2018 Regulation would apply prospectively “to

circumstances as they arise”. That is, the interpretive law, more so than the verb tense, indicates

an intention to make a regulation that has prospective effect.

[321] We find that the grammatical and ordinary sense of the words of the 2018 Regulation

prohibit licensed insurers from receiving or accepting for deposit funds or payments in excess of

amounts required to pay the life insurance premium for the eligible period under contracts for life

insurance (s. 3.1(2)(a)) and in excess of the life insurance premium required to keep the contract

in force until the end of the eligible period in circumstances where such a contract is not exempt

from accrual taxation (s. 3.1(2)(b)). The 2018 Regulation also amends life insurance contracts that

are not variable insurance contracts by incorporating the restrictions set forth under s. 3.1(2) as

contractual terms (s. 3.1(4)).

[322] The question is, what does “applying to circumstances as they arise” mean in this context?

In other words, did the 2018 Regulation cover life insurance contracts in force at the time of its

enactment and the funds received by insurers under those contracts before its enactment?

Page 139

iii.

The Scheme and Object of The Insurance Act, 1978 and

the Intention of the Legislature

[323] Under s. 2-10(2) of The Legislation Act, the Legislature has directed that “[e]very Act and

regulation is to be construed as being remedial and is to be given the fair, large and liberal

interpretation that best ensures the attainment of its objects”. Each of the operative provisions of

the 2018 Regulation, and indeed the whole of it, must be read with these interpretive directions in

mind.

[324] Although the scheme and the object of The Insurance Act, 1978 is to be derived from the

whole of that statute, the provisions of the Act most material to the interpretation of the 2018

Regulation are the insurer licensing provisions and regulation-making authority, some of which

included ss. 11, 28, 29(3), 32, 40, 44(1)–(3), 46, 48, 105, and 467. We particularly note the

language and import of:

Necessity for licence

28

No person shall transact insurance in Saskatchewan unless he is the holder of a

subsisting licence under this Act as an insurer.

…

Limited or conditional licence

29(3) The superintendent may, at the time a licence is issued pursuant to this Part or at

any time after the licence is issued, impose any limitations and conditions on the licence

and may amend, vary or repeal those limitations and conditions or impose new limitations

and conditions.

…

Certain standards to be met

34(1) Every insurer who is a licensee shall comply with the conditions, including

conditions respecting solvency, capital and other financial standards, prescribed in the

regulations.

(2)

No insurer who applies for a licence is entitled to be issued a licence unless it has

complied with the conditions, including conditions respecting solvency, capital and other

financial standards, prescribed in the regulations.

…

Requirements to obtain licence

40

The superintendent shall not issue a licence to an insurer until the superintendent

is satisfied that the insurer has met all the requirements of this Act.

…

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Insufficiency of assets to be reported by superintendent

44(1) Where the superintendent finds that the assets of an insurer are insufficient to

justify the continuance of the insurer in business or to provide proper security to persons

effecting insurance with the insurer in Saskatchewan or that the insurer has failed to comply

with any provision of law, or its charter, he shall so report to the minister.

Suspension or cancellation of licence by Lieutenant Governor in Council

(2)

Where the minister, after consideration of the report and after hearing or giving

notice of a hearing to the insurer, and upon any further investigation he thinks proper,

reports to the Lieutenant Governor in Council that he concurs in the report of the

superintendent, the Lieutenant Governor in Council may suspend or cancel the licence of

the insurer.

Issue of limited or conditional licence

(3)

Where the superintendent has so reported, the minister or the Lieutenant Governor

in Council may direct the issue of such modified, limited or conditional licence as is

deemed necessary for the protection of persons in Saskatchewan who have effected or

effect contracts of insurance with the insurer.

…

Insurer to cease business on suspension or cancellation of licence

46

Upon the suspension or cancellation of the licence of an insurer, the insurer shall

cease to carry on business as an insurer in Saskatchewan except for the purpose of winding

up its affairs in Saskatchewan and complying with this Act, but nothing in this section

prejudicially affects any contract holder or creditor of the insurer.

…

Revival of licence

48

If the licence of an insurer is suspended or cancelled pursuant to this Act, it may

be revived if the insurer corrects the deficiency or remedies its default to the satisfaction

of the minister.

[325] In broader terms, the Lieutenant Governor had authority to license and regulate insurers in

all aspects of the business they carry on in Saskatchewan (ss. 3–100, generally, and ss. 133–185,

with respect to life insurance), including the authority to enact regulations that affect the licensing

of insurers carrying on business in Saskatchewan (ss. 467(h) and (k)). The administrative exercise

of the Lieutenant Governor’s authority to license insurers was, in large measure, devolved upon

the superintendent of insurance (ss. 3–24),²⁴but the authority was that of the Lieutenant Governor

(s. 11). The authority to enact regulations included the authority to impose conditions on licensed

²⁴Under s. 2(2) of The Insurance Act, 1978, the Legislature had assigned to the Financial and Consumer Affairs

Authority of Saskatchewan the performance of all responsibilities imposed on the superintendent and the exercise of

all powers given to the superintendent.

Page 141

insurers, including with respect to standards of solvency and capital and other financial indicators

(ss. 34 and 467(k)).

[326] The record of debates and proceedings in the Legislative Assembly on the subject of

insurance legislation is, unfortunately, quite limited. Although such legislation dates back over

100 years, the Legislative Assembly has not often debated it. Nonetheless, it is clear from its

wording that the legislation protects insureds by regulating the form and content of insurance

contracts and by licensing and regulating insurers. These objects and schemes are evident from as

early as 1913, when the Legislature enacted the first iteration of the province’s insurance

legislation, The Saskatchewan Insurance Act, SS 1913, c 37 [1913 Act].

[327] The 1913 Act dealt comprehensively with all types of insurance at the time and with the

licensing of insurers. The government of the day introduced the 1913 Act on December 12, 1913,

and it received Royal Assent on December 19, 1913. When introducing it, the Attorney General,

the Honourable W.F.A. Turgeon (as he then was) said it had been “designed to afford the greatest

possible measure of protection to policyholders”, that it “provide[d] for the most careful regulation

of the operations of companies doing business in Saskatchewan”, and that it “deal[t]

comprehensively with all matters pertaining to insurance with the exception of the affairs of

beneficiaries” (“Insurance Act Will Protect Policyholders”, The Morning Leader (15 December

1913) at 4). There is no other mention in The Morning Leader about the debates or discussions

that took place with regard to the 1913 Act.

[328] The legislation had a relatively peaceful existence for decades. However, in 1970, the

government introduced Bill No. 66, An Act to amend The Saskatchewan Insurance Act. During the

second reading of that Bill, the Honourable D.V. Heald, then Attorney General, said it was

designed to make Saskatchewan’s insurance legislation more uniform with that of other provinces

and to increase the standardisation of insurance contracts and policies (Saskatchewan, Legislative

Assembly, Debates and Proceedings (Hansard) 16th Leg, 3rd Sess (6 April 1970) at 1376).

Notably, he observed that one of the proposed amendments was intended to strengthen the powers

of the superintendent to refuse to grant a licence to an insurer “in order to more adequately protect

the insuring public in Saskatchewan” (at 1377).

Page 142

[329] When the Legislature again amended The Insurance Act, 1978 in 1998, the Honourable

John Nilson, Minister of Justice and Attorney General, observed that the object of the amendments

was to increase consumer protection (Saskatchewan, Legislative Assembly, Debates and

Proceedings (Hansard) 23rd Leg, 3rd Sess (20 May 1998) at 1238–1239). The Honourable Bob

Bjornerud, speaking for the opposition, noted the amending legislation protected “both the

consumer and the insurance industry” and said, “The insurance industry is a complex one for many

people, and the need for effective protection for the consumer cannot be stressed too highly”

(Saskatchewan, Legislative Assembly, Debates and Proceedings (Hansard) 23rd Leg, 3rd Sess

(1 June 1998) at 1470).

[330] When what is now The Insurance Act, 2015 was introduced in 2014 as Bill No. 177, the

Minister of Justice and Attorney General, the Honourable Gordon Wyant, stated that the legislation

had remained largely unchanged since 1913 (Saskatchewan, Legislative Assembly, Debates and

Proceedings (Hansard) 27th Leg, 4th Sess (8 December 2014) at 6299). He went on to say the

amendments were designed to modernise the legislation and to “modernize the regulations of the

Saskatchewan insurance industry in accordance with the regulatory frameworks in place in other

Canadian jurisdictions” (at 6300). Attorney General Wyant remarked that The Insurance Act, 2015

would protect both the insurance sector and consumers (at 6302):

Mr. Speaker, with this new Act, the insurance sector will enjoy the flexibility it needs to

expand and evolve in a rapidly changing environment, and it will ensure that the

superintendent has full suite of governance powers to ensure compliance with the Act.

Most importantly, Mr. Speaker, it will also ensure that consumer protection through fair

process in the insurance sector remains a singular operating priority for all stakeholders.

Indeed, consumer protection and industry regulation remained overarching themes throughout the

second reading of the Bill that became The Insurance Act, 2015.

[331] In addition to law-maker debates and proceedings, this Court and the Supreme Court of

Canada have previously construed legislative intent for the purposes of interpreting

Saskatchewan’s insurance legislation. For example, in Saskatchewan Government Insurance v

Bury (1990), 75 DLR (4th) 449 (WL) (Sask CA) at para 15 [Bury], Sherstobitoff J.A. (Tallis,

Cameron and Vancise JJ.A. concurring; Wakeling J.A. dissenting) adopted part of the reasoning

of the trial judge, who had said:

[The Insurance Act, 1978] is regulatory legislation, not empowering legislation. In the

words of the judge:

Page 143

[The Insurance Act, 1978] is a form of consumer protection legislation. It

is intended to provide control and discipline in the insurance industry in

Saskatchewan through a system of licencing, investigation of insurers,

records and reports. The Act also governs insurance transactions,

supervision of licences, deposits, investment of insurance funds, and

forfeiture of corporate powers. Insurance contracts are strictly and

extensively controlled.

Part XV (ss. 393-415) of [The Insurance Act, 1978] provides for control in the case of

amalgamation, transfer, reinsurance and liquidation.

Part XV, as regulatory legislation, was meant to govern relationships between government,

insurers, and insureds in relation to the transactions covered, and to impose government

control over, and to require government approval of, any such transactions. …

[332] In Falk Bros. Industries Ltd. v Elance Steel Fabricating Co., [1989] 2 SCR 778 [Falk

Bros.], McLachlin J. (as she then was), writing for a unanimous Supreme Court in the context of

whether s. 109 of The Insurance Act, 1978 was confined to statutory conditions as opposed to

contractual ones, confirmed the Act is remedial legislation that “should be given an appropriately

broad interpretation” (at 782), relying on prior judicial interpretation of Ontario’s legislation and

The Interpretation Act, RSS 1978, c I-11, s. 11 (repealed and replaced by The Interpretation Act,

1995, s. 10).

[333] In Brown’s Mobile Homes Ltd. v Royal Insurance Co. Ltd. (1965), 54 WWR 490 (CanLII)

(Sask CA), a case where this Court had been tasked with determining whether the statute’s in-

writing requirements prevented the application of the doctrine of estoppel, Culliton C.J.S. wrote:

[11]

Learned counsel for the appellant contended that Mr. Brown, having admitted that

he read the endorsement and having accepted the refund of premium, and having thus acted

to the prejudice of the insured, is estopped from asserting the invalidity of the endorsement.

With respect, I cannot agree with this contention. As I have already stated, subsecs.

[103](1) and (2) were enacted by the legislature as a matter of public policy for the

protection of the insured, and it is well-settled law that under such circumstances an

estoppel will not be allowed to defeat the requirements of such an Act, of parliament or of

the legislature: Vide Maritime Elec. Co. v. General Dairies Ltd., [1937] 1 W.W.R. 591,

[1937] A.C. 610, 46 C.R.C. 1, reversing [1935] S.C.R. 519, 44 C.R.C. 43, and Kok Hoong

v. Leong Cheong Kweng Mines Ltd., [1964] A.C. 993, [1964] 2 W.L.R. 150, [1964] 1 All

E.R. 300. Consequently the respondent is entitled to the indemnity benefits provided by

the terms of the contract of insurance when issued.

(Emphasis added)

Page 144

[334] Similarly, in RBC DS Financial Services Inc. v Life Insurance Council, 2000 SKCA 116,

[2001] 4 WWR 189, Bayda C.J.S. (for the majority) remarked on the general nature and broad

scope of The Insurance Act, 1978:

[2]

[The Insurance Act, 1978] is a general statute passed for the purpose of regulating

the insurance industry in the Province. It addresses itself to most, if not all, of the various

types of insurance sold in the Province, including life insurance. It expressly empowers the

Lieutenant-Governor in Council to establish Insurance Councils and to make regulations

prescribing the functions, powers and duties of such councils (s. 466.1). Pursuant to the

power contained in the Act, the Lieutenant-Governor in Council promulgated The

Saskatchewan Insurance Councils Regulations, R.R.S., c. S-26, Reg. 2.

[335] Courts in Saskatchewan have also found that the Legislature intended to cover the entire

field of insurance and to provide a complete and comprehensive code respecting the law of

insurance in this province: Lloyd’s of London v Saskatchewan Government Insurance Office

(1973), 37 DLR (3d) 311 (CanLII) (Sask CA) at para 8, citing Royal Bank of Canada v Pischke,

[1933] 1 WWR 145 (Sask DC); and Crown Bakery Ltd. v Preferred Accident Insurance Company

of New York, [1933] 2 WWR 33 (Sask CA).

[336] In other jurisdictions, courts have identified the purpose of the licence conditions for

insurers as protection of the public from harm, e.g., Canadian Western Bank v Alberta, 2007 SCC

22 at para 10, [2007] 2 SCR 3; Brick Protection Corporation v Alberta (Provincial Treasurer),

2011 ABCA 214 at para 35, 337 DLR (4th) 154; Commercial Union Life Assurance Co. of Canada

v John Ingle Insurance Group Inc. (2002), 217 DLR (4th) 178 (CanLII) (Ont CA) at para 47; and

Konovsky v Pacific Marine Insurance Co. (1924), 34 Man R 149 (CA) at 160.

[337] All of the foregoing is in keeping with an industry-wide regulatory scheme having the

objects of protecting consumers (directly and indirectly, by protecting the industry) and industry

regulation and it demonstrates the clear intention of the Legislature to impose regulatory

restrictions and controls over insurers who carry on business in Saskatchewan so as to achieve

those objects (Bury).

iv.

Interpretive Harmony

[338] The Insurance Act, 1978 and the Insurance Regulations are consumer protection legislation

that control and discipline the insurance industry in Saskatchewan (Bury at para 15). The Act

governs relationships between or among government, insurers and insureds in respect of insurance

Page 145

contracts and the overall business of insurance and, in so doing, it imposes government control

over transactions between insurers and insureds (Bury at para 15). One purpose of legislation is to

alter (or, occasionally, to declare and thereby confirm) the common law in order to implement the

policies the Legislature or the Lieutenant Governor consider to be in the public interest (The

Legislation Act, s. 2-10(2); see also Sullivan Text at §25.79; and Ruth Sullivan, Statutory

Interpretation, 3d ed (Toronto: Irwin Law, 2016) at 365–366). In this regard, the scheme of the

Act, and all of the expressions of legislative intent, necessarily evince that the Legislature intended

to interfere with the civil rights of Saskatchewan citizens to achieve the overarching object of the

Act—i.e., insurance industry regulation for the public benefit. In this context, interpreting the 2018

Regulation to have prospective application to licensed insurers universally in respect of all

contracts for life insurance (other than variable insurance contracts) sounds harmoniously with the

scheme and object of that Act, and of the 2018 Regulation itself, and with legislative intent. That

is to say, having established that the 2018 Regulation is a remedial measure, it is clear that the

application of licensing conditions under s. 3.1(2) to all licensed insurers will better advance that

purpose and legislative intent.

[339] By the internal reference to s. 34 of The Insurance Act, 1978 in the 2018 Regulation, it

must be taken that the Lieutenant Governor sought to address, through enactment of the 2018

Regulation, some insurer licensing concern or regulatory gap arising in respect of the then extant

solvency, capital requirements or other financial standards applicable to licensed insurers. Given

the ordinary and grammatical sense of the wording of s. 3.1(2), the Lieutenant Governor’s concern

must be tied directly to the fact that insurers are, or have been, receiving or accepting or may in

the future receive or accept for deposit funds or payments “in excess of the amount required to pay

the life insurance premium for the eligible period” under contracts for life insurance (s. 3.1(2)(a))

or “in excess of the life insurance premium required to keep the contract for life insurance in force

until the end of the eligible period” where the contracts are not exempt from accrual taxation

(s. 3.1(2)(b)). That is to say, the plainly evident object of the 2018 Regulation is to prohibit licensed

insurers from undertaking the type of transactions enumerated in s. 3.1(2), whether for solvency,

capital, financial or other reasons.

[340] In more detailed terms, the opening language of s. 3.1(2) of the 2018 Regulation states that,

for the purposes of s. 34 of The Insurance Act, 1978, the licensing conditions in s. 3.1(2) apply

Page 146

“with respect to a contract for life insurance”. In its grammatical and ordinary sense, the 2018

Regulation applies to licensed insurers in respect of contracts for life insurance. Read in its entire

context, s. 3.1(3) narrows the scope of application by expressly excluding variable insurance

contracts. The relevant terms, i.e., contract, life insurance and variable insurance contract, are all

defined consistently in either the 2018 Regulation or The Insurance Act, 1978. Consequently, there

is no ambiguity in the regulation in respect of its scope of application.

[341] As to temporal effect, the phrase “during the eligible period” in the opening language of

s. 3.1(2) modifies ss. 3.1(2)(a) and (b) by indicating that the licensing conditions set forth apply in

respect of a characteristic of a contract for life insurance, i.e., its eligible period. Unlike the

Respondents, we do not read that phrase as indicating when the 2018 Regulation comes into effect

for the purpose of amending such contracts under s. 3.1(4).

[342] Here, the Respondents place great weight on an interpretive principle that directs courts to

give “the same words the same meaning throughout a statute”, citing the Sullivan Text at §8.34,

which itself cites R v Zeolkowski, [1989] 1 SCR 1378 at 1387. BMO Life notes the undefined word

issued appears a number of times in The Insurance Act, 1978, where, it is argued, it must be read

as referring to existing insurance policies, not policies that might be issued in the future, i.e., those

to be issued (e.g., ss. 16(1) and 273(4)). While there is some merit to this argument, the argument

itself is a double-edged sword.

[343] The argument cuts both ways because the 2018 Regulation does not employ the language

generally used by the Legislature in The Insurance Act, 1978 when signalling that a matter is

deemed to be part of all contracts for insurance, i.e., when the deeming provision operates

retroactively or retrospectively. As examples, with emphasis highlighting the difference in

wording, the former statute read: “in any contract to which this Part applies the contract shall be

deemed to…” (s. 124(1), emphasis added); “any policy sent to the insured shall be deemed to be

intended to be in accordance with the terms of the application” (s. 126, emphasis added); “[t]he

conditions set forth in this section shall be deemed to be part of every contract in force in

Saskatchewan” (s. 128(1), emphasis added); “every contract evidenced by a motor vehicle liability

policy shall…be deemed to provide all the types of coverage mentioned in section 203” (s. 210(9),

emphasis added); and “the conditions set forth in this section shall be deemed to be part of every

Page 147

contract other than a contract of group insurance” (s. 234, emphasis added); see also s. 286(1)). In

other respects, The Insurance Act, 1978 stated that a premium payment made under a dishonoured

bill of exchange “shall be deemed never to have been paid” (s. 238(2), emphasis added), which

clearly has retroactive effect. When addressing the transfer of premiums between insurers,

s. 275(7) stated that the amount held by the initial insurer shall be “deemed to have been tendered

with the application” (emphasis added) to the subsequent insurer, which more than suggests

retroactive effect. In contrast to this wording, s. 3.1(4) unconstructively stated “[e]ach contract

for life insurance issued by a licensed insurer is deemed to contain the restrictions set out in this

section” (emphasis added).

[344] The second edge of this argument is honed by looking forward to The Insurance Act, 2015

and the 2020 Regulation. The Insurance Act, 2015 consistently provides: “the Statutory Conditions

set out in this section are deemed to be part of every contract of insurance in force in

Saskatchewan” (s. 8-28(1)(a), emphasis added); “[t]he Statutory Conditions set out in this section

are deemed to be part of every contract” (s. 8-95(1), emphasis added); and “the Statutory

Conditions set out in this section are deemed to be part of every contract other than a contract of

group insurance or of creditor’s group insurance” (s. 8-166(a), emphasis added). In contrast, the

2020 Regulation still states: “[e]ach contract of insurance for life insurance issued by a licensed

insurer is deemed to contain the restrictions set out in this section” (s. 2-5.1(4), emphasis added).

[345] Further, if it were intended to retroactively or retrospectively set aside past transactions

that contravene its restrictions, we would have thought the 2018 Regulation would say something

about licensed insurers being required to return any funds they might have already received from

insureds in excess of the licensing conditions imposed under s. 3.1(2); albeit, it would have been

inconsistent with the licensing objectives of s. 34 of The Insurance Act, 1978 to penalise insurers

for undertaking such transactions prior to the enactment of the 2018 Regulation. Nonetheless,

because the 2018 Regulation does not address this circumstance at all, it is indicative of a

prospective effect.

Page 148

[346] No small measure of interpretive assistance as to the effect of the 2018 Regulation is lent

by the phrase “for the purposes of section 34” because that section of The Insurance Act, 1978

provided:

Certain standards to be met

34(1) Every insurer who is a licensee shall comply with the conditions, including

conditions respecting solvency, capital and other financial standards, prescribed in the

regulations.

(2)

No insurer who applies for a licence is entitled to be issued a licence unless it has

complied with the conditions, including conditions respecting solvency, capital and other

financial standards, prescribed in the regulations.

[347] As a statutory provision, s. 34 “[applies] to circumstances as they arise” (The Legislation

Act, s. 2-11). Contextually, s. 34 mandated that every licensed insurer must comply with any

licensing conditions prescribed in the regulations. Indeed, s. 475.1 of The Insurance Act, 1978

made it an offence for any insurer to contravene any provision of that Act and s. 475.11 provided

for administrative penalties for noncompliance with the Act. As such, when read harmoniously

with the licensing scheme and object of The Insurance Act, 1978, the 2018 Regulation required

every licensed insurer to comply with the restrictive conditions it set forth as the circumstances to

which it spoke arose. There is no disharmony or ambiguity in the 2018 Regulation in this regard.

As such, we conclude the 2018 Regulation applied to all licensed insurers from the date of its

enactment.

[348] We further conclude the presumption against retrospectivity and the presumption against

interference with vested rights are of no interpretive use in this context. In the Driedger Article,

the learned professor summarised his conclusions on the interplay between the presumption

against retroactive and retrospective legislation (at 276):

To summarize:

1.

2.

A retroactive statute is one that changes the law as of a time prior to its enactment.

(1) A retrospective statute is one that attaches new consequences to an event that

occurred prior to its enactment.

(2) A statute is not retrospective by reason only that it adversely affects an

antecedently acquired right.

(3) A statute is not retrospective unless the description of the prior event is the fact-

situation that brings about the operation of the statute.

3.

The presumption does not apply unless the consequences attaching to the prior

event are prejudicial ones, namely, a new penalty, disability or duty.

Page 149

4.

The presumption does not apply if the new prejudicial consequences are intended

as protection for the public rather than as punishment for a prior event.

(Emphasis added)

[349] In no small part, a prospective interpretation that catches all licensed insurers universally

in respect of all transactions described in the 2018 Regulation results from pragmatism. The 2018

Regulation imposed remedial licensing conditions on insurers respecting solvency, capital and

other financial standards, ostensibly to safeguard insurer financial stability. The 2018 Regulation

could not pragmatically attain that objective if the licensing conditions it imposed were to have

less than universal application to licensed insurers in respect of all contracts for life insurance. In

smaller part, the interpretation is trite because the rule of law holds that everyone is subject to a

valid law immediately upon its enactment, unless a contrary intention has been made clear.

[350] Notably in this regard, the Lieutenant Governor could have demarked less than universal

application by creating “categories of persons, matters or things and [making] different regulations

for each of those categories” (The Interpretation Act, 1995, s. 40(2)). In fact, the Lieutenant

Governor implicitly exercised this power to establish three categories of life insurance contracts

under the 2018 Regulation. First, s. 3.1(2)(a) established the broad group of insurance contracts to

which the 2018 Regulation applied, namely, all contracts for life insurance. Second, s. 3.1(2)(b)

carved out a subcategory of contracts for life insurance, namely, those that are “not exempt from

accrual taxation pursuant to the Income Tax Act (Canada)”. Third, s. 3.1(3) expressly excluded

those contracts that are variable insurance contracts. Further, in operational terms, ss. 3.1(2)(a) and

(b) established different licensing conditions for the category of contracts falling under these

subsections.

[351] The language of the 2018 Regulation did not create any categories of licensed insurer and

no other categories of insurance contracts on any basis. Rather, in its entire context and in its

grammatical and ordinary sense, it applied universally to all licensed insurers and in respect of all

of their contracts for life insurance that are not variable insurance contracts. Other than in respect

of variable insurance contracts, nothing in the wording of the 2018 Regulation or in the scheme or

object of The Insurance Act, 1978 suggested the prohibition on receipt of funds and the deeming

provision (i.e., the licensing conditions) applied in any way other than prospectively and

universally.

Page 150

[352] In terms of pragmatism, the correctness of this interpretation is proven by the cracks in the

alternative. For this purpose, suppose the 2018 Regulation did not apply to contracts for life

insurance that were entered into prior to its enactment on October 26, 2018. In that case, the

restrictions under s. 3.1(2) of the 2018 Regulation would mean that the regulatory compliance

requirements would have been fractured into four categories: (a) contracts for life insurance

entered before October 26, 2018; (b) contracts for life insurance entered after October 26, 2018,

that are exempt from accrual taxation (s. 3.1(2)(a)); (c) contracts for life insurance entered after

October 26, 2018, that are not exempt from accrual taxation (s. 3.1.2(b)); and (d) contracts for life

insurance that are variable insurance contracts (s. 3.1(3)). Although the Lieutenant Governor

explicitly created the latter three categories, the first category of contracts was not expressly

designated in the 2018 Regulation.

[353] In practical terms, this four-fold fracturing would mean that a licensed insurer would have

been lawfully required to adhere to the licensing conditions under s. 3.1(2) in respect of only two

of the four categories of its contracts for life insurance and contractually obligated to act

inconsistently with the object of the 2018 Regulation in respect of the other two categories.

Moreover, common sense suggests that those first two categories caught by s. 3.1(2) would hold

the fewest contracts—each covering no contracts whatsoever on enactment and only five months

of contracts at the time the Judge issued his decisions; versus the other two categories covering

decades of contracts entered into prior to October 26, 2018.

[354] The absurdity of this alternative interpretation is plain and obvious given the reference to

s. 34 of The Insurance Act, 1978, which related to solvency, capital requirements or other financial

standards of licensed insurers. If the object of the 2018 Regulation was to prohibit licensed insureds

from undertaking the type of transactions enumerated in s. 3.1(2), one only need bring a little

financial common sense to bear to see that this object could not have been achieved by exempting

the vast bulk of contracts for life insurance from the operation of the 2018 Regulation. This is

consistent with the purposive approach to statutory interpretation mandated by the modern rule.

[355] The words of the 2018 Regulation cannot be read to have the alternative interpretation

without ignoring the interpretive direction in s. 2-10 of The Legislation Act. Section 2-10(2)

affirms the contextual inference that the Lieutenant Governor enacted the 2018 Regulation to

Page 151

remediate the common law or an existing circumstance. If the ostensible purpose of the 2018

Regulation was the imposition of remedial licensing conditions on insurers, then interpreting the

2018 Regulation as fracturing its application in operational terms such that it would not apply to

any contracts for life insurance on its enactment would necessarily undermine its object and be

inharmonious with the scheme and object of The Insurance Act, 1978. Even if that inference were

open to be drawn, we simply cannot conclude that such a construction of the 2018 Regulation

would be “fair, large and liberal” or the “interpretation that best ensures the attainment of its

objects” (The Legislation Act, s. 2-10(2), emphasis added).

[356] The interpretation that best ensures the attainment of the object of the 2018 Regulation is

to construe it as applying to all licensed insurers in respect of all of the insurer’s contracts for life

insurance that are not variable insurance contracts at the time of its enactment. To be clear about

its scope, the 2018 Regulation prohibited licensed insurers, effective October 26, 2018, from

receiving or accepting for deposit any funds or payments:

(a)

in excess of amounts required to pay the life insurance premium for the eligible

period under a contract for life insurance (s. 3.1(2)(a)); and

(b)

in excess of the life insurance premium required to keep a contract for life insurance

in force until the end of the eligible period in circumstances where the contract is

not exempt from accrual taxation (s. 3.1(2)(b)).

[357] While s. 3.1(4), often called the deeming provision of the 2018 Regulation, received much

discussion in the hearing of these matters, it does not truly go to the root of the issue in the

cross-appeals. If anything, s. 3.1(4), which states “[e]ach contract for life insurance issued by a

licensed insurer is deemed to contain the restrictions set out in this section”, simply adds to a

bootstrap to the certainty of the foregoing interpretation of the 2018 Regulation.

[358] We say that because all that s. 3.1(4) does is insert the licensing conditions under s. 3.1(2)

into “[e]ach contract for life insurance issued by a licensed insurer”. In that respect, the interpretive

question raised by the parties under s. 3.1(4) is irrelevant because it does not matter when a contract

is deemed to have been so amended if the insurer is already prohibited by statutory law from

receiving or accepting such funds under the contract regardless of its amendment. Where a change

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in the law prohibits a transaction, there is no need to amend that contract to contractually prohibit

such transactions from occurring into the future—the change in the law does that.

[359] This does not mean, however, that the legality of the Respondents’ prior receipt or

acceptance for deposit of funds or payments under the ULPs is in any way affected by the 2018

Regulation. Again, nothing in the wording of the 2018 Regulation suggests that it applies

retroactively or retrospectively. In this context, that means there is nothing to suggest it applies to

those transactions or to retrospectively change the legality of or rights attained under those

transactions.

d.

Statement of Interpretation—2018 Regulation

[360] To summarise, we find the 2018 Regulation is not declaratory, retroactive or retrospective.

Effective October 26, 2018, the 2018 Regulation applied to all licensed insurers in respect of all

contracts for life insurance that are not variable insurance contracts and thereby prohibited licensed

insurers as of that date from receiving or accepting for deposit funds or payments:

(a)

in excess of amounts required to pay the life insurance premium for the eligible

period under each such contract (s. 3.1(2)(a)); and

(b)

in excess of the life insurance premium required to keep the contract in force until

the end of the eligible period in circumstances where such a contract is not exempt

from accrual taxation (s. 3.1(2)(b)).

4.

Interpretation of the 2020 Regulation

[361] As noted above, the 2020 Regulation has marginally different wording than the 2018

Regulation by reason of amendments consequent on the repeal of The Insurance Act, 1978 and

enactment of The Insurance Act, 2015. Under the interpretation that follows, we nonetheless find

that these consequential amendments do not affect the operative effect of the 2020 Regulation.

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a.

Consequential Amendments

[362] When The Insurance Act, 2015 became the law of Saskatchewan on January 1, 2020, the

Insurance Regulations were updated to conform to the newly-enacted, modernised insurance

legislation. This resulted in a few changes to the wording of the Regulation, including to its title,

which is now “Prohibited activity”, having little or no consequence to its interpretation.

[363] Most noticeably, however, the 2020 Regulation states that the restrictions imposed under

s. 2-5.1(2) were made “for the purposes of clause 2-28(1)(e)” of The Insurance Act, 2015. That

clause provides that, except as permitted under the Act and the Insurance Regulations, “no licensed

insurer shall…carry on any other prescribed activity”.

[364] As is evident, s. 2-28 of The Insurance Act, 2015 differs from s. 34 of The Insurance Act,

1978, which referred to licensing conditions, “including conditions respecting solvency, capital

and other financial standards, prescribed in the regulations”. That is, s. 34 provided an internal

reference point, which is absent from s. 2-28(1)(e), to assist with gleaning an understanding of the

object of the Regulation. However, s. 34 also spoke to standards that licensed insurers were

required to meet, which were imposed through regulatory licensing conditions. Section 2-28(1)

speaks to activities, which are prescribed under its clauses or in the Insurance Regulations, in

which licensed insurers are prohibited from engaging.

[365] In all other respects, the 2020 Regulation is the same as the 2018 Regulation.

b.

Interpretation

[366] As it results from the repeal and replacement of the 2018 Regulation, the interpretation of

the 2020 Regulation must begin with s. 2-15 of The Legislation Act, recited below for reference:

No implication from repeal, amendment, etc.

2‑15(1) The repeal of an enactment, the repeal and replacement of an enactment or the

amendment of an enactment is not to be construed to be or to involve:

(a)

a declaration that the enactment was, or was considered by the Legislature

or other body or person by whom it was enacted to have been, previously in force;

or

(b)

The amendment of an enactment is not to be construed to be or to involve a

declaration that the law pursuant to the enactment before the amendment was or was

a declaration as to the previous state of the law.

(2)

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considered by the Legislature or other body or person who enacted it to be different from

the law under the enactment as amended.

(3)

A re‑enactment in the same words, a revision, a consolidation or an amendment of

an enactment is not to be construed to be or to involve an adoption of the construction that

has by judicial decision or otherwise been placed on the language used in the enactment or

on similar language.

[367] Three interpretive directions may be drawn from the application of s. 2-15 of The

Legislation Act in the circumstances of the Regulation:

(a)

(b)

(c)

the repeal and replacement of the 2018 Regulation is not to be construed to be or to

involve declarations that it was previously in force or as to the previous state of the

law;

the consequential amendment of the Regulation is not to be construed to be or to

involve a declaration that the law pursuant to the 2018 Regulation was different

from the law under the 2020 Regulation; and

the 2020 Regulation is not to be construed to be or to involve an adoption by the

Lieutenant Governor of the construction given to the 2018 Regulation by the Judge.

With those directions in mind, we will construe and interpret the 2020 Regulation.

[368] As with the 2018 Regulation, there is no disputing what the 2020 Regulation prohibits.

Section 2-5.1(2)(a) states that “no licensed insurer shall receive or accept for deposit funds or

payments in excess of the amount required to pay the life insurance premium for the eligible

period”. Nothing in the 2020 Regulation detracts from or modifies the interpretation we have given

to the corresponding section under the 2018 Regulation. That is, s. 2-5.1(2) places a calculable

upper limit on the amount an insurer may receive as investment funds under a contract for life

insurance by prohibiting licensed insurers from carrying on the activity of using a contract for life

insurance as an investment vehicle for insureds in a way that is divorced from financing the cost

of the life insurance coverage.

[369] As to its temporal effect, the 2020 Regulation does not contain any language that expressly

or by necessary implication indicates that it is declaratory or that it is to apply retroactively or

retrospectively. The analysis and reasoning under our interpretation of the 2018 Regulation applies

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equally to the construction and interpretation of the 2020 Regulation. In short form, application of

the modern principle of statutory interpretation confirms that the 2020 Regulation has prospective

effect.

[370] As to whether it continues to apply to all licensed insurers in respect of all contracts for

life insurance that are not variable insurance contracts, we are unable to interpret the 2020

Regulation any differently than the 2018 Regulation. As of the date of its enactment, the 2020

Regulation universally prohibits licensed insurers from receiving or accepting for deposit funds or

payments under contracts for life insurance:

(a)

in excess of amounts required to pay the life insurance premium for the eligible

period under each such contract (s. 2-5.1(2)(a)); and

(b)

in excess of the life insurance premium required to keep the contract in force until

the end of the eligible period in circumstances where such a contract is not exempt

from accrual taxation (s. 2-5.1(2)(b)).

[371] In one sense, the wording of The Insurance Act, 2015 and the 2020 Regulation is stronger

because those enactments now speak of prohibited activities, as opposed to licensing conditions

under the former law. On the other hand, a prospective interpretation that catches all licensed

insurers in respect of all transactions described in the 2020 Regulation is somewhat less compelling

because, unlike s. 34 of The Insurance Act, 1978, s. 2-28(1) of The Insurance Act, 2015 does not

refer to the imposition of “solvency, capital and other financial standards” as being the impetus for

its promulgation.

[372] Nonetheless, the 2020 Regulation is remedial legislation that prohibits insurers from

carrying on certain activities, ostensibly in the interest of consumer protection and industry

regulation. In that regard, the 2020 Regulation would be far less effective in prohibiting an activity

if it had less than universal application to licensed insurers in respect of all contracts for life

insurance. Moreover, everyone is subject to a valid law immediately upon its enactment, unless a

contrary intention has been made clear and we cannot infer anything more than prospective,

universal application from the wording of the 2020 Regulation. Like the 2018 Regulation, the 2020

Regulation does not create any categories of licensed insurer and no other categories of insurance

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contracts on any basis. Finally, the offence provisions of The Insurance Act, 2015 speak of

contravention of “any term or condition of a licence or a restriction imposed on a licence”

(s. 9-17(1)(g)) and further provide that it is an offence to “contravene any provision of this Act,

the regulations or an order made pursuant to this Act” (s. 9-17(1)(j)). In other respects, under

ss. 9-21 to 9-24, administrative penalties, compliance undertakings, Superintendent compliance

orders, and court compliance orders are also available to enforce The Insurance Act, 2015 and the

Insurance Regulations.

[373] Accordingly, under the application of the modern principle of statutory interpretation, we

interpret the 2020 Regulation as applying universally to all licensed insurers and in respect of all

of their contracts for life insurance that are not variable insurance contracts.

c.

Statement of Interpretation—2020 Regulation

[374] The 2020 Regulation is not declaratory, retroactive or retrospective. It applies to all

licensed insurers in respect of all contracts for life insurance that are not variable insurance

contracts and thereby prohibits licensed insurers from receiving or accepting for deposit funds or

payments:

(a)

in excess of amounts required to pay the life insurance premium for the eligible

period under each such contract (s. 2-5.1(2)(a)); and

(b)

in excess of the life insurance premium required to keep the contract in force until

the end of the eligible period in circumstances where such a contract is not exempt

from accrual taxation (s. 2-5.1(2)(b)).

VII. CONCLUSION

[375] For the foregoing reasons, the Mosten Appeal (CACV3407) and the Atwater Appeal

(CACV3408) are allowed and the Judge’s interpretations of the ULPs are set aside, as are the

Judge’s costs orders. As to the principal issue of interpretation in those appeals, we find that the

ULPs at issue do not set a limit on the amount an insured may invest in the side account. The Ituna

Appeal (CACV3409) is dismissed.

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[376] The cross-appeals in CACV3407, CACV3408 and CACV3409 are allowed and the Judge’s

interpretation of the 2018 Regulation is varied. We find that the 2018 Regulation applied and the

2020 Regulation applies to all licensed insurers in respect of all contracts for life insurance that

are not variable insurance contracts, including the insurance contracts that are the subjects of these

appeals, effective October 26, 2018.

[377] As the parties to the Mosten Appeal and the Atwater Appeal have each met with mixed

success in these matters, we make no order as to costs in this Court or in the Court of Queen’s

Bench. We order Ituna to pay Industrial Alliance’s taxable costs in the Ituna Appeal and at the

Court of Queen’s Bench.

“Caldwell J.A.”

Caldwell J.A.

“Barrington-Foote J.A.”

Barrington-Foote J.A.

“Tholl J.A.”

Tholl J.A.