I'...I': r [ f I I I· Court File No. CV-16-11425-00CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL...
Transcript of I'...I': r [ f I I I· Court File No. CV-16-11425-00CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL...
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Court File No. CV-16-11425-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE INSURANCE COMPANIES ACT, S.C. 1991, c. 47, AS AMENDED, AND THE MUTUAL PROPERTY AND
CASUALTY INSURANCE COMPANY WITH NON-MUTUAL POLICYHOLDERS CONVERSION REGULATIONS, SOR/2015-168
AND IN THE MATTER OF A PLAN OF CONVERSION OF ECONOMICAL MUTUAL INSURANCE COMPANY
FACTUM OF THORNTON GROUT FINNIGAN LLP (Motion to Appoint Committee Members Returnable November 29, 2016)
(Moving Party)
November 15, 2016 THORNTON GROUT FINNIGAN LLP 100 Wellington Street West Suite 3200, P.O. Box 329 TD West Tower Toronto-Dominion Centre Toronto, ON M5K 1K7 Fax: (416) 304-1313
John L. Finnigan (LSUC# 24040L) Tel: (416) 304-0558 Email: [email protected]
Denisa Mertiri (LSUC# 678561) Tel: (416) 304-0596 Email: [email protected]
Counsel for the Non-Mutual Policyholders of Economical Mutual Insurance Company
TO:
TO:
AND TO:
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SUPERIOR COURT OF JUSTICE Commercial List 330 University Avenue Toronto, ON MSG 1R7
MCCARTHYTETRAULTLLP PO Box 48, Suite 5300 Toronto-Dominion Bank Tower Toronto, ON MSK 1E6
Geoff R. Hall (LSUC# 347010) Tel: (416) 601-7856
Byron Shaw (LSUC# 57745V) Tel: (416) 601-8256
Counsel for the Mutual Policyholders of Economical Mutual Insurance Company
OSLER, HOSKIN & HARCOURT LLP 100 King Street West 1 First Canadian Place Suite 6200, P.O. Box 50 Toronto, ON M5X 1B8
Mark A. Gelowitz (LSUC# 31857J) Tel: (416) 862-4743
Laura K. Frie (LSUC# 36545Q) Tel: (416) 862-5899
Geoffrey J. Hunnisett (LSUC# 57138G) Tel: (416) 862-5657
Counsel for Economical Mutual Insurance Company
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Court File No. CV-16-11425-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE INSURANCE COMPANIES ACT, S.C. 1991, c. 47, AS AMENDED, AND THE MUTUAL PROPERTY AND CASUALTY INSURANCE COMPANY WITH NON-MUTUAL POLICYHOLDERS CONVERSION REGULATIONS, SOR/2015-168
AND IN THE MATTER OF A PLAN OF CONVERSION OF ECONOMICAL MUTUAL INSURANCE COMPANY
FACTUM OF THORNTON GROUT FINNIGAN LLP (Motion to Appoint Committee Members Returnable November 29, 2016)
PART I - OVERVIEW
1. This motion is made pursuant to the requirements of this Court's Order dated July
15, 20161 (the "Initial Order") to appoint members to the committee representing
the 630,000 non-mutual policyholders (the "NMP Committee") of Economical
Mutual Insurance Company (the "Company") in its statutorily governed process
to demutualize. The NMP Committee will negotiate with a committee appointed
by this Court to represent the approximately 880 mutual policyholders of the
Company to determine the method by which the benefits arising from the
1 Order of Justice Hainey dated July 15, 2015, Exhibit A, Affidavit of James H. Grout sworn on November 15, 2016, at para. 3 ("Grout Affidavit"), Thornton Grout Finnigan LLP Motion Record ("TGF Record"), Tab2.
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Company's demutualization will be allocated among eligible policyholders as well
as, potentially, others persons. The Court appointed Thornton Grout Finnigan LLP
("TGF") as counsel to the eligible non-mutual policyholders (the "NMP").
TGF is recommending the appointment of six eligible NMPs to the NMP
Committee. Each has experience in negotiations, business and financial affairs and
will fairly and adequately represent the interests of the NMPs.
PART II-BACKGROUND
3. The Company is in the process of demutualizing pursuant to the Mutual Property
and Casualty Insurance Company with Non-Mutual Policyholders Conversion
Regulations2 (the "Conversion Regulations").
4. The Initial Order sets out information and documents to be published on its website,
the process for making applications and filing submissions, the manner of effecting
service, the date, time and location of any hearings and the procedure for submitting
costs and expenses.3
5. On September 22, 2016, this Court appointed TGF as representative counsel for the
NMPs.4
6. The next step in the process is the appointment of committees of eligible mutual
and non-mutual policyholders to conduct the negotiation mandated by section 12
of the Conversion Regulations.
2 SOR/2015-168 ["Conversion Regulations"].
3 Exhibit A; Grout Affidavit, at para. 6, TGF Record, Tab 2.
4 Exhibit C; Grout Affidavit, at para. 7, TGF Record, Tab 2.
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In the negotiations, the policyholder committees will attempt to reach an agreement
on the method by which the benefits of demutualization will be allocated among
the eligible policyholders and whether there are any other persons that should
benefit from the demutualization. 5
Pursuant to the Initial Order, TGF reviewed the 40 applications for membership
received and makes this motion recommending the appointment of the applicants
to the NMP Committee. 6
9. TGF invited each applicant to participate in an interview. One of the applicants did
not respond to TGF's invitation and one other was unavailable for an interview.7
10. In selecting the recommended committee members, TGF considered their
experience in negotiations, business and financial affairs, 8 their apparent level of
sophistication and experience in complex problem solving and working
cooperatively in groups, their knowledge of the process of demutualization as well
as their geographical location.9
s Conversion Regulations, supra at s. 12(1).
6 Exhibit A at para. 13, Grout Affidavit at para. 8, TGF Record, Tab 2.
7 Grout Affidavit, at para. 17, TGF Record, Tab 2.
8 Conversion Regulations, supra at s. 9(6).
9 Grout Affidavit, at paras. 14-18, TGF Record, Tab 2.
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Each recommended applicant possesses experience in negotiations, business and
financial affairs10 and other qualities and professional experiences that will allow
them to fairly and adequately represent the interests of the NMPs. 11
TGF recommends the following applicants for membership on the NMP
Committee: 12
(a) Adriana Davies is from Edmonton, Alberta. Dr. Davies was the Executive
Director of the Heritage Community Foundation and Executive Director of
the Alberta Museums Association. She has served on several federal and
provincial committees and task forces including the Alberta provincial
Charitable Fundraising Committee, the federal Non-Profit and Voluntary
Sector Task Force, and the federal Review Committee for the Museums
Assistance Program. She holds a BA in English and French, an MA in
English, and PhD in comparative literature. In 2010, Dr. Davies was
awarded the Order of Canada for her role in creating the Alberta Online
Encyclopedia and in promoting and preserving Alberta's cultural heritage.
(b) Paul Duncan is from Nanaimo, British Columbia and holds CPA, CMA
and CF A designations. He also holds an MA in Economics as well as an
MBA in Finance. Mr. Duncan has many years of senior executive
experience managing member owned banks. From 1999 to 2002, he was
10 Grout Affidavit, at para. 18, TGF Record, Tab 2.
11 Grout Affidavit, at paras. 14 and 21-22, TGF Record, Tab 2.
12 Grout Affidavit, at para. 21, TGF Record, Tab 2.
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President and CEO of Coast Capital Savings. He has actively participated
in industry consolidations including merger negotiations.
George Fowlie is from Toronto, Ontario and holds an MBA as well as the
ICD.D designation. Mr. Fowlie was Managing Director for Investment
Banking at First Marathon Securities (1991-2000) where he was part of the
financial institutions group that earned a syndicate position in all four life
company demutualizations. He has also held management positions with
W estwind Capital Partners, Edgestone Capital Partners, and most recently
as Chairman and Director of Crown Capital Partners.
( d) Guy Legault is from Ottawa, Ontario and holds CPA and CGA
designations as well as an MBA. Mr. Legault is currently the Chief
Operating Officer of the Canadian Chamber of Commerce. He was
previously a Vice President at Engineers Canada, President and CEO of the
Canadian Payments Association, and President and COO of CGA-Canada.
(e) William Paul McCrossan is from Toronto, Ontario. He is an actuary and
holds the FSA, FCIA, and MAAA designations. Mr. McCrossan is a former
Member of Parliament for York Scarborough (1978-1988), as well as a
former President of the Canadian Institute of Actuaries. Mr. McCrossan
previously worked with Eckler Partners Ltd., the International Monetary
Fund, the Ontario Teachers' Pension Plan, and, most recently, with the New
Brunswick Pension Reform Task Force. Mr. McCrossan has been an NMP
for approximately 45 years.
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(f) Wilberdien (Willy) Robinson is from Halifax, Nova Scotia and she holds
CMA and CPA designations as well as an MBA. Ms. Robinson was the
General Manager of iNova Credit Union. She previously worked as a
branch manager at CIBC and as a management consultant. She has been a
board member of the Co-operative Development Foundation since 2011.
13. In making its recommendation, TGF has considered the Company's input regarding
any background information that could disqualify or otherwise call into question
the candidacy of the proposed committee members. 13
14. The proposed committee members have no interests in conflict nor any perceived
interests in conflict with the NMP .14
PART III - ARGUMENT
ISSUE 1: The Qualifications of the Proposed Committee Members
15. The Conversion Regulations provide for the appointment of at least three and not
more than nine eligible policyholders to be members of each policyholder
committee. 15 This Court must assess whether each applicant is able to fairly and
adequately represent the interests of the NMPs, including by taking into account
13 Grout Affidavit, at para. 16, TGF Record, Tab 2.
14 Grout Affidavit, at para. 24, TGF Record, Tab 2.
15 Conversion Regulations, supra at s. 9(6) .
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[ - their experience in negotiations and business and financial affairs and by having
regard to any objections filed. 16
16. TGF's background in business negotiations and representative appointments as
well as its review of the committee applications and interviews of the applicants
led it to the view that the NMP Committee should be comprised of six members.
In proposing this committee size, TGF was cognizant of:
(a) the requirement that at least two-thirds of the members of each committee
approve of the methods of allocating the value of the converting company
pursuant to the Conversion Regulations. 17
(b) the need to have a committee that was representative of the broader
policyholder group; and
( c) the need for operational efficiency in a process that will be complex and
time-constrained. 18
17. The six proposed NMP Committee members stood out among many other qualified
candidates. 19 They are highly accomplished professionals with a diverse skill set
and are expected to be able to grasp and effectively deal with the complex issues
that will be raised in these negotiations.20
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17 Conversion Regulations, supra at s. 12(5).
18 Grout Affidavit, at para. 20, TGF Record, Tab 2.
19 Grout Affidavit, at para. 21, TGF Record, Tab 2.
20 Grout Affidavit, at paras. 21-22, TGF Record, Tab 2.
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None of the proposed committee members oppose the Company's demutualization.
They also understand the importance of a resolution in such a complex and
expensive process and are expected to proceed on a good faith basis towards such
a resolution. All the proposed committee members, however, understand their
responsibility in ensuring that they fairly and adequately represent the interests of
630,000 NMPs and are expected to proceed on a principled basis to advocate for
the NMP's interests.21
ISSUE 2: The Proposed Committee Members have no Interests in Conflict with
the NMP Constituency
19. The Conversion Regulations also require that applicants to the NMP Committee
not have any interest in conflict with the eligible policyholders they seek to
represent and that they are not officers, employees or related parties to the
Company.22 No such conflict of interest has been found or brought to the attention
ofTGF.23
ISSUE 3: Payment of Costs by the Converting Company
20. Section 11(1) of the Conversion Regulations contemplates that this Court should
determine the reasonable amounts payable by the Company to committee members
in the negotiation process for reimbursements of their travel, accommodation and
21 Grout Affidavit, at paras. 22-23, TGF Record, Tab 2.
22 Conversion Regulations, supra at s. 9(2).
23 Grout Affidavit, at para. 24, TGF Record, Tab 2.
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meal expenses and remuneration in respect of their attendance at policyholder
committee meetings.24
TGF proposes that the committee members be paid a reasonable per diem amount
for dedicating their efforts, professional skills as well as time to this negotiation.
The committee members will, for example, regularly review complex financial and
actuarial information, strategize approaches to the negotiation and deploy their
professional experiences to navigate the inevitable challenges of this negotiation
process. As such, TGF submits that a per diem amount of $800 and a half day
amount of $400 is reasonable in the circumstances.25
ISSUE 4: Limitation of Liability
22. Court officers such as receivers, monitors and representative counsel are routinely
protected from liability (gross negligence and wilful misconduct excepted) in the
discharge of their duties.
23. It is submitted that, in addition to the indemnity protections provided in section 9(8)
of the Conversion Regulations, the six committee members, TGF as representative
counsel and any expert retained to assist the NMP Committee should not incur any
liability or obligation as a result of their appointment or the carrying out of their
duties pursuant to the Conversion Regulations, save and except for any gross
negligence or wilful misconduct on their part. Additionally, nothing should
24 Conversion Regulations, supra at s. 11 (1 ).
25 Grout Affidavit, at para. 25, TGF Record, Tab 2.
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derogate from the committee members' protections granted by the Conversion
Regulations. 26
PART IV - ORDER REQUESTED
24. TGF respectfully requests an order appointing the applicants Adriana Davies, Paul
Duncan, George Fowlie, Guy Legault, William Paul McCrossan and Wilberdien
(Willy) Robinson as members of the NMP Committee in the form of the Order
attached to the Notice of Motion.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 15th day ofNovember, 2016.
Toronto-Dominion Centre Toronto, ON M5K 1K7
John Finnigan (LSUC# 24040L) Tel: (416) 304-0558
Counsel for the Non-Mutual Policyholders of Economical Mutual Insurance Company
26 Grout Affidavit, at para. 26, TGF Record, Tab 2.
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SCHEDULE "A" RELEVANT STATUTES
MUTUAL PROPERTY AND CASUALTY INSURANCE COMPANY WITH NONMUTUAL POLICYHOLDERS CONVERSION REGULATIONS, SOR/2015-168
Interpretation
Definitions
1 The following definitions apply in these Regulations.
eligible mutual policyholder means a person who holds a mutual policy if
• (a) they held it on the eligibility date;
• (b) they applied for it before the date specified in the resolution passed under section 3 and it was issued after the eligibility date but before the day on which the special resolution referred to in section 5 is passed; or
• ( c) they held it before the eligibility date but it lapsed before that date and was reinstated after that date but before the day on which the special resolution referred to in section 5 is passed. (souscripteur admissible d'une police mutuelle)
eligible non-mutual policyholder means a person who
• (a) holds a non-mutual policy and has done so for the 12-month period ending on the eligibility date; or
• (b) belongs to any other group of policyholders specified in the resolution passed under section 3. (souscripteur admissible d 'une police non mutuelle)
eligible policyholder means
• (a) an eligible mutual policyholder; or
• (b) an eligible non-mutual policyholder. (souscripteur admissible)
Application
Companies with non-mutual policyholders
2 These Regulations apply to mutual property and casualty insurance companies in which some of the policyholders hold non-mutual policies.
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Negotiations Between Classes of Policyholders
Committee membership
9 (1) Any eligible policyholder may submit to counsel for the class of policyholders to which they belong, in the time and manner set out in the initial order, an application for membership on the policyholder committee for that class.
Restrictions
(2) Applicants must not have any interest that is in conflict with that of the eligible policyholders they seek to represent and must not be an officer, employee or related party of the converting company.
Filing and service
(3) Counsel must file with the court all applications received under subsection (1) and must serve on counsel for the other class of policyholders and on the converting company the names of the applicants from the class of policyholders they represent.
Publication
( 4) The converting company must publish on its website the names of all applicants for membership on each policyholder committee.
Objections
(5) Any eligible policyholder or counsel for a class of policyholders may file, in the time and manner set out by the court in the initial order, an objection to the candidacy of a policyholder who has submitted an application for membership on a policyholder committee.
Appointment
(6) The court must appoint at least three and not more than nine eligible policyholders to be members of each policyholder committee and must notify the converting company and counsel for the class of policyholders represented by that committee of its decision following a hearing at which the court assesses the ability of each applicant to fairly and adequately represent the interests of the class of policyholders in question, including by taking into account their experience in negotiations and business and financial affairs and by having regard to any objections filed under subsection (5).
Publication
(7) The converting company must publish on its website the names of the members of each policyholder committee.
Obligations of company in respect of policyholder committee members
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(8) In any legal proceeding, the converting company is bound to take up the interest for and assume the defence of any member of the policyholder committees for anything done or omitted to be done in good faith in the performance of their functions and, if applicable, indemnify that member.
Duration of representation
(9) The policyholder committees are disbanded on the day on which the notice referred to in subsection 14(1) is sent or the day on which the conversion process is terminated, whichever is earlier.
Costs payable by converting company
11 (1) The court must determine, having regard to their reasonableness, the amounts payable by a converting company in relation to the negotiations referred to in section 12, including the costs of counsel and any experts consulted by the policyholder committees, remuneration for policyholder committee members and reimbursement of their expenses for travel, accommodation and meals in respect of attendance at policyholder committee meetings.
Payment
(2) All amounts determined by the court must be paid by the converting company no later than the day on which it seeks the Superintendent's authorization to send the notice referred to in paragraph 237(1.2)(a) of the Act or the day on which the conversion process is terminated under section 21, whichever comes first, or on any other day that the court may set.
Method and Benefits
Purpose of negotiations
12 (1) The policyholder committees, with the assistance of the counsel appointed by the court, must enter into negotiations to establish the method of allocating the value of the converting company and to determine whether any benefits will be provided to any persons or classes of persons - other than eligible policyholders - as a result of the conversion.
Method of allocating value of converting company
(2) The method of allocating the value of the converting company among eligible policyholders and, as the case may be, any persons or classes of persons - other than eligible policyholders - must be described in detail and set out
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(a) the basis on which any variable amount of benefits will be calculated;
(b) any fixed, minimum or maximum amount of benefits to be provided to each of theni;
( c) the rationale for choosing the method of determining and allocating the benefits; and
(d) the aggregate value of the benefits.
Calculation of variable amount
(3) The variable amount of benefits referred to in paragraph (2)(a) must, in respect of each eligible policyholder, be calculated having regard to at least the following factors:
(a) their obligations, rights and benefits;
(b) the premiums paid by them;
(c) the length of time they have held a policy with the company; and
(d) the historical growth of the company's surplus account.
Persons or classes of persons other than eligible policyholders
(4) If benefits will be provided to any persons or classes of persons - other than eligible policyholders- as a result of the conversion, the policyholder committees must establish a list of those persons or classes of persons to whom benefits will be provided including, any persons or classes of persons suggested by the converting company and approved by the policyholder committees.
Approval by policyholder committees
(5) The method of allocating the value of the converting company and, if any, the list of persons or classes of persons - other than eligible policyholders - are considered approved by the two policyholder committees once at least two thirds of the members of each committee approve them.
IN THE MATTER OF THE INSURANCE COMPANIES ACT, R.S.C. 1991, c. 47, AS AMENDED, AND THE MUTUAL PROPERTY AND CASUALTY INSURANCE COMPANY
WITH NON-MUTUAL POLICYHOLDERS CONVERSION REGULATIONS, SOR/2015-168
Court File No.: CV-16-11425-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(COM:MERCIAL LIST)
Proceedings commenced at Toronto
FACTUM OF THORNTON GROUT FINNIGAN LLP (MOTION TO APPOINT COM:MITTEE MEMBERS
RETURNABLE NOVEMBER 29, 2016)
THORNTON GROUT FINNIGAN LLP 100 Wellington Street West Suite 3200, P.O. Box 329 TD West Tower Toronto-Dominion Centre Toronto, ON M5K 1K7
John Finnigan (LSUC# 24040L) Tel: (416) 304-0558
Denisa Mertiri (LSUC# 678561) Tel: (416) 304-0596
Counsel for the Non-Mutual Policyholders of Economical Insurance Company