Scottish & York Insurance Co. v. Canada
T-2384-86
Teitelbaum J.
4/1/00
27 pp.
Motion to amend amended statement of claim pursuant to Federal Court Rules, 1998, r. 75(1) by adding following particulars of negligence: Crown failed to act or protect interest of unprotected Canadian policyholders by requiring Co-Operative Fire & Casualty Company (Co-Operators) to return deposits of Security Casualty Company (SCC) in Canada it had released to them when learned understanding of Co-Operators' assumption of SCC's liabilities to plaintiff incorrect; believing that Co-Operators assumed SCC's liabilities to plaintiff in respect of which released SCC's liabilities to Co-Operators, defendant failed to require CoOperators to discharge those liabilities, or maintain margin requirements pursuant to Canadian British Insurance Companies Act or suspend registration of Co-Operators for non-compliance with respect to representations to defendant-Motion to strike out paragraphs of reply-Plaintiffs, general insurance companies, Canadian policyholders of SCC, foreign insurer-Entered into re-insurance treaties with SCC from 1967 to 1980-Pursuant to Foreign Insurance Companies Act, SCC maintained assets in Canada under control of Minister-SCC experienced financial difficulties in United States resulting in liquidation proceedings-At that time SCC owed plaintiffs $850,000; had $1 million on deposit in Canada-Two forms of assets on deposit: those vested in trust, those held by Receiver General-Also had bank accounts in Canada seized by Department of Insurance in 1981-Liquidator entering agreement with Co-Operators whereby latter acquiring all right, title, interest to assets, property, business of Canadian branch of SCC; Co-Operators agreeing to assume all obligations, liabilities of vendor relating to Canadian branch-Crown's understanding of agreement that Co-Operators to assume responsibility for reinsurance contracts-Department of Insurance recommending to Minister sanction be given to agreement due to belief purchaser acquiring all outstanding liabilities of SCC to Canadian policyholders-In 1982 Co-Operators published notice of intention to acquire Canadian business of SCC-Assets released-Plaintiffs learned of purchase transaction in June 1982, when Co-Operators claimed not to have acquired reinsurance assumed business of SCC in response to plaintiffs' inquiry as to how communication with respect to premium, losses would be set up between them-Purchase price paid by Co-Operators based on balance sheet, prepared by Ernst & Whinney, excluding liabilities to plaintiffs from statement of liabilities-CoOperators received all SCC's assets in Canada, but not deducting, in calculating purchase price, SCC liabilities to plaintiffs-Ernst & Whinney financial statements "reclassified" reinsurance assumed liabilities of SCC such that what had previously been recorded as payable from branch to Canadian policyholders now payable to head office, head office recorded as liability holder of all liabilities under reinsurance assumed-Neither plaintiffs nor defendant aware of how Co-Operators justifying position until saw Ernst & Whinney statement in 1986-By 1986 action plaintiffs commenced action against Superintendent of Insurance for negligence in connection with advice to Minister of Finance to sanction agreement of purchase, sale between Co-Operators and SCC, pursuant to Canadian British Insurance Companies Act-Action also brought in regard to Superintendent's actions in connection with release of assets maintained by SCC in Canada pursuant to Foreign Insurance Companies Act, ss. 7, 14-1987 amended statement of claim substituting Crown as defendant, alleging Superintendent servant of Crown for whose act Crown vicariously liable-1987 defence denied Superintendent owed duty of care to plaintiffs, but if duty of care owed, not breached-1999 amended defence alleging plaintiffs had notice in 1982 Co-Operators not assuming re-insurance treaties; knew in 1982 Superintendent released to CoOperators securities formerly held on deposit; cause of action out of time given plaintiffs' knowledge of alleged breach of duty of care-1999 reply raising discoverability rule, existence of indefinitely continuing damages, location of cause of action in place other than Ontario, claim reserves held by Minister constituted trust funds which could not have been conveyed in contravention of statute, still in Crown's possession-(1) Motion to amend-Federal Court Rules, 1998, r. 201 permitting amendment notwithstanding effect to add new cause of action, if new cause of action arising out of substantially same facts as cause of action in respect of which party seeking amendment already claimed relief in action-Thus issue whether allegations in amendments arising from same factual situation-R. 201 unambiguous, must be interpreted broadly-Amendments arising out of substantially same set of facts as cause of action for which already claiming relief-Must be allowed pursuant to r. 201-R. 75 permitting Court on motion to allow party to make amendment-R. 75 not limited to make amendments subject to r. 76-(2) Motion to strike paragraphs in reply as (i) reply delivered beyond prescribed time; (ii) paragraphs not proper matter for reply-R. 58(1) permitting party by motion to challenge any step taken by another party for noncompliance with Rules-R. 58(2) providing motion under r. 58(1) shall be brought as soon as practicable after moving party obtaining knowledge of irregularity-Defendant waited two months before bringing motion for hearing-Had ample opportunity to bring motion in two-month period after received amendments, prior to motion being filed-Defendants failed to comply with r. 58(2) explicit requirement motion must be filed as soon as practicable-Motion dismissed-Federal Court Rules, 1998, SOR/98-106, rr. 58, 75, 76, 201-Canadian British Insurance Companies Act, R.S.C. 1970, c. I-15-Foreign Insurance Companies Act, R.S.C. 1970, c. I-16, ss. 7 (as am. by R.S.C. 1970 (1st Supp.), c. 20, ss. 14, 18), 14 (as am. idem, s. 17; 1976-77, c. 39, s. 32).