Central Manufacturers’ Mutual Insurance Company v. His Majesty the King, [1950] CTC 406

TASCHEREAU, J.:—I am of the opinion that this appeal fails and should be dismissed with costs.

KELLOCK, J.:—F or the purposes of this appeal I am prepared to assume the correctness of Mr. Hayden’s contention that the amounts paid to the policyholders making up the total here involved, constitute the return of premiums to policyholders. I am similarly prepared to decide the appeal without reference to the 1942 amendment of the definition of "‘net premiums’’ as applied to a life insurance company.

In 1931 by c. 54, "‘net premiums’’ was defined by s. 13(1) (d) as follows: ‘‘ " Net premiums’ means the gross premiums received less the rebates, return premiums and premiums paid for reinsurance to companies to which sections fourteen and fifteen of this Act apply.”

By s. 17(1), every company affected was required to make a return to the Superintendent of Insurance on a form to be furnished by him showing the gross premiums received and "‘the rebates, return premiums and reinsurance premiums paid by it.”

In 1932 by c. 54, "‘net premiums’’ was defined by s. 13(f) as ‘‘the gross premiums received or receivable by the company or paid or payable by the insured less the rebates and return premiums paid on the cancellation of policies.’’

Deduction of reinsurance premiums was provided for in the taxing section. The form of s. 17 as to returns remained unchanged.

In 1942-43 by c. 32, the Act was amended with respect to life companies but the relevant provisions here in question were not changed.

Mr. Hayden contends that the word ‘‘rebates’’ in s. 13(f) is sufficient to describe the amounts in question on this appeal and to entitle his client to the deduction claimed. In his submission any payment to a policyholder not being in satisfaction of a claim under the policy and not being a return premium paid on cancellation of the policy is a rebate within the meaning of the Act.

It might be that under the form of the legislation as it existed in 1931 this contention could be accepted. It is not necessary to decide the question. Under the legislation of 1932 or 1942, however, I am unable to agree. From the form which the legislation assumed in 1932, Parliament, in my opinion, intended to restrict the meaning of the word "‘rebates’’. I cannot accept the contention that the words "‘paid on the cancellation of policies” do not apply to rebates as well as to ‘‘return premiums”. The word ‘‘rebates’’ is preceded by the definite article. It is ‘‘the rebates’’ which are to be deducted and what rebates unless ‘‘the rebates paid on the cancellation of policies?’’ It is not suggested that any part of the amount in question on this appeal was paid in any way in connection with the cancellation of any policy.

I further do not think that s. 17 can control the construction of the taxing provisions of the statute.

I think, therefore, that the appeal fails and should be dismissed with costs.

Estey, J., concurs with KERWIN, J.

Locke, J.:—Unless the amounts in question which were paid by the appellant company to certain of its policyholders in the year 1944 were rebates within the meaning of that term, as used ins. 13(f) of the Special War Revenue Act, R.S.C. 1927, ce. 179, as amended by s. 4 of c. 32 of the Statutes of 1942, this appeal must fail.

The appellant company is organized on the mutual plan and has no shareholders and, as established by the evidence, all current policyholders are members. All of its policies are partici- pating and s. 1 of art. 11 of the by-laws provides in part that "participating policyholders in this company shall participate in the earnings of the company in such manner and to such an extent as may be determined by the Board of Directors in its absolute discretion from time to time”. The standard fire policy issued by the company which I understand to be typical of its policies, under the heading ‘‘Mutual Policy Conditions’’ gives notice of the date upon which the annual meeting of the company is to be held in each year and states that every policyholder shall be entitled to one vote, to be cast in person or by proxy. The policy form in use is endorsed with a statement reading in part: "Each year since 1876 the company has paid a substantial dividend to policy holders thus reducing the net cost of insurance protection.’’ The amounts in question were paid to the policyholders in their capacity as members of the company qua dividend. If a shareholder in a joint stock company carrying on the business of insurance is also insured with the company and receives a dividend upon his shares, no one would, I think, suggest that the amount so paid was a rebate of the premium paid or payable by him in respect of the risk against which he was insured. I see no difference in the character of the payment made to the member of the mutual company.

I agree with the argument of Mr. Hayden that the word ‘‘rebate’’ is not one commonly used among those engaged in the business of insurance to describe premiums returned when policies are cancelled under the provisions of stat. con. 10, but in the view I take of this matter it is unnecessary to consider this point.

The appeal should be dismissed with costs.

Appeal dismissed.