Ontario court allows proposed vote of mutual policyholders to replace The Economical’s board to proceed at the company’s AGM

The Ontario Superior Court of Justice has ordered the Economical Mutual Insurance Company to proceed with a vote of its mutual policyholders on proposals to remove and replace the insurer’s board of directors at its upcoming annual general meeting.
Toronto firm VC & Co. Advisory Limited submitted proposals to Economical’s policyholders in Dec. 2010 calling for the replacement of the insurer’s board of directors. The policyholder proposals, signed by 105 of the Economical’s policyholders, were to be the subject of a vote at the next scheduled Economical policyholder annual general meeting, scheduled for May 26, 2011.
The Economical challenged the legality of the proposals, claiming they were contrary to the Insurance Companies Act, which says the removal of directors must be handled by way of a “special meeting.” The Economical argued the annual general meeting does not fit within the definition of a “special meeting.”
On behalf of the 105 policyholders that signed the proposals, VC & Company filed a cross-application, asking that:
•an independent chairman preside at the AGM,
•anonymous voting be conducted by secret ballot; and
•The Economical make available its list of mutual policyholders to VC & Co.
The court allowed the vote on a proposed new board to proceed. But it dismissed VC & Company’s cross application requesting an independent chairman and secret ballot.
The Economical had argued that under section 181 of the ICA, the removal of directors must be dealt with only at a “special meeting.” But the legislation does not contain a clear-cut definition of “special meeting,” Ontario Superior Court Justice John Cavarzan wrote in his decision.
Cavarzan cited a 1931 British Columbia Supreme Court case in his decision. “It is quite true that even an ordinary or annual meeting of a company may be given as well the character of a special meeting, if due notice is given of the special business to be transacted at such an annual meeting.”
In a news release, VC & Co. said it would mail an information circular “in the near future,” outlining the reasons why the board should be changed. It would also be sending out the names and relevant experience of new, independent candidates who will be proposed for election to the board at the upcoming AGM.
In its response, Economical issued a release saying it sought a court ruling to ensure all parties were clear on the legality of the dissident proposals.
“We welcome the clarity the court has provided and its timely decisions, which will allow us to proceed with our scheduled annual meeting date of May 26,” said Gerald Hooper, The Economical’s board chairman. “The company is particularly pleased that it has been able to protect the privacy of our mutual policyholders. We have no intention of appealing the court’s decision.”