Bank of Nova Scotia v. British Columbia (Superintendent of Financial Institutions), 2003 BCCA 29 (CanLII)

When a bank offers creditor insurance to its customers, is the activity subject to provincial insurance regulation? The question was answered on January 20, 2003 by the British Columbia Court of Appeal in The Bank of Nova Scotia and Optima Communications Canada Inc. v. Superintendent of Financial Institutions et al. The Court unanimously reversed a trial level decision, which had held that the telemarketing of creditor insurance by the Bank was part of the business of insurance, not the business of banking and, therefore, was subject to provincial regulation. The trial judge had held that the unlicensed telemarketing of creditor insurance to customers of the Bank was not permitted by provincial law.

The Court held that the Bank's creditor insurance marketing activities were constitutionally insulated from provincial regulation. The Court found that the promotion of creditor insurance provides security to the Bank by enhancing its ability to receive payment on loans. In a significant ruling, the Court held that the taking of security is both a core aspect of the federal legislative power over banking and a vital part of a banking enterprise. The Court further held that, as a form of security, creditor insurance was within the core of the federal banking power. The Court noted that a provincial licensing regime, which would allow the province to say who gets a licence and under what conditions, and which could prevent the Bank from obtaining security in a certain way, would affect a vital part of a federal enterprise. As a result, based on the doctrine of interjurisdictional immunity, the provincial legislation was constitutionally inapplicable to the creditor insurance marketing activities of the Bank and its marketing agent. The Court of Appeal also held that, apart from the constitutional immunity, the Bank, its employees, and agents enjoyed the privilege of an exemption under the provincial legislation.

Instructed by Michael Davenport, the Bank's assistant general counsel, were Fasken Martineau DuMoulin LLP's Geoffrey Cowper, Q.C., Stanley Martin and Ted Purdy, with financial services regulatory assistance from Robert McDowell and Robert Elliott.