Marche et al. v. Halifax Insurance Co., (2005) 230 N.S.R.(2d) 333 (SCC)

• Judge: McLachlin, C.J.C., Major, Bastarache, Binnie, Deschamps, Fish and Charron, JJ.
• Court: Supreme Court (Canada)
• Case Date: February 24, 2005
• Jurisdiction: Canada (Federal)
• Citations: (2005), 230 N.S.R.(2d) 333 (SCC);2005 SCC 6;[2005] RRA 1;248 DLR (4th) 577;230 NSR (2d) 333;18 CCLI (4th) 1;[2005] ILR 4383;EYB 2005-85987;JE 2005-432;729 APR 333;[2005] ACS no 7;[2005] SCJ No 7 (QL);137 ACWS (3d) 415;[2005] 1 SCR 47;330 NR 115;[2005] CarswellNS 77

Marche v. Halifax Ins. (2005), 230 N.S.R.(2d) 333 (SCC);

 729 A.P.R. 333

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2005] N.S.R.(2d) TBEd. FE.051

Theresa Marche and Gary Fitzgerald (appellants) v. The Halifax Insurance Company (respondent)

(29754; 2005 SCC 6; 2005 CSC 6)

Indexed As: Marche et al. v. Halifax Insurance Co.

Supreme Court of Canada

McLachlin, C.J.C., Major, Bastarache, Binnie, Deschamps, Fish and Charron, JJ.

February 24, 2005.

Summary:

The plaintiffs did not disclose to their insurer that their rental property was vacant for three months (the first vacancy). There­after, the male plaintiff's brother became a tenant, but the plaintiffs took steps to re­move him after he failed to pay rent (shut off water and power). Shortly after the brother vacated, but before he removed his personal property, the property was de­stroyed by fire. The insurer, relying on the first vacancy, denied coverage for non­dis­closure of a material risk contrary to statu­tory condition 4 of the policy. The plaintiffs sued the insurer to enforce their claim for coverage.

The Nova Scotia Supreme Court, in a judg­ment reported (2002), 202 N.S.R.(2d) 345; 632 A.P.R. 345, allowed the action. The court, without determining whether the plain­tiffs breached statutory condition 4, exercised its discretion under s. 171 of the Insurance Act to grant the plain­tiffs relief from the nondisclosure. Since there was no causal link between the vacancy and the fire, it was un­just and un­reasonable to permit the insurer to deny coverage based on the prior un­related non­disclosure. The insurer appealed.

The Nova Scotia Court of Appeal, in a de­ci­sion reported 214 N.S.R.(2d) 1; 671 A.P.R. 1, allowed the appeal and dismissed the plain­tiffs' action. The court held that s. 171 did not apply to statutory conditions, but only to optional conditions in the policy. The plaintiffs appealed.

The Supreme Court of Canada (Bastarache and Charron, JJ., dissenting), allowed the ap­peal, set aside the decision of the Court of Appeal and affirmed the decision of the trial judge. The court held that s. 171 applied to statutory conditions. The court stated that where the application of statutory conditions produced unjust or unreasonable results, the court could grant relief under s. 171.

Insurance - Topic 5587

Fire insurance - The risks or perils - Ma­terial misdescriptions and changes - Vacan­cy or failure to occupy - The plain­tiffs did not disclose to their insurer that their rental property was vacant for three months (the first vacancy) - Thereafter, the male plain­tiff's brother became a tenant, but the plain­tiffs took steps to remove him after he failed to pay rent (shut off water and power) - Shortly after the brother vacated, but before he removed his per­sonal prop­erty, the property was destroyed by fire - The insurer, relying on the first vacancy, denied coverage for nondisclosure of a ma­terial risk (that property vacant) con­trary to statutory condition 4 of the policy - The trial judge held that the insurer was liable for coverage - The judge, without deter­mining whether the plaintiffs breached stat­u­tory condition 4 of the policy, exer­cised his discretion under s. 171 of the Insurance Act to grant the plaintiffs relief from the nondisclosure - Since there was no causal link between the vacancy and the fire, it was unjust and unreasonable to permit the insurer to deny coverage based on the prior unrelated nondisclosure - The court held that the discretionary relief under s. 171 was not limited to contractual provisions inserted by an insurer, but applied equally to statu­tory conditions - The Nova Scotia Court of Appeal reversed the trial judge - The Supreme Court of Canada restored the trial decision, holding that s. 171 applied to statutory conditions - The court stated that where the application of a statutory condi­tion produced an unjust or unreason­able result, the court could grant relief.

Insurance - Topic 5606

Fire insurance - Exclusions - Requirement that exclusion be just and reasonable - [See Insurance - Topic 5587 ].

Insurance - Topic 5606

Fire insurance - Exclusions - Requirement that exclusion be just and reasonable - Sec­tion 171(b) of the Insurance Act (N.S.) pro­vided that "Where a contract ... contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or mainte­nance of the insured property, the exclu­sion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court be­fore which a question relating thereto is tried." - The Supreme Court of Canada held s. 171 applied not only to de­lete conditions that were unreasonable on their face (should there be any), but also to re­lieve against the results of applying condi­tions that, in the particular circum­stances of the case, were unreasonable in their application or draconian in their conse­quences - The court held that s. 171 ap­plied not only to contractual conditions, but to statutory conditions that were un­reasonable or unjust in their application - See paragraphs 7 to 45.

Insurance - Topic 5606

Fire insurance - Exclusions - Requirement that exclusion be just and reasonable - Sec­tion 171(b) of the Insurance Act (N.S.) pro­vided that "Where a contract ... contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or mainte­nance of the insured property, the exclu­sion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court be­fore which a question relating there­to is tried." - The Supreme Court of Can­ada held that s. 171 applied to statutory con­di­tions - Section 171 had a remedial pur­­pose and should be given a broad inter­pretation - The actual wording of s. 171 was broad enough to cover statutory condi­tions - The history of the provision demon­strated that it was intended to apply to stat­utory condi­tions - The jurisprudence sup­port­ed this conclusion - See paragraphs 13 to 45.

Statutes - Topic 8506

Remedial statutes - General principles - Interpretation - [See third Insurance - Topic 5606 ].

Cases Noticed:

Elance Steel Fabricating Co. v. Falk Bros. Industries Ltd. and Canadian Surety Co., [1989] 2 S.C.R. 778; 99 N.R. 228; 80 Sask.R. 22, refd to. [paras. 13, 110].

Krupich v. Safeco Insurance Co. of Ameri­ca (1985), 63 A.R. 30; 16 C.C.L.I. 18 (Q.B.), refd to. [paras. 28, 114].

528852 Ontario Inc. et al. v. Royal Insur­ance Co., [2000] O.T.C. 809; 51 O.R.(3d) 470 (Sup. Ct.), refd to. [paras. 28, 113].

Nahayowski v. Pearl Assurance Co. (1964), 45 W.W.R.(N.S.) 662 (Alta. S.C.), refd to. [paras. 29, 113].

Kekarainen v. Oreland Movers Ltd. and Wawanesa Mutual Insurance Co., [1981] 3 W.W.R. 534; 8 Man.R.(2d) 23 (Q.B.), refd to. [para. 29].

Poast v. Royal Insurance Co. of Canada (1983), 21 Man.R.(2d) 67 (Q.B.), refd to. [para. 29].

Curtis's and Harvey (Can.) Ltd. v. North British and Mercantile Insurance Co. (1920), 55 D.L.R. 95 (P.C.), refd to. [paras. 31, 78].

Arcand v. Grenville Patron Mutual Fire Insurance Co. (1923), 25 O.W.N. 175 (H.C.), refd to. [para. 40].

Henwood v. Prudential Insurance Co. of America, [1967] S.C.R. 720, refd to. [para. 42].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241, refd to. [para. 54].

Action Travail des Femmes v. Canadian National Railway Co. et al., [1987] 1 S.C.R. 1114; 76 N.R. 161, refd to. [para. 54].

Canadian National Railway Co. v. Cana­dian Human Rights Commission - see Action Travail des Femmes v. Canadian National Railway Co. et al.

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 54].

R. v. Sharpe (J.R.), [2001] 1 S.C.R. 45; 264 N.R. 201; 146 B.C.A.C. 161; 239 W.A.C. 161; 2001 SCC 2, refd to. [para. 54].

R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867; 275 N.R. 201; 206 Nfld. & P.E.I.R. 304; 618 A.P.R. 304; 2001 SCC 56, refd to. [para. 54].

Chieu v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 84; 280 N.R. 268; 2002 SCC 3, refd to. [para. 54].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1; 2002 SCC 42, refd to. [para. 54].

Canadian Pacific Air Lines Ltd. et al. v. Cana­dian Air Line Pilots Association et al., [1993] 3 S.C.R. 724; 160 N.R. 321, refd to. [para. 60].

2747-3174 Québec Inc. v. Régie des per­mis d'alcool du Québec et autres, [1996] 3 S.C.R. 919; 205 N.R. 1, refd to. [para. 67].

Brossard (Town) v. Commission des droits de la personne du Québec and Laurin, [1988] 2 S.C.R. 279; 88 N.R. 321; 18 Q.A.C. 164, refd to. [para. 69].

Ontario v. Canadian Pacific Ltd., [1995] 2 S.C.R. 1031; 183 N.R. 325; 82 O.A.C. 243, refd to. [para. 69].

R. v. Daoust (C.) et al., [2004] 1 S.C.R. 217; 316 N.R. 203; 2004 SCC 6, refd to. [para. 69].

R. v. Goulis (1981), 33 O.R.(2d) 55 (C.A.), refd to. [para. 70].

R. v. Nova Scotia Pharmaceutical Society et al. (No. 2), [1992] 2 S.C.R. 606; 139 N.R. 241; 114 N.S.R.(2d) 91; 313 A.P.R. 91, refd to. [para. 70].

R. v. Dubois, [1985] 2 S.C.R. 350; 62 N.R. 50; 66 A.R. 202, refd to. [para. 72].

City of London Fire Insurance Co. v. Smith (1888), 15 S.C.R. 69, refd to. [para. 79].

Ordon et al. v. Grail, [1998] 3 S.C.R. 437; 232 N.R. 201; 115 O.A.C. 1, refd to. [para. 95].

Gravel v. St. Leonard (City), [1978] 1 S.C.R. 660; 17 N.R. 486, refd to. [para. 99].

Janzen and Govereau v. Pharos Restaur­ant and Grammas et al., [1989] 1 S.C.R. 1252; 95 N.R. 81; 58 Man.R.(2d) 1, refd to. [para. 101].

Janzen v. Platy Enterprises Ltd. - see Janzen and Govereau v. Pharos Restaur­ant and Grammas et al.

R. v. Hafey et al., [1985] 1 S.C.R. 106; 57 N.R. 321; 67 N.S.R.(2d) 181; 155 A.P.R. 181, refd to. [para. 102].

Skoke-Graham v. R. - see R. v. Hafey et al.

R. v. McIntosh (B.B.), [1995] 1 S.C.R. 686; 178 N.R. 161; 79 O.A.C. 81, refd to. [para. 103].

Hirst v. Commercial Union Assurance Co. of Canada (1978), 8 B.C.L.R. 396 (S.C.), refd to. [para. 113].

Hirst v. Commercial Union Assurance Co. of Canada (1979), 70 B.C.L.R.(2d) 361 (C.A.), refd to. [para. 113].

Statutes Noticed:

Insurance Act, R.S.N.S. 1989, c. 231, sect. 171 [para. 7].

Authors and Works Noticed:

Baer, Marvin G., and Rendall, James A., Cases on the Canadian Law of Insurance (6th Ed. 2000), pp. 27, 28, 74, 75 [para. 48]; 419 [para. 122]; 642 [para. 112].

Boivin, Denis, Insurance Law (2004), pp. 1 [para. 47]; 59, 60 [para. 86].

Brown, Craig, and Menezes, Julio, Insur­ance Law in Canada (2nd Ed. 1991), pp. 178, 188 [para. 105]; 190 [para. 32].

Brown, Craig, Insurance Law in Canada (1999 Looseleaf Ed.) (2004 Looseleaf Update) (Release 3), vol. 1, pp. 1-1 [para. 47]; 20-8, 20-9 [para. 81].

Côté, Pierre-André, Interpretation of Legis­la­tion in Canada (3rd Ed. 2000), gen­erally [para. 54]; pp. 308 [para. 72]; 421, 423 [para. 101].

Driedger, Elmer A., Construction of Stat­utes (2nd Ed. 1983), p. 87 [para. 54].

Graham, Randal N., Statutory Interpreta­tion: Theory and Practice (2001), gen­erally [para. 54].

Ivamy, E.R. Hardy, General Principles of Insurance Law (6th Ed. 1993), pp. 154, 155 [para. 118]; 174 [para. 117].

Rendall, James A., Annotation to Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18, pp. 20 [paras. 31, 85, 87]; 21 [para. 114].

Sullivan, Ruth, Sullivan and Driedger on the Construction of Statutes (4th Ed. 2002), generally [para. 54]; pp. 20 [para. 63]; 21 [para. 59]; 41 [para. 15]; 158 [para. 109]; 162 to 166 [para. 95]; 173 [para. 68]; 218 [para. 98]; 259 [para. 71]; 260, 261, 262 [para. 66]; 471, 472 [para. 99]; 473 [para. 101]; 477 [para. 103].

Counsel:

Derrick J. Kimball, Nash T. Brogan and H. Heidi Foshay Kimball, for the appellants;

Scott C. Norton, Q.C., and Daniela Bassan, for the respondent.

Solicitors of Record:

Kimball Brogan, Wolfville, Nova Scotia, for the appellants;

Stewart McKelvey Stirling Scales, Halifax, Nova Scotia, for the respondent.

This appeal was heard on November 2, 2004, before McLachlin, C.J.C., Major, Bas­ta­rache, Binnie, Deschamps, Fish and Char­ron, JJ., of the Supreme Court of Canada.

The decision of the Supreme Court of Can­ada was delivered in both official lan­guages on February 24, 2005, when the following opinions were filed:

McLachlin, C.J.C. (Major, Binnie, Deschamps and Fish, JJ., concurring) - see paragraphs 1 to 45;

Bastarache, J., dissenting (Charron, J., concurring) - see paragraphs 46 to 123.