Association de Taxis Lasalle v. Blais et al., [1971] SCR 643

Supreme Court of Canada

Association de Taxis Lasalle v. Blais et al., [1971] S.C.R. 643

Date: 1971-04-05

L’Association de Taxis Lasalle Appellant;

and

Gérard Biais, Fernand Leblanc and Taxi Owners’ Reciprocal Insurance Association Respondents.

1971: February 11; 1971: April 5.

Present: Fauteux C.J. and Abbott, Martland, Judson and Pigeon JJ.

ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC

Insurance—Co-operative association supplying members with insurance coverage—Contract with insurer—Premiums collected and paid by association—Cancellation of policy—Claim for premiums—Mandatary of insurer or of members.

The appellant, a co-operative association, provides various services to its members including liability insurance. It signed an application for insurance with the respondent insurer T. As the appellant’s members were not individually named in the policy and as their number varied from day to day, the insurance certificates were issued to each member by the appellant on behalf of the insurer. If a member withdrew, he was given a certificate of cancellation by the appellant. In all cases, copy of the certificate was immediately forwarded to the insurer. Each month the insurer sent appellant a statement of premiums owed, and the appellant paid immediately. The insurer allowed the appellant 5 per cent of the premiums collected, in consideration of the latter’s services. On May 24, 1960, a rider was added to the policy providing for a premium increase, and withdrawing the allowance. On June 21, 1960, appellant gave a notice of cancellation and, on July 22, 1960, the insurer went into bankruptcy. The trustees claimed the premium for the month of June. Their petition was dismissed on the ground that the insurer had not fulfilled its obligations, since the appellant had to pay more than $100,000 to meet claims against its members on which the insurer had defaulted. This judgment was reversed by a majority judgment in the Court of Appeal which held that the insurance premiums collected by the appellant as the mandatary of the insurer formed part of the assets in receivership.

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Held: The appeal should be allowed and the judgment at trial restored.

The obligation assumed by the appellant towards the insurer was to pay the full amount of premium due monthly, without regard to collection. Thus, the appellant at the outset obtained the insurance and undertook the obligation to pay the premium as the mandatary of its members, not as the agent of the insurer. Its conduct does not show that it agreed to make this collection, not as agent for its members under its contract with them, but as mandatary of the insurer. In order to change its legal position, there would have to be an express stipulation leaving no doubt as to this intention. The rider does not expressly state that the appellant shall collect the premiums as the mandatary of the insurer.

APPEAL from a judgment of the Court of Queen’s Bench, Appeal Side, province of Quebec[1], reversing a judgment of Montpetit J. Appeal allowed.

Claude Béland, for the appellant.

Pierre Lamontagne, for the respondents.

The judgment of the Court was delivered by

PIGEON J.—Appellant is a cooperative association which provides various services to its members under a contract signed with each member. These services include a communications system, taxi stands and liability insurance.

On May 28, 1958, the Association signed an application for insurance addressed to Taxi Owners’ Reciprocal Insurance Association, hereinafter called “Taxi Owners’”. A liability insurance policy was issued the same day, describing the insured as THE MEMBERS OF L’ASSOCIATION DE TAXIS LASALLE AND/OR THE MEMBERS OF THE DOMINION TAXI ASSOCIATION. The suit involves only the first of these two associations.

Taxi Owners’ was a non-incorporated, purely contractual association; appellant became a member by contract at the same time as it obtained the insurance policy. In addition, some accessory

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agreements were verbally made: as appellant’s members were not individually named in the policy, and as their number varied from day to day, the insurance certificates were issued to each member by the appellant itself on behalf of the insurer. If a member withdrew he was given a certificate of cancellation by the appellant; in all cases, a copy of the certificate was immediately forwarded to the insurer. This procedure was designed to enable Taxi Owners’ to know who was insured under the contract, and to compute the amount of the premium. Each month Taxi Owners’ sent appellant a statement of premiums owed, made out on the basis of the certificates of insurance or cancellation sent to it. Appellant paid the amounts charged immediately on receipt of these statements. It is worth noting that appellant always paid the premium on all certificates of insurance it had issued and not cancelled, whether or not the insured members then paid their monthly contribution of $47 that covered all services, including insurance.

Taxi Owners’ allowed appellant 5 per cent of the premiums collected in consideration of the latter’s services. However, on May 24, 1960, with appellant’s written consent, a rider was added to the policy as follows:

[TRANSLATION] It is hereby understood and agreed that the premium established at the rate of $32.00 monthly per taxi, without allowance for premium collection, shall be raised during the continuance of this contract if experience proves unfavourable.

Less than a month later, on June 21, 1960, appellant gave a notice of cancellation effective immediately, and simultaneously obtained a new policy from another insurer. Another month later, on July 22, 1960, Taxi Owners’ went into bankruptcy: respondents Blais and Leblanc are the trustees. As such, they claimed by petition in the bankruptcy court the sum of $29,578, being the premium for the month of June less an amount of $10,000 paid on July 7, 1960.

The Superior Court dismissed the petition on the grounds that Taxi Owners’ had not fulfilled

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its obligations as insurer, since appellant itself had to pay more than $100,000 to meet claims against its members on which Taxi Owners’ had defaulted.

The essential part of the reasons of Montpetit J. is as follows:

[TRANSLATION] It is a fundamental and frequently acknowledged rule of law that a party to a contract may only be compelled to perform his own obligations to the extent that the other party has done so…

However it is clear that in the months preceding its bankruptcy the debtor association, in its capacity as insurer of the members of L’Association de Taxis LaSalle, was unable to carry out its contractual undertakings as such. It would appear to me to be quite contrary to law—I would say, even immoral—to order the respondent, which in this case represents its members thus insured, to hand over to the debtor association or to the petitioners (the latter obviously have no greater rights than the former) premiums which they paid for protection they did not receive, and from which they did not benefit.

Obviously, a mandatary (such as respondent) is entitled to take this course on behalf of its mandators, even if such mandatary also acts for the insurer, as the second mandate differs from the first and is clearly distinguishable in its terms and ambit.

This decision was reversed by the Court of Appeal[2]. Tremblay C.J. stated:

[TRANSLATION] The insurance premiums collected by LaSalle as the mandatary of Taxi Owners’ formed a part of the assets in receivership. By disposing of such assets to settle claims against its members, LaSalle made preferential payments to them which not even the trustee may do.

Pratte J. also rejected the reason given by the trial judge, and said:

[TRANSLATION]… the exception “non adimpleti contractus” can apply only between two reciprocal obligations arising out of the same contract. In this instance the obligation which appellants seek to enforce stems from the verbal mandate given by TORIA to the Association, whereas the obligation which the Association complains was not performed

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by the insurer derives from the insurance contract between the latter and the parties insured. As the mandatary is required to deliver to the mandator everything he has received by virtue of his mandate, even if it were not due (C.C. 1713), I do not see how the Association can avoid the obligation to pay.

On the other hand, Owen J., dissenting, said:

In their original petition the Appellants based their claim on the written contract of reciprocal insurance. When the Association in its contestation denied any obligation under this contract the Appellants by their answer admitted this allegation and added that the obligation of Respondent was created by other contracts and agreements. The petition was amended and Appellants alleged that Respondent by verbal agreement undertook to collect the premiums and to guarantee payment of the said premiums… Subsequently Appellants dropped their contention that Respondents guaranteed payment of the premiums and finally took the position that the sole basis of their action was a verbal contract of mandate appointing the Association agent to collect the premiums on behalf of TORIA.

* * *

From the different positions taken by Appellants it appears to me that the verbal contract of mandate was an after-thought. The actions of the Association are more consistent with the Association having acted as agent for its members in collecting the premiums in accordance with the terms of the written service contract between the Association and its members. In any event, the burden was on the Appellants to prove the basis of their claim referred to above, and in my opinion they have failed to discharge this burden.

In my opinion, Owen J. is correct. The obligation assumed by appellant towards Taxi Owners’ was to pay the full amount of premium due monthly, without regard to collection. This is the basis on which the statements were regularly prepared and paid. Appellant for its part collected a monthly contribution from its members which covered all services, including insurance. As a cooperative syndicate, it ordinarily acted on its members’ behalf; it undoubtedly entered into dealings with Taxi Owners’ on this basis. The latter, moreover, was represented at that time by a broker. Thus, appellant at the outset obtained the insurance and undertook the obligation to pay the

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premium as the mandatary of its members, not as the agent of Taxi Owners’.

On the other hand, it is clear that Taxi Owners’ gave a certain mandate to appellant, since the latter issued the insurance certificates to its members. This in no way implies that in these group insurance arrangements appellant collected the monthly premium as the mandatary of Taxi Owners’, and not as the mandatary of its members by virtue of its contract with them. It required the insurer’s authority to issue the certificates; but not for collecting the premium, for this the contract with its members was sufficient. It is true that in the course of the negotiations appellant said that it would look after the collection of the monthly premium, and undertook to be responsible therefor towards Taxi Owners’. This, it seems to me, in no way establishes that it agreed to make this collection, not as agent for its members under its contract with them, but as mandatary of the insurer.

Only the rider remains to be considered. As to this, Pratte J. said: [TRANSLATION] “The words ‘without allowance for premium collection’ show clearly that the Association had made itself responsible for the collection of the premiums; otherwise, there was no reason for the insurer to have them inserted in the rider.” Is the wording of this reference to the allowance previously granted for services rendered by appellant, and not for collection of the premium, sufficient to establish the existence of an agreement making appellant the insurer’s agent for such collection, rather than the agent of its members under its contract with them? I think not. In order to change the legal position of appellant, which originally contracted with Taxi Owners’ as mandatary for its members, there would have to be an express stipulation leaving no doubt as to this intention. Indeed, the result of such a stipulation in this case would be to deprive appellant of the benefit of the defence admitted by the Superior Court, namely that a party to a contract cannot be compelled to perform his obligations when the other party has not done so. The very purpose

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of the contention that appellant collected the premiums as mandatary for Taxi Owners’ is to prevent appellant from taking advantage of the fact that the latter did not fulfil its contractual obligations to the appellant as mandatary for its members.

In order to find that, by an accessory agreement, appellant agreed to place itself in such a position, when this is not the ordinary effect of the basic contract, there would have to be no room for doubt regarding the existence and ambit of such further agreement. The wording used in describing the allowance of 5 per cent of the premiums in the rider does not seem to me to be sufficient. It does not expressly state that appellant is collecting the premiums as the mandatary of Taxi Owners’. This could probably be inferred from the wording, but as it is contrary to the position of the parties regarding the premium, namely that appellant collected it from its members under the service contract, I do not think this is sufficient to change the position. After all, the purpose of the rider in so far as the allowance was concerned was to end it, not to define it, and I would not feel justified in attaching decisive effect to the way in which it was thus described, all the more so because it is clear that this description was incomplete. In fact, it is shown that the allowance was granted for various services rendered, especially the preparation of accident reports with photographs, and not for premium collection in particular. A witness even mentioned a letter, unfortunately lost, in which it was stated that the 5 per cent allowance was made for the expense of organizing an office to take accident reports, and the purchase of equipment in this connection. Moreover, it was established without objection that appellant did not collect from its members the additional $8 a month stipulated in the rider of May 24, but had previously set up a reserve fund by charging a dollar a month more for the insurance than the amount of the premium agreed upon with Taxi Owners’, which it paid in full without regard to collection. All of this is hardly compatible with the position of mandatary for the insurer.

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For these reasons I would allow the appeal, set aside the judgment of the Court of Appeal, and restore the judgment of the Superior Court, with costs against the respondents in all courts.

Appeal allowed with costs.

Solicitors for the appellant: Béland, Trudeau & Bastien, Montreal.

Solicitors for the respondents: Geoffrion & Prud’Homme, Montreal.