SUPREME
COURT OF CANADA
Citation:
3091‑5177 Québec inc. (Éconolodge Aéroport) v. Lombard General
Insurance Co. of Canada, 2018 SCC 43
|
Appeal Heard: January
10, 2018
Judgment
Rendered: October 19, 2018
Dockets:
37421, 37422
|
Between:
3091-5177
Québec inc., c.o.b. as Éconolodge Aéroport
Appellant
and
Lombard
General Insurance Company of Canada
(now
known as Northbridge General Insurance Corporation)
Respondent
And Between:
3091-5177 Québec
inc., c.o.b. as Éconolodge Aéroport
Appellant
and
AXA
Insurance Inc.
(now
known as Intact Insurance Company)
Respondent
-
and -
Promutuel
Insurance Portneuf-Champlain
Intervener
___________
And
Between:
Promutuel
Insurance Portneuf-Champlain
Appellant
and
Lombard
General Insurance Company of Canada
(now
known as Northbridge General Insurance Corporation)
Respondent
Official English Translation: Reasons of Gascon J.
Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté,
Brown, Rowe and Martin JJ.
Reasons for
Judgment:
(paras. 1 to 58)
|
Gascon J. (Wagner C.J. and Abella, Moldaver, Karakatsanis,
Côté, Brown and Martin JJ. concurring)
|
Concurring
Reasons:
(para. 59)
|
Rowe J.
|
Note: This document is subject to editorial revision before its
reproduction in final form in the Canada Supreme Court Reports.
éconolodge aéroport v. lombard
3091‑5177 Québec inc.,
c.o.b. as Éconolodge Aéroport Appellant
v.
Lombard General Insurance Company of Canada
(now known as Northbridge
General Insurance Corporation) Respondent
‑ and ‑
3091‑5177 Québec inc.,
c.o.b. as Éconolodge Aéroport Appellant
v.
AXA Insurance Inc. (now known
as Intact Insurance Company)
Respondent
and
Promutuel Insurance Portneuf‑Champlain Intervener
___________
Promutuel Insurance Portneuf‑Champlain Appellant
v.
Lombard General Insurance Company of
Canada
(now known as
Northbridge General Insurance Corporation) Respondent
Indexed as: 3091‑5177 Québec inc. (Éconolodge
Aéroport) v. Lombard
General Insurance Co. of Canada
2018 SCC 43
File Nos.: 37421, 37422.
2018: January 10; 2018: October 19.
Present: Wagner C.J.
and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and
Martin JJ.
on appeal from the court of appeal for quebec
Civil
liability ⸺ Contract for services ⸺ Obligation to act with
prudence and diligence ⸺ Theft of cars belonging to guests of park and
fly hotel ⸺ Guests required to leave their vehicle in open, unfenced,
unattended and freely accessible parking lot while travelling ⸺ Whether
hotel operator liable for theft of cars because of failure to take reasonable
steps to secure its parking lot ⸺ Civil Code of Québec, art. 2100.
Insurance ⸺ Liability insurance ⸺
Exclusion ⸺ Theft of cars belonging to guests of park and fly hotel
⸺ During winter, guests required to hand over their vehicle keys to
hotel operator while travelling so that parking lot could be cleared of snow
⸺ Hotel operator’s liability insurance policy excluding coverage for
personal property in its care, custody or control ⸺ Whether handover of
keys triggered application of exclusion clause.
The
hotel operator owned a park and fly hotel, which invited guests to sleep in its
rooms, leave their car in its parking lot while travelling and use its shuttle
service to get to the airport. During the winter, guests who left their car in
the hotel’s parking lot had to hand over their keys at the front desk so that
their car could be moved for snow removal. During the winters of 2005 and 2006,
two guests had their cars stolen from the hotel’s parking lot. The owners were
compensated for their losses by their respective insurers, AXA Insurance Inc.
and Promutuel Insurance Portneuf‑Champlain. Since the insurers were
subrogated to the rights of their insured, each of them brought an action
against the hotel operator to recover the amount of compensation paid.
Promutuel also brought a direct action against the hotel operator’s insurer,
Lombard General Insurance Company of Canada. In the case between the hotel
operator and Axa, the hotel operator impleaded Lombard in warranty. The actions
were joined and were heard together.
In
the case between the hotel operator and Axa, the trial judge found the hotel
operator liable for the theft of the car, while the hotel operator’s liability
was accepted in the case between it and Promutuel as a result of a default
judgment. The trial judge also found that the clause in the hotel operator’s
liability insurance policy excluding coverage for property damage (loss of use
or physical injury) to personal property in the care, custody or control of the
insured did not apply in these cases, despite the fact that the keys to guests’
cars had to be left at the hotel’s front desk. She therefore ordered Lombard to
compensate the hotel operator and Promutuel. The Court of Appeal affirmed the
trial judge’s judgment with respect to liability for the thefts of cars but
allowed the appeal in both cases on the issue of the exclusion clause, which it
found to be applicable.
Held:
The hotel operator’s appeal (file No. 37421) is allowed in part.
Held:
Promutuel’s appeal (file No. 37422) is allowed.
Per
Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté,
Brown and Martin JJ.: The courts below did not err in finding the hotel
operator liable for the theft of the car insured by Axa, and there are
therefore no grounds for intervention on this issue.
The
trial judge did not err in characterizing the contract between the hotel
operator and its guests as a contract for services within the meaning of
art. 2098 of the Civil Code of Québec (“C.C.Q.”). The
characterization of the contractual relationship between the hotel operator and
its guests is a question of mixed fact and law, since it is necessary here to
consider the evidence of the parties’ common intention; the characterization is
therefore entitled to deference on appeal. In characterizing the contract, the
trial judge properly considered the full range of services offered by the hotel
operator. As a park and fly hotel, it offered its guests a number of services,
including accommodation, parking and a shuttle service. It is not appropriate
to separate these services given that a package of services is what was
considered by guests and advertised by the hotel operator. Because the hotel
operator encouraged its guests to leave their vehicle in its parking lot while
they were away, the guests were reasonably entitled to expect that it would
look after their interests and take such security measures as were necessary in
the circumstances. Since there was a contract for services, the hotel operator
had an obligation under art. 2100 C.C.Q. to act in the best
interests of its guests, with prudence and diligence. The determination that
the hotel operator breached its obligation of prudence and diligence by failing
to take reasonable steps to secure its parking lot, unbeknownst to its guests, is
a finding of mixed fact and law that is also entitled to deference on appeal,
since an assessment of the facts is necessary to make such a finding. Finally,
the trial judge’s finding that there was a clear causal connection between the
fault and the damage is not open to review unless a
palpable and overriding error was made, since it is a question of fact.
In
addition, there is no palpable and overriding error in the trial judge’s finding on the issue of custody of the stolen
vehicles that could justify the Court of Appeal’s intervention. The guests’
handover of their car keys to the hotel operator did not trigger the
application of the care, custody or control exclusion clause in the insurance
policy.
While
custody is a legal concept, the determination of custody is a highly factual
question that depends on the specific circumstances of each case. Whether the
hotel operator had custody of the vehicles is therefore a question of mixed
fact and law, and the trial judge’s answer to this question is entitled to
deference on appeal. In the instant cases, the judge’s finding on the limited
effect of the handover of keys was firmly based on an assessment of the
evidence.
The
handover of keys is certainly a relevant fact in determining custody of the
property, since the keys provide access to the vehicle. However, the handover
of keys does not automatically transfer custody. To determine whether there has
been a transfer of custody and thus control of property, a court must consider
all the circumstances, including the reason for any handover of keys. That
reason is important because it distinguishes custody from mere physical holding
of the vehicles, which are two distinct concepts. A holder of property does not
have custody of it where the holder is able to exercise only a limited, and not
a general, power over the property. Here, the trial judge’s finding that the
keys were handed over solely for the purpose of snow removal in the parking lot
is supported by the evidence concerning the parties’ intention. It was open to
the judge to conclude from her analysis of the evidence heard that the hotel
operator had the power to move vehicles only when there was a build‑up of
snow and that this was not sufficient in itself to transfer custody of the
stolen cars.
Lastly,
there is no inconsistency in the findings of the trial judge, who recognized
both that the hotel operator had an obligation of prudence and diligence and
that the cars were not in its care, custody or control. The obligations are
different in nature. The hotel operator’s obligation of prudence and diligence
originates in art. 2100 C.C.Q., which governs contracts for
services, and attaches to its performance of services. The care, custody or
control clause excludes coverage for property over which the insured
exercises certain powers; it does not attach to the insured’s acts. The hotel
operator’s obligation to take reasonable steps to secure its parking lot does
not imply a sufficient transfer of control and of responsibility for the
preservation of a vehicle to result in a change in legal custody.
Per
Rowe J.: There
is agreement with Gascon J.’s analysis and disposition. With respect to
the characterization of the contract between the hotel operator and its
clients, it is a question of mixed fact and law because the trial judge found
it necessary to have regard to extrinsic evidence in order to ascertain the
true nature of the contract. However, where having regard to extrinsic evidence
is not needed, characterization remains a question of law.
Cases Cited
By Gascon J.
Referred
to: Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43,
[2017] 2 S.C.R. 59; Station Mont‑Tremblant v. Banville‑Joncas,
2017 QCCA 939; Montréal, Maine & Atlantique Canada Cie (Montreal, Maine
& Atlantic Canada Co.) (MMA), Re, 2014 QCCA 2072, 49
R.P.R. (5th) 210; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R.
235; Groupe Ledor inc., mutuelle d’assurances v. 7041730
Canada inc. (Éconolodge Aéroport (TM)), 2014 QCCQ
2920; Tremblay v. 4328175 Canada inc. (Marriott Fairfield Inn & Suites
Montréal Aéroport), 2017 QCCQ 13774; St‑Jean v. Mercier, 2002
SCC 15, [2002] 1 S.C.R. 491; Montréal (Ville) v. Lonardi, 2018 SCC 29; Benhaim
v. St‑Germain, 2016 SCC 48, [2016] 2 S.C.R. 352; Ledcor
Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37,
[2016] 2 S.C.R. 23; American Home assurances inc. v. Compagnie d’assurances
générales Lombard, 2006 QCCA 112, [2006] R.R.A. 35; Arkwright‑Boston
Manufacturers Insurance Co. v. Zurich Insurance Co., [1996] R.R.A. 923; Guay
inc. v. I.C.I. Canada inc., [1997] R.R.A. 717; Guardian Insurance Co. of
Canada v. Dale and Co., [1972] C.A. 231; United States Fire Insurance
Co. v. Bouchard et Blanchette Marine ltée, [1990] R.R.A. 667; Indemnity
Insurance Co. of North America v. Excel Cleaning Service, [1954]
S.C.R. 169; Atlantic Consolidated Foods Ltd. v.
Barnes Security Ltd., [1981] C.S. 7; 9144‑6765
Québec inc. v. Plante, 2013 QCCS 1279; Société d’assurance des caisses
populaires v. Hains, [1986] R.R.A. 644; Garage G.T.D. inc. v. Lévesque,
[1986] R.J.Q. 466; Groupe Commerce Compagnie d’assurances v. Service d’entretien
Ribo inc., [1992] R.R.A. 959; 3457265 Canada inc. v. 9124‑8948
Québec inc., 2016 QCCS 2462; Consolidated‑Bathurst Export Ltd. v.
Mutual Boiler and Machinery Co., [1980] 1 S.C.R. 888.
By
Rowe J.
Referred
to: Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43,
[2017] 2 S.C.R. 59.
Statutes and Regulations Cited
Civil
Code of Québec, arts. 2098, 2100.
Authors
Cited
Baudouin, Jean‑Louis, Patrice Deslauriers et Benoît Moore. La
responsabilité civile, 8e éd. Cowansville, Que.: Yvon Blais,
2014.
Bergeron, Jean‑Guy. Les contrats d’assurance (terrestre):
lignes et entre‑lignes, t. 1. Sherbrooke: SEM Inc., 1989.
Karim, Vincent. Les obligations, 4e éd. Montréal:
Wilson & Lafleur, 2015.
Lluelles, Didier. Droit des assurances terrestres, 6e
éd. Montréal: Thémis, 2017.
Lluelles, Didier, et Benoît Moore. Droit des obligations, 2e
éd. Montréal : Thémis, 2012.
Massé, Chantale. “L’exclusion des biens sous les ‘soin, garde et
contrôle’ de l’assuré: où en sommes‑nous?”, dans Service de la formation
continue du Barreau du Québec, vol. 243, Développements récents en
droit des assurances. Cowansville, Que: Yvon Blais,
2006, 121.
APPEALS from a judgment of the Quebec Court of Appeal (Chamberland,
Bélanger and Hogue JJ.A.), 2016 QCCA 1903, [2016] AZ‑51345275, [2016]
J.Q. no 16781 (QL), 2016 CarswellQue 11276 (WL Can.), setting aside
in part a decision of Chalifour J.C.Q., 2015 QCCQ 1539, [2015] AZ‑51156874,
[2015] J.Q. no 1736 (QL), 2015 CarswellQue 1949 (WL Can.).
Appeal of 3091‑5177 Québec inc., c.o.b. as Éconolodge Aéroport, allowed
in part. Appeal of Promutuel Insurance Portneuf‑Champlain allowed.
Maurice Cantin, Q.C., and Marc
Cantin, for
the appellant 3091‑5177 Québec inc., c.o.b. as Éconolodge
Aéroport (37421).
Amélie Thériault and Ronald Silverson, for the respondent Lombard
General Insurance Company of Canada (now known as Northbridge General Insurance
Corporation) (37421 and 37422).
Yan Romanowski and Gabriel Romanowski, for the respondent AXA
Insurance Inc. (now known as Intact Insurance Company) (37421).
Louis Dufour and Pierre Gourdeau, for the intervener (37421) and
appellant (37422) Promutuel Insurance Portneuf‑Champlain.
English version of the judgment of
Wagner C.J. and Abella, Moldaver, Karakatsanis,
Gascon, Côté, Brown and Martin JJ. delivered by
Gascon
J. —
I.
Overview
[1]
This appeal concerns both a hotel establishment’s
civil liability for the theft of cars belonging to its guests and the
applicability of an exclusion clause in its liability insurance policy in this
situation.
[2]
Éconolodge Aéroport (“Éconolodge”) is a park and
fly hotel located near Montréal–Pierre
Elliott Trudeau International Airport. Its main purpose is to provide
travellers with accommodation before they leave for the airport and upon their
return from a trip. During the winters of 2005 and 2006, two of Éconolodge’s
guests had their cars stolen from the hotel’s parking lot while they were
abroad. The owners were compensated for their losses by their respective
insurers, AXA Insurance Inc. (now Intact Insurance Company) (“Axa”) and
Promutuel Insurance Portneuf‑Champlain (“Promutuel”). Since each insurer
was subrogated to the rights of its insured, it brought an action against
Éconolodge to recover the amount of compensation paid to its client. Promutuel
also brought a direct action against Éconolodge’s insurer, Lombard General
Insurance Company of Canada (now Northbridge General Insurance Corporation)
(“Lombard”). In the case between Éconolodge and Axa, Éconolodge itself
impleaded its insurer, Lombard, in warranty.
[3]
The actions concerning the two thefts were
joined and were heard together in the Court of Québec. In the case between
Éconolodge and Axa, the trial judge found Éconolodge liable for the theft of
the car and the Court of Appeal upheld that finding. In the case between
Éconolodge and Promutuel, Éconolodge’s liability was accepted, since a default judgment
had been rendered in that case against the hotel operator. It should be noted
that, at the times the thefts occurred, Éconolodge was owned successively by two different entities, 3091‑5177 Québec inc. (theft from Axa’s
insured) and A.M.A. Investments inc. (theft from Promutuel’s insured).
[4]
The judge also held that the standard care,
custody or control exclusion clause in Éconolodge’s liability insurance policy
did not apply in these cases, with the result that Lombard had to compensate
its insured in the first case and Promutuel in the second. However, the Court
of Appeal found that the judge had made a palpable and overriding error in this
regard; in its view, the clause applied in the circumstances and the stolen
cars were therefore excluded from Éconolodge’s insurance coverage. The central
point on which the courts below were divided was how the guests’ handover of
car keys to the hotel operator affected the determination of who had custody of
the vehicles.
[5]
This Court is called upon to decide two issues
in this context. First, in the case involving Axa only, it must be decided
whether Éconolodge is liable for the theft of the car because it did not take
reasonable steps to secure its parking lot. Second, in both cases, it must be
determined whether the clause in Éconolodge’s insurance contract excluding
coverage for property damage (loss of use or physical injury) to personal
property in the care, custody or control of the insured applies on the facts.
[6]
With respect, I am of the view that the Court of
Appeal erred in intervening and that the judgment of the Court of Québec should
be restored. I would therefore dismiss the appeal of 3091‑5177
Québec inc. against Axa in the first file (37421), but I would allow its
appeal in the same file against its insurer, Lombard, as well as Promutuel’s
appeal against the same insurer in the second file (37422).
II.
Factual Background
[7]
In the two cases before us, Éconolodge was owned
successively in 2005 and 2006 by 3091‑5177 Québec inc. (theft from Axa’s
insured) and A.M.A. Investments inc. (theft from Promutuel’s insured). Under
both of those companies, Éconolodge adopted the same promotional strategy.
Capitalizing on its convenient location a few minutes from the site of the
airport, the hotel invited travellers to sleep in its rooms, leave their car in
its parking lot while travelling and use its shuttle service to get to the
airport.
[8]
Éconolodge’s parking lot was located behind the
hotel. It was an open, unfenced and unattended lot that was freely accessible
to guests of the hotel, clients of the neighbouring office building and
restaurant and others who were passing by. Éconolodge’s guests kept their car
keys after
parking. However, during the winter, guests who left their car in the hotel’s
parking lot while travelling had to hand over their keys at the front desk so
that their car could be moved if necessary for snow removal. They filled
out a registration form to enable the hotel staff to identify their car. The
form did not indicate the date when the vehicle was expected to be picked up.
[9]
On returning from a trip in January 2005, a
first guest of Éconolodge discovered that his car was no longer in the parking
lot. He turned to his insurance company, Axa, which compensated him for his loss. As
Axa was subrogated to the rights of its insured, it sued Éconolodge (3091‑5177
Québec inc.) to recover the amount of compensation it had paid. Éconolodge
impleaded its insurer, Lombard, in warranty.
[10]
In March 2006, a second guest of Éconolodge made
the same discovery. His insurance company, Promutuel, also compensated him and
became subrogated to his rights. It instituted proceedings both against
Éconolodge (A.M.A. Investments inc.) and against Lombard directly.
[11]
Both victims of the thefts in question had
handed over their keys at the hotel’s front desk before leaving. Éconolodge was
not aware that their cars had been stolen from its parking lot until they
informed it. The keys were, at that point, still in the same place and in the
hotel operator’s possession. At the time of the thefts, Éconolodge held
property and liability insurance policies issued by Lombard. Two successive
policies, which were identical with respect to the issues in these cases, were
therefore in effect during the relevant period. Both of them contained a clause
excluding liability insurance coverage for property damage to personal property
in the care, custody or control of the insured.
III.
Judicial History
A.
Court of Québec (2015 QCCQ 1539)
[12]
The actions brought by Axa and Promutuel were
joined and were heard together by Judge Chalifour of the Court of Québec. In
both cases, the quantum of damages was agreed.
[13]
In the case between Éconolodge and Promutuel,
Éconolodge’s liability for the theft of the car was accepted, since a default
judgment had been rendered against A.M.A. Investments inc. The judge found that
the hotel operator was also liable for the theft of the car insured by Axa.
Refusing to separate the various services offered through Éconolodge’s park and
fly system, the judge found the contractual relationship between Éconolodge and
its guests to be a contract for services that included an obligation to look
after the guests’ interests with prudence and diligence. In light of its
business model, the hotel operator’s failure to take reasonable steps to secure
its parking lot was a fault that engaged its liability.
[14]
In Éconolodge’s action in warranty against its
insurer, Lombard, and Promutuel’s direct action against Lombard, the judge
found that the thefts of the guests’ cars were covered by Éconolodge’s
liability insurance policies. In her view, the exclusion clause relied on by
Lombard did not apply in these cases because Éconolodge had neither custody nor
real control or care of its guests’ cars. The fact that the keys had been left
at the front desk so that the parking lot could be cleared of snow did not have
the effect of transferring custody of the cars to Éconolodge. The judge noted
that applying the exclusion clause in such a manner would produce absurd results.
B.
Quebec Court of Appeal (2016 QCCA 1903)
[15]
Lombard filed an appeal against Éconolodge and
Promutuel on the issue of the applicability of the care, custody or control
exclusion clause. Éconolodge appealed the judge’s finding concerning its
liability for the theft of the car insured by Axa.
[16]
The Court of Appeal affirmed the trial judge’s
judgment with respect to Éconolodge’s liability. However, it came to a
different conclusion on the application of the exclusion clause. In its view,
the judge had made a reviewable error by failing to consider the evidence
concerning the handover to the hotel operator of the keys to the stolen cars.
The Court of Appeal found that possession of the keys meant that Éconolodge had
custody of the cars and that the insurance coverage was therefore inapplicable.
It added that the judge had been wrong to [translation]
“try to come up with a single solution applicable to every case” (para. 22
(CanLII)). The Court of Appeal stated that it would be incongruous for the
hotel operator to have an obligation of prudence and diligence without having
custody of its guests’ vehicles.
IV.
Analysis
A.
Éconolodge’s Civil Liability for the Theft
[17]
To begin with, I am of the view that the courts
below did not err in finding Éconolodge liable for the theft of the car insured
by Axa. I note that Éconolodge’s civil liability is in issue only in the case
between it and Axa. The hotel operator’s liability for the theft of the car
insured by Promutuel is not disputed by anyone before this Court.
[18]
As the Court of Appeal stated, the
characterization of the contractual relationship between Éconolodge and its
guests is a question of mixed fact and law (para. 17). Characterizing a
contract involves determining the purpose of the contract or the essential
prestation that is central to it (D. Lluelles and B. Moore, Droit
des obligations (2nd ed. 2012), at No. 1733). However, the
characterization of a contract is not a pure question of law when this
determination makes it necessary, as it does here, to consider the evidence of
the parties’ common intention (Uniprix inc. v. Gestion Gosselin et
Bérubé inc., 2017 SCC 43, [2017] 2 S.C.R. 59, at para. 42; Station Mont‑Tremblant v. Banville‑Joncas,
2017 QCCA 939, at paras. 63‑64 (CanLII); Montréal,
Maine & Atlantique Canada Cie (Montreal, Maine & Atlantic
Canada Co.) (MMA), Re, 2014 QCCA 2072, 49 R.P.R. (5th) 210, at para. 20).
As a mixed question, the trial judge’s characterization of the contract is
therefore entitled to deference on appeal (Housen v. Nikolaisen,
2002 SCC 33, [2002] 2 S.C.R. 235, at para. 32).
[19]
In characterizing the contract, the trial judge
properly considered the full range of services offered by Éconolodge. As a park
and fly hotel, Éconolodge offered its guests a number of services, including
accommodation, parking and a shuttle service. It is not appropriate to separate
these services given that a package of services is what was considered by
guests and advertised by Éconolodge. In fact, Éconolodge encouraged its guests
— mainly travellers — to leave their vehicle in its parking lot while they were
away. In doing so, the guests were reasonably entitled to expect that
Éconolodge would look after their interests and take such security measures as
were necessary in the circumstances.
[20]
This holistic approach to the contract between
Éconolodge and its guests is consistent with the testimony given by the owner
of the car insured by Axa, the prestations provided for in the contract and the
case law on park and fly hotels (Groupe Ledor inc., mutuelle d’assurances v.
7041730 Canada inc. (Éconolodge Aéroport (TM)), 2014 QCCQ 2920, at paras. 41‑43
(CanLII); Tremblay v. 4328175 Canada inc. (Marriott Fairfield Inn &
Suites Montréal Aéroport), 2017 QCCQ 13774, at paras. 14‑15
(CanLII)).
[21]
On the basis of this analysis, the trial judge
characterized the contract between Éconolodge and its guests as a contract for
services within the meaning of art. 2098 of the Civil Code of Québec (“C.C.Q.”)
(C.Q. reasons, at para. 24). Under art. 2100 C.C.Q.,
Éconolodge therefore had an obligation “to act in the best interests of [its]
client[s], with prudence and diligence”.
[22]
Both the Court of Québec and the Court of Appeal
found that Éconolodge had breached its obligation of prudence and diligence by
failing to take reasonable steps to secure its parking lot, unbeknownst to its
guests (C.Q. reasons, at para. 30; C.A. reasons, at para. 20). The
evidence before the trial judge showed that Éconolodge was not taking even
minimal steps to watch over or monitor the parking lot. The judge was also of
the view that the discrepancy between the guests’ reasonable expectations and
Éconolodge’s nonchalant attitude toward the security of its parking lot was
such that the hotel operator could be found to have deceived its guests.
[23]
This determination of fault is a finding of
mixed fact and law (St‑Jean v. Mercier, 2002 SCC 15, [2002]
1 S.C.R. 491, at paras. 60 and 104). It is entitled to deference on
appeal, since an assessment of the facts is necessary to make such a finding (Housen,
at para. 32). In the instant case, there is no error that would justify
reversing the trial judge’s finding on this point.
[24]
The judge further found that [translation] “the causal connection
between this fault and the damage is clear” (para. 30). Again, the
determination of causation is a question of fact that is
not open to review by an appellate court unless a palpable and overriding error
has been made (Montréal (Ville) v. Lonardi, 2018
SCC 29, at para. 41; Benhaim v. St‑Germain, 2016 SCC 48,
[2016] 2 S.C.R. 352, at para. 36; St‑Jean, at paras. 104‑5).
In any event, the parties are not challenging the judge’s finding on this
point.
[25]
The Court of Appeal was therefore right to
uphold Éconolodge’s liability for the theft of the car insured by Axa. There
are no grounds for this Court’s intervention on this first issue.
B.
The Care, Custody or Control Exclusion Clause
[26]
On the second issue raised by these cases, this
Court must decide whether the Court of Appeal was correct in stating that the
trial judge had made a reviewable error by finding that the handover of keys
did not trigger the application of the care, custody or control exclusion
clause. This issue relates to Lombard’s defence both to the direct action
brought against it by Promutuel and to Éconolodge’s action in warranty in the
case between it and Axa.
[27]
In this regard, Lombard argues that it does not
have to compensate Éconolodge for the theft of its guests’ cars because that
property is excluded from its liability insurance coverage. Lombard relies on
the care, custody or control exclusion clause in its insurance policies, which
reads as follows:
[translation]
This insurance does not apply to:
. . .
H. “Property damage” to:
. . .
(d) Personal
property in your care, custody or control;
(see A.R., vol. II, at pp. 123‑24,
and A.R., vol. III, at pp. 64‑65)
[28]
It is well established that the party relying on
an exclusion clause in an insurance policy has the onus of proving that the
clause applies on the facts of the case (Ledcor Construction Ltd. v.
Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016]
2 S.C.R. 23, at para. 52; American
Home assurances inc. v. Compagnie d’assurances générales Lombard, 2006
QCCA 112, [2006] R.R.A. 35, at para. 23). In order
to succeed, Lombard therefore had to establish that the vehicles in question
were in Éconolodge’s care, custody or control. In this regard, Lombard submits
that custody of a vehicle is necessarily transferred by handing over the keys,
which are needed to start it.
[29]
In the instant cases, the applicability of the
exclusion clause is the point on which the judges below were divided. The Court
of Québec judge found the exclusion inapplicable because Éconolodge did not
have care, custody or control of its guests’ vehicles (C.Q. reasons, at paras. 39‑49).
The Court of Appeal was rather of the view that Éconolodge had [translation] “a real power of
preservation, safekeeping, direction and physical control over its guests’ cars
while they were travelling” (para. 33).
[30]
As the Court of Appeal correctly stated, whether
Éconolodge had custody of the vehicles is, once again, a question of mixed fact
and law; the trial judge’s answer to this question is entitled to deference on
appeal (para. 22). While custody is a legal concept, the determination of
custody is a highly factual question that [translation]
“depends on the specific circumstances of each case” (J.‑L. Baudouin,
P. Deslauriers and B. Moore, La responsabilité civile
(8th ed. 2014), at No. 1‑958). The applicability of the care,
custody or control clause is therefore [translation]
“largely a question of fact” (Arkwright‑Boston
Manufacturers Insurance Co. v. Zurich Insurance Co., [1996] R.R.A. 923
(Que. C.A.), at p. 928; Guay inc. v. I.C.I. Canada inc., [1997] R.R.A. 717
(Que. Sup. Ct.), at p. 727).
[31]
I also note that the issue before us involves
the application of the clause, not its interpretation. It is true that this
Court established in Ledcor that the interpretation of a standard form
contract is a question of law subject to correctness review where the
interpretation is of precedential value and is not based on any meaningful
factual matrix (para. 24). However, this principle does not apply here.
There is no ambiguity in the care, custody or control clause that needs to be
resolved through the interpretation process. Rather, what is in issue is the
application of the clause to the facts (see Guardian Insurance Co. of
Canada v. Dale and Co., [1972] C.A. 231 (Que.), at p. 239).
Specifically, the issue before us is whether the clause applies in a factual
context in which guests handed over the keys to their vehicle at the hotel’s
front desk.
[32]
This being the case, I am of the view that the
trial judge’s finding of mixed fact and law with regard to custody of the
stolen vehicles was not open to appellate review unless a palpable and overriding error had
been made. As a result, in my view, the Court of Appeal’s
intervention was unwarranted, for three reasons.
[33]
First, it is not accurate to say that the judge
did not consider the handover of keys. On the contrary, she did consider it,
but she found that, in the circumstances, it was not sufficient in itself to
transfer custody of the vehicles to Éconolodge. Second, the record did not
permit the Court of Appeal to review the judge’s finding on the reason why the
guests handed over their keys to the hotel. Third, there is no contradiction or
inconsistency in law between the judge’s finding that Éconolodge had an
obligation of prudence and diligence and her finding that the stolen cars were
not in its care, custody or control.
(1)
Trial Judge’s Consideration of the Handover of
Keys
[34]
The Court of Appeal stated that the judgment of
the Court of Québec [translation] “contains
an overriding error in that it fails to take into account the specific
circumstances in which the two losses occurred. The judge had to consider the
evidence concerning the handover of keys by the guests . . .” (para. 22).
With respect, I believe that this statement does not do justice to the judge’s
reasons. She specifically considered the handover of keys at paras. 38 and
39 of her judgment:
[translation] Counsel for Lombard argues
that the handover of keys during the winter months is fatal to the insured; the
exclusion then becomes applicable. Had the theft occurred in the summer,
Lombard could not have relied on the exclusion. The Court cannot accept this
argument; it might lead to absurd results, depending on the situation.
In
the cases at bar, the hotel does not have a “real power of preservation,
safekeeping, direction and physical control” over its guests’ cars. The
hotel operator’s duties do not change simply because the keys to vehicles are
left on site during the winter in case the parking lot needs to be cleared of
snow. [Emphasis in original.]
[35]
Based on these paragraphs, it cannot be said
that the judge failed to consider the handover of keys by the hotel’s guests.
She considered it, but she found that it was insufficient in itself to transfer
custody of the car to Éconolodge in the circumstances. In my view, the judge
did not make a palpable and overriding error on this point, and her finding on
the limited effect of the handover of keys was firmly based on an assessment of
all of the evidence. Essentially, the Court of Appeal criticized her for coming
to a different conclusion than it did on the transfer of custody of the
vehicles because of the limited effect she attributed to the handover of keys.
With respect, this did not justify appellate intervention.
[36]
The clause at issue here excludes liability
insurance coverage for personal property that is in the care, custody or
control of the insured. Its purpose is to prevent liability coverage from being
transformed into property coverage (here, for the property of another). Since
liability insurance is not intended to cover the risk of loss of the insured’s
property, it is equally not intended to cover the risk of loss of property of
which the insured assumes custody. An insurer does not want to cover a risk
that is unrelated to the purpose for which coverage is purchased, since it is
unable to assess the value of the property entrusted to the insured and to set
premiums that reflect the risk of its loss (United States Fire Insurance Co.
v. Bouchard et Blanchette Marine ltée, [1990] R.R.A. 667 (Que.
C.A.), at pp. 671‑72). In short, the
exclusion attaches to certain property, not to the acts of the insured
(Baudouin, Deslauriers and Moore, at No. 2‑533; C. Massé, “L’exclusion
des biens sous les ‘soin, garde et contrôle’ de l’assuré: où en sommes‑nous?”,
in Barreau du Québec, vol. 243, Développements récents en droit des
assurances (2006), at p. 127; Bouchard et Blanchette Marine, at
p. 671; Guay, at p. 727).
[37]
While the clause in the instant cases is clear
and does not need to be interpreted, it is helpful to consider the meaning
given by the authorities to the words used in the original French: “garde”
(custody), “direction” (direction) and “gestion” (management). It
is not a matter of determining the nature of these concepts, which is already
well established. Rather, this exercise offers guidance in assessing whether
the particular facts of these cases show that these concepts apply here (see Guardian
Insurance, at p. 239).
[38]
The authorities indicate that “garde”
(custody) and “pouvoir de direction ou de gestion” (power of direction
or management) are related concepts pertaining to control over property.
According to Professor Karim, [translation]
“the custodian of a thing is the person that exercises a power of
supervision, control or direction” (V. Karim, Les obligations (4th
ed. 2015), vol. 1, at para. 3109). Baudouin, Deslauriers and Moore
state that [translation] “custody is assessed directly by
reference to the power of control, supervision and direction over the property”
and that the “power of direction
and management must . . . enable the insured to prevent the damage
that may be caused to the property . . .” (at Nos. 1‑970
and 2‑533, respectively). Chantale Massé notes that the concept of [translation] “power of direction or management”
has guided the courts in determining when a person has custody of property
(Massé, at p. 126).
[39]
In Indemnity Insurance Co. of North America
v. Excel Cleaning Service,
[1954] S.C.R. 169,[1] this Court interpreted the clause at issue here — the French version
of which used the words “soin, garde et contrôle” (care, custody and
control) at the time — as requiring that control and responsibility for the
preservation of the property be transferred sufficiently to change legal
custody of the property (pp. 174‑75, per Rand J., and
179, per Estey J.; see also Baudouin, Deslauriers and Moore, who
note at No. 2‑533 that while the French wording of this standard
clause has changed somewhat over the years, its logic has remained the same).
In Arkwright, the Quebec Court of Appeal determined that this
clause [translation] “will apply
only if the insured exercises a real power of preservation, safekeeping,
direction and physical control over the property” (p. 927). This is the
same language used by the courts below in the instant cases (C.Q. reasons, at para. 39;
C.A. reasons, at para. 33). In Guay, the Superior Court similarly
found that [translation] “[c]ustody
is . . . in a broad sense, the relationship between the person
responsible and the object, a relationship based on a power of supervision,
control and direction that enables the former to prevent the damage that may be
caused to the latter” (p. 726).
[40]
Here, there is no doubt that the handover of
keys is a relevant fact in determining custody of the property, since the keys
provide access to the vehicle (see Atlantic
Consolidated Foods Ltd. v. Barnes Security Ltd., [1981]
C.S. 7 (Que.), at pp. 10‑11). Nevertheless, I cannot accept Lombard’s
argument that custody is transferred automatically when the keys to a vehicle
are handed over. Such an absolute rule is inconsistent with the highly
contextual nature of the determination of custody and with the principles
developed in the case law. For example, in 9144‑6765 Québec
inc. v. Plante, 2013 QCCS 1279, the Superior Court held that custody
of a boat had not been transferred despite the handover of keys because the
delegated power over the boat was too limited in time (para. 55 (CanLII)).
In Société d’assurance des caisses populaires v. Hains, [1986]
R.R.A. 644 (Que. C.A.), and Garage G.T.D. inc. v. Lévesque, [1986]
R.J.Q. 466 (Sup. Ct.), the Court of Appeal and the Superior Court both
found that custody of immovable property had not been transferred despite the
handover of keys because the keys had been handed over solely to provide access
and to accommodate the insured.
[41]
To determine whether there has been a transfer
of custody and thus control of property, a court must consider all the
circumstances, including the reason for any handover of keys. This is precisely
what the trial judge did in the instant cases. This brings me to the second
error in the Court of Appeal’s intervention.
(2)
Reason for the Handover of Keys
[42]
The Court of Appeal found that, when guests hand
over their car keys at the front desk, Éconolodge [translation] “is then responsible for looking after the
vehicles, not only when there is a build‑up of snow, but also if anything
at all occurs that may affect them while they are parked in its lot” (C.A.
reasons, at para. 33; see also para. 23). However, in writing this,
the Court of Appeal unjustifiably overturned the trial judge’s finding of fact
that the keys were handed over solely for the purpose of snow removal in the
parking lot (C.Q. reasons, at paras. 15 and 39). With all due respect for
the appellate judges, I am of the view that this intervention was unwarranted.
[43]
The reason the guests handed over their keys is
important because it distinguishes custody from mere physical holding of the
vehicles. Of course, both custody and physical holding imply that there is some
power to control property. They are nonetheless two distinct concepts. A holder
of property does not have custody of it where the holder is able to exercise
only a limited, and not a general, power over the property (Baudouin,
Deslauriers and Moore, at No. 1‑962).
[44]
Where a contractual relationship exists, as in
the instant cases, [translation] “reference
must be made to the obligational content of the agreement to determine whether
custody has been transferred” (Baudouin, Deslauriers and Moore, at No. 1‑964).
For example, in Excel Cleaning, Estey J. noted that the owner of
the property had given the service provider permission to deal with the
property only to the extent necessary to perform the service. Because of the
nature of the service in question, that limited permission was not sufficient
to transfer custody of the property. Thus, mere permission to handle a rug in
order to clean it did not give rise to an obligation to keep it intact and to
preserve it generally (p. 179).
[45]
Here, the trial judge’s finding that the keys
were handed over solely for the purpose of snow removal in the parking lot is
supported by the evidence concerning the parties’ intention, particularly the
testimony given by the owner of one of the stolen cars and by the first owner
of the hotel. Moreover, the fact that Éconolodge required keys to be handed
over only during the winter by guests who left their car in the hotel parking
lot while they were away supports the finding that the handover of keys gave
the hotel operator only a limited, clearly circumscribed power. It was
therefore open to the judge to conclude from her analysis of the evidence heard
that Éconolodge had the power to move vehicles only when there was a build‑up
of snow and that this was not sufficient in itself to transfer custody of the
stolen cars. Contrary to what Lombard argues, the handover of keys does not
automatically transfer custody regardless of the circumstances.
[46]
With respect, the Court of Appeal’s statement
that the handover of keys could serve other purposes was not based on the facts
in evidence, let alone on an improper assessment of that evidence by the trial
judge that could be characterized as a palpable and overriding error.
(3)
Distinction Between Custody and an Obligation of
Prudence and Diligence
[47]
Lastly, I am of the view that the Court of
Appeal erred in suggesting that there was an inconsistency in the findings of
the trial judge, who recognized both that Éconolodge had an obligation of
prudence and diligence and that the cars were not in its care, custody or
control (C.A. reasons, at paras. 3 and 33).
[48]
In Arkwright, the Quebec Court of
Appeal specifically rejected the idea of equating a contractor’s obligation of
prudence with a power of direction or management under a care, custody and
control exclusion clause in a liability insurance policy:
[translation] . . . I
understand that the [care, custody and control] exclusion will apply only where
the insured exercises a real power of preservation, safekeeping, direction and
physical control over the property and does not merely have a duty of
prudence or care in carrying out an activity in respect of the property.
[Emphasis added; p. 927]
[49]
The obligations are indeed different in nature.
Éconolodge’s obligation of prudence and diligence originates in art. 2100 C.C.Q.,
which governs contracts for services. It therefore attaches to the performance
of services by the hotel operator. But as I have stated, unlike the
obligations in art. 2100 C.C.Q., the care, custody or control
clause excludes coverage for property over which the insured exercises
certain powers; it does not attach to the insured’s acts. The fact that
the insured breached its duty of prudence and diligence in performing a service
does not mean that it necessarily had legal custody of the property in
question; it must still be found that the insured had control over the property
and an obligation to preserve it.
[50]
In Excel Cleaning, Rand J.
emphasized the distinction between an obligation that exists in performing a
service and the powers granted in relation to property: “Clearly
custody [of the property] was not transferred; the only care called for was in
the execution of the service, not toward the property as such; and no control
[over the property in question], in a proprietary sense, was intended” (p. 175). More recently, the Quebec Court of Appeal
reiterated this admonition against confusing the insured’s obligations relating
to the manner of providing a service with the insured’s obligations toward the
property (American Home, at paras. 27‑29). In these two
decisions, the courts were specifically considering the application of the
exclusion clause at issue here.
[51]
In her judgment, the trial judge properly
distinguished Éconolodge’s obligation of prudence and diligence from custody of
the cars. The hotel operator’s obligation to take reasonable steps to secure
its parking lot — such as monitoring the lot or putting up fences, cameras or
concrete blocks — did not ipso facto lead to a change in custody of
the vehicles left in the lot. There was no inconsistency in the judge’s
findings in this regard. Éconolodge could very well have been merely holding a
vehicle physically and been subject to an obligation of prudence and diligence
in performing a service. In itself, this obligation does not imply a sufficient
transfer of control and of responsibility for the preservation of the vehicle
to result in a change in legal custody.
[52]
I therefore conclude that the trial judge’s
judgment contained no error warranting appellate intervention as regards
Éconolodge’s liability insurance coverage. My conclusion is also supported by
two additional considerations.
[53]
First, the care, custody or control exclusion
clause should not be applied in such a way that the coverage offered by the
insurer becomes ineffective (Baudouin, Deslauriers and Moore, at No. 2‑533;
J.‑G. Bergeron, Les contrats d’assurance (terrestre): lignes et entre‑lignes
(1989), t. 1, at p. 237). The courts have therefore been reluctant to
exclude coverage for the main activities engaged in by an insured (Excel
Cleaning, at p. 179, per Estey J.; Groupe Commerce
Compagnie d’assurances v. Service d’entretien Ribo inc., [1992] R.R.A.
959, at p. 964 (Que. C.A.); 3457265 Canada inc. v. 9124‑8948
Québec inc., 2016 QCCS 2462, at paras. 37‑38 (CanLII); Atlantic
Consolidated, at p. 11). This approach helps to maintain some balance
between the coverage taken out by an insured and the exclusions in the policy (3457265
Canada inc., at para. 35) and promotes a sensible
commercial result in accordance with Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co.,
[1980] 1 S.C.R. 888, at pp. 901‑2; see also D. Lluelles, Droit
des assurances terrestres (6th ed. 2017), at Nos. 130, 133 and
157.
[54]
In this regard, I note that one rationale for
the care, custody or control exclusion clause is to prevent the insurer from [translation] “tying its obligation to
pay compensation to uncertainties resulting from initiatives that may be taken
by an insured who agrees to store items that belong to third parties and have
nothing to do with the kind of commercial activities engaged in by the insured
and known to the insurer” (Bouchard et Blanchette, at p. 671). In
the instant cases, however, parking was a key component of the package of
services offered by Éconolodge as a park and fly hotel. Excluding liability for
its guests’ cars from its insurance coverage would have undercut the usefulness
of the coverage for one of its main activities. The trial judge found that
Lombard was well aware of Éconolodge’s business model and had chosen to insure
it with full knowledge of the situation (C.Q. reasons, at paras. 43‑48).
As the judge put it, [translation]
“Lombard is not taken by surprise by the claims in issue” (para. 48).
[55]
Second, I agree with the trial judge that
Lombard’s argument leads to results that are incongruous, if not absurd. In the
Court of Québec, Lombard’s senior analyst conceded that the exclusion clause
was inapplicable in the summer, since Éconolodge did not have the keys to
parked vehicles in its possession during that time. In short, in the same year
of coverage, the applicability of the exclusion clause would depend on the
season or even on the amount of precipitation. Moreover, if we follow Lombard’s
line of reasoning, the insurance policy would cover the theft of a car during
the winter if its owner remained at the hotel, but not the contemporaneous
theft of the car next to it whose owner went abroad and handed over the keys at
the front desk in case the parking lot needed to be cleared of snow. The
purpose of highlighting the absurdity of this situation is not to [translation] “come up with a single
solution applicable to every case”, as the Court of Appeal suggested (para. 22).
Rather, it is to emphasize the importance of considering all the relevant facts
and not presumptively giving decisive weight to a particular fact without
factoring in all the relevant circumstances.
V.
Conclusion
[56]
The finding by the courts below that Éconolodge
is liable for the theft of the car insured by Axa does not warrant any
intervention by this Court. I would therefore dismiss the appeal of 3091‑5177
Québec inc. against Axa in file 37421, with costs.
[57]
However, the trial judge did not make any
palpable and overriding error that is reviewable on appeal
in finding that the keys were handed over solely for
the purpose of snow removal in the parking lot and that this was insufficient
to transfer custody and control to Éconolodge. Since the exclusion clause in
Éconolodge’s liability insurance policy is therefore inapplicable on the facts,
I would allow the appeal of 3091‑5177 Québec inc. against Lombard in
file 37421 as well as Promutuel’s appeal against the same insurer in
file 37422, with costs throughout. I would thus restore the trial judge’s
decision ordering Lombard to pay damages, interest and the additional indemnity
to 3091‑5177 Québec inc. and Promutuel.
[58]
I note in closing that the parties have agreed
on terms for the payment by Lombard of Éconolodge’s extrajudicial defence costs
for the proceedings in the Court of Appeal and this Court. It is therefore
unnecessary for me to deal with this aspect of the case.
The following are the reasons delivered by
Rowe J. —
[59]
I agree with my colleague Justice Gascon in his analysis and in
the result. I would add only the following regarding the jurisprudence relating
to contract characterization. My colleague states (at para. 18) that
characterization of the contract between Éconolodge and its clients is a
question of mixed fact and law. As the trial judge found it necessary to have
regard to extrinsic evidence in order to ascertain the true nature of the
contract (2015 QCCQ 1539, at paras. 17-24 (CanLII)), I would agree that, in
this case, characterization is a mixed question. By contrast, where having
regard to extrinsic evidence is not needed, characterization remains a question
of law: Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43,
[2017] 2 S.C.R. 59, at para. 42.
Appeal
of 3091‑5177 Québec inc., c.o.b. as Éconolodge Aéroport, allowed in part.
Appeal of Promutuel Insurance Portneuf‑Champlain allowed.
Solicitors
for the appellant 3091‑5177 Québec inc., c.o.b. as Éconolodge Aéroport
(37421): Martel, Cantin, Montréal.
Solicitors
for the respondent Lombard General Insurance Company of Canada (now known as Northbridge
General Insurance Corporation) (37421 and 37422): Gasco Goodhue St‑Germain,
Montréal.
Solicitors
for the respondent AXA Insurance Inc. (now
known as Intact Insurance Company) (37421): Romanowski &
Associés, Île‑des‑Sœurs, Quebec.
Solicitors
for the intervener (37421) and appellant (37422) Promutuel Insurance Portneuf‑Champlain: Carter
Gourdeau, Québec.