Supreme Court of Canada
Standard Marine Insurance Co. v. Whelan Pulp and Paper Mills, Ltd., 64 S.C.R. 90
Date: 1922-06-17
Standard Marine Insurance Company (Plaintiff) Appellant;
and
Whalen Pulp And Paper Mills, Ltd. (Defendant) Respondent.
1922: May 3, 4; 1922: June 17.
Present: Sir Louis Davies C.J. and Idington, Duff, Anglin, Brodeur and Mignault JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA.
Insurance—Marine—Floating policy—Facts subsequent to its execution—Insured barge—Unseaworthiness—Previous uninsurability—Non-disclosure.
The appellant issued to the respondent a floating policy of marine insurance to cover wood pulp during transportation (including loading) between certain termini. The respondent chartered a barge; while in the course of being loaded, she sank at respondent's wharf. The respondent, being bound to "declare" all shipments made and to pay premiums thereon at rates fixed by a schedule to the policy, complied with these conditions as to the above cargo and the premium was accepted by the appellant. The claim for insurance was also paid by the appellant; but, subsequently, it took an action to recover the amount on the ground that the barge was unseaworthy and uninsurable to the knowledge of the respondent at the time the cargo was declared and the premium paid.
Held, that the appellant was liable under the floating policy. The evidence did not show that the respondent had known of the unseaworthiness of the barge. As all the conditions of the policy had been complied with, the appellant would have been bound even if the fact of the uninsurability of the barge had been communicated to it so that the non-disclosure of that fact, although known by the respondent at the time the premium was paid, did not vitiate the contract.
Judgment of the Court of Appeal ([1922] 1 W.W.R. 679) affirmed.
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APPEAL from the Court of Appeal for British Columbia, reversing the judgment of Murphy J. at the trial and dismissing the appellant's action.
The appellant issued to the respondent a floating policy of marine insurance to cover wood pulp to be transported from Mill Creek, near Vancouver, "in the ship or vessel called the steamers approved, including risk of North Bend barge and 2 scows." The respondent chartered a barge or scow called the Baramba from the Kingsley Navigation Company, of Vancouver and sent her to Mill Creek to be loaded and while in the course of being loaded she sank at respondent's wharf. The claim for insurance was paid. After proceedings had been commenced against the Kingsley Navigation Company by the appellant, who had been subrogated to respondent's rights, for damages, the appellant alleged that they discovered that the respondent was aware of the unseaworthiness of the Baramba prior to loading and had not disclosed this fact to the appellant. The latter then discontinued that action and sued the respondent to recover the insurance money paid to them.
The trial judge found that the Baramba was unseaworthy but that the respondent did not consider her so; but he also found that the respondent did know that she had been refused insurance, and on that ground he maintained the appellant's action.
The Court of Appeal reversed the judgment of the trial judge on practically the same grounds as the Supreme Court of Canada, McPhillips, J.A., dissented, held that the material fact of the uninsurability of the barge should have been disclosed.
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E. P. Davis K.C. and E. F. Newcombe for the appellant.—The duty of an insurer is to make a full disclosure to the underwriter of every material fact which might, if correct, affect the contract of insurance, otherwise such contract is void.
The respondent did not disclose to the appellant the following facts known to them, i.e., that the Baramba was unseaworthy and that no insurance could be obtained upon her.
W. N. Tilley K.C. and A. H. Douglas for the respondent.—There is no duty of disclosure upon an assured at any time after the formation of a contract such as the one in this case. Ionides v. The Pacific Fire and Marine Insurance Co.. The Baramba was not unseaworthy to the knowledge of the respondent at the time of her sailing. The appellant had absolved the respondent from any duty of disclosure, if such duty had existed.
THE CHIEF JUSTICE.—For the reasons stated by my brother Anglin, with which I fully concur, I am of the opinion that this appeal must be dismissed with costs.
IDINGTON J.—I think for the reasons respectively assigned by the learned Chief Justice and Mr. Justice Martin in the Court of Appeal (taken as a whole, for each covers different ground) with which I entirely agree, that this appeal should be dismissed with costs throughout.
I desire, however, in deference to the argument of counsel presented here, to add a few words.
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The action is in principle founded upon a mistake of fact and, if well founded, might as well have been brought by resorting to the simple old fashioned count of a case for money had and received.
That was long ago declared by Lord Mansfield in the case of Moses v. Macferlan, to be a form of action in which the question raised is whether or not it is inequitable that the defendant should retain the money he has been paid.
The facts presented here fall far short of fulfilling such a condition and hence the money should remain where it is.
The policy was specifically amended so as to avert any reliance upon an implied warranty of seaworthiness in the vessel that might be in question. Hence the appellant's counsel frankly admits that even if unseaworthy he could not rely upon that alone.
Yet he tries to induce us to believe that if the facts come to the knowledge of the respondent that the owner of the vessel had said something tending to shew the vessel was uninsurable though in good condition and fitted for the service she was to be put to in quiet inland or almost inland waters, that if the appellant had been told this same story its agents would, beyond doubt, have rejected the risk so to be taken.
I am not quite sure that he consistently stated his proposition quite so broadly for at times and for the most part he put it as if connected with the fact of undoubted unseaworthiness.
I do think, however, that unless the story can be relied on as ground of relief quite independently of that question, there is nothing to stand upon unless fraud, which is not argued for.
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I fail to see how its connection with either seaworthiness or unseaworthiness is at all material in this case where it is not contended that respondent knew it was so and if it is so put the evidence contradicts it.
He in effect asks us to assume that appellant would, beyond doubt, have, if told the story in question, rejected the declaration made by the respondent. I certainly cannot accept that as proven.
Nor, in face of the overwhelming evidence that such barges and scows as in the service this one was engaged for, would not be insured by a large part of the insurers in the Vancouver district and by the other part only when induced by the chance of obtaining thereby other large and important business, can I believe that the appellant, doubtless well aware of that condition of the insurance business there, would have paid any attention to such a story as of any significance, any more than respondent did.
It is shewn that a very large part of the business handled by the respondent was for the long time the appellant was its insurer of pulp so carried by what were practically uninsurable scows and barges. Yet not a word of inquiry as to whether these vessels were insured or insurable in that district.
Surely, if faith is to be kept by business men, these now laying stress upon an omission which had consistently been observed throughout, as if quite permissible, cannot be permitted to be thus treacherously set up.
The only difference (if it is one, which is not clear from the evidence) in this case would seem to be that the owner of this barge, now in question, refused to accept the risk and insisted and had his way that respondent become its own insurer by agreeing to return the Baramba in same good condition as got.
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The Baramba was, twice before the occasion now in question, used under more onerous conditions than existed at the loading under which she sank.
The mystery has not been solved.
The appellant got Mr. Cullington, an expert, to try to solve it. He did not. Of course he tells us how it was possible for water to have got in through certain holes, but these holes were there for all the prior trips and under as heavy loading as had taken place when she began to sink.
The Baramba had been duly declared to the appellant by respondent, and the accident duly reported on the 25th of February, and Mr. Cullington immediately summoned by the appellant to investigate, which he did, twice, yet no solution that appeals to one's common sense in light of the immediately preceding history or its carrying powers.
The appellant was not surprised nor did it ask any questions of the respondent as to past history or relation between the owner and respondent, and yet it agreed to pay on the 14th of April, six weeks after the curious accident, the amount found due, and nearly two years later the balance of same arising out of general average.
It seems asking too much to try to make of a most equitable principle of our law the basis for a most inequitable operation of the law.
I am, therefore, not surprised to find that the appellant has been unable to cite to us any case in which anything like what it asks us to decide was ever decided, much less decided in its way of presenting the law.
It cites case of actions by insured against insurer in which were set up a variety of defences of failure to disclose something material.
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What might be material and have weight in such a case is very far from being the same as setting it up by way of founding an action to recover back money voluntarily paid.
The only case it cites of that kind is the case of Kelly v. Solari where, through the clearest inadvertence, the insurance company had, when paying life insurance, included the amount of a policy which had not only expired, but been marked so.
Yet in so clear a case of mistake of fact, which is the only basis for this action, as it was for that, the court had to give a second trial.
I fail to see the semblance between the two cases if we have any regard to the principles to be observed.
A mere voluntary payment, as this may have been for aught we ought to care, is not recoverable whatever the motives behind it on the part of appellant so paying.
Having referred to all the cases cited by the appellant and then turned to respondent's citations, I imagine the decisions in the judgments, especially that of Willes J. in the case of Thompson v. Hopper , sets forth what is still good law and a safe guide.
DUFF J.—This action is brought to recover moneys paid to the respondent by the appellant company under an insurance policy covering pulp, the policy having been issued by the appellant to the respondent.
The insurance was on
wood pulp, * * * shipped, or to be shipped, per steamers approved or held covered from Howe Sound to Vancouver (including risk per scows &/or North Bend barge) &/or Seattle and thence per steamer approved or held covered to a direct port in Japan.
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On the policy there was indorsed a memorandum by the appellant that
seaworthiness of the vessel as between the assured and the assurers is hereby admitted.
In February, 1919, the defendant hired a craft named the Baramba and on the 25th of that month, while the Baramba was being loaded with pulp which the respondent company intended to ship to Japan by way of Vancouver, she sank and the pulp was lost. The defendant declared the cargo under the policy and on the 31st of March, 1919, paid the premium according to rates provided by the policy, and on the 14th of April, 1919, the plaintiff paid to the defendant the sum of $12,715.20, the amount of the respondent company's loss.
The appellant company having first sued the owners of the Baramba for breach of a warranty of seaworthiness under an assignment to them by the defendant of the defendant's rights, and the action having been discontinued upon the discovery that no such warranty could be established, the appellant company brought the action out of which the present appeal arises, alleging that at the time the insurance was effected, that is to say, when the premium was paid and accepted by the appellant, the respondent company was aware of the fact that the Baramba was an uninsurable craft and that this fact ought to have been disclosed to the appellant company when the cargo was declared under the policy, and that for default in this duty of disclosure the contract of insurance effected by declaration and the acceptance of the premium was voidable at the option of the appellant company. The payment of the loss in April was, the appellant company
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alleges, a payment in ignorance of facts entitling them to avoid the policy and a payment consequently which they are entitled to revoke as made under a mistake of fact.
The appellant company relied also upon another ground. It was contended that the Baramba when she sank was in such a state as to be utterly unfit for the carriage of cargo even from Mill Creek to Vancouver; that the respondent company was aware of this and that the loading of the cargo in such circumstances was a wrongful act, which was the real cause of the respondent company's loss, a loss for which upon the sound principle that a plaintiff is not entitled to recover reparation for damages resulting from his own wrongful act, the appellant company was not obliged to make good under its policy. As to this I think the appeal fails because I think the evidence does not establish that the officials of the respondent company can have seriously doubted that the Baramba was in a fit state to carry a cargo from Howe Sound to Vancouver.
The conditions of the appellant company's right to recover are of course, first, that the moneys paid in April were paid under a mistake of fact and, second, that this mistake arose from the supposition of the appellant company of the existence of a state of facts which did not exist but which if it had existed would have disentitled the respondent company to the moneys paid.
In the view I take of the appeal, the question of substance is: Were the moneys paid under a mistake of fact which was relevant in the sense above indicated? I think it sufficiently appears that the appellant company was not aware of the fact that the respondent company knew the Baramba to be uninsurable, although
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the evidence does not convince me that the appellant company did not know the condition of the Baramba and the probable state of the respondent company's knowledge with respect to her condition at the time the premium was paid.
But was the plaintiff company's ignorance of the respondent company's non-disclosure of the uninsurability of the craft a relevant mistake—a mistake within the meaning of the rule? That depends upon the answer to this question: Did the fact of non-disclosure absolve them from the obligation to pay in execution of which the moneys were paid?
Now the obligation to pay under which they acted was undoubtedly the obligation of the policy. The cargo was declared under the policy; the premium was paid and accepted under the policy; the insurance moneys were paid as moneys due under the policy. That this was so in fact is on the evidence incontrovertible.
The cargo was treated as a cargo covered by the policy, notwithstanding the fact that the appellant company was fully aware of the character of the Baramba.
It is now said indeed that the policy did not contemplate shipment from Howe Sound in barges but only in scows, except in the case of the barge North Bend and that, consequently, a shipment by the Baramba which it is said was a barge and not a scow was not covered by the policy.
But it is to be observed not only that the character of the Baramba herself was known when the insurance moneys were paid; but as the appellant company admits, the appellant company had acquiesced in the
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use by the defendant company of barges other than the North Bend for shipment from Howe Sound, and that the cargoes so shipped had been treated as cargoes under the policy.
If, therefore, there was any mistake in this connection there was no mistake of fact. It could only be a mistake as to the construction of the policy and a mistake in this sense that in point of law the policy is incapable of a construction such as would cover shipment by a craft like the Baramba.
Now in construing a commercial contract such as this policy, it is unquestionably open to the parties to show that in the locality in which the contract is made and is to operate a word such as the word "scow" is commonly used and understood to denote craft of a particular kind. The word "scow" is not a word of fixed legal significance and therefore such evidence would be admissible. And when one reads the evidence, noting the application of the words "scow" and "barge" by witnesses who must be familiar with the uses of such terms in Vancouver and Seattle, and indeed when one refers to the pleadings, one is left without a doubt that had the contention been put forward at the early stages of the litigation it would inevitably have raised a contest on the meaning of the word "barge" in such a contract and it is therefore too late now to rely upon it.
Such being the scope of the policy, was there any legal duty of disclosure resting on the respondent company? I think there was no such duty. The contract of insurance had been effected, the subject matter had been ascertained, the seaworthiness had been admitted of all craft within the contemplation of it; and the risk attached as soon as the conditions of the policy were complied with. Mr. Davis' con-
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tention as to the premium must, I think, be rejected; the premium was fixed by the policy itself. The case cited by the Chief Justice in the court below, Ionides v. Pacific Fire and Marine Ins. Co., seems to be in point and is conclusive.
I think the appeal fails and should be dismissed with costs.
ANGLIN J.—The floating insurance in question covered any and all "declared" cargoes of pulp belonging to the respondent during transportation (including loading) between certain termini. The respondent was bound to "declare" all such shipments and to pay premiums thereon at rates fixed by a schedule to the policy and, as I read the policy, the appellant was obliged to insure the respondent, at the appropriate rate so fixed, against loss of, or injury to, any such cargo so declared. In the absence of fraud upon the policy in the making of the declaration (as there would have been in declaring the shipment by the Baramba if the respondent had known of her unseaworthiness, Thompson v. Hopper), the appellant could not reject the insurance of any declared shipment however unseaworthy the craft on which it was, or was to be, transported from Mill Creek to an "approved" steamship either at Vancouver or Seattle, as the case might be, provided such craft was a scow or the North Bend barge. Ionides v. Pacific Fire and Marine Insurance Co.. The practice of allowing the plaintiff to use any scow or barge it chose for the transportation from Mill Creek to the steamship's side seems to have been well established.
The shipment in respect of which the loss occurred was undoubtedly to be carried by the Baramba from Mill Creek to Vancouver. The rate of premium for pulp shipped via Vancouver was fixed in the schedule to the policy at 5-8% from Howe Sound to Japan whether a scow or the barge North Bend—or, according to the practice, any other barge—was employed to transport the cargo from Mill Creek to Vancouver. By some error—probably due to the date having been given as the 17th of February instead of the 25th—the shipment was treated by the appellant as having been intended to be carried via Seattle instead of via Vancouver, and consequently the rate of premium was inserted by it at 1 1-8% instead of 5-8%. If, as I think, the appellant had no option to reject the insurance of the cargo in question because of any exception that it might have taken, when the respondent's declaration was communicated, to the use of the Baramba, the rate of premium being also fixed, as it was, it is difficult to appreciate the materiality of non-disclosure of the fact that the Baramba could not be insured. Ionides v. Pender ; Ionides v. Pacific Fire and Marine Insurance Co..
The evidence fully warranted the findings of the learned trial judge that the Baramba was unseaworthy, but that that fact was not known to the respondent, and also that the respondent was aware that the Baramba could not be insured when it was last hired. That her unseaworthiness was the cause of her sinking was, I think, the only inference reasonably open on the evidence. The voyage from Mill Creek to Vancouver on inland waters involved very slight risk to
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the Baramba. The respondent readily assumed that risk and itself became the insurer of it to her owners. It was no doubt believed that the Baramba would make the trip in perfect safety.
Upon this state of facts the declaration of the cargo intended to be sent by the Baramba from Mill Creek to Vancouver was not such a fraud on the policy as would avoid the risk. Thompson v. Hopper .
The loss was not paid by the plaintiff under mistake as to any facts which, if known, would have afforded it a valid defence to the respondent's claim under the policy. The existence of such facts has not been shown.
I would for these reasons uphold the judgment appealed from and dismiss this appeal with costs.
BRODEUR J.—I concur with my brother Idington.
MIGNATULT J.—I concur in the judgment dismissing this appeal.
The appellant had insured the defendant's shipments under a floating policy. While a shipment of pulp was being loaded on a barge called The Baramba the barge sank and the loss was incurred. In due time the appellant paid this loss to the respondent, but subsequently took an action to recover back the money paid, alleging that the payment had been made in error on substantially two grounds: 1, that the barge was unseaworthy to the knowledge of the respondent; 2, that no insurance could be obtained on this barge, and that the respondent although aware of this fact had failed to disclose it to the appellant.
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The learned trial judge found that the barge was unseaworthy, but that the respondent had no knowledge of its unseaworthiness. He, however, came to the conclusion that the respondent company knew that the barge could not be insured and for that reason he rendered judgment in favour of the appellant.
The Court of Appeal set aside this judgment agreeing with the trial court that, although the barge was unseaworthy, the respondent was not aware of it, which was shewn by the fact that the respondent had undertaken to return the barge in good condition to its owners. And as to the non-disclosure of the fact that the barge had been refused insurance, the learned Chief Justice of British Columbia did not consider that non-disclosure of such a fact coming to the knowledge of the insured only after a policy of this description, i.e., a ship or ships policy, was issued, would vitiate the contract. Mr. Justice McPhillips dissented from the judgment of the Court of Appeal.
Had the respondent been aware of the unseaworthiness of The Baramba, the concealment of this fact, when the respondent declared its shipment to the appellant, would have amounted to fraud. But no such knowledge is proved. No doubt the respondent was aware that the barge had been refused insurance. It is, however, suggested that insurance companies as a rule refuse to insure barges. And unless refusal of insurance on this barge brought home to the respondent the knowledge that it was unseaworthy, and that has not been shewn, I do not think that refusal of insurance for other reasons than unseaworthiness, for instance, because barges in general are not considered by insurers as desirable risks (a fact which the appellant
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company must have known), was something which under the policy in question should have been disclosed to the insurer under pain of forfeiture of the right to claim the insurance.
On the question whether The Baramba came within the description of the policy, this was a fact which could have been ascertained by the appellant before it paid the insurance. I am therefore not impressed by the contention that it was not a "scow" within the meaning of the policy.
I would not disturb the judgment appealed from.
Appeal dismissed with costs.
Solicitors for the appellant: Davis & Company.
Solicitors for the respondent: Bowser, Reid, Wallbridge, Douglas & Gibson.
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