Supreme Court of Canada
Wandlyn Motels Limited et al. v. Commerce General
Insurance Co. et al., [1970] S.C.R. 992
Date: 1970-06-26
Wandlyn Motels
Limited and Charles H. Llewellyn (Plaintiffs) Appellants;
and
Commerce General
Insurance Company et al. (Defendants) Respondents;
and
W. Hedley Wilson
Limited (Defendant) Respondent.
1969: November 10, 12; 1970: June 26.
Present: Cartwright C.J. and Judson,
Ritchie, Hall and Spence JJ.
ON APPEAL FROM THE SUPREME COURT OF NEW
BRUNSWICK, APPEAL DIVISION
Insurance—Subscription policy of fire
insurance covering company s motels—Agency agreeing to extend coverage to new
motel built by company’s principal shareholder—Motel destroyed by fire—Whether
insurers bound—Estoppel—Named insured having no insurable interest except in
part of contents—Plea of rectification.
[Page 993]
In 1963 W Ltd., an insurance agency, arranged
to have a subscription policy issued to insure against fire loss all of the
then properties of W Motels Ltd., a company in which L was the principal shareholder.
W Motels Ltd. was the named insured and W Ltd. was shown in the policy as
agent. W Ltd. continued in many ways to act as agent, and the only agent,
dealing with W Motels Ltd. or with L.
Two years later L commenced to build a new
motel at Woodstock, New Brunswick. A builder’s risk policy was obtained and the
insured named therein were L and/or W Motels Ltd. On March 29, 1966, L and an
agent for W Ltd. agreed that the builder’s risk policy would be replaced by the
addition of the new motel to the general subscription policy. The following day
the motel and its contents were completely destroyed by fire.
The appellants, W Motels Ltd. and L, brought
an action claiming $74,510 against the respondent insurance companies, and in
the alternative if the appellants were found not to be insured by the
respondent insurance companies under the subscription policy the appellants
claimed the same amount against W Ltd. on the ground of wrongful warranty of
authority to issue coverage in that amount and on the ground of the company’s
negligence in failing to perform what the appellants alleged was its duty owing
to the appellants of providing the coverage agreed upon and in falsely
informing the appellants that the agreed coverage was in effect.
The trial judge allowed the claim against the
defendant insurance companies and dismissed the action against W Ltd. On appeal
to the Appeal Division, that Court allowed the appeal and dismissed the
cross-appeal of the plaintiffs against W Ltd. In this Court, the appellants
appealed both against the dismissal of the action against the insurance
companies by the Appeal Division and the alternative claim against W Ltd. which
had been dismissed both at trial and in the Appeal Division.
Held (Spence
J. dissenting in part): The appeal as against the insurance companies should be
allowed and judgment entered against each of them for its proportionate share
of the sum of $21,810; the appeal as against the insurance agency should be
dismissed.
Per Cartwright
C.J. and Judson, Ritchie and Hall JJ.: The actions of W Ltd. had the effect of
binding the respondent insurance companies as in-
[Page 994]
surers of the building, contents and rentals
at Woodstock. W Motels Ltd. had no insurable interest in the property except in
that part of the contents owned by it and valued at $21,810. The insurers were
liable for their proportionate share of this amount. A case had not been made
out for rectification by adding L as an insured.
The finding that W Ltd. did bind the
insurance companies disposed of the claim based on breach of warranty of
authority. The claim based on negligence failed.
Per Spence J.,
dissenting in part: There was at the least a representation by estoppel
and probably even an implied representation that W Ltd. had authority to add
the additional risk in the insuring of the Woodstock motel.
W Motels Ltd. did not have an insurable
interest in the new motel, and, therefore, on the policy, as it was written, W
Motels Ltd. could not recover. However, the plea for rectification of the
policy should be acceded to. The amendment of the subscription policy by the
addition of an endorsement covering the Woodstock motel should have covered the
exact agreement between L and the agent of W Ltd., and if it was necessary to
replace the builder’s risk policy by a policy which named L as an insured
person then the endorsement should have added L’s name as an insured and the
endorsement should be rectified in order to carry out that intent.
Accordingly, the appeal as against the
insurers should be allowed in full.
APPEAL from a judgment of the Supreme Court
of New Brunswick, Appeal Division,
allowing an appeal from a judgment of Pichette J. Appeal allowed in part,
Spence J. dissenting in part.
D.M. Gillis, Q.C., for the plaintiffs,
appellants.
J. Edward Murphy, Q.C., and E. Neil
McKelvey, Q.C., for the defendants, respondents, Commerce General Insurance Co.
et al.
H.A. Hanson, Q.C., and D.T. Hashey, for
the defendant, respondent, W. Hedley Wilson Ltd.
[Page 995]
The judgment of Cartwright C.J., Judson, Ritchie
and Hall JJ. was delivered by
CARTWRIGHT C.J.—The relevant facts and the
course of the proceedings in the Courts below are set out in the reasons of my
brother Spence which I have had the advantage of reading.
For the reasons given by my brother Spence I
agree with his conclusion that the actions of the respondent W. Hedley Wilson
Limited had the effect of binding the respondent insurance companies as
insurers of the building, contents and rentals at Woodstock under subscription
policy No. N.B. 3973. From this it follows that the respondent insurers were prima
facie bound to indemnify Wandlyn Motels Ltd. for their proportionate share
of the $250,000, the $50,000 and the $35,000 covering the above items. I agree,
however, with my brother Spence that Wandlyn Motels Ltd. had no insurable
interest in the property insured except in part of the contents.
I am unable to agree that a case has been made
out for rectification by adding the appellant Llewellyn as an insured under
policy N.B. 3973. To permit this rectification it would be necessary to find
that an agreement to add Llewellyn as an insured was arrived at between him and
David Wilson at their meeting on the morning of March 29, 1966, and that there
was a common mistake in recording this agreement. I can find no sufficient
evidence of this. Whatever Llewellyn may have intended the bargain to be, I
think it clear that Wilson understood that what was required of him was simply
to add the items of property mentioned above to the list of properties covered
by the subscription policy; this was what he agreed to do and this was what he
accomplished by his memorandum of March 29, 1966, addressed to the Provincial
Insurance Agency which is quoted in the reasons of my brother Spence.
It follows that Wandlyn Motels Ltd. was the only
insured under the policy and, under the terms of statutory condition 2, quoted
by my brother Spence, has no enforceable claim for the loss of the building or
of that part of the contents owned by Llewellyn.
[Page 996]
It appears from the report of the adjusters
employed by the insurers that part of the contents, consisting of items 13 to
23 inclusive set out in that report, exhibit P. 12, belonged to Wandlyn Motels
Ltd. These items total $21,810. The respondent insurance companies are liable to
Wandlyn Motels Ltd. for their proportionate share of this amount. It was agreed
that if the respondent insurers were liable for their proportionate share of
the whole loss their liability in respect of the contents would be as to the
Commerce General Insurance Co. $3,750 and as to each of the other five
companies $1,500. The total loss being $50,000, it would seem therefore that
each would be liable for 2181/5000 of the amounts mentioned. If the parties
cannot agree upon the correct figure I would direct a reference to the proper
officer of the Supreme Court of New Brunswick to ascertain it.
Turning to the claim of the appellants against
W. Hedley Wilson Ltd., the finding that it did bind the respondent insurance
companies disposes of the claim based on breach of warranty of authority. As to
the claim based on negligence, I agree with the conclusion of Bridges C.J.N.B.
that negligence was not established and I am content to adopt his reasons on
this branch of the matter.
I would dismiss the appeal as against W. Hedley
Wilson Ltd. I would allow the appeal as against the six respondent insurance
companies and direct that judgment be entered against each of them for its
proportionate share of the sum of $21,810, the amount for which each is liable
to be referred for determination to the proper officer of the Supreme Court of
New Brunswick if the parties are unable to agree upon it. I would direct that
the appellants recover one set of costs of the trial and of the appeal to this
Court from the respondent insurers, that the respondent insurers recover one
set of costs in the Appeal Division from the appellants and that W. Hedley
Wilson Ltd. recover its costs throughout from the appellants.
[Page 997]
SPENCE J. (dissenting in part)—This is an
appeal from the judgment of the Appeal Division of the Supreme Court of New
Brunswick
pronounced on November 27, 1968. By that judgment, the Appeal Division allowed
an appeal from the judgment of Pichette J. pronounced on October 7, 1967. In
the latter judgment, the learned trial judge had allowed the plaintiffs’
(appellants’ in this Court) claim against six defendant insurance companies
(respondents in this Court) and dismissed the action against the defendant W.
Hedley Wilson Limited (respondent in this Court).
Charles H. Llewellyn was a contractor and
builder building private homes, apartment houses, schools and other types of
buildings. During the 1950’s, he began to build motels in New Brunswick. These
motels were known as the Wandlyn Motels and up to 1963 he had insured them
through various insurance agencies. The motels in each case seem to have been
built by Mr. Llewellyn and thereafter the title in them transferred to the
Wandlyn Motels Ltd. In one case, the owner of the land and buildings became the
Kennedy Rentals Limited, but this circumstance was only discovered after the
events with which this action is concerned.
Wandlyn Motels Ltd. was a corporation in which
Charles H. Llewellyn owned all but two qualifying shares which were in the name
of an accountant and another employee.
In the year 1963, Mr. Llewellyn found that
the operation of his motel business and the management of the insurance
policies on the various parts of that business were most laborious when the
policies were handled through a large number of agents. He therefore conferred
with Mr. W. Hedley Wilson, an insurance agent in the City of Fredericton
and the president of W. Hedley Wilson Ltd. Mr. Wilson suggested that
instead of having a variety of policies and a variety of companies managed by
various agents, there should be one policy of the type known as a subscription
policy in which many companies carried different stated proportions of the risk
so that the one policy would cover the whole enter-
[Page 998]
prise. Mr. Wilson himself did not write
such policies so he went with Mr. Llewellyn to the office of the
Provincial Insurance Agency (1961) Ltd., in Saint John, a general insurance
agency with which Mr. Wilson had done a considerable amount of business.
There they conferred with Mr. Hill, the manager. It was
Mr. Llewellyn’s insistence that this new type of insurance coverage should
not deprive the agencies with which he had dealt previously of the benefit from
premiums which the Wandlyn Motels would be called upon to pay. It was
Mr. Hill’s opinion that such a result could be attained by having the
various policies cancelled and having the agents with whom Mr. Llewellyn
had been dealing previously cause their companies to become subscribing members
on the new subscription policy. He therefore consulted those agents, chiefly
two in number, F.E. Daniels & Sons Limited and Angus-Miller Limited. On
these two agencies consenting, the old policies were all cancelled and a new
subscription policy known as No. N.B. 3973 was issued under date of September 10,
1963, for a term of thirty-six months. The sum insured by this policy was
$1,140,000 and the premium payable under the policy was $13,362. The policy
covered the motels and their out buildings and adjuncts situated at three
different places: firstly, at Lincoln, New Brunswick; secondly, at
Frederic-ton, New Brunswick; thirdly, at Magnetic Hill, Westmorland County, New
Brunswick. The named insured was “Wandlyn Motels Limited, Fredericton, N.B.”.
On the first page of the policy, in the upper left-hand corner are typed the
words:
Agency W.
HEDLEY WILSON LTD.
Fredericton, N.B.
From that time on, W. Hedley Wilson Ltd.
continued to operate this insurance policy; by that I mean that that company
was the only one who conferred with or consulted Mr. Llewellyn or any officer
of Wandlyn Motels Ltd. and the only one who took instructions from either of
those persons. There were many dealings with the insurance on the various motel
properties. Some additional motels were added; the amount of insurance was
altered; there were mortgage endorsements added; in short, the usual dealings
with insurance
[Page 999]
in an enterprise of considerable size. As I have
said, all of these were made by Wandlyn Motels Ltd., almost invariably acting
through Mr. Llewellyn, and W. Hedley Wilson Limited, acting either through
Mr. Hedley Wilson or through his son, Mr. David Wilson.
It is true that many of the endorsements were
prepared not by Mr. Wilson or his agency but by the Provincial Insurance
Agency (1961) Ltd. and that Mr. Hill in the latter agency submitted to
Angus-Miller or to F.E. Daniels & Sons Ltd. the proposed endorsements for
their approval; but so far as Mr. Wilson was concerned he knew nothing of
this nor did Mr. Llewellyn.
Premiums on the policy were collected by W.
Hedley Wilson Ltd. and that agency then divided the premium in accordance with
the proportion of the risk taken by the various companies on the schedule and
forwarded the cheques for the proportionate amounts of the premiums directly to
those agencies, i.e., to Provincial Insurance Agency (1961) Ltd.,
F.E. Daniels & Sons Ltd., and Angus-Miller Ltd.
In September 1965, Charles H. Llewellyn
commenced to build another new large motel at Woodstock, New Brunswick. He
obtained the interim financing therefor from the Bank of Montreal and he
arranged a mortgage with the Central Trust Company of Canada upon which
advances were to be made so soon as the building had been completed. The
application for this mortgage, which was in the amount of $175,000, was made to
the Central Trust Company of Canada through its local agent in Fredericton
which was W. Hedley Wilson Ltd. The land upon which the motel near Woodstock
was built had been purchased under an agreement for sale from Frank Wallace and
his wife to Oakland Realty, a company name which Charles H. Llewellyn used. In
September 1965, Llewellyn Construction, which is a trade name under which
Charles H. Llewellyn carried on business, started work on the motel at the
Woodstock site. On October 29, 1965, there was obtained through the agency of
W. Hedley Wilson Ltd. what is known as a “builder’s risk policy”. This policy,
also a subscription policy, was numbered N.B. 13109 and eleven companies were
subscribers thereto. None
[Page 1000]
of these eleven companies is amongst the
respondents on this appeal. That policy was originally in the amount of
$250,000 but it was subsequently reduced by Llewellyn to $150,000. The insured
named therein are: Charles Llewellyn and/or Wandlyn Motels Ltd.
In March 1966, when the motel at Woodstock, New
Brunswick, was well-nigh completed, the Central Trust Company of Canada was
ready to advance on the mortgage which it had granted to Mr. Llewellyn.
Since the mortgage was in the sum of $175,000 and the builder’s risk policy was
only in the amount of $150,000, Central Trust Company of Canada requested
Mr. Llewellyn to increase his insurance to at least the amount of the
mortgage. Early on the morning of March 29, 1966, Mr. Llewellyn telephoned
to the office of W. Hedley Wilson Ltd. and there spoke to Mr. David Wilson;
Mr. Hedley Wilson himself was out of town. Mr. Llewellyn stated that
he desired an appointment immediately to consider the insurance and
Mr. David Wilson agreed to meet him at 10.15 a.m. in Mr. Llewellyn’s
office. There the two men discussed the increase of the insurance and it was
agreed that the builder’s risk policy would be replaced by the addition of the
new motel at Woodstock to the general subscription policy. It was agreed that
the amount of the additional insurance attributable to the building at
Woodstock should be $250,000 on the building, $50,000 on the contents, and
$35,000 to cover loss of rentals in case of a claim under the policy. I stress
the intent of the two men at this time and I quote Mr. David Wilson’s
evidence:
Q. And this coverage was to supercede [sic]
and replace coverage that was previously on your builder’s risk, and that was
agreed?
A. That was agreed.
The matter having been settled, Mr. David
Wilson was about to leave Mr. Llewellyn’s office when he, Wilson, paused
and asked when the coverage would take effect. Mr. Llewellyn replied, “As
of right now”. Mr. Wilson swore that at that point he looked at his watch,
noted the time as being 10.55 a.m., and stated: “You can consider
[Page 1001]
it is bound as of now”. Mr. Wilson then
returned to his own office and forwarded to the Provincial Insurance Agency
immediately by mail a letter produced at trial in which he stated:
MESSAGE
Effective today, add the Woodstock 51 unit
motel to the Wendlyn policy in the following amounts.
|
Bldg.
|
$250,000
|
|
The
loss
payable is
Central Trust
|
|
Contents &/ or Equipment
|
50,000
|
|
|
Rental
|
35,000
|
|
|
PP & O
|
100,000
|
incl.
|
|
Money & Sec.
|
3,500
|
inside
|
|
(Broad Form)
|
3,500
|
outside
|
|
Neon Signs
|
3,000
|
|
The Board has the rate and we would
appreciate endorsement by April 20, 1966.
At 4.00 a.m. the next day, March 30, 1966, a
fire commenced which completely destroyed the motel at Woodstock, New
Brunswick. On Provincial Insurance Agency notifying Angus-Miller Ltd. and F.E.
Daniels & Sons Ltd., these two agents denied liability on behalf of their
principals, the six respondent companies, and this action was commenced. It is
agreed by all parties that the proportion of the loss which will have to be
paid by the respondent insurance companies, if they are liable under the
policy, will be $74,510, and that amount of damages is admitted by all the
respondents.
The appellants, Wandlyn Motels Ltd. and Charles
H. Llewellyn, claim for that amount against the respondent insurance companies,
and in the alternative if the appellants were found not to be insured by the
respondent insurance companies under policy No. N.B. 3973 the appellants claim
the same amount against W. Hedley Wilson Ltd. on the ground of wrongful
warranty of authority to issue coverage in that amount and on the ground of the
company’s negligence in failing to perform what the appellants allege was its
duty owing to the appellants of providing the coverage agreed upon and in
falsely informing the appellants that the agreed coverage was in effect.
[Page 1002]
At trial, Pichette J. allowed the claim against
the defendant insurance companies with costs and dismissed the action against
W. Hedley Wilson Ltd. with costs but allowed the plaintiff to add the costs
paid to the defendant W. Hedley Wilson Ltd. to those which were due from the
defendant insurance companies.
On appeal to the Appeal Division, that Court
allowed the appeal and dismissed the cross‑appeal of the plaintiffs
against W. Hedley Wilson Ltd.
In this Court, the appellants appealed both
against the dismissal of the action against the insurance companies by the
Appeal Division and the alternative claim against W. Hedley Wilson Ltd. which
had been dismissed both at trial and in the Appeal Division.
The respondents’ reply to the claim of the
appellants in all Courts may be summarized very briefly. It is two-fold:
firstly, that W. Hedley Wilson Ltd. had neither expressed nor implied power to
bind them on the policy and that neither appellant can prove any agency by
estoppel; and, secondly, that even if such agency, expressed, implied or by
estoppel, could be proved by the appellants, the named insured was Wandlyn
Motels Ltd. and that insured, not being the owner of the property covered by
the policy, had no insurable interest.
I turn to consider the first defence, namely,
that W. Hedley Wilson Ltd. had no power to bind the six defendant companies
(respondents in this Court). Certainly, prior to the arrangements which gave
rise to the execution of policy N.B. 3973, W. Hedley Wilson Ltd. did not act as
either general or local agent for any of the six companies nor for either
Angus-Miller Ltd. or F.E. Daniels & Sons Ltd., the general agents of one or
the other of those companies. However, when that policy was executed, the
execution took place after a conference between Mr. Llewellyn, Mr. W.
Hedley Wilson and Mr. Hill, when Mr. Llewellyn had expressed the
desire that these agents should continue to have the benefit of a proportion of
the premiums from the new subscription policy which was to replace the many old
policies. Mr. Hill did consult the officers of those two agencies, i.e.,
F.E. Daniels & Sons Ltd.
[Page 1003]
and Angus-Miller Ltd., and did obtain their
agreement for the cancellation of the old policies and for the issuance of a
new subscription policy placing their clients, the respondent insurance
companies, on the risk, and F.E. Daniels & Sons Ltd. and Angus-Miller both
executed the new policy N.B. 3973 for their clients the respondent companies.
That new policy, as I have pointed out, was issued showing W. Hedley Wilson
Ltd., Fredericton, New Brunswick, as being the agent. That was the policy which
these two agents, on behalf of their companies, authorized W. Hedley Wilson
Ltd. to deliver to the assured Wandlyn Motels Ltd. Thereafter, as I have
pointed out, in many ways W. Hedley Wilson Ltd. acted as the agent, and the
only agent, dealing with Mr. Llewellyn or with Wandlyn Motels Ltd. It is
true that only as to two rather inconsequential endorsements W. Hedley Wilson
Ltd. alone prepared and executed the endorsements and that in other cases the
endorsements were executed by Provincial Insurance Agency (1961) Ltd., F.E.
Daniels & Sons Ltd. and Angus-Miller Ltd. In my view, that is not
indicative of any requirement that the latter three agencies were required to
execute such endorsements and that only their execution made the endorsements
binding. On the other hand, one could not imply that as to the two small
endorsements the various insurance companies including the six respondent
companies were not bound. They never took any such positions. It is more
probable that in the case of an endorsement of a serious nature such as the
addition of new risks the three general agents felt it proper to execute the
endorsement in order to indicate to their client companies that they were
giving the matter their personal consideration and decision.
Under these circumstances, there was certainly
no express agency granted to W. Hedley Wilson Ltd.; however, were it necessary
to so hold, I would find that the agency had been implied in the conduct of the
parties and certainly there is a representation of that agency to the insured
Wandlyn Motels Ltd. Wandlyn Motels Ltd. had acted on that representation and
has altered its position relying on that representation. Therefore, I am ready
to conclude that there was at the least a representation by estoppel and
probably
[Page 1004]
even an implied representation that W. Hedley
Wilson Ltd. did have the authority to add the additional risk involved in this
litigation, that is, the risk entailed in the insuring of the new motel at
Woodstock, New Brunswick. I am of the opinion that this conclusion is in
accordance with the test as outlined by Kerwin J., as he then was, in World
Marine & General Insurance Co. Ltd. v. Leger, and in so far as agency by estoppel
is concerned, the situation meets the test outlined in Bowstead on Agency, 12th
ed., p. 10.
In my view, the defence that the named insured
had no insurable interest is a much more serious hurdle for the appellants. The
named insured in policy N.B. 3973 is “Wandlyn Motels Ltd., Fredericton, N.B.”
Statutory condition 2 of the policy reads:
2. Unless otherwise specifically stated in
the contract, the insurer is not liable for loss or damage to property owned by
any person other than the insured, unless the interest of the insured therein
is stated in the contract.
As I have said, at the time of the action of W.
Hedley Wilson Ltd. to cause to be added to policy N.B. 3973 the risk as to the
motel at Woodstock, the land on which the motel had been constructed was owned
by the appellant Llewellyn solely. The mortgagee was the Central Trust Company
of Canada. It was certainly intended that the title to the property should be
transferred by Llewellyn to his company Wandlyn Motels Ltd. but no such transfer
had yet been carried out and there was no agreement in writing providing for
such transfer. It was said in the evidence that the directors of Wandlyn Motels
Ltd. had passed a resolution that a motel should be built in Woodstock, New
Brunswick. As I have said, with the exception of two qualifying shares held by
employees, Charles H. Llewellyn was the only shareholder in Wandlyn Motels Ltd.
According to the adjuster’s report, Wandlyn
Motels. Ltd. were the owners of equipment and
[Page 1005]
chattels in the motel to the amount of $21,810.
As mentioned earlier, Wandlyn Motels Ltd. did not own the building and did not
own the other contents. The appellants argued that this ownership of the shares
in Wandlyn Motels Ltd. by Llewellyn and the ownership by Wandlyn Motels Ltd. of
the contents to the extent which I have outlined gave Wandlyn Motels Ltd. an
insurable interest in the whole of the property purported to be insured. The
appellants cite, inter alia, Keefer v. Phoenix Insurance Co. of Hartford. In that case, however, an unpaid
vendor who, by agreement with the purchaser, had insured the property which was
sold, was held to be entitled to recover the full value of the loss although
his own interest as an unpaid vendor was limited to part of that value. In that
case, the unpaid vendor had an interest in the whole property, although that
interest was a proportionate one. In the present case, Wandlyn Motels Ltd. had
a legal interest, at any rate, only in the equipment and no legal interest in
the building or the lands upon which it stood.
The Chief Justice of New Brunswick, in giving
reasons in the Court of Appeal in the present case, cited Welford &
Otter Barry’s Fire Insurance, 4th ed., 1948, at pp. 22-3 as follows:
Where the assured is the owner of such object,
possessing the whole legal property in it, he has undoubtedly an insurable
interest in it, and a part owner is in the same position. An insurable interest
is not, however, confined to the interest arising from ownership; it includes
every kind of interest that may subsist in or be dependent upon an object
exposed to danger from fire. It need not, therefore, be a legal interest, an
equitable or beneficial interest of any kind being equally insurable. It must,
nevertheless, be more than a mere expectation, however probable.
I am ready to accept the statement made by that
learned author.
In so far as the shareholding situation of
Wandlyn Motels is concerned, it should be noted that this is not an attempt by
a shareholder who was named as an insured in a policy to recover on a loss
which occurred to a property owned by
[Page 1006]
a corporation of which he was the main
shareholder. Such was the situation in Macaura v. Northern Assurance Co. Rather, it is an attempt by a
corporation to recover on a policy in which it was the named insured and which
purported to cover property that was not owned by the corporation. I am of the
opinion, however, that the principle has been well established that
shareholding does not give an insurable interest and I think it equally
established that a corporation has not an insurable interest in property owned
by its principal or even its sole shareholder. It was the intention of both
Mr. Llewellyn and of the Wandlyn Motels Ltd. that the property should be
transferred to Wandlyn Motels Ltd. but, as I have said, the latter had not even
an equitable interest at the time of the policy nor at the time of the fire.
Therefore, I think it must be concluded that the Wandlyn Motels Ltd. had not an
insurable interest in the motel which was destroyed in this fire, and,
therefore, on the policy, as it was written, Wandlyn Motels Ltd. cannot
recover.
Paragraph 7 of the statement of claim of the
plaintiffs, however, reads:
On the 29th day of March, 1966, the
defendant, W. Hedley Wilson Limited through its agent David J. Wilson did cause
a binder notice to be forwarded by mail to Provincial Insurance Agency, Saint
John, New Brunswick, advising of the addition of the Woodstock motel building
and property to Subscription Policy N.B. 3973. If the said Subscription Policy
N.B. 3973 was not actually amended to provide coverage for the plaintiffs for
the Woodstock motel building and property, the plaintiffs claim rectification
of the said policy to give effect to the said agreement and undertaking made by
the defendant W. Hedley Wilson Limited, the agent of the defendant insurance
companies, thereby adding the Woodstock motel building and property as an
additional location and also adding Charles H. Llewellyn as a named insured.
The learned trial judge, in his reasons for
judgment, said:
I must accordingly find that the plaintiffs
had an insurable interest in the property at Woodstock, N.B. and the said
policy should be rectified to give
[Page 1007]
effect to the intention of the parties and
to include Charles Llewellyn as a named insured in the said policy.
The learned justices of the Appeal Division
found it unnecessary to deal with rectification as they had come to the
conclusion that W. Hedley Wilson Ltd. had no power to bind the respondent
companies. I have, however, come to the opposite conclusion, therefore, I must
consider the plaintiffs’ plea for rectification. It is appropriate to refer
again to the circumstances under which this purported addition of the Woodstock
motel was made to the subscription policy N.B. 3973. As I have already pointed
out, there existed on that Woodstock motel a builder’s risk policy in which the
named insured were Charles H. Llewellyn and/or Wandlyn Motels Ltd. On March 29,
1966, it was the agreement between Mr. Llewellyn and Mr. David Wilson
that the builder’s risk policy which had been numbered N.B. 13109 should be
cancelled and should be replaced by the addition of the loss on the newly
constructed building to the subscription policy, N.B. 3973. Both
Mr. Llewellyn and Mr. David Wilson thought that result had been
attained when they parted on March 29, 1966, and Mr. David Wilson
immediately forwarded his letter to the Provincial Insurance Agencies Ltd. to
this effect. It would seem, therefore, that the amendment of the policy N.B.
3973 by the addition of an endorsement covering the Woodstock motel should have
covered the exact agreement between the two men, and if it was necessary to
replace the builder’s risk policy by a policy which named Mr. Llewellyn as
an insured person then the endorsement should have added Mr. Llewellyn’s
name as an insured and the endorsement should be rectified in order to carry
out that intent. Rectification of an insurance policy is a well established
step in the administration of justice. In F.J. Laverty’s work, The Insurance
Law of Canada, 2nd ed., 1936, at p. 50, the learned author says:
It is well established that policies of
insurance, like other instruments, will be reformed by equity, so as to conform
to the intention of the parties, in cases of mutual mistake…
Rectification may take place even after a loss
on any claim: Harley v. Canada Life Assurance Co.,
[Page 1008]
and rectification as to the identity of the
assured person may take place: Hough v. Guardian Fire and Life Assurance Co.
Ltd.. In
the latter case, the rectification was also made after the loss had been
sustained.
Laverty, in his statement, continues:
Where reformation is sought after loss the
Court will give judgment, if plaintiff succeeds, for the amount of the policy,
where the equity and law jurisdictions are merged, rather than go through the
useless form of rectifying the policy.
Counsel for the respondent companies submits
that one cannot rectify a non-existing document and that the endorsement as
requested by Mr. Wilson, in his letter to the Provincial Insurance Agency
on March 29, 1966, never was executed. The answer, of course, is once
Mr. Wilson agreed that the coverage had been granted, as he did so in his
words to Mr. Llewellyn, then the insurance was in effect and a document
may be presumed although it did not physically exist, and it is this document
which may be rectified.
For these reasons, I would accede to the
appellants’ plea for rectification of the policy and would direct that the
endorsement to cover the Woodstock, New Brunswick, motel loss be amended to
show as an insured Charles H. Llewellyn.
I would, therefore, allow the appeal with costs
and would restore the judgment at trial giving to the appellants judgment
against the various respondent companies in the amounts set out in the notice
to admit facts dated May 9, 1967, and which was agreed to by all parties at
trial, totalling $74,510.10, together with one set of costs. In view of this
conclusion, I need not consider further the alternative claim by the appellants
against W. Hedley Wilson Ltd. except as it relates to the matter of costs.
At trial, Pichette J. dismissed the claim
against W. Hedley Wilson Ltd. with costs but permitted the plaintiffs to add
such costs as they might pay
[Page 1009]
to that defendant to the costs which they could
claim against the defendant insurance companies. By the judgment of the Appeal
Division, the action was dismissed as against all defendants with costs
throughout. Although the action as against W. Hedley Wilson Ltd. must be
dismissed, I am of the opinion that this dismissal should be without costs in
any of the proceedings. It must be remembered that W. Hedley Wilson Ltd. had
full knowledge of the circumstances that Charles H. Llewellyn was the owner of
the premises and not Wandlyn Motels Ltd. and, indeed, had not only issued the
builder’s risk policy naming Mr. Llewellyn but had applied, on his behalf,
for a mortgage from the Central Trust Company. If this was not in the mind of
Mr. David Wilson personally when he purported to add an endorsement to the
subscription policy to cover the Woodstock motel property naming as an insured
Wandlyn Motels Ltd. only then it should have been. The knowledge was in his
firm. I am of the opinion that had the appellants not succeeded against the
respondent insurance companies they could well have succeeded as against W.
Hedley Wilson Ltd. and therefore the dismissal of the action as against that
respondent should be without costs throughout.
Appeal allowed in part with costs,
Spence J. dissenting in part.
Solicitors for the plaintiffs,
appellants: Cochrane, Stevenson, Sargeant & Nicholson, Fredericton.
Solicitors for the defendants,
respondents, Commerce General Insurance Co. et al.: Murphy, Murphy &
Mollins, Moncton.
Solicitors for the defendant, respondent,
W. Hedley Wilson Ltd.: Hanson, Gilbert & Hashey, Fredericton.
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