Quebec Workmen’s Compensation Commission v. Gagnon et al., [1981] 2 SCR 676

Supreme Court of Canada

Quebec Workmen’s Compensation Commission v. Gagnon et al., [1981] 2 S.C.R. 676

Date: 1981-12-17

Quebec Workmen’s Compensation Commission (Intervener-Appellant) Appellant;

and

Jean-Pierre Gagnon (Plaintiff-Respondent) Respondent;

and

Gérard Forget and Laurentian Motor Leasing Limited (Defendants-Respondents) Respondents.

1981: October 27; 1981: December 17.

Present: Dickson, Beetz, Estey, McIntyre and Chouinard JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Workmen’s compensation—Compensation—Election—Subrogation—Action by Commission to recover amounts paid—Necessary interest to intervene in action by victim—Prescription—Workmen’s Compensation Act, R.S.Q. 1964, c. 159, ss. 5, 7(1),(2),(3),(5), 8—Civil Code, art. 1056a—Code of civil procedure, art. 208.

As the result of an accident which occurred on December 9, 1974, respondent Gagnon, on May 16, 1975, made an election in accordance with s. 7 of the Workmen’s Compensation Act. On November 20, 1975, that is within the period of one year fixed by subs. 2 of art. 2262 C.C., he brought an action claiming $71,942.92 from respondents Forget and Laurentian Motor for the damage sustained in the accident. On June 22, 1976, appellant submitted a motion to intervene, which asked inter alia that respondents Forget and Laurentian Motor be held liable and ordered to pay it the sum of $10,077.13 in reimbursement of amounts it had paid or would have to pay respondent Gagnon.

The Superior Court dismissed the motion to intervene without giving reasons. The Court of Appeal affirmed the judgment on the ground that appellant’s action was prescribed.

Held: The appeal should be dismissed.

From the time the subrogation occurs, that is from the time the election is made, only the Commission can claim the amounts which it has paid or will have to pay, and the victim can claim from the perpetrator of the accident only the additional sum provided for in s. 8 of

[Page 677]

the Workmen’s Compensation Act. If, as in the case at bar, the victim claims for the entire amount, he does so without right, contrary to art. 1056a C.C. and s. 8. This does not have the effect of validly introducing into the proceeding the object of the Commission’s claim, so as to create in favour of the Commission the interest necessary to intervene or to constitute an interruption of the prescription to the latter’s benefit.

Commission des accidents du travail v. Lacroix et al., [1976] C.A. 490; Canadian Pacific Railway Co. v. Domingue; Choinière v. Canadian Pacific Railway Co., [1972] C.A. 316; Commission des accidents du travail de Québec v. Hamelin, C.A. Mtl., No. 500‑09‑000598‑789, May 29, 1979, referred to.

APPEAL from a judgment of the Court of Appeal of Quebec affirming a judgment of the Superior Court. Appeal dismissed.

Marcus Spivock, for the appellant.

Michel Garceau, for the respondents Forget and Laurentian Motor Leasing Limited.

English version of the judgment of the Court delivered by

CHOUINARD J.—This appeal concerns the prescription of the Quebec Workmen’s Compensation Commission’s right to recover the compensation which it paid the victim of an industrial accident.

As appellant proceeded by intervening in the action brought by the victim against the individuals whom he held responsible for the accident, the appeal also raises the question of whether appellant had the necessary interest within the meaning of art. 208 C.C.P. to make its intervention admissible. Article 208 C.C.P. reads as follows:

208. Any person interested in an action to which he is not a party, or whose presence is necessary to authorize, assist or represent a party who is incapable, may intervene therein at any time before judgment.

The Workmen’s Compensation Act, R.S.Q. 1964, c. 159, now the Workmen’s Compensation Act, c. A-3 of the Revised Statutes of Québec 1977, provides that the victim of an industrial accident caused by someone other than his employer, who is entitled to compensation under

[Page 678]

this Act, has a choice: he may claim such compensation or sue the perpetrator of the accident.

If the victim sues the perpetrator of the accident, and the sum obtained is less than the compensation to which he is entitled under the Workmen’s Compensation Act, he will receive compensation for the difference.

If however he opts for compensation under the Workmen’s Compensation Act, the Act reserves his right to sue the perpetrator of the accident for the additional sum required to constitute, with the compensation, an indemnity proportionate to the loss actually sustained.

The Quebec Workmen’s Compensation Commission, which has paid or will be required to pay compensation, is by the mere making of the election subrogated pleno jure in the workman’s rights and may, personally or in the name and stead of the workman, exercise any remedy available at law against the person responsible.

These provisions are contained in s. 7(1),(2) and (3) and s. 8:

7. (1) Where an accident happens to a workman in the course of his employment under such circumstances as entitle him or his dependants to an action against some person other than his employer, such workman or his dependants, if entitled to compensation under this act, may, at their election, claim such compensation or bring such action.

(2) If an action is brought and less is recovered and collected than the amount of the compensation to which the workman or his dependants are entitled under this act, such workman or his dependants shall receive compensation for the difference.

(3) If the workman or his dependants elect to claim compensation under this act, the employer, if he is individually liable to pay it, or the Commission, if the compensation is payable out of the accident fund, as the case may be, shall be subrogated pleno jure in the rights of the workman or his dependants and may, personally or in the name and stead of the workman or his dependants, institute legal action against the person responsible, and any sum so recovered by the Commission shall form part of the accident fund. The subrogation takes place by the mere making of the election and may be exercised to the full extent of the amount which the employer or the Commission may be called upon to pay

[Page 679]

as a result of the accident. Nevertheless, if as a result of this act, the employer or the Commission happen afterwards to be freed from the obligation of paying a part of the compensation so recovered, the sum not used shall be reimbursable within the month following the event which determines the cessation of the compensation.

…

8. Notwithstanding any provision to the contrary and notwithstanding the fact that compensation may have been obtained under the option contemplated by subsection 3 of section 7, the injured workman, his dependants or his representatives may, before the prescription enacted in the Civil Code is acquired, claim, under common law, from any person other than the employer of such injured workman any additional sum required to constitute, with the above-mentioned compensation, an indemnification proportionate to the loss actually sustained.

The accident which is at issue here occurred on December 9, 1974.

Respondent Gagnon made his election and claimed compensation under the Workmen’s Compensation Act on May 16, 1975.

On November 20, 1975 he brought an action claiming $71,942.92 from respondents Forget and Laurentian Motor Leasing Limited for the damage sustained in the accident. Respondent Gagnon’s action was brought within the prescription period of one year fixed by art. 2262(2) C.C., applicable in the case at bar.

On January 21, 1976, appellant sent respondent Forget a notice telling him of the election made by respondent Gagnon and of the subrogation of the Commission in the latter’s rights and remedies.

On June 22, 1976, and so over a year after the accident, appellant submitted a motion to intervene, which asked inter alia that the Court order defendants to pay him the sum of $10,077.13, as a consequence of the payment made or to be made to the plaintiff.

By a judgment dated July 16, 1976, the Superior Court dismissed the motion to receive without giving reasons.

This judgment was unanimously affirmed by a decision of the Court of Appeal on May 1, 1979, on the ground that appellant’s action was prescribed. However, Montgomery J.A. also relied on

[Page 680]

the absence of any interest, referring to the decision of the Court of Appeal in Commission des accidents du travail v. Lacroix et al.[1] in which an intervention by the Workmen’s Compensation Commission was dismissed on the ground of an absence of interest.

To my knowledge, the decision a quo is one of four in which the Court of Appeal was called on to rule directly on the points at issue.

In Canadian Pacific Railway Co. v. Domingue; Choinière v. Canadian Pacific Railway Co.[2], the employer, pleading the subrogation of s. 7 of the Workmen s Compensation Act, claimed from the perpetrator of the accident the sum which it had had to pay the victim’s widow. The accident occurred on October 9, 1963 and the action was served on October 16, 1964. It was a direct action by the employer against the perpetrator of the accident, and not an intervention in an action between the victim or his heirs and the perpetrator of the accident. The action was held to be prescribed. The employer argued, inter alia, that the prescription did not begin to run until the compensation was paid, or until the widow made her election. These two arguments were rejected and the date applied was that of the accident.

In Commission des accidents du travail v. Lacroix et al., cited above, the victim, after alleging that she had received compensation from the Workmen’s Compensation Commission, claimed an additional amount from the perpetrators of the accident, in accordance with s. 8 of the Workmen’s Compensation Act. Intervention by the Workmen’s Compensation Commission was denied on the ground that it did not have an interest in the action as brought.

In Commission des accidents du travail de Québec v. Hamelin, an unpublished decision, dated May 29, 1979, No. 500-09-000598-789 of the Court of Appeal for Montreal, there had been an accident on July 18, 1975. The Workmen’s Compensation Commission sent the perpetrator of the accident a notice of subrogation on October 1, 1975. By his action served on December 1, 1975

[Page 681]

the victim claimed $49,000 from the perpetrator of the accident. The statement of claim contained no allegation that plaintiff had received compensation from the Workmen’s Compensation Commission and that his claim applied only to the additional amount mentioned in s. 8 of the Workmen’s Compensation Act. The intervention by the Workmen’s Compensation Commission was served on January 17, 1978 and was dismissed as prescribed. This decision was based on the decision of the Court of Appeal in the case at bar.

It can be seen that in Canadian Pacific Railway, the direct action was dismissed as prescribed and it was held that the prescription began to run from the date of the accident; in Lacroix, where the victim claimed from the perpetrator of the accident only the additional amount mentioned in s. 8 of the Workmen’s Compensation Act, the motion of the Commission to intervene was dismissed because the Commission had no interest in the proceeding as brought; and in Hamelin, in which the victim did not indicate whether he was claiming all the damage sustained or only the additional amount mentioned by s. 8 of the Workmen’s Compensation Act, the motion of the Commission to intervene was dismissed as prescribed.

In the case at bar, respondent Gagnon claimed all the damage sustained in the accident without mentioning the compensation received or to be received from the Workmen’s Compensation Commission. Appellant proceeded by intervention and respondents Forget and Laurentian Motor Leasing Limited pleaded both the absence of any interest in intervening and prescription of the Commission’s claim. This Court must therefore consider both arguments.

In reality, however, the fate of the two arguments depends on the solution to one question, namely whether after the subrogation pursuant to s. 7 of the Workmen’s Compensation Act, the subrogating party can bring an action against the debtor for rights belonging to the subrogated party.

If this is possible, when as in the case at bar the victim is claiming all the damages he sustained,

[Page 682]

these damages include those to which the subrogated party is entitled, and the latter has an interest within the meaning of art. 208 C.C.P. in the proceeding to which he is not a party, since the object of the action which he can bring is included in the object of the victim’s action. Similarly, interruption of the prescription in the victim’s favour will benefit the subrogated party.

If this is not possible, however, the subrogated party will not have the necessary interest, as the object of his action will be unrelated to the proceeding instituted by the victim, and he will also not be able to benefit from interruption of the prescription as a result of the action brought by the victim.

In brief, therefore, the question is as to the effect of the subrogation enacted by subs. (3) of s.7.

Baudry-Lacantinerie and Barde, Traité théorique et pratique de droit civil, vol. 13, Des obligations II, 3rd. ed., 1907, No. 1516, define subrogation as:

[TRANSLATION] … the legal substitution of one person for another so that the first can exercise, for his benefit, all or part of the rights belonging to the second.

Jean-Louis Baudoin in his Traité élémentaire de droit civil, Les obligations, 1970, at No. 513, defines subrogation as follows:

[TRANSLATION] Subrogation is the legal procedure by which the solvens is legally or contractually given by the creditor the claim of the latter, with all its incidents.

It will be seen that the subrogated party can exercise the rights acquired from the subrogating party, and that in the event that the subrogation is only for part of the rights of the subrogating party, the latter retains his claim for the rights kept by him.

It does not follow that in the latter case there are two rights or two causes of action. Only one cause of action exists, namely, in the case at bar, the accident and the resulting damage. As Tremblay C.J. observed in Canadian Pacific Railway, cited above, at p. 320: [TRANSLATION] “… Canadian Pacific is exercising the widow’s claim.”

[Page 683]

In the case of a partial subrogation, there are two persons who have a claim, each for his own share.

In her “Etude de la subrogation de la Commission des accidents du travail”, (1979) 39 R. du B. 183, Louise Poudrier-LeBel writes, at p. 220:

[TRANSLATION] … the claim is divided between the victim and the W.C.C., since the victim is to be compensated by means of a sum of money, which is an essentially divisible obligation (Art. 1121 C.C.). When this claim lies with the victim alone, it must be exercised as if it were indivisible, but when a part of it is transferred to the W.C.C. it becomes divisible.

From the date of the subrogation the Workmen’s Compensation Commission can claim the share of the victim’s damages which it has paid or will have to pay. The victim, for his part, can claim the additional sum required to constitute with the compensation an indemnity proportionate to the loss actually sustained.

A victim who has opted for compensation cannot claim anything but this additional amount. He can only bring the actions provided for in arts. 1053 et seq. of the Civil Code to the extent that he is enabled to do so by the Workmen’s Compensation Act, and in this case it is the only remedy he is given by s. 8 of that Act. This is the rule stated in art. 1056a of the Code:

1056a. No recourse provided for under the provisions of this chapter shall lie, in the case of an accident contemplated by the Workmen’s Compensation Act, 1931, except to the extent permitted by such act.

I therefore concur with Montgomery J.A. when, referring to Lacroix, cited above, he writes:

I see no reason to distinguish the present case on the ground that the Plaintiff Gagnon may, without any colour of right, have included in his claim items of damages in which the Commission was subrogated.

I also concur with Paré J.A. when he observes:

[TRANSLATION] If the victim of the accident takes on himself the right to sue the perpetrator of the damage (except in a case where the Commission itself is suing in the name of the victim) for the entire amount of the injury, without deducting what he has received from the

[Page 684]

Q.W.C.C., the defendant can successfully raise the election made under s. 7 of the Act, and have the amount of the order reduced accordingly, to the surplus provided for by s. 8. There is no legal connection between the victim and the perpetrator of the accident with regard to this portion of the claim, which s. 8 of the Act does not assign to the victim.

Similarly, Nadeau in Traité de Droit civil du Québec, vol. 8, No. 338, at p. 305, expresses the view that a court having before it the action of the victim for additional compensation must [TRANSLATION] “take into account the amount awarded by the Commission and deduct it from the amount which it proposes to award”.

I conclude from the foregoing that appellant does not have the interest necessary to intervene and that its intervention cannot be received. As Bélanger J.A. wrote in Lacroix at p. 491:

[TRANSLATION] … in intervening to assert its right to reimbursement for the compensation paid, appellant did not intervene seeking recognition that it has a right on which the issue was joined in the principal action.

Additionally, while the prescription was interrupted as to respondent Gagnon with regard to his claim under s. 8 of the Workmen’s Compensation Act, it was not interrupted with regard to the claim of appellant, which is not properly included in the object of respondent Gagnon’s claim.

In her study cited above Louise Poudrier-LeBel wrote at p. 220:

[TRANSLATION] We feel that the W.C.C. should not benefit from the interruption of prescription resulting from the victim’s action, regardless of whether the latter claimed the difference or the entire amount of the damage. In the latter case, we think the victim who has been compensated by the W.C.C. has no further right to reimbursement of this amount and has no authorization to act on behalf of the W.C.C.

Appellant further submitted that the subrogation could only take effect from the time the compensation was paid by the Workmen’s Compensation Commission. This contention, which was dismissed in the aforementioned Canadian Pacific Railway case, also appears to me to be without

[Page 685]

basis in light of such a clear provision as subs. (3) of s. 7 of the Workmen’s Compensation Act, which states that “the subrogation takes place by the mere making of the election … ”, and I do not think any further comment is necessary.

The fact that under the same subs. (3) the Commission can exercise its remedy personally or “in the name and stead of the workman” has no bearing on the matter, because it did not in fact proceed in this manner. Appellant indeed acknowledged this, and in any case the intervention itself indicates that it was not already a party to the case. Otherwise, there would have been no reason for it to intervene.

It remains to consider whether the time at which the Commission gives the perpetrator of the damage notice of the subrogation in its favour can affect the outcome of the case. As I mentioned earlier, in Hamelin cited above a notice of subrogation was served on the perpetrator of the damage on October 1, 1975, that is before the victim brought an action on December 1. In that case, leave to appeal to this Court was denied[3] on the same day on which it was granted in the case at bar.

Notice was given in the case at bar on January 21, 1976, after respondent Gagnon’s action was brought on November 20, 1975.

In this connection appellant referred the Court to subs. 5 of s. 7 of the Workmen’s Compensation Act, which reads as follows:

(5) The election as between the above recourses shall be made and notice of it shall be given in the manner provided by section 5.

However, it is only necessary to read s. 5, referred to in subs. (5), to see that it has nothing to do with a notice by the Commission to the perpetrator of the damage stating that it has been subrogated in the rights of the victim. Rather, mention is made of a notice which the victim must give, where applicable, to the Commission of his election between the law in force in the place in

[Page 686]

which the accident occurred and the law of Quebec. Subparagraph (1) of s. 5 read at the time in question:

5. (1) Where by the law in force in the place in which the accident happens, the workman or his dependants are entitled to compensation and are also entitled to compensation under this act, they shall be bound to elect between the said law and that of Québec and to give notice of such election. If such election is not made and notice given, it shall be presumed that they have elected not to claim compensation under this act.

In fact, no notice is required from the Commission under the Workmen’s Compensation Act, any more than in general in cases of subrogation generally notice is required from the subrogated party to the debtor.

It goes without saying that, in order to exercise the rights acquired against the debtor, the subrogated party must disclose the subrogation to him. In Jurisprudence générale Dalloz, Codes annotés, Nouveau Code civil, vol. III, 1903-1905, under art. 1249 of the Code Napoléon, we find at p. 120, Nos. 26 and 27:

[TRANSLATION] 26. It follows from the differences dealt with above, No. 17, that with regard to form, first, the forms of subrogation are applicable to assignment, and second, the service required by art. 1690 also does not apply to subrogation.

27. However, in order to prevent the debtor being validly released by paying the former creditor, the subrogated party must inform him in some way, even by a private writing, of the payment made with subrogation.

Similarly, under our Civil Code no notice is required for subrogation to take effect. In this subrogation differs from the assignment of a debt, in which service is required if it is to have effect against third parties, according to art. 1571 C.C.:

1571. The buyer has no possession available against third persons, until signification of the act of sale has been made, and a copy of it delivered to the debtor. He may, however, be put in possession by the acceptance of the transfer by the debtor, subject to the special provisions contained in article 2127.

There is no similar provision regarding subrogation.

In my opinion, no notice is required as regards the subrogation of the Workmen’s Compensation

[Page 687]

Commission in the rights of a victim whom it has compensated, under subs. (3) of s. 7. Accordingly, the fact that no notice has been given or that notice was given before or after the victim brought his action in no way alters the situation. From the time the subrogation occurs, that is from the time the election is made, only the Commission can claim the amounts which it has paid or will have to pay. The victim can claim from the perpetrator of the accident only the additional sum provided for in s. 8. If he claims for the entire amount, he does so without right, contrary to art. 1056a C.C. and s. 8 of the Workmen’s Compensation Act. This does not have the effect of validly introducing into the proceeding the object of the Commission’s claim, so as to create in favour of the Commission the interest necessary to intervene or to constitute an interruption of the prescription to the latter’s benefit.

For these reasons, I would’ dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Boissonneault, Roy & Poulin, Montreal.

Solicitors for respondents Forget and Laurentian Motor Leasing Limited: Pagé, Duchesne, Desmarais & Picard, Montreal.