Supreme Court of Canada
Commerce & Industry Insurance Co. et al. v. West End Investment Co., [1977] 2 S.C.R. 1036
Date: 1976-06-29
Commerce & Industry Insurance Co. et al. (Defendants) Appellants;
and
West End Investment Company (Plaintiff) Respondent.
1976: December 11; 1976: June 29.
Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Insurance—Fire—Tenant—Insurable interest—Contractual liability to insure thing—Statutory condition 10a of policy—Meaning of “owned”—Insurance Act, R.S.Q. 1964, c. 295, s. 240—Civil Code, art. 2571.
Respondent sold the hotel in question and the purchaser leased the building to a person who was acting for a company which was duly incorporated. In the lease the tenant undertook to insure the leased building. The broker whose offer was accepted obtained the policies, not directly from appellants but through the intermediary of two other authorized agents, and the indemnity was stipulated as being payable to the purchaser and the seller in accordance with their interests, subordinately to the hypothecary clause. After a fire in the hotel appellants were condemned to pay the indemnity to respondent and the decision of the Court of Appeal affirmed this judgment. Hence the appeal to this Court.
Held: The appeal should be dismissed.
Per Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson and Beetz JJ.: The first ground raised by appellants to the effect that the party insured never had an insurable interest is untenable in the circumstances. Nobody denies this interest where the tenant has agreed to insure the building leased.
Appellants maintained that the insurance contracts never existed in law, since the company was not the true owner of the building and did not specify the nature of its interest in the building. This second ground is unacceptable. Article 2571 C.C. is not a provision of public order. The existence of an insurable interest on the part of the insured is a condition of the contract’s validity, and not a matter of form. Whatever concerns the form of the policy is not of public order. Nothing in the Code precludes an insurer from choosing not to require the mention of the nature of the insured’s interest in a fire insurance policy. The forms used do not provide for a
[Page 1037]
description of the insured’s interest. The insured did not guarantee that its interest was that of an owner. Appellants did not claim to have suffered prejudice. They did not even allege that they would not have made the contract if they had known that the insured was only a tenant. The insured’s interest is apparent. It consisted in fulfilling the obligation assumed and in not being exposed, should a fire occur, to the risk of a claim by the owner’s insurers.
All that is necessary to satisfy statutory condition 10(a) of the policy is that the insured have an insurable interest. The interest of the insured is not a circumstance that he is obliged to declare when not required. Without having a real right, the owner does nevertheless have possession within the meaning of the word “possédée” in the French text of condition 10(a), which is equivalent to the word “owned” in the English. This possession makes him liable for any loss and it was proper for him to seek to protect himself from this contingency by obtaining insurance for the benefit of the owner. The situation is different from that of a figurehead who has no insurable interest.
Per de Grandpré J.: Article 2571 C.C. imposes on the insured the obligation of revealing the nature of his interest, and in the case at bar the insurers did not relieve the insured of this obligation. However, even though prima facie this obligation exists when the insured is the owner, this conclusion must be rejected owing to the natural presumption in favour of the right of ownership when a person asks an insurer to issue a contract of insurance, especially when, as in the case at bar, the hypothecary clause attached to the policies identified the seller and the purchaser as hypothecary creditors.
However, the rule established in art. 2571 C.C. seems to have been modified by the enactment of condition 10a. In enacting legislation which came from the common law, the Quebec legislator broadened the group of insured persons whose interest does not have to be specified in the policy at the risk of rendering the latter invalid. The word “owned” was translated by the word “possédée”, which has a much broader meaning, as established by art. 2192 C.C.
[La Compagnie d’Assurance Stanstead and Sherbrooke v. Fabi, [1960] Que. Q.B. 601; Agnew-Surpass Shoe Stores Ltd. v. Cummer-Yonge Investments, [1976] 2 S.C.R. 221; Pantel v. Air Canada, [1975] 1 S.C.R. 472; Wandlyn Motels v. Commerce General Insurance Company, [1970] S.C.R. 992; Ritchie and Dobbie v. Stanstead and Sherbrooke Fire Insurance Company (1940), 7 I.L.R. 41; Keefer v. The Phoenix
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Insurance Co. of Hartford (1901), 31 S.C.R. 144, setting aside (1899), 26 O.A.R. 277; Caldwell v. Stadacona Fire (1883), 11 S.C.R. 212; North Empire Fire Insurance Co. v. Vermette, [1943] S.C.R. 189; Summers v. The Commercial Union Insurance Co. (1881), 6 S.C.R. 19; The Canadian Fire Insurance Co. v. Robinson (1901), 31 S.C.R. 488; Canadian Home Assurance Co. v. Gauthier, [1966] S.C.R. 305; Car & General Insurance Corporation Ltd v. Therrien, [1969] Que. Q.B. 144, referred to.]
Appeal from a decision of the Court of Appeal of Quebec affirming a judgment of the Superior Court. Appeal dismissed.
Robert Boyer, for the appellants.
Robert S. Litvack, for the respondent.
The judgment of Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson and Beetz JJ. was delivered by
PIGEON J.—This appeal is against a decision of the Court of Appeal of Quebec, which affirmed the judgment of the Superior Court condemning appelants to pay respondent (West End) the sum of $50,000, being the amount of insurance policies issued by them on a hotel which was destroyed by fire on October 16, 1967. At the hearing, leave to appeal was granted to those appellants for whom the amount in controversy did not exceed $10,000.
West End had sold the hotel to one Hector Charette on September 27, 1965, and was owed on the sale price a balance exceeding $50,000. On February 1, 1967, Charette leased the building to one Jean-Guy Brunet, acting for a company which was duly incorporated as Jeando Inc. In the lease the tenant undertook to insure the premises with an insurance company approved by the lessor. Brunet accepted the offer of a broker named Philippe Guénette to obtain the required insurance for him. The latter obtained the policies, not directly from appellants but through the intermediary of two other agents authorized to act on their behalf. The policies describe Jeando Inc. as the insured and an endorsement entitled [TRANSLATION] “Clause concerning mortgage creditors” reads as follows:
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[TRANSLATION] At the request of the insured, indemnity in the case of damage or loss under the terms of the present policy is payable to 1. Hector Charette; 2. West End Investment Co.; as their interests may appear…
In their plea to the action brought by West End, appellants raised two grounds of defence, as follows:
[TRANSLATION] 26. Jeando Inc., the party insured by the defendants, never had an insurable interest in the building which burnt down;
27. Even if Jeandon Inc. had an insurable interest in the building which burnt down, which is not admitted but expressly denied, the insurance contracts never existed in law since Jeando Inc. was not the true owner of the building, and, contrary to the provisions of statutory condition 10(a) of the fire insurance policy and to art. 2571 C.C., it did not specify the nature of its interest in the building.
The first ground is untenable in the circumstances. To reject it, as the courts of Quebec did, it is not necessary to decide whether, as I incline to believe despite many contrary opinions, a tenant ordinarily has an insurable interest under the law of Quebec. It will suffice to note that no one denies such interest when, as in the case at bar, the tenant has agreed to insure the building leased (La Compagnie d’Assurance Stanstead and Sherbrooke v. Fabi).
Concerning the second ground, reference should first be made to art. 2571 C.C., which reads as follows:
Art. 2571. The interest of an insurer against loss by fire may be that of an owner, or of a creditor, or any other interest appreciable in money in the thing insured; but the nature of the interest must be specified.
Is this provision of public order? I do not think so. Reference should be made to art. 2480 which is of more general scope and reads as follows:
Art. 2480. The contract of insurance is usually witnessed by an instrument called a policy of insurance.
The policy either declares the value of the thing insured and is then called a valued policy, or it contains no declaration of value, and is then called an open policy.
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Wager or gaming policies, in the object of which the insured has no insurable interest, are illegal.
The wording of the last paragraph, where wager or gaming policies are declared to be illegal, seems to imply that this provision is one of public order, from which there can be no derogation. There are therefore good reasons for maintaining that the existence of an insurable interest on the part of the insured is a condition of the contract’s validity, and not a matter of form.
On the other hand, the wording of the first paragraph implies that whatever concerns the form of the policy is not of public order. The statement that a contract of insurance is usually witnessed by a policy clearly implies that the contract may be concluded without being witnessed by any instrument. This is so well established that it seems unnecessary for me to cite anything in support of this statement. Thus, it is universally admitted that a contract of insurance is not a solemn contract, but rather a consensual contract, which means that it may be concluded in any form, even verbally.
Since it is not essential that a policy be issued, I do not see how one can logically consider that the provisions relating to the contents of this document are of public order. In saying this, I am referring only to the provisions contained in the Code. The character of the provisions contained in the Insurance Act (R.S.Q. c. 295) or in other statutes is to be determined from those legislations. I think it must be said, therefore, that since the contract of insurance is consensual, and since the issue of a policy is not a condition of its validity, nothing in the Code precludes an insurer from choosing not to require the mention of the nature of the insured’s interest in a fire insurance policy.
An examination of the printed forms on which the policies were drawn up shows nothing which requires the mention of the insured’s interest. The wording of the form implies that the first blank to be filled in requires only the name of the insured. Moreover, in the subscription policy which binds most of the appellants one finds only the following:
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| [TRANSLATION] |
|
| Name of Insured |
JEANDO INC. |
| Indemnity payable to |
1. HECTOR CHARETTE, |
| |
2. WEST END INVESTMENT CO. |
The policies issued by Canadian General Insurance Company and Aetna Insurance Company contain the following wording:
[TRANSLATION]
WHEREAS JEANDO INC.
(hereinafter referred to as the Insured) has paid or agreed to pay to the Insurer the aforementioned premium,…
Furthermore, the policies in question were issued, according to accepted practice, without the insurers requiring a written application from the insured. Thus, not only did they use policy forms which did not provide for a description of the insured’s interest, but in addition they did not give an opportunity to supply this information by requiring an application for insurance to be signed. Now however, after a loss has occurred, they take the stand that the insured having applied to a broker who later dealt with their authorized agents, it guaranteed that its interest was that of an owner.
In my opinion, nothing in art. 2571 allows such an interpretation. It is only provided that the insured’s interest must be specified, without distinguishing in any way between a case where the insured is an owner and one where he has another interest. Nothing supports appellants’ submission whereby the article is dealt with as if a distinction was made between the interest of an owner and any other interest. Nowhere is it said that the insured’s interest shall be presumed to be that of an owner unless otherwise specified, even less is it stated that the insured guarantees that his interest is that of an owner if no other interest is mentioned in the policy.
Article 2571 follows two provisions, arts. 2569 and 2570, which deal with the contents of a fire policy. It is only in the following article, that is art. 2572, that a provision may be found concerning the obligation of the insured to declare all relevant facts to the insurer. This article refers to the object of the insurance, not the interest of the insured:
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Art. 2572. It is an implied warranty on the part of the insured that his description of the object of the insurance shall be such as to show truly under what class of risk it falls according to the proposals and conditions of the policy.
A warranty is mentioned here, but the first statutory condition prescribed by s. 240 of the Insurance Act, which may be found in each of the policies, allows the insurer to plead the omission to declare a circumstance only if the latter is material, and if the company suffers prejudice thereby.
1. If any person insures his buildings or goods and causes the same to be described otherwise than as they really are, to the prejudice of the company, or misrepresents or omits to communicate any circumstance which is material to be made known to the company, in order to enable it to judge of the risk it undertakes, such insurance shall be of no force with respect to the property in regard to which the misrepresentation or omission is made; but when the application is made out by the company’s agent, such application shall be deemed to be the act of the company.
In the case at bar the appellants did not claim to have suffered prejudice and it is easy to understand why; their only ground of defence consists in maintaining that they are free of any liability for the sole reason that Hector Charette was described only as beneficiary of the indemnity. If he had been described as the insured along with Jeando Inc., appellants would have no case. How can they argue that a consensual contract is void for a formal defect without evidence of prejudice, especially when they have written it themselves? It seems clear to me that if the policies were worded as they were, this was because Jeando Inc. was obliged to pay the premium under a perfectly legal contract, and this shows that Guénette, the broker, knew it.
To give substance to their defence, the appellants should have shown that they believed Jeando Inc. to be the owner, and that if they had known it was only a tenant, they would not have made the contract. They did not even allege this, and it is consequently unnecessary to consider whether because, according to the findings of the trial judge, Brunet disclosed his legal position to a broker who denies this, and who claims not to have
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declared it to the authorized agents of the insurers, this ground of defence is available to the latter.
It may be asked what interest Jeando Inc. had in obtaining insurance the proceeds of which would necessarily go to the owner of the building, or rather to the mortgagee. This interest is apparent; it consisted not only in fulfilling the obligation assumed by the lease, but also in not being exposed, should a fire occur, to the risk of a claim by the owner’s insurers subrogated under art. 2584 C.C. (Cf. Agnew-Surpass Shoe Stores Ltd. v. Cummer-Yonge Investments).
I must now consider condition 10(a), which reads as follows:
10. The company is not liable for the losses following, that is to say:
(a) For the loss of property owned by any other person than the assured, unless the interest of the assured is stated in or upon the policy;
At first sight, this wording seems to provide a certain basis for appellants’ submissions. The wording can in fact be said to admit of the distinction which they seek to make under art. 2571 C.C. However, this is a case where the origin of the text must be taken into account. The statutory conditions for fire insurance were taken verbatim from an Ontario Statute dating from 1876 (39 Vict. c. 24) with all amendments thereto, when the Quebec legislature inserted identical provisions in the Insurance Act of 1909 (8 Ed. VII, c. 69). They were not rewritten to adapt them to the context of the Civil Code, as was done for art. 1056 (cf. Pantel v. Air Canada). They were copied from c. 203 of the Revised Statutes of Ontario, 1897 (s. 168) as they then stood and included in the Insurance Act without any coordination with the articles of the Civil Code, which were simply ignored. “Statutory condition” 10(a) of the Ontario Statute became statutory condition 10(a) in Quebec with no other change than the substitution of the word “person” for the word “party”. In these circumstances it is clear that the Legislature intended the enactment to have the same effect as the statute it had thus
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copied and translated, regardless of any inconvenience.
This Court recently dealt with the New Brunswick statutory condition corresponding to Quebec statutory condition 10(a). This condition, now numbered 2 in New Brunswick as in Ontario, reads as follows:
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.
This Court unanimously agreed that all that is necessary to satisfy this condition is that the insured have an insurable interest (Wandlyn Motels v. Commerce General Insurance Company. This decision is in agreement with the judgment of the Court of Appeal of Ontario rendered in 1940 in Ritchie and Dobbie v. Stanstead and Sherbrooke Fire Insurance Company, where Riddell J., speaking for the Court, said (at p. 42):
It was contended that as the insured was simply the tenant of the city, the insured property was the property, not of the insured, but of the city, and as this was not the property of the insured, and the fact was not “stated in the policy”, the companies were not liable.
This brought into consideration the meaning of the word “owned” in the condition.
We think that this is fully and conclusively settled by the decisions in our own and the English courts.
Stroud’s Judicial Dictionary, vol. 2, p. 1386, under the heading “owner” correctly states the law in England thus “The word ‘owner’ or ‘proprietor’ of a property is the person in whom (with his or her assent) it is for the time being beneficially vested and who has the occupation, or control, or usufruct of it: e.g. a lessee is during the term, the owner of the property demised.
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In Keefer v. The Phoenix Insurance Co. of Hartford, a case from Ontario, the building had not been leased but sold. By agreement with the purchaser, the vendor had insured the property for its full value and not just for the amount still owing. This Court allowed him to recover the full amount, contrary to what the Ontario Court of Appeal had held. Statutory condition 10(a) was not referred to, although Gwynne J. noted at the outset of his reasons (at p. 145) that the policy was in the statutory form prescribed by the act (at that time R.S.O. 1887, c. 167). It is perhaps not without interest to observe that in that case, the insurer did not know that the interest of the insured was that of a vendor who had not been fully paid, not that of an owner. Under the Nova Scotia Act, it had earlier been held in Caldwell v. Stadacona Fire, that the interest of the insured is not a circumstance that he is obliged to declare when not required.
To interpret the statutory condition as appellants contend would mean that, after loss or damage, insurance companies could without having to show any prejudice, evade their obligations whenever the insured’s interest is not that of an owner and has not been stated in the policy; and they make this argument on the basis of public order, whereas it is purely a matter of form in a consensual contract. For such an interpretation of the Act to prevail, the legislator’s intention of imposing this inequitable result would have to be abundantly clear, whereas it is apparent that the Legislature of Quebec, in adopting the statutory conditions established in the province of Ontario following an inquiry made in the interest of persons insured and for their protection, could have no other intention than that of securing the same benefits to persons insured in Quebec, not of imposing unjust conditions on them due to some differences between the principles of the civil law and those of the common law.
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Furthermore, it should be noted that the French version of condition 10(a) has the word “possédée” as the equivalent of the word “owned” in the English. This word in itself does not necessarily imply possession as owner. While it is true that a tenant’s possession is precarious and does not make him a possessor for the purpose of real actions such as a possessory action, the fact remains that, without being a real right, it is nevertheless possession of a kind. From the point of view of fire insurance, this possession has an important consequence. It makes the tenant legally liable for any loss occurring by fire in the premises leased, unless he can prove that the fire was not caused by his fault or that of persons for whom he is responsible (in 1965, art. 1629 C.C.). It is thus quite proper for him to seek to protect himself from this contingency by obtaining insurance for the benefit of the owner, instead of letting the latter take care of it, with the consequence that, in economic terms, he incurs the cost thereof without any benefit, on account of art. 2584.
There remains to consider what was said in North Empire Fire Insurance Co. v. Vermette, a case which appellants made the basis of their argument. It is important to emphasize that in that case, the insured was a figure-head, that is a person who held the insured assets on behalf of the true owner and had no right in them. It was held that this figure-head had no insurable interest, and this is in line with all the cases on that point. No one may contend that the same applies to a tenant who undertook to insure the thing, and did so for the benefit of the owner and the mortgagee. As has been seen, appellants abandoned this contention. Therefore, all they now quote from Vermette is what was there said concerning the meaning of the word “possédée” in statutory condition 10(a), interpreting it as if it were a clause in a marriage contract (at p. 192, referring to [1937] S.C.R. 288), without considering the origin of the provision. The Court of Appeal very properly rejected this interpretation, which should be considered an
[Page 1047]
obiter dictum, as well as what was said concerning art. 2571 C.C.
For these reasons I conclude that the appeal should be dismissed with costs.
DE GRANDPRÉ J.—This appeal raises the question of the validity of three insurance policies in the light of art. 2571 of the Civil Code and statutory condition 10(a) (Insurance Act, R.S.Q. 1964, c. 295).
These policies, for a total sum of $50,000, were issued in the spring of 1967 to Jeando Inc., the lessee of the insured hotel. The compensation in case of loss was made payable to (1) Hector Charette and (2) West End Investment, in accordance with their interests, subordinately to the hypothecary clause annexed to the policy. The following are the facts which preceded the issuance of these three insurance contracts:
(1) on September 27, 1965, West End sold Hector Charette the building in question, keeping a hypothec of over $50,000, which was still in existence at the time of the fire;
(2) on February 1, 1967, Charette rented the building to Jean-Guy Brunet, who was acting for “a company to be incorporated under the name of Jeando Inc.”, under a lease the only pertinent clause of which imposes on the lessee the obligation of insuring “the premises in question and their contents” for the duration of the lease, and paying the resulting premiums regularly;
(3) in March 1967 the letters patent creating Jeando Inc. were issued;
(4) in April 1967 Brunet entrusted an insurance broker, Philippe Guénette, with the task of obtaining the necessary insurance; Guénette did not communicate directly with appellants, but he was able to have the policies issued by contacting a certain Morin, a representative of appellants Aetna Insurance Company and Compagnie d’Assurance Canadienne Générale, and Canado-Britannia Insurance Brokers Ltd., representing the other insurers.
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On October 16, 1967, there occurred the fire which destroyed the building that had been insured, causing damage admitted by the parties to be over $50,000. After the fire the insurers learned that Jeando was only the lessee of the insured building, a fact which neither Morin nor Canado-Britannia knew. Relying on arts. 2474, 2480 and 2571 of the Civil Code as well as on statutory condition 10(a), the insurers maintained the policies were void and refused to pay the compensation claimed by respondent. The insurers stated
(a) that there was no insurable interest, or at the very least,
(b) that if an interest existed, it could only be a partial interest which had not been specified in the policies as required by the relevant legislation.
The Superior Court rejected the first argument. In my opinion it was justified in doing so, in view of the obligation accepted by the lessee of insuring the entire building and its contents for the term of the lease. The insurers were therefore right not to raise this point again in the Court of Appeal or in this Court. Legal theory and precedent rightly consider that a lessee who has assumed the obligation of obtaining insurance for the benefit of the lessor and other persons with an interest in the building has an insurable interest “in the thing insured”. The Court of Appeal mentions this in La Compagnie d’Assurance Stanstead and Sherbrooke v. Fabi, where Choquette J., speaking for the Court, writes at p. 604:
[TRANSLATION] We must also respect the contractual provision making insurance the responsibility of the lessee.
For reasons based on fundamental differences between civil and common law, as we shall see later, the lessee’s insurable interest is accepted in English law as a general principle.
It is therefore only the second argument, which was also rejected by the Quebec courts, which the parties have examined in this Court. Article 2571 C.C. reads as follows:
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The interest of an insurer against loss by fire may be that of an owner, or of a creditor, or any other interest appreciable in money in the thing insured; but the nature of the interest must be specified.
Appellants argued that since the interest of the insured party, the lessee of the building, could only be a partial interest, and since the nature of this interest was not specified in the policies, the policies are invalid.
There is no doubt in my mind that the text of art. 2571 C.C., read together with the other articles of the Code setting forth the obligations of the insured party, imposes on the latter the obligation of revealing the exact nature of his interest in the thing insured. This is merely a clarification of the rule contained in art. 2485 C.C., that “the insured is obliged to represent to the insurer fully and fairly every fact which shows the nature and extent of the risk”. This risk is a function of several factors, the identity of the owner and the relationship of the insured party to the object being certainly facets of the moral risk. This obligation exists, whether or not the insurer has asked any questions about the matter, when, as in the present case, the proposal is an oral one; if the proposal had been written, the situation might have been quite different, depending on the questions put to the proposer.
It cannot be concluded from the foregoing that the insurers had to prove the “materiality” of the fact that Jeando was not the owner of the insured hotel. It is true that in The North Empire Fire Insurance Company v. Vermette the insurer presented two testimonies in this connection. It has always seemed to me that proof of this nature is at least unnecessary, since the law itself has provided that the insured is obliged to reveal the nature of his interest, with the result that this statement automatically becomes “material”.
Respondent, for its part, replies that in the case at bar the insurers cannot raise this argument because they were aware of the facts, since these had been revealed to the broker Guénette, and the latter’s knowledge is, for all legal purposes, the
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knowledge of the insurers. I cannot accept this contention. The evidence indicates consistently that Guénette had no authority to bind the insurers and that in fact he did not represent any of them. Even if one maintains that Guénette was not the insured’s broker, the fact remains that neither was he an agent of the insurers capable of binding them through his knowledge of the facts. The policies are not his doing but that of Morin and Canado-Britannia, and Guénette stated in his testimony that his volume of business did not permit him to place $50,000 insurance directly on a hotel. Between the insured and the insurers there were two intermediaries, and in order for Guénette’s knowledge, if any, to bind the insurers, this knowledge should also have been that of Morin and Canado-Britannia, which was not the case. We must apply here the well-established rule of this Court in Summers v. The Commercial Union Assurance Company, The Canadian Fire Insurance Company v. Robinson and Canadian Home Assurance Company v. Gauthier, a rule which has been recognized on several occasions by the Court of Appeal of Quebec, in particular in Car and General Insurance Corporation Limited v. Therrien.
This situation was not changed by the fact that Morin and Guénette shared the commission. It should be noted that no evidence was introduced regarding dealings between Canado‑Britannia and Guénette. Even if the trial judge was correct in inferring that the situation was the same in both cases—an inference which does not seem to me to be justified—this situation does not allow one to conclude that there were two associations, between Guénette and Morin on the one hand and between Guénette and Canado-Britannia on the other hand, with the result that the knowledge of Guénette would be the knowledge of the other two. Moreover, the simple fact of splitting the commission does not prove anything other than that each of the intermediaries, recognizing that his role had been a partial one, wished the remuneration to be divided in accordance with the size of each per-
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son’s contribution. Distribution of the sum according to the participation of two persons in the result does not in itself make it possible to conclude, in insurance any more than in other commercial activities, that there is an association between them.
The insurers are therefore right in saying that art. 2571 C.C. imposes on the insured the obligation to reveal the nature of his interest, and that in the case at bar, they have not relieved Jeando of this obligation. However, even though prima facie art. 2571 C.C. imposes on the insured the obligation of revealing the nature of his interest even where he is the owner, this conclusion must be rejected owing to the natural presumption in favour of the right of ownership when a person asks an insurer to issue a contract of insurance. This is especially true in the case at bar since the hypothecary clause attached to the policies identified Charette and West End Investment as hypothecary creditors; the result is an even stronger prima facie presumption that the insured is the owner of the building mentioned in the policy (art. 2037 ff. C.C.).
However, the foregoing does not dispose of the appeal. The rule established in art. 2571 C.C. seems to me to have been modified by the enactment of condition 10(a) in 1908.
(10) La compagnie n’est pas responsable des pertes suivantes, savoir:
(a) De la perte d’une propriété possédée par toute autre personne que l’assuré, à moins que l’intérêt de l’assuré ne soit mentionné dans ou sur la police;
It must be remembered that the statutory conditions were borrowed almost word for word from the other provinces, in particular Ontario, with the result that the French text is but a translation of the English text, which reads as follows:
(10) The company is not liable for the losses following, that is to say:
(a) For the loss of property owned by any other person than the assured, unless the interest of the assured is stated in or upon the policy;
In my opinion the legislator, in adopting this text, changed the rule in art. 2571 and limited the obligation to reveal the nature of the interest only
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to those cases where the insured does not “own” the insured object. The concept of “propriété” in the Civil Code is much narrower than the concept of “ownership” in the common law. For the civil lawyer the lessee acquires only a personal right, a claim of enjoyment (Mignault, Le droit civil canadien, Vol. 7, p. 233), whereas in common law the lessee holds part of the property right—he has an “estate or interest in the land or premises demised” (Williams’ Canadian Law of Landlord and Tenant, 4th ed., 1973, p. 1). This is what has allowed the common law courts to maintain, as they always have, that “a lessee is during the term, the owner of the property demised” (Ritchie and Dobbie v. Stanstead and Sherbrooke Fire Insurance Company).
In enacting in this manner in 1908 legislation which came from the common law, the Quebec legislator broadened the group of insured persons whose interest does not have to be specified in the policy at the risk of rendering the latter invalid. This is clear from the French version, the word “owned” having been translated in such a way as to indicate that what is involved is clearly not the right of “propriété” in the civil law sense (art. 406 C.C.). On the contrary, the word “owned” was translated by the word “possédée”, which has a much broader meaning, as established by art. 2192 C.C.
This conclusion is obviously contrary to the opinion, expressed by this Court in Vermette supra, that statutory condition 10(a) refers to the owner in the civil law sense. With all due respect, I am of the opinion that this was an obiter dictum, the decision really being based on the fact that the insured had no insurable interest. Since this lack of interest had been recognized by the Court, the other points raised by the insurer lost their purpose. Moreover, a reading of the parties’ factums shows that they had not considered the result of this evolution in the legislation.
For these reasons I would uphold the judgment being appealed and dismiss the appeal with costs.
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Appeal dismissed with costs.
Solicitors for the appellants: Viau, Bélanger, Hébert, Mailloux, Beauregard, Paquet & Pinard, Montreal.
Solicitors for the respondent: Chais, Salomon, Gebber, Reis, Bronstein & Litvack, Montreal.
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