[ Cite as; Sun Alliance Insurance Company v. Judgment Recovery (N.S.) Ltd., 1990 NSCA 94 l I IN THE SUPREME COURT OF I APPEAL Macdonald, Chipman and Freeman, JJ.A. I . I BETWEEN: I SUN ALLIANCE INSURANCE COMPANY Appellant I - and - I JUDGMENT RECOVERY (N.S.) LIMITED Respondent ~ I I I I THE COURT: The appeal is dismissed with costs to the respondent I as per reasons for Macdonald and Freeman, JJ.A., concurring. I l [ยท S.C.A. No. 02317 NOVA SCOTIA DIVISION ) ) ) S. R. Morse ) for the Appellant ) ) ) ) ) R. Jackson ) for the Respondent ) ) C. D. Bryson ) for Raymond Steel ) ) ) ) Appeal Heard: ) November 29, 1990 ) ) Judgment Delivered: ) December 11, 1990 judgment of Chipman, J.A.;
[ t [ CHIPMAN, J.A. This is an appeal from a decision of Mr. I in Chambers whereby he held, respondent, that the appellant had an obligation under ' of automobi 1 e insurance to indernni fy claimants in four actions I arising out of a motor vehicle collision. The coll is ion occurred June I 101 near Springfield Lake, Halifax County. Cheryl Ann Llewellyn with three passengers was in collision with I a vehicle driven by Ovila Neault. occupants of the vehicles were ki 11 ed. I brought by or on behalf of the estates of the deceased occupants ~ of the Llewellyn vehicle against Dianne Judith Neault, executrix of the estate of Ovila Neault. I The respondent's application was pursuant to s. the Motor Vehicle Act, R.S.N.S. I material provides: I "216 ( 1) Where (a) an application Judgment Recovery I payment of a claim for loss or damages occasioned by or operation, ownership, maintenance or use I of a motor vehicle, originating notice has been issued or a judgment has been entered; I (b) it appears or is alleged that an insurer may policy of automobile l the meaning of Part VI Act to respond to the claim; and I ' Justice Nunn upon the application of the a policy 25, 1988, on Highway No. A vehicle driven by As a result, all of the The four actions were 216 of 1989, c. 293 which as far as is made to (N.S.) Ltd. for arising out of the whether or not an be obligated under a insurance within of the Insurance
- 2 - (c) the insurer denies that it is so obligated, Judgment Recovery (N.S.) Ltd. shall within a reasonable period of time but not to exceed sixty days from the date of such application make an ex parte application to the Trial Division of the Supreme Court or a judge of a county court to set a date for a hearing to determine whether the insurer has such an obligation." It must be kept in mind that the obligation to respond is always subject to defences against claims outside of the basic coverage. s. 133(11) of the Insurance Act. On the application before Mr. Justice Nunn, the parties filed an agreed statement of facts as follows: "l. A motor vehicle accident occurred on June 25, 1988, at or near Springfield Lake, Halifax County, Nova Scotia, that involved a 1988 Audi that was driven by Ovila Neault and owned by Auto World Leasing Ltd., in the complete write-off vehicle and the death of Ovila Neault. 2. At the time Neault' s driver's 1 icense because of previous convictions for refusal of breathalyzer. 3. That from October Ovila Neault was the Vice President Atlantic Region for Raymond responsible for the operation of its Atlantic Region office in Dartmouth, Nova Scotia. 4. That from October 1985 to June 1988 Ovila Neault was also the principal owner of three local companies that he operated whose names were Double (0) Holdings Ltd., and Tri-Sec Reinforcing Steel Ltd. I J J I a judge of l J which the insurer may advance ] See s. 133(10) and ] J ,J resulting ] of the motor of the accident Mr. ] had been revoked ] 1985 to June 1988 Steel Ltd. and was l l and Sons Ltd., Slim l J I l
[ l - 3 [ 5. In September arranged for the lease of was sold by Carriage Lane Fine Cars Ltd. I MacPhee Pontiac Leasing, which in turn leased the motor vehicle to Slim Holdings Ltd. vehicle was added to the existing insurance policy that had been issued to Slim Holdin9s [ Ltd. by Sun Alliance through the agency Insurance Services. I contained a permission endorsement, SEF No. Holdings Ltd. I 6. In August or September 1987, the name of the lessee in the changed from Slim Holdings I Reinforcing Steel Ltd. at the request of Mr. Neault. I 7. In May 1988 Ovila Neault arranged for the 1 ease of a 1988 Audi Carriage Lane Fine Cars Leasing Ltd., which in turn leased the motor ~ vehicle to Raymond Steel Limited pursuant to a motor vehicle lease agreement dated May 17, 1988, between Auto World I owner and Raymond Steel Ltd., as lessee. Neault signed the 1 ease agreement of Raymond Steel Ltd. signed the lease agreement on behalf of Auto I World Leasing Limited. 8. Upon application I Insurance Company issued an insurance policy insuring the 1988 Reinforcing Steel Ltd., I vehicle, bearing policy having a policy period from May May 17, 1989. The policy contained a 5 permission to lease or rent endorsement, in I favour of Tri-Sec Reinforcing Steel Ltd., as lessee. I 9. At time of application for insurance on the 1988 Audi Ovila disclose that his driver's license had been revoked as a result of prior motor l convictions. The lessee of the vehicle was reported as Tri-Sec Reinforcing Steel Ltd. I I - 1986, Ovila Neault a 1986 Audi which to The Insurance Company of Sherwood General The existing policy to rent or lease 5 in favour of Slim insurance policy was Ltd. to Tri-Sec that was so-1 d by Ltd. to Auto World Leasing Ltd. , as Mr. on behalf Mr. Malcolm MacNei 1 Sun Alliance Audi, naming Tri-Sec as lessee of the number 1096153, 17, 1988 to SEF No. Neault did not vehi c 1 e
- 4 - 10. A cheque dated written on the bank Reinforcing Steel Ltd., $1,889.00 payable to Auto World Leasing Ltd., which included the first Auto World Leasing for the 1988 Audi." In addition, five witnesses testified and the discovery evidence of Malcolm MacNeil was admitted by consent. Mr. Justice Nunn found that Tri-Sec was the true lessee of the Audi from Autoworld, that the latter through MacNeil, fully aware of that fact, and that the name of Raymond Steel as lessee was a name of convenience only, as much for Autoworld as for Neault. He therefore rejected the appellant's that the policy was void ab initio. the Audi and Tri-Sec was the lessee whom the appellant agreed to indemnify to the same extent as Neault, as an opera tor with Tri-Sec' s insured under the policy entitled to the same indemnity as the owner, the named insured. In each of the four actions, the only defendant named was the estate of Neault, so that a finding that Neault was insured under the policy was important in determining whether the insurer had an obligation to respond. Nunn suggested that the owner and lessee shotild be joined in the actions. Mr. Justice Nunn further misrepresentations in the application respecting Neault's license and convictions were not relevant since they could not be set up against claimants by reason of s. J J May 13, 1988 was account of Tri-Sec , in the amount of l lease payment to I ] l was l J submission Autoworld was the owner of J the owner. It foll owed that consent, was an unnamed ] ] Mr. Justice l l held that the alleged J 133 ( 5) of tbe Jnsui::.a11ce Act, J J I
[ l - 5 -I R.S.N.S. 1989, c. 231. Thus the appellant had an obligation to respond to the claims. I . The appellant advances three principal submissions: (1) Mr. Justice Nunn was wrong in finding that Tri- [ Sec was the true lessee. I ( 2) The misrepresentation as to the identity of the lessee was as basic to the coverage in the policy as a I misrepresentation as to the ownership of the insured vehicle. The policy was, therefore, void ab initio, being it was said, the I stillborn product of a fraudulent sham. I (3) If the real lessee was Raymond Steel, the lessee named in the policy (Tri-Sec) was not in a position to give to ~ Neault consent to operate the vehicle. Without the consent of the lessee Neault was not an unnamed insured under the terms of I the policy. The policy contained a permission to lease endorsement, I S.E.F. No. 5, which provided in part: I "The Insurer agrees to indemnify, in the same manner and to the same extent as if named herein as the Insured, the Lessee and every I other person who with the Lessee's consent personally drives the automobile ... " In my opinion, it is not necessary to decide whether or I not Mr. Justice Nunn was right in determining that Tri-Sec was I the true lessee under the policy. I have concluded that any misrepresentation as to the identity of the 1 essee was not so l basic to the coverage as to entitle the appellant to treat the policy as void. [
- Section 133(5) of the respect to the position of a third party claimant against the proceeds of a motor vehicle liability policy: "133 ( 5) It is not a under this Section that an instrument issued as a motor vehicle person engaged in the business of an insurer, and alleged by a party to the action to be such a policy, is liability policy, and this Section applies, mutatis mutandis, to the instrument." This provision and its equivalent in other provinces was enacted presumably to overcome the result of the decision in Bourgeois et al. v. Prudential Assurance Company Limited (1946), 1 D.L.R. 139, which was that an action brought by a third party against an insurer could be defeated if the policy was issued on the basis of misrepresentation note in the report of the case in the Dominion Law Report reads: "This is a decision of great importance. has been fairly generally assumed that an insurer issues a motor vehicle liability policy no misrepresentation in respect to its issue would affect rights ... " As Hallett, J. pointed out in 1_~~..r~-~-~~ v. -al. (1977), 28 N.S.R. (2d) 167, this section and its counterparts in other provinces have received a restrictive interpretation in a 1 ine of cases commencing with Transport et al. v. London a~d Midland Gen~s_~_l_-1.!?,~uran~~_g_~~P~~y (1971), 19 D.L.R. (3d) 643 where concluded that while the legislation had the effect of overcoming the results of such decisions as ~_()ll_l_~_i:: v. ]3_1,l_ยง~~!J __~ t ___ ~_L_, I 6 ,.. J Insurance Act provides with l J defence to an action liability policy by a l not a motor vehicle l l ] J by the insured. The editorial ,J It l when ] an injured persons' l P o w e l - 1 - e --t l the decision in ~Jl:!_t~t_~~-of l the Ontario Court of Appeal l [1940] J 3 I
[ - 7 l 1 D.L.R. 97 and Bourgeois et al. v. Prudential Assurance C9~~~ I 1Jmited, supra, it did not take away from an insurer the defence E that what was issued to the insured was not an "owner's policy" where the insured did not in fact own the vehicle. ' in such cases, no pol icy came into existence. Hallett, J. points out on p. 175, the rationale for this is that I the policy, being void ab ini ti o, I meaning of that word as used ins. 133(5). section has been interpreted I vagueness and possibly the assumption or the presumption that had the 1egis1 ature intended to take I insurer it woufd have done so in where the ownership of the vehicle has been misrepresented, ~ real owner and people operating I cannot be said to have been consent of the named insured as that person, not being an owner, I is not in a position to give or withhold consent. On these two grounds, it has been consistently held in I this province that s. 133 ( 5) does not prevent the insurer I escaping 1iabi1 i ty in such cases ~<?JJ_e v . 9 U: v er ( 197 4 ) , 8 N . S . R . I ~_l~, sup~_~; _Si~_bi_I!_? v. ltl:_~j._I]._S_ _ ~_t_ __ _g._L_ M_~cN_e!il_ v. Ca_!!l~J;"O~ (1988), 86 I other provinces go the other way. t Burche 11 , J. reviewed thoroughly the Canada. I concur with his conclusion E interpretation of s. 133(5) should govern. As a result, Presumably, as was never "issued" within the Further, he said, the restrictively because of its away a1 l the defences of an c 1 earer 1 anguage. Moreover, the with such owner's permission operating the vehicle with the f ram of misrepresented ownership; (2d) Powell et (1982), 53 N.S.R. (2d) 599; N.S.R. (2d) 44. Cases in some two 1 in es of authority in that the restrictive
- 8 - Filed as an exhibit before expert report of one J. R. Millier, Superintendent of Automobile and Personal Lines of Prudential Halifax. His opinion was to the effect that a change in the name of the lessee alone would not effect the premium, acceptance of the risk or policy conditions automobi 1 e insurance issued to lease endorsement. The appel 1 ant's underwriter policy agreed that the premium was based not on the identity of the lessee but on the individuals insured vehicle. I have given consideration difference if the identity of the lessee is found to be material to the risk. Materiality should consideration in determining whether the principle of Oliver, supra, applies. The basis of that principle does not lie in materiality, but in 1 ack of identity of owner. Indeed, in many cases owner might not be at al 1 material, many cases falling within the provisions misrepresentation of a very material nature. Thus, I have considered that in the case of an owner's policy with permission to lease endorsement, the identity of the coverage in the same way as is the identity of the owner of the vehicle. In this case the I J Mr. Justice Nunn was an J Insurance Company Limited at J l in the case of a policy of J an owner with a permission to who issued the l who would be driving the J whether it makes any l ~J not, in my opinion, be a Wal f e v. ] the insured as an l the misrepresen ta ti on as to the ] whereas on the other hand of s. 133(5) involve ] l under the S.E.F. No. 5 J 1 essee is not basic to the owner named in the policy J J I
[ l - 9 - [ Autoworld is in fact the owner of the vehicle. I think it I would be undesirable to interpret s. 133 ( 5) even more restrictively by extending the reasoning in Wolfe v. 01 i ver, I supra, to apply to the identity of the lessee as contended for by I the appellant. The appellant has issued the policy to the owner and misrepresentation as to the lessee, even if material, is E certainly no more material than other misrepresentations such as accidents and convictions. The case law makes clear that these I are excluded by virtue of s. 133(5) from affording a defence to I the insurer to a claim by third party claimanta. The misrepresentations with respect to Neault's driving record, which ~ยท cannot be successfully relied on, are certainly more material than misrepresentation as to the lessee. If fraud was involved I in connection with such latter misrepresentation, it was probably I done more for the purpose of deceiving the bank which financed the loan for Autoworld and Neault's employers than for the I purpose of deceiving the insurer. I The 1 ast point is whether Neault is a person insured under the policy. In my view, whether the lessee is Tri-Sec or I Raymond Steel, the result is the same. The pol icy on its face I insures Autoworld, and apart altogether from S.E.F. No. 5, by virtue of s. 114(1) of the Insurance A~t: t c [
- 10 -"114(1) Every contract owner's policy insures therein, and every other person who with his consent personally drives an automobile owned by the insured named within the description or definition thereof in the contract, against liability imposed by law upon the insured named in the contract or that other person for loss or damage (a) arising from use or operation automobile; and (b) resulting from to or the death of any person, and damage to property." Endorsement S.E.F. No. reduce the scope of this coverage. the class of insured persons the lessee and those who operate the vehicle with the lessee's consent. There can be no question but that Autoworld consented to the operation of the Audi atยท al 1 material Neault and his wife were named in the application as the persons who would be operators. Autoworld, taken to have consented to the operation of the vehicle by Neault and his wife, if not by virtue application as operators then consent of the party taking possession of the vehicle as lessee whether it be Raymond Steel or Tri-Sec. I J evidenced by an J the person named I in the contract and l the ownership, I of any such ] bodily injury l 5 cannot and does not purport to l It enlarges it by adding to ,j l ] times by Neault. l through MacNeil, must be l of their being named in the ] as persons operating with the ] J I I
I l - 11 -I.n the result, therefore, I would dismiss the appeal ' with costs to the respondent. There should be no costs in favour I of Raymond Steel whose counsel participated briefly in this appeal. I I {Ht 4-J.A. I Concurred in: I Macdonald, J.A. !VA / / I Freeman, J.A. ~ I I I I I I t [ [
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