SUPREME COURT OF CANADA
Citation: Marche v. Halifax Insurance Co., [2005] 1 S.C.R. 47, 2005 SCC 6 |
Date: 20050224 Docket: 29754 |
Between:
Theresa Marche and Gary Fitzgerald
Appellants
v.
The Halifax Insurance Company
Respondent
Coram: McLachlin C.J. and Major, Bastarache, Binnie, Deschamps, Fish and Charron JJ.
Reasons for Judgment: (paras. 1 to 45)
Dissenting reasons: (paras. 46 to 123) |
McLachlin C.J. (Major, Binnie, Deschamps and Fish JJ. concurring)
Bastarache J. (Charron J. concurring) |
______________________________
Marche v. Halifax Insurance Co., [2005] 1 S.C.R. 47, 2005 SCC 6
Theresa Marche and Gary Fitzgerald Appellants
v.
The Halifax Insurance Company Respondent
Indexed as: Marche v. Halifax Insurance Co.
Neutral citation: 2005 SCC 6.
File No.: 29754.
2004: November 2; 2005: February 24.
Present: McLachlin C.J. and Major, Bastarache, Binnie, Deschamps, Fish and Charron JJ.
on appeal from the court of appeal for nova scotia
Insurance — Fire insurance — Statutory conditions — Material change to risk — Vacancy — Insured’s property destroyed by fire — Insurer denying claim because insured failed to inform them of earlier vacancy — Statutory condition permitting avoidance of fire insurance contract if insurer not promptly notified of any change material to risk within control and knowledge of insured — Provision in insurance legislation giving court discretion to relieve insured from avoidance of fire insurance contract where stipulation, condition or warranty unjust or unreasonable — Whether relief provision applies to statutory conditions — Insurance Act, R.S.N.S. 1989, c. 231, s. 171, Sch. to Part VII, Statutory Condition 4.
The insured purchased a house, converted it to two apartments and left Cape Breton to find work in British Columbia. The house remained vacant for a period of time before a tenant moved in. It was subsequently destroyed by fire and the insurer denied the claim, noting that the insured had failed to inform them of the earlier vacancy. The insurer maintained that the vacancy amounted to a change material to the risk which invalidated coverage pursuant to Statutory Condition 4 of Part VII (Fire Insurance) of the Insurance Act (N.S.). The trial judge found that, assuming the insured had breached Statutory Condition 4 by not advising the insurer of the earlier vacancy, the insured should be relieved from the consequences of that breach under s. 171 of the Act, which states that a policy condition is not binding on the insured if a court holds it to be “unjust or unreasonable”. The Court of Appeal reversed the decision on the ground that s. 171 did not apply to statutory conditions, but applied only to contractual conditions.
Held (Bastarache and Charron JJ. dissenting): The appeal should be allowed.
Per McLachlin C.J. and Major, Binnie, Deschamps and Fish JJ.: Section 171 of the Insurance Act applies to statutory conditions that are unreasonable or unjust in their application. First, s. 171’s purpose is to provide relief from unjust or unreasonable insurance policy conditions and should be given a broad interpretation. Second, on its face, s. 171 appears to apply to both contractual and statutory conditions. The word “condition” in that section is not qualified by a restrictive adjective. Since statutory conditions are part of the insurance contract, they fall within the phrase “[w]here a contract . . . contains any . . . condition” that defines the application of s. 171. Furthermore, in light of the imprecise use of the word “condition” throughout the Insurance Act, a reading of the entire Act, including s. 33, does not support the contention that the word “condition” in s. 171 refers only to contractual conditions. Third, the precursor of s. 171 referred expressly to statutory conditions while the current version does not. The legislative history of s. 171 and the guiding rule of interpretation that legislative change is made for a purpose confirm that s. 171 was intended to apply to all conditions, statutory or otherwise. [13-27]
The expression “unjust or unreasonable” in s. 171 allows a court to look at the application of a statutory condition. While an insurance condition may on its face be reasonable and just, it may in its application be unreasonable and unjust. The expression “unjust or unreasonable” in relation to a condition means little unless it refers to the effects the condition may create. To hold that only the condition in the abstract must be unjust or unreasonable without regard to its effects when applied would not accord with the broad remedial purpose of s. 171 to protect the public against unjust or unreasonable insurance conditions. [30-35]
In light of the finding that s. 171 applies to statutory conditions, there is no reason to interfere with the trial judge’s conclusion that if the insurance contract was void by reason of Statutory Condition 4, the court should relieve against that result under s. 171 on the ground that the vacancy had been rectified prior to the loss. [44]
Per Bastarache and Charron JJ. (dissenting): Section 171 of the Insurance Act does not apply to statutory conditions. An analysis of the immediate, broader and external contexts of s. 171 leads to that conclusion. [58-111]
A term or expression cannot be interpreted without taking the surrounding terms into account. In this case, while the word “condition” standing alone could potentially have a broader connotation, its association in s. 171 with the words “stipulation” and “warranty” narrows its scope. Since, under the Insurance Act, the concepts of “statutory” stipulation or “statutory” warranty do not exist, a stipulation or warranty is necessarily contractual. Consequently, the list should be limited to the common denominator of all the terms: the contract. [67] [70]
The broader context supports that interpretation. The purpose of the statutory conditions is to provide fairness to both the insured and the insurer. These conditions, taken as a whole, and their mandatory nature shows that the legislature intended to create an equitable scheme. Each condition is just and reasonable, as it is necessary to ensure the balance of the regime. The consequences of the application of a statutory condition in an individual case are not to be examined under s. 171, as they do not change the “just and reasonable” character of the condition. For the same statute to require on the one hand that statutory conditions be mandatory to assure fairness to both parties, but to allow on the other hand that the same conditions be avoided because they are unreasonable or unjust by virtue of s. 171 would defeat the purpose of the statutory conditions. Section 171 was enacted as a complement to the mandatory statutory conditions (s. 167) rather than as a curative provision applicable to such conditions. The scheme of Part VII of the Insurance Act can therefore only be interpreted as giving discretion to the courts to grant relief under s. 171 where a “contractual” condition is held to be unjust or unreasonable. This interpretation is consistent with s. 33 of Part II (Insurance Contracts in the Province) of the Act, which explicitly permits relief against forfeiture of insurance for imperfect compliance with a statutory condition. [77-94]
With respect to the external context, the legislative history of s. 171 clearly demonstrates that its predecessor sections have always targeted contractual provisions as opposed to statutory conditions. This is also evidenced by the legislative evolution of s. 33 which was in the past a companion to the provision under scrutiny. [98-110]
Finally, the alleged good intentions of the insured in this case cannot have any impact on the determination of the applicability of s. 171 to statutory conditions. Ignorance of the obligation to disclose or failure to appreciate its materiality will not excuse the insured. [117]
Cases Cited
By McLachlin C.J.
Referred to: Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778; Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18; 528852 Ontario Inc. v. Royal Insurance Co. (2000), 51 O.R. (3d) 470; Nahayowski v. Pearl Assurance Co. (1964), 45 W.W.R. 662; Kekarainen v. Oreland Movers Ltd., [1981] 3 W.W.R. 534; Poast v. Royal Insurance Co. of Canada (1983), 21 Man. R. (2d) 67; Curtis’s and Harvey Ltd. v. North British and Mercantile Insurance Co. (1920), 55 D.L.R. 95; Arcand v. Grenville Patron Mutual Fire Insurance Co. (1923), 25 O.W.N. 175; Henwood v. Prudential Insurance Co. of America, [1967] S.C.R. 720.
By Bastarache J. (dissenting)
Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536; Canadian National Railway Co. v. Canada (Canadian Human Rights Commission), [1987] 1 S.C.R. 1114; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; R. v. Sharpe, [2001] 1 S.C.R. 45, 2001 SCC 2; R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867, 2001 SCC 56; Chieu v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 84, 2002 SCC 3; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42; Canadian Pacific Air Lines Ltd. v. Canadian Air Line Pilots Assn., [1993] 3 S.C.R. 724; 2747‑3174 Québec Inc. v. Quebec (Régie des permis d’alcool), [1996] 3 S.C.R. 919; Brossard (Town) v. Quebec (Commission des droits de la personne), [1988] 2 S.C.R. 279; Ontario v. Canadian Pacific Ltd., [1995] 2 S.C.R. 1031; R. v. Daoust, [2004] 1 S.C.R. 217, 2004 SCC 6; R. v. Goulis (1981), 33 O.R. (2d) 55; R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606; Dubois v. The Queen, [1985] 2 S.C.R. 350; Curtis’s and Harvey Ltd. v. North British and Mercantile Insurance Co. (1920), 55 D.L.R. 95; City of London Fire Insurance Co. v. Smith (1888), 15 S.C.R. 69; Ordon Estate v. Grail, [1998] 3 S.C.R. 437; Gravel v. City of St‑Léonard, [1978] 1 S.C.R. 660; Janzen v. Platy Enterprises Ltd., [1989] 1 S.C.R. 1252; Skoke‑Graham v. The Queen, [1985] 1 S.C.R. 106; R. v. McIntosh, [1995] 1 S.C.R. 686; Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778; Hirst v. Commercial Union Assurance Co. of Canada (1978), 8 B.C.L.R. 396, aff’d (1979), 70 B.C.L.R. (2d) 361; Nahayowski v. Pearl Assurance Co. (1964), 45 W.W.R. 662; 528852 Ontario Inc. v. Royal Insurance Co. (2000), 51 O.R. (3d) 470; Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18.
Statutes and Regulations Cited
Act to Amend Chapter 9 of the Acts of 1962, the Insurance Act, S.N.S. 1966, c. 79, s. 2.
Civil Code of Québec, S.Q. 1991, c. 64.
Fire Insurance Act, R.S.N.L. 1990, c. F‑10, ss. 8, 11, Sch., para. 4.
Fire Insurance Act, S.N.S. 1956, c. 6, ss. 16, 19.
Fire Insurance Policies’ Act, R.S.N.S. 1900, c. 147, ss. 6, 7.
Fire Insurance Policies’ Act, R.S.N.S. 1923, c. 211, ss. 6, 7.
Fire Insurance Policy Act, R.S.N.S. 1954, c. 100, ss. 10, 11.
Fire Insurance Policy Act, S.N.S. 1899, c. 30, ss. 26, 27(1).
Fire Insurance Policy Act, 1930, S.N.S. 1930, c. 7, ss. 10, 11.
Insurance Act, R.S.A. 2000, c. I‑3, ss. 549, 552(1).
Insurance Act, R.S.B.C. 1996, c. 226, ss. 126, 129.
Insurance Act, R.S.M. 1987, c. I40, ss. 142, 145.
Insurance Act, R.S.N.B. 1973, c. I‑12, ss. 127, 130.
Insurance Act, R.S.N.S. 1967, c. 148, ss. 126, 129.
Insurance Act, R.S.N.S. 1989, c. 231, ss. 18, 21, 23, 32(1), 33, 159(1)(d), 163, 164, 166, 167(2), 169(3), 171, Sch. to Part VII, s. 4.
Insurance Act, R.S.N.W.T. 1988, c. I‑4, ss. 64(2), 67.
Insurance Act, R.S.O. 1990, c. I.8, ss. 148, 151.
Insurance Act, R.S.P.E.I. 1988, c. I‑4, ss. 114, 117.
Insurance Act, R.S.Y. 1986, c. 91, ss. 68, 71.
Insurance Act, S.N.S. 1962, c. 9, ss. 124, 127.
Interpretation Act, R.S.N.S. 1989, c. 235, s. 9(5).
Saskatchewan Insurance Act, R.S.S. 1978, c. S‑26, ss. 128, 131.
Authors Cited
Baer, Marvin G., and James A. Rendall. Cases on the Canadian Law of Insurance, 6th ed. Scarborough, Ont.: Carswell, 2000.
Boivin, Denis. Insurance Law. Toronto: Irwin Law, 2004.
Brown, Craig. Insurance Law in Canada. Scarborough, Ont.: Carswell, 1999 (loose‑leaf updated 2004, release 3).
Brown, Craig, and Julio Menezes. Insurance Law in Canada, 2nd ed. Scarborough, Ont.: Carswell, 1991.
Côté, Pierre‑André. The Interpretation of Legislation in Canada, 3rd ed. Scarborough, Ont.: Carswell, 2000.
Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Graham, Randal N. Statutory Interpretation: Theory and Practice. Toronto: Emond Montgomery, 2001.
Ivamy, E. R. Hardy. General Principles of Insurance Law, 6th ed. London: Butterworths, 1993.
Rendall, James A. Annotation to Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18.
Sullivan, Ruth. Sullivan and Driedger on the Construction of Statutes, 4th ed. Markham, Ont.: Butterworths, 2002.
APPEAL from a judgment of the Nova Scotia Court of Appeal (Glube C.J.N.S. and Oland and Hamilton JJ.A.) (2003), 214 N.S.R. (2d) 1, 47 C.C.L.I. (3d) 165, 671 A.P.R. 1, [2003] I.L.R. ¶I‑4197, [2003] N.S.J. No. 121 (QL), 2003 NSCA 32, reversing a decision of MacAdam J. (2002), 202 N.S.R. (2d) 345, 632 A.P.R. 345, [2002] N.S.J. No. 157 (QL), 2002 NSSC 62. Appeal allowed, Bastarache and Charron JJ. dissenting.
Derrick J. Kimball, Nash T. Brogan and H. Heidi Foshay Kimball, for the appellants.
Scott C. Norton, Q.C., and Daniela Bassan, for the respondent.
The judgment of McLachlin C.J. and Major, Binnie, Deschamps and Fish JJ. was delivered by
The Chief Justice —
I. Introduction
1 This is the sad case of a couple, Ms. Marche and Mr. Fitzgerald, who purchased the latter’s family home, converted it to two apartments and, having left Cape Breton to find work in British Columbia, suffered the loss of the house through fire. They had insured the house with the Halifax Insurance Company (“Halifax”). It denied their claim for the fire loss. Until shortly prior to the fire, the house was occupied. Halifax relied on an earlier vacancy which it said the owners should have advised them of under the policy, and claimed that this amounted to a change material to the risk which invalidated coverage pursuant to Statutory Condition 4.
2 The trial judge found that, assuming the owners had breached Statutory Condition 4 by not advising Halifax of the earlier vacancy, the owners should be relieved from the consequences of that breach under s. 171 of the Nova Scotia Insurance Act, R.S.N.S. 1989, c. 231, which states that a policy condition is not binding on the insured if a court holds it to be “unjust or unreasonable”: (2002), 202 N.S.R. (2d) 345, 2002 NSSC 62. The Nova Scotia Court of Appeal reversed this decision on the ground that s. 171 did not apply to statutory conditions, but only to optional conditions in the policy: (2003), 214 N.S.R. (2d) 1, 2003 NSCA 32.
3 I conclude that s. 171 of the Insurance Act applies to statutory conditions, and that the trial judge’s decision should be upheld.
II. Facts
4 There is no real dispute about the facts relevant to the appeal. It is clear that the owners left the house vacant when they left for British Columbia. They did not inform Halifax that the property was vacant and that they were looking for tenants for both flats. The property remained vacant between September and early December 1998, when Mr. Fitzgerald’s brother, Danny, moved in. The rent not having been paid, Ms. Marche had the water to the property disconnected in mid-January 1999 and the electric power boxes removed at the end of January 1999. Although the intention was to induce Danny to move out, it was not established that he did so. At the time of the fire on February 7, 1999, his possessions were still in the house.
5 In these circumstances, Halifax could not establish a vacancy at the time of loss. However, it denied liability under the contract of insurance on the ground that Ms. Marche and Mr. Fitzgerald had not advised them of the earlier vacancy, prior to Danny moving in, and that this constituted a change material to the risk that voided the policy.
III. Analysis
6 The insurer argued the insured had breached Statutory Condition 4 by not advising of their earlier vacancy. The trial judge, without finding breach, stated he would have granted relief in any event under s. 171 of the Insurance Act. The main issue in the case as argued was whether s. 171 applies to statutory conditions. If it does, the issues arise of whether there was a statutory breach and whether relief against it should be granted.
A. Does Section 171 of the Insurance Act Apply to Statutory Condition 4?
7 Section 171 of the Nova Scotia Insurance Act provides:
171 Where a contract
. . .
(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property,
the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court before which a question relating thereto is tried.
8 The dispute about whether s. 171 applies to statutory conditions masks a deeper question: what does it mean to say that s. 171 applies, or does not apply, to a statutory condition?
9 For some, the question is whether s. 171 of the Insurance Act could be used to amend the contract and delete conditions that form part of every policy as a matter of law. Put that way, the question compels a negative answer: the legislature could hardly have intended to empower trial judges to declare unreasonable on their face conditions that the legislature has made mandatory for all contracts of insurance.
10 For others, the question is whether s. 171 applies not only to delete conditions that are unreasonable on their face (should there be any), but also to relieve against the results of applying conditions that, in the particular circumstances of the case, are unreasonable in their application or draconian in their consequences. Framed in these terms, the question takes on an entirely different complexion — which I find more attractive because it avoids an inequitable result otherwise inescapable.
11 The wording of s. 171 permits the issue to be characterized either way, but the second, in my view, better corresponds with the remedial objectives of the provision.
12 It follows that the essential question is whether s. 171 applies to statutory conditions that are unreasonable or unjust in their application. For the reasons that follow, I conclude that it does.
(1) Arguments for the Application of Section 171 to Relieve Against the Unreasonable or Unjust Application of Statutory Conditions
(a) Section 171 Is Remedial and Should Be Given a Broad Interpretation
13 In Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778, this Court held that the relief against forfeiture provision of the Saskatchewan Insurance Act, R.S.S. 1978, c. S-26, s. 109, was not confined to “statutory conditions” and could include “contractual conditions” even though the provision explicitly referred to “statutory conditions”. One of the key reasons was that the provision had a remedial purpose and should be interpreted broadly. Similarly, in this case, s. 171’s purpose is to provide relief from unjust or unreasonable insurance policy conditions and should be given a broad interpretation. This approach to interpretation is supported by s. 9(5) of the Nova Scotia Interpretation Act, R.S.N.S. 1989, c. 235, which states that “[e]very enactment shall be deemed remedial and interpreted to insure the attainment of its objects . . .”.
(b) The Wording of Section 171 Is Broad Enough to Cover Statutory Conditions
14 Statutory Condition 4 is a term of the contract and hence falls within the phrase “[w]here a contract . . . contains any . . . condition” that defines the application of s. 171. “Condition” is not qualified by a restrictive adjective. Thus on its face, s. 171 appears to apply to both negotiated and statutory conditions.
15 Including statutory conditions within the term “condition” in s. 171 may accord with the presumption in favour of the ordinary, non-technical meaning: R. Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at p. 41. There is no automatic inference that the term “condition” excludes “statutory conditions”; thus the text of the legislation supports this interpretation.
16 The insurer raises several arguments against this “plain reading” argument. None are convincing.
17 First, the insurer argues that since statutory conditions are mandatory, the phrase in s. 171 “[w]here a contract . . . contains” implies that the condition must be contractual since a contract must contain a statutory condition. However, this phrase is equally consistent with the intention to cover both mandatory statutory conditions as well as optional warranties, conditions and stipulations. Since statutory conditions are contained in the insurance contract, “[w]here a contract . . . contains” can be read as including these conditions.
18 Second, the insurer points to the grouping together of the terms “stipulation, condition or warranty”, and the absence of such a thing as a “statutory stipulation” or “statutory warranty”. This, it submits, implies that the condition referred to is a contractual condition: respondent’s factum, at para. 30. However, it is clear from reading the whole Insurance Act that there is little precision in the use of the term “condition”. Statutory conditions refer to themselves as “conditions”: e.g., Insurance Act, s. 167(2) (see Appendix A). “Statutory conditions” are also referred to throughout the Insurance Act as “mandatory conditions”: e.g., s. 159(1)(d). The fact that the term “condition” may include “statutory conditions” is reinforced by s. 32(1) which specifies “a condition, statutory or otherwise” and s. 169(3) which refers to “any contract condition”: Insurance Act. Thus a reading of the entire Act fails to support the insurer’s contention.
19 Third, the insurer argues that the only other relief provision potentially applicable to fire insurance contracts in the Insurance Act, s. 33 “relie[f] against forfeiture” (which it is agreed does not apply here), explicitly refers to statutory conditions, whereas s. 171 does not. The explicit reference to statutory conditions reinforces that s. 33 alone applies to statutory conditions, and s. 171 only applies to optional contractual provisions. This conclusion, however, is of limited relevance given the different legislative histories and objects of the two provisions, the broad interpretation of “statutory conditions” in Falk Bros., and the generally imprecise use of the term “condition” throughout the Insurance Act.
20 In summary, the wording of s. 171 includes statutory conditions.
(c) The History of Section 171
21 The Nova Scotia Interpretation Act, s. 9(5)(g), advocates considering the “history of legislation on the subject” as an aid to interpreting legislation. This is buttressed by the guiding rule of interpretation that legislative change is made for a purpose.
22 The precursor of s. 171 referred expressly to statutory conditions. It read:
11 Where the rate of premium is affected or modified by the user, condition, location or maintenance of the insured property, the policy may contain a clause not inconsistent with any statutory condition setting forth any stipulation in respect of such user, condition, location or maintenance, and such clause shall not be deemed a variation of any statutory condition. Such clause shall be binding on the insured only in so far as it is held by the court before which a question relating thereto is tried to be just and reasonable.
(Fire Insurance Policy Act, R.S.N.S. 1954, c. 100, previously S.N.S. 1930, c. 7)
23 This provision (and its predecessors) permitted optional, non-statutory, conditions not inconsistent with statutory conditions, and held they were binding if the court found them to be “just and reasonable”. The court could relieve, but only against optional, non-statutory, conditions.
24 In 1956, the legislature replaced s. 11 with what is now the present s. 171, which makes no distinction between statutory conditions and optional conditions, and provides that the court can relieve against conditions generally if it finds them “unjust or unreasonable”. See Fire Insurance Act, S.N.S. 1956, c. 6.
25 Thus prior to 1956, the legislature clearly stated that courts could not relieve against statutory conditions. In 1956, the legislature stated that courts could relieve against conditions generally. The guiding rule of interpretation, as mentioned, is that legislative change is made for a purpose. This confirms that s. 171 was intended to apply to all conditions, statutory or otherwise.
26 In effect, the insurer argues that we should proceed as if the law had not been changed in 1956, and read as it did prior to that date. To do so runs counter to accepted canons of interpretation.
27 Far from supporting the insurer’s position, the history of s. 171 demonstrates that it was intended to apply to statutory conditions.
(d) Jurisprudence
28 The cases that have considered whether s. 171 (or its equivalent) applies to statutory conditions have concluded that it does: Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18 (Alta. Q.B.), at p. 27; 528852 Ontario Inc. v. Royal Insurance Co. (2000), 51 O.R. (3d) 470 (S.C.J.), at para. 24 (it distinguishes its facts from Krupich on other grounds). To date courts have not adopted the interpretation of s. 171 submitted by the respondent insurer. Despite these decisions, legislatures have not acted to alter the wording. This has significance: Falk Bros.
29 In sum, while the cases are few, there is no decision other than the N.S. Court of Appeal decision appealed in this case that finds that s. 171 (or its equivalent) does not apply to statutory conditions. The cases cited by the insurer claiming that courts have decided that s. 171 does not apply to statutory conditions have not in fact decided that point: e.g., Nahayowski v. Pearl Assurance Co. (1964), 45 W.W.R. 662 (Alta. S.C.); Kekarainen v. Oreland Movers Ltd., [1981] 3 W.W.R. 534 (Man. Q.B.); Poast v. Royal Insurance Co. of Canada (1983), 21 Man. R. (2d) 67 (Q.B.).
(2) Arguments Against the Application of Section 171 to Relieve Against the Unreasonable or Unjust Application of Statutory Conditions
30 The insurer’s arguments on the wording of s. 171, its history and the case law have been dealt with in the foregoing section. It remains to consider the insurer’s strongest argument — that statutory conditions by definition cannot be unreasonable or unjust and that hence s. 171 cannot apply to them.
31 The insurer asserts that the purpose of statutory conditions is remedial and intended to enhance, as opposed to restrict, the rights of the insured. Therefore, the statutory conditions are, by definition, “just and reasonable”, and s. 171 cannot apply: Court of Appeal decision, at paras. 53-54; Curtis’s and Harvey Ltd. v. North British and Mercantile Insurance Co. (1920), 55 D.L.R. 95 (P.C.), at p. 99, supported by Professor J. A. Rendall in a critical annotation to Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18, at p. 19.
32 This argument ignores the fact that an insurance condition may on its face be reasonable and just but in its application be unreasonable and unjust. For example, whether a change is “material to the risk” is a highly charged, fact-based question whose strict application may be unjust or unreasonable in the particular factual circumstances of a case. In this respect, C. Brown and J. Menezes conclude that “[o]ne basic statement of approach to the question of what is unjust or unreasonable, and which has appeared to have remained constant over the years, is that the question is to be determined on the facts in dispute in a particular case and not on purely abstract general terms”: Insurance Law in Canada (2nd ed. 1991), at p. 190.
33 The concrete approach enunciated by Brown and Menezes is required by the words of the section itself. As discussed earlier, the legislature could hardly be intended to mandate clauses that are unjust on their face. The words “unjust” and “unreasonable” in relation to a condition mean little unless they refer to the effects the condition may create. For this reason few clauses in an insurance contract, viewed merely on their face without regard to their effect, could likely be called unjust or unreasonable. The question of how the clause will work when applied cannot be avoided, if we are to make sense of s. 171.
34 Finally, the principle enunciated by Brown and Menezes that “unjust or unreasonable” must be determined on the facts of particular cases and not in the abstract reflects the remedial purpose of s. 171. To hold that only the condition in the abstract must be unjust or unreasonable without regard to its effects when applied would not accord with the broad remedial purpose of the provision to protect the public against unjust or unreasonable insurance conditions.
35 Clearly “unjust or unreasonable” in s. 171 allows the Court to look at the application of the clause. It is not suggested that this would not be the case for optional, non-statutory, conditions. If this be so, there is no basis for arguing that when it comes to statutory conditions one must look only at the condition abstracted from the effects of its application. If one considers consequences, the argument that statutory conditions can by definition never be unjust or unreasonable vanishes. At this point the insurer’s main argument — that s. 171 cannot apply because statutory conditions must always be just and reasonable — collapses.
(3) Conclusion on the Application of Section 171 to Statutory Conditions
36 The remedial purpose of s. 171, its wording, its legislative history and the jurisprudence support the conclusion that s. 171 applies to statutory conditions. The opposing arguments fail to displace these considerations. I conclude that s. 171 applies to Statutory Condition 4. Where their application produces unjust or unreasonable results, the Court can grant relief under s. 171.
B. Did the Trial Judge Err in Relieving Against the Statutory Condition?
(1) Is Avoidance of the Policy Under Statutory Condition 4 Established?
37 Here we face a difficulty. The trial judge did not find that there was a change material to the risk that breached Statutory Condition 4. He simply stated:
To the extent the vacancy may have avoided the policy, I am satisfied it would be both unjust and unreasonable to give effect to the exclusion of coverage by reason of the non-occupancy, in view of the circumstance the Property was later occupied until shortly before the fire and at the time of the loss there was no breach of the statutory condition. [para. 63]
38 Oland J.A. at the Court of Appeal concluded, however, that Halifax had shown that the vacancy was a change material to the risk within the meaning of Statutory Condition 4, which obliged the insured to advise their insurer that the property was vacant. Noting that the insured failed to notify their insurer and concluding that subsequent compliance could not cure the material change in risk, Oland J.A. held that the contract was avoided from the time of that breach.
39 Statutory Condition 4 provides:
SCHEDULE TO PART VII
STATUTORY CONDITIONS
4 Material change — Any change material to the risk and within the control and knowledge of the insured shall avoid the contract as to the part affected thereby, unless the change is promptly notified in writing to the insurer or its local agent; and the insurer when so notified may return the unearned portion, if any, of the premium paid and cancel the contract, or may notify the insured in writing that, if he desires the contract to continue in force, he must, within fifteen days of the receipt of the notice, pay to the insurer an additional premium; and in default of such payment the contract shall no longer be in force and the insurer shall return the unearned portion, if any, of the premium paid.
40 It is well established in insurance law that vacancy can be a change material to the risk: e.g., Arcand v. Grenville Patron Mutual Fire Insurance Co. (1923), 25 O.W.N. 175 (H.C.), and this is reflected in the common and accepted practice of including 30-day vacancy exclusion clauses in insurance policies. Halifax, however, was presumably unable to rely on that clause in this case since MacAdam J. had found that the property was occupied until shortly prior to the time of the loss. Halifax could still, however, rely on Statutory Condition 4 to avoid the policy on the basis that “[a]ny change material to the risk and within the control and knowledge of the insured shall avoid the contract as to the part affected thereby”: Schedule to Part VII of the Insurance Act.
41 The insured argue that a vacancy months prior to the actual fire should not disallow their claim to coverage for the fire that destroyed their house. There is no concrete evidence linking that earlier vacancy to the actual circumstances of the fire, which was presumed to constitute arson. The insured submit that upholding the Court of Appeal’s decision could lead to situations where an unreported vacancy (e.g., for a vacation) prior to an unrelated fire would avoid the insurance policy. This could have serious implications for rental properties which may often remain vacant while landlords seek appropriate tenants. Moreover, while the first clause of Statutory Condition 4 states that the change “shall avoid the contract as to the part affected thereby . . .”, the balance of the provision suggests that the contract continues in effect until further events, for example cancellation by the insurer. It follows, the argument continues, that the contract does not automatically cease to exist prior to the correction of the change material to the risk. The question then becomes whether the insurer was entitled to cancel the contract on the basis of the earlier, rectified change to the risk. It might be argued that where the change has been rectified, this is at best a debt and hardly justifies the draconian consequence of policy cancellation where the change material to the risk has been corrected.
42 On the other hand, the insurer might argue that lack of notification of a change cost it an opportunity to cancel the contract before the loss. Moreover, it is not essential that a statutory breach be causally connected to the loss: see Henwood v. Prudential Insurance Co. of America, [1967] S.C.R. 720, in which coverage was denied where the insured had not disclosed the fact that she suffered from clinical depression, and was later killed in an unrelated car accident. It might be argued that this reasoning does not apply to failure to advise of a change in the risk which has subsequently been rectified and hence is not in play at the time of the loss. Many events can temporarily change the risk — for example, a short vacancy, or a sump pump breaking down. Are homeowners obliged, at the risk of losing coverage, to advise insurers of these temporary problems even after they have been remedied and are no longer of any consequence?
43 In conclusion, Statutory Condition 4 is not a model of clarity. Arguments can be put for and against the proposition that its application avoids the policy on these facts. Lacking as we do sufficient argument on the issue, the prudent course is to leave this issue to be resolved by legislative amendment or in another case.
(2) If the Insurance Contract Was Void for Breach of Statutory Condition 4, Should the Court Grant Relief Under Section 171 of the Insurance Act?
44 The trial judge held that if the insurance contract was void by reason of Statutory Condition 4, the court should relieve against that result under s. 171 of the Insurance Act on the ground that the vacancy had been rectified prior to the loss. This conclusion is not seriously contested; the insurer’s main argument was that s. 171 did not apply to Statutory Condition 4. Having concluded that s. 171 is applicable, I see no reason to interfere with the trial judge’s conclusion on this point.
IV. Conclusion
45 I would allow the appeal and affirm the decision of the trial judge with costs to the appellants/insured throughout.
The reasons of Bastarache and Charron JJ. were delivered by
Bastarache J. (dissenting) —
I. Introduction
46 The sole issue of contention in this appeal is the statutory interpretation of s. 171 of the Nova Scotia Insurance Act, R.S.N.S. 1989, c. 231, and its application to Statutory Condition 4. Section 171 gives the court discretion to relieve an insured from the avoidance of a fire insurance contract when it is determined that a stipulation, condition or warranty is unjust or unreasonable. Statutory Condition 4 will avoid a contract of insurance if the insurer is not promptly notified in writing of any change material to the risk within the control and knowledge of the insured.
47 Insurance has become an essential part of our society. “Whether public or private, compulsory or voluntary, insurance touches everyone on a daily basis”: D. Boivin, Insurance Law (2004), at p. 1. But what is the objective of insurance law? Insurance law provides control and ensures “a proper balance between insurers’ need to maintain sufficient financial viability and their customers’ reasonable expectations”: C. Brown, Insurance Law in Canada (loose-leaf ed.), vol. 1, at p. 1-1.
48 The insurance business was one of the first regulated industries, the legislatures having sought to control the economic impact of insurance companies, the undesirable business practices and the insolvencies of the insurers: M. G. Baer and J. A. Rendall, Cases on the Canadian Law of Insurance (6th ed. 2000), at pp. 27-28. Incursion by the provincial legislatures in major aspects of the relations between insured and insurers was first observed in matters dealing with the substance and the form of the contracts made with respect to fire insurance. Indeed, the widespread public criticism of the marketing practices and the content of insurance policies were so prevalent that legislatures set out standard terms for fire insurance policies which paved the way to the statutory conditions as we now know them: Baer and Rendall, at pp. 74-75.
49 The scheme surrounding s. 171 and Statutory Condition 4 (material change in the risk) appears in all provincial insurance statutes dealing with fire insurance (with the exception of the province of Quebec, which deals with material change in risk under the Civil Code of Québec, S.Q. 1991, c. 64): Insurance Act, R.S.B.C. 1996, c. 226, ss. 129 (“Unjust exclusions”) and 126; Insurance Act, R.S.A. 2000, c. I-3, ss. 552(1) (“Special stipulations”) and 549; The Saskatchewan Insurance Act, R.S.S. 1978, c. S-26, ss. 131 (“Special stipulations”) and 128; Insurance Act, R.S.M. 1987, c. I40, ss. 145 (“Unjust exclusions”) and 142; Insurance Act, R.S.O. 1990, c. I.8, ss. 151 (“Special stipulations”) and 148; Insurance Act, R.S.N.B. 1973, c. I-12, ss. 130 and 127; Insurance Act, R.S.P.E.I. 1988, c. I-4, ss. 117 (“Unjust or unreasonable exclusions or conditions not binding, where) and 114; Fire Insurance Act, R.S.N.L. 1990, c. F-10, ss. 11 (“Special stipulations”), 8 and Sch., para. 4; Insurance Act, R.S.N.W.T. 1988, c. I-4, ss. 67 (“Special stipulations”) and 64(2); Insurance Act, R.S.Y. 1986, c. 91, ss. 71 (“Special stipulations”) and 68.
50 I maintain that the interpretation of s. 171 of the Insurance Act can lead to only one conclusion: s. 171 does not apply to statutory conditions. Therefore, the Court of Appeal’s decision should be upheld.
II. Preliminary Remarks
51 Since the Chief Justice has succinctly summarized the relevant facts of this case, I need not repeat that part of her reasons. I nevertheless want to clarify a few important facts.
52 The Chief Justice describes the situation here as “the sad case of a couple” who suffered the loss of the house they had converted to two apartments (para.1). Without getting into a dispute over the facts, I take issue with this characterization. The property was vacant long before the fire and later occupied by Mr. Fitzgerald’s brother, Danny, pursuant to a rental agreement. When Danny failed to make rental payments, the insured did not stand by, not knowing what to do; they were determined to have him evicted. In fact, Ms. Marche arranged for the water connections to the property to be disconnected and subsequently for the electric power boxes to be removed. While the insured may not have been pervaded with malice but only ignorance as to what their obligations were under the policy, this does not make this case singular in any way. They purposefully left the property vacant without water and electricity. One should bear in mind that it is the legislature that drafted the impugned section and that it is a fact that Halifax Insurance did nothing but invoke the policy.
53 McLachlin C.J. indicates, at para. 4 of her reasons that although the intention of the insured was to induce Danny to move out, it was not established that he did so as his possessions were still in the house. In fact, the trial judge concluded that “[t]he fire at the Property apparently occurred shortly after Danny had vacated” and later added “Danny endeavoured to find other premises and may even have moved out of the Property shortly before the fire”: (2002), 202 N.S.R. (2d) 345, 2002 NSSC 62, at para. 25. This is more consistent with the fact that there was no water or electricity in the home and that the events took place in February. I think it is reasonable to conclude that Danny had left the property even though at least some of his personal property remained behind.
III. General Principles of Statutory Interpretation
54 Much has been written about the interpretation of legislation in Canada (see R. Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed. 2002); P.-A. Côté, The Interpretation of Legislation in Canada (3rd ed. 2000); R. N. Graham, Statutory Interpretation: Theory and Practice (2001)). This Court has repeatedly cited, and this across a wide range of interpretive settings, that the preferred approach to statutory interpretation is that set out by E. A. Driedger in Construction of Statutes (2nd ed. 1983), at p. 87:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
(See Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536, at p. 578, per Estey J. (taxation); Canadian National Railway Co. v. Canada (Canadian Human Rights Commission), [1987] 1 S.C.R. 1114, at p. 1134, per Dickson C.J. (administrative); Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21, per Iacobucci J. (employment); R. v. Sharpe, [2001] 1 S.C.R. 45, 2001 SCC 2, at para. 33, per McLachlin C.J. (criminal); R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867, 2001 SCC 56, at para. 28, per Iacobucci J. (admiralty); Chieu v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 84, 2002 SCC 3, at para. 27, per Iacobucci J. (immigration); Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42, at para. 26, per Iacobucci J. (radiocommunication).)
55 Although the factors enumerated by Driedger create the framework that needs to be applied in order to interpret a statutory provision, this Court warned in Chieu, at para. 28, against a formulaic approach of the interpretive factors, given that they are closely related and interdependent.
56 Furthermore, as pointed out by the insurer, the same approach was incorporated by the legislature in s. 9(5) of the Interpretation Act, R.S.N.S. 1989, c. 235, which requires an examination of the object of a section, the former law and the history of legislation on the subject when interpreting a provision:
9. . . .
(5) Every enactment shall be deemed remedial and interpreted to insure the attainment of its objects by considering among other matters
(a) the occasion and necessity for the enactment;
(b) the circumstances existing at the time it was passed;
(c) the mischief to be remedied;
(d) the object to be attained;
(e) the former law, including other enactments upon the same or similar subjects;
(f) the consequences of a particular interpretation; and
(g) the history of legislation on the subject.
57 While it is true that one can and should consider as context the former law and the history of the legislation, as noted in the Interpretation Act, these factors, especially in a non-constitutional context, are subordinate to the duty to interpret every provision according to its object as can be determined by examining the Act as a whole. Parliamentary sovereignty should guide the courts, as was confirmed in Bell ExpressVu, at para. 62:
Statutory enactments embody legislative will. They supplement, modify or supersede the common law. More pointedly, when a statute comes into play during judicial proceedings, the courts (absent any challenge on constitutional grounds) are charged with interpreting and applying it in accordance with the sovereign intent of the legislator.
IV. Application of the Principles to Section 171
58 In order to determine the appropriate interpretation of the statutory provision at issue in this appeal, I will first consider the grammatical and ordinary sense of the words used in the section. I will then proceed to read this section in its context. This inquiry will include an examination of (i) the immediate context of the expression under scrutiny, (ii) the broader context of the section, which entails the object and the intention of the legislator, and (iii) the external context, i.e., the history of the impugned section. Although it appears at first blush that none of these factors are by themselves conclusive, it is their impact as an ensemble that is persuasive.
A. Grammatical and Ordinary Sense
59 The interpretation begins with the ordinary meaning. But what does this first stage involve? Professor Sullivan, at p. 21, explains:
The expression “ordinary meaning” is much used in statutory interpretation, but not in any consistent way. Sometimes it is identified with dictionary meaning, sometimes with literal meaning and sometimes with the meaning that results after the words to be interpreted are read in total context. Most often, however, it refers to the reader’s first impression meaning, the understanding that spontaneously emerges when words are read in their immediate context . . . .
60 Hence, as expressed by Gonthier J. in Canadian Pacific Air Lines Ltd. v. Canadian Air Line Pilots Assn., [1993] 3 S.C.R. 724, at p. 735, the ordinary meaning is “the natural meaning which appears when the provision is simply read through”.
61 The insurer observes that the opening words of s. 171(b) are “[w]here a contract contains”, not “where a contract is deemed to contain”. The former suggests provisions which have been negotiated between the parties, and hence are contractual, whereas the latter suggests statutory conditions that are automatically part of every contract pursuant to s. 167(2) of the Insurance Act.
62 The insurer also contends that, contrary to other provisions of the statute (which will be examined later), the words “any . . . condition” are not qualified by the adjective “statutory” or by the phrase “statutory or otherwise”. It concludes that in the absence of such a qualification, “any . . . condition” reflects the ordinary definition of the concept in a contract, that is to say a contractual provision. In my view, the usage by the legislature of the word “condition” interchangeably — sometimes to mean only statutory, at other times to mean statutory and contractual — does not permit to draw a clear conclusion from this reading.
63 After this preliminary step, I acknowledge that it would be difficult to determine the issue; the scale does not seem to tip in favour of either party. Nevertheless, the analysis does not stop here. It has been recognized by this Court that this first step must be followed with a consideration of the total context of the words to be interpreted in every case (Chieu, at para. 34; see also Sullivan, at p. 20).
B. Total Context
64 The modern approach recognizes the important role that context must inevitably play when a court construes the written words of a statute. It is undoubted that words take their colour from their surroundings: Bell ExpressVu, at para. 27.
65 When read in its entire context, I am of the view that s. 171(b) does not purport to relieve an insured from a statutory condition. A number of contextual factors which I will now strive to canvass support this conclusion.
66 I will examine this second factor of the modern approach in three steps. First, I will scrutinize the immediate context of the impugned words: the provision in which the words appear and any closely related provisions. Second, I will follow with an inquiry into the broader context of the section, i.e., the Act as a whole to determine the intention of the legislator. Finally, I will review the external context, that is the historical settings in which s. 171 was enacted (see Sullivan, at pp. 260-62).
(1) Immediate Context: Noscitur a Sociis Rule
67 The insurer submits that when reading s. 171, it can be observed that the word “condition” is linked by “or” with the concepts of “stipulation” and “warranty”. It is a well-known rule of interpretation that a term or an expression cannot be interpreted without taking the surrounding terms into account. “The meaning of a term is revealed by its association with other terms: it is known by its associates”: 2747-3174 Québec Inc. v. Quebec (Régie des permis d’alcool), [1996] 3 S.C.R. 919, at para. 195 (emphasis omitted).
68 Professor Sullivan, at p. 173, defines the associated words rule, noscitur a sociis, as follows:
The associated words rule is properly invoked when two or more terms linked by “and” or “or” serve an analogous grammatical and logical function within a provision. This parallelism invites the reader to look for a common feature among the terms. This feature is then relied on to resolve ambiguity or limit the scope of the terms. Often the terms are restricted to the scope of their broadest common denominator.
69 This rule of statutory interpretation was applied by this Court on numerous occasions: Brossard (Town) v. Quebec (Commission des droits de la personne), [1988] 2 S.C.R. 279, at pp. 328-29; Ontario v. Canadian Pacific Ltd., [1995] 2 S.C.R. 1031, at para. 64; 2747-3174 Québec Inc., at para. 195; R. v. Daoust, [2004] 1 S.C.R. 217, 2004 SCC 6, at para. 51.
70 When applying the noscitur a sociis rule (associated words rule) to a term that is part of a list, one must look for a common feature among the terms, “the meaning of the more general being restricted to a sense analogous to the less general”: R. v. Goulis (1981), 33 O.R. (2d) 55 (C.A.), at p. 61. Legislative provisions must not be considered in a vacuum. “The content of a provision ‘is enriched by the rest of the section in which it is found . . .’”: Canadian Pacific, at para. 64; R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606, at p. 647. In the present case, while “condition” standing alone could potentially have a broader connotation, its association with the words “stipulation” and “warranty” narrows its scope. As submitted by the insurer, under the Insurance Act, the concepts of “statutory” stipulation or “statutory” warranty do not exist. A stipulation or warranty is necessarily contractual. Consequently, the list should be limited to the common denominator to all the terms: the contract. Every single one of these provisions is of a contractual nature. When addressing this factor, one must not confuse the immediate context with the broader context of the statute. These two factors, while linked, should be examined separately: one needs to address the specific context of an expression or word before referring to the entire context of the statute.
71 This rule needs to be kept in mind during the examination of the general context, i.e., s. 171 in the context of other provisions of the Insurance Act (and more specifically s. 33 which I will address fully later). “[W]ords in isolation are virtually meaningless”: Sullivan, at p. 259. The same can be said for the provisions in the Insurance Act scheme.
(2) Broader Context: Scheme of Insurance Act, Object and Intention of the Legislator
72 “As the product of a rational and logical legislature, the statute is considered to form a system. Every component contributes to the meaning as a whole, and the whole gives meaning to its parts: ‘each legal provision should be considered in relation to other provisions, as parts of a whole’ . . .”: Côté, at p. 308. See also Dubois v. The Queen, [1985] 2 S.C.R. 350, at p. 365.
73 Obviously, the general scheme of the Insurance Act is to shape insurance contract law and the business of insurance in Nova Scotia. For the purpose of regulating contracts, insurance has been divided into several classes under the statute, each of which is governed by different rules. The Act contains 12 parts covering such issues as the licensing of insurance agents and adjusters, and the penalties arising from contraventions of the Act.
74 When dealing with fire insurance, the framework applicable can be found in the general provisions of Part II (Insurance Contracts in the Province) and the specific provisions of Part VII (Fire Insurance). It is important to note that while these two parts are now distinct and a fraction of the bigger insurance scheme in Nova Scotia, when first adopted, the complete legislative framework on fire insurance formed a single statute, the Fire Insurance Policy Act. I will review the historical foundation of the litigious section when analysing the external context.
(a) Part VII — Fire Insurance
75 Part VII prescribes various aspects of a fire insurance contract including the extent of coverage against fire (s. 163), the contents of the policy (s. 164), and the renewal contract (s. 166). It also includes s. 171, the disputed section. Part VII is of great significance; it prescribes the mandatory statutory conditions. Section 167(2) deems a Schedule of 15 statutory conditions to be part of every contract for fire insurance. No variation, omission or addition to any statutory condition is binding on the insured. Therefore, part of a fire insurance policy is mandated in the form of statutory conditions which neither the insurer nor the insured may set aside.
76 In the case at bar, the statutory condition at the heart of the dispute is Statutory Condition 4. As earlier mentioned, it requires the insured to promptly notify in writing the insurer or its local agent of any change material to the risk that is within his control and knowledge. A failure to abide by that condition will result in the avoidance of the contract. The insurer submitted at trial that the insured had breached Statutory Condition 4 by failing to advise the insurer that the property in question was vacant. This position was upheld by the Court of Appeal. This conclusion is not in dispute before our Court.
77 The insurer submits that the object of the mandatory statutory conditions is to enhance, as opposed to restrict, the rights of the insured; therefore, by definition, statutory conditions are “just and reasonable”. This argument was accepted by the Court of Appeal. I agree with the insurer because, in my view, and this will be further demonstrated below, the statutory conditions, taken as an ensemble, and their mandatory nature are the legislator’s answer to creating an equitable scheme. Each condition is just and reasonable as it is necessary to ensure the balance of the regime. The Chief Justice takes the position that the fact that a statutory condition may on its face be reasonable and just ignores that in its application it can be unreasonable or unjust (para. 32). I respectfully disagree that this is the proper approach to the interpretation of this provision.
78 It is necessary to first consider the purpose of statutory conditions. The answer to this question is found in decisions of England’s Privy Council as well as those of this Court. In Curtis’s and Harvey Ltd. v. North British and Mercantile Insurance Co. (1920), 55 D.L.R. 95, Lord Dunedin states, at p. 99:
The primary object of the statutory conditions is to prevent the insurer by means of exceptions skilfully worded and not particularly brought to the notice of the assured, avoiding liability which it is only just and reasonable he should undertake in a fire policy. Their Lordships agree . . . that these conditions, if there is doubt, should be held rather as amplifying than as cutting down the insurer’s liability.
79 In addition, this Court acknowledged in City of London Fire Insurance Co. v. Smith (1888), 15 S.C.R. 69, at pp. 79-80, the special nature of statutory conditions:
The statutory conditions being themselves framed as being conditions just and reasonable to be exacted a variation which should make any such conditions to be less onerous, must of necessity be just and reasonable, and it is only in the case of a variation exacting something more onerous upon the insured than the statutory condition in the same matter enacts, that any question could arise calling for the decision of a judge or court to determine whether the variation is a just and reasonable one to be exacted by the company.
80 Consequently, the purpose of the statutory conditions is to provide fairness to both the insured and the insurance provider.
81 The author Brown, at pp. 20-8 and 20-9, clearly makes a distinction between a statutory condition and “stipulations, conditions or warranties” when discussing the above purpose:
This consumer protection objective is underscored by the requirement that the statutory conditions be printed on the policy although this does not apply to interim receipts or binders. Whether printed or not, they are to be deemed part of the fire insurance contract and variations or omissions of conditions are not binding on the insured. This does not prevent certain stipulations, conditions, or warranties material to the risk and respecting the use, condition, location or maintenance of the insured property from being included in the contract, provided they are not inconsistent with statutory conditions (and provided they are not held to be unjust or unreasonable). Moreover, what may appear to be a possible variation and, therefore invalid, may merely be a valid limitation on the description of the risk, or an exclusion. [Emphasis added.]
82 Consequently, I agree with Oland J.A. of the Court of Appeal, when she expresses the view that statutory conditions, which are mandated by legislation to be incorporated into insurance contracts for the protection of the insured, must be considered just and reasonable: (2003), 214 N.S.R. (2d) 1, 2003 NSCA 32, at para. 54.
83 This said, it is important to reconcile the inclusion by the legislature of the statutory conditions in contracts for fire insurance with the terms of s. 171. This Court has recognized in Rizzo & Rizzo Shoes, at para. 27, that legislatures do not intend to produce absurd consequences:
. . . an interpretation can be considered absurd if it leads to ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment. . . .
84 I agree with the insurer that it would be both illogical and incoherent to interpret s. 171 as applying to statutory conditions in Part VII. Like it, I believe it would be unreasonable and incongruous for the same statute to dictate, on the one hand, that statutory conditions are mandatory to assure fairness to both parties, but, on the other hand, to allow that the same conditions be avoided because they are unreasonable or unjust by virtue of s. 171. This would defeat the purpose of the statutory conditions and render them pointless and futile. We must presume that the legislature, in an attempt to protect the insured from shrewd tactics by the insurer in drafting its policy, provided for conditions which are just and reasonable for both the insured and the insurers, and wanted them applied and not defeated by its own legislative scheme. While some may not agree with the position taken by the legislature, absent any challenge on constitutional grounds, the interpretation process cannot be used to avoid the legislative scheme.
85 Professor J. A. Rendall adopted the same position in his annotation to the decision Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18, at p. 20:
It makes very good sense to include a statutory provision, by way of judicial discretion, to control the freedom of contract by which insurers might otherwise impose harsh terms in the form of policy exclusions and conditions. This, surely, is precisely what s. 238(1) [equivalent to s. 171 of the Nova Scotia Insurance Act] does and is directed at doing. It seems obvious that s. 238(1) was never intended to give a Court any role in deciding whether one of the statutory conditions, mandatorily incorporated as part of every fire insurance policy by s. 235(1), might be thought to be “unjust or unreasonable”. The statutory conditions have been developed according to a legislative judgment of what insurance contract terms are “just and reasonable”, and those conditions are made part of every contract by a clear legislative statement in s. 235(1). [Emphasis added.]
86 Moreover, statutory conditions are a means of attaining one of the foundational objectives of the statutory regulation of the insurance industry: limiting the freedom of contract enjoyed by insurance companies. In this regard, Professor Boivin, at pp. 59-60, when addressing this legislative objective, expressed the following opinion:
[This] legislative objective . . . is designed to compensate for the fact that insurance consumers have only weak bargaining power compared to insurers. Insurance policies are contracts of adhesion in many important respects. Pre-contractual discussions tend to focus on the object of the insurance, the amount of coverage, and the resulting premium. However, the issues that give rise to most litigation — the conditions, limitations, and exclusions of coverage — are themselves imposed without negotiation. But this is only half the problem from the perspective of consumers. Knowledge is another disparity between insurer and insured. . . .
Given this reality, the formation and enforcement of a contract constitute important dimensions of provincial and territorial insurance regulation concerns. . . .
“Statutory conditions” constitute another important feature of this statutory framework. . . . [S]tatutory conditions are specific contractual provisions drafted by the legislature and deemed to be part of every contract issued in the corresponding province or territory that deals with accident and sickness insurance, automobile insurance, or fire insurance. These conditions can be compared to the implied conditions imposed by the judiciary, with the important exception that they are beyond the reach of the contracting parties. Insurers cannot make any additions, omissions, or variations with respect to these conditions. Regarding classes of insurance other than accident and sickness, automobile, or fire, the provincial and territorial legislatures have opted for a more conventional form of statutory intervention: they confer rights and impose corresponding obligations. [Underlining added.]
87 In my view, it is clear from the object of the statutory conditions that the legislature wanted to elevate a number of conditions to supreme grounds and make them untouchable by both insurers and insured. I contend that s. 171 was enacted as a complement to the mandatory statutory conditions rather than a curative provision applicable to such statutory conditions. The objective of the legislature was to frame the fire insurance contract and to shield the insured from the abuse and oppression of insurance companies (Rendall, at p. 20). In fact, the protection of the insured is provided for by two components: the mandatory statutory conditions (s. 167) and the relief provision (s. 171). Each has a particular end; together, they create a whole.
88 McLachlin C.J. argues that the presumption that the legislature enacted statutory conditions which are just and reasonable can be rebutted and refuted by examining the consequences the condition may create in a specific case. I believe this is contrary to the very wording of the provisions and the legislative intent. When dealing with consequences, the legislature was clear, as I will demonstrate shortly in discussing s. 33. I would add that in any event, the insured in the present case were not able to establish that the provision was unfair on its face or in its application. If it is unfair to apply Statutory Condition 4 when there is no misconduct by the insurer and nothing unusual about the breach of the condition or the fire, it is no longer a mandatory term of the contract. It cannot be that the unfairness simply results from the fact that the contractual breach occurred prior to the fire, for there would then be no meaning to the avoidance provision. The material change in the risk is a feature that is provided in order to exclude the necessity of establishing causality. There is no merit to the argument that it is unfair for the insurer to apply Statutory Condition 4 because there is no causality between the breach and the fire; the same could be said of most statutory conditions. In my view, the history of s. 171 and its association with s. 33 precludes any inquiry into the effects of a statutory condition. Otherwise, every single one of the 15 statutory conditions would potentially be unreasonable or unjust, an outcome that would be inconsistent with the purpose of the Act, and create great uncertainty for both parties.
89 In addition, I am of the view that policy concerns, which I will address in section VI of my reasons, go against a rebuttal of the presumption. One may be naturally inclined to protect the insured against the corporate entity in every case; nevertheless, one must not forget that the legislature has taken the steps it considered necessary to protect the insured and to assure fairness to both parties to the contract. It specifically took into consideration in drafting the mandatory provisions that the insurance company has no other choice but to rely on the information that it receives from the insured.
90 Thus, I conclude that the scheme in Part VII of the Insurance Act can only be interpreted as giving discretion to the courts to grant relief under s. 171 where a “contractual” condition is held to be unjust or unreasonable. Section 171 should not apply to statutory conditions because it will undermine them and deny the complementary approach of ss. 167 and 171 of the Insurance Act.
(b) Part II — Insurance Contracts in the Province
91 Part II of the Insurance Act includes general provisions applicable to all insurance contracts in Nova Scotia (subject to certain exceptions which do not apply in this case) where not inconsistent with some other provision of the Act. Therefore, Part II applies to contracts of fire insurance.
92 Part II prescribes various aspects of the insurance contracts including delivery of the insurance policy (s. 18), the effect of default in paying a premium (s. 21) and the submission of forms for proof of loss (s. 23). I want to draw attention to s. 33, the provision for “relief against forfeiture”. Section 33 provides that a court may relieve against forfeiture or avoidance of the insurance where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured (or other matter or thing required to be done or omitted by the insured), where the court considers it inequitable that the insurance should be forfeited or avoided. The insurer evokes a parallel between s. 33 and s. 171 which McLachlin C.J. dismisses quickly on the basis that the legislative histories and objects of the two provisions are different. I strongly disagree. Actually, I contend that the history of the sections corroborates their complementary nature. I will deal with this external factor later. For now, an examination of the language of s. 33 is indispensable:
33 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss, and a consequent forfeiture or avoidance of the insurance in whole or in part, and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
93 The language in s. 33 is explicit and clear: it permits relief against forfeiture of the insurance for imperfect compliance with a “statutory” condition after a loss. In contrast, s. 171 permits a “stipulation, condition or warranty” in a contract not to bind the insured if it is held to be unjust or unreasonable by the court. Compliance and nature of the provision are distinct notions, and the legislature did not ignore this. Another important divergence between the two sections is the determination of inequity: on the one hand, s. 33 speaks of what the courts consider inequitable in the consequences of the non-compliance with the statutory conditions; on the other hand, s. 171 deals only with unjust conditions, not their consequences. The distinctions between these two types of relief provisions which apply to fire insurance contracts cannot be ignored or modified by judicial interpretation: it would be to feed into s. 171 the same language that the legislature only chose to include in s. 33.
94 While today ss. 33 and 171 are not in the same part of the Insurance Act (this was not the case not so long ago, as evidenced from the external context to be discussed later), they are a good indication of the intention of the legislature. One cannot interpret the explicit language in s. 33 as referring to statutory conditions but fail to notice the absence of such explicit language in s. 171. Their language is distinct.
(c) Other Provisions
95 The insurer contends that since the legislature has explicitly referred to “statutory conditions” throughout Part II, Part V and Part VII of the Insurance Act, if it had intended the phrase “stipulation, condition or warranty” in s. 171 to apply to “statutory conditions”, an explicit reference would have been included. The pattern in the use of a phrase in other parts of an Act is a factor relied upon by the courts to determine the context in statutory interpretation. It is presumed that the legislature uses language carefully and consistently so that within a statute or other legislative instrument the same patterns of expression have the same meaning, and different patterns have different meanings: Sullivan, at pp. 162-66. An example of the application of this presumption is found in this Court’s decision in Ulybel Enterprises, at para. 42, where Iacobucci J. writes:
Indeed, had Parliament intended the phrase “any proceeds realized from its disposition” to be limited to proceeds of perishables in ss. 71(1) and 72(1), it could have done so expressly, as it did in s. 70(3), as well as ss. 72(2) and 72(3). Instead, a pattern in the use of the phrase at issue is evident whereby in some sections it is expressly limited to the proceeds of perishables and in other sections it refers more generally to all forms of property seized under the Act and proceeds thereof.
(See also Ordon Estate v. Grail, [1998] 3 S.C.R. 437, at para. 60.)
96 McLachlin C.J. finds little precision in the use of the term “condition” when reading the Act as a whole (para. 18). I disagree. In my view, although the use of the word “condition” might not be totally unequivocal, one must presume, as I indicate above, that the legislature is consistent and coherent. In the present case, when the legislature wants to refer to “statutory conditions”, it does so expressly. In this regard, I note eight examples extracted from the Act:
Notice to insured or insurer
29 Subject to any statutory condition, where the mode of giving a notice for any purpose is not provided, the notice may, in the case of notice by an insurer, be given by mailing it by registered letter to the last known address of the insured on its records or, if there is no such record, to the address of the insured given in his application or by delivering it to the insured and, in the case of notice by an insured, be given by mailing it by registered letter to the last known address of the insurer in the Province or failing that by mailing it by registered letter or delivering it to a licensed agent of the insurer.
Court may relieve against forfeiture
33 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss, and a consequent forfeiture or avoidance of the insurance in whole or in part, and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
Statutory conditions
74 Subject to Section 75, the conditions set forth in the Schedule to this Part shall be deemed to be part of every contract other than a contract of group insurance and shall be printed on or attached to the policy forming part of such contract with the heading “Statutory Conditions”.
Omission of statutory condition
75 (1) Where a statutory condition is not applicable to the benefits provided by the contract it may be omitted from the policy or varied so that it will be applicable.
Notice of statutory conditions
76 In the case of a policy of accident insurance of a non‑renewable type issued for a term of six months or less or in relation to a ticket of travel, the statutory conditions need not be printed on or attached to the policy if the policy contains the following notice printed in conspicuous type:
Notwithstanding any other provision herein contained, this contract is subject to the statutory conditions in the Insurance Act respecting contracts of accident insurance.
Imperfect compliance with statutory condition
102 Where there has been imperfect compliance with a statutory condition as to any matter or thing to be done or omitted by the insured, person insured or claimant with respect to the loss insured against and a consequent forfeiture or avoidance of the insurance in whole or in part, and a Court before which a question relating thereto is tried deems it inequitable that the insurance should be forfeited or avoided on that ground, the Court may relieve against the forfeiture or avoidance on such terms as it deems just.
“Policy” defined
167 (1) In this Section, “policy” does not include interim receipts or binders.
Statutory conditions
(2) The conditions set forth in the Schedule to this Part shall be deemed to be part of every contract and shall be printed on every policy with the heading “Statutory Conditions” and no variation or omission of or addition to any statutory condition shall be binding on the insured.
Notice of cancellation or alteration
168 . . .
(2) The length of and manner of giving the notice under subsection (1) shall be the same as notice of cancellation to the insured under the statutory conditions in the contract.
97 The latter demonstrates how the legislature is not shy to explicitly refer to the specific type of condition in other sections of the Act. This additional factor further steers the analysis toward the non-application of s. 171 to statutory conditions.
(3) External Context: Legislative History
98 According to Professor Sullivan, “[o]ne of the most effective ways of establishing legislative purpose is to trace the evolution of legislation from its inception, through successive amendments, to its current form”: Sullivan, at p. 218. The author asserts as well, at p. 218:
Tracing may expose the legislature’s past decision to adopt a new policy or strike out in a new direction; it may reveal a gradual trend or evolution in legislative policy; or it may reveal the original purpose of legislation and show that this purpose has remained constant through successive amendments to the present. [Emphasis added.]
99 It is well established that the legislative evolution may be used to interpret a statute as prior enactments may throw some light on the intention of the legislature in repealing, amending, replacing or adding to a statute: Ulybel Enterprises, at para. 33; Gravel v. City of St-Léonard, [1978] 1 S.C.R. 660, at p. 667; Sullivan, at pp. 471-72.
100 The insurer, in its submissions to this Court, detailed the legislative evolution of s. 171. I reproduce in Appendix B the different enactments of the section from 1899 to the last consolidation in 1989. The evolution of s. 171 shows how predecessor sections have always targeted contractual provisions as opposed to statutory conditions.
101 The Chief Justice adopts the view that the only accepted canon of interpretation is the one that presumes “that amendments are specifically intended to change the substance of an enactment”: Côté, at p. 421. I respectfully disagree. While there might be a presumption of substantive change at common law, it is a presumption which can be rebutted: see Sullivan, at p. 473; Côté, at p. 423. Hence, it is erroneous to presume that in all circumstances legislative amendments signal a change in the law. In fact, amendments could be adopted in order to clarify and educate rather than alter the interpretation of the legislation or, as this Court put it in Janzen v. Platy Enterprises Ltd., [1989] 1 S.C.R. 1252, at p. 1286, “to make express and explicit what had previously been implicit”.
102 An example of only “formal change” (contrary to “substantive change”) is found in the reasons of Wilson J. in Skoke-Graham v. The Queen, [1985] 1 S.C.R. 106. In that case, this Court had to interpret the expression “anything that disturbs the order or solemnity” in s. 172(3) of the Criminal Code, R.S.C. 1970, c. C-34, and more specifically decide whether a non-disorderly act that nonetheless disturbed other worshippers because of its ideological significance should be prohibited by the section. Before concluding that it should not, Wilson J. relied on the legislative evolution of the section. She writes at pp. 130-31:
It is noteworthy that in legislation dating from 1869 disturbance, interruption or disquiet of a religious assembly was only punishable if it took place “by profane discourse, by rude or indecent behaviour, or by making a noise”. The Crown argues that the 1953‑54 amendment to the section, as part of a major revision to the Criminal Code, broadened the section and such restrictions are no longer applicable. This does not, however, appear to have been Parliament’s intention.
It seems to me that all Parliament intended to do in enacting s. 161(3) of the 1953‑54 Code was to use general rather than specific words to cover the types of things which were considered capable of disturbing the order or solemnity of a meeting. I do not believe they were seeking to expand the scope of the provision to cover peaceful acts of defiance of religious authority. I am reinforced in this view by the fact that s. 161 of the 1953‑54 Code (like s. 172 of the present Code) is one of a series of offences falling under the heading “Disorderly Conduct”. I believe, therefore, that the word “anything” must be read down so as to extend only to things in the nature of profane discourse, rude or indecent behaviour or making a noise. Where, as in this case, the appellants’ acts were peaceful and orderly I would be reluctant to find that an offence had been committed even if the acts did disturb the order or solemnity of the service to the minimal extent found by the trial judge. [Emphasis added.]
103 Thus, it is possible to conclude that “even dramatic changes in wording are meant to simplify or otherwise modernize the style rather than to change the substance of the provision”: Sullivan, at p. 477; see also R. v. McIntosh, [1995] 1 S.C.R. 686, at paras. 62-75. I maintain this is the case in the present appeal.
104 During its history, as it is evidenced from Appendix B, the relief provision, s. 171, has taken three different forms: one in 1899, another in 1930 and a last one in 1956. In my view, the forms as enacted in 1899 and in 1930 are clear and explicit: the legislature was targeting contractual provisions. The reference to “any condition other than or different from the conditions set forth in section 2 of this Act” in 1899 and then to “the policy may contain a clause not inconsistent with any statutory condition” in 1930 confirm the distinction between statutory and contractual conditions. Both “condition” and “clause” referred to contractual provisions negotiated between the parties, these provisions being different from the statutory conditions mandatorily included in the insurance policy by the legislature. While the legislature may have labelled the contractual provisions from 1899 to 1989 “stipulations”, “clauses”, “conditions” and “warranties”, I contend that at no time did it intend to include statutory conditions under s. 171.
105 C. Brown and J. Menezes in the second edition of their book Insurance Law in Canada (1991), at p. 178, explain why this remedial section evolved over the years:
The much reduced list of statutory conditions remains an unalterable part of the policy as it has been since the 1920’s. However, since far fewer matters are now covered by statutory conditions the necessity and freedom of the insurer to deal with the items not mentioned has increased. As a reflection of this, the wording of the section dealing with judicial discretion over the terms of fire policies has been widened so as to preserve that mechanism of control.
Later, at p. 188, they state:
The use of a statutory contract to protect against abuses by insurers in the drafting of policies clearly had to suffer the consequences of being overly rigid and sometimes unworkable. The courts mitigated this rigidity by drawing on the distinction between conditions in a policy and the description of the risk. Where a term in the policy with respect to the use or location of the subject matter seemed eminently reasonable and just, the courts could by-pass the failure to meet the formal requirements with respect to variation of statutory conditions by characterizing the term as part of the description of the risk.
106 Indeed, the number of statutory conditions went from 25 in 1900 to 15 in 1956, the latter being the date when the legislature modified s. 171 to its present form. Hence, with a relatively smaller number of statutory conditions that are mandatory, the legislature, by amending the discretionary relief under s. 171, sought to protect the insured from the increase in contractual conditions that would ensue.
107 Hence, s. 171 was always directed at contractual conditions or, as referred by the Chief Justice, optional conditions.
108 An inquiry into the legislative evolution of s. 33 is also very revealing. The section pinpointed in time is reproduced in Appendix B. Foremost, it is important to note that the relief from forfeiture provision, now s. 33, was in the past a companion to the provision under scrutiny in what was a statute exclusively applicable to fire insurance. From 1899 to 1968, these two provisions were only sections apart, when not one after the other.
109 In 1930, the legislature modified s. 33 (then s. 10) to what is now its current form and more specifically qualified the condition with the word “statutory”. At no time did the legislature introduce the same amendments to s. 171, not even in 1956 when the legislature modified s. 171 to adopt the present language and format. It is only in 1966 that the legislature, in s. 2 of An Act to Amend Chapter 9 of the Acts of 1962, the Insurance Act, S.N.S. 1966, c. 79, decided to move s. 33 to Part II of the Insurance Act and thus give the section application over other classes of insurance beside fire insurance. This amendment was proclaimed on December 17, 1968 and came into force on the 1st day of January 1969. Nonetheless, this does not change the fact that from 1956 to 1968 (and this after the consolidation of all the insurance legislation in 1962 into one Act), both relief sections were found in the same part of the Act and each had distinct language. They were obviously complementary. Besides, the legislature is presumed to avoid superfluous or meaningless words: Sullivan, at p. 158. In this case, it is clear that the legislature intended to use distinct language differentiating both relief sections.
110 Section 33 is very specific; it applies to statutory conditions. It is also very wide in its scope, referring to “the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss”. The equivalent provision in Saskatchewan has been given a broad interpretation by this Court in Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778. To extend the application of s. 171, as suggested by the Chief Justice, to cover statutory conditions and the effect of their application in individual cases, would change its character and considerably diminish its value and utility. In my view, the Chief Justice’s reasoning leads to the overriding of the legislative intent regarding the character of two parallel and distinct provisions.
111 In sum, the immediate, broader and external context demonstrate the intention of the legislature to establish a scheme in which s. 171 does not apply to statutory conditions. Section 171’s role as a companion to the Statutory Conditions and s. 167(2) is depicted through the evolution of the impugned section. Thus, each section has a special function, and altering their specific exercise would destroy their purpose, but more importantly annihilate the harmony underlying the complete insurance scheme.
V. Precedent
112 Section 171 and its equivalent in the other provinces has been very rarely tested: Baer and Rendall, at p. 642. The insured argue that the line of cases on the question of relief supports their position.
113 I am of the view that these decisions fail to support their argumentation. A number of those cases, apart from being distinguishable on the facts, dealt with a “vacancy exclusion clause” and not a statutory condition (see Hirst v. Commercial Union Assurance Co. of Canada (1978), 8 B.C.L.R. 396 (S.C.), aff’d (1979), 70 B.C.L.R. (2d) 361 (C.A.)), or, in some cases, both with a statutory condition and an exclusion clause (see Nahayowski v. Pearl Assurance Co. (1964), 45 W.W.R. 662 (Alta. S.C.); 528852 Ontario Inc. v. Royal Insurance Co. (2000), 51 O.R. (3d) 470 (S.C.J.)). Not only was an exclusion clause not at issue in this case, but there was no finding regarding its presence in the policy, its applicability or its breach.
114 Moreover, the decisions cited by the insured dealt with the operation of the principles in s. 171 — asking whether a situation was unjust or unreasonable — rather than the nature of the section on statutory conditions (see Hirst (C.A.); 528852 Ontario). McLachlin C.J. refers to the decision of the Alberta Court of Queen’s Bench in Krupich v. Safeco Insurance Co. of America (1985), 16 C.C.L.I. 18. First, the court in Krupich addressed the issue of the relief provision only in obiter, after having concluded that the insured had not made a misrepresentation. This occurred in the context of an examination of the consequences of the application of the statutory conditions: Krupich, at pp. 27-28. This lower court decision was heavily criticized by Professor Rendall in the annotation to Krupich; he maintained, at p. 21, that the reasoning of the Alberta Court of Queen’s Bench was very unsound and created confusion between contractual provisions (policy exclusion) and statutory conditions:
It is not entirely clear whether Moshansky J. intends to say that he is exercising the discretion given him by s. 238(1) [equivalent to s. 171 of the Nova Scotia Insurance Act] to defeat a defence under statutory condition 1, a defence under statutory condition 4, or a defence based on a contractual term removing coverage in respect of vacancy extending beyond 30 days. Quite clearly, it is only the third defence which is amenable to Moshansky J.’s discretion under s. 238(1). One would be inclined to think that Moshansky J.’s last statement concerning the injustice or unreasonableness of giving effect to “the exclusion of coverage by reason of non-occupancy” is the dominant passage and conveys the meaning that he is only purporting to give relief under s. 238(1) from the effect of a contractual exclusion clause. Unhappily, there is the earlier passage in which Moshansky J. quite clearly says that he would apply s. 238(1) even if he had found a material non-disclosure which would render the contract voidable at the instance of the insurer.
(The same language was used by MacAdam J. of the Supreme Court of Nova Scotia who concluded that it would be both unjust and unreasonable to give effect to the exclusion of coverage by reason of the non-occupancy (para. 63).)
115 Thus, I echo Professor Rendall’s comment and maintain that Krupich was wrongfully decided; in any event, the comments of the Alberta Court of Queen’s Bench were obiter.
116 Consequently, I conclude, as previously observed, that this is an appeal where none of the previously decided cases can shed light on the issue and act as precedent.
VI. Policy Concerns
117 In this appeal, the alleged good intentions of the insured cannot have any impact on the determination of the applicability of s. 171 to statutory conditions. Ignorance of the obligation to disclose (which the insured ought to have known) or the failure to appreciate its materiality will not excuse the insured: E. R. H. Ivamy, General Principles of Insurance Law (6th ed. 1993), at p. 174. The fact that the insured did not advise the insurer that the property was vacant because they did not know they had to disclose the information cannot impact on the application of s. 171 to statutory conditions because it would in fact nullify the conditions. By the same token, it is not alleged that Halifax Insurance acted in bad faith when handling the claim of the insured. I reiterate that the consequences of Statutory Condition 4 are not to be examined under s. 171; what must be examined is the condition itself. The conduct of the insured could only be a factor if the Court determined that the relief provision was applicable to statutory conditions; the Court would then have to determine if, in the present case, Statutory Condition 4 was just and reasonable. Considering my conclusion on this first issue, there is no need to embark on the second enquiry.
118 McLachlin C.J. posits that, because s. 171 is unclear and remedial in nature, it should be interpreted in favour of the insured. While the remedial aspect of a section can be relevant in certain circumstances, I do not believe it holds any weight in this situation. In the insurance business, all players, insured as well as insurers, must fulfill their obligations in order to maintain a coherent and definite system. The insurer needs to be able to rely on the insured to provide it with all the material facts regarding the risk. The information that needs to be disclosed by the insured under Statutory Condition 4 is what he or she actually knows or ought reasonably to know. Evidently, the information disclosed is personal and not readily available to the insurer. Hence, how is the insurer supposed to learn of this information? The insurer may never discover the truth until after the loss has been incurred. The insurer has no other tool to determine any change in the risk. Some authors argue that facts which are material in ordinary circumstances may become immaterial if they could have been discovered by the insurer through inquiry: Ivamy, at pp. 154-55. While this may be the general rule, in the case at bar it would be inconceivable and unfair to compel the insurer to contact the insured on a regular basis to confirm no material change to the risk. Furthermore, one needs to remember that the insured were landlords. This business venture which they took upon themselves entailed obligations which they could not escape. Thus, this is not a case of an insurer neglecting the information it received and shutting its eyes to the reality. Halifax Insurance was not wilfully blind; on the contrary, it was completely in the dark.
119 In the same vein, I adopt the comment of Oland J.A. where she writes, at para. 56:
Moreover, the wording of Statutory Condition 4 clearly shows that it is the responsibility of the insured to notify the insurer. This reflects the reality that, except in unusual circumstances, the insurer will not otherwise become aware of a change in the risk. The insurer’s ability to assess risk and to decline or make adjustments to coverage is an essential feature of the underwriting aspect of insurance. It is also likely that many insureds who think a change might be contrary to Statutory Condition 4 or any other term of their insurance already act cautiously by contacting their insurers. [First emphasis added; second emphasis in original.]
120 The insurer and the insured need certainty regarding the contract into which they have entered. Their obligations must be definite and precise. They have to be able to rely on the insurance contract without fear that an intervention of the court will modify their rights and obligations.
121 I am of the view that the interpretation of the Insurance Act and the jurisprudence do not support the insured’s position.
VII. Conclusion
122 The Insurance Act is a very precisely drafted piece of legislation that is meant to create balance and equilibrium between the duty of disclosure and the tendency toward oppressiveness which freedom of contract permitted (Baer and Rendall, at p. 419). Nonetheless, this structure is not a constitutional requirement and, in the case at bar, the parties did not raise a constitutional issue.
123 I would dismiss the appeal with costs and affirm the decision of the Court of Appeal.
APPENDIX A
Insurance Act, R.S.N.S. 1989, c. 231
33 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss, and a consequent forfeiture or avoidance of the insurance in whole or in part, and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
167 . . .
(2) The conditions set forth in the Schedule to this Part shall be deemed to be part of every contract and shall be printed on every policy with the heading “Statutory Conditions” and no variation or omission of or addition to any statutory condition shall be binding on the insured.
171 Where a contract
(a) excludes any loss that would otherwise fall within the coverage prescribed by Section 163; or
(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property,
the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court before which a question relating thereto is tried.
APPENDIX B
1899 — The Fire Insurance Policy Act, S.N.S 1899, c. 30
[In certain cases conditions to be null and void]
26. In case a policy is entered into or renewed containing or including any condition other than or different from the conditions set forth in section 2 of this Act, if the said condition so contained or included is held by the court or judge before whom a question relating thereto is tried to be not just and reasonable, such condition shall be null and void.
[Provision, where by reason of necessity, mistake, etc., conditions as to proof not strictly complied with]
27. (1) Where by reason of necessity, accident or mistake, the conditions of any contract of fire insurance on property in this province as to the proof to be given to the insurer after the occurrence of a fire, have not been strictly complied with; or where, after a statement or proof of loss has been given in good faith by or on behalf of the assured in pursuance of any proviso or condition of such contract, the insurer, through its agent or otherwise, objects to the loss upon other grounds than for imperfect compliance with such conditions, or does not within a reasonable time after receiving such statement or proof, notify the assured in writing that such statement or proof is objected to, and what are the particulars in which the same is alleged to be defective, and so from time to time; or where, for any other reason, the court or judge before whom a question relating to such insurance is tried or inquired into, considers it inequitable that the insurance should be deemed void or forfeited by reason of imperfect compliance with such conditions, no objection to the sufficiency of such statement or proof or amended or supplemental statement or proof (as the case may be) shall, in any of such cases, be allowed as a discharge of the liability of the company on such contract of insurance wherever entered into.
1900 — The Fire Insurance Policies’ Act, R.S.N.S. 1900, c. 147
[In certain cases conditions to be null and void]
6. Where a policy is entered into or renewed containing or including any condition other than or different from the conditions set forth in the first schedule to this Chapter, if the condition so contained or included is held by the court or judge before whom a question relating thereto is tried to be not just and reasonable, such condition shall be null and void.
[Provision, where by reason of necessity, mistake, etc., conditions as to proof not strictly complied with]
7. In any one of the following cases: —
(a) Where by reason of necessity, accident or mistake, the conditions of any contract of fire insurance on property in this province as to the proof to be given to the insurer after the occurrence of a fire, have not been strictly complied with; or
(b) Where, after a statement or proof of loss has been given in good faith by or on behalf of the assured in pursuance of any proviso or condition of such contract, the insurer, through its agent or otherwise, objects to the loss upon other grounds than for imperfect compliance with such conditions, or does not within a reasonable time after receiving such statement or proof, notify the assured in writing that such statement or proof is objected to, and what are the particulars in which the same is alleged to be defective, and so from time to time; or
(c) Where, for any other reason, the court or judge before whom a question relating to such insurance is tried or inquired into, considers it inequitable that the insurance should be deemed void or forfeited by reason of imperfect compliance with such conditions,
no objection to the sufficiency of such statement or proof, or amended or supplemental statement or proof (as the case may be) shall, in any of such cases, be allowed as a discharge of the liability of the company on such contract of insurance wherever entered into.
1923 — The Fire Insurance Policies’ Act, R.S.N.S. 1923, c. 211
[Conditions, when null and void]
6. Where a policy is entered into or renewed containing or including any condition other than or different from the conditions set forth in the first schedule to this Chapter, if the condition so contained or included is held by the court or judge before whom a question relating thereto is tried to be not just and reasonable, such condition shall be null and void.
[Provision, where by reason of necessity, mistake, etc., conditions as to proof not strictly complied with]
7. In any one of the following cases: —
(a) where by reason of necessity, accident or mistake, the conditions of any contract of fire insurance on property in this province as to the proof to be given to the insurer after the occurrence of a fire, have not been strictly complied with; or
(b) where, after a statement or proof of loss has been given in good faith by or on behalf of the assured in pursuance of any proviso or condition of such contract, the insurer, through its agent or otherwise, objects to the loss upon other grounds than for imperfect compliance with such conditions, or does not within a reasonable time after receiving such statement or proof, notify the assured in writing that such statement or proof is objected to, and wha[t] are the particulars in which the same is alleged to be defective, and so from time to time; or
(c) where, for any other reason, the court or judge before whom a question relating to such insurance is tried or inquired into, considers it inequitable that the insurance should be deemed void or forfeited by reason of imperfect compliance with such conditions,
no objection to the sufficiency of such statement or proof, or amended or supplemental statement or proof (as the case may be) shall, in any of such cases, be allowed as a discharge of the liability of the company on such contract of insurance wherever entered into.
1930 — The Fire Insurance Policy Act, 1930, S.N.S. 1930, c. 7
[Where rate affected or modified by user and etc.]
11. Where the rate of premium is affected or modified by the user, condition, location or maintenance of the insured property, the policy may contain a clause not inconsistent with any statutory condition setting forth any stipulation in respect of such user, condition, location or maintenance, and such clause shall not be deemed a variation of any statutory condition. Such clause shall be binding on the insured only in so far as it is held by the court before which a question relating thereto is tried to be just and reasonable.
[Where imperfect compliance with statutory conditions as to proof, court may relieve against forfeiture]
10. In any case where there has been imperfect compliance with a statutory condition as to the proof or (sic) loss to be given by the insured and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the court deems it inequitable that the insurance shall be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as may seem just.
1954 — Fire Insurance Policy Act, R.S.N.S. 1954, c. 100
[Where rate affected or modified by user and etc.]
11 Where the rate of premium is affected or modified by the user, condition, location or maintenance of the insured property, the policy may contain a clause not inconsistent with any statutory condition setting forth any stipulation in respect of such user, condition, location or maintenance, and such clause shall not be deemed a variation of any statutory condition. Such clause shall be binding on the insured only in so far as it is held by the court before which a question relating thereto is tried to be just and reasonable.
[Where imperfect compliance with statutory conditions as to proof, court may relieve against forfeiture]
10 In any case where there has been imperfect compliance with a statutory condition as to the proof or (sic) loss to be given by the insured and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the court deems it inequitable that the insurance shall be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as may seem just.
1956 — Fire Insurance Act, S.N.S. 1956, c. 6
[Relief from unjust or unreasonable provisions]
16 Where a contract,
(a) excludes any loss that would otherwise fall within the coverage prescribed by Section 5, or
(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property,
the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court before which a question relating thereto is tried.
[Relief from forfeiture]
19 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the court deems it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as may seem just.
1962 — Insurance Act, S.N.S. 1962, c. 9
[Relief from unjust or unreasonable provisions]
124 Where a contract,
(a) excludes any loss that would otherwise fall within the coverage prescribed by Section 113, or
(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property,
the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court before which a question relating thereto is tried.
[Relief from forfeiture]
127 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the court deems it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as may seem just.
1967 — Insurance Act, R.S.N.S. 1967, c. 148
[Relief from unjust or unreasonable provisions]
126 Where a contract,
(a) excludes any loss that would otherwise fall within the coverage prescribed by Section 115, or
(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property,
the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court before which a question relating thereto is tried.
[Relief from forfeiture]
129 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the court deems it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as may seem just.
1989 — Insurance Act, R.S.N.S. 1989, c. 231
[Relief granted by court]
171 Where a contract
(a) excludes any loss that would otherwise fall within the coverage prescribed by Section 163; or
(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property,
the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the court before which a question relating thereto is tried.
[Court may relieve against forfeiture]
33 Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss, and a consequent forfeiture or avoidance of the insurance in whole or in part, and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
Appeal allowed, Bastarache and Charron JJ. dissenting.
Solicitors for the appellants: Kimball Brogan, Wolfville, Nova Scotia.
Solicitors for the respondent: Stewart McKelvey Stirling Scales, Halifax.