Supreme Court of Canada
Travelers Insurance Co. of Canada v. Corriveau et al., [1982] 2 S.C.R. 866
Date: 1982-12-21
Travelers Insurance Company of Canada (Garnishee—Respondent) Appellant;
and
Polydore Corriveau (Plaintiffès-qualités—Appellant)
and
Serge Péloquin (Defendant—Respondent) Respondents.
File No.: 16160.
1982: March 18; 1982: December 21.
Present: Beetz, Estey, McIntyre, Chouinard and Lamer JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Insurance—Motor vehicle accident—Damages—Insurance contract—Nature of additional indemnity under art. 1056c C.C.—Civil Code, art. 1056c.
Pursuant to a judgment against its insured, appellant paid the maximum amount of $35,000 provided for in the contract, plus costs and interest from the date of service. However, appellant refused to pay the indemnity awarded under the second paragraph of art. 1056c of the Civil Code, arguing that under the contract it only had to pay “interest accrued on the amount of its guarantee from the date when the action was instituted”. The Superior Court ruled in favour of appellant, but the Court of Appeal reversed the judgment: hence this appeal.
Held (McIntyre and Lamer JJ. dissenting): The appeal should be dismissed.
Per Beetz, Estey and Chouinard JJ.: The interest which appellant undertook to pay is necessarily the interest which the insured may be ordered to pay; this interest is necessarily that provided for in art. 1056c C.C.; it is in reality damages due to delay; the indemnity contemplated in the second paragraph of that article, determined in the same way as the “interest” in the first paragraph, namely by means of a percentage of the capital sum awarded, is of the same nature as the “interest” mentioned in the first paragraph; and this indemnity is therefore included in the interest which, appellant undertook to pay by its policy. The Highway Victims Indemnity Fund v. Martineau, [1978] 1 S.C.R. 247, is not conclusive in the case at bar.
[Page 867]
Per McIntyre and Lamer JJ., dissenting: This Court decided in Highway Victims Indemnity Fund v. Martineau, [1978] 1 S.C.R. 247, that the word “interest” in s. 14 of the Highway Victims Indemnity Act does not include the indemnity provided for in the second paragraph of art. 1056c C.C. This interpretation will apply to any insurance contract containing a clause written in almost identical terms, and that is the case here. Quite apart from that case, the wording of the insurance contract cannot be disregarded. It is not possible, as the Court of Appeal did, to characterize the indemnity and interest of art. 1056c as moratory damages and then give the word “interest” the meaning of moratory damages when it is used elsewhere, as here in an insurance contract.
[R. v. Nord-Deutsche Versicherungs Gesellschaft, [1971] S.C.R. 849, considered; Highway Victims Indemnity Fund v. Martineau, [1978] 1 S.C.R. 247, distinguished; Girard v. Lavoie, [1975] C.A. 904; Trottier v. British American Oil Co., [1977] C.A. 576; Voyageur (1969) Inc. v. Ally, [1977] C.A. 581; Lauzière v. Demers, [1977] R.P. 120 (C.A.), referred to.]
APPEAL from a judgment of the Quebec Court of Appeal, [1980] C.A. 4, reversing a judgment of the Superior Court, [1978] C.S. 5. Appeal dismissed, McIntyre and Lamer JJ. dissenting.
Alain Létourneau, Q.C., and Pierre Morin, for the appellant.
Louis M. Cossette, for the respondent Corriveau.
English version of the judgment of Beetz, Estey and Chouinard JJ. delivered by
CHOUINARD J.—I have read the reasons for judgment of Lamer J. However, I have come to the opposite conclusion, that the appeal should be dismissed for the following reasons.
In my opinion, the only question raised by this appeal, and I say so with respect, is that stated by Mayrand J.A., who wrote the unanimous judgment of the Court of Appeal, namely: [TRANSLATION] “What is the nature of the additional indemnity awarded under the second paragraph of article 1056c of the Civil Code?”
[Page 868]
Article 1056c of the Civil Code provides:
1056c. The amount awarded by judgment for damages resulting from an offence or a quasi-offence shall bear interest at the legal rate as from the date when the action at law was instituted.
There may be added to the amount so awarded an indemnity computed by applying to the amount, from such date, a percentage equal to the excess of the interest rate fixed according to section 53 of the Revenue Department Act (Revised Statutes, 1964, chapter 66) over the legal interest rate.
The facts are not in dispute. Following a highway accident in which Joseph Corriveau lost his life, respondent Polydore Corriveau, in his capacity as tutor for the victim’s minor children, obtained a judgment against respondent Péloquin for the sum of $53,353.32 [TRANSLATION] “with interest from the date of service plus the indemnity provided for in article 1056c of the Civil Code, and costs”. This judgment was affirmed by the Court of Appeal.
Appellant, the insurer of respondent Péloquin, paid on the latter’s behalf the maximum amount of $35,000 provided for in the contract, interest on that amount at the legal rate of 5 per cent and costs.
Respondent Corriveau then proceeded by a garnishment in the hands of appellant. The latter stated that it had discharged in full the obligations which it had under its insurance contract. Respondent Corriveau contested this negative declaration, contending that appellant owed in addition the indemnity provided for in the second paragraph of art. 1056c C.C.
Respondent Corriveau’s action was dismissed in the Superior Court and allowed in the Court of Appeal. The latter found appellant’s negative declaration to be incorrect and ordered it to pay [TRANSLATION] “the additional indemnity” which respondent Péloquin “was himself ordered to pay in accordance with art. 1056c C.C.” Hence this appeal.
The gist of the relevant clauses of the insurance contract is as follows:
[Page 869]
[TRANSLATION]
CHAPTER A—CIVIL LIABILITY
The Insurer guarantees the Insured […] against the pecuniary consequences of the civil liability which the Insured may incur as a result of the ownership, use or operation of the insured vehicle, and by reason of bodily injuries or material damages sustained by third parties …
…
ADDITIONAL GUARANTEES
In accordance with the provisions of this chapter, the Insurer further undertakes:
…
(4) to pay the costs of any proceeding at law defended by it, and interest accrued on the amount of its guarantee from the date when the action was instituted;
At the hearing appellant raised orally in this Court for the first time a new argument not put forward in the lower courts. This argument may be summarized as follows: this is a contract and the interest which appellant undertook to pay on behalf of its insured is to be found in the contract. Appellant, its counsel argued, undertook to pay [TRANSLATION] “interest accrued on the amount of its guarantee from the date when the action was instituted”. In his submission, therefore, it is the interest on its guarantee that appellant undertook to pay, not the interest which the insured was ordered to pay. In such circumstances, the nature of the indemnity provided for in the second paragraph of art. 1056c C.C. is immaterial, for it is in the contract and in the contract alone that the meaning of the word “interest” is to be found. The rate of interest is not specified in the contract, and since this is an action in contract, it is s. 3 of the Interest Act, R.S.C. 1970, c. I-18, which applies, and the rate is 5 per cent per annum.
In my view this reasoning cannot be accepted for two reasons which are apparent merely from reading the contract. Appellant guarantees respondent [TRANSLATION] “against the pecuniary consequences of the civil liability which the Insured may incur”. These pecuniary consequences comprise the capital sum of $35,000, costs of any proceeding at law defended by the insurer and interest. The latter must be a pecuniary conse-
[Page 870]
quence of the liability incurred by the insured, which implies an obligation imposed on to the latter to pay interest.
Additionally, the interest which appellant undertook to make good is [TRADUCTION] “interest accrued on the amount of its guarantee from the date when the action was instituted”. It is therefore when an action is brought against the insured that the obligation to pay interest arises, as does the obligation of the insurer to pay interest accrued from the date on which an action was instituted. No one would argue that the insurer must pay interest if, at the end of the trial, the action against the insured is dismissed, or that the insurer must pay interest on the balance of its guarantee if the judgment rendered against the insured is for an amount less than that of the guarantee. The clause contains the words [TRANSLATION] “on the amount of its guarantee” in order to limit to this amount that on which the insurer may be required to pay interest: there can be no question of the insurer paying interest on a capital sum exceeding the amount of its guarantee.
In my view it is unquestionably the interest which the insured may be ordered to pay that the insurer has undertaken to make good, limited needless to say to interest on the capital award in fact made, but only up to the amount of the guarantee, which in the case at bar is $35,000.
It thus becomes necessary to consider the source of this pecuniary consequence for the insured, that is the source of the insured’s obligation to pay interest. This source is art. 1056c, added to the Civil Code in 1957, and it is therefore the interest contemplated by this article which the insurer has undertaken to make good.
The first paragraph creates no difficulty in view of the way in which it is worded and the use of the word “interest”. A judgment against the insured carries with it an obligation to pay this interest, and by its contract the insurer has undertaken to make good this interest as a pecuniary consequence of the civil liability of the insured.
It is however necessary to examine the nature of the indemnity provided for in the second para-
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graph, to determine whether it is different or whether it should be treated in a similar fashion to the interest provided for in the first paragraph.
To this end, it is necessary to determine what constitutes interest under the first paragraph.
What the first paragraph in fact provides for is not interest strictly speaking, but an indemnity for delay. There can be no question in a case involving an offence or quasi-offence of interest before judgment, since the damages are not liquidated. This is where the first paragraph of art. 1056c comes in: it provides that the amount awarded shall bear interest and fixes the date from which it begins to run at the date when the action at law was instituted.
What is referred to as interest is more precisely damages due to delay, which the legislator chose to express in terms of a percentage of the capital amount awarded, computed on a yearly basis. It should be added that these damages are awarded for the delay from the time the action was instituted until judgment is rendered. Interest on the judgment itself, once it is rendered, is not at issue here.
In R. v. Nord-Deutsche Versicherungs-Gesellschaft, [1971] S.C.R. 849, this Court had to determine whether the federal government, which had been held liable for a delict in its capacity as the employer of negligent employees, could be ordered to pay the interest mentioned in the first paragraph of art. 1056c C.C. No mention was made of the second paragraph, which was not in effect at the time in question.
As it is established that interest may not be allowed against the Crown unless this is required by contract or provided for by statute, the Court had to determine whether this provision of art. 1056c C.C. applied to a claim against the federal government under the Crown Liability Act, 1952-53 (Can.), c. 30 (now R.S.C. 1970, c. C-38).
The following are the observations made by Pigeon J., at pp. 880-84, in this passage which I feel must be cited in full:
[Page 872]
The next issue to be considered is the allowance of interest of 5 per cent on the amount recoverable, from the date of the filing of the petition of right. The trial judge gave this by application of art. 1056c C.C.:
1056c. The amount awarded by judgment for damages resulting from an offence or a quasi-offence shall bear interest at the legal rate as from the date when the action at law was instituted.
The only question is whether this provision is properly applicable to a claim against the Crown by virtue of The Crown Liability Act. I do not find it necessary to review the numerous authorities that were relied on, the basic principle is, in my view, established as follows by the judgment of this Court in The King v. Carroll, [1948] S.C.R. 126 at 132, [1948] 2 D.L.R. 705:
It is settled jurisprudence that interest may not be allowed against the Crown, unless there is a statute or a contract providing for it.
Nothing else than art. 1056c was relied on as so providing and the only question is whether it is applicable under The Crown Liability Act. The applicability of the article is disputed on two grounds:
1. that it is not in respect of liability for damages in delicts or quasi-delicts;
2. that its enactment is subsequent to the enactment of The Crown Liability Act.
On the first point, one must start from the premise that s. 3 of that Act provides that “the Crown is liable in tort for the damages for which, if it were a private person of full age and capacity, it would be liable …”. By virtue of the definition section, “tort” in respect of any matter arising in the Province of Quebec, means “delict or quasi-delict”. On that basis, it is clear that art. 1056c can have application only if it is to be characterized as an enactment pertaining to liability for damages in delicts or quasi-delicts.
It must first be noted that when enacted, art. 1056c was inserted in the Code as the last provision under the heading “Offences and Quasi-Offences”, in French “Des Délits et Quasi-Délits”. However, the wording is “The amount awarded by judgment for damages … shall bear interest”. Does this mean that the provision really is with respect to interest, not with respect to liability for damages? Such a construction would be unduly literal. It would lose sight of the fact that the so-called interest is in fact nothing but a part of the compensation allowed to the successful claimant. Prop-
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erly speaking, a judgment cannot bear interest before it is rendered. Up to that time, there is in the case of unliquidated damages such as those resulting from a delict or quasi-delict, no fixed sum or debt on which interest can run. The so-called interest is really a part of the judgment debt that is established at the time when the amount is fixed and this debt is made up of
(a) the damages assessed without taking into account the prejudice suffered by the delay in the payment resulting from the necessity of instituting proceedings not merely for recovering the debt but for establishing it;
(b) 5 per cent per annum on (a) from the date of the institution of the proceedings to the date of the judgment, as compensation for the delay.
In determining the legal nature of the enactment in question it is, I think, proper to consider that Parliament has, to the exclusion of the provincial legislatures, sole jurisdiction over interest. Therefore, if art. 1056c was to be characterized as legislation on interest, it would be invalid. Although by claiming interest at 5 per cent from the date of the institution of the proceedings the suppliants clearly indicated that they were relying on this provision, no question was raised respecting its constitutional validity. In Lynch v. The Canada North-West Land Co. (1891), 19 S.C.R. 204, this Court held that legislation directing an additional 10 per cent to be added on municipal taxes unpaid by a certain date was not in relation to interest. It is true that in that case, the word “interest” was not used and the amount did not accrue day by day. Nevertheless, the principle established was that the addition of a percentage on account of delay in the payment of taxes was considered as legislation in relation to taxes, not as legislation in respect of interest. This principle was carried to its logical conclusion and applied to interest on municipal bonds in the case of Ladore v. Bennett, [1939] A.C. 468, [1939] 3 D.L.R. 1, [1939] 3 All E.R. 98, [1939] 2 W.W.R. 566, 21 C.B.R. 1, when the rate of interest was affected by municipal amalgamation legislation. This was held to be municipal law. However, it was held otherwise when the Province of Alberta attempted to reduce by one half the interest on certain provincial guaranteed securities. (Trustees of Lethbridge Irrigation District v. Independent Order of Foresters, [1940] A.C. 513, [1940] 1 W.W.R. 502, [1940] 2 All E.R. 220, [1940] 2 D.L.R. 273).
Of course, special considerations apply in the construction of constitutional provisions and it often happens that a given word is not to be ascribed the same
[Page 874]
meaning in a federal statute as in the BNA Act (see for instance Mitchell v. Tracey (1919), 58 S.C.R. 640 at 650, 31 C.C.C. 410, 46 D.L.R. 520). However, on this point the problem is one of characterization in a context in which, in my view, it seems proper to be guided by similar principles in deciding whether art. 1056c C.C. is legislation in respect of liability for damages in delicts and quasi-delicts or in relation to “interest”. Furthermore, to characterize it as legislation in respect of interest would imply that it is constitutionally invalid in a case in which its constitutional validity is not questioned. It might be noted that no such question arose in the case of Toronto Ry. v. City of Toronto, [1906] A.C. 117, 75 L.J.P.C. 36, referred to by the learned trial judge in a foot-note at p. 239. The statute in that case was a reproduction of a pre-Confederation statute, such as is the case for the original Quebec Civil Code.
Although not directly applicable because they were made in an Admiralty case, the following observations of Lord Selborne in the Khedive case (1882), 7 App. Cas. 795 at 803, [1881-5] All E.R. 342, might be noted respecting the legal characterization of interest on claims for unliquidated delictual damages:
The computation of interest by the registrars, in cases of this class, might, at first sight, seem to imply that there was, in that stage, an ascertained judgment debt, carrying interest. But I think this cannot be a correct view, whatever (in other respects) may be the effect of the decrees under which the Registrars acted. It does not appear to have been the general course of the Court that those decrees should contain any direction as to interest; and I think it more probable that the principle on which interest was computed under them is that mentioned by Mr. Sedgwick in his book on Damages (chapter 15, pp. 373 and 385-7), where he treats of the power of a jury to allow interest, as in the nature of damages, for the detention of money or property improperly withheld, or to punish negligent, tortious, or fraudulent conduct; the destruction of or injury to property involving the loss of any profit which might have been made by its use or employment.
In this case Pigeon J. dissented in part. However, the majority also directed the federal government to pay the interest provided for in the first paragraph of art. 1056c. Ritchie J. wrote, for the majority, at p. 864:
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The damages should bear interest at the rate of 5 per cent from the day of the deposit of the Petition of Right in accordance with the provisions of art. 1056c C.C., s. 3(1)(a) and 2(d) of the Crown Liability Act, 1952-53 (Can.), c. 30 and s. 3 of the Interest Act, R.S.C. 1952, c. 156. In this regard I agree with the careful reasoning of the learned trial judge at pages 232 to 240 of his reasons for judgment.
In his reasons adopted by a majority of this Court, Noël J., at first instance, concluded that ss. 3 and 2(d) of the Crown Liability Act (supra) made art. 1056c applicable to the federal government. He wrote inter alia at p. 239:
It would, I should think, take clearer language than this [s. 18 of the Crown Liability Act] to set aside the right of a claimant from Quebec to obtain compensation for the damages and interest he is entitled to obtain under the laws of that Province and to which the Crown Liability Act refers in order to create the liability of the Crown in such cases. After a careful consideration of this matter, I can indeed reach no other conclusion without disregarding the clear language used in section 3(1)(a) and (b) and 2(d) of the Act. The suppliants will, therefore, be entitled to interest from the date of the deposit of their petition of right at a rate of five per cent (5%) which is the legal rate mentioned in Art. 1056 C.C.
There is a conflict between the reasons of Pigeon J. and those of Noël J. as to the applicability of certain judgments referred to by the latter and the proposition stated by him, that art. 1056c does not create a new right, but only clarifies the way in which the courts must give effect to an existing right. However, in my opinion there is no conflict as to the view taken of art. 1056c by Pigeon J., which is not dealt with by Noël J. It is therefore open to this Court to adopt this view and that is what I would suggest.
As interest under the first paragraph of art. 1056c is in reality damages due to delay, what is the nature of the indemnity which may be awarded under the second paragraph? With respect, in my opinion it is the same. It cannot be anything but damages due to delay. It is not damages which result from the delict itself. The damages resulting from the delict are the object of the amount
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awarded by the judgment, which bears interest. The indemnity is determined in the same way as the interest in the first paragraph, that is by a percentage of the capital sum awarded, computed on a yearly basis. It adds, by a variable formula, to the original percentage of 5 per cent, to take account of the economic situation at the time when the paragraph was adopted in 1971, and in the future. I adopt the following passage from Mayrand J.A. of the Court of Appeal [at p. 6]:
[TRANSLATION] The additional indemnity authorized under art. 1056c of the Civil Code is, so to speak, an incidental and secondary indemnity. It clearly does not correspond to the material or bodily injury suffered by the victim as a direct consequence of the delict or quasi-delict; rather, its purpose is to compensate the victim for the delay in paying him the primary and principal indemnity. Like the legal interest to which it is added, its amount will vary depending on the length of that delay.
The parties further referred the Court to the following judgments of the Court of Appeal: Girard v. Lavoie, [1975] C.A. 904; Trottier v. British American Oil Co., [1977] C.A. 576; Voyageur (1969) Inc. v. Ally, [1977] C.A. 581; Lauzière v. Demers, [1977] R.P. 120 at p. 135. In view of the foregoing reasons it is not necessary to examine these judgments.
There remains to be considered the judgment of this Court in Highway Victims Indemnity Fund v. Martineau, [1978] 1 S.C.R. 247, relied on by appellant, which would seem at first glance to raise a question as to whether this Court has not already ruled on the second paragraph of art. 1056c. The relevant passage from this judgment, at pp. 261 and 262, is as follows:
IV. Other matters
The first paragraph of the order in the trial judgment reads as follows:
Condemns the Defendants jointly and severally to pay to Plaintiff the sum of $148,402.44 with interest at 5% annually from the date of service of the action to December 31st, 1971, and thereafter at 8% annually, the whole with costs of experts and exhibits.
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(1) Counsel for the appellants Jeannette Martineau and Allen Robindaine submitted that, according to art. 1056c of the Civil Code, a supplementary indemnity may be added to the amount awarded to respondent, computed by applying to the amount a percentage equal to the excess (three per cent) over the legal interest rate of the rate of interest fixed according to s. 53 of the Revenue Department Act, R.S.Q. 1964, c. 66, as replaced by the Revenue Department Act, 1972 (Qué.), c. 22, (Order in Council No. 3784-72, Quebec Official Gazette, December 30, 1972), but that appellants Jeannette Martineau and Allen Robindaine could not be condemned to pay interest other than legal interest, in accordance with art. 481 C.C.P. The letter of art. 1056c supports him. This is in reality only a change in the label or description of the excess, but it is possible for this change to affect the relationship between insurer and insured. I would therefore amend the trial judgment to this extent.
…
V. Conclusions
I would dismiss the appeal of Jeannette Martineau and Allen Robindaine with costs, except as follows: amending the decision of the Court of Appeal, I would amend the judgment of the Superior Court by replacing the words “to December 31st, 1971, and thereafter at 8 per cent annually”, in the first paragraph of the order, by the following: “and an additional indemnity of 3 per cent annually on the said sum of $148,402.44 as from January 1st, 1972”; I would allow the appeal of the Highway Victims Indemnity Fund with costs in this Court and in the Court of Appeal, and amending the decision of the Court of Appeal, I would amend the judgment of the Superior Court by replacing the final period by a comma, in the first paragraph, and adding to it the following words: “said condemnation against the Defendant the Highway Victims Indemnity Fund to be limited however to the sum of $35,000 with interest at 5 per cent from the date of service of the action and costs as aforesaid”.
Commenting on this judgment, Mayrand J.A. wrote [at. p. 6]:
[TRANSLATION] In my opinion, this judgment of the Supreme Court does not rule on the nature of the additional indemnity; it simply renders judgment in accordance with “the letter” of art. 1056c, while preserving the “label” used by the Legislator. The judgment notes the problem that may be presented by the true nature of the indemnity as between insurer and
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insured. This problem, which the Supreme Court did not have to resolve in the case cited, is precisely what is at issue here.
It is true that as regards appellants Martineau and Robindaine, the only ones who raised this point, in reality only a change in the label or description of the excess was involved. This is why the first paragraph of the trial judgment was amended as regards them without for all practical purposes amending the order made against them. The amended paragraph, instead of annual interest of 8 per cent, orders them to pay annual interest of 5 per cent and an additional indemnity of 3 per cent per annum.
Beetz J., speaking for the Court, says nothing more on this point. However, without any explanation being given, a further amendment was made to the formal judgment, this time relating to the Indemnity Fund. The annual rate of 8 per cent which had been set by the trial judge was reduced to 5 per cent.
It is possible that, without saying so, this Court was of the opinion that the indemnity mentioned in the second paragraph of art. 1056c was of a different nature from the interest mentioned in the first paragraph, and that for this reason the Fund could not be required to pay it. It is also possible that, in the absence of other submissions to this Court, the latter made this amendment in order to make the judgment conform to the letter of art. 1056c, since s. 14 of the Highway Victims Indemnity Act, R.S.Q. 1964, c. 232, referred to “interest” but was silent as to the indemnity in the second paragraph of art. 1056c. It may also be possible that the Court did not think it advisable to allow the indemnity under the second paragraph, which “may” be added but does not necessarily have to be as the “interest” of the first paragraph must be. This judgment is not conclusive in the case at bar.
I conclude from the foregoing that the interest which appellant undertook to pay, namely “interest accrued on the amount of its guarantee from the date when the action was instituted”, is necessarily the interest which respondent Péloquin may be ordered to pay, limited of course to interest
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which he was in fact ordered to pay and on a capital sum not exceeding the limit of $35,000 of its guarantee; that this interest is necessarily that provided for in art. 1056c C.C.; it is in reality damages due to delay; the indemnity contemplated in the second paragraph of that article, determined in the same way as the “interest” in the first paragraph, namely by means of a percentage of the capital sum awarded, computed on a yearly basis, is of the same nature as the “interest” mentioned in the first paragraph; and that this indemnity is therefore included in the interest which appellant undertook to pay by its policy.
For these reasons, I would dismiss the appeal with costs.
English version of the reasons of McIntyre and Lamer JJ. delivered by
LAMER J. (dissenting)—Joseph Corriveau was struck and killed by the automobile of Serge Péloquin. Polydore Corriveau sued Péloquin in his capacity as tutor for the children of Joseph. The Superior Court ordered Péloquin to pay the sum of $53,353.32, [TRANSLATION] “with interest from the date of service plus the indemnity provided for in article 1056c of the Civil Code, and costs”.
Péloquin was insured with the Travelers Insurance Company of Canada in the sum of $35,000. The clauses of the insurance contract relevant to the case at bar are as follows:
[TRANSLATION]
NATURE AND EXTENT OF COVERAGE
In consideration of the premium agreed upon, and in accordance with the special conditions, the insurer guarantees the insured against the risks expressly mentioned as covered, up to the amounts agreed upon for each.
CHAPTER A—CIVIL LIABILITY
The insurer guarantees the insured, his heirs and assigns, against the pecuniary consequences of the civil liability which the insured may incur as a result of the ownership, use or operation of the insured vehicle, and as a consequence of bodily or material injury sustained by third parties, it being understood that in the context of this guarantee “insured” refers not only to the named insured but also to any person operating the said vehicle, or using the same, with the consent of the named
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insured or of an adult member of the latter’s household, other than a chauffeur or domestic; any person operating any part of the vehicle shall be deemed to make use of the same.
…
SUBSIDIARY GUARANTEES
In accordance with the provisions of this chapter, the insurer further undertakes:
(1)…
(2)…
(3) to be responsible for the defence of any insured in the event of an action involving the latter’s civil liability as the consequence of an insured loss;
(4) to pay the costs of any proceeding at law undertaken by it, and interest accrued on the amount of its guarantee from the date when the action was instituted.
…
CHAPTER C OF THIS CONTRACT PROVIDES FOR THE PAYMENT OF ACCIDENTAL DAMAGE EXCESS
| GUARANTEES |
|
RISKS |
AMOUNT |
PREMIUM |
| Chapter A Civil liability |
DIVISIONS |
Bodily or material injury to third parties |
$ (In addition to costs and interest) by accident, and regardless of the nature of the damage and the number of persons insured |
$ |
The insurance company paid Polydore Corriveau, in his capacity as tutor, the maximum amount provided for in the policy, namely $35,000 of the $53,353.32 awarded by the judgment, plus an amount of $5,439.39 representing interest on this amount from the date of service at the legal rate of 5 per cent, and $2,025.70 as costs. The insurance company made a negative declaration in opposition to the garnishment by the tutor in the amount of $5,492.23. This sum of $5,492.23 represented the amount of the indemnity provided for in art. 1056c of the Civil Code taken from the unpaid balance.
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1056c. The amount awarded by judgment for damages resulting from an offence or a quasi-offence shall bear interest at the legal rate as from the date when the action at law was instituted.
There may be added to the amount so awarded an indemnity computed by applying to the amount, from such date, a percentage equal to the excess of the interest rate fixed according to section 53 of the Revenue Department Act (Revised Statutes, 1964, chapter 66) over the legal interest rate.
It is necessary to reproduce the key portion of this declaration, as both the Superior Court and the Court of Appeal interpreted it as a refusal by the company to pay the additional indemnity ordered by the judge, which in my opinion is incorrect.
[TRANSLATION] 1. On December 8, 1973 the garnishee issued to defendant a policy having No. YYP CA 885184, covering the loss at issue in this matter up to the limit stated in the said policy, namely a capital sum of $35,000.00 with interest at the legal rate on the said sum of $35,000.00, and court costs;
2. Pursuant to the final judgment rendered in this matter, the garnishee has already paid counsel for the plaintiff their legal costs and to plaintiff himself the sum of $35,000.00, plus interest on the said amount at the legal rate, the whole making a total of $40,439.39;
3. The garnishee has accordingly discharged in full the obligations which it has under its insurance contract and therefore makes this negative declaration.
It can be seen from reading the declaration that the company did not refuse to pay the indemnity as such, but felt that, since it was not interest within the meaning of the insurance contract, this portion of the award (the indemnity) should be met from the amount of $35,000. It was actually Mr. Corriveau, and he can hardly be blamed, who saw that the $35,000.00 had been used up and sought to describe the indemnity as interest.
The Superior Court judge, relying on the judgment of this Court in Highway Victims Indemnity Fund v. Martineau, [1978] 1 S.C.R. 247, came to the conclusion that the interest referred to in the Travelers contract, in the absence of any provision
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to the contrary, was legal interest of 5 per cent, and added [TRANSLATION] “if the payment of this additional indemnity were required from the insurer, beyond the limits of its insurance contract, the Court would be imposing on it an obligation which it really did not assume”.
Mayrand J.A., speaking for the Court of Appeal, was of the opinion that the judgment relied on by Larue J. of the Superior Court could not be applied in the case at bar, since as he said [at p. 6]:
[TRANSLATION] In my opinion, this judgment of the Supreme Court does not rule on the nature of the additional indemnity: it simply renders judgment in accordance with “the letter” of art. 1056c, while preserving the “label” used by the Legislator. The judgment notes the problem that may be presented by the true nature of the indemnity in the relationship between insurer and insured. This problem, which the Supreme Court did not have to resolve in the case cited, is precisely what is at issue here.
The Court of Appeal formulated as follows the question which it considered must be answered in order to decide the appeal:
[TRANSLATION] What is the nature of the additional indemnity awarded under the second paragraph of art. 1056c of the Civil Code? That is the only question presented by the case at bar.
Having presented the problem in these terms, Mayrand J.A. distinguished between compensatory damages and those which are moratory, noted that the word “interest” only applied to the latter while the word “indemnity” applied equally to the former and the latter, and concluded, in line with other judgments of the Quebec Court of Appeal (Voyageur (1969) Inc. v. Ally, [1977] C.A. 581; Trottier v. British American Oil Co., [1977] C.A. 576; Lauzière v. Demers, [1977] R.P. 120, at p. 135; Girard v. Lavoie, [1975] C.A. 904), [TRANSLATION] “that the further indemnity authorized by art. 1056c of the Civil Code is in reality additional interest and not an increase in the compensatory damages”.
I would not say that he was in error in his description of the art. 1056c indemnity, though I
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refrain from expressing any opinion on this point, which in my opinion is not at issue in this appeal.
I concur with Mayrand J.A. when he says that, in Highway Victims Indemnity Fund v. Martineau, supra, this Court did not rule on the nature of the additional indemnity under art. 1056c of the Civil Code, but I hasten to add that this case is nonetheless relevant to the question which must be answered in order to decide the appeal at bar, which is not that of determining the nature of the indemnity contemplated by art. 1056c, but determining the meaning and scope of the word “interest” in the Travelers insurance contract. In the case at bar, in specific terms, it is as follows: does the use of the word “interest” in the contract refer to the legal interest of 5 per cent under art. 1056c of the Civil Code, or does it also include the indemnity mentioned in that article?
In Indemnity Fund (taking only the points strictly relevant to the case at bar) the Court was required, inter alia, to determine the limits of the Fund’s liability for the accident caused by an unknown driver. My brother Beetz J., rendering judgment for the Court, agreed with the Fund’s argument that the liability imposed on it by s. 43 of Division XIII of the Highway Victims Indemnity Act, R.S.Q. 1964, c. 232 (hereinafter referred to as the Act) was limited to the amount of financial responsibility required of all motorists, owners, chauffeurs and operators, which is described by s. 14 of the Act as follows:
14. The financial responsibility required by this act amounts, besides interest and costs, to the sum of thirty-five thousand dollars for all damages in the same accident, subject to a deduction of two hundred dollars from all damage to the property of others.
At trial, the Fund was ordered jointly and severally with the two other defendants, Jeannette Martineau and Allen Robindaine, to pay the following:
Condemns the Defendants jointly and severally to pay to Plaintiff the sum of $148,402.44 with interest at 5% annually from the date of service of the action to
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December 31st, 1971, and thereafter at 8% annually, the whole with costs of experts and exhibits.
Dealing with an argument raised by counsel for the co-defendants Martineau and Robindaine, Beetz J., speaking for this Court, said the following:
Counsel for the appellants Jeannette Martineau and Allen Robindaine submitted that, according to art. 1056c of the Civil Code, a supplementary indemnity may be added to the amount awarded to respondent, computed by applying to the amount a percentage equal to the excess (three per cent) over the legal interest rate of the rate of interest fixed according to s. 53 of the Revenue Department Act, R.S.Q. 1964, c. 66, as replaced by the Revenue Department Act, 1972 (Qué.), c. 22, (Order in Council No. 3784-72, Quebec Official Gazette, December 30, 1972), but that appellants Jeannette Martineau and Allan Robindaine could not be condemned to pay interest other than legal interest, in accordance with art. 481 C.C.P. The letter of art. 1056c supports him. This is in reality only a change in the label or description of the excess, but it is possible for this change to affect the relationship between insurer and insured. I would therefore amend the trial judgment to this extent.
Though it is true, as Mayrand J.A. of the Court of Appeal noted, that in considering the case of Martineau and Robindaine this Court only had in view the possibility that this change might affect the relationship between insurer and insured, the effect of this change on the relationship between insurer and insured becomes apparent when Beetz J. disposes of the appeal with respect to the Indemnity Fund.
The Court concluded the judgment as follows:
V. Conclusions
I would dismiss the appeal of Jeannette Martineau and Allen Robindaine with costs, except as follows: amending the decision of the Court of Appeal, I would amend the judgment of the Superior Court by replacing the words “to December 31st, 1971, and thereafter at 8 per cent annually”, in the first paragraph of the order, by the following: “and an additional indemnity of 3 per cent annually on the said sum of $148,402.44 as from January 1st, 1972”; I would allow the appeal of the
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Highway Victims Indemnity Fund with costs in this Court and in the Court of Appeal, and amending the decision of the Court of Appeal, I would amend the judgment of the Superior Court by replacing the final period by a comma, in the first paragraph, and adding to it the following words: “said condemnation against the Defendant the Highway Victims Indemnity Fund to be limited however to the sum of $35,000 with interest at 5 per cent from the date of service of the action and costs as aforesaid”. [Emphasis added.]
The fact that interest is limited to 5 per cent and the additional indemnity of 3 per cent is left to be paid, if possible, from the limiting amount of $35,000, indicates that this Court necessarily decided that the word “interest” in s. 14 of the Act does not include the indemnity provided for in art. 1056c.
The interpretation given by this Court to the word “interest” in s. 14 of the Act where the Fund is concerned will apply to any insurance contract containing a clause written in almost identical terms. Like Larue J., I find that the terms used in the Travelers insurance contract are almost identical to those in s. 14 of the Highway Victims Indemnity Act.
This is not altogether surprising, since s. 9 of the Act requires that “Every liability insurance policy covers responsibility not less in extent than that provided in section 14”. It is clear that the company chose the wording of its contract in keeping with its obligation to guarantee the minimum financial responsibility required by s. 14 of the Act, namely $35,000, plus costs, and interest.
Quite apart from Indemnity Fund, supra, however, I do not see how it is possible to disregard the wording of the insurance contract by finding in favour of respondent.
In Chapter A of the policy, the insurer guarantees the insured against the pecuniary consequences of civil liability which the insured may incur up to the sum of $35,000. When court proceedings are brought against the insured, the company further undertakes [TRANSLATION] “to pay the costs of any proceeding at law undertaken
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by it, and interest accrued on the amount of its guarantee from the date when the action was instituted”.
Both the wording of the contract and the nature of the guarantee must be understood and interpreted in light of the fact that the contractual obligation of the insurance company is to protect its insured against the pecuniary consequences of his delictual liability under the Civil Code, and in particular art. 1056c. I agree that the contract leads to art. 1056c, but the reverse is not true. It is not possible, as the Court of Appeal did, to characterize the indemnity and interest of art. 1056c as moratory damages and then give the word “interest” the meaning of moratory damages when it is used elsewhere, in another statute (for example, s. 14 of the Act), or, as here, in the Travelers contract. The word “interest” could be used in the sense of moratory damages, but this will be determined not from looking at art. 1056c, but from interpretation of the statute or contract.
The contract does not speak of moratory damages. Had it done so the approach taken by the Court of Appeal would have been correct. In that case it would be necessary, as Mayrand J.A. did, to identify the components of 1056c that are moratory damages, since art. 1056c does not use this expression. The contract chose the terms of the legislator, and like him speaks of interest accrued “from the date when the action was instituted”.
With respect, the principles of interpretation of statutes or contracts do not support the approach taken by the Court of Appeal.
In my opinion, the relationship which these indemnities have with interest as moratory damages does not assist us in determining the scope of the insurance sold to Péloquin; that relationship would undoubtedly be relevant to determining the constitutionality of art. 1056c of the Civil Code as to whether it was legislation on the matter of interest; but that is a question which is not before the Court. This Court is not required to determine the nature of the interest provided for in the first paragraph of art. 1056c and of the indemnity in its
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second paragraph in light of the nature of the interest dealt with in s. 91(19) of the Canadian Constitution and s. 3 of the Interest Act, R.S.C. 1952, c. 156. If it were, the Attorneys General of Quebec and Canada would at least have to be given an opportunity to be heard.
For these reasons, I would allow the appeal and restore the judgment of the Superior Court. Appellant did not ask for costs in its submission. In the circumstances, I would only award it costs at first instance and on appeal, but not in this Court.
Appeal dismissed with costs, MCINTYRE and LAMER JJ. dissenting.
Solicitors for the appellant: Pépin, Létourneau et Associés, Montreal; Vézina, Pouliot, L’Écuyer & Morin, Ste-Foy.
Solicitors for the respondent Corriveau: Gagnon, de Billy & Associés, Quebec City.