Supreme Court of Canada
Highway Victims Indemnity Fund v. Gagné et al., [1977] 1 S.C.R. 785
Date: 1975-12-19
Highway Victims Indemnity Fund Appellant;
and
Louis Gagné et al. Respondents.
1975: June 6; 1975: December 19.
Present: Judson, Ritchie, Pigeon, Dickson and Beetz JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Motor vehicles—Indemnity Fund—Prescription of claims—Insurer under winding-up order—Highway Victims Indemnity Act, R.S.Q. 1964, c. 232, ss. 36, 37, 38, 39 and 40—Civil Code, arts. 2262 and 2265.
Following an automobile accident which occurred on May 9, 1964, respondents obtained judgments in the Superior Court on December 24, 1966 against Jacques Guilbert, an automobile owner and driver, for the damages that resulted. Guilbert was insured by the North American Insurance Company against which a winding-up order had been made. On December 5, 1967 respondents submitted to appellant (“the Fund”) statements under oath, made in accordance with s. 37 of the Highway Victims Indemnity Act, attesting that the judgments had not been satisfied, and declaring that no insurer would benefit from the amount claimed. Since the Fund did not pay, respondents brought an action against it on January 20, 1969. Neither the Superior Court nor the Court of Appeal accepted the Fund’s grounds of appeal, namely, that there was prescription or that the action was premature, and they ordered it to pay respondents the amount of the judgments. Hence the appeal to this Court.
Held: The appeal should be dismissed.
Respondents submitted their application to the Fund within one year, as required by s. 36 of the Act. The Act does not set a time limit for bringing actions against the Fund. Paragraph 2 of art. 2262 of the Civil Code which deals with the prescription of actions for bodily injuries is not applicable. Respondents’ action against the Fund was based not on liability, but on the judgment obtained. Therefore art. 2265 C.C., that is prescription by thirty years, is applicable.
In the case of the second ground of appeal, the Court of Appeal properly rejected the theory according to which the Fund was liable to pay only after the claimant had exhausted his remedies against the insurer. There is
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nothing in the Act to justify this argument. The payment by the Fund would not benefit the insurer, since s. 39 of the Act transfers to the Fund all the creditor’s rights without restriction. French legal theory and judicial decisions cannot enlighten us in this matter, since the law in force in France is different. Nor are the explanatory notes accompanying the bill tabled in the Legislative Assembly of any help, since these are parliamentary documents to which the rule of exclusion applies. Since respondents fulfilled the requirements of the Act, the Fund should, on receipt of an application for payment, comply within the time limit provided for.
Even if the remedy against the Fund was subsidiary (which was not admitted), the claimants were dispensed from taking action against the insurer who was under a winding-up order: they were in the same position as a creditor who is dispensed from suing a bankrupt debtor before claiming on a surety bond.
Fonds d’indemnisation v. Federation Insurance Company of Canada, [1972] C.A. 783, distinguished; Romaniuk v. Highway Victims Indemnity Fund, [1967] C.S. 466; Highway Victims Indemnity Fund v. D’Albenas, [1975] C.A. 244; Highway Victims Indemnity Fund and Hartford Insurance Group v. Napier, [1973] C.A. 280; The Attorney General of Canada v. The Reader’s Digest Association. (Canada) Ltd., [1961] S.C.R. 775, referred to.
APPEAL from a decision of the Court of Appeal of Quebec[1], affirming a judgment of the Superior Court[2] ordering appellant to make payment. Appeal dismissed.
Guy Gilbert, Q.C., for the appellant.
André Drouin and Camille Antaki, for the respondents.
The judgment of the Court was delivered by
PIGEON J.—The appeal is against an unanimous decision of the Court of Appeal for Quebec affirming a judgment of Challies A.C.J. of the Superior Court ordering appellant (“the Fund”) to pay a total of $37,808.71 with interest and costs. The proceedings were instituted on a statement of facts, the gist of which may be thus stated.
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Following an automobile accident which occurred on May 9, 1964, the Superior Court rendered judgments on December 24, 1966 against Jacques Guilbert, an automobile owner and driver, for the damages that resulted. Guilbert was insured by the North American Insurance Company against which a winding-up order had been made. On December 5, 1967 plaintiffs submitted to the Fund statements under oath attesting that the judgments had not been satisfied, and declaring that no insurer would benefit from the amount claimed. Since the Fund did not pay, an action was brought against it on January 20, 1969. This action is based on the following provisions of the Highway Victims Indemnity Act (“the Act”, R.S.Q. c. 232):
36. Any creditor under a final judgment rendered in the Province awarding damages of one hundred dollars or more resulting from bodily injuries or death and arising out of an automobile accident that occurred in the Province after the 30th of September 1961, or for damage to the property of another in excess of two hundred dollars and arising out of such an accident, may apply to the Fund within a delay of one year to satisfy such judgment.
37. The creditor shall apply to the Fund by a sworn declaration,
(a) establishing that the judgment has in no way been satisfied or indicating, if need be, the amount paid, the value of the thing given in payment or of the services rendered in partial indemnification;
(b) establishing that no insurer will benefit by the amount claimed; and
(c) disclosing any other possible claim arising out of the same accident.
38. Within seven days of receipt of the application accompanied by an authentic copy of the judgment, the Fund shall satisfy the judgment, up to the amount prescribed in section 14, but deducting from such amount any sum or value received by the creditor and deducting from any amount due for damage to property the sum of two hundred dollars.
If, however, there is a possibility of claims exceeding the whole of the prescribed amount, the Fund may defer payment to the extent deemed necessary until the other claims are liquidated.
39. The application to the Fund transfers to it all the creditor’s rights without restriction…
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40. The following persons cannot make application to the Fund:
(a) an insurer to whom a recourse contemplated by sections 3, 31 or 36 has been assigned or who is subrogated in such recourse;… (N.B. Section 3 is the general provision concerning automobile owners’ and drivers’ liability.)
The Fund’s grounds of appeal are that there is prescription or that the action was premature.
Paragraph 2 of art. 2262 C.C. is cited on the question of prescription. This provision deals with the prescription of actions for bodily injuries. It was probably applicable to the plaintiffs’ action against Guilbert, but there is no basis for applying it to these proceedings. They are based on the judgments obtained, not on the liability on which these are founded. Only the prescription by thirty years is now applicable, under art. 2265 C.C.
Art. 2265. Any action which is not declared to be perempted, and any judicial condemnation, constitutes a title which is only prescribed by thirty years, although the subject matter thereof be sooner prescriptible.
In s. 36 the Act sets a time limit of one year for submitting an application to the Fund; this time limit was observed. On the other hand, the Act does not set any particular time limit for bringing actions against the Fund. Accordingly, only prescription by thirty years may be applied to this remedy, which is not a right of action for injuries but an obligation deriving from the Act and based on a judgment. Thus the Superior Court and the Court of Appeal properly rejected the defence of prescription.
The legal situation in the case at bar is completely different from that in the decision, mentioned by the trial judge, rendered by Mayrand J. in Fonds d’indemnisation v. Federation Insurance Company of Canada and subsequently affirmed by the Court of Appeal[3]. The Fund had indemnified the victim and was exercising the victim’s remedy against the insurer of the party liable. This remedy was based on s. 6 of the Act, which makes the insurer “directly responsible towards third parties
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for any damage covered by liability insurance”. There is no necessity to enquire in the case at bar whether it was correctly held that the short prescription remained applicable in that case after judgment had been obtained against the party liable. The basis for that conclusion was that the section in question made the insurer liable for damages. The case at bar is different. It is the judgment which gave rise to the obligation of the Fund not the damage on which the judgment was based.
The Fund’s second ground of appeal is that the action was premature, because the applicants have not exercised their remedy against the insurer of the party liable. This contention is based on the wording of s. 37(b) of the Act, which obliges the claimant to establish “that no insurer will benefit by the amount claimed”. In my opinion Challies A.C.J., rejecting this contention in Romaniuk v. Highway Victims Indemnity Fund[4] (at p. 468), properly held:
The payment of the present claim by the Highway Victims Indemnity Fund will in no way benefit Wawanesa Mutual Insurance Company in the event that it may be held responsible under the policy, because section 39 of the Act provides that the application to the Fund transfers to it all the creditor’s rights without restriction.
This interpretation of the word “benefit” was approved by the Court of Appeal, not only in the case at bar but also in Highway Victims Indemnity Fund v. D’Albenas[5] where Owen J., after reviewing three Superior Court decisions to the contrary cited by the Fund, said (at p. 249):
In my opinion there is no valid basis under the provisions of the H.V.I.A. for the position taken by the Fund that before it can be called upon to satisfy a judgment in favour of the victim of an automobile accident the victim is obliged to sue the Assurer of the person against whom he has obtained the judgment and have his action against the Assurer dismissed with costs. There is no text to support this proposition.
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Bernier J., for his part, said (at p. 252):
[TRANSLATION] What has been overlooked is that the Fund has no choice on receipt of an application for payment. It has to comply with the demand for indemnity within seven (7) days, as stated in the first paragraph of s. 38 of the Act (the case contemplated in the second paragraph being inapplicable), and it was for it as transferee of the entire judgment debt of D’Albenas to seek a decision, if it wished to take the risk of proceedings, on the question of the liability of the insurer…
A victim who has obtained a judgment as defined in s. 36 of the Act (which is the case here) against the person liable for the delict, or against whomever is liable with him, as soon as the judgment has become final, that it has become res judicata, may choose either to proceed to execute the judgment or demand that the Fund satisfy it. The remedy against the Fund is neither a “subsidiary” nor an “ultimate” remedy as the Fund claims in its factum. There is nothing in the Act which imposes on the victim the preliminary obligation to attempt to execute it, even less to exhaust the execution remedies, establish that his debtor (or each of them if there is more than one) is insolvent, or that his debtor (or one of them) was not covered by liability insurance, the invalidity of which could not be set up against him under the provisions of s. 6 of the Act. The requirements of the Act are that the victim be the holder of such a judgment, that this judgment has not been satisfied (and not that it cannot be satisfied) in whole or in part (ss. 36 and 37 of the Act), and that the application to the Fund be made within one year from the day on which the judgment became final…
There is no doubt that s. 37(b) does not apply to the insurer of one of the debtors of the judgment debt, because the payment made by the Fund to the claimant-creditor may not, in view of the provisions of s. 39, have the effect of extinguishing the judgment debt; at the time such a payment is made, the claimant-creditor has already completely transferred his judgment debt to the Fund (Highway Victims Indemnity Fund v. Daniel and Delisle, [1970] C.S. 197); the only effect of such payment is to extinguish the Fund’s obligation towards the claimant-creditor to indemnify him in the amount of the judgment (reduced as provided in s. 14 of the Act, if applicable); on the other hand, the obligations of the insurer of the debtor remain unchanged; there has merely been a substitution of creditor, and that for the full amount of the judgment debt; such insurer has in no way benefited from it.
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It should be pointed out that in D’Albenas the claimant had brought an action against the insurer as well as the Fund. The Court of Appeal having concluded that the insurer was liable, adopted the same solution as in Highway Victims Indemnity Fund and Hartford Insurance Group v. Napier[6]. Considering that the Fund had been wrong in not paying immediately and then suing the insurer, it nevertheless felt it should condemn the latter to indemnify the claimant. This conclusion in no way implied that the theory of the subsidiary nature of the remedy against the Fund was accepted. Since the insurer was solvent, the Court simply considered it advisable to render a single judgment against the party which would in the end have to satisfy the claim, rather than simultaneously condemning the Fund to pay and the insurer to indemnify it. It is unnecessary to consider whether this solution was correct; it suffices to note that the theory according to which the Fund is liable to pay only after the claimant has exhausted his remedies against the insurer was not accepted, but on the contrary expressly rejected.
French legal theory and judicial decisions cannot enlighten us in this matter, because the regulations regarding the guarantee fund established by the Act of December 31, 1951 include provisions which have no equivalent in the law of Quebec. The last paragraphs of s. 8 of the decree of June 30, 1952 read as follows:
[TRANSLATION] The claimants must also show either that the person responsible for the accident could not be identified, or that he, and ultimately his insurer, proved to be totally or partially insolvent after the fixing of the amount of the indemnity by a settlement or by an executory court judgment.
For the guarantee fund, the insolvency of the person responsible for the accident results from a demand for payment which is refused, or which remains unfulfilled for a period of one month from the service thereof. The insolvency of the insurer results from the withdrawal of the licence contemplated in chapter IX of the decree of December 30, 1938, concerning the administrative regulations for the establishment, functioning and control of insurance and savings companies.
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The conclusion to be drawn from the absence of provisions of this kind in the Quebec statute enacted in 1961 (c. 65) is not that they are implied therein, but rather that the Quebec legislators did not intend the remedy against the Fund to be subject to such conditions.
In his factum and at the hearing, counsel for the Fund sought to rely on the explanatory notes accompanying the bill tabled in the Legislative Assembly. These notes are parliamentary documents to which the rule of exclusion set forth in The Attorney General of Canada v. The Reader’s Digest Association (Canada) Ltd.[7] must be applied.
Before concluding, however, it is important to point out that the case involves not an insurer repudiating his obligations, but an insurer under a winding-up order. Consequently, even if the remedy against the Fund was subsidiary, the claimants were dispensed from first taking action against the insurer for the same reason that a creditor does not have to sue a bankrupt debtor before claiming on a surety bond the terms of which are that it does not have to be paid until after judgment is obtained against the principal debtor. Like a bankruptcy petition, a winding-up order suspends all proceedings. It is only in cases of unliquidated or contested debts that leave must be obtained to institute proceedings notwithstanding the winding-up order or bankruptcy. Here there is nothing of the kind. It must therefore be concluded that it is the Fund, not plaintiffs who must await the result of the winding-up and receive any dividend.
The appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitors for the appellant: Gilbert, Magnan & Marcotte, Montreal.
Solicitors for the respondents: Drouin, Sirois, Rouleau & Généreux, Montreal.