Melukhova v. Employers' Liability Assurance Co.

LIABILITY)

ASSURANCE

CORPORATION RESPONDENT; (GARNISHEE).....................

AND

ASBESTOS

& ASBESTIC

COM- PANY (DEFENDANT).

APPEAL FROM THE COURT OF KING'S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC the judgment of Weir J. and dismissing the contestation of the declaration of the respondent made in answer to a writ of seizure in garnishment.

The material facts of the case and the questions in issue are fully stated in the above head-note and in the judgments now reported.

J.-The appellant is the widow of a man who when working for the Asbestos & Asbestic Co. Ltd. on the 3rd February, 1915, was accidentally killed under such circumstances as entitled her to recover on behalf of herself and children from his said employers (hereafter referred to as the "company") damages arising therefrom.

At that time the said company held an insurance policy issued to it in the next previous 29th December by respondent assurance corporation

(hereinafter referred to as the "corporation") to indemnify the said company against such risk to the extent of $2,000, out of a total of $10,000 provided for in the policy. The corporation was, immediately after the said accident, notified by the company of the same and the death of appellant's husband resulting therefrom.

Nothing having been done by either the company or the corporation, the appellant brought on the

21st January, 1916, an action against the company to recover damages arising from the said accident.

On the 16th July, 1916, the company was put into liquidation under the "Winding ip Act" of Canada.

In November, 1916, the liquidator was granted by the court at Sherbrooke authority to pay a dividend of 10%.

On the 31st January, 1917, the liquidator also obtained from the court authority to retain a sum of

$2,000 to cover the appellant's claim in the event of the said action being maintained.

By an order of the court on the 23rd January,

1917, the corporation, which had elected to defend appellant's action, was permitted to plead thereto in the name of the company and, accordingly, on the

28th April, 1917, filed a defence.

The action came for trial on the 26th of June,

$5,000 with interest and costs against the company.

On or about the 9th of January, 1918, the respondent corporation paid the appellant's costs of the action but, notwithstanding the foregoing history and the attendant circumstances, refused to meet its obligation under the policy to pay the $2,000 indemnity thus established as clearly its duty, so far as I can see, falling Er sback on the condition that the company before being entitled thereto must first hand over to appellant the two thousand dollars.

Idington J.

This I will presently revert to and deal with the legal aspects thereof in light of other conditions in the policy. The appellant thereupon applied to the court for authority to issue a writ of execution by means of attaching the money in the hands of the respondent corporation as garnishee and, on the 14th September, 1917, was granted same but the said corporation made its declaration to the effect that it owed nothing to the company. Thereupon an order was made, after notice to the liquidator requiring him to contest same and his failing to do so, in the following terms:- Doth therefore grant the said motion to the extent following, namely, the said plaintiff is hereby authorized to take in the place and stead of the defendant and liquidator the necessary suits and proceedings to recover from the said Employers' Liability Assurance Corporation Limited the amount of the judgment rendered in favour of the plaintiff against the company defendant and liquidator bearing date the 29th June, 1917: and, further, the said plaintiff is authorized on her own behalf and for and on behalf of her minor children to contest the said declaration of the said garnishee, the whole with costs to follow the final result of such litigation.

Hence the proceedings which ensued whereunder Mr. Justice Weir found entirely in the appellant's favour notwithstanding that the respondent corporation set up the condition F. indorsed on the policy, reading as follows:- Condition F: No action shall lie against the corporation to recover for any loss under this policy unless it shall be brought by the assured for loss actually sustained and paid in money by the assured in satisfaction of a judgment after trial of the issue; nor unless such action is brought within ninety (90) days after final judgment against the assured has been so paid and satisfied. The corporation does not prejudice by this condition any defences against such action it may be entitled to make under this policy.

The sole part of the said condition upon which aid corporation now relies, or can rely, is that the defendant company had not paid the judgment by reason of the manifest impossibility of its doing so after going into

LIBILiY insolvency and liquidation, though everything else for which the condition provided was duly fulfilled Idington J. and the interest of the corporation fully protected as it stipulated for.

The Court of Appeal, however, reversed Mr. Justice

Weir's judgment on this ground alone.

Neither court seems to have had its attention drawn to Condition "I" which reads as follows:- Condition I:-If the business of the assured is placed in the hands of a receiver, assignee or trustee, whether by the voluntary act of the assured or otherwise, this policy shall immediately terminate, but such termination shall not affect the liability of the corporation as to any accidents theretofore occurring.

If the assured is a corporation, a change of title, or if a firm or individual a change of title or of ownership, shall in like manner terminate this policy, unless such change is consented to by the corporation, by an indorsement thereon, signed by the manager.

I think this must be read along with condition F., and so read I fail to find how effect can be given to the words in condition I, just quoted, but such termination shall not affect the liability of the corporation as to any accidents theretofore occurring, unless the ceremony of the actual payment by the coin pany itself of that established to be due is thereby impliedly to be held as dispensed with.

They expressly reserve the liability. How can that liability be pretended to be reserved, if effect is to be given to the present contention, that the mere non-payment by the.

defunct company of the money is, under such impossible circumstances, to be held as a barrier in the way?

I can hardly imagine that the corporation deliberately contrived a trick by holding out a continued liability as being assured when in fact the term relied on had become simply impossible.

The non-payment might properly be relied upon as a protection against a dishonest scheme on the part of the insured, but when the personality of the insured had passed away I cannot think it either honest or the true meaning of the policy read as a whole.

I agree that all else designed in condition F. may well be needed for the protection of the corporation and must be observed, but this latter part as to the actual payment of the amount by the company I think has been eliminated or must be so if the stipulation in condition I for liability is to be given effect to. I would allow the appeal with costs throughout against the corporation and give judgment for the $2,000 with interest thereon from the date of the judgment given the appellant.

DuFF J.-The responsibility of the respondent under the policy is conditional in the sense at all events that no action lies against them until loss has been actually sustained and paid in money.

It may of course be argued that the loss insured against, that is to say, the loss in respect of which the respondents agreed to indemnify the Asbestos Company was a loss arising by reason of payment in money to the assured in satisfaction of a judgment; that payment, in other words, is not strictly a mere condition of the obligation but part of the substratum of fact out of which the obligation arises.

It does not, however, seem to me to be seriously open to doubt that the obligation constitutes a conditional indebtedness within the contemplation of Art. 675 C.P.C. and that the insurance moneys were "due under conditions not yet fulfilled" when the seizure was made.

That being so it would follow that the appellant must succeed unless it should appear that the condition is one which could not be realized.

I do not think this can be affirmed.

A payment in part satisfaction would clearly I think give rise to a right of indemnity and that is a contingency which can not be put aside as beyond the bounds of practical possibility.

J.-I concur with Mr. Justice Mignault. BRODEUR J.-J'en suis arriv6 A la conclusion que la contestation de la declaration de la tierce-saisie 6tait bien fond6e et qu'elle devrait 6tre maintenue. La demanderesse-appelante avait jugement contre la compagnie Asbestos-Asbestic pour dommages r6sultant d'un accident qui avait caus6 la mort de son mani lorsque ce dernier 6tait A l'emploi de cette compagnie.

La compagnie Asbestos-Asbestic avait, lorsque cet accident est arriv6, un contrat d'assurance ou d'indemnit6 avec la compagnie intim6e "The Employers Liability Assurance Corporation" par lequel cette dernibre s'engageait de l'indemniser

Ce contrat d'assurance contenait plusieurs conditions: par exemple, l'indemnit6 ne devait 6tre que de deux mille dollars si l'ouvrier se faisait tuer (clause A); si un accident survenait, I'assur6 devait imm6diatement en avertir l'assureur (clause C); et il n'6tait pas peris

I'assur6 d'assumer aucune responsabilit6 , vis-A-vis la victime de 1'accident ou de r6gler la r6clamation de cette victime sans l'assentiment formel de l'assureur (clause E); si une poursuite 6tait institude contre l'assur6 pour cet accident, il devait remettre l'action A l'assureur pour que ce dernier puisse luimnme conduire la d6fense (clause D);

I'assur6 ne pouvait pas poursuivre l'assureur pour les dommages qu'il avait subis, A moins qu'il n'ait au pr6alable pay6 la victime (clause F); dans le cas de faillite de l'assur6, la police

(clause J).

VoilA le r6sum6 de quelques-unes des conditions qui tendent toutes A restreindre les obligations de la compagnie d'assurance et A diminuer les droits de l'assur6.

Il est fort possible que les contrats d'assurance en g6n6ral peuvent pr~ter A des fraudes; mais dans une assurance conmme celle-ci, on peut pr6sumer difficilement qu'un ouvrier se ferait mutiler de propos ddlib6r6 pour donner A son patron l'avantage de faire une r6clamation frauduleuse contre son assureur, et surtout quand il s'agit d'un cas oi la victime a perdu la vie. La compagnie Asbestos-Asbestic ayant t6 poursuivie par la demanderesse-appelante, elle a confi6 l'action A la compagnie d'assurance qui a, au nom de l'Asbestos- Asbestic, fait les d6fenses qu'elle a jug6 A propos de faire contre cette r6clanation;

mais ces d6fenses ont 6t6 rejet6es et jugement a 6t6 rendu en faveur de la demanderesse contre la compagnie Asbestos- Asbestic pour $5,000.

Un bref de saisie-arrit aprbs jugement a t6 6mis entre les mains de la compagnie d'assurance en execution de ce jugement et cette derni~re est venue d6clarer sous le serment de l'un de ses principaux employ6s qu'elle ne devait rien et qu' elle ne devrait rien plus tard , la ddfenderesse.

Cette d6claration 6tait faite sous les dispositions de I'article 685 C.P.C. qui se lit comme suit:

A Cette d6claration 6tait absolument fausse et mensong~re, car la compagnie d'assurance 6tait d6bitrice de la compagnie Asbestos-Asbestic en vertu du contrat d'assurance qu'elle avait avec elle jusqu'A concurrence d'une somme de $2,000.

Cette dette n'6tait peut- 6tre pas exigible parce que la d6fenderesse n'avait pas sous la clause F du contrat pay6 elle-mime le jugement qui avait 6t6 rendu.

Mais A tout 6v~nement la compagnie d'assurance, qui 6tait bien au courant de toute la cause puisque c'est elle-mime qui avait d6fendu l'action principale, aurait dd d6clarer qu'il y avait une dette conditionnelle.

Esp6rait-elle qu'avec cette d6claration mensong~re elle empicherait cette pauvre 6trang6re qu'6tait la demanderesse de se mettre un nouveau pro chs sur les bras? Heureusement que les autoritis consulaires du pays d'origine de la demanderesse sont venues A son secours, qu'il s'est trouv6 des avocats assez ddvouds pour se charger de cette nouvelle cause, et elle a contest6 la d~claration de la tierce-saisie.

Si la tierce-saisie avait fait une d6claration v6ridique des faits, jugement aurait pu de suite Atre rendu d6clarant SaiSie-arr~t tenante jusqu'" I'avinement de la condition de sa police d'assurance qui exigeait pr6alable par 1'assur6 (art. 690 C.P.C.). L'avocat de la demanderesse, suivant qu'il en avait le droit, a transquestionn6 l'officier de la compagnie qui a fait la d6claration (art. 686 C.P.C.). Et la demanderesse a obtenu par ce moyen des informations suffisantes pour 6tablir qu'il y avait une obligation conditionnelle de la tierce-saisie en faveur du saisi. me semble qu'apris cela la tierce-saisie aurait de suite demander A amender sa d6claration de fagon h la mettre conforme aux faits et aux pr6tentions qu'elle a 6mises plus tard sur la contestation de sa d6claration. Mais non.

Elle n'a pas jug6 A propos de ce faire; et alors la demanderesse a t6 oblig6e de contester la d6claration, ainsi qu'il a 6t6 jug6 par la Cour de Revision.

Par sa contestation la demanderesse a conclu k ce que la d6claration de la tierce-saisie soit d6clarde fausse et mensong~re et A cc que cette derni6re soit condamn6e A lui payer la somme de $2,000 qu'elle devait A la compagnie Asbestos-Asbestic par son contrat d'assurance;

et elle s'est fait autoriser en mime temps par le juge & exercer non-seulement ses droits comme la demanderesse mais aussi les droits de la compagnie Asbestos-Asbestic.

Je dois dire que pendant le prochs sur l'action originaire la compagnie d6fenderesse a 60 mise en liquidation. Nous ne savons pas exactement la raison pour laquelle elle a 6t mise en liquidation; mais il est A supposer que 1'6tait dd A son insolvabilit6.

Aucune preuve directe cependant n'a t faite de ce fait.

La cour sup6rieure a maintenu la contestation de la d6claration de la tierce-saisie.

En appel ce jugement a 6t6 renvers6.

On y a d6clar6 que la tierce-saisie devait une dette conditionnelle.

Tout de mime, le dispositif du jugement est A 'effet que la contestation de la d6claration de la tierce-saisie est rejet6e et que la saisie-arrAt est renvoy6e avec frais, mais sans frais en cour sup6rieure.

Ce jugement ne me parait pas logique.

En effet, du moment que la cour reconnaissait qu'il y avait une dette conditionnelle de due elle aurait dd maintenir la contestation de la declaration et d6clarer que la saisie-arrAt aurait 6t6 tenante. En effet, l'article

690 du code de proc6dure civile 6nonce formellement que si les deniers dus par le tiers-saisi ne sont dus que sous des conditions qui ne sont pas encore accomplies le tribunal peut ordonner que la saisie-arrit soit d6clar6e tenante jusqu'A I'avinement de la condition.

IL y avait en cour d'appel, ainsi qu'en cour sup~rieure, sur cette contestation de la d6claration, deux points en litige, savoir si la dette 6tait exigible d~s maintenant ou si elle ne serait due que lorsque la d6fenderesse aurait elle-mnme pay6 le jugement qui avait t6 rendu contre elle en faveur de la demanderesse.

P La cour sup6rieure a 6td d'avis que la dette 6tait due et exigible.

W La cour d'appel, au contraire, a 6t6 d'opinion que la dette ne devenait exigible que lorsque la d6fenderesse

'aurait payee A la demanderesse.

En acceptant cette opinion de la cour d'appel je dis tout de meme que le dispositif de son jugement est erron en ce qu'au lieu de renvoyer la saisiearrit elle aurait la declarer tenante et maintenir la contestation de la d6claration de la tierce-saisie. Jen suis venu A la conclusion que la demanderesse avait eu raison de contester la d6claration de la tiercesaisie et que sa contestation devait Atre maintenue et que la saisie-arrit devrait 4tre ddclarde tenante jusqu'A ce que la condition stipulde au paragraphe F de la police d'assurance ait 6t0 d6clar6e remplie par la cour sup6rieure.

L'appel doit 6tre maintenu avec d~pens de cette cour et des cours inf6rieures contre l'intim6e, moins les frais de la cour du Banc du Roi chaque partie paiera ses frais.

J.-The appellant obtained, on June 29th, 1917, a judgment for $5,000.00 for damages against the Asbestos and Asbestic Company, Limited, as civilly responsible for the death of her husband while in its employment.

During the proceedings, and before the filing of a plea, the company was placed in liquidation and William J. Henderson was appointed its liquidator.

The respondent, thereunto obliged by an'indemnity policy issued by it in favour of the company, contested the appellant's action in the name of the company, and several months after the judgment paid the appellant's costs of action. The present proceedings are to force the respondent to pay to the appellant the amount for which the respondent by its policy promised to indemnify the Asbestos and Asbestic Company, which, in the case of any one employee of the latter, was restricted to $2,000.00.

.522

The appellant proceeded against the respondent by way of seizure in garnishment and the latter declared that it had not and was not aware that it would have hereafter in its hands, possession or custody, or in any manner whatsoever, any money, movable effects or other things due or belonging to the Asbestos and Asbestic Company, the defendant.

The declaration was contested by the appellant and her contestation was maintained by the Superior

Court, Weir J. The Court of King's Bench, Guerin

J. dissenting, reversed the judgment of the Superior

Court, and dismissed the contestation without costs in the Superior Court, stating however that the respondent had not disclosed in its declaration that it was subject to a conditional obligation towards the

Asbestos and Asbestic Company under its policy.

The reason for which the appellant's contestation of the respondent's declaration was dismissed may be briefly explained.

By the conditions of the policy, the insured company, on the taking against it of an action for an accident to one of its employees, was obliged forthwith to hand over the papers served on it to the respondent, and was prohibited from making any settlement or payment to the injured employee or his representatives, and the respondent undertook to defend the action at its own cost. Condition "F" of the policy on which the respondent now relies reads as follows:- The respondent successfully contended in the court below that no liability exists on its part until the , insured company has actually paid in money the amount which it has been condemned to pay by a judgment, and, the insured not having paid the appellant's judgment, the respondent now argues that it truly declared that it owed and would owe nothing to the company.

In my opinion the respondent's liability existed but was a contingent or conditional liability, and under Art. 685 C.P.C. the respondent should have declared that it was conditionally indebted. Had it done so, under Art. 690 C.P.C. the court, on motion of the plaintiff, could have declared the seizure binding pending the fulfilment of the condition. It follows that the respondent's declaration was not the one it should have made. This forced the appellant to contest it. In my opinion, however, the appellant cannot say that the respondent's obligation is payable or demand that the respondent be condemned to pay. So long as the Asbestos Company has not itself paid under the appellant's judgment, no demand of payment can be made against the respondent. But that does not mean that the appellant's seizure in garnishment should be dismissed as the Court of King's Bench dismissed it. Under Art. 690 C.P.C. the appellant, on the contrary, is entitled to have the seizure remain binding until the condition is fulfilled, if it ever be fulfilled.

There seems to be some possibility that it may be fulfilled. In the record there is a judgment of Mr. Justice Hutchinson of the 7th February, 1917, authorizing the liquidator, on his petition, to retain the sum of $2,000.00 to provide for the payment of the claim and costs of this appellant.

Should the liquidator pay this money in part satisfaction of the appellapt's judgment, the respondent will thereupon become liable to the Asbestos and Asbestic Company under condition "F" of its policy. This right of the Asbestos Company rE against the respondent is now being exercised by the appellant by virtue of her seizure in garnishment, so that, if the payment be made by the liquidator, she will be entitled to demand that the respondent make a new declaration under the seizure.

The parties were unable to inform us whether the liquidator still retains the sum of $2,000.00.

Under the circumstances, and in view of the fact that the respondent did not make the declaration it should have made, I would give the appellant judgment declaring the seizure binding on the respondent until the condition rendering its obligation payable has been fulfilled.

The appeal should therefore be allowed and the record. remitted to the Superior Court for such further proceedings as may be necessary.

Costs to the appellant in this court and in the Superior

Court, and no costs to either party in the Court of

King's Bench.

Appeal allowed with costs.

Lawrence, Morris &

McGore.

DeWitt, Tyndale &

Howard.