Date: 19980323
Docket: T-1904-95
BETWEEN:
HOSPITALITY OF NEW YORK INC.
Plaintiff
AND
NORWICH UNION FIRE
INSURANCE SOCIETY LIMITED
Defendant
REASONS FOR ORDER
RICHARD MORNEAU, ESQ., PROTHONOTARY
[1] This is a motion by the Defendant pursuant to rules 461 and 465.4(3) of the Federal Court Rules directed to an outstanding question from the examination for discovery of the Plaintiff in an action based on a marine insurance valued policy. By its question, the Defendant seeks to discover the actual purchase price to the Plaintiff of the goods that the Plaintiff insured with the Defendant for a specified value agreed between the parties.
Background
[2] The Plaintiff alleges in its statement of claim that its cargo which was insured by the Defendant was a total loss by reason of an explosion while in transit. Under the policy existing between the parties, the Plaintiff claimed the insured value of $403,000. The Defendant denied being under any liability in virtue of the policy, thus the Plaintiff's action.
[3] The discovery of the Plaintiff took place after the production of the statement of defence by the Defendant and the production by both parties of their affidavit of documents.
[4] During the said discovery, counsel for the Defendant caused the Plaintiff's representative to discuss the sale price to the purchaser of the goods shipped by the Plaintiff. That price corresponds to the value declared in the insurance policy.
[5] According to counsel for the Defendant, the answers brought forth then by the Plaintiff's representative signalled for the first time to the Defendant that the sale price asked by the Plaintiff could very well correspond to three to four times the actual purchase price of the goods to the Plaintiff.
[6] Consequently, counsel for the Defendant asked the following question to the Plaintiff's representative who, through his counsel, objected thereto:
| I wanted to know who you bought the cargo from and at what cost, and to provide me with such documentary evidence as you had to support that answer and information relative to how the consignment was valued vis-à-vis the sale price on the invoice to the purchaser EMEM. |
[7] Counsel for the Defendant contends that in accordance with paragraph 19(1)(c) of the Marine Insurance Act, R.S.C., c. M-0.6 (the Act), the normal value to be declared to an insurer is the prime cost of the goods. He further contends that any declared value that is significantly above the prime cost is therefore a material circumstance that must be declared to the insurer as per section 21 of the Act or it constitutes a material representation that must be true in accordance with section 22 of the Act; in the event that there has been non-disclosure of a material fact or a false declaration of the insured value, the policy of insurance may be void or avoided by the insurer.
[8] Counsel for the Plaintiff strongly contends that since it is admitted that we are dealing with a valued policy, since at the time of the discovery of the Plaintiff's representative the Defendant had not pleaded fraud on the part of the Plaintiff and since the Defendant as an insurer has not returned to its insured the premium paid for the coverage under the policy, subsection 30(4) of the Act prevents any effort on the part of the Defendant to go beyond the value specified in the policy at bar. Subsection 30(4) reads as follows:
| 30.(4) Subject to this Act and in the absence of fraud, the value specified by a valued policy is, as between the insurer and the insured, conclusive of the insurable value of the subject-matter intended to be insured, regardless of whether any loss is a total loss or a partial loss. |
[9] Counsel for the Defendant acknowledges that the Defendant's statement of defence dated October 31, 1995 does not raise any allegations of fraud or misrepresentations. However, he argues that as of that date, his client had no information in order to properly and seriously question the insured value declared in the policy and to raise, therefore, in the Defendant's statement of defence any allegation of fraud or of misrepresentations. He further argues that it would have been ill-advised for his client, without any material at hand, to introduce in its defence allegations of fraud on the part of the Plaintiff just to be in a position to explore that avenue of inquiry at discovery. As a matter of fact, counsel for the Defendant contends that until he obtains an answer to the question objected to, his client will not be in a position to contemplate bringing an amendment to its statement of defence. (I note for the record that late on March 16, 1998, after the hearing of the motion at bar, the Defendant served and filed an amended statement of defence. It must be noted that even though I read that pleading, I did not consider it for the purpose of deciding the said motion.)
[10] Without deciding any issue of fraud or misrepresentations as between the parties, I am of the view under the present circumstances that although the Defendant had not pleaded fraud or misrepresentations at the time of the discovery, it should be allowed to pursue the question objected to. Depending on the answer and documents obtained, the Defendant shall consider bringing a motion to amend its statement of defence should it decide to raise the nullity or the voidable character of the policy. (It appears that this is what the Defendant is seeking to accomplish by its amendment of March 16, 1998.)
[11] Consequently, this motion shall be granted. Since no costs were requested by the Defendant, either in the notice of motion or in argument, none will be granted. An order will issue accordingly.
Richard Morneau
Prothonotary
MONTREAL, QUEBEC
March 23, 1998
FEDERAL COURT OF CANADA
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT NO.:
STYLE OF CAUSE:
T-1904-95
HOSPITALITY OF NEW YORK INC.
Plaintiff
AND
NORWICH UNION FIRE INSURANCE SOCIETY LIMITED
Defendant
PLACE OF HEARING:Montreal, Quebec
DATE OF HEARING:March 16, 1998
REASONS FOR ORDER BY RICHARD MORNEAU, ESQ., PROTHONOTARY
DATE OF REASONS FOR ORDER:March 23, 1998
APPEARANCES:
Mr. Louis Buteau for the Plaintiff
Mr. Andrew G. Deere for the Defendant
SOLICITORS OF RECORD:
Mr. Louis Buteau for the Plaintiff
Sproule Castonguay Pollack
Montreal, Quebec
Mr. Andrew G. Deere for the Defendant
The Law Offices of David F.H. Marler
Montreal, Quebec