2005 BCCA 123 Hua v. Optimum West Insurance Co.

Before:	The Honourable Madam Justice Rowles
	The Honourable Mr. Justice Donald
	The Honourable Madam Justice Huddart

I.D. Mackie	Counsel for the Appellant
S.A. Read	Counsel for the Respondent
Place and Date of Hearing:	Vancouver, British Columbia
12 November 2004
Place and Date of Judgment:	Vancouver, British Columbia
4 March 2005

Written Reasons by:

The Honourable Madam Justice Rowles

Concurred in by:

The Honourable Mr. Justice Donald

The Honourable Madam Justice Huddart

Reasons for Judgment of the Honourable Madam Justice Rowles:

I. Overview

[1] This is an appeal from a judgment awarding the respondent the replacement cost of a house damaged by fire on 9 December 2000. The trial judge's reasons for judgment given orally on 5 November 2003, following a summary trial under Rule 18A of the Rules of Court, are not reported.

[2] At trial, the appellant insurer argued that since the respondent had failed to comply with a requirement of his insurance policy that repair or replacement of damaged buildings be completed within 180 days, he was not entitled to the replacement cost. There was no dispute that the respondent had not completed the repairs within the 180 days. Section 10 of the Insurance Act, R.S.B.C. 1996 c. 226 (the "Act"), allows the court to grant relief from forfeiture in certain circumstances and the trial judge did so in this case.

[3] The insurer appeals the judgment on the grounds that the trial judge erred in fact when she found that the issue of replacement cost was not settled between the parties on 1 May 2001; erred in law in concluding that the respondent's decision not to repair or replace the damaged property within 180 days after the damage had occurred fell within the provisions of s. 10 of the Act and erred in principle in granting the respondent relief from forfeiture under s. 10.

[4] In my opinion, the trial judge's finding that the replacement cost was not settled between the parties on 1 May 2001, which is the focus of the appellant's first ground of appeal and critical to some of the appellant's other arguments, is not one with which this Court can properly interfere. I am also of the view that the conclusion the trial judge reached on the issue of whether s. 10 of the Act was available to grant relief from forfeiture was not wrong in law and that the trial judge did not err in principle in the exercise of her discretion in granting relief from forfeiture under s. 10. Accordingly, I would dismiss the appeal.

II. Background

[5] The replacement cost provision in the respondent's insurance policy, which is the term on which the litigation centered, reads as follows:

Replacement Cost

Coverage A – Dwelling

1. Dwelling and Detached Private Structures:

If you repair or replace the damaged or destroyed building on the same location with a building of the same occupancy constructed with materials of similar kind and quality within 180 days after the damage, you may choose as the basis of loss settlement either a) or b) below; otherwise, settlement will be as in b).

a) The cost of repairs or replacement (whichever is less) without deducting for depreciation, in which case we will pay in the proportion that the applicable amount of insurance bears to 80% of the replacement cost of the damaged building at the date of damage, but not exceeding the actual cost incurred.

[there is no paragraph b)]

c) The actual cash value of the damage at the date of the occurrence.

[6] Following the fire that caused damage to the respondent's property on 9 December 2000, the parties each retained insurance adjusters. The adjusters first met on 28 December 2000. It was undisputed that the appellant's adjuster understood from as early as 21 January 2001 that the respondent intended to repair or replace the building. Through February and March of 2001 the adjusters discussed and negotiated the scope of the work to reconstruct the property, and obtained a series of competing bids for the work.

[7] The evidence of the adjusters differed as to when their respective clients had reached an agreement regarding an appropriate replacement cost for the property. At trial, the appellant's position was that the evidence supported a finding that the parties agreed to the replacement cost on 1 May 2001. The respondent contended that agreement was not reached until 25 July 2001, which was after the 180 days had run. The significance of the date related only to the question of whether it was reasonably possible after the conclusion of any such agreement for the respondent to have performed the repairs within the 180-day period.

[8] The respondent's position was not that he was unable for financial or other reasons to start the repairs until the replacement cost coverage was settled; rather, he deposed that he understood from his adjuster that the insurance policy required that the insurer agree to the cost of repairs before the repairs were started. The trial judge held that such an agreement was not a requirement of the policy and, if the respondent received such advice, it was bad advice for which the appellant would not be responsible.

[9] The trial judge found that implicit in the appellant's position and submissions was the acknowledgment that, regardless of whether the respondent was badly advised on the point, it was reasonable for him to have held off starting the repairs or replacement of the property until he had the insurer's agreement as to how much of that cost the insurer would cover. In the words of the trial judge, "It is only common sense to suppose that an insured will want to know the level of coverage the insurer is prepared to provide before committing himself or herself to a particular reconstruction process."

[10] Critical to the first ground of appeal is the evidence on which the trial judge based her finding that agreement on the replacement cost was not reached until 25 July 2001. Set out below, in chronological order and in point form, is a summary of the evidence to which the trial judge referred in deciding that the date on which the agreement had been concluded was 25 July 2001:

(i) The appellant's adjuster, Mr. O'Dell, deposed that in an in-person meeting in his office on 10 April 2001, the two adjusters agreed to settle replacement cost at $73,420.00, subject to confirmation by their respective principals.

(ii) Mr. O'Dell deposed that his principal issued a cheque for actual cost value of coverage on 12 April 2001.

(iii) The file of the appellant's adjuster contained a copy of a letter dated 19 April 2001, written to the insurer. In the letter, Mr. O'Dell referred to his and the insurer's telephone conversation of the same date and discussed the respondent's three insurance claims. In regard to the fire claim, which was the claim in issue in the litigation, the letter concluded as follows:

The fire claim is based on settlement at a point between the Standard General Restoration quote of $71,420.83 and the Preferred Restoration quote of $75,220.79. If we are unsuccessful at reaching settlement at the above noted figures, I recommend moving up to no more than the Preferred bid of $75,220.79 which would increase the overall settlement by $1,420.79 ($75,220.79 minus $73,800.00 = $1,420.79).

I look forward to receiving your authority to negotiate settlement based on these figures. The final acceptance of the settlement will be subject to the Insured reporting to their broker, the break and enter claim. I do not anticipate this will create any problems for us.

(iv) The appellant's adjuster deposed that in a telephone conversation on 1 May 2001, the two adjusters agreed to a replacement cost value of $73,800 and he therefore sent the actual cost value cheque to the respondent. On his evidence, the agreement as to replacement cost coverage was concluded on 1 May 2001.

(vi) The respondent's adjuster deposed that finally on 25 July 2001, the appellant's adjuster indicated that the insurer had given authority to settle replacement cost at $75,220. On the evidence of the respondent's adjuster, any agreement as to replacement cost coverage was not concluded until 25 July 2001.

(vii) There were no confirming letters between the adjusters.

[11] In her analysis of the evidence, the trial judge noted that in the letter of 19 April 2001, the appellant's adjuster had asked the appellant insurer for its authority to settle the claim. In regard to that evidence, the trial judge stated: "In examination for discovery, the defendant adjuster was unable to explain, except unconvincingly as a mistake, why his letter would refer to looking forward to receiving authority to negotiate settlement if settlement was already concluded."

[12] The trial judge observed that the amount set out in the letter of the appellant's adjuster of 19 April 2001 was the amount agreed to on 25 July 2001. The adjusters were in accord that the amount agreed to on 25 July 2001 was $75,220, whereas the figure provisionally or finally agreed to before that date was $73,800.

[13] With respect to the evidence of the dates and the difference in the two figures, the trial judge said: "It is difficult to understand, and the defendant adjuster's evidence is not persuasive in this regard, why the insurer would agree to a figure higher than one which, by the insurer's position, was agreed to some months earlier."

III. Ground One: Did the trial judge err in accepting the evidence of the respondent's adjuster that the replacement cost was not agreed upon until 25 July 2001?

(i) The standard of review

[14] This case was determined by way of summary trial under Rule 18A of Rules of Court. In its factum, the appellant argues that, in the case of trials held pursuant to Rule 18A and in which the evidence is documentary and on affidavits, the Court of Appeal has "a greater latitude to differ from the trial judge's findings of fact than it would where the trial involved viva voce testimony with conflicts in the evidence and especially … where credibility of the witnesses was an issued [sic]".

[15] In my view, the case authorities do not support the appellant's submission on this point. The standard of review applicable to determinations made on a summary trial under Rule 18A was considered by a five-judge panel of this Court in Orangeville Raceway Ltd. v. Wood Gundy Inc., (1995) 6 B.C.L.R. (3d) 391, 40 C.P.C. (3d) 226 [cited to B.C.L.R.]. As stated by Goldie J.A. at para. 26, "... the sole issue here is whether it was an error on the part of the chambers judge, reviewable by this Court, to find on affidavit evidence that the plaintiff's principal witness was not credible".

[16] It was argued in Orangeville Raceway, supra, that the Court of Appeal is in as good a position as the judge on the summary trial to draw inferences of credibility on the basis of affidavit evidence, as neither level of court has had the opportunity to observe the witnesses. However, the argument that it is open to this Court to interfere on that basis was rejected, at para. 47:

It has been said that an appellate court is in as good a position to draw inferences from proven facts as the trial judge. But this states only half the equation. The appellate court may be in as good a position but the burden is still on the appellant to demonstrate error, that is to say, that the position reached below after a summary trial cannot reasonably be supported.

[17] The Court held that, despite the fact that the trial judge did not have the advantage of observing witnesses and seeing their evidence tested through cross-examination, the Court was not entitled to substitute its own view for that of the trial judge. To support that conclusion, the Court referred to the decision of Taylor J.A. in Colliers Macaulay Nicolls Inc. v. Clarke, [1989] B.C.J. No. 2455 (Q.L.); at para. 45:

So far as findings of fact are concerned, the onus on the appellant in an appeal against a summary disposition of issues made without oral testimony under R. 18A cannot be merely to persuade the appeal court to a different view of the evidence. The appellant must show that the chambers judge reached a conclusion which cannot reasonably be supported. That is a heavier burden than merely to establish that the appeal court would have made different findings, or have drawn different inferences.

[Underlining added.]

[18] The Orangeville Raceway test was reiterated and applied in, among others, Degelder Construction Co. Ltd. v. Dancorp Developments Ltd. (1996), 21 B.C.L.R. (3d) 112, 73 B.C.A.C. 45, aff'd on other grounds [1998] 3 S.C.R. 90, 58 B.C.L.R. (3d) 1.

[19] Thus it appears that the standard of review, including the findings of the trial judge as to credibility gleaned from the material available on the summary trial, requires that the appellant demonstrate that the conclusion of the trial judge cannot reasonably be supported by the evidence.

[20] Findings of credibility are often the result of inferences drawn by the trier of fact. In Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33 [cited to S.C.R.], the majority judgment (at para. 19), holds that the standard of review for inferences of fact is the same standard as that applied to the review of other factual determinations; that is, in order for an appeal to succeed, the appellant must demonstrate that the trial judge made a palpable and overriding error in respect to the facts in issue.

[21] In Housen, supra, Iacobucci J. held that the unique opportunity of the trial judge to observe the witness in making a determination of credibility is not the sole justification for the imposition such a standard of review (at para. 25):

Although the trial judge will always be in a distinctly privileged position when it comes to assessing the credibility of witnesses, this is not the only area where the trial judge has an advantage over appellate judges. Advantages enjoyed by the trial judge with respect to the drawing of factual inferences include the trial judge's relative expertise with respect to the weighing and assessing of evidence, and the trial judge's inimitable familiarity with the often vast quantities of evidence. This extensive exposure to the entire factual nexus of a case will be of invaluable assistance when it comes to drawing factual conclusions...

[Underlining added; "only" underlined in original.]

[22] The foregoing passage highlights the fact that the trial judge's observation of witnesses is not the sole source of the deference that is to be afforded to the inferences a trial judge draws from facts. Trial judges have other advantages over appellate judges that demand the same high standard of review in relation to all conclusions of fact, as Iacobucci J. stated (at para. 25):

. . . It is our view that the trial judge enjoys numerous advantages over appellate judges which bear on all conclusions of fact, and, even in the absence of these advantages, there are other compelling policy reasons supporting a deferential approach to inferences of fact. We conclude, therefore, by emphasizing that there is one, and only one, standard of review applicable to all factual conclusions made by the trial judge – that of palpable and overriding error.

[Underlining in original.]

[23] In my opinion, what was said by this Court in Orangeville Raceway, supra, as well as what was said in the foregoing passages in Housen, supra, concerning inferences, shuts the door on the possibility of this Court, on a review of a judgment given under Rule 18A, applying a lower standard of review to findings of fact, including inferences drawn from those findings on issues of credibility, than that expressed in Orangeville Raceway, supra.

[24] Finally, I would add that there may well be an argument, based on the reasoning in Housen, supra, that the standard of review on a summary trial under Rule 18A ought to be the same as that on a conventional trial, that is, palpable and overriding error rather than a "cannot reasonably be supported by the evidence" standard. However, the question of which standard ought to be applied was not argued before us and, for that reason, I prefer not to express an opinion on the matter. I simply note that if the standard that ought to be applied is that of "palpable and overriding error", it would obviously not assist the appellant.

(ii) The appellant's arguments respecting the evidence and the trial judge's findings of fact

[25] It is the appellant's submission that the trial judge erred in fact when she decided that the issue of replacement cost was not settled between the parties on 1 May 2001 and that this error, together with other errors of fact, resulted in the trial judge's erroneous decision to grant the respondent relief from forfeiture.

[26] The appellant urged us to find that the trial judge erred in preferring the evidence of the respondent's adjuster, Mr. Smart, over that given by the appellant's adjuster, Mr. O'Dell, because her preference was based on an erroneous determination that a settlement had been reached prior to 19 April 2001 when, in the appellant's submission, the evidence was that a settlement had been reached on 1 May 2001. The appellant also urged us to conclude that the trial judge erred in fact when she found that the replacement cost was settled at $75,220.70 on 25 July 2001.

[27] The appellant further argued that the trial judge erred when she stated that it was reasonable for the respondent to have delayed commencing repairs or replacement until he had the insurer's agreement on the amount of the replacement cost and erred in finding that the appellant, by its conduct, endorsed the respondent's failure to comply with the replacement cost endorsement.

[28] As the appellant points out, there was evidence to support a finding that the agreement was made on 1 May 2001. In the affidavit of Mr. Smart, the adjuster for the respondent, Mr. Smart stated as follows:

13. Attached hereto as Exhibit "J" is a true copy of a letter from Mr. O'Dell to myself dated May 1, 2002 which encloses cheques for "partial payment of the fire loss of December 9, 2000" including $41,520.00, representing the ACV of the building loss, and a second payment of $2,800.00 for rental income. A further cheque was also enclosed for $1,860.00 in regard to an entirely separate claim relating to a break and enter on the Property.

[29] The issuance of a cheque by the appellant is significant because Mr. Smart acknowledged in his cross-examination that an actual cost value payment is usually not made until the replacement cost has been settled:

Q Okay. Would you agree with me that in general an actual cash value payment is not made until replacement cost has been settled?

A Generally speaking, yes. Generally.

[30] The letter to the respondent of 1 May 2001 enclosing a cheque tends to support the appellant's contention that the agreement was reached on that date, based on Mr. Smart's admission that such cheques are generally not issued until replacement value has been settled.

[31] While there is evidence that provides support for the finding for which the appellant contends, I am nevertheless of the view that the trial judge's determination that the agreement was not reached until 25 July 2001 is not one with which this Court can properly interfere. The trial judge was persuaded by the fact that the ultimate value which was agreed to by the parties was approximately $2,000 higher than the amount that had been discussed in the 1 May 2001 communications. She found the increase in the value inconsistent with the appellant's position that a final agreement had been reached at the earlier date. Support for the trial judge's finding in that regard can be found in the affidavit of Mr. O'Dell, the adjuster for the appellant:

21. On or about July 25, 2001, Mr. Smart contacted me by telephone. At that time, Mr. Smart advised me that reconstruction had not commenced and it was his position that replacement cost had not been settled. I advised Mr. Smart that the Replacement Cost Endorsement may limit his client's claim for that valuation as the Plaintiff had not complied with the 180 day provision. Though I was of the view that we had, in fact, settled replacement cost value on May 1, 2001, I further discussed the valuation of replacement cost with Mr. Smart and we revised the replacement cost settlement to $75,220.79, subject to the insurer's agreement to extend the 180 day provision in the Replacement Cost endorsement.

[Underlining added.]

[32] In my view, it was not unreasonable for the trial judge to have concluded, based on the evidence to which I have just referred, that the 1 May 2001 value had not been the final settlement value. It was open to the trial judge to draw the inference that no agreement was reached on 1 May 2001, from the fact the insured's adjuster was willing to negotiate a higher value at a later date. Indeed, it would be odd to do so if a lesser amount had been conclusively agreed to at an earlier date.

[33] Applying the standard of review set out in Orangeville Raceway, supra, to the finding of fact in contention, I am of the view that this court cannot disturb the finding of fact that the replacement cost value had not been settled until 25 July 2001.

IV. Ground two: Did the trial judge err in finding that the respondent's decision not to repair or replace the damaged property within 180 days of the damage occurring would come within the provisions of s. 10 of the Act?

[34] Section 10 of the Act allows courts to grant relief from forfeiture in certain circumstances:

If 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, or if there has been a termination of the policy by a notice that was not received by the insured owing to the insured's absence from the address to which the notice was addressed, and the court deems it inequitable that the insurance should be forfeited or avoided on that ground or terminated, the court may, on terms it deems just, relieve against the forfeiture or avoidance or, if the application for relief is made within 90 days of the date of the mailing of the notice of termination, against the termination.

[35] The leading case on the relief from forfeiture issue is Falk Brothers Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778, 62 D.L.R. (4th) 236 [cited to S.C.R.], in which McLachlin J., as she then was, giving the judgment for the Court, considered a provision of the Saskatchewan Insurance Act, R.S.S. 1978, c. S-26 which is substantially the same as s. 10 of the British Columbia legislation. In considering the appellant's arguments in this case, it is useful to begin by referring to what McLachlin J. said in Falk Brothers, supra, in relation to the provision.

[36] First, McLachlin J. held that the relief from forfeiture section in the legislation was remedial and should be broadly interpreted (at 782). The purpose of the provision and when it would apply were stated this way (at 783):

The purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer....

[37] Thus the prevention of hardship and the absence of prejudice to the insurer are primary considerations in determining whether s. 10 of the Act may be applicable in granting relief from forfeiture.

[38] Whether the respondent's failure to make repairs or replacements before the expiry of the 180 day period constituted non-compliance, rather than imperfect compliance under s. 10 of the Act, is critical to the appellant's appeal.

[39] In Falk Brothers, supra, the Supreme Court considered a failure to give notice within a prescribed time and whether the failure ought to be characterized as imperfect compliance or non-compliance. In that regard, McLachlin J. said, at 784-786:

...The distinction between imperfect compliance and non-compliance is akin to the distinction between breach of a term of the contract and breach of a condition precedent. If the breach is of a condition, that is, it amounts to non-compliance, no relief under s. 109 is available.

The case law has generally treated failure to give notice of claim in a timely fashion as imperfect compliance whereas failure to institute an action within the prescribed time period has been viewed as non-compliance, or breach of a condition precedent. Thus, courts have generally been willing to consider granting relief from forfeiture where notice of claim has been delayed.

On the other hand, cases in which failure to meet a time requirement has been held to be non-compliance rather than imperfect compliance have largely been cases in which the time period was for the commencement of an action rather than for the giving of notice.

The reasons for the distinction are bi-fold. First, failure to give notice of claim has been viewed as a breach of a term rather than a breach of a condition. Clearly, being akin to failure to meet a limitation period, failure to bring an action within the time required is a more serious breach than failure to give timely notice. A notice of a claim simply informs the insurer of the possibility of a future action, thereby allowing the insurer some time to investigate the merits of the claim and to negotiate a settlement: the actual bringing of an action, however, is the legal crystallization of the claim which sets its parameters and magnitude. Second, and probably more importantly, failure to give notice of the claim within the time required is a defect in provision of proof of loss for which relief against forfeiture is, by the terms of the statute, available. "Where there has been imperfect compliance with the statutory condition as to the proof of loss to be given by the insured or with any 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", ...s. 109 gives the court power to relieve from such forfeiture or avoidance. But it is only in respect of such statutory conditions as to proof of loss or other matters or things that are required to be done or omitted with respect to the loss that the court has this power. Culliton C.J.S. made this point in Presco Industrial Ltd. v. Saskatchewan Government Insurance Office (1967), 61 W.W.R. 637 (Sask. C.A.) There, a condition which imposed a time limitation for the bringing of an action was held to not fall into this category (at p. 639):

[The time limitation condition] does not work a forfeiture or avoidance; it does not bar any right -- it only bars a remedy…

[Citations omitted; underlining in original.]

[40] In Falk Brothers, supra, the failure to supply the insurer with proof of loss in breach of a term of the insurance contract was characterized as imperfect compliance, which potentially could be remedied under the statutory relief from forfeiture provision.

[41] In Holme Estate v. Unum Life Insurance Co. of America (2000), 83 B.C.L.R. (3d) 108, 2000 BCCA 627 at paras. 16-17, this Court held that the failure of the insured to comply with a term of the insurance contract requiring delivery of the notice of the claim to the insurer within 30 days of the claim arising, and proof of claim within 90 days, did not have the "crystallizing effect" that is characteristic of a limitation clause. The Court determined that the failure to meet the requirements of the notice term was imperfect compliance, and s. 10 of the Act applied.

[42] In Rolls-Royce Industries (Canada) Inc. v. Commercial Union Assurance Co. of Canada (1996), 8 C.P.C. (4th) 164, 8 O.T.C. 128 (Ont. Court of Justice, General Division), the insured failed to submit a claim for arbitration within the time limit set out in the insurance policy, which resulted in the forfeiture of its insurance. In considering whether the relief from forfeiture section of the Ontario legislation applied, Lane J. distinguished terms pertaining to time limitations from terms that stipulate that a particular action must be taken within a particular time period, at para. 59:

...In the present case, an entirely different clause deals with the time limitation applicable to institution of an action. Although the Award is a condition precedent to an action, the clause requiring arbitration does not set a time limit for the bringing of the action itself and thus is not within the line of cases represented by Presco Industrial Ltd. v. Saskatchewan Government Insurance Office (1967) 65 D.L.R. (2d) 120 (Sask. C.A.) in which it has been held that failure to comply with such limitation clauses cannot be relieved against.

[43] In Rolls-Royce Industries, supra, Lane J. rejected the view that a clause that sets out a time limit for bringing an arbitration is analogous to a limitation of action clause, the breach of which cannot be relieved against under the relief from forfeiture provision. Lane J. gave three reasons for holding that the view was untenable, at paras. 61-63:

First, the mere existence of a time limit cannot be a ground for barring relief; it is from failures of timeliness that most of the cases grant relief and in that respect the arbitration clause is not different from a notice clause.

Second, the rationale for the different treatment of limitation of action clauses, as discussed in Falk Bros., supra, is that the action represents the legal crystallization of the claim. By contrast, generally speaking, an arbitration under a policy is but a step on the road to that crystallization; in the words of the statute, it is a matter or thing to be done with respect to the loss. A typical arbitration in an insurance case might deal with the value of one or more of several articles destroyed by fire or stolen, or with the calculation of the business loss portion of a fire claim. Because the particular problem here is the more general one of coverage there is a danger that the normal role of the arbitration in relation to the loss might be overlooked in the legal analysis. As discussed in Falk Bros., it is clear that failure to perform acts or things required to be done with respect to the loss may be relieved against and in my view the arbitration process is exactly that.

Third, the statute is remedial and to be given a fair, large and liberal construction: Minto Construction, supra. It is not to be allowed to become so encrusted with authorities as to become a circumscribed rule of law rather than a principle of equity to be exercised with judicial discretion: Canadian Equipment Sales & Service Co. v. Continental Insurance Co. (1975), 9 O.R. (2d) 7 (Ont. C.A.) at 16, per MacKinnon J.A. Accordingly, sweeping exclusions from its scope are not to be encouraged and the equitable approach of focusing on the facts and on issues of conduct and prejudice is to be preferred. No case was cited to me laying down that failure to commence an arbitration under an insurance policy in a timely way could not be relieved against; and I am far from willing to create the first such decision when no prejudice has been shown and justice can be done by staying the action to await the Award. I therefore grant relief from forfeiture.

[Underlining added.]

[44] In Petersen v. Bannon (1993), 84 B.C.L.R. (2d) 350, 107 D.L.R. (4th) 616 (C.A.) [cited to B.C.L.R.], Finch J.A., as he then was, writing for the Court, set out the conditions that a party seeking relief from forfeiture must satisfy in order to avail himself of the remedy provided by s. 34 of the Insurance Corporation Act, R.S.B.C. 1979, c. 201, which provision was virtually identical to s. 10 of the Act in question (at para. 67):

(a) that there has been imperfect compliance;

(b) that this imperfect compliance pertained either

(i) to a statutory condition as to the proof of loss to be given by the insured, or

(ii) to a thing required to be done or omitted by the insured about the loss;

(d) that it is inequitable that the insurance be forfeited or terminated.

[45] In Petersen v. Bannon, supra, the Court held that the insured had not met the conditions precedent, and therefore denied relief from forfeiture. At issue in that case was a wilfully false statement that had been made to the insurer. The Court was of the view that such a statement did not constitute "imperfect compliance with a statutory condition," nor had the insured demonstrated that forfeiture would be inequitable.

[46] It is the appellant's submission that the conditions for relief from forfeiture have not been met in this case. The appellant characterizes the failure of the respondent to make repairs or replacement within 180 days of the damage as non-compliance, rather than mere imperfect compliance. The appellant argues that the 180 day provision of the Replacement Cost Endorsement is a condition precedent to the recovery of replacement costs, and is analogous to a limitation period. The appellant puts the argument this way in its factum: "Failure to meet that prescription period crystallizes the extent of recovery to which the Respondent is entitled, and is non-compliance as opposed to incomplete compliance for which relief from forfeiture is available."

[47] In her reasons, the trial judge referred to Falk Brothers, supra, in determining whether the 180-day term fell within the scope of s. 10 of the Act and concluded that the respondent's breach of the term amounted to imperfect compliance. In regard to the issue, the trial judge said:

I am unable to accept the defendant's submission that on this analysis the 180-day replacement cost term creates a condition precedent akin to a limitation period for the purposes of section 10. The 180-day term here goes to the essence of the insurance contract itself. It does not directly address the plaintiff's right to a legal remedy in relation to the loss. I conclude that without relief the 180-day term here causes, "forfeiture or avoidance of the insurance in whole or in part" but does not directly address any legal remedy. It relates to either or both of "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 thus falls perfectly within the scope of section 10.

[48] I would add that the 180-day term in the policy relates only to the formula or process by which the insurance money is calculated: see Rolls-Royce Industries, supra. The fact that a time reference is contained within the term is not determinative of its characterization. Although the 180-day term is a condition precedent to the receipt of replacement cost value, the term does not set a time limit for the bringing of an action. The 180-day clause is not related to the crystallization of the claim; it is merely a step in the process of obtaining the insurance proceeds. Failure to comply with the term did not invalidate the claim; it merely stipulated that an alternative form of quantification of the insurance proceeds would apply. Using the words of s.10 of the Act, the repairs or replacement to be undertaken within 180 days was a "matter or thing required to be done or omitted by the insured with respect to the loss". Moreover, the remedial nature of the statute demands that it ought not be narrowly applied.

[49] In light of the foregoing, I am of the view that the first two requirements that must be satisfied in order for relief from forfeiture to be granted as outlined by Finch J.A. in Petersen v. Bannon, supra, are met; that is, there has been imperfect compliance; and the imperfect compliance pertained to a thing required to be done or omitted by the insured about the loss.

[50] Having satisfied herself that requirements (a) and (b) were met, the trial judge ought to have proceeded to an analysis of the requirements set out in (c) and (d); that is, that a consequent forfeiture or avoidance of the insurance occurred; and that it is inequitable that the insurance be forfeited or terminated.

[51] Requirement (c) is clearly met in this case; the respondent's breach of the term led to a "forfeiture or avoidance of the insurance in whole or in part," as the actual cost value that was to be awarded in the event of a breach of the term was substantially less (approximately $33,000) than that which would have been paid to the respondent in replacement cost value.

[52] While the trial judge did not explicitly address whether it would be inequitable for the insurance to be terminated or forfeited, she did make a determination as to the inequity of the reduction in insurance proceeds in her analysis of whether to exercise her discretion to grant relief under s. 10. Her reasons in that regard are supported by the evidence.

[53] In summary, I am of the view that the trial judge did not err in finding that this was a case of imperfect compliance and that the other conditions for granting relief under s. 10 of the Act, as set out in Petersen v. Bannon, supra, were met.

V. Ground Three: Did the trial judge err in granting the respondent relief from forfeiture under the provisions of s. 10?

[54] The trial judge granted relief from forfeiture pursuant to s. 10 of the Act and, in doing so, gave the following reasons, which are summarized below in point form:

• The only prejudice to the appellant that would result is their obligation to make a greater pay-out;

• There was no discussion of the 180-day term after 27 December 2000 until 25 July, 2001;

• The appellant's actions and those of its adjuster made compliance with the term "difficult if not impossible";

• The adjusters understood at all times that the respondent intended to reconstruct the property;

• The appellant was largely responsible for the delays in the final settlement;

• The appellant did not strictly observe its own time requirements. It did not make an actual cost value payment to the respondent within the 60-day period stipulated it its policy, thereby endorsing a departure from the time requirements stipulated in the policy.

(i) The reasonableness of the respondent's conduct

[55] With regard to the reasonableness of respondent's decision to wait longer than 180 days to repair or replace the damaged property, the trial judge thought that the date on which the adjusters had agreed to an appropriate replacement cost was relevant. The trial judge stated: "The significance of the date of any such agreement relates only to whether it was reasonably possible after the conclusion of the agreement for the plaintiff to have performed repairs within the 180-day period." The trial judge found as a fact that the agreement as to the replacement cost value had not been reached by the parties until 25 July, 2001. Presumably, the trial judge felt it necessary to make this finding in order to support her conclusion that it was not unreasonable for the respondent to have breached the 180-day term.

[56] The trial judge further noted that the respondent had been wrongly informed by his adjuster that the insurance policy required that an agreement be in place before repairs could commence. Additionally, the trial judge found that the respondent had no financial impediment to start the repairs until the replacement cost money had been settled. The trial judge appears to have weighed these factors in determining whether or not the actions of the respondent in breaching the 180-day term were reasonable. The trial judge made an additional finding of fact that appears to have been critical to her ultimate determination that relief from forfeiture ought to be granted:

However, I note also that implicit in the defendant's position and submissions is the acknowledgment that whether or not the plaintiff was badly advised in this fashion, it was reasonable for him to have held off from starting the repairs or replacement of the property until he had the insurer's agreement as to how much of that cost the insurer would cover. It is only common sense to suppose that an insured will want to know the level of coverage the insurer is prepared to provide before committing himself or herself to a particular reconstruction process.

[Underlining added.]

[57] These findings of fact, taken together, supported the trial judge's determination that it was not unreasonable for the respondent to have breached the 180-day term of the policy.

[58] The appellant asks this Court to find that the trial judge made reversible errors in respect to these factual findings. I have already considered the appellant's arguments in regard to the trial judge's findings and, for the reasons I have already expressed, I am of the opinion that this court cannot properly interfere with those findings.

[59] As the factual findings cannot be overturned, I see no basis for disturbing the trial judge's determination that the respondent's actions in breaching the 180-day term were not unreasonable.

(ii) The gravity of the breach

[60] As to the gravity of the breach, factors such as those considered in Rolls-Royce, supra, are relevant. In that case, Lane J. considered whether the breach had led to an act or omission by the insurer that had "compromised its position" (para. 54) and whether the breach had been a "deliberate flouting of the policies" (para 54).

[61] In the case before us, it seems to me that the trial judge's finding that the respondent's breach did not compromise the position of the appellant was correct. As previously noted, the trial judge found that the only prejudice that would be suffered by the appellant is their liability for the higher amount of insurance proceeds. This does not constitute the sort of compromised position that would warrant the rejection of the respondent's application for relief from forfeiture. Additionally, the trial judge found that far from being a deliberate avoidance of the policy, the respondent's breach of the term was not unreasonable. Based on those findings, it cannot be said, in my opinion, that the breach was so grave as to warrant refusal to grant relief from forfeiture.

(iii) The disparity between the value of the property forfeited and the damage caused by the breach

[62] As to the disparity between the value of the property forfeited and the damage caused by the breach, I note that the respondent was paid an actual cost value amount of $41,520, which is $33,700.79 less than the replacement cost amount of $75,220.79. The forfeited amount is nearly half the value of the total claim. That being the case, the granting of relief from forfeiture appears to me to be warranted.

[63] I would not accede to the third ground of appeal.

VII. Conclusion

[64] For the reasons given, I would not accede to the appellant's submissions concerning the alleged errors in the trial judge's findings of fact or her conclusion in law that s. 10 of the Act was available to relieve against forfeiture. It was open to the trial judge to exercise her discretion to grant equitable relief from forfeiture and no error in principle in the exercise of that discretion has been demonstrated.

[65] I would dismiss the appeal.

“The Honourable Madam Justice Rowles”

I Agree:

“The Honourable Mr. Justice Donald”

I Agree:

“The Honourable Madam Justice Huddart”

Citation:	*Hua v. Optimum West Insurance Co.,*
	2005 BCCA 123