Estate of Mary Theresa McCunn by her executor McCunn v. Canadian Imperial Bank of Commerce et al.

[Indexed as: McCunn Estate v. Canadian Imperial Bank of Commerce]

53 O.R. (3d) 304

[2001] O.J. No. 486

Docket No. C32521

Court of Appeal for Ontario

Catzman, Borins and Feldman JJ.A.

February 15, 2001

• Application for leave to appeal to the Supreme Court of Canada granted October 4, 2001 (Gonthier, Major and Binnie JJ.). S.C.C. Bulletin, 2001, p. 1773. S.C.C. File No. 28516

Insurance--Insurance contract--Deceased and husband had joint line of credit with bank which was insured by insurer --Insurance premiums automatically debited monthly from account of deceased and husband--Deceased did not deal directly with insurer--Certificate of insurance stated that insurance terminated at age 70--Bank continued to debit premiums after deceased turned 70--Deceased died at age 71--Express agreement between bank and deceased necessary to extend contract of insurance past deceased's 70th birthday--Bank's oversight in continuing to debit account did not create binding contract of insurance.

The deceased and her husband had a line of credit with the respondent bank. The line of credit was insured by the respondent insurer. The insurer had no direct involvement with the deceased or her husband and all the steps required to put the life insurance coverage in place were carried out by bank officials. The insurance premiums were automatically debited on a monthly basis from the account of the deceased and her husband. The certificate of insurance issued by the insurer set out clearly that the insurance terminated at age 70. After the deceased turned 70, the premiums continued to be deducted from her bank account for a period of 16 months until she died, whereupon the bank took steps to reverse the charges to the account for her portion of the life insurance premiums. On an application by the deceased's executor, the court held that there was a binding contract of insurance in effect at the time of the deceased's death as the conduct of the bank had the effect of extending the insurance contract. The insurer and the bank appealed.

Held, the appeal should be allowed.

Per Borins J.A. (Catzman J.A. concurring): The applications judge was incorrect in his conclusion that a new contract of insurance had resulted from the bank's debiting of monthly insurance premiums to the deceased's credit line subsequent to the termination of the insurance policy by reason of her age. For the parties to have created a new contract of insurance it was necessary that the bank, with the requisite knowledge and intent, make an offer to provide insurance and that the deceased, with the requisite knowledge and intent, accept the offer. Moreover, as this was a contract of insurance, to create a new contract it was necessary that there be agreement upon every material term of the contract. No such offer was made by the bank and there was no acceptance by the deceased. An act which occurs through an administrative oversight is not an intended act. As the bank was in error in debiting the premiums, it could not be said that it intended to extend the contract.

The deceased's estate was attempting to take advantage of the bank's mistake to demand payment of the insurance. Where a party knows of another's mistake, or should reasonably be aware of it, she cannot expect that the law will permit her to take advantage of it, particularly in circumstances, as in this case, where she neither relied on it to her detriment, nor acted in the reasonable expectation that coverage had not come to an end.

Per Feldman J.A. (dissenting): The applications judge did not err in concluding that the conduct of the bank (on behalf of the insurer) extended the life insurance contract beyond the deceased's 70th birthday and that the deceased accepted that extension. The bank's deduction and premiums and sending of statements constituted an offer, while acceptance was demonstrated by the deceased's lack of objection to the continuation of her life insurance policy regime by continuing to allow the deduction of premiums from her account. There was consideration flowing from the deceased to the bank by the payment of the premiums from the line of credit account together with any interest charges incurred as a result. The bank's conduct could not be described as an administrative oversight. As the applications judge observed, the bank's conduct was the direct result of automation in banking, because automatic processes may be set up without the periodic monitoring of a thinking human being. The bank must be deem ed to have intended the consequences of those actions, and thus to have extended the contract.

APPEAL from a judgment of Chadwick J. (1999), 1999 14814 (ON SC), 45 O.R. (3d) 112, [1999] I.L.R. 1-3710, 47 B.L.R. (2d) 301 that a binding contract of insurance existed at the time of the deceased's death.

St. John Tug Boat Co. v. Irving Refinery Ltd., 1964 88 (SCC), [1964] S.C.R. 614, 46 D.L.R. (2d) 1, 49 M.P.R. 284, consd Other cases referred to American Home Mutual Life Assurance Co. v. Harvey, 109 S.E.2d 322 (1959) (Ga. App., Div. No. 2); Barwick v. General American Life Insurance Co., 324 S.E.2d 758 (1984) (Ga. App.); Blanchette v. C.I.S. Ltd., 1973 3 (SCC), [1973] S.C.R. 833, [1973] 5 W.W.R. 547, 36 D.L.R. (3d) 561, [1973] I.L.R. 1-532; Boult v. Maryland Casualty Co., 111 F.2d 257 (1940) (5th Cir.); Cordell v. Greene Finance of Georgetown, Georgia, 953 F.Supp. 1391 (1996) (U.S. Dist. Ct., M.D. Ala., Northern Division); Davidson v. Global General Insurance Co. (1964), 1964 179 (ON SC), [1965] 1 O.R. 505, 48 D.L.R. (2d) 503 (H.C.J.); Duplisea v. T. Eaton Life Assurance Co., 1979 191 (SCC), [1980] 1 S.C.R. 144, 26 N.B.R. (2d) 319, 99 D.L.R. (3d) 445, 27 N.R. 369, 55 A.P.R. 319, 7 B.L.R. 24, [1979] I.L.R. 1-1104; Gottardo Properties (Dome) Inc. v. Toronto (City) (1998), 1998 6184 (ON CA), 162 D.L.R. (4th) 574, 46 M.P.L.R. (2d) 309 (Ont. C.A.); Kalkinis v. Allstate Insurance Co. of Canada (1998), 1998 6879 (ON CA), 41 O.R. (3d) 528 (C.A.) [Leave to appeal to S.C.C. (2000), 255 N.R. 199n]; McMaster University v. Wilchar Construction Ltd., 1971 594 (ON SC), [1971] 3 O.R. 801, 22 D.L.R. (3d) 9 (H.C.J.), affd (1973), 1976 757 (ON SC), 12 O.R. (2d) 512n, 69 D.L.R. (3d) 400n (C.A.); Minnesota Mutual Life Insurance Co. v. Larr, 567 So.2d 239 (1990) (Miss.); Pitts v. New York Life Insurance Co., 148 S.E.2d 369 (1966) (S.C.); Smith v. Hughes (1871), [1861-73] All E.R. Rep. 632, L.R. 6 Q.B. 597, 440 L.J.Q.B. 221, 25 L.T. 329, 19 W.R. 1059; Travelers Ins. Co. v. Eviston, 37 N.E.2d 310 (1941) (Ind. App.) Authorities referred to Crawford, B., and J.D. Falconbridge, Crawford and Falconbridge Banking and Bills of Exchange, 8th ed., Vol. 1 (Toronto: Canada Law Book, 1986) Holmes' Appleman on Insurance, 2d ed., Vol. 5 (1998) MacGillivray, E.J., MacGillivray on Insurance Law, 9th ed. (London: Sweet & Maxwell, 1997)

K.S. McLean, for respondent. John P. O'Toole, for appellants.

[1] BORINS J.A. (CATZMAN J.A. concurring):--I have read the reasons of my colleague Feldman J.A. With respect, I am unable to agree with her decision to dismiss this appeal.

[2] The issue in this appeal is whether the estate of Mary Theresa McCunn can take advantage of the mistake of the appellant, the Canadian Imperial Bank of Commerce ("CIBC" or "the bank"), in debiting monthly insurance premiums to Mrs. McCunn's credit line after the insurance policy provided by the other appellant, the Mutual Life Assurance Company for Canada ("Mutual Life"), had come to an end. Chadwick J. held that the mistaken debiting of premiums extended the term of the insurance policy beyond its termination date. For the reasons that follow, it is my view that the decision of the applications judge is incorrect. I would, therefore, allow the appeal, set aside the judgment of Chadwick J. and direct that the application be dismissed.

Facts

[3] The material facts are not in dispute. On January 22, 1990, Mrs. McCunn applied for and obtained a personal credit line from the CIBC. A few days later, her husband, Dr. McCunn also obtained a personal credit line from the bank. At that time, through Mutual Life, the bank provided, at its own expense, an insurance policy on the life of customers who had obtained credit lines. The purpose of the insurance was to reduce or liquidate any outstanding indebtedness under the credit line upon a customer's death. As of January, 1990, Dr. and Mrs. McCunn were each insured under a Mutual Life group policy.

[4] The bank changed its policy of providing insurance without cost to its credit line customers in July, 1990, when it decided to pass along to them the responsibility for obtaining, at their own expense, insurance coverage. Customers were notified in writing of this decision and provided with an information package that explained, inter alia, that customers who were at that time insured were automatically enrolled in the new insurance plan "subject to the age 70 limit", unless they elected to opt out of the new plan. Customers also received a specimen insurance certificate which contained the following term: "Coverage will continue . . . until the date on which the Insured Person reaches age 70." Dr. and Mrs. McCunn each became automatically insured under the new plan on August 1, 1990. As before, the insurance was provided by Mutual Life. It was common ground that the coverage provided by the insurance policy terminated on Mrs. McCunn's 70th birthday.

[5] On May 21, 1993, Dr. and Mrs. McCunn decided to consolidate their credit lines into a single credit line. It was necessary that each sign a document effecting this change, with the result that the existing insurance coverage of their separate credit lines merged and coverage continued of their consolidated credit line. On June 2, 1993, the bank wrote to Mutual Life giving the insurer the particulars of this change and confirming that insurance coverage would continue on the new consolidated credit line.

[6] From August 1, 1990, when Mrs. McCunn became responsible for paying the cost of her insurance, monthly premiums were debited to her credit line. After the credit lines were consolidated on May 21, 1993, monthly premiums were debited to the joint credit line. Premiums were structured based on the average daily balance of the credit line and the customer's age. Mrs. McCunn reached her 70th birthday on December 7, 1996. Although the coverage on her life terminated on that day under the terms of the certificate of insurance, the bank continued to debit monthly premiums to the credit line for a further sixteen months until her death on March 25, 1998. Monthly statements sent to Mrs. McCunn reflected the debiting of the premiums.

[7] After Mrs. McCunn's death, a representative of her estate sought payment under the policy of an amount appropriate to reduce or liquidate any outstanding indebtedness under the credit line at the date of her death. The request was rejected by the bank, which pointed out that coverage had been terminated on Mrs. McCunn's 70th birthday. In a letter to the estate's solicitor, the bank wrote: "It would appear that insurance premiums did continue after Mrs. McCunn reached the age of 70, said premiums amounting to $1,067.38 have been reversed."

[8] It was the evidence of the bank's representative, Wayne Godin, that the premiums were debited to the credit line after Mrs. McCunn's 70th birthday as "a result of administrative oversight". Although Mr. Godin was extensively cross-examined, this explanation was not seriously challenged. He elaborated on it by stating that the debiting of insurance premiums was generated by the bank's computer. He said that [the] "computer system . . . collects the premiums", having been programmed to debit monthly premiums to the consolidated credit line. It is clear from Mr. Godin's testimony that it was as a result of the bank's oversight in failing to program the computer to discontinue the debiting of monthly premiums after Mrs. McCunn's 70th birthday that it continued to debit the premiums each month until the death of Mrs. McCunn.

[9] Consequent to the bank's refusal to make payment under the insurance policy, the estate proceeded by notice of application for the following relief:

The Applicant makes application for the determination of rights that depend upon the interpretation of a certain contract made between the late Mary Theresa McCunn and the respondent, Canadian Imperial Bank of Commerce (CIBC) and Mutual Life Assurance Company of Canada (Mutual Life), and in that respect for determination of the following:

(a) whether the Certificate of Life Insurance attached as Exhibit "B" to the affidavit of Timothy J. McCunn herein evidences a binding contract of insurance made between the deceased and CIBC and Mutual Life, holding the deceased covered under Mutual Group Policy 30000 in accordance with the terms of the Certificate;

(b) whether the said coverage became effective on or about May 21, 1993 (the date of the application);

(c) whether pursuant to the terms and conditions of the Certificate, the deceased was entitled to, in the interests of her estate, the benefit defined in paragraph 3 of the Certificate; and

(d) whether any limitation or exclusion applies to deny the estate the benefit of coverage and, in particular, whether under the circumstances set out in the Affidavit of Timothy J. McCunn the estate is entitled to the benefit under the Certificate and Policy notwithstanding that at her death the deceased was 71 years of age.

Reasons of the Applications Judge

[10] To Chadwick J. the purpose of the application was "to determine whether there [was] a binding contract of insurance made between the deceased Mary Theresa McCunn, C.I.B.C. and Mutual Life". As such, he saw the issue to be resolved to be "whether C.I.B.C. and Mutual Life as a result of their conduct [in continuing to debit premiums after the contract had terminated as a result of Mrs. McCunn's age] had extended [the] contract past the age of 70 to the point where Mary McCunn was covered at the time of her death". In resolving this issue, the analysis which the applications judge undertook appeared to involve the application of contract law principles.

[11] The estate took the position that there were three alternative grounds on which the court could find that the insurance contract had been extended beyond its termination date. The applications judge described them as follows:

(1) That there was a reasonable expectation;

(2) Estoppel; and

(3) Extension of contract.

[12] The position of the bank, on behalf of itself and Mutual Life, was that the insurance contract had terminated on Mrs. McCunn's 70th birthday. It submitted before the applications judge, and this court, that as a result of administrative oversight, it continued to debit insurance premiums to the credit line. The bank further submitted, relying on contract law, that the mistaken debiting of premiums did not result in the formation of a new contract between it and the insurer, on the one hand, and Mrs. McCunn, on the other, to extend coverage beyond her 70th birthday.

[13] The applications judge rejected the doctrine of reasonable expectation of the insured that she was covered by the policy at the time of her death. In doing so, he pointed out that the terms of the policy were clear in respect to its termination date.

[14] In addition, he rejected the estate's position that the CIBC was estopped from relying on the termination date in the policy. After reviewing the test for estoppel, he found that one of its essential factors had not been established. In concluding that Mrs. McCunn had not relied to her detriment on the erroneous debiting of premiums, the applications judge found [at p. 116 O.R.]:

In this particular case the deceased did not alter her conduct. There is no evidence she was even aware the policy was still in effect although the premiums remained the same. It would be speculation to try and determine whether the deceased would have gone to the marketplace to seek other insurance if she was aware her coverage had terminated at age 70.

(Emphasis added)

[15] However, on the basis of "the conduct of the bank" the applications judge found that the insurance contract had been extended. Although he made no finding as to when it had been extended, relative to his ultimate finding it seems that he considered the contract to have been extended to the date Mrs. McCunn died. The conduct of the bank which the applications judge found to be significant was the debiting of the premiums subsequent to Mrs. McCunn's 70th birthday, its awareness of her birth date and the fact it sent her monthly statements which reflected the debiting of the premiums.

[16] In addition, the applications judge applied St. John Tug Boat Co. v. Irving Refinery Ltd., 1964 88 (SCC), [1964] S.C.R. 614, 46 D.L.R. (2d) 1, which he considered "as authority that the contract was extended".

[17] Chadwick J. concluded his reasons for judgment [at pp. 119-20 O.R.] in this way:

The bank's conduct is the direct result of automation in banking, and indeed, in the whole corporate sector. Administrative systems are set up to ensure the automatic processing of regular and predictable transactions. As a result, automatic processes may be set in motion without the periodic monitoring of a thinking human being. This is a fact of modern life. On the face of its conduct, the bank must be deemed to have intended the consequences of these actions, and thus to have extended the contract.

In this case, the bank continued to send statements and debit Mrs. McCunn's account for premiums as if the insurance contract were still in place. Also, the bank made a big deal about advising Mrs. McCunn what steps she should take with her R.R.S.P.s when she turned 70; but no mention was made of the life insurance contract. Furthermore, the bank had previously allowed Mrs. McCunn to take out the insurance when she was 65, even though the rules stated that it was only available to those under the age of 65. Clearly, the bank's conduct was more than acquiescent, and consistent with an active extension of the insurance. The bank's conduct was more than an administrative error. As such, I find the contract of insurance was in place at the time of her death.

(Emphasis added)

Analysis

[18] Applying basic principles of contract law, it is my view the applications judge was incorrect in his conclusion that a new contract of insurance had resulted from the bank's debiting of monthly insurance premiums to Mrs. McCunn's credit line subsequent to the termination of the insurance policy by reason of her age. For the parties to have created a new contract of insurance it was necessary that the bank, with the requisite knowledge and intent, make an offer to provide insurance, and that Mrs. McCunn, with the requisite knowledge and intent, accept the offer. As I will explain, it cannot be said that either the bank made such an offer, or that there was an acceptance by Mrs. McCunn.

[19] Moreover, as this was a contract of insurance, to create a new contract it was necessary that there be agreement upon every material term of the contract. In this regard, in MacGillivray on Insurance Law, 9th ed. (London: Sweet & Maxwell, 1997), at p. 89 it is stated:

An acceptance will be of no effect in law unless the parties have agreed upon every material term of the contract they wish to make. The material terms of a contract of insurance are: the definition of the risk to be covered, the duration of the insurance cover, the amount and mode of payment of the premium and the amount of insurance payable in the event of loss. As to all these there must be a consensus ad idem, that is to say, there must either be an express agreement or the circumstances must be such as to admit of a reasonable inference that the parties were tacitly agreed. Without such agreement, it would be impossible for the courts to give effect to the parties contract except by virtually writing the contract for them, which is not the function of the courts to do.

The corresponding paragraph to the above statement in the 4th edition of MacGillivray on Insurance Law was approved in Davidson v. Global General Insurance Co. (1964), 1964 179 (ON SC), [1965] 1 O.R. 505, 48 D.L.R. (2d) 503 at p. 509 O.R., p. 507 D.L.R. (H.C.J.).

[20] To extend the insurance contract beyond its termination date, it was necessary that there be an express agreement to do so between the bank and Mrs. McCunn. Either the insurer or the insured would have had to make an offer containing the material terms described above, and the other party would have had to accept it. On the reasons of the applications judge, the bank was deemed to have made an offer by erroneously continuing to debit monthly premiums after the termination of the original policy. I use the word "erroneously" because it is implicit in the conclusion reached by the applications judge that it was because the bank had failed to program its computer to take into account Mrs. McCunn's 70th birthday that the debiting of premiums continued. It was for this reason that he "deemed" that the bank intended to extend the contract.

[21] The applications judge did not reject the bank's position that the debiting of the premiums was an administrative oversight as explained by Mr. Godin. An oversight is an inadvertent omission or error. This is precisely what occurred when the bank failed to program its computer properly. An act which is the result of an administrative oversight is not an intended act. As the bank was in error in debiting the premiums, it cannot be said that it intended to extend the contract. To act erroneously is inconsistent with acting knowingly. It follows that by inadvertently debiting the monthly premiums to Mrs. McCunn's credit line subsequent to the termination date of the contract, the bank cannot be seen to have knowingly intended to make an offer to extend the contract or, properly speaking, to enter into a new contract. Moreover, even if this could be said to amount to such an offer, there was no evidence that it was accepted by Mrs. McCunn. The applications judge made no such finding. Indeed, in considering the estate's estoppel argument he observed that there was no evidence that Mrs. McCunn "was ever aware that the policy was still in effect although the premiums remained the same".

[22] In my view, Saint John Tug Boat does not assist Mrs. McCunn's estate. It was an entirely different case where there was evidence that the plaintiff had offered the defendant the use of its tug boats. The issue was whether, in the absence of a written or verbal acceptance of the offer, the defendant in some other manner had accepted it. It was found that by its conduct the defendant had accepted the offer. The case is not authority for any general legal principle. It was entirely fact driven and illustrates that a party may accept an offer by its conduct.

[23] What this case comes down to is a mistake by the bank which, as the applications judge found, was not relied on by Mrs. McCunn. Based on the clear language of the insurance contract, the insurer's duty to pay was discharged on her 70th birthday, a fact which was apparent on the face of the documents she signed. She must be taken to have known, or to have had reason to know, that by its terms the insurance coverage had come to an end when she reached age 70. Yet, in the face of these circumstances, the estate has attempted to take advantage of the bank's mistake to demand payment of the insurance. Where a party knows of another's mistake, or should reasonably know of it, she cannot expect that the law will permit her to take advantage of it, particularly in circumstances, as in this case, where she neither relied on it to her detriment, nor acted in the reasonable expectation that coverage had not come to an end McMaster University v. Wilchar Construction Ltd., 1971 594 (ON SC), [1971] 3 O.R. 801, 22 D.L.R. (3d) 9 (H.C.J.), affd (1973), 1976 757 (ON SC), 12 O.R. (2d) 512n, 69 D.L.R. (3d) 400n (C.A.).

[24] This case is analogous to the situation in which a bank has mistakenly deposited a sum of money into a customer's account. Had the bank mistakenly deposited $1,000,000, or any other sum, into her account, Mrs. McCunn would not have been entitled to keep it and would be required to make restitution to the bank. The applicable legal principle is stated in B. Crawford, Crawford and Falconbridge Banking and Bills of Exchange, 8th ed. (Toronto: Canada Law Book, 1986), Vol. 1 at p. 776:

The fundamental principle is that money or other value (such as a credit to an account) paid or transferred by a mistake of fact is recoverable to the extent that by its retention the payee or transferee enjoys an unjustified enrichment. The typical mistake made by a bank in over-crediting a customer's account is one of pure fact caused by posting the right amount to the wrong account or the wrong amount to the right account. Prima facie, therefore, the bank may rectify the error at any time upon discovering it and may justify its adjustment of the accounts by reference to its right to restitution.

[25] There is one other point that requires comment. As one of the reasons for deeming that the contract had been extended by the bank's conduct, the applications judge observed that the bank had permitted Mrs. McCunn to "take out" the insurance when she was 65, "even though the rules stated it was only available to those under the age of 65". I believe that he had in mind the documents signed by Mrs. McCunn in May 1993, when she and her husband consolidated their credit lines after she had passed her 65th birthday. I would point out that the purpose of signing these documents was not to "take out" fresh insurance, but was to transfer or continue the existing insurance coverage, which both Mrs. McCunn and her husband had obtained in 1990 on their individual credit lines, to the consolidated credit line. The evidence does not support a finding that the bank permitted Mrs. McCunn to obtain insurance when she was ineligible for coverage by reason of her age.

Conclusion

[26] In summary, the application judge's finding that the bank's automated computer system had mistakenly continued to debit monthly premiums to Mrs. McCunn's credit line after the insurance coverage had terminated on her 70th birthday cannot be elevated to a knowing intention on the part of the bank to extend the coverage to some unspecified date in the future, particularly in light of his additional findings that Mrs. McCunn had neither relied to her detriment on the debiting of the premiums, nor formed any reasonable expectation that her life would be insured subsequent to her 70th birthday. In my view, there was no evidence that was capable of supporting a finding that the CIBC and Mrs. McCunn had entered into a contract extending the insurance contract that had terminated on her 70th birthday, or that they had agreed upon a new insurance contract. In reaching the conclusion that the CIBC had extended the insurance contract, the applications judge wrote an insurance contract. He erred in doing so.

[27] I would allow the appeal, set aside the judgment of Chadwick J. and order that the application be dismissed with costs in this court and below.

[28] FELDMAN J.A. (Dissenting):--The appellants appeal from the decision of Chadwick J. that at the date of her death, Mary McCunn had a binding contract of life insurance with Mutual Life Assurance Company of Canada which insured her line of credit with the Canadian Imperial Bank of Commerce ("the bank").

[29] The matter was determined on application after Mrs. McCunn's death, based on the history of Mrs. McCunn's dealings with the bank. In 1990, Mrs. McCunn and her husband, Dr. Donald McCunn, each established individual lines of credit with the bank. Mrs. McCunn's credit line limit was $50,000, while Dr. McCunn's was $25,000. At that time, the bank automatically placed life insurance on all personal lines of credit through Mutual Life.

[30] Later that year, the bank changed its policy of automatic coverage to a policy of optional coverage at the expense of the customer. Both Mrs. McCunn and her husband elected to accept the coverage and to have the premiums deducted automatically on a monthly basis from their accounts.

[31] In May of 1993, the McCunns decided to consolidate their lines of credit into one joint account with a credit limit of $100,000. The McCunns applied for and received a transfer of their life insurance coverage to the new single account. Mrs. McCunn was 66 years old at the time. Thereafter the premiums were calculated as a "joint premium" based on the amount of indebtedness on the McCunns' line of credit. An account statement was sent to them jointly reflecting the activity in the account, including deduction of the premium.

[32] The certificate of insurance issued by Mutual Life provides that "An applicant must be under age 65 to apply for insurance coverage under this plan. Coverage will continue however until the date on which the insured person reaches age 70."

[33] The bank continued to deduct the joint life insurance premium from the McCunn account for 16 months after Mrs. McCunn reached the age of 70 and until her death. After deducting its administration fee, which was a percentage of the total aggregate premium, the bank forwarded the premiums to Mutual Life.

[34] The bank continued to deduct the joint premium notwithstanding that through the McCunns' branch, the bank was aware of Mrs. McCunn's birthdate and age. She was a "private banking" customer. When Mrs. McCunn was approaching her 70th birthday on December 7, 1996, the bank recommended to her that she convert her R.R.S.P. funds into a Registered Retirement Income Fund (R.R.I.F.). The bank also confirmed internally in its records and notified the branch by a report in early 1997, generated the month after the customer reaches age 70, that Mrs. McCunn had turned 70.

[35] After Mrs. McCunn's death, when the estate sought to collect the life insurance, the bank took steps to reverse the charges to the account for Mrs. McCunn's portion of the premium for the 16 months after she had reached the age of 70, on the basis that the insurance coverage had terminated when she reached that age. On this application, the bank took the position that its continued deduction of premiums after that time was an "administrative error" on its part.

[36] How this error occurred was never explained by the bank in the evidence. In particular, there was no evidence as to whether this was an isolated incident limited to Mrs. McCunn, or whether the bank's computer also deducted premiums from other persons over the age of 70. The bank's deponent on the application, Mr. Godin, refused on cross examination to provide any documentation to substantiate that premiums were not deducted from other customers over age 70.

[37] The issue articulated by the application judge [at p. 115 O.R.] was "whether C.I.B.C. and Mutual Life, as a result of their conduct, have extended a contract past the age of 70 to the point where Mary McCunn was covered at the time of her death".

[38] Three legal avenues were argued by the respondent on the application. The application judge rejected both the arguments of reasonable expectation and of estoppel. However, he held that the contract of insurance had been extended beyond the date when Mrs. McCunn reached age 70 by virtue of the following factors: (a) the bank continued to send statements and to debit Mrs. McCunn's account for premiums as if the insurance contract was still in place; (b) the bank advised Mrs. McCunn what steps she could take with her R.R.S.P.s when she turned 70, evidencing that the bank clearly knew her birthdate and her age, and was in contact with her with respect to banking issues arising as a result of her age; and (c) the bank had allowed Mrs. McCunn to take out the insurance in 1993 when she reapplied to transfer the insurance to her new joint account, even though she was over age 65, when the contract provided that persons over 65 could not apply.

[39] The application judge concluded [at p. 120 O.R.] that the bank's conduct was "more than acquiescent, and consistent with an active extension of the insurance. The bank's conduct was more than an administrative error". As a result, he found that the insurance contract remained in place at the date of Mrs. McCunn's death when she was 71 years old.

[40] The appellants' submission on the appeal is that the application judge erred in law by finding a contract where there was no consensus ad idem, on the basis that there was no evidence that Mrs. McCunn was aware that the insurance policy was still in effect after her 70th birthday. The appellants also argue that their conduct could not amount to waiver or estoppel. The appellants also raised a procedural issue that the application judge erred by deciding the application on "a theory not directly referable to the materials adduced on the application before him", to the prejudice of the appellant.

1. The procedural issue

[41] The application judge set out the three alternative bases cited by the respondents on their application, for the submission that the insurance contract remained in effect at the death of Mrs. McCunn. He rejected the first two, but accepted the third. The Notice of Application asks for a determination of rights in respect of the contract of insurance including "whether the estate is entitled to the benefit under the Certificate and Policy notwithstanding that at her death the deceased was 71 years of age". The facts relied on by the application judge were set out in the affidavits filed by each side and the brief cross-examinations thereon.

[42] In the case of Kalkinis v. Allstate Insurance Co. of Canada (1998), 1998 6879 (ON CA), 41 O.R. (3d) 528 (C.A.), relied on by the appellants, Finlayson J.A. was critical of trial judges deciding cases on issues not pleaded, but raised in argument after the evidence has been presented and heard based on the case as pleaded. This case, however, was an application where the record was completed and before the court for consideration on the argument. In this case, the application judge did not ignore the pleadings, but simply relied on a Supreme Court of Canada case apparently not presented by the parties, in order to enhance his analysis of the pleaded issues. That does not constitute any error.

[43] It is the obligation of the parties to bring the relevant authorities to the attention of the court. If the court finds further authorities which support or contradict the positions of the parties on the issues, it is the duty of the court to apply the law as it exists. In some circumstances, the court may wish to have the submissions of the parties on some case law which was not brought to the court's attention, for example, where the law has undergone a significant change and the court intends to base its decision on that change. That was not the case here. It was open to the application judge to consider all authorities which pertain to the matter as framed by the parties.

2. Consensus ad idem

[44] In my view the application judge made no error in his analysis that by its conduct the bank (on behalf of Mutual Life) extended Mrs. McCunn's life insurance contract beyond the age of 70 and that Mrs. McCunn accepted that extension.

[45] The appellant contends that there was no evidence of agreement because there was no evidence that Mrs. McCunn either knew about the extension or agreed with it, and in particular, no evidence that she relied on it to her detriment because there was no evidence that she could have obtained alternate insurance coverage had she attempted to do so.

[46] The application judge referred to the case of St. John Tug Boat Co. v. Irving Refinery Ltd., 1964 88 (SCC), [1964] S.C.R. 614, 46 D.L.R. (2d) 1. In that case, the plaintiff tug boat company had offered to have on stand-by two tug boats for the use of the defendant to escort oil tankers into the harbour to its refinery. The advantage to the defendant of having boats on stand-by was that if it had to find a tug boat each time its tankers arrived, it would have had to incur significant demurrage charges while the tankers waited to unload their cargo. The defendant had initially accepted the offer first for one month, and then agreed to two two-week extensions thereafter. The defendant continued to use the services of the plaintiff's tugs for several months, but without a further formal extension of the terms of the stand-by facility. The defendant then refused to pay for the stand-by service.

[47] The Supreme Court [of] Canada held that by continuing to make the stand-by services available after the extension period, and by sending invoices which showed that the same rates were being charged, the plaintiff made a new offer to the defendant to render the same services at the same rate. This offer was accepted by the defendant by its conduct of using the services from time to time.

[48] The application judge noted that in this case, the roles of the parties were reversed, but with the bank as the offeror, the case on behalf of Mrs. McCunn was stronger. I agree with that analysis.

[49] The system set up by the bank for premium payments and therefore for administration of the life insurance contract was fully within the control of the bank. The system put in place by the bank required no action by Mrs. McCunn because premiums were automatically debited from her account and her monthly statement referenced the deduction each month as "PLC life insurance charged". She could have complained upon receipt of her monthly statements, which provided on their face for a 30- day limit for doing so, but she did not do so. Her silence, if anything, is further evidence of her acceptance of the bank's actions in continuing to collect premiums after she turned 70.

[50] In an offer and acceptance situation creating an agreement, there is no need for detrimental reliance. That may be necessary for promissory estoppel, but that is not the basis of the finding of liability in this case. In this case, the offer is the bank's deduction of premiums and sending of statements, while acceptance is demonstrated by Mrs. McCunn's lack of objection to the continuation of her life insurance policy regime by continuing to allow the deduction of premiums from her account. Furthermore, the element of consideration necessary for the formation of a [contract] is satisfied here. There is consideration flowing from Mrs. McCunn to the bank by the payment of the premiums from the line of credit account together with any interest charges incurred as a result. This is not a situation where a party is clearly acting in error by taking or giving money because there is no consideration flowing from that act. Here the continued taking and application of premiums by the bank and the insurance comp any must be in consideration of the extension of the insurance contract.

[51] The bank asserted that the deduction of premiums did not indicate any intention to extend the contract because it was done merely as a result of administrative oversight. The application judge rejected that submission. He observed [at p. 119 O.R.] that the bank's conduct was "the direct result of automation in banking" because automatic processes may be set up without "the periodic monitoring of a thinking human being". He concluded: "On the face of its conduct, the bank must be deemed to have intended the consequences of these actions, and thus to have extended the contract."

[52] Finally, Chadwick J. also relied on the fact that the appellants did not take the position that there never was any life insurance on Mrs. McCunn for the joint line of credit because Mrs. McCunn did not qualify when she applied for it in 1993 at age 66. He concluded [at p. 120 O.R.] that "clearly the bank's conduct was more than acquiescent and consistent with an active extension of the insurance. The bank's conduct was more than an administrative error."

[53] This conclusion of the application judge is supported both by the evidence and by the law. Although the bank's deponent stated baldly that the bank's actions were a result of administrative oversight, there was no evidence as to how this oversight occurred within the automated structure set up to deduct the premiums from Mrs. McCunn's account. There was no evidence, for example, that her age had been programmed into the computer, but that there was an error in the computer's operation. The reasonable inference from the evidence was that the computer was programmed to continue deducting premiums from Mrs. McCunn's line of credit account without regard to her age. The fact that the bank was aware of her birthdate and of her age adds weight to this conclusion.

[54] Therefore, Chadwick J.'s conclusion that such an automatic process had been set in motion by the bank and could be considered as a continuing offer to Mrs. McCunn, was in accordance with the evidence on the application put forward by the appellants. There is no basis to overturn that finding on appeal and to treat the bank's action as an error or mistake.

[55] Chadwick J. also relied on basic principles of contract law referred to by the Supreme Court of Canada in the St. John case, including the following quote from Smith v. Hughes (1871), [1861-73] All E.R. Rep. 632, L.R. 6 Q.B. 597, at p. 637 All E.R., p. 607 Q.B.:

If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to that party's terms.

[56] Thus, Chadwick J. effectively rejected the evidence of the bank that its actions were a result of administrative oversight, and also held that the actions of the bank, whatever its subjective intention, amounted to conduct which objectively demonstrated an intention that the life insurance contract would continue in force on payment of premiums without a limit on Mrs. McCunn's age.

[57] I agree with Chadwick J.'s findings on the evidence. Furthermore, this court has recently reaffirmed that on questions of fact or mixed fact and law, a court of appeal should apply a deferential standard of review to the findings of a trial judge including those made on a wholly written record: Gottardo Properties (Dome) Inc. v. Toronto (City) (1998), 1998 6184 (ON CA), 162 D.L.R. (4th) 574 at p. 591, 46 M.P.L.R. (2d) 309.

[58] The result reached by Chadwick J. is also consistent with a leading line of cases in the United States courts which reaches the same conclusion but by application of the doctrine of waiver in cases where premiums are paid and accepted after a policy would otherwise have terminated once the insured reaches a specified age [^1]. In the insurance text Holmes' Appleman on Insurance, 2d ed. (1998), Vol. 5, c. 30, at pp. 463-64, the principle is stated as follows:

The acceptance of premiums after a credit life insured reaches an age where the policy should terminate will serve as a waiver of the policy eligibility requirements.

[59] Therefore, whether the legal analysis is formulated in terms of extension of the insurance contract as Chadwick J. did, or, as the U.S. cases have characterized it, as "waiver" of the age termination provision of the policy by the insurer, in either case, the judgment below is consistent with established insurance law. [^2]

Conclusion

[60] I would dismiss the appeal with costs.

Appeal allowed.

[^1]: See: Boult v. Maryland Casualty Co., 111 F.2d 257 (1940) (5th Cir.); Travelers Ins. Co. v. Eviston, 37 N.E.2d 310 (1941) (Ind. App.); American Home Mutual Life Assurance Co. v. Harvey, 109 S.E.2d 322 (1959) (Ga. App., Div. No. 2); Pitts v. New York Life Insurance Co., 148 S.E.2d 369 (1966) (S.C.); Barwick v. General American Life Insurance Co., 324 S.E.2d 758 (1984) (Ga. App.); Minnesota Mutual Life Insurance Co. v. Larr, 567 So.2d 239 (1990) (Miss.); Cordell v. Greene Finance of Georgetown, Georgia, 953 F.Supp. 1391 (1996) (U.S. Dist. Ct., M.D. Ala., Northern Division).

[^2]: The conclusion is also consistent with one of the ratios of two cases in the Supreme Court of Canada which dealt with waiver by an insurer by accepting premiums: Blanchette v. C.I.S. Ltd., 1973 3 (SCC), [1973] S.C.R. 833, 36 D.L.R. (3d) 561 and Duplisea v. T. Eaton Life Assurance Co., 1979 191 (SCC), [1980] 1 S.C.R. 144, 99 D.L.R. (3d) 445. In Duplisea, Dickson J. referred to Blanchette as follows at p. 156 S.C.R.:

In Blanchette v. C.I.S. Ltd., 1973 3 (SCC), [1973] S.C.R. 833, at p. 838 my brother Pigeon rejected out of hand the suggestion that an insurance company should have the benefit of a premium without having been at risk. If the argument of the company in the case at bar were valid, the company would have the benefit of the monies represented by the cheque received from Mr. Duplisea from date of receipt until date of presentment -- a full month -- without having been at risk. That is what was found objectionable in Blanchette.