Supreme Court of Newfoundland and Labrador, Court of Appeal

Pittman v. Manufacturers Life Insurance Co.

Date: 1993-09-02

Counsel:

Ronald S. Noseworthy, Q.C., for Marystown Shipyard Ltd; F. Geoffrey Aylward, for Manufacturers Life Insurance Co.; Pittman, the Second Respondent, was not Represented.

Docket: (1992 No. 227; 1993 No. 5)

September 2, 1993.

[1] MIFFLIN, J.A.: Marystown Shipyard Limited (the Shipyard) appeals the decision of Cummings, J., made pursuant to an interlocutory application of the Manufacturers Life Insurance Company (the insurer) to determine the question of contribution or indemnity between them and a further decision from the same judge made pursuant to another interlocutory application for determination of the costs of the original trial and appeal in accordance with the order of the court of appeal which provided:

"The question of costs as between the appellant and the second respondent at trial and on appeal may be determined by the Trial Division in conjunction with the determination of the questions of contribution or indemnity if either of the appellant or the second respondent apply to the Trial Division pursuant to the leave given herein.

"Pending such determination on the question of costs by the Trial Division, the appellant and the second respondent shall bear their own costs at trial and on appeal."

Although two notices of appeal were filed, to which different Registry numbers were ascribed, the second application before Cummings, J., with respect to costs was in effet a continuation of the hearing with respect to liability.

[2] These applications were made consequent on the decision of this court on an appeal by the insurer from a judgment in which the same trial judge found the insurer liable to pay the amount of $50,000 under a group policy of insurance, plus interest of $23,301.15 to Alvin Pittman, with costs, and dismissed the claim of Pittman against the Shipyard. Pittman was also permitted to recover from the insurer the costs taxed against him by the Shipyard. (See Manufacturer's Life Insurance Company v. Alvin Pittman and Marystown Shipyard Limited (1991), 1990 6516 (NL CA), 88 Nfld. & P.E.I.R. 279; 274 A.P.R. 279.)

[3] Alvin Pittman had brought an action for $50,000 plus interest as a beneficiary under a group insurance policy following the death of his wife. The policy, made by Dominion Life Assurance Company with the Shipyard for its employees, was acquired and assumed by the insurer.

[4] The contract provided for basic and optional life insurance coverage. Basic insurance was compulsory for eligible employees and proof of insurability was not required. Optional insurance was voluntary and available to an employee and his or her spouse upon approval by the insurer. The plan was employer administered. The Shipyard was to receive application forms for optional insurance and forward them to the insurer for approval.

[5] Pittman alleged that he had delivered to the Shipyard a completed application form for insurance in the amount of $50,000 on the life of his wife. That he had done so was disputed when he filed his claim following his wife's death.

[6] Pittman's claim was first against the insurer on the basis of the policy and, secondly, against the Shipyard in the event the policy was not in effect, because of its negligence in failing to forward his application for insurance to the insurer.

[7] The trial judge made the following factual findings:

(i) that Pittman had delivered his wife's application for optional life insurance to the Shipyard on November 24, 1982;

(ii) that the Shipyard lost the application form because of its negligence;

(iii) that Pittman's wife was in good health at the time the application was delivered to the Shipyard, and

(iv) that if the form had been delivered to the insurer, the insurance would have been approved,

[8] He held that the Shipyard was the agent of the insurer for the purpose of receiving and forwarding insurance application forms and that any errors and omissions by the Shipyard in that regard must be attributed to and charged to the insurer. He found that Pittman knew he was dealing with the Shipyard for the purpose of forwarding application forms for approval by the insurer, but dismissed Pittman's further contention that the Shipyard was his agent for the purpose of effecting coverage and was liable to him for its failure to forward the application.

[9] Following on these findings the trial judge found the insurer liable on the principle of respondeat superior, and dismissed the claim against the Shipyard.

[10] The trial judge stated in his decision that the question of whether the insurer would be entitled to indemnity from the Shipyard was not in issue. Indeed, that was the case. As has been stated, the action was against the insurer on the policy and failing that against the Shipyard in negligence. There was no claim made by the insurer for indemnity from the Shipyard in the pleadings and it was not an issue at trial.

[11] On appeal by the insurer the majority decision of the Court of Appeal upheld the factual findings of the trial judge and his decision "permitting the recovery of the coverage from the appellant insurance company on the basis of the negligence of its agent, the Shipyard".

[12] The majority, however, disagreed with the finding by the trial judge that the Shipyard was not liable to Pittman and held that the liability of the insurer and the Shipyard to Pittman was joint and several.

[13] Having found the insurer and the Shipyard jointly and severally liable to Pittman, the majority went on to consider other matters and gave strong gratuitous advice in respect thereof. The judgment contains a lengthy discussion of the right of the insurer to claim against the Shipyard as well as the effects of the Contributory Negligence Act and indicated that a contribution and/or indemnity situation existed as between the insurer and the Shipyard.

[14] Their opinion in that regard is at variance with an earlier decision of this Court, Churchill v. Young and Carbonear General Hospital Corporation (1981), 35 Nfld. & P.E.I.R. 412; 99 A.P.R. 412 (Nfld. C.A.).

[15] In that case, this court dealt with the question of the joinder of a third party in a claim for contribution and indemnity and, in so doing, confirmed that an application for contribution or indemnity must be grounded by allegations within the pleadings. In particular, if the Contributory Negligence Act is to be relied on, that must likewise be found in the facts alleged by the pleadings. That case, however, was not brought to the court's attention.

[16] In light of the fact that the question of contribution or indemnity had not been raised in the pleadings the majority concluded that it was inappropriate for them to resolve that matter until the issues had first been fully litigated. They accordingly granted leave to either the insurer or the Shipyard to apply to the Trial Division for a determination of the question of contribution or indemnity as well as the question of costs.

[17] Following the appeal decision the insurer, having paid Pittman the full amount of his claim plus costs, made an application to Cummings, J., to determine the question of contribution or indemnity by the Shipyard based solely on the initial pleadings.

[18] Cummings, J., quite understandably felt that he was bound by the statements of the majority of the Court of Appeal with respect to the Contributory Negligence Act and other matters and considered the further application to be a continuation of the action by Pittman against the insurer and the Shipyard. This had the effect of precluding the Shipyard from raising any other defences, including the possible applicability of the Limitation of Personal Actions Act. Furthermore, it confined the Shipyard to any defence which might be available in any contract between it and the insurer absolving it of responsibility. There being no such defence available in any contract, Cummings, J., found the Shipyard completely responsible and ordered it to indemnify the insurer. He also ordered the Shipyard to indemnify the insurer for all costs of the original trial and appeal.

[19] In my opinion, the appeal of Pittman's claim was completed upon the determination by the court that the liability of the insurer and the Shipyard to him was joint and several and while I may not necessarily agree with that finding, nevertheless it is binding. However, further opinions which were expressed in the judgment, not relevant to the issues in Pittman's claim, must be considered obiter.

[20] As I have said, the pleadings in the original action made no mention of indemnity or contribution as between the two defendants. The plaintiff Pittman sued both the Shipyard and the insurer and the matter of indemnity or contribution was not in issue. The Contributory Negligence Act was not pleaded, nor were facts alleged that would make it applicable. Moreover, the possible effect of the Limitation of Personal Actions Act was not within the contemplation of the court. That matter was first raised by the Shipyard in reply to the insurer's application which is the subject of this appeal. The majority of the court was never aware of the latent relevancy of the limitation statute as a defence and obviously could never have intended that a party be prohibited or prevented from raising what may be a legitimate defence.

[21] Had the majority intended that the issue of contribution or indemnity be dealt with on the record then before the Court, they would simply have remitted the matter to the trial judge for determination. The granting of leave in this instance to make a further application can only be taken as an affirmation of the existing right of either party to institute an action to resolve this matter between them.

[22] In summary, the issue of contribution or indemnity from the Shipyard to the insurer, for reasons already stated, should be resolved in a separate action, not a continuation of an action in which it was not pleaded, in which the several defences available to the Shipyard could be raised on the pleadings and any additional facts bearing thereon could be heard, and the law relating thereto argued by counsel and dealt with by the court.

[23] Further, it was the Contributory Negligence Act which moved the majority to grant leave. The only issue for the trial judge was whether there might be contractual provisions which would interfere with a finding that the Shipyard should indemnify Manufacturers. The trial judge was only following the logical result of his having been given jurisdiction to continue the action when he held that he was bound by the majority and the Act was applicable.

[24] The appeals are accordingly allowed and the orders of Cummings, J., both with respect to liability and costs, are set aside without prejudice to the right of the insurer to assert, by an appropriate action, any claim it may have against the Shipyard. In the circumstances, the insurer and the Shipyard will each bear its own costs of these appeals and the applications before Cummings, J.

Dissent

[25] Cameron, J.A. [dissenting]: This case has had a long and tortuous history beginning in 1984 when the second respondent (Pittman) commenced an action against the appellant (Shipyard) and the first respondent. For the purpose of this decision, no distinction will be made between the first respondent and its predecessor company. Both will be referred to as "Manufacturers".

[26] Pittman was an employee of the Shipyard which had a group insurance policy with Manufacturers. The policy included provision for optional life insurance for employees of the Shipyard and their spouses. When, following the death of his wife, Pittman submitted a claim for benefits, the claim was denied because Manufacturers had no record of a policy on Mrs. Pittman's life. The trial judge found that:

1. Pittman had delivered his wife's application form for optional life insurance to the Shipyard on November 24, 1982;

2. the shipyard lost the application form because of its negligence;

3. Pittman's wife was in good health at the time the application was delivered to the Shipyard;

4. if the form had been delivered to Manufacturers, the insurance would have been approved;

5. the Shipyard was the agent of Manufacturers for the purpose of receiving and forwarding insurance application forms and that errors or omissions by the Shipyard in that regard must be attributed to and charged to Manufacturers; and

6. the Shipyard was not the agent of Pittman for the purpose of effecting coverage.

[27] The trial judge held Manufacturers to be liable to Pittman but dismissed the claim against the Shipyard. He declined to deal with the question of possible contribution or indemnity between the defendants both because it had not been raised in pleadings and because his conclusion respecting liability made the determination unnecessary.

[28] On appeal, this court refused to disturb the trial judge's findings that Pittman had filed the application form and that the Shipyard was the agent of Manufacturers for the purpose of receiving application forms. However, the majority held that the Shipyard and Manufacturers were liable to Pittman jointly and severally. This finding, as against the Shipyard, was founded upon the negligent handling of the application form and as against Manufacturers, on the basis of vicarious liability.

[29] The majority decision went on to raise, and to some extent dispose of, the issue of contribution and indemnity between Manufacturers and the Shipyard. Leave was granted to the Shipyard and Manufacturers to apply to the Trial Division for a final determination of the question. As has been pointed out, no such issue was raised by the pleadings.

[30] The Shipyard made application to this court and to the Supreme Court of Canada for leave to appeal to the Supreme Court of Canada. Leave was denied. Among the issues raised by those applications was whether the insurer was entitled to indemnity from the agent.

[31] Manufacturers then made an application to the trial judge, Cummings, J., for a determination of the matter of contribution or indemnity as between the Shipyard and Manufacturers. The Shipyard was ordered by Cummings, J., to indemnify Manufacturers for any amount paid by Manufacturers to Pittman. Subsequently a further application was made in respect of costs. The Shipyard appeals the decisions of the trial judge respecting both indemnity and costs. The appellant lists five issues:

1. Did this court, on the first appeal, have jurisdiction to deal with the issue of contribution and indemnity?

2. Did the trial judge err in failing to treat the remarks of the majority in the first appeal on the subject of contribution and indemnity as obiter dicta?

3. Is the Contributory Negligence Act applicable?

4. Was the Shipyard the agent of Manufacturers; and,

5. What were the damages suffered by Manufacturers as a result of the negligence of the Shipyard?

[32] The first argument is that neither this court nor the Trial Division had the jurisdiction to consider an issue not raised in the pleadings. It is submitted that this lack of jurisdiction results in the portion of the first decision of the Court of Appeal which dealt with contribution and indemnity being a nullity. Further, it is submitted that this Court could not grant jurisdiction to the Trial Division in the circumstances. In the alternative, it is submitted that any portion of the judgment which is contrary to the rules of natural justice or the rules of court must be set aside ex debito justitiae. Manufacturers takes the position that these arguments may only be made to the Supreme Court of Canada on appeal from the first decision of the Court of Appeal and leave to appeal to that Court having been denied these issues cannot now be raised.

[33] In Chandler v. Alberta Association of Architects, 1989 41 (SCC), [1989] 2 S.C.R. 848; 99 N.R. 277; 101 A.R. 321; 70 Alta. L.R.(2d) 193; 62 D.L.R.(4th) 577, at 860 S.C.R., Sopinka, J., stated:

"The general rule that a final decision of a court cannot be reopened derives from the decision of the English Court of Appeal in In re St. Nazaire Co. (1879), 12 Ch. D. 88. The basis for it was that the power to rehear was transferred by the Judicature Acts to the appellate division. The rule applied only after the formal judgment had been drawn up, issued and entered, and was subject to two exceptions:

1. where there had been a slip in drawing it up, and,

2. where there was an error in expressing the manifest intention of the court. See Paper Machinery Ltd. v. J.O. Ross Engineering Corp., 1934 1 (SCC), [1934] S.C.R. 186."

Neither of those exceptions can be said to be applicable in this case. However, the appellant argues that a third exception exists: where the judgment or order is made without jurisdiction.

[34] The appellant cites six cases in support of the power of this court to set aside its own order or judgment for want of jurisdiction. These are: Craig v. Kanssen, [1943] 1 All E.R. 108 at 113; Marsh v. Marsh, 1945 513 (UK JCPC), [1945] A.C. 271; First City Trust Co. v. Wood, 1983 2438 (SK QB), [1984] 1 W.W.R. 762; 30 Sask.R. 63 (Q.B.); Bache Halsey Stuart Shields Inc. v. Charles et al. (1982), 1982 730 (BC SC), 40 B.C.L.R. 103 (S.C.); LeBlanc v. A Party Unknown (1982), 1982 4166 (NB QB), 40 N.B.R.(2d) 638; 105 A.P.R. 638 (Q.B.); Wiseman v. Wiseman, [1953] 1 All E.R. 601. Not all address the power of the court which issued the order. They do address the effect of failure to comply with certain procedures such as failure to serve a party. Of course, the Craig, Marsh and Wiseman cases were decided before the 1964 amendment to the English Rules which, like rule 2 of the Rules of the Supreme Court, 1986, declared that unless the court otherwise ordered a failure to comply with the Rules was to be treated as an irregularity and not nullify the proceeding. This does not prevent the court from setting aside the proceeding in appropriate circumstances. It does make it clear that whether the proceeding is to be set aside is a matter within the discretion of the court. In all but one of the cases cited, the question was raised in the context of failure to comply with procedural rules or statutes which resulted in no notice having been given to a party. This undermined the validity of the proceedings from the beginning.

[35] The appellant cites in support of the argument that this court was without jurisdiction to consider the matter of contribution or indemnity The Owners of the Ship Tasmania (1890), 15 App. Cas. 223 (H.L.), at 225; Shaver Hospital for Chest Diseases v. Slesar (1979), 1979 1662 (ON CA), 106 D.L.R.(3d) 377 (Ont. CA.); Canadiana Towers Ltd. v. Fawcett (1978), 1978 1370 (ON CA), 90 D.L.R.(3d) 758 and U.F.C.W. Local 1252 v. Cashin et al. (1988), 1988 4444 (NL CA), 70 Nfld. & P.E.I.R. 139; 215 A.P.R. 139, at p. 143. These cases give expression to the general rule that an appeal court will not entertain new issues on appeal. There are exceptions, of course, such as where the question is one of law upon which no new evidence is required. However, the decision by a court of appeal whether or not to hear new issues is a matter of discretion based on an assessment of the fairness of allowing the new issue to be raised not a question of jurisdiction. In my view, if there is an error in exercising the discretion it is a matter for a further appellate court not the court which made the order.

[36] In the alternative, the Shipyard argues that the expressions of opinion on the subject of contribution and indemnity made by the majority were unnecessary to the determination of the first appeal and therefore were obiter dicta which could and should have been ignored by the trial judge on the applications. In the further alternative, the appellant submits that the Court of Appeal, contrary to the conclusions of the trial judge, directed that its views respecting contribution and indemnity be ignored when it granted leave for the application to determine the full issue. Manufacturers argues that the Court of Appeal must have intended that the trial judge be bound by its findings on the issue of indemnification and the findings were part of the ratio decidendi of the original appeal decision.

[37] "Obiter Dictum" means a statement by the way. Often, it is defined as a statement not necessary to the decision. Certainly, it was not necessary to determine contribution and indemnity to determine the first appeal. However, this court granted leave to the parties to continue their action before the Trial Division. As the majority decision in this appeal points out, the effect of the granting of leave was to deny the Shipyard a possible limitation of actions defence without the right to make submissions on the point. The Newfoundland Law Reform Commission, in its Working Paper on Limitation of Actions at pp. 223-232, has pointed to the apparent dichotomy of views on when the limitation period against a third party for contribution or indemnity beginnings to run.

[38] Of course, either of the defendants was free to bring a separate action to have the matter of contribution or indemnity determined. However, they were not in a position to bring the application in this action. The trial judge, in the absence of the leave granted to the parties by this court, would not have had the jurisdiction to hear the application. In M. Hodge and Sons Limited v. Monaghan et al. (1983), 1983 2800 (NL CA), 43 Nfld. & P.E.I.R. 162; 127 A.P.R. 162 (Nfld. C.A.), at 163, Morgan, J.A., said:

"Whether or not the trial judge was in error in the first instance in declaring the proceedings a nullity, and ordering the Writ of Summons and Statement of Claim to be struck out, is not relevant to the issue now before us. The order given was, by its very nature, final and even if made in error it could not be amended by the judge who gave it. That could only be done by this court. Indeed, an appeal from that order was pending before this court when the summons to discharge or vary was heard by Noel, J. Clearly then the learned trial judge was functus officio and without jurisdiction to hear the matter."

[39] The leave to bring an application for contribution and indemnity was granted because of the finding that the two defendants were joint tortfeasors which was in turn based on the existence of an agency relationship. That finding was critical to the granting of leave. It cannot then be characterized as obiter dictum. The following paragraph from the original appeal decision captures the findings of the majority:

"In addressing the question of the degree of joint liability, one must be cognizant that the appellant's liability here arises from the principal and agent relationship which the trial judge found to exist between it and the shipyard and is, therefore, vicarious. It is a recognized principle of common law that, in cases of vicarious liability, the person responsible for the tort of another has a right of indemnity as against the negligent actor. (See Salmond & Heuston, supra., p. 543). Section 3 of the foregoing enactment modifies this common law premise, however, since it provides that 'any contract express or implied' can affect the determination of the mutual liability as between joint tortfeasors. Hence, in this case all of the relevant circumstances touching upon the agency relationship of [Manufacturers] with the shipyard must be addressed to determine whether they represent or reflect any agreement which might affect the question of contribution or [Manufacturer's] right to indemnity as principal of the shipyard."

[40] The majority went on to note the difficulty of attributing liability because of a lack of evidence respecting the agency relationship. The majority, therefore, granted leave to bring the application for determination of the issue by the Trial Division so that all relevant circumstances could be brought before the court. The relevant circumstances in the context of this decision are the contractual arrangements, if any, between the Shipyard and Manufacturers. In the minority judgment Chief Justice Goodridge specifically addressed the matter of whether it was appropriate to consider the application of the Contributory Negligence Act and stated he would not refer the issue to the Trial Division. The Chief Justice then noted the disadvantage of having the issue determined in a separate action. In this context I cannot agree that the decision in the original appeal to refer the matter to the Trial Division can be characterized as merely an unnecessary permission to commence another action.

[41] Further, it was the Contributory Negligence Act which moved the majority to grant leave. The only issue for the trial judge was whether there might be contractual provisions which would interfere with a finding that the Shipyard should indemnify Manufacturers. The trial judge was only following the logical result of his having been given jurisdiction to continue the action when he held that he was bound by the majority and the Act was applicable.

[42] With respect to the fourth issue cited by the appellant, this matter was also central to the determination of the Court of Appeal on the first appeal on the issue of liability. I see no basis for a reconsideration of the issue at this stage.

[43] Manufacturers made the same point with respect to the fifth argument. The first appeal held that the defendants were jointly and severally liable to Pittman. In the context of that determination, the argument that the Shipyard was liable only to the extent of the premiums lost was rejected by this Court. The issue before the trial judge on the application was solely the extent of fault of the two. I see no error in his finding that he was bound by the decision of this Court respecting the argument that the liability of the Shipyard should be limited.

[44] Counsel for the Shipyard has carefully framed his argument to try to avoid the appearance of seeking to overturn the prior decision of this court. However, in reality that is what he asks. Whether another panel of this Court might agree with the original appeal decision is of no import as there is, in my view, no jurisdiction in this Court to disturb that decision.

[45] I would therefore deny the appeal and award the first respondent its costs on appeal.

Appeals allowed.