Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490

The Maritime Life Assurance Company Appellant

v.

Saskatchewan River Bungalows Ltd.

and Connie Doreen Fikowski Respondents

Indexed as: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co.

File No.: 23194.

1994: March 14; 1994: June 23.

Present: La Forest, L'Heureux‑Dubé, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.

on appeal from the court of appeal for alberta

Insurance -- Policy lapse -- Waiver -- Insurance premium remaining unpaid after grace period expired -- Insurer requesting immediate payment of premium -- Whether insurer waived right to compel timely payment under policy ‑‑ If so, whether waiver still in effect when payment tendered.

Insurance -- Relief against forfeiture -- Waiver -- Insurance premium remaining unpaid after grace period expired -- Insurer requesting immediate payment of premium -- Whether insurer waived right to compel timely payment under policy -- If not, whether relief against forfeiture should be granted under s. 10 of Judicature Act, R.S.A. 1980, c. J-1.

In 1978, Maritime issued an insurance policy on the life of MF to the respondent Saskatchewan River Bungalows Ltd. ("SRB"). In 1984, ownership of the policy was transferred to the respondent Fikowski ("CF"), who became the beneficiary. SRB remained responsible for paying the annual premiums. On July 24, 1984, SRB mailed a cheque to pay the annual premium due on July 26, but this cheque was never received by Maritime, nor was it deducted from SRB's bank account. After the grace period expired on August 26, Maritime sent a late payment offer to SRB agreeing to accept payment of the July premium if it was postmarked or received by September 8, but SRB did not respond to this offer. In November Maritime wrote a letter advising CF that the premium due on July 26, 1984 remained unpaid and stating that "this policy is now technically out of force, and we will require immediate payment of $1,361 to pay the July 1984‑85 premium". Finally, in February 1985 Maritime sent a notice of policy lapse to the respondents. The application for reinstatement appended to the notice required evidence of insurability. Since SRB closed its hotel business and picked up the corporate mail infrequently during the winter season, it did not become aware of the late payment offer, the November letter or the lapse notice until April 1985. It then began to search for the lost premium cheque. It was not until July 1985 that SRB sent a replacement cheque to Maritime, and a cheque for the 1985 premium. Both cheques were refused. MF was by then terminally ill and uninsurable. He died in August. Maritime rejected SRB's claim for benefits under the policy on the ground that it was no longer in force. The trial judge dismissed the respondents' claim for benefits under the policy and refused to grant them relief against forfeiture. A majority of the Court of Appeal allowed the respondents' appeal. The issues here are whether Maritime waived its right to compel timely payment in accordance with the terms of the policy, and, if there was no waiver, whether the respondents are entitled to relief against forfeiture under s. 10 of the Judicature Act.

Held: The appeal should be allowed.

The respondents are not entitled to any of the benefits under the policy. The demand for payment in the November letter was a clear and unequivocal expression of Maritime's intention to continue coverage upon payment of the July premium and, as such, constituted waiver of the time requirements for payment under the policy. The waiver was not still in effect, however, when SRB tendered payment of the missing premium in July 1985. Waiver can be retracted if reasonable notice is given to the party in whose favour it operates. A notice requirement should not be imposed, however, where there is no reliance on the waiver. Here, the respondents were not aware of Maritime's waiver until they received the November letter in April 1985 and therefore did not rely on it. The statement that "this policy has lapsed" contained in the February lapse notice accordingly took effect on its terms. In any event, once the respondents opened their mail in April 1985, they clearly became aware of Maritime's intention to retract its waiver. Even if a reasonable notice requirement were imposed, it would thus be adequately met by the respondents' failure to tender a replacement cheque until July 1985, three months later. Maritime had no obligation to accept the replacement cheque, and the policy lapsed. Maritime was required to reinstate coverage only if the respondents provided evidence of insurability, which was not possible in this case.

Relief against forfeiture is an equitable remedy and is purely discretionary. The factors to be considered by the court in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach. The reasonable conduct requirement is not met in this case. The respondents knew, at all relevant times, that MF was terminally ill and uninsurable, but they nonetheless chose to have their correspondence from Maritime sent to a post office mail box over the winter, and to collect their mail only intermittently. When the respondents learned that payment of the premium was nine months overdue in April 1985, they did not tender a replacement cheque, but rather waited three months, until July 1985. As the respondents are barred by their conduct from recovering, it is not necessary to determine whether the court's general power to relieve against forfeiture under s. 10 of the Judicature Act applies to contracts regulated by the Insurance Act or whether relief from forfeiture can operate generally as a before‑loss remedy in the insurance context.

Cases Cited

Referred to: Holwell Securities Ltd. v. Hughes, [1974] 1 All E.R. 161; W. J. Alan & Co. v. El Nasr Export and Import Co., [1972] 2 Q.B. 189; Re Tudale Explorations Ltd. and Bruce (1978), 1978 CanLII 1471 (ON SC), 88 D.L.R. (3d) 584; Mitchell and Jewell Ltd. v. Canadian Pacific Express Co., 1974 ALTASCAD 18, [1974] 3 W.W.R. 259; Marchischuk v. Dominion Industrial Supplies Ltd., 1991 CanLII 59 (SCC), [1991] 2 S.C.R. 61; Federal Business Development Bank v. Steinbock Development Corp. (1983), 42 A.R. 231; Duplisea v. T. Eaton Life Assurance Co., 1979 CanLII 191 (SCC), [1980] 1 S.C.R. 144; Anguish v. Maritime Life Assurance Co. (1987), 1987 ABCA 77, 51 Alta. L.R. (2d) 376, leave to appeal refused, [1988] 2 S.C.R. vii; McGeachie v. North American Life Assurance Co. (1893), 1893 CanLII 21 (SCC), 20 O.A.R. 187 (C.A.), aff'd (1893), 23 S.C.R. 148; Northern Life Assurance Co. of Canada v. Reierson, 1976 CanLII 156 (SCC), [1977] 1 S.C.R. 390; Hartley v. Hymans, [1920] 3 K.B. 475; Charles Rickards Ltd. v. Oppenhaim, [1950] 1 K.B. 616; Guillaume v. Stirton (1978), 1978 CanLII 1844 (SK CA), 88 D.L.R. (3d) 191 (Sask. C.A.), leave to appeal refused, [1978] 2 S.C.R. vii; Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691; Liscumb v. Provenzano (1985), 1985 CanLII 2051 (ON SC), 51 O.R. (2d) 129 (H.C.J.), aff'd 1986 CanLII 2595 (ON CA), 55 O.R. (2d) 404 (C.A.); Stenhouse v. General Casualty Insurance Co. of Paris, 1934 CanLII 221 (AB SCAD), [1934] 3 W.W.R. 564; Swan Hills Emporium & Lumber Co. v. Royal General Insurance Co. of Canada (1977), 1977 ALTASCAD 13, 2 A.R. 63; Johnston v. Dominion of Canada Guarantee and Accident Insurance Co. (1908), 17 O.L.R. 462.

Statutes and Regulations Cited

Insurance Act, R.S.A. 1980, c. I‑5, ss. 201, 205, 211.

Judicature Act, R.S.A. 1980, c. J‑1, s. 10.

Authors Cited

Snell, Edmund Henry Turner. Snell's Equity, 29th ed. London: Sweet & Maxwell, 1990.

Waddams, S. M. The Law of Contracts, 3rd ed. Toronto: Canada Law Book, 1993.

APPEAL from a judgment of the Alberta Court of Appeal (1992), 1992 ABCA 204, 127 A.R. 43, 20 W.A.C. 43, 92 D.L.R. (4th) 372, 10 C.C.L.I. (2d) 278, [1992] I.L.R. ¶1‑2895, reversing a decision of the Court of Queen's Bench dismissing the respondents' action against the appellant. Appeal allowed.

James D. McCartney and Brian E. Leroy, for the appellant.

James S. Peacock, for the respondents.

The judgment of the Court was delivered by

MAJOR J. --

I. Facts

On July 26, 1978, the appellant Maritime Life Assurance Company ("Maritime") issued an insurance policy on the life of Michael Fikowski Sr. to the respondent Saskatchewan River Bungalows Ltd. ("SRB"). In 1984, ownership of the policy was transferred to the respondent Connie Fikowski, at which time she became the beneficiary. SRB retained the responsibility of paying the annual premiums under the policy.

The policy issued to the respondents was a term policy, renewable every five years. The policy expiry date was the insured's 70th birthday -- July 26, 2000. However, prior to July 26, 1988, the policyholder had an option to convert the policy to a new life or endowment policy. The policy contained the following conditions relating to premium payment:

2. PREMIUM PAYMENT PROVISIONS

(1) General

The agreements made by the Company and contained in this contract are conditional upon payment of the premiums as they become due.

Each premium is payable on or before its due date at the Head Office of the Company.

(2) Grace Period

After the first premium has been paid, a grace period of thirty-one days following its due date is allowed for the payment of each subsequent premium. During the grace period, this policy continues in effect.

(3) Non-payment of Premiums

If any premium remains unpaid at the end of the grace period, this policy automatically lapses (terminates because of non-payment of premiums).

Under certain conditions, this policy may be reinstated, as described below.

(4) Reinstatement

This policy may be reinstated within 3 years of the date of the lapse upon written application to the Company subject to the following conditions:

a) evidence that satisfies the Company of the life insured's good health and insurability must be submitted; and

b) all unpaid premiums plus interest, at a rate to be determined by the Company, must be paid to the Company.

Over the years, SRB paid the annual policy premium irregularly. In 1979, the policy lapsed after SRB failed to pay the annual premium within the 31-day grace period. The policy was subsequently reinstated in accordance with the reinstatement provision (clause 2(4)) of the policy. In 1981, SRB again failed to make payment within the grace period. On this occasion, Maritime accepted late payment and did not require evidence of insurability or an application for reinstatement.

On July 24, 1984, SRB mailed a cheque for $1,316 to pay the annual premium due on July 26, 1984. On August 13, 1984, SRB received a premium due notice from Maritime, requesting payment of $1,361. It sent Maritime a cheque for $45 -- the difference between the July 24 cheque and the amount demanded in the payment due notice. This second cheque was received by Maritime on August 22, 1984. The first cheque, in the amount of $1,316, was never received by Maritime, nor was it deducted from SRB's bank account.

Subsequent to the expiry of the grace period on August 26, 1984, Maritime sent a late payment offer to SRB. In this offer, Maritime agreed to accept late payment of the July premium if it was "postmarked or, if not mailed, received in the Head Office at Halifax, N.S." on or before September 8, 1984. The offer also contained an explicit reserve of Maritime's right to require evidence of insurability. SRB did not respond to the late payment offer.

On November 28, 1984, Maritime wrote a letter ("the November letter") advising the respondent Connie Fikowski that the premium due on July 26, 1984 remained unpaid. This letter contained the following statement:

Unfortunately this policy is now technically out of force, and we will require immediate payment of $1,361.00 to pay the July 1984-85 premium.

Finally, on February 2, 1985, Maritime sent a notice of policy lapse to the respondents. This notice was originally sent to an incorrect address in Vancouver, but was eventually forwarded to SRB. It read, in part:

According to our records this policy has lapsed for non-payment of the premium due on the date shown. The policy is no longer in force and no benefits are payable. Because your insurance affords valuable protection and represents a worthwhile investment we invite you to apply for reinstatement of the policy.

The Application for Reinstatement appended to the lapse notice required evidence of insurability.

SRB closed its hotel business at Lake Louise, Alberta for the winter season around the middle of November 1984. SRB picked up the corporate mail on an infrequent basis throughout the winter. As a result, SRB did not become aware of the late payment offer, the November letter or the lapse notice until April 1985. They then began to search for the lost premium cheque. It was not until July 1985 that SRB sent a replacement cheque to Maritime, and a cheque for the 1985 premium. Both cheques were refused.

On July 9, 1985, SRB's insurance agent informed Maritime that Michael Fikowski Sr. was terminally ill and uninsurable. On August 10, 1985, Michael Fikowski Sr. died. On October 11, 1985, Maritime rejected SRB's claim for benefits under the policy on the ground that it was no longer in force. The respondents then commenced the present action, claiming a right to benefits under the policy or, alternatively, relief against forfeiture.

II. Judgments Below

A. Alberta Court of Queen's Bench

Deyell J. rejected the plaintiffs' claim and refused to grant them relief against forfeiture. He made no specific finding as to whether a cheque was actually mailed to Maritime by SRB in July 1984, but emphasized that Maritime did not receive payment and advised SRB accordingly. Deyell J. reasoned that the respondents had to "live with the results" of their decision to have their corporate mail sent to Lake Louise throughout the year. As well, he considered that SRB was obliged to do more than search for a cancelled cheque when they learned of the policy lapse in April of 1985. Deyell J. further ruled that Connie Fikowski was bound by SRB's actions.

B. Alberta Court of Appeal

A majority of the Alberta Court of Appeal allowed the respondents' appeal: (1992), 1992 ABCA 204, 127 A.R. 43, 20 W.A.C. 43, 92 D.L.R. (4th) 372, 10 C.C.L.I. (2d) 278, [1992] I.L.R. ¶1-2895. The majority held that the postal acceptance rule did not apply, since an express term of the policy required that premiums be paid, not posted, by the due date: Holwell Securities Ltd. v. Hughes, [1974] 1 All E.R. 161. However, both Harradence and Hetherington JJ.A. considered that, because it encouraged policyholders to mail premium payments, Maritime was barred from demanding strict compliance with the time requirements for payment under the policy. Harradence J.A. cast this ruling in terms of estoppel, while Hetherington J.A. relied on waiver. Both agreed that, until the respondents were notified that the 1984 cheque had not been received and were given a reasonable period during which to effect payment, Maritime could not terminate the policy for non-payment.

Hetherington J.A. considered that none of Maritime's acts, including the late payment offer, the November letter and the lapse notice, gave the respondents reasonable notice that Maritime intended to rely on the lapsing provision of the policy. The February lapse notice was premature because it stated that "this policy has lapsed", without giving reasonable notice to the respondents. As such, Maritime's right to rely on the lapsing provision of the policy was never reinstated. She concluded that the policy was still in force in August 1985.

Harradence J.A. found that the respondents could have made payment within a reasonable period after they received actual notice of the overdue premium in April 1985. However, the respondents failed to pay within this period. Their three-month delay in providing a replacement cheque was unreasonable, and the policy lapsed. However, Harradence J.A. concluded that it was an appropriate case to relieve against forfeiture under s. 10 of the Judicature Act, R.S.A. 1980, c. J-1.

In dissent, McClung J.A. stated that Maritime did not waive its right to rely on the lapsing provision of the policy by encouraging policyholders to use the mail. He found that while Maritime had waived its position in the November letter, the eventual payment of the missing premium in July 1985 did not comply with the request for "immediate payment" in the November letter. As a result, there was no waiver. In addition, he concluded that the Court had no jurisdiction to relieve against forfeiture since the field was occupied by a statutory scheme (the Insurance Act, R.S.A. 1980, c. I-5).

III. Issues

This appeal raises two issues:

(1) Did Maritime waive its right to compel timely payment in accordance with the terms of the policy?

(2) If there was no waiver, are the respondents entitled to relief against forfeiture under the Judicature Act, R.S.A. 1980, c. J-1., s. 10?

IV. Analysis

A. Waiver

Maritime's position is that the policy issued to the respondents lapsed after the expiry of the grace period for payment of the 1984 premium. Fikowski Sr.'s death occurred when the policy was not in force and the respondents had no right to benefits under it.

The respondents' position is that Maritime, through its conduct, waived its right to compel timely payment under the policy. The respondents further submit that none of Maritime's acts were sufficient to retract its waiver of time and that the policy was still in force at the time of death.

Although the parties argued in terms of waiver, Harradence J.A. considered the doctrine of promissory or equitable estoppel. Recent cases have indicated that waiver and promissory estoppel are closely related: see e.g. W. J. Alan & Co. v. El Nasr Export and Import Co., [1972] 2 Q.B. 189 (C.A.), and Re Tudale Explorations Ltd. and Bruce (1978), 1978 CanLII 1471 (ON SC), 88 D.L.R. (3d) 584 (Ont. Div. Ct.), at p. 587. The noted author Waddams suggests that the principle underlying both doctrines is that a party should not be allowed to go back on a choice when it would be unfair to the other party to do so: S. M. Waddams, The Law of Contracts (3rd ed. 1993), at para. 606. It is not necessary for the purpose of this appeal to determine how or whether promissory estoppel and waiver should be distinguished. As the parties have chosen to frame their submissions in waiver, only that doctrine need be dealt with.

Waiver occurs where one party to a contract or to proceedings takes steps which amount to foregoing reliance on some known right or defect in the performance of the other party: Mitchell and Jewell Ltd. v. Canadian Pacific Express Co., 1974 ALTASCAD 18, [1974] 3 W.W.R. 259 (Alta. S.C.A.D.); Marchischuk v. Dominion Industrial Supplies Ltd., 1991 CanLII 59 (SCC), [1991] 2 S.C.R. 61 (waiver of a limitation period). The elements of waiver were described in Federal Business Development Bank v. Steinbock Development Corp. (1983), 42 A.R. 231 (C.A.), cited by both parties to the present appeal (Laycraft J.A. for the court, at p. 236):

The essentials of waiver are thus full knowledge of the deficiency which might be relied upon and the unequivocal intention to relinquish the right to rely on it. That intention may be expressed in a formal legal document, it may be expressed in some informal fashion or it may be inferred from conduct. In whatever fashion the intention to relinquish the right is communicated, however, the conscious intention to do so is what must be ascertained.

Waiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them. The creation of such a stringent test is justified since no consideration moves from the party in whose favour a waiver operates. An overly broad interpretation of waiver would undermine the requirement of contractual consideration.

As there is little doubt that Maritime had full knowledge of its rights under the respondents' policy, the waiver issue turns entirely on Maritime's intentions. The respondents have identified several factors which, in their view, support a finding that Maritime "clearly and unequivocally" intended to waive its right to timely payment. In particular, the respondents submit that by encouraging policyholders to pay by mail, by requesting payment of the 1984 premium after the expiry of the policy grace period, by delaying issuance of the February lapse notice, by failing to return the $45 partial payment, and in accepting late payment in 1981, Maritime waived its right to require payment in accordance with the terms of the policy.

It is not necessary to address each of the factors identified by the respondents, for it seems clear that the November letter, taken alone, constituted a waiver of Maritime's right to receive timely payment under the policy. The November letter contained the following statement:

Unfortunately this policy is now technically out of force, and we will require immediate payment of $1,361.00 to pay the July 1984-85 premium.

As late as November 28, 1984, Maritime was willing to continue coverage under the policy upon payment of the July 1984 premium. The November letter makes no mention of evidence of insurability, nor does it speak of reinstatement. As such, it constitutes clear evidence of Maritime's intention to waive its right to compel timely payment. In this regard, little weight should be given to the assertion that the policy was "technically out of force", for the qualifier "technical" removes all meaning from the expression "out of force". In any event, this assertion does not detract from the clarity of Maritime's demand for payment.

The appellant submits that, whereas the right to compel timely payment is clearly waived where premium payments are received and deposited by an insurance company after the expiry of the policy grace period (Duplisea v. T. Eaton Life Assurance Co., 1979 CanLII 191 (SCC), [1980] 1 S.C.R. 144; Anguish v. Maritime Life Assurance Co. (1987), 1987 ABCA 77, 51 Alta. L.R. (2d) 376 (C.A.), leave to appeal refused, [1988] 2 S.C.R. vii), a mere demand for payment beyond the grace period is insufficient. Support for that proposition is found in McGeachie v. North American Life Assurance Co. (1893), 1893 CanLII 21 (SCC), 20 O.A.R. 187 (C.A.), aff'd (1893), 23 S.C.R. 148, and in Northern Life Assurance Co. of Canada v. Reierson, 1976 CanLII 156 (SCC), [1977] 1 S.C.R. 390. In both cases, this Court concluded that a demand for payment was equivocal or insufficient to give rise to a waiver. However, in some circumstances a demand for payment may constitute waiver. The nature of waiver is such that hard and fast rules for what can and cannot constitute waiver should not be proposed. The overriding consideration in each case is whether one party communicated a clear intention to waive a right to the other party.

The demand for payment in the present appeal provides stronger evidence of waiver than did the demands in either McGeachie or Reierson. The demand for payment by the appellant in its November letter was made well beyond the expiry of the grace period. As well, payment in the present case was tendered prior to the occurrence of the event insured against. Any doubt about whether Maritime intended to waive the time requirements of the policy was resolved by the testimony of its legal advisor, who indicated that, having received the $45 partial payment, Maritime was still awaiting payment of the July 1984 premium in January 1985. It was for this reason that the lapse notice was not sent until February 2, 1985. In these circumstances, the demand for payment in the November letter was a clear and unequivocal expression of Maritime's intention to continue coverage upon payment of the July premium and, as such, constituted waiver of the time requirements for payment under the policy.

As the November letter constituted waiver, the question is then whether the waiver was still in effect when SRB tendered payment of the missing premium in July 1985.

Waiver can be retracted if reasonable notice is given to the party in whose favour it operates: Hartley v. Hymans, [1920] 3 K.B. 475; Charles Rickards Ltd. v. Oppenhaim, [1950] 1 K.B. 616; Guillaume v. Stirton (1978), 1978 CanLII 1844 (SK CA), 88 D.L.R. (3d) 191 (Sask. C.A.), leave to appeal refused, [1978] 2 S.C.R. vii. As Waddams notes, the "reasonable notice" requirement has the effect of protecting reliance by the person in whose favour waiver operates: The Law of Contracts, supra, at paras. 604 and 606. It follows that a notice requirement should not be imposed where reliance is not an issue: ibid. at para. 606. In the present appeal, the respondents were not aware of Maritime's waiver until they received the November letter, along with the lapse notice and late payment offer, in April 1985. It follows that they did not rely on Maritime's waiver. In such circumstances, Maritime was not required to give any notice of its intention to lapse the policy. The statement that "this policy has lapsed", contained in the February lapse notice, took effect on its terms.

In any event, once the respondents opened their mail in April 1985, they clearly became aware of Maritime's intention to retract its waiver. An informal communication of a party's intention to insist on strict compliance with the terms of a contract is sufficient notice: see e.g. Guillaume v. Stirton, supra. The respondents did not tender a replacement cheque until July 1985, three months after they became aware of Maritime's intentions. As such, even if a reasonable notice requirement were imposed, it would be adequately met by the respondents' failure to act between April and July.

Maritime's waiver, as contained in the November letter, was no longer in effect when the respondents sought to make payment in July 1985. Maritime had no obligation to accept the replacement cheque, and the policy lapsed. Maritime was required to reinstate coverage only if the respondents provided evidence of insurability, which was not possible in this case. Therefore, the respondents are not entitled to any of the benefits under the policy.

B. Relief Against Forfeiture

The second issue on appeal is the Court's equitable jurisdiction to relieve against forfeiture. The respondents submit that the general power to grant relief, contained in s. 10 of the Judicature Act, should be exercised in this case. The appellant contends that the Judicature Act does not apply since the field is occupied by a statutory scheme (the Insurance Act). It further submits that the respondents' loss was not a forfeiture and argues that, in any event, this is not an appropriate case for granting relief.

Section 10 of the Judicature Act reads:

10 Subject to appeal as in other cases, the Court has power to relieve against all penalties and forfeitures and, in granting relief, to impose any terms as to costs, expenses, damages, compensation and all other matters that the Court sees fit.

The power to grant relief against forfeiture is an equitable remedy and is purely discretionary. The factors to be considered by the Court in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach: Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691 (H.L.); Snell's Equity (29th ed. 1990), at pp. 541-42.

The Ontario High Court in Liscumb v. Provenzano (1985), 1985 CanLII 2051 (ON SC), 51 O.R. (2d) 129, aff'd 1986 CanLII 2595 (ON CA), 55 O.R. (2d) 404 (C.A.), relying on the Shiloh decision, summarized the governing principles as follows (at p. 137, per McKinlay J.):

I consider that the following are the appropriate questions to consider in determining whether there should be relief from forfeiture in this case: first, was the conduct of the plaintiff reasonable in the circumstances; second, was the object of the right of forfeiture essentially to secure the payment of money, and third, was there a substantial disparity between the value of the property forfeited and the damage caused the vendor by the breach?

The first element of the test set out in Liscumb -- the reasonable conduct requirement -- is not met in this case. The respondents knew, at all relevant times, that Fikowski Sr. was terminally ill and uninsurable. Nonetheless, they chose to have their correspondence from Maritime sent to Lake Louise over the winter, and to collect their mail only intermittently. When the respondents learned that payment of the premium was nine months overdue in April 1985, they did not tender a replacement cheque, but rather waited three months, until July 1985. The trial judge, who was in a position to assess the respondents' conduct, concluded that it was not reasonable. He wrote:

The corporation chose to have a mail box at the Post Office at Lake Louise to receive its corporate mail on a 12 month basis and having made that decision I think they must live with the results. If you only pick-up your mail every two weeks then you are going to be late in getting notices that may be of some importance. Ultimately when the advice that the policy had lapsed was received in late April or early May of 1985 Mr. Michael Fikowski and Mr. J. D. Thomas started a search for a cancelled cheque. Under the circumstances in this day and age of long distance telephones and all the communications that are available I think that they had an obligation to their company to take additional procedures in regard to this matter. They were advised that payment had not been made. There were procedures to have the policy reinstated. If they were going to do anything about it, it had to be done quickly. It wasn't until July 25th, if memory serves me correctly, met [sic] the replacement cheque was sent out, that is three months after they ultimately received the notice.

I therefore find that the plaintiff's case fails and that they are not entitled to relieve against forfeiture.

As the failure to satisfy the first test in Liscumb determines the outcome of this appeal, it is unnecessary to comment on the second and third tests outlined in the case.

As the respondents are barred by their conduct from recovering, it is not necessary to determine whether our general power to relieve against forfeiture under s. 10 of the Judicature Act applies to contracts regulated by the Insurance Act. However, I would note that the existence of a statutory power to grant relief where other types of insurance are forfeited (Insurance Act, ss. 201, 205 and 211) does not preclude application of the Judicature Act to contracts of life insurance. The Insurance Act does not "codify" the whole law of insurance; it merely imposes minimum standards on the industry. The appellant's argument that the "field" of equitable relief is occupied by the Insurance Act must therefore be rejected.

Several of the authorities cited by the appellant involved forfeitures made under statutory insurance conditions, which is not the case here: Stenhouse v. General Casualty Insurance Co. of Paris, 1934 CanLII 221 (AB SCAD), [1934] 3 W.W.R. 564 (Alta. S.C.A.D.); Swan Hills Emporium & Lumber Co. v. Royal General Insurance Co. of Canada (1977), 1977 ALTASCAD 13, 2 A.R. 63 (S.C.A.D.). The case of Johnston v. Dominion of Canada Guarantee and Accident Insurance Co. (1908), 17 O.L.R. 462 (C.A.) treated the insurance legislation at issue as a statutory code, and for this reason is no longer good law.

It is also unnecessary to determine whether relief from forfeiture can operate generally as a before-loss remedy in the insurance context. Clearly, the holder of a term life policy has no vested right to benefits until the loss insured against -- death of the insured -- has occurred. However, a modern understanding of the doctrine of relief would likely expand the notion of forfeiture to include less tangible losses, such as the loss of an option to convert a term policy into one under which benefits would be certain, or the loss of one's insurability. This question remains open.

C. Conclusion

For the foregoing reasons, I would allow the appeal with costs, set aside the judgment of the Alberta Court of Appeal and restore the judgment at trial.

Appeal allowed with costs.

Solicitors for the appellant: MacKimmie Matthews, Calgary.

Solicitors for the respondents: Code Hunter, Calgary.