Nelson Marketing International Inc. Plaintiff v. Royal & Sun Alliance Insurance Company of Canada, 2003 BCSC 439

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Nelson Marketing International v. Royal & Sun Alliance Insurance 2003 BCSC 439 Date: 20030324 Docket: S003056 Registry: Vancouver Between: Nelson Marketing International Inc. Plaintiff And Royal & Sun Alliance Insurance Company of Canada Defendant Before: The Honourable Mr. Justice McEwan Reasons for Judgment Counsel for the Plaintiff: C. Harvey, Q.C. Counsel for the Defendant: D.F.

McEwen Date and Place of Trial/Hearing: February 26, 2003 Vancouver, B.C. [ 1 ] This is an appeal of an order of Master Barber made January 16, 2003 setting aside a jury notice. [ 2 ] The action concerns a shipment of laminated wooden truck flooring which was allegedly damaged in transit from Malaysia to Long Beach, California in June and August, 1999. [ 3 ] The cargo was insured under a Marine Insurance Cargo policy issued by the defendant. [ 4 ] The cargo was damaged by water and the plaintiff, which was the purchaser of the product, has sued the defendant insurer. [ 5 ] There is a factual issue as to whether certain damage occurred due to an insured peril, or was caused by things like improper packaging, “inherent vice”, or improper storage at Long Beach, all of which the policy would not insure.

There are further issues respecting alleged breaches of the plaintiff’s obligations to preserve its right to action against the carrier, and to present its claim in accordance with its duty of “utmost good faith” under the Marine Insurance Act S.C. 1993, c. 22 . [ 6 ] Master Barber’s ruling turned on his assessment of the nature of the case, which he described at ¶9 of his Reasons: It is clear to me that there will be questions of fact that must be decided.

However, for the reasons set forth in the defendant’s outline, I find that this matter is one where the principal issue, or principal issues, are one of construction of an enactment or of a document and therefore are not within the purview of a jury and therefore should be tried by a judge alone. [ 7 ] The plaintiff’s position is that the Master erred in concluding, in essence, that a case need only have an issue of contractual or statutory construction to bring Rule 39(25)(

j) and Rule 10(1)(

b) into play. They read:

(25) A trial shall be heard by the court without a jury where it relates to …

(

j) a matter referred to in Rule 10(1) … * * * * * (10)

(1) An application, other than an interlocutory application or an application in the nature of an appeal, may be made by originating application where … (

b) the sole or principal question at issue is alleged to be one of construction of an enactment, will, deed, oral or written contract, or other document, … [ 8 ] The plaintiff submits that the Master’s error is apparent in ¶9 of his Reasons where he says “ a principal issue”.

The plaintiff submits the Master misstated the law and that the Section 10(1) matter must be “ the principal issue” in order to oust the plaintiff’s presumptive rights to a trial by jury. [ 9 ] The plaintiff quotes the defendant’s Outline as demonstrative, in itself, of the fact that the issues which must be determined in this case are primarily issues of fact: The trial will entail determination of several interrelated issues, including: (

i) the manner in which the loss was actually caused, and thus the time at which it was proximately caused; (ii) whether the damage was caused in whole, or in part, by ‘inherent vice or nature’ of the Cargo; (iii)whether the damage was caused in whole, or in part, by ‘improper packaging or preparation of the Cargo; (iv) whether the Plaintiff’s conduct breached its duty to mitigate its loss, or to preserve the Defendant’s right of subrogation against the ocean carriers; (

v) whether the Plaintiff’s conduct breached its duty to act in utmost good faith; (vi) whether the damage was exacerbated by failure to take “reasonable steps to prevent further damage”; and (vii)whether the loss was exacerbated by the improvident sale of the Cargo afterwards. The plaintiff submits that where there are significant factual issues such as these, it cannot be said that the principal issue is a matter of construction of a contract or document. The plaintiff cites Manley v. Chilliwack General Hospital Society , [2000] B.C.S.C. 649, as authority for the proposition that the fact that there may be issues of

interpretation is insufficient to engage the mandatory provisions of Rule 39(25) or Rule 10(1)(b). It cites Penner v. Great-West Life Assurance Company , [2002] B.C.S.C. 1131 as authority for the proposition that the question of construction must be the principal issue in order to deprive a party to its substantive right to a jury trial. [ 10 ] The plaintiff’s position is that it has not been shown that the question of construction of the policy is the principal issue, and that the Master in referring to “a principal issue” both misstated the test as a matter of law and misapplied it to the circumstances of this case. The plaintiff’s position is that the provisions of Rule 39(25)(

j) and Rule 10(1)(

b) must be met strictly, and that because the mandatory conditions of Rule 39(25) have not been met in this case the order setting aside the jury notice was made in error. [ 11 ] The plaintiff submits, moreover, that because the Master erred on a question of law this appeal may be heard and disposed of upon

its merits (see Northland Properties Ltd. v. Equitable Trust Co. (1992), (BC SC), 71 B.C.L.R. (2d) 124 (S.C.) perFraser, J. at ¶10). [12] The defendant’s position respecting the standard of appellate review is that the Master must be shown to have been “clearlywrong”, in accordance with the ordinary standard (see: Aberim Corporation v. Granges Exploration Ltd. (1990), 41 C.P.C. 59 S.C. affd (BC CA), 48 B.C.L.R. (2d) 125).

The defendant points out that in numerous cases the court has held that motions tostrike jury notices are matters involving the exercise of discretion, not matters of pure law (see, for example, Robertson v.

CanadianImperial Bank of Commerce, (unreported) April 16, 1993, Vancouver Registry C920419 (S.C.B.C.)). [13] The defendant’s position is essentially that the Master’s decision was discretionary and that in the absence of a clear error the courtshould not re-weigh the evidence and substitute its own view if different from that of the Master. [14] The defendant further submits that, in any event, the Master was correct. The defendant submits that, in the context of an insurancecontract, Rule 39(25) will bar trial by jury where “the principle issue relates to the

interpretation of particular words in the contract or theconstruction of statutory provisions related to the insurance contract in order to determine whether coverage exists in a given situation asa matter of law” [quoted from the defendant’s outline]. There is no question that on the material those sorts of issues are raised in thiscase. [15] In Bell v. AXA Pacific Insurance Co., (BC SC), [1997] B.C.J. No. 2026 (B.C.S.C.), Master McCallum dealtwith a case where the parties were at odds over whether the principal issue was the construction of a fire insurance policy, or whether itwas the “cause” of the fire.

Master McCallum made the following observations: ¶17 This is a case where the principal question at issue is one of construction of the policy of insurance issued by Axa and upon whichthe plaintiffs rely. The causation issue will undoubtedly be important but it could not be said, in my view, that a finding in favour of theplaintiffs on the causation issue will necessarily resolve the litigation.

The defendants are entitled to rely upon the wording of the policywith respect to misrepresentation at last and the issue of construction will become the principal question even in those circumstances.The framers of the rules elected to take from juries trial where the principal question is one of construction of a contract. Ultimately thisproceeding will involve as its central theme construction of the policy of insurance issued by Axa to the plaintiffs. As in Watchel, thecourt will be required to make findings of fact with respect to the cause of the fire.

I am not persuaded that resolution of the factual issueinvolving causation will necessarily resolve the proceeding. [16] This strikes me as the right way to approach such questions. [17] It may be that some of the controversy generated in these cases is attributable to the manner in which the Rules are drafted. Rule39(25) provides that “a trial shall be heard by the court without a jury where it relates to (

j) a matter referred to in Rule 10(1) …”. The“matters” referred to in Rule 10(1)(

b) are “construction of an enactment, will, deed and or written contract or other document”. Ofcourse, if, in fact, “the sole or principal question at issue” is one of those matters, the point of Rule 10, taken alone, is that there need notbe a trial at all. It seems to me that the importation of this provision into Rule 39(25) as a means of describing certain matters, must beread in the context of that rule. There will obviously be issues of fact if the premise is that there is going to be a trial. [18] I think that to seize upon the phrase “the sole or principal question at issue” as if one must then weigh the issues of fact against the“questions at issue” referred to in Rule 10(1)(

b) to determine which should be declared “principal” is to adopt a somewhat flawedanalysis. In Bell, Master McCallum asked himself whether the resolution of the causation issue (ie, the issues of fact) would “necessarilyresolve the litigation”. I think that approximates the proper test, which really must be whether, once the facts are decided, there remain“questions at issue” as to the “construction of an enactment, will, deed, oral or written contract, or other document”. [19] Cases such as Manley v. Chilliwack General Hospital Society (supra) and Penner v.

The Great-West Life Assurance Company(supra) are illustrative. In Manley the court found (at ¶34): Here, the issue for the jury will not revolve around construing the terms of any contract between the parties. It will rather revolve aroundthe question of whether there was a contract (a mixed question of fact in law) and whether it was breached – the latter being the samequestion a jury would answer in tort in the context of the duty of care. And, in any event, even accepting that there might be someinterpretation issues presented, on the facts these will not be the sole or principal issues for the jury.

In Penner the court found (at ¶16): … However, the principal issues in this case involve matters of fact, including, principally, whether the plaintiff in light of the medicalevidence was “totally disabled” and did the insurer act in good faith in denying coverage in the circumstances. Thus, in my view, itcannot be said that the principal question at issue concerns construction of an enactment or a contract. [20] These cases demonstrate that if the findings of fact substantially dispose of the issues to be tried then Rule 39(25) should not beapplied.

But if, after the facts have been found, a genuine question remains as to the significance of those facts within a Rule(10)(

b) issue, it will be the “principle question in issue” within the meaning of the Rule, regardless of the relative length or complexity of the fact finding exercise itself. [ 21 ] Here, the Master weighed the appropriate considerations. He did not misstate the law in his reference to “the principal issue or principal issues” as submitted by the plaintiff. Inasmuch as the Master’s decision in such applications involves the exercise of discretion, he must, in the absence of a pure error or law, be shown to have been “clearly wrong”.

There was a strong basis on the pleadings and in the materials before him for his conclusion that the “principal issue or issues” would involve “construction of an enactment or document” applying the proper test. [ 22 ] The appeal is therefore dismissed with costs to the defendant. “T.M. McEwan, J.” The Honourable Mr. Justice T.M. McEwan