PEOPLE’S TRUST COMPANY PLAINTIFF AND: CITY OF KAMLOOPS, HSBC BANK OF CANADA , formerly Hong Kong Bank of Canada v. M.T.R. DEVELOPMENTS LTD., 2003 BCSC 554

Citation: People’s Trust Company v. City of Kamloops et al Date: 20030324 2003 BCSC 554 Docket: S012108 Registry: Vancouver IN THE SUPREME COURT OF BRITISH COLUMBIA Oral Reasons for Judgment Master Bolton March 24, 2003 BETWEEN: PEOPLE’S TRUST COMPANY PLAINTIFF AND: CITY OF KAMLOOPS, HSBC BANK OF CANADA , formerly Hong Kong Bank of Canada and M.T.R. DEVELOPMENTS LTD. DEFENDANTS Counsel for Plaintiff M.L. Palleson Counsel for M.T.R. Developments D.A.

McMillan [ 1 ] THE COURT: This is an application in commercial litigation by a plaintiff for an order striking out a certain paragraph in the statement of defence of one of the defendants. [ 2 ] The facts underlying the litigation are that the plaintiff lent money to a developer for a residential/commercial project in Kamloops in 1998. The developer subsequently obtained a letter of credit from the defendant M.T.R. Developments Ltd. as security for the payment of development cost charges to the City of Kamloops.

Subsequently, the developer defaulted on the mortgage and it ended up with the plaintiff paying about $100,000 for development cost charges to the City. [ 3 ] The plaintiff now argues that it should never have paid those monies, that the development cost charges should have been paid by M.T.R. under the letter of credit.

It has claimed against the City of Kamloops for recovery of its money and against MTR for unjust enrichment. [ 4 ] One of the defences pleaded by M.T.R. is this: In further answer to the whole of the Amended Statement of Claim, this Defendant says and the fact is that the Plaintiff has been fully indemnified in respect of its payment of the Monies claimed in this action pursuant to mortgage insurance provided to the Plaintiff by Canada Mortgage and Housing Corporation and, in the premises, the Plaintiff has not suffered any losses or damages as alleged or at all. [ 5 ] The plaintiff claims to strike out this pleading, relying on the principle that insurance is entirely irrelevant to the cause of action between it and the defendant. [ 6 ] Counsel for the defendant referred to many cases to this effect, to the extent that I ended up stopping him in the course of his argument.

They seem to me to be simply illustrating the same point in different circumstances, and I am not going to refer to any authority at all. I am satisfied that there is a fundamental principle of law that the issue of insurance is irrelevant to the principal parties to litigation. This principle applies whether or not there is a claim of subrogation by the insurer. It applies whether or not there has been an actual assignment of the cause of action to the insurer.

It applies, so far as I can see, in absolutely all circumstances. [ 7 ] Counsel for the plaintiff argues that the authorities cited refer to cases based on tort or breaches of contract. He points out that the claim here is for unjust enrichment and suggested there is a distinction to be made on that basis. But with respect, I cannot agree.

I was not referred to any cases on point and it seems to me the nature of the cause of action is entirely irrelevant to the underlying principle of insurance law that the rights of the insurer and insured are utterly irrelevant to the rights as between the insured and a third party such as itself. The nature of the cause of action seems to me to be irrelevant to the underlying principle of the legal doctrine.

[ 8 ] The defendant also relies on the decision of the English Court of Appeal in Castellain v. Preston . I will not give the full citation.

It is a frequently cited decision, apparently from 1883. [ 9 ] The paragraph that counsel principally relied on is from the decision of Lord Justice Brett at page 386 of the Queens Bench Reports: The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. [ 10 ] In my view, that is a proposition which relates only to the rights as between the insurer and the insured and is completely irrelevant to an issue such as this between the insured and a third party. [ 11 ] Another decision relied on by the defendant is another case from the English Queens Bench Reports Compania Colombiana de Seguros v.

Pacific Steam Navigation Co . It is a bit more recent, in 1963. The case is cited for the proposition that there cannot be double recovery by an insured and also by an insurer. The basic proposition is unexceptionable, that there cannot be double recovery, although in some situations the law has permitted double recovery, for example, loss of earnings without deduction for the proceeds of earnings insurance. But that is not the case here.

Counsel for the defendant raised the spectre of the potential liability of his client to a separate action on behalf of CMHC, the insurer, but with respect that seems to me to be a straw man. There is no evidence that that is likely to happen. If it did, then the case that I have just referred to, the Compania Colombiana case, would likely apply to prevent double recovery. But as things stand, there is one case and can only be one case. It is brought in the name of the insured.

Whether or not there is a subrogated claim pursuant to an assignment, whether or not there is a subrogated claim pursuant to statute, whether or not CMHC has any right to control the course of the litigation is all entirely irrelevant to the present application. The defendant is faced with one defence.

It is in no worse situation as a result of the existence of any insurance. [ 12 ] There is a separate question about the production of the insuring agreement in the course of this litigation in order to establish another defence, and that is something that I am still going to have to deal with in the context of an application for answers to interrogatories. I make no comment on that at this stage. The existence of the policy may be quite relevant to some of the other issues involved in the lawsuit.

All that I am concerned with here is whether or not this defence could possibly succeed, and in my respectful opinion there is absolutely no prospect of it doing so. [ 13 ] It is worth repeating the thrust of the defence here comes in the final clause of the paragraph I have quoted, an allegation that the plaintiff has not suffered any losses or damages because of the existence of the policy, and I say, categorically, the defendant is not entitled to raise that defence.

It is not entitled to ascertain whether or not any loss has been met by insurance because that question is solely between the insurer and the insured and is utterly irrelevant to the cause of action pleaded in this particular case by this particular plaintiff against this particular defendant. [ 14 ] In the circumstances, there will be an order striking out paragraph 10 of the statement of defence since it discloses no arguable theory of defence that is capable of being put to the Court. [ 15 ] The question of costs I will deal with after I hear the argument on interrogatories. “Master N. Bolton”