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					Supreme Court of Canada
Ontario Equitable Life & Accident Ins. Co. v. Baker, [1926] S.C.R. 297
Date: 1926-03-13

The Ontario Equitable Life and Accident Insurance Company (Defendant) Appellant;


Hester Anne Baker (Plaintiff) Respondent.

1926: February 8; 1926: March 13.

Present: Anglin C.J.C. and Duff, Mignault, Newcombe and Rinfret JJ.


Insurance—Life—Premium—Payment—Receipt for premium on agent’s life signed by
agent—Prima facie proof of payment—Onus

     A receipt for an insurance premium on the life of a district agent of the insuring
company countersigned by the district agent himself and found among his papers after his
death, admitted in evidence in an action on the policy, did not in the circumstances
constitute prima facie proof of the payment of the premium.

     The onus of proof of the issue as to payment of the premium was not, by the
production of the receipt, shifted to the defendant company but rested upon the plaintiff
uninterruptedly from the beginning to the end of the case.

[Page 298]

     The production of the receipt should have been treated by the trial judge merely as
one fact in the case, i:e., as a part or incident of the whole body of the evidence.

    The evidence adduced in this case by the company held sufficient to show that the
premium had not in fact been paid.

          Judgment of the Court of Appeal (19 Sask. Lit. 571) rev.

     APPEAL from a decision of the Court of Appeal for Saskatchewan1 affirming the
judgment of the trial judge and maintaining the respondent’s action.

     The material facts of the case and the questions at issue are fully stated in the
judgment now reported.

Gordon for the appellant.

Bastedo for the respondent.

The judgment of the court was delivered by

    [1925] 19 Sask. Lit. 571; [1925] 2 W.W.R. 378.
NEWCOMBE J.—The plaintiff (respondent) sued as beneficiary under a policy of insurance
upon the life of her son, the later /?/ Fletcher Baker, who lived with her at Moose Jaw, in
the province of Saskatchewan, alleging that the deceased had paid the premiums which
had become due upon the policy at the time of his death. The defendant (appellant)
denied the payment of the premium which became payable on 1st September, 1923, the
last to mature. It is upon the issue so raised that the right of recovery depends.

The policy, dated 27th August, 1922, covered the life of Wilbur Fletcher Baker for the term
of three years next following. It was payable to his mother, Hester Anne Baker, the
respondent, if living, at the death of the insured, otherwise to his executors or
administrators. The amount of the premium was $27.70, and was, by the terms of the
policy, payable

     on the delivery of this policy * * * a like amount on or before the 1st day of March and
     September in every year during the continuance of the contract, until the premiums
     for three years shall have been fully paid.

By the conditions of the policy, thirty days of grace were allowed for the payment of
renewal premiums, and, if any premium were not paid when due, the policy was to be void
and all liability of the company thereon to cease: provided that the company might revive
the policy within the

[Page 299]

time and upon the terms thereby stipulated. It was further provided that

     all premiums are payable at the head office of the company, but will be accepted
     elsewhere in exchange for the company’s printed receipts, signed by the president,
     and countersigned by any authorized agent.

The head office of the appellant company is at Waterloo in the province of Ontario. By
agreement of 1st September, 1921, the company appointed Lewis B. Willan its agent for
Southern Saskatchewan

     to solicit personally and through sub-agents for applications for life insurance, and to
     receive premiums for the said company,

and, within this district, he was to have power to appoint sub-agents, subject to the
approval and rules of the company. He was to be responsible for all moneys received for
or on behalf of the company either by himself or by his agents, and it was stipulated that
such moneys should be treated as trust funds of the company, and should be used for no
purpose other than as specifically authorized by the agreement. It was also provided that
at the close of each month or oftener, as required by the company, the agent should make,
on the forms furnished for that purpose, a full report of all collections, the report to be
made to the head office not later than the first day of the next succeeding month. By the
company’s instructions, which accompanied the contract, renewal premiums, due on the
first of the month, were to be reported by the sixth of the month following.

By agreement of 1st February, 1922, Mr. Willan, who is therein described as general agent
for the appellant company, appointed the above named Wilbur Fletcher Baker district
agent for the company

     within the limits and under the instructions contained in the company’s manual of
     rates, book of instructions to agents and requirements and provisions herein stated,
     or that may hereafter be communicated to him by the company, to solicit, personally
     and through sub-agents, for applications for life insurance, and to receive premiums
     for the said company, all of which applications and premiums so received by the
     district agent shall be delivered to the general agent (Willan) at his office in the Aldon
     Building in the city of Regina.

By this agreement the area within which the district agent had permission to operate was
defined as the city of Moose Jaw and its environs, as thereby described, and the sub-
agent had authority within his district to appoint sub-agents, subject to the approval and
rules of the company.

[Page 300]

It was moreover stipulated that the district agent should be responsible for all moneys
received for or on behalf of the company, or on behalf of the general agent, either by him
or by agents or other persons appointed or employed by him, and that

     all such moneys shall be treated as trust funds of the general agent, and shall be
     used for no purpose other than as herein specifically authorized.

Then it was provided that

     promptly at the close of each month, or oftener if required by the general agent, the
     district agent shall make, on the forms furnished for that purpose, a full report of all
     collections, enclosing therewith proper vouchers for commissions and authorized
     expenses and a remittance for the amount due to the general agent. This report must
     be made to the general agent at his office in the Aldon Building in the city of Regina,
     Saskatchewan, not later than the first day of the next succeeding month.

Moreover, it was stipulated that
     All records of business done for the company by the district agent shall be entered
     upon records belonging to the general agent and all books of account, together with
     card records, bank books, policy registers, documents, vouchers and all other books
     and papers connected with the business of the company, whether paid for by the
     district agent or not, shall be at any and all times open to the officers of the company,
     and of the general agent in particular, or their respective representatives, for
     inspection, and freely exhibited and delivered to the general agent at any time on

This agreement, by its terms, took effect as of 1st February, 1922, a date antecedent to
the policy.

The insured paid the first and second premiums; these payments are not disputed. The
policy was by its terms to be computed as from 1st September, 1922. The assured met
with an accident on 7th or 8th September, 1923, followed by erysipelas, from which he
died on 7th October following.

The respondent in making her case at the trial produced a receipt for the semi-annual
premium of 1st September, 1923, made out in the company’s printed form, signed by the
company’s president and managing director, and

     countersigned, dated September 1, 1923, W. F. Baker, Agent.

Following this counter-signature on the form of receipt is the printed note,

     This receipt is not binding unless signed by an agent or cashier of the company.

The respondent testified that the counter-signature “W. F. Baker,” was that of her son, the
insured, and that the receipt was found after her son’s death in her room, where he and
Mr. Willan had been transacting some busi-

[Page 301]

ness during her son’s illness. It was on 13th September that Mr. Willan was there, and
Mrs. Baker says that

     after Mr. Willan left, the papers were there and that receipt was put in my room.

The deceased had an office in the Grayson Block on Main street where he transacted his
insurance business, but he lived with his mother at her home. She says that her son did
not visit his office after he was injured on 7th or 8th September; that he kept his business
papers there, and the policy and his private papers at home; that she thought that the
premium receipts, other than the one in question, were kept along with the insurance
policy; that at the time Mr. Willan was there, her son had a good many of his office papers
at the house going over them; that the policy was always kept in a private drawer; that she
found the receipt “just where he left it for her.” Then the respondent’s son, Fred Baker, was
called as a witness on her behalf. He said that previously to his brother’s death, they
(meaning his mother and he) could not find the September receipt; that the other receipts
were kept with the policy which was in the desk at home; that the September receipt was
not with the policy; that it was found after his brother’s death in his mother’s dresser.
Ernest George Cook was called for the appellant and he testified that he had been
appointed a sub-agent for the appellant company by the deceased, and he produced his
agency agreement, whereby he was authorized to procure applications for insurance in the
appellant company upon terms which were defined, or to be communicated. He said that
Fred Baker came to his office on Saturday afternoon, a day or two before the expiration of
the days of grace for paying the premium, and told him that he did not know whether the
premium upon his brother’s policy had been paid; that he wanted to make sure of it, and
wanted him to see Mr. Willan; that he, Cook, then told Baker that Mr. Willan would be
coming to Moose Jaw on the following Monday; that Mr. Coleman of his office had been
talking to Mr. Willan on the telephone, and that he had told Mr. Coleman that he would be
coming on Monday. He said:—

     A. I suggested to Fred Baker that he should wait and see Mr. Willan on Monday, and
     he thought he would do so, I know his intention was to

[Page 302]

     pay the premium then, if it was not paid, I think he did not know whether it had been
     paid or not. Q. As far as you know he was not sure one way or the other? Did he tell
     you that he would tender it on Monday?

     A. Yes, he did.

     Q. He said he would do so?

     A. Yes.

In cross-examination Mr. Cook testified that he had no authority to receive the premium for
the company, and that he told Fred Baker so. Mr. Coleman said that, on the Saturday
mentioned, Mr. Willan had telephoned from Regina to enquire as to the condition of Wilbur
F. Baker; that he, Coleman, had answered the telephone, and that in the conversation Mr.
Willian “mentioned that he would be up to Moose Jaw on Monday.” Then Fred Baker was
recalled, and he testified that, as a result of the conversation which he had with Mr. Cook,
he had refrained from remitting the premium to Mr. Willan at Regina on Saturday, relying
upon the assurance received from Cook, such as it was, that Mr. Willan would be at
Moose Jaw on the following Monday, which was the last day for payment of the premium;
that it transpired however that Mr. Willan did not come until Tuesday; that on Tuesday he
tendered the premium, but that Mr. Willan would not accept it.

Upon this evidence the plaintiff rested her case. There was no proof of payment of the
premium, except in so far as the receipt operated as an acknowledgment; no books,
accounts or entries were produced to show the payment; no evidence of any appropriation
for the purpose. The defendant then moved for judgment.

The insured and the agent to receive the premium and to give the receipt being the same
person, it is obvious that, upon the question of actual payment, the mere production of a
receipt signed by the district agent, who was also the insured and the beneficiary under
the policy, if he survived his mother, if evidence at all, was of very little value. It was the
duty of the agent to keep account of his receipts for the company, and to keep the moneys
so received separate from his own. If then the premium had been paid to the district agent,
or appropriated by him for the company, one would naturally expect to find trace of it in his

[Page 303]

Although no such evidence was produced, and the plaintiff’s case rested solely upon the
receipt, the learned judge, upon the motion for judgment intimated that he would not allow
the motion without serious consideration, and the defendant’s counsel, being unwilling to
rest his case upon the material before the court, proceeded to call his witnesses.

It was proved for the defence that, on 1st September, 1923, the deceased was indebted to
Mr. Willan, the company’s general agent, in the sum of $648.32; that on 13th September,
while the deceased was ill, Mr. Willan went to his house to assist him in the preparation of
his report and statement for the preceding month; that a statement was then prepared
showing $389.42 due for August premiums; that the deceased had not the money to pay
the amount so due; but that he borrowed from the Canadian Bank of Commerce by
discounting a note, the proceeds of which were credited to the deceased’s bank account
no. 1, and applied to the extent of $200 in payment of a cheque for that amount which the
deceased gave to Mr. Willan on account, leaving a balance due of $189.42, which he
promised to pay, saying that
     as soon as he got around he would be able to square the whole thing, not only that
     but the other amount that I owe as well.

The August statement did not include amounts payable to the general agent for premiums
collected during June and July. Mr. Willan gave evidence that the total deficit when
discovered was $1,343.30. It appeared that the deceased kept at the Canadian Bank of
Commerce an account described as trust account no. 2, upon which he drew the cheques
which he remitted to the general agent in payment of premiums collected. Senator Laird,
the vice-president of the appellant company, testified that he had an interview with the
deceased on 3rd April, 1923, when he instructed him

     that all the company’s business and all company funds should be done through a
     specific trust account for that purpose;

that the deceased told him that he already had a trust account that he called no, 1, but that
he would open a trust account, no. 2, for the purpose of carrying the company’s business,
and Mr. Laird says he understood that this account would be opened in the Bank of

[Page 304]

These bank accounts were produced; no. 1 begins on 31st March, 1923, and continues to
the end of September, showing a credit balance of $11.29 on 17th September, 1923, the
date of the last transaction, except a deposit of $31 on 3rd October. September opened
with a credit balance of $1.36, and during that month were deposited $15 on the 1st, $50
on the 4th, $50 on the 5th, and $240.03, proceeds of discount, on the 14th. There is no
evidence of the source of the three earlier deposits, amounting to $115. Trust account no,
2 was opened by a deposit of $336.75 on 4th May, 1923, the month following Mr. Laird’s
instructions. This account was active until 23rd July following, when it showed a balance of
$1.42. There are no subsequent deposits or withdrawals shown upon this account. The
bank manager explained that the deceased told him that his cheques might be charged to
either account. It appeared that the deceased had sent to the; general agent cheques on
account of monthly settlements for which there were not sufficient funds. Senator Laird
testified that the first he heard of these was in June, and that the deceased was in arrears
from that time until his death. Mr. Willan and Senator Laird proved the system of issuing
and distributing the official receipts, including the one upon which the plaintiff relies. It was
shown that these receipts were issued by the head office and sent to the general agent
about two months before the premiums became due, and that, when received by the
general agent, they were sent out by him to the district agents, with bills for the premiums;
that the deceased’s receipt was accordingly sent to him a month or two before the expiry
of the days of grace. The head office at the time of forwarding these receipts also sent
notices to the policyholders, informing them of the dates when their premiums became
payable, and therefore, in ordinary course, the deceased would receive notice of the
maturity of his premium about the time that his September billing, accompanied by the
receipt forms, including his own, came to hand. It was through this process that the
deceased came into possession of the receipt for the premium in question, signed by the
president of the company, and there is no doubt that he countersigned that receipt,
presumably on 1st September, because it bears no other date.

[Page 305]

The learned trial judge considered that the receipt was prima facie proof of payment which
had not been refuted by the evidence which he describes as

          referring to Baker’s shortage in his accounts and his banking business,

and that the burden was on the defendant to show that the payment acknowledged by the
receipt had not been made. He reviewed the evidence as to the efforts made by Fred
Baker on 29th September and 1st October to pay the premium to the sub-agent, Cook, or
to Willan, and he finds

          that Fred Baker was acting as agent for his brother, the insured, or his mother, the
          plaintiff, and that the tender (which he made to Willan on 2nd October) was good,
          although not made until one day after the expiration of the thirty days grace, either on
          the doctrine of estoppel or on the ground that the thirty days grace were extended by
          the actions of Willan;

he referred to Tattersall v. Peoples Life Assurance Co.2. He found moreover,

          that Fred Baker did not send the premium to Regina solely on account of the
          assurance that Willan would be in Moose Jaw on October 1, and that he had not sent
          it to Regina on October 1, because he was assured that Willan would be in Moose
          Jaw on October 2. If the action of the defendant through Willan did not amount to an
          estoppel, then it seems to me there was an extension of the time for one day on
          account of Willan’s actions and statements.

Here it may be observed that if, as the learned judge found, Fred Baker, in his endeavours
to pay the premium at the end of September and on 1st and 2nd October, was acting as
agent for the insured or his mother, that fact is in direct conflict with any probability that the

    [1904] 9 Ont. L.R. 611.
individual whose agent he was considered at the time that the premium had been paid on
1st September, the date of the receipt.

In the Court of Appeal Lamont J.A., who pronounced the judgment, having summarized
the trial judgment, says that the evidence shews that it was a breach of the agent’s duty to
countersign and deliver a receipt for renewal of premium before he actually obtained the
money; that a breach of duty will not be presumed; that the receipt was prima facie
evidence of payment, because the deceased had authority to receive the premium and
deliver the receipt to the insured, and that

     the onus of displacing the plaintiff’s prima facie proof of payment was on the
     defendants, and the question is, have they succeeded in establishing that the
     premium was not in fact paid by Baker to himself as agent of the company.

[Page 306]

The learned Justice of Appeal considered that the evidence did not shew that the premium
had not been paid; he says that, although the contract required the insured to treat the
moneys of the company as trust funds, Baker had in practice been permitted by Willan to
retain out of his collections the amount to which he was entitled for commissions, and to
remit the balance only; that, for the months of June, July and August, Baker had not been
remitting the full amount of the balances shewn in his reports; that if therefore he had
collections in his pocket, the use by him of that money, up to the amount coming to him for
commissions, would appear to have been sanctioned by the existing practice, and that at
any rate the evidence did not warrant a finding that

     Baker committed a breach of his duty by handing over to himself, as a policyholder,
     the receipt for payment of the premium without first having received the same.

I have already shewn that the evidence of payment of the premium, if any, furnished by the
facts which the plaintiff proved is of a very fragile character. The case is that the receipt
was found in the plaintiff’s room, which the insured had been using, and where he had
been working with Mr. Willan upon his accounts; that his business papers had been
brought there from his office; that the receipt when found was countersigned by the
deceased, without whose signature it was expressed not to be binding, and that the receipt
was not with the policy, although the policy was also in the room. It is the inference to be
drawn from these facts which constitutes the alleged prima facie case of the plaintiff; but,
whatever might otherwise have been the strength of this proof, it has to be considered with
the evidence subsequently adduced by the defendant company in its defence, where it is
shewn, as appears from the foregoing narrative, that the insured was in default in payment
of premiums collected in June, July and August; that his bank balances had been found
deficient and that payment of his cheques had been refused in consequence; that the
balances to the credit of his two bank accounts on 1st September were only $1.36 and
$1.42 respectively; that there was no deposit to the credit of either account which could be
identified as including the premium in question; that on 13th September, when the

[Page 307]

deceased, with Willan’s assistance, prepared his August statement, he could not pay the
premiums, amounting to $389.42, which he had collected for that month, and that the $200
which he paid on account were borrowed from the bank; that the combined balances in
both accounts at the end of the accounting period of September amounted to only $12.71;
that the state of the accounts was inconsistent with any right to make deductions for
commissions; that the receipt forms signed by the president of the company, including
Baker’s, were sent to the district agent for collection, and that his possession of the receipt
in question was therefore no evidence in itself that he had paid his premium. There was no
suggestion of any record, credit, entry or note of the payment. It was of course the duty of
the insured, as agent, to keep separate the company’s money, and to have a just account
of his receipts, and agency transactions always available for the information of his
principal. Guerreiro v. Peile3, Clarke v. Tipping4. In Gray v. Haig5, the Master of the Rolls

          It cannot, however, be too generally known or understood, amongst all persons
          dealing with each other, in the character of principal and agent, how severely this
          court deals with any irregularities on the part of the agent, how strictly it requires that
          he who is the person trusted shall act, in all matters relating to such agency, for the
          benefit of his principal, and how imperative it is upon him to preserve correct
          accounts of all his dealings and transactions in that respect.

It is suggested by the judgment on appeal that “Baker had collections in his pocket.” That
is mere conjecture, but, if he had the money wherewith to pay his premium, that does not,
in the absence of other requisite evidence, establish the appropriation or payment of it to
his principal’s account.

In view of these facts, it is, I think, impossible, having regard to the weight of evidence, to
find that the premium was paid. At best there is only some evidence of payment. Although

    [1820] 3 B. & Ald. 616, at p. 618.
    [1846] 9 Beav. 284, at p. 292.
    [1854] 20 Beav. 219, at p. 239.
ordinarily a receipt is prima facie proof of payment, here it is very questionable that, having
regard to the facts and circumstances which accompanied the proof of the receipt, it could
be taken as any evidence, still less as affording sufficient weight or probability to

[Page 308]

make prima facie proof. In any event I would have thought that any inference of payment
which was admissible upon the plaintiff’s case was overborne by the facts established for
the defence.

But the fatal infirmity of the judgment consists in the misdirection that the onus of proof of
the issue as to payment of the premium was, by the production of the receipt, shifted to the
defendant, upon whom it thereafter devolved to establish that the premium had not been
paid. On the contrary the burden of proving the affirmative of that issue rested upon the
plaintiff uninterruptedly from the beginning to the end of the case. If, as the learned judges
hold, the receipt, which was the plaintiff’s exhibit, should be regarded as prima facie
evidence of payment, and if, in the plaintiff’s case, as rested at the trial, there was no
evidence to negative or to disparage the presumption of payment arising from the
possession of the receipt, then there was at that stage a burden upon the defendant to
adduce evidence in answer to the prima facie proof—a burden which I think was amply
satisfied; but the plaintiff had propounded the allegation that the premium was paid and
the burden always rested upon her to establish that issue. Then, if at the end of the case
the learned judge who tried the facts were left in uncertainty as to how the issue should be
found, it was not the defendant who should have suffered; the trial judge ought rather to
have regarded the receipt simply as one fact in the case, upon which there was no
attendant or consequential shifting of the burden to prove the issue, and to be considered
not otherwise than as a part or incident of the whole body of the evidence. Abrath v. North
Eastern Railway Co.6, Smith v. Nevins7, per Duff J. The truth is that the judgments have
confounded two different rules connected with proof which for the justice of the case it is
necessary to distinguish, namely, the rule which requires that the burden of establishing an
issue of which the proof is essential to the plaintiff’s case shall rest upon the plaintiff, and
the rule applicable to the condition which arises in the course of a trial, when a stage has
been reached at which there is prima facie proof or presumption of the truth of

[Page 309]

    [1883] 11 Q.B.D. 440.
    [1925] S.C.R. 619, at p. 638.
an allegation, which ought therefore to be found true in the absence of further evidence;
and this confusion has resulted in a finding which, I have no doubt, the evidence as a
whole does not justify.

It remains to consider briefly the view expressed by the learned trial judge that the
conversations which took place on 29th September and 1st October between Fred Baker,
Mr. Cook, the sub-agent of the defendant company at Moose Jaw, and Mr. Willan, the
general agent at Regina, operated either to estop the defendant company from denying
the payment of the premium, or as an extension of the time for payment until 2nd October,
when it was actually tendered by Fred Baker to Willan. It is clear that neither Cook nor
Willan had any authority to extend the time for payment, and not only that, but Mr. Willan
was expressly instructed in the documents defining his agency that renewal premiums
were not to be received after the expiry of the days of grace, unless the policy were
revived upon proof satisfactory to the company; and moreover, the evidence upon which
the plaintiff relies to establish estoppel is lacking in the requisite elements. To mention only
one particular, the information which Mr. Willan communicated to Mr. Cook by telephone,
to the effect that he would be at Moose Jaw on 1st October, can justly be regarded as no
more than a statement of intention, which, although not executed, did not lay the
foundation for estoppel.

The appeal should be allowed with costs both in this court and in the Court of Appeal, and
the action should be dismissed with costs.

Appeal allowed with costs.

Solicitors for the appellant: Gordon & Gordon.

Solicitors for the respondent: Haig & Haig.

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