Construction: An unwarranted contestation may be considered an abuse of procedure

December 5, 2022

In the decision in 9058-4004 Québec inc. c. 9337-9907 Québec inc.¹ rendered on October 21, 2022, the court granted compensation to a subcontractor for its extrajudicial fees further to a general contractor’s unfounded contestation of its claim as part of a hypothecary action.

The facts

In May 2019, Portes de garage Citadelle Ltée (“Citadelle”) and general contractor 9337-9907 Québec inc. (“AllConstructions”) concluded a contract for the provision of services and materials needed to install unloading docks in a building under construction. On May 16, 2019, notice of the contract was given to the building owner, 9058-4004 Québec inc. (“Transport Pouliot”).

The first two phases of Citadelle’s work were completed between June and August 2019. In late September 2019, AllConstructions allegedly vacated the worksite after a dispute with Transport Pouliot. The third phase of Citadelle’s work was completed in October 2019. On November 25, 2019, Citadelle sent a statement of account to AllConstructions and registered a legal hypothec on the building two days later.

On December 23, 2019, after registering a prior notice of the exercise of a hypothecary right, AllConstructions brought a hypothecary action against Transport Pouliot in the Superior Court, claiming the sums it was owed.

For its part, Citadelle brought a hypothecary action against the owner, Transport Pouliot, and instituted legal proceedings against AllConstructions in April 2020.

It is important to note that during the proceedings, AllConstructions admitted that it had received payment from Transport Pouliot for the sums invoiced by Citadelle.

To justify its refusal to pay its subcontractor Citadelle, AllConstructions argued summarily that the services and materials provided were inadequate and did not meet standards.

Despite its weak position and the lack of compelling evidence, AllConstructions maintained its argument. Citadelle had no choice but to pursue its legal proceedings and apply to have AllConstructions’ action declared abusive in order to recover its extrajudicial fees.

AllConstructions’ abuse of procedure

Citadelle claimed that AllConstructions’ defence was unfounded, frivolous and intended to delay. AllConstructions only had testimonial evidence to support its allegations, and it failed to file any expert opinions or exhibits. The contract did not contain a “pay when paid” clause, and AllConstructions admitted in the proceedings that it had received payment from Transport Pouliot for the sums invoiced by Citadelle.

AllConstructions claimed that it had serious arguments to make in response to the application to have its action declared abusive. It stated that the work performed by Citadelle was inadequate and that the materials and services provided were not up to standards. It maintained its position, despite the fact that it had vacated the worksite a month before Citadelle’s work was completed and, therefore, could not have verified the actual quality of the work performed.

In March 2022, AllConstructions ultimately abandoned its contestation of Citadelle’s claim a few days before the trial and nearly a year and a half after the proceedings began.

The judge allowed Citadelle’s application to have AllConstructions’ action declared abusive. AllConstructions’ defence was unfounded, frivolous and intended to delay. It had no solid factual or legal basis. The allegation that Citadelle failed to comply with standards in the performance of its contract is mere speculation, as AllConstructions left the worksite in September 2019.

Citadelle incurred unnecessary extrajudicial fees as a result of AllConstructions’ unfounded contestation of its claim. The judge awarded Citadelle a sum of $9,000.00 as compensation for the legal fees that it had paid.

What it means

A general contractor that cannot justify a deduction from its subcontractor’s claims after the work is completed but does so anyway risks having its contestation declared abusive. Jurisprudence has established that abuse of procedure may consist of légèreté blâmable [blameworthy conduct]² or témérité [recklessness] resulting from allegations that do not stand up to careful analysis or are exaggerated beyond the scope of the dispute between the parties.³

A manifestly unfounded action is a civil fault that may be subject to legal proceedings and sanctions in accordance with article 51 of the Code of Civil Procedure.⁴ A party that considers itself the victim of abusive proceedings may, in addition to applying to have the proceedings declared abusive, claim the reimbursement of reasonable legal fees it has paid.⁵

This is precisely what Citadelle did and what it obtained. AllConstructions irresponsibly managed its dispute with its subcontractor. It made arguments based only on unverified assumptions, even though the evidence set out in the application was relatively solid and complete. As a victim of abuse of procedure, Citadelle was granted a reimbursement of its legal fees in addition to the sums that it was owed by AllConstructions.

Court file No. 760-22-011912-204
Royal Lepage commercial inc. c. 109650 Canada ltd., 2007 QCCA 915
El-Hachem c. Décary, 2012 QCCA 2071
2741-8854 Québec inc. c. Restaurant King Ouest, 2018 QCCA 1807 (CanLII)
Only extrajudicial fees deemed reasonable are reimbursed in full. The factors considered in establishing a total reasonable amount are summarized in paragraph 32 of the case at hand and are cited from Groupe Van Houtte inc. c. Développements industriels et commerciaux de Montréal inc., 2010 QCCA 1970, and Iris Le Groupe visuel (1990) inc. c. 9105-1862 Québec inc., 2021 QCCA 1208

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Marc-André Bouchard
Senior Associate

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August 9, 2024

The elected domicile appearing in the Québec Enterprise Register cannot provide a basis for the Superior Court’s territorial jurisdiction within the meaning of article 41(3) of the Code of Civil Proce

Introduction On July 11, 2024, the Court of Appeal1 rendered a decision that, for the first time, addresses the question of whether the elected domicile appearing in the Québec Enterprise Register (the “REQ”), established under the Act respecting the legal publicity of enterprises,2 can provide a basis for the Superior Court’s territorial jurisdiction within the meaning of article 41(3) of the Code of Civil Procedure.3 Upholding the decision rendered by the Superior Court,4 the Court of Appeal answered that it cannot. The Facts On April 25, 2023, Promark Electronics Inc. and Electrical Components International Inc. (collectively, “Promark”) filed a claim for damages against Bombardier Recreational Products Inc. (“BRP”) in the judicial district of Montréal, alleging that a letter of agreement had been terminated and related purchase orders cancelled. On June 22, 2023, BRP raised a declinatory exception asking the court to issue an order transferring the case to the judicial district of Bedford, where its head office is located. Promark argued that filing its claim in the judicial district of Montréal was warranted because of BRP’s elected domicile indicated in the REQ, which corresponded to the office of its counsel located in Montréal. On September 5, 2023, the Honourable Tiziana Di Donato, J.S.C. (the “Judge”) allowed BRP’s declinatory exception and issued an order referring the case to the judicial district of Bedford. On November 10, 2023, the Honourable Stephen W. Hamilton, J.C.A., granted leave to appeal the Judge’s decision, indicating that the courts have never settled the question of whether the domicile elected under section 33 ALPE is sufficient to make paragraph 3 of article 41 of the C.C.P. apply. He added that it appeared to him that the lower courts had rendered contradictory judgments in this regard.5 The Trial Judgement The Judge began by pointing out that, generally, for a purely personal action, the judicial district of the defendant’s domicile is the natural forum (article 41(1) C.C.P.) and that, in the case of a corporation, the domicile would be that of its head office. The Judge further clarified this principle by explaining that, where more than one judicial district has jurisdiction, the plaintiff may institute its proceedings before another court having territorial jurisdiction (article 42 C.C.P.), provided that it establishes that it is entitled to make such an election. In support of its contestation to the declinatory exception, Promark argued that it was entitled to institute the proceedings in the judicial district of Montréal because BRP had elected its domicile under the ALPE, and that, consequently, that district constituted an “elected domicile” under article 41(3) C.C.P., which reads as follows: So far as public order permits, the court of the defendant’s elected domicile, or the court designated by an agreement between the parties other than a contract adhesion, also has territorial jurisdiction. [Our emphasis] To render her decision, the Judge determined that article 41(3) C.C.Q. should be interpreted using modern rules of statutory interpretation, adding in particular that it is useful to refer to prior provisions of a law to ascertain the legislature’s intent. The Judge thus revisited the legislative history of article 41 C.C.P., affirming that it essentially restates the prior law, in particular article 68 of the former Code of Civil Procedure, CQLR c. C-25, which provided in paragraph 1, subparagraph 1 that “. . . a purely personal action may be instituted: (1) [b]efore the court of the defendant’s real domicile or, in the cases contemplated by article 83 of the Civil Code, before that of his elected domicile.” Although paragraph 3 of article 41 C.C.P. no longer specifically refers to article 83 of the Civil Code of Québec (the “C.C.Q.”)6 the Judge, following an interpretive analysis, found that said article still applies to determine whether a party has elected domicile, and stressed the fact that the election of domicile must be express and unequivocal. The Judge added that election of domicile is the exception and must be interpreted restrictively. As for the scope of an election of domicile under the ALPE, the Judge pointed out that subsection 33(1) ALPE indicates that a business may elect domicile and appoint a person to “receive documents for the purposes of this Act.” Article 98(5) ALPE also indicates that the domicile elected by a business under the ALPE is intended to inform third parties of the address where the business wishes to receive documents “for the purposes of this Act.” The Judge was thus of the opinion that sections 33(1) and 98(5) ALPE, as drafted, cannot have the scope that Promark seeks to ascribe to them, as they are clear and they do not need to be interpreted. In the case of an election of domicile under the ALPE, the purpose of the election is to provide an address where documents can be sent to the business, unless there is specific evidence to the contrary. For these reasons, the Judge allowed the declinatory exception and referred the case to the judicial district of Bedford. The Judgement on Appeal From the outset, the Court of Appeal confirmed that the Judge did not commit a reviewable error: (1) the domicile elected for purposes of attributing territorial jurisdiction under article 41 (3) C.C.P. is the domicile designated by the parties for the execution of their agreement within the meaning of article 83 C.C.Q., and (2) the domicile elected under the ALPE is elected for the purposes of applying the ALPE (para. 23). The Court of Appeal is of the opinion that the Judge’s decision is consistent with what the legislature had prescribed in article 68 of the former Code of Civil Procedure and upholds stability in the law, which is particularly important in matters of jurisdiction. After analyzing the parliamentary debates surrounding the enactment of article 41 C.C.P. and the Commentaires de la ministre de la justice, the Court indicated that there is a presumption of the survival of the existing legal rule and that, contrary to what the appellants claimed, the wording of article 41 C.C.P. and articles 33 and 98 ALPE do not give the courts territorial jurisdiction other than that of the defendant’s domicile. The removal of the reference to article 83 C.C.Q. in article 41 C.C.P. does not constitute a clear indication of the legislature’s intent to set aside the requirements of article 83 C.C.Q., under which, for the purposes of determining territorial jurisdiction, the parties must establish the elected domicile in their agreement. On that basis, the Court of Appeal dismissed the appeal without costs and confirmed the Judge’s reasoning that territorial jurisdiction of the courts under article 41(3) C.C.P. is established based on the election of domicile made under article 83 C.C.Q., and not on the election of domicile made by a corporation under the ALPE, whereby a business elects a domicile for the purposes of the application of that law. Conclusion This case serves as a reminder that the C.C.Q. establishes the general law in our province. It is therefore important to refer to it when interpreting other laws enacted by the Quebec legislature. Because the legislature is “deemed to know its legislative fabric as well as the existing law,”7 the Court cannot interpret a given law—such as the ALPE—in a way that would amend a substantive statutory provision of general application—in this case, the C.C.Q.—where there is no clearly expressed intention to that effect. Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2024 QCCA 906 CQLR, c. P-44.1 (the “ALPE”) CQLR, c. C-25.01 (the “C.C.P.”) Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2023 QCCS 3405 Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2023 QCCA 1427, para. 8 83. “The parties to a juridical act may, in writing, elect domicile with a view to the execution of the act or the exercise of the rights arising from it. Election of domicile is not presumed.” Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2024 QCCA 906, para. 24

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July 26, 2024

A tenderer’s failure to comply with the preliminary complaint process as part of a municipality’s public call for tenders leads to a fin de non-recevoir

Introduction On June 14, 2024, the Superior Court of Québec issued a decision1 interpreting section 938.1.2.2 of the Municipal Code of Québec, which came into force in 2019. This provision gives a person interested in participating in the awarding process the opportunity to file a preliminary complaint about a requirement in the tender documents that they believe does not ensure the honest and fair treatment of tenderers. To our knowledge, this is the first time a court has considered the impact on a claim for damages for loss of profits2 when an unsuccessful tenderer fails to comply with this relatively new provision The Superior Court concluded that a tenderer’s failure to submit a complaint in a timely manner should be considered as [translation] “a form of fin de non-recevoir, or at the very least, a break in the chain of causation between the alleged fault and the damages claimed” (paragraph 40). Facts The dispute at hand pitted Transport Martin Forget Inc. (“Transport Forget”) against the Municipality of Saint-Alexis (the “Municipality”). On May 6, 2019, the Municipality issued a call for tenders for a snow clearing and salting contract. Transport Forget submitted the lowest bid, which was $150,000 below that of the winning tenderer. Transport Forget was excluded from the call for tenders given its failure to comply with the tender specifications requiring it to provide a Régie du bâtiment du Québec (“RBQ”) licence number, together with an attestation that its licence was in good standing. Further to the Municipality’s refusal to award the contract to Transport Forget, it claimed $300,000 in damages for alleged loss of profits. Transport Forget believed that its tender was compliant, that the RBQ licence requirement imposed by the Municipality was frivolous and unreasonable, that the Municipality failed to uphold the principle of equal treatment of tenderers and that the complaint process provided for in section 938.1.2.2 of the Municipal Code of Québec did not deprive it of its rights. As for the Municipality, it considered the irregularity in Transport Forget’s tender to be major and Transport Forget’s failure to comply with the complaint process concerning this requirement—both reasonable and in the public interest—was fatal to its legal action. The evidence showed that the RBQ licence number provided in Transport Forget’s tender was invalid and that Transport Forget deliberately chose not to renew said licence before submitting its tender, as it was unsure as to whether it would win the bidding process and wished to avoid needlessly paying the $1,000 annual fee required for the licence renewal. Applicable principles In order to determine the outcome of this dispute, the Court analyzed the case based on the decision in Tapitec,3 a landmark ruling in tendering matters. It reiterated the Court’s view that the decisive factor in determining whether an irregularity is minor or major is the equal treatment of tenderers. It also pointed out that municipalities can set out conditions aimed at limiting the number of tenderers, provided that this is done for an important and legitimate purpose. As for section 938.1.2.2 of the Municipal Code of Québec, the Court viewed it as a mechanism for monitoring all contracts awarded by public bodies which is designed to establish a process to ensure compliance with the principles of integrity needed to protect the public interest. According to the Court, the legislator’s intention is also to protect small municipalities such as the one in question (with a population of approximately 1,500) from potential legal action following the opening of tenders by ensuring that issues concerning the principle of equal treatment of tenderers are resolved prior to the tendering process. Tenderers that fail to comply with this requirement will not be entitled to claim damages for loss of profits, as in this case, except where there has been fraud or blatant bad faith, as in cases of collusion. The purpose of the provision in question is to prevent a tenderer that is aware of the requirements set out in the tender documents from contesting such requirements after the fact. Decision The Court found that the requirement to hold an RBQ licence number was a condition intended to limit the number of tenderers, which the Municipality was entitled to do. Although the Court recognized that there is no correlation between being able to perform snow clearing operations and holding an RBQ licence, it accepted the evidence that this condition was an appropriate and quick way for the Municipality to ascertain the credibility and organizational skills of tenderers, which was a important and legitimate objective. The Court therefore concluded that this requirement of the tender specifications was neither frivolous nor arbitrary. The Court considered the irregularity in Transport Forget’s tender to be major. Although the obligation to hold a valid RBQ licence is neither a requirement of public policy nor a substantive requirement, it is intended precisely to proscribe the lack of seriousness shown by Transport Forget when it opted not to pay the renewal fees for its RBQ licence before submitting its tender. The Municipality exercised its administrative discretion in a reasonable manner and ensured that all tenderers were treated equally. The Court found that the Municipality was right to reject Transport Forget’s tender. Although the Court dismissed the claim, it did nevertheless consider section 938.1.2.2 of the Municipal Code of Québec. In the Court’s view, Transport Forget could have lodged a preliminary complaint about the validity of the condition imposed by the Municipality to hold an RBQ licence. Doing so would have given the Municipality the opportunity to amend its call for tenders before the opening of tenders. Transport Forget’s failure to do this rendered its claim for damages inadmissible. Commentary Tenderers for public calls for tenders issued by a municipality must be aware of section 938.1.2.2 of the Municipal Code of Québec4 and understand how to apply it in a timely manner. As demonstrated by the Superior Court’s interpretation of this section in the judgment in question, an unsuccessful tenderer that has not complied with the complaint process set out in said section and who intends to sue for damages for an alleged loss of profits could have their claim turned down on grounds of a fin de non-recevoir. Transport Martin Forget Inc. c. Municipalité de Saint-Alexis, 2024 QCCS 2208 We came across the decision in Sintra inc. c. Municipalité de Noyan, 2019 QCCS 4293 (CanLII), which also deals with this provision, but in the context of an application for an interim injunction from the lowest tenderer attempting to prevent the awarding of the contract to a third party: the Court dismissed the claim, in particular because the tenderer had not lodged a complaint about the process provided for the awarding of the contract, in accordance with section 938.1.2.2 of the Municipal Code of Québec, and concluded that the prima facie case requirement had not been met. Tapitec c. Ville de Blainville 2017 QCCA 317 We would also like to draw your attention to section 573.3.1.4 of the Cities and Towns Act, which is identical to section 938.1.2.2 of the Municipal Code of Québec. We have not found any decisions interpreting this section, so we urge tenderers to be cautious and comply with the complaint process applicable to calls for tenders issued by cities and towns, to avoid having their claim turned down on grounds of a fin de non-recevoir.

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July 9, 2024

Presumptive Evidence of an Insured’s Intentional Fault: The Superior Court Dismisses Proceedings Instituted Against an Insurer

Introduction On July 2, 2024, the Superior Court rendered a decision in Lallier c. Société d’assurance Beneva inc.,1 ruling on an insured’s claim against his insurer for an insurance benefit further to a loss, as the insurer had denied coverage, alleging the insured’s intentional fault. Despite the absence of hard evidence of the insured’s intentional fault, the Court ruled in favour of the insurer based on evidence established by presumption. The facts During the night of August 2 to 3, 2020, a fire destroyed the home of Plaintiff, Mr. Réjean Lallier (hereinafter “the Insured”). His version is that he accidentally left a candle burning in the bathroom before running errands with his son. When he returned, the Insured saw that the house was on fire. Having no telephone, he rushed to a convenience store to call the fire department, rather than asking a nearby resident for help. After the loss, the Insured contacted his insurer Société d’assurance Beneva inc., the defendant in the case (“the Insurer”), to obtain compensation for the damage to his property. The claims adjuster that the Insurer had assigned to the case and who had been tasked with investigating the loss and compensating the Insured raised several anomalies in the Insured’s deposition. These included the Insured’s precarious financial situation, the fact that the residence was poorly maintained and the fact that, despite the urgency of the situation, the Insured had decided to take his car to call for help rather than go to a neighbour’s house. In these circumstances, the case is referred to the Insurer's special investigation unit. The Insurer’s investigation ultimately led to the conclusion that the Insured had intentionally caused the fire. This meant that contractual and legal exclusions applied, allowing the Insurer to deny coverage and justify its refusal to pay an insurance benefit. The Insured, who represented himself at the trial, instituted legal proceedings for the sum of $680,000, seeking reparation for damage to the immovable, his movable property and for living expenses. He also claimed $20,000 in compensation for the alleged inconvenience he suffered as a result of the Insurer’s “abusive behaviour.” Analysis The Honourable Justice Sébastien Vaillancourt, J.S.C., pointed out that, under article 2464 of the Civil Code of Québec2 and the provisions of the insurance policy, the Insurer is not obliged to compensate for damages intentionally caused by the Insured. However, the Insurer has the burden of establishing the Insured’s intentional fault. The Court reiterated that intentional fault is defined as behaviour that is deliberately and voluntarily intended to cause harm.3 The offender’s intention must not only be evident in the actions taken, but also in the ensuing consequences.4 This can be demonstrated through serious, precise and concordant presumptions, in accordance with the teachings of the Court of Appeal in Barrette on the subject.5 To meet its burden of proof, the Insurer presented to the Court the inconsistencies and improbabilities in the Insured’s statements. For example, in some statements, he claimed to be in a good financial position, while in others, he stated the opposite. In addition, the time at which he left his house after lighting the candle, what he did with his son after he left and how long he was gone changed from one statement to the next. The Insured had trouble explaining in a coherent manner why he was gone for so long late in the evening while his house was going up in flames. The Insured indicated that he went to the convenience store to contact the fire department after seeing the fire, stating that he did not want to go to his neighbour’s house because they had had a disagreement in the past. The Court concluded that this version was implausible given the gravity of the situation. Several other contradictions were noted in the Insured’s testimony at trial. The Insured tried to justify himself by claiming that he had trouble speaking in public and that his medication was causing him to lose his memory.6 However, there was no evidence to support these claims, and they were not upheld by the Court.7 Ultimately, the judge did not accept the Insured’s version. The sheer number of contradictions in his statements went beyond what was acceptable to the Court to consider them reliable. Given that certain contradictions emerged as early as the first statement after the fire, the time lapse between the incident and the trial could not be used as a justification.8 The statements were considered untrue, as they were mutually inconsistent.9 What is more, the contradictions and inconsistencies in the statements pointed to fraudulent intent on the Insured’s part. Lastly, the claim for damages in compensation for the Insurer’s abusive behaviour was also dismissed, given the absence of evidence in this regard.10 Conclusion Demonstrating fraudulent intent to deny coverage is no simple feat for insurers. In this case, the Insurer succeeded in meeting its burden of proof by relying on presumptions rather than hard evidence. The facts spoke for themselves. And faced with the Insured’s numerous inconsistent and contradictory statements, the Court ruled in favour of the Insurer. The Insured’s fraudulent intent was successfully substantiated and his claim against the Insurer was dismissed.11 Lallier c. Société d’assurance Beneva inc., [2024] n° 500-17-116356-216, QCCS. [Lallier] (Time limit for appeal: 30 days after the date of the notice of judgment). Civil Code of Québec, a. 2464; Lallier, para. 34. Allstate du Canada, compagnie d’assurances c. D., SOQUIJ AZ-50101469, J.E. 2001–1891, (C.A.), para. 18, as quoted in Lallier, para. 36. [Allstate] Allstate, para. 18, as quoted in Lallier, para. 36. Lallier, paras. 37–38; see Barrette c. Union canadienne (L’), compagnie d’assurances,2013 QCCA 1687, paras. 12–13. Lallier, para. 43. Lallier, paras. 44–46. Lallier, para. 47. Maud Rivard, Dispositions générales applicables aux assurances de dommages, JCQ-Droit civil Contrats nommés II, Fascicle 20, para. 92, updated to June 20, 2023, as quoted in Lallier para. 49. Lallier, paras. 59–62. Lallier, paras. 56–58.

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March 13, 2024

An insurer ordered to pay damages – The Court of Appeal intervenes

On February 12, 2024, the Court of Appeal of Quebec handed down its decision in Société d’assurance Beneva inc. c. Bordeleau,1 dealing in particular with the burden of proof incumbent on an insurer when it denies coverage on the basis of an insured’s intentional fault, and an award of damages against an insurer for breach of its duty of good faith. The facts This decision was rendered further to a dispute between Société d’assurance Beneva inc. (hereinafter the “Insurer") and some of its insureds, including Mr. Michel Bordeleau, the owner of a multi-storey rental building that was damaged by fire. He lived in one of the units with his parents. According to the uncontested expert evidence presented, the fire originated in one of the storage spaces in the basement of the building, which was assigned to a lessee couple. Access to the basement and all storage spaces was locked. The cause of the fire was deemed to be intentional, given the traces of accelerant found in the area of the fire’s origin. The instigator or instigators were not identified. On November 21, 2016, 60 days after the fire, the Insurer denied coverage because of the intentional nature of the fire, which it attributed to its insured, Mr. Bordeleau. A few months later, on March 22, 2017, it reached an agreement with Mr. Bordeleau’s hypothecary creditor. The subrogation release provides for the Insurer’s payment of the balance of the hypothecary debt of $149,720.99, and subrogation to the creditor’s rights up to the amount paid. Mr. Bordeleau, in his belief that he had been harmed by the Insurer’s decision, instituted legal proceedings to recover the insurance benefit to which he claimed to be entitled, while also claiming damages. The Insurer filed a cross-application for recovery of the balance paid to the hypothecary creditor. The trial The trial judge, relying on the evidence, concluded that although the fire was intentional in nature, the Insurer had not discharged its burden of establishing the insured’s involvement in the fire. Taking this conclusion into account, she then proceeded to analyze the plaintiffs’ claim and to weigh the damages in light of the evidence and the limits of the insurance policy. In particular, she ruled in favour of Mr. Bordeleau’s claim for damages for the building, the amount of which was admitted. In addition, she ordered the Insurer to pay $15,000.00 in damages for nuisance and inconvenience caused by its conduct, which she considered faulty. This conclusion was based on the Insurer’s duty to act in good faith, to consider the facts and act on their basis, and to conduct a full investigation, duty which the Insurer had breached by failing to sufficiently follow-up on leads that could have identified who was responsible for the fire. In order to deny coverage, clear and compelling evidence of the insured’s involvement, going beyond mere suspicion, was necessary. Given the sometimes implausible and sometimes contradictory testimonies of the people met during the investigation, there was no such evidence. In other words, the claims adjuster had jumped to conclusions. In light of her conclusions, the trial judge dismissed the Insurer’s cross-application, which she deemed to be unfounded, without giving further reasons. The appeal The Court of Appeal first refrained from intervening in light of the Superior Court’s conclusions regarding the failure to demonstrate Mr. Bordeleau’s involvement in the fire. It did however intervene on the damages awarded for nuisance and inconvenience suffered by the insureds, and pointed out the following: [40] [translation] Firstly, apart from the strict mathematical calculation of the amounts payable, and perhaps other technical aspects not requiring the exercise of judgment, the processing of a claim is an obligation of means, not one of result. The fact that a court found at the end of a trial held many years after the incident that an insurer should have covered in the first place obviously does not mean that the insurer necessarily committed a fault other than its refusal to pay, making it civilly liable, let alone that it acted in bad faith. [41] In this case, there was nothing in the evidence to support a finding of fault or breach of the duty of good faith. [42] On the contrary, there is enough evidence to conclude that the investigation by the appellant and its experts, which led to the denial of coverage, was not botched. . . . In the opinion of the Court of Appeal, the evidence showed that the Insurer’s investigation had been done in a conscientious manner, in particular because it had transferred the claim file to a special investigative unit, mandated a fire origin and cause expert and external investigators, and interviewed many witnesses who could have provided information on the circumstances of the incident. Moreover, it had no allegations that the Insurer had failed to consider exculpatory evidence against its insured. In this context, although it took several years for the insured to obtain his due, with all the inconveniences of going through proceedings, the Insurer’s conduct could not be considered offending or revealing of bad faith. No damages could be awarded. Lastly, the Court of Appeal took a closer look at the question of the Insurer’s subrogation to the hypothecary creditor’s rights, which was little discussed in the judgment under appeal. Reiterating the fundamental principle in property and casualty insurance that the indemnification of an insured cannot result in enrichment, the Court of Appeal concluded that dismissing the Insurer’s cross-application would have such an effect. In addition to receiving an insurance benefit for the damages sustained, Mr. Bordeleau would also have had seen his hypothecary debt discharged. This would have given him a clear advantage. In this case, the benefit paid to the hypothecary creditor needed to be deducted from the damages claimed by the insured. The trial judge’s finding were thus revised accordingly. Conclusion Despite the clear principles addressed in this case, the Court of Appeal’s analysis points to practical difficulties that insureds and insurers can encounter when dealing with similar claims. It points to the coexistence of two factors that can be difficult to balance: First, the burden of proof where coverage is denied on the basis of the insured's intentional fault, and second, the insurer’s obligation of means in processing the associated claim. The dismissal of a coverage defence does not in itself warrant awarding damages. Société d’assurance Beneva inc. c. Bordeleau, 2024 QCCA 171

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