This summary does not constitute a legal opinion. The information it contains may not reflect the current state of the law.

The extrinsic evidence¹ permitted when presenting a Wellington motion must not open up a debate about the merits of the dispute between the third party who is suing and the insured who is being sued. We were recently reminded of this by the Court of Appeal in Technologies CII Inc. v. Société d’assurance générale Northbridge.².

In first instance,³the Superior Court dismissed the Wellington motion by the insured, Technologies CII Inc. (hereinafter “the insured”) against its insurer, Société d’assurance générale Northbridge (hereinafter “the insurer”), which was denying coverage on the grounds that the insured had breached a formal obligation pertaining to welding work. The insured had taken part in some welding or cutting work for the purposes of installing a heat recovery system in a mechanical equipment shelter on the roof of a high school that had burned down. While the plaintiffs claimed that the fire was caused by the Technologies CII Inc.’s work, the latter argued in its defence that the mechanical equipment shed had been improperly built, being neither insulated nor fireproof. Technologies CII Inc. blamed this on the architect who had worked on the refurbishment of the roof in 1989.

In determining whether Northbridge had a duty to defend its insured, the Honorable Justice Michel A. Pinsonnault, S.C.J., based his analysis on the policy, on the allegations of the proceedings, as well as exhibits communicated in support thereof, including the insurer’s defense exhibits, which included the statutory examination of the president of the insured; Justice Pinsonnault came to a negative conclusion. The Court also considered an expert report submitted by the plaintiffs in the principal action and by Northbridge for purposes of the Wellington motion, indicating that extrinsic evidence was admissible in this context.

On January 15, 2016, the Court of Appeal granted the insured’s appeal. It underscored that it had not been established whether the damage in question resulted from the welding work contemplated in the rider, nor whether the work carried out constituted welding within the narrow meaning of said rider. The Court held that this question could not be resolved using the extrinsic evidence. The Court also found that the insured could indeed claim the benefit of the application of section 2400 of the Civil Code of Québec based on the fact that at this stage of the proceedings, the evidence did not permit a finding that the insurer had met its obligation to deliver copies of the policy and the proposal.

In an obiter⁴the Court of Appeal was astonished by how much extrinsic evidence was administered in first instance, whereas the debate must be kept brief on a motion. It was even more astonished that, notwithstanding the presented evidence, certain questions remained unanswered, and that to obtain the answers, a debate on the merits needed to be opened up—a debate that is not allowed with this type of motion.

The insurer was dissatisfied with the judgment. On March 15, 2016, it filed an application for leave to appeal to the Supreme Court of Canada. Specifically, the insurer is claiming that the Court of Appeal unduly restricted and misrepresented the rules that apply to Wellington motions. The insurer also holds that the Court of Appeal disregarded the evolution of case law with respect to admissible extrinsic evidence, making it virtually impossible for an insurer to not defend the insured, even though the claimant’s allegations cited the insured’s non-compliance with the formal undertaking it had made.

It is true that in recent years, the courts have authorized the administration of extrinsic evidence other than only the evidence cited in the judicial demand. For example, in their analysis of the insurer’s obligation to defend, they considered the insured’s written statements⁵, exchanges of correspondence between the insurer and the insured⁶, statutory examinations⁷ and experts’ reports in support of the judicial demand⁸ or the insured’s defense⁹. They also allowed witnesses to be heard¹⁰. On the other hand, certain judgments have refused the administration of such evidence¹¹, thus continuing to leave the issue open to debate.

It will therefore be interesting see whether the Supreme Court of Canada agrees to hear the insurer’s application for leave to appeal. If not, we will have to wait and see how the Court of Appeal’s obiter will affect future litigation: will the courts limit extrinsic evidence only to the evidence cited in the judicial demand or will they come round to recent case law that authorizes more generous extrinsic evidence. Only time will tell!

By M^e Marie-Hélène Betournay, associée, Stein Monast S.E.N.C.R.L.

^{1 Documents that the judge consults to verify the possibility of the insured being found liable for an act for which he has insurance coverage.
2 2016 QCCA 41.
3 Québec (Procureure générale) c. Services énergétiques Ecosystem inc., 2015 QCCS 1988, paragr. 31 to 34.
4 “Statements made by a judge in the course of giving his reasons for a decision in a particular case that are not necessary elements of the reasons for decision.” [Unofficial translation] – Dictionnaire de maximes et locutions latines utilisées en droit, Albert Mayrand, Éditions Yvon Blais.
5 Charron v​. Entreprises de rénovations Pareco inc., 2010 QCCS 4471; Desjardins Assurances générales v. Souscripteurs du Lloyd’s, 2011 QCCS 3559 (withdrawal of the application for leave to appeal​).
6 Elopack Canada inc. v. Cascades Canada inc., 2009 QCCS 4981; Immeubles Stageline inc. v. Distribution Tapico inc., 2012 QCCS 6319; Charcuterie La Tour Eiffel, division de McCainFoods Ltd. v. S3E Renewable Energies Inc., 2014 QCCS 210.
7 Axa Assurances inc. v. Jacques Chevalier inc., 2012 QCCQ 4200.
8 Université de Montréal v. Desnoyers Mercure & Associés, 2013 QCCS 481 (motion for leave to appeal dismissed in​Toitures et construction Robitaille [1985] inc. v. Liberty Mutual Insurance Company, 2013 QCCA 679); Bio-Biscuit v. Bi-Pro Marketing Ltd, 2013 QCCS 6133 (motion for leave to appeal dismissed in​Co-operators General Insurance Company v. Bi-Pro Marketing Ltd., 2014 QCCA 1028).
9 Compagnie d’assurances American Home v. Groupe Ohméga inc., 2008 QCCS 5849 (the insured fully acquiesced on appeal to the findings sought against her on appeal​).
10 Hydro-Québec v. 9138-7274 Québec inc., 2010 QCCQ 8110; Desjardins Assurances générales v. Souscripteurs du Lloyd’s, 2011 QCCS 3559 (motion for leave to appeal withdrawn).
11 Royal & Sun Alliance du Canada, société d’assurances v. Toitures Qualitoitinc., 2015 QCCS ​4080.}