IN THE SUPREME
COURT OF BRITISH COLUMBIA

Date: 20120816

Docket: M130205

Registry:
New Westminster

Between:

Yu Jung Lau and
Victa Wei Lau

Plaintiffs

And:

Insurance
Corporation of British Columbia

Defendant

Before:
The Honourable Mr. Justice Verhoeven

Reasons for Judgment

Introduction

[1]          
On December 28, 2009, the plaintiff Victa Lau, aged 22, was driving a
2005 Subaru Impreza WRX STI that he and his father, the plaintiff Yu Jung Lau,
had purchased just over two months before, at a cost of $41,287.21.  There was
an accident.  The Subaru Victa Lau was driving collided with another vehicle.  Victa
Lau was determined by the Insurance Corporation of British Columbia (“ICBC”),
the defendant in these proceedings, to be solely at fault for the accident,
which resulted in the total loss of the Subaru, and claims against the
plaintiffs by the occupants of the other vehicle.  The claims remain
unresolved.

[2]          
ICBC has denied coverage to the plaintiffs under the vehicle’s insurance
policy, asserting that the plaintiff Yu Jung Lau misrepresented the identity of
the vehicle’s intended principal operator when he applied for the insurance, in
that he stated that he would be the vehicle’s principal operator, when in fact
it was Victa Lau.

[3]          
ICBC also asserts that Yu Jung Lau made a wilfully false statement with
respect to his claim for insurance benefits and coverage.  After the accident,
Yu Jung Lau gave a statement to ICBC in which he stated that when he purchased
the vehicle, he was intended to be the person who would drive the vehicle the
majority of the time.

[4]          
The plaintiffs claim for a declaration of coverage and for indemnity in
respect of the insurance.  They contend that Yu Jung Lau was intended to be the
principal operator when the insurance was obtained and that he was in fact the
vehicle’s principal operator thereafter.

[5]          
For the reasons that follow, I conclude with considerable reluctance that
Yu Jung Lau knowingly misrepresented the identity of the vehicle’s intended
principal operator when he applied for the insurance, and therefore the
insurance coverage was forfeited.

[6]          
The reason I reach the conclusion I do with reluctance is that in my
view, the misrepresentation was made in order to save a relatively modest
amount of insurance premium, and almost certainly without any real appreciation
that forfeiture of the insurance could result, with dire financial
consequences. The result is harsh for the plaintiffs.

[7]          
However, ICBC does not have to prove that the plaintiffs were aware of the
consequences of a misrepresentation concerning the insurance.  A contract of
insurance is one of utmost good faith, and one cannot commit frauds or make
wilfully false statements about the subject-matter of the claim without risking
the loss of the right to indemnity: Inland Kenworth Ltd. v. Commonwealth
Insurance Company (1990), 48 B.C.L.R. (2d) 305 (C.A.) at 310.

[8]          
Judging by the number of similar cases that have come before the courts,
it seems likely the plaintiffs’ lack of understanding of the consequences of a
false declaration as to the vehicle’s intended principal operator is shared
with many members of the public. The result in this case should serve as a
warning.

Legal Principles

[9]          
In asserting that the plaintiffs have forfeited coverage, ICBC relies on
s. 75 (a)(ii) and (c) of the Insurance (Vehicle) Act, R.S.B.C. 1996,
c. 231 (the “Act”), which provide as follows:

75        All claims by or in respect of the applicant or
insured are invalid and the right of an applicant, an insured, or a person
claiming through or on behalf of an applicant or insured or of a person
claiming as a dependant of the applicant or the insured, to insurance money
under the plan or an optional insurance contract, is forfeited if

(a) the applicant for coverage
under the plan or the optional insurance contract

…

(ii)  knowingly misrepresents
or fails to disclose in the application a fact required to be stated in it,

(b) … or

(c) the insured makes a wilfully false statement with
respect to the claim.

[10]       
ICBC relies upon s. 75(a)(ii) in relation to its allegation that Yu
Jung Lau misrepresented the identity of the vehicle’s principal operator when
he applied for the insurance.

[11]       
“Principal operator” is defined by section 1 of the Insurance
(Vehicle) Regulation, B.C. Reg. 447/83, as “the person who will operate the
vehicle described in an application for a certificate for the majority of the
time the vehicle is operated during the term of the certificate”.

[12]       
In turn, “operate” is defined as follows: “in the case of a vehicle,
includes to have care, custody or control of the vehicle”.

[13]       
ICBC relies on s. 75(c) in relation to its allegation that Yu Jung
Lau made a wilfully false statement with respect to the claim in his statement
to ICBC after the accident.

[14]       
It is not disputed that the identity of the vehicle’s intended principal
operator is a fact required to
be stated in the application for coverage, or that it was a material fact. 
Indeed, the Owner’s Certificate of Insurance issued to the plaintiffs, which
functions as both the application for insurance and evidence of the insurance
obtained, states that by signing the application, the applicant for insurance
certifies that the principal operator as declared in the document is correct. It
is common ground that Yu Jung Lau stated that he was the vehicle’s intended
principal operator when he applied for the insurance set out in the Owner’s
Certificate of Insurance.  It is
also not disputed that in his statement to ICBC after the accident, Yu Jung Lau
stated that when the vehicle was purchased, he was intended to be the driver of
the vehicle the majority of the time.

[15]       
The coverage claimed by
the plaintiffs falls within the perils insured against under the terms of the
policy coverage. Accordingly, the onus is on the insurer to prove that the
coverage is forfeited under the terms of s. 75 of the Act: Bevacqua
v. I.C.B.C. 1999 BCCA 553, at para. 24 [Bevacqua].

[16]       
ICBC’s allegations that
Yu Jung Lau knowingly misrepresented the identity of the principal operator
when he applied for the insurance and that he made a wilfully false statement
with respect to the claim are allegations equivalent to fraud on his part.  In Bevacqua,
the Court stated at para. 48 that proof of an allegation of fraud would
require “something substantially more than a mere tilting of the evidentiary
scale. Clear and cogent proof would have been required.”

[17]       
However, more recently,
in F.H. v. McDougall, 2008 SCC 53
[F.H.], the Supreme Court of Canada clarified the law relating to the burden
of proof in civil cases.  At para. 40, the Court stated that there is only
one civil standard of proof at common law and that is proof on a balance of
probabilities.  The Court added that, of course, context is all important and,
where appropriate, a judge should not be unmindful of inherent probabilities or
improbabilities or the seriousness of the allegations or consequences.  (See
also Booth v. I.C.B.C., 2009 BCSC 1346, at para. 8 [Booth].)

[18]       
It is therefore now clear
that the reference in Bevacqua to “something substantially more than a
mere tilting of the evidentiary scale” is not the law, as the standard of proof
applicable is simply a balance of probabilities.  Less clear is whether the reference
in Bevacqua to the need for “clear and cogent proof” remains valid.  In Lexis
Holdings Int’l Ltd. v. Insurance Corporation of British Columbia, 2009 BCSC
344 [Lexis Holdings], after referring to F.H., the Court
nonetheless made reference at paras. 17 and 38 to the requirement for “clear
and cogent evidence” in cases of this nature. Booth does not repeat the
reference to “clear and cogent proof” found in Bevacqua.  In my view,
the concept of “clear and cogent proof” must now be interpreted as essentially
equivalent to the cautionary remarks in F.H. concerning the importance
of context, and the need to be mindful of inherent probabilities or
improbabilities or the seriousness of the allegations and consequences of the
issue at stake.

[19]       
Suspicious circumstances and speculation are not enough for ICBC to meet
its burden of proof: Swales v. I.C.B.C., 1999 BCCA 767, at para. 6;
and Lexis Holdings, at paras. 27-34.

[20]       
The question of whether there has been a knowing misrepresentation is to
be determined on the basis of the circumstances that existed at the time the
policy of insurance was issued: Booth, at para. 9.

[21]       
For ICBC to succeed in its defence of the plaintiffs’ claim, it must
show that when he made the application for insurance coverage, Yu Jung Lau knew
that he was not going to be the principal operator of the vehicle, and that he
knowingly misrepresented that fact: Lexis Holdings, at paras. 24-26.

[22]       
ICBC served Victa Lau with an adverse party notice under Rule 12-5(21)
of the Supreme Court Civil Rules, B.C. Reg. 168/2009 (the “Civil Rules”),
requiring his attendance at the trial for the purpose of testifying for the
defence.  He failed to attend the trial.  At the commencement of the trial,
ICBC applied for dismissal of the case against both plaintiffs pursuant to Rule
12-5(25), as a remedy for Victa Lau’s refusal to attend the trial in accordance
with the notice.   During the course of the brief submissions on ICBC’s
application, I expressed doubt about whether Yu Jung Lau could be held
responsible for the failure of his son to attend court as required and whether
Yu Jung Lau’s case could be dismissed for failure of Victa Lau to attend.  The
parties were given the option of adjourning the trial rather than proceeding in
the absence of Victa Lau.  I note that if Victa Lau had been served with a
subpoena, the Court would have the option of issuing a warrant for his arrest
under Rule 12-5(38).  No such remedy is expressly provided for in the Civil Rules
for a failure to comply with an adverse party notice.  ICBC and Yu Jung Lau
decided to proceed with the trial in the absence of Victa Lau. In its closing
submissions, ICBC merely sought an adverse inference with respect to the
failure of Victa Lau to comply with the notice or to testify in his own case.

Factual Background

[23]       
Yu Jung Lau was the only witness for the plaintiffs.  He is an autobody
repairman.  He immigrated to Canada from China 31 years ago. He gave evidence
in Cantonese, through an interpreter.  His English language ability is limited.
He is married and has three sons.  Victa Lau is the eldest. Yu Jung Lau’s wife
operates a convenience store in Burnaby. The family residence is above the
convenience store.

[24]       
Yu Jung Lau testified that he saw a newspaper advertisement for the Subaru,
which was being offered for sale at a car dealership in Surrey.  He testified
that he was interested in buying the car, but sent Victa to go look at it. Victa’s
report was positive. He then went to the dealership to look at the car, without
Victa.  He said that he, his wife, and Victa discussed whether he should buy
the car. He could not afford to buy the car.

[25]       
 Yu Jung Lau testified that “the household” already owned four vehicles:
a 2005 Lexus RX330, a 2000 Toyota Corolla, a Volvo 850, and a Ford van.  In his
statement to ICBC, he said that he owned the Lexus and the Toyota. I infer that
he or his wife owned the other two vehicles, as there was no suggestion that
their children or anyone else owned them.  Only two of the four vehicles were
insured at the time the Subaru was purchased: the Lexus and the Toyota.  He
testified that he could not afford to insure all the vehicles.  Yu Jung Lau was
declared as the principal operator of the Lexus and the Toyota for insurance
purposes.  He had also been declared (historically) as the principal operator
of the other two, uninsured vehicles.   However, in cross examination, he
acknowledged that his wife would drive the Toyota most of the time. Victa Lau’s
testimony on examination for discovery, which was read into evidence at trial
by ICBC, was that the Toyota was his mother’s.

[26]       
In practical terms, then, prior to the purchase of the Subaru, Yu Jung
Lau was the principal operator of the 2005 Lexus RX330, and his wife was the
principal operator of the 2000 Toyota Corolla.

[27]       
Yu Jung Lau testified that although he could not afford to buy the
Subaru, his wife and Victa both agreed to “support” the purchase.  Although the
details of the “support” are unclear on the evidence, it is clear that Victa
Lau agreed to make the payments on the loan required to buy the car.

[28]       
Yu Jung Lau and Victa went to the dealership to make the purchase.  Yu Jung
Lau was not sure if he test-drove the vehicle before buying it, but he was
certain that Victa did.  It was purchased October 17, 2009. The purchase
agreement is in the names of both Yu Jung Lau and Victa Lau, as is the
registration.  The purchase agreement refers to a “partial payment” of $3,000
and also a “down payment” of $4,000.  The partial payment and the down payment
on the car and the insurance were paid for from the joint chequing account of
Yu Jung Lau and his wife. Victa agreed to be responsible for the monthly
payments of $657.29, with the first payment being due immediately. Thus, he
would have made three payments before the car was destroyed in the accident on
December 28, 2009.

[29]       
Yu Jung Lau testified that he met with a Cantonese speaking insurance
agent at a restaurant in Burnaby.  He had dealt with the same insurance
brokerage previously.  Victa was present.  He testified that the agent
explained the terms of the insurance clearly.  He did not have any lack of
understanding as to what was meant by “principal operator” when the insurance
was obtained. He testified that he understood that it meant the person who
would be driving the vehicle most of the time.

[30]       
Victa and a friend of his took delivery of the vehicle from the
dealership. Yu Jung Lau testified that he was busy.

[31]       
Yu Jung Lau testified that after the purchase, he was the person who
drove the Subaru the most. He would mainly drive it on weekends and sometimes
after work.  He and Victa worked together at the body shop, and would drive to
work together, mostly in the Lexus, and less frequently in the Subaru. He
testified that Victa was only permitted to drive the Subaru with his express
permission, obtained each time that Victa wanted to take the car. Victa drove
the Subaru on weekends.

[32]       
In his written statement to ICBC given on January 6, 2010, Victa Lau
says the accident occurred in Burnaby on Monday, December 28, 2009, at about 5
p.m., while he was driving a friend home from work in Richmond.  He admitted
that he was the “principal operator of this car as I drive it the majority of
the time.”  He said the same thing to the ICBC adjuster handling the file on
the telephone before they met on January 6, and also said the same thing verbally
at the meeting on January 6.

[33]       
 On the other hand, in his examination for discovery, Victa Lau
testified that he only drove the Subaru to church on Sundays, and on special
occasions, or to run errands for his mother in connection with the store.

[34]       
Yu Jung Lau was vague as to why the vehicle was purchased and registered
jointly with Victa. In his examination in chief, he said that the reason was so
that Victa could drive it, because Victa wanted to learn how to drive a car
with a standard transmission. On cross examination, he acknowledged that he
knew that it was not necessary to register the car in Victa’s name for him to
be able to drive it.

[35]       
Yu Jung Lau testified that the reason that Victa agreed to make the
payments on the car was as a means to assist the family with its overall
finances, as he was working and not otherwise contributing financially.

[36]       
Yu Jung Lau denied that saving insurance premiums had anything to do
with the declaration of himself as the principal operator of the Subaru.  The
insurance policy purchased was for a six month term at a cost of $973.  ICBC’s
evidence was the annual premium would have been higher by approximately $760 if
Victa had been declared the principal operator.  On that basis, the actual
difference for the six month policy purchased was about $380.

Analysis

Misrepresentation of Principal Operator

[37]       
This aspect of the case centers on the state of mind of Yu Jung Lau at
the time he made the application for insurance.  In that context, his
reliability and credibility is key: Lexis Holdings, at para. 37. 
The thrust of his evidence was that he made the decision to buy the car, and
that it was primarily for his use, although other persons in the family,
including of course Victa, would also be allowed to use it.

[38]       
In general, however, the evidence supporting the purchase of the car for
the primary use of Yu Jung Lau makes very little sense, while the evidence
supporting the purchase of the car for the primary use of Victa Lau makes a
great deal of sense.

[39]       
Yu Jung Lau already owned the 2005 Lexus RX330, which he acknowledged he
was the principal operator of, before and after the purchase of the Subaru.  He
had purchased the Lexus only about three months before the Subaru was
purchased.  There was no suggestion in the evidence that he was going to
dispose of the Lexus or that he would not continue to be its principal
operator. The Lexus was the same vintage as the Subaru.  In practical terms,
his wife was the principal operator of the 2000 Toyota Corolla.  Yu Jung Lau
was not so wealthy that he could afford to own and operate multiple vehicles
just for his own use and enjoyment.  He or his wife already owned four
vehicles, two of which they could not afford to insure.  The Subaru was the
fifth vehicle added to the family stable of vehicles.  He could not afford to
buy the Subaru.  The purchase required financing on unfavourable terms. 
Certainly, he did not need the car.  Its purchase for his own primary use could
only be considered a costly and unnecessary extravagance.

[40]       
The 2005 Subaru WRX STI was an expensive, high performance vehicle, with
300 horsepower, a very prominent spoiler on the trunk and a large air intake scoop
on the hood.  This is the kind of car that would certainly appeal to a young
man.

[41]       
 Yu Jung Lau’s testimony concerning his reasons for buying the car is
unconvincing.  He testified that he wanted to buy the car simply because he
liked it.  He says it was very powerful. It handled well.  It had a standard
transmission and it shifted well.  Yet he could not be sure if he test-drove it
before the purchase.  He also had trouble recalling much detail about the car. 
He could not recall the full model name. He was unsure of the number of
cylinders in the engine, or the engine displacement, or whether it was
turbocharged, or the number of speeds of the manual transmission.  He did not
recall that there was a hood scoop on the car.  He did not recall the vivid
blue interior door panels.  Although some of this could be attributed to a poor
memory, it is more consistent with a lack of real interest in the car.

[42]       
Yu Jung Lau’s evidence regarding his reasons for Victa’s co-ownership of
the car also does not make sense.  There was no reason to put the car in Victa’s
name just so that he would be able to drive it some of the time, or so he could
learn to drive a standard transmission vehicle.   Yu Jung Lau also vaguely
referred to an insurance reason for having Victa co-own the vehicle.  This was
not explained or supported by any other evidence, and is also unpersuasive.   On
his examination for discovery, Victa Lau had no explanation as to why he was a
co-owner of the vehicle.

[43]       
Yu Jung Lau’s rationale for Victa making the payments also does not make
sense. Victa could contribute to the family finances or pay room and board
without his father buying an expensive high performance car that the family did
not need.

[44]       
On the other hand, putting the car in Victa’s name, and making him
responsible for the payments, is consistent with an intention that the car be
primarily for his use.  It does not make sense that Victa Lau would make
payments on a car that he only drove to church on Sundays, or on other special
occasions, and only with his father’s express permission.

[45]       
Victa was involved in the purchase of the car. According to Yu Jung Lau,
but not Victa, Victa test-drove the car.  I find that Victa test-drove the
car.  It is unclear whether Yu Jung Lau also test-drove it.  As noted, Yu Jung
Lau said that he was unable to take delivery of the car himself because he was busy.
Usually, a person who is buying an expensive vehicle would make arrangements to
take delivery of the vehicle personally.  Victa took delivery of the car. Victa
Lau was present when the insurance was obtained.  Victa Lau’s Facebook postings
reveal that he demonstrated great pride in the car among his friends.  All of
this is consistent with the car being obtained primarily for his use.

[46]       
The fact that Yu Jung Lau and his wife financed or paid the down
payment, the partial payment and the insurance premium is not inconsistent with
assisting Victa to acquire a car for Victa’s primary use, in all of the
circumstances.

[47]       
At one point in his evidence, Yu Jung Lau referred to all of his three
sons using the car in the future. His second son, Raymond, also had a driver’s license
at the time of the Subaru purchase.  His youngest son was not yet licensed. 
The principal operator declaration would relate to the policy period, not a
future time. But this evidence also does not support Yu Jung Lau being the
intended principal operator.

[48]       
Most significantly, of course, Victa Lau plainly admitted that he was
the principal operator of the vehicle in his written, signed statement to
ICBC.  He failed to attend the trial to deny the truth of his statement, and
indeed refused to attend the trial contrary to his obligations pursuant to the
adverse party notice served upon him by ICBC.

[49]       
Counsel for the plaintiffs argued that Victa may have misunderstood the
meaning of the words used in the statement. In view of Victa Lau’s failure to
attend the trial to give such evidence, that argument rests only on speculation.

[50]       
Surprisingly, given Victa Lau’s statement, counsel for ICBC read into
evidence Victa Lau’s own contradictory evidence on his examination for
discovery, in which he said that, in general, he drove the car rarely, chiefly
to church on Sundays.  Victa Lau did not attend the trial to assist me with any
reasons why I should prefer his examination for discovery testimony to his
statement.  In any event, for several reasons, I am unable to accept his
examination for discovery evidence in preference to his ICBC statement.  The
discovery evidence was given during litigation, by which time Victa Lau was
well aware of the consequences of the issue. This provides an obvious
explanation for the diametric contradiction in his evidence.  The examination
for discovery evidence is inherently improbable; as noted, it is very difficult
to accept that the car was purchased for the primary use of Yu Jung Lau, in all
of the circumstances.  Victa Lau’s evidence that he primarily drove the Subaru
to church on Sundays or on special occasions is not consistent with the only
verified evidence concerning his use of the car, which was at the time of the
accident.   The accident occurred on a Monday afternoon when he was taking a
friend home from work.  I am driven to the conclusion that Victa Lau’s
statement to ICBC is truthful and reliable.

[51]       
Yu Jung Lau’s evidence concerning the insurance discount was
unpersuasive.   He acknowledged that he knew his own discount was between 40-45%.
The application itself shows a 43% claim-rated scale discount.  He admitted
knowing that the discount was based upon his own good driving record.  He
acknowledged that, on the basis of his own knowledge, it would be logical to
assume that a new driver would not be eligible for such a discount.   At the
time the vehicle was insured, Victa was only licensed as a Novice driver.   Yu
Jung Lau clearly had some considerable experience in relation to insuring
vehicles.  Yet he testified that he never thought about whether the premium
would be higher if Victa was declared to be the principal operator.

[52]       
ICBC alleges that Yu Jung Lau misrepresented the true principal operator
of the vehicle in order to save insurance premiums, which it has calculated at
$760 on an annual basis.   Counsel for the plaintiffs argues that the saving
would only have been $380 on the basis of the six month policy obtained, and
that this saving is too modest to provide an incentive to commit fraud.  I find
that Yu Jung Lau was aware that by declaring himself to be the principal
operator, he would save a significant amount of insurance premium, enough to
provide a material incentive to make a false declaration.

[53]       
The plaintiffs argue that Victa could not have been driving the Subaru
very much in the month of December, as he had to look after the convenience
store while his mother was away in China.  The store hours are from 8:30 a.m.
to 9:30 p.m. However, on this basis, he should have been minding the store when
the accident occurred, so it seems clear that he could not have been solely
responsible for minding the store in his mother’s absence.  In any event, even
if Victa had only limited opportunities to drive the car in the month of
December, this does not lead to the conclusion that he was not intended to be
the car’s principal operator when the insurance was obtained, or even that he
was not the principal operator during the month of December, in view of the
fact that Yu Jung Lau had the Lexus and the Toyota to drive.

[54]       
ICBC argues that the absence of Victa’s testimony should result in an
adverse inference.  Victa was obviously a crucial witness.  No excuse was
suggested for his failure to attend, not only in support of his own case, but
also in response to the adverse party notice he received.  I accept that an
adverse inference is called for relating to his failure to testify, in the
sense that I infer that his testimony would likely be adverse to his case. In
Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 3d ed.
(Markham: LexisNexis, 2009), the authors state at 377:

In civil cases, an unfavourable
inference can be drawn when, in the absence of an explanation, a party litigant
does not testify, or fails to provide affidavit evidence on an application, or
fails to call a witness who would have knowledge of the facts and would be
assumed to be willing to assist that party. In the same vein, an adverse
inference may be drawn against a party who does not call a material witness
over whom he or she has exclusive control and does not explain it away. Such
failure amounts to an implied admission that the evidence of the absent witness
would be contrary to the party’s case, or at least would not support it.

[55]       
Victa is a plaintiff litigant as well as a material witness.  ICBC
apparently believed that it would gain from his cross examination at the trial,
and it appears, based on his non-attendance and failure to testify, that Victa
Lau believed the same.

[56]       
Yu Jung Lau and Victa Lau have an identity of interests in the outcome
of the case.  Yu Jung Lau’s testimony at trial was broadly consistent with the
examination for discovery evidence of Victa Lau.  Adverse evidence from Victa
Lau would have been detrimental to the case of Yu Jung Lau.   Yu Jung Lau chose
to proceed with the trial despite the absence of Victa Lau’s testimony.  I
therefore consider it appropriate to draw an adverse inference in relation to
the case of both plaintiffs as a result of the failure of Victa Lau to testify.

[57]       
ICBC read into evidence substantial portions of Victa Lau’s examination
for discovery, including portions detrimental to its case.  However, the fact
that Victa testified at an examination for discovery is not in itself a
sufficient reason to decline to draw an adverse inference: Bronson v.
Hewitt, 2010 BCSC 169, at para. 331.

[58]       
The plaintiffs also did not call evidence from Yu Jung Lau’s wife, who
would have been a material witness.  According to Yu Jung Lau, she was involved
in the family discussion to buy the car. She could also have testified about
the use of the car prior to her departure for China.  She was present at trial
and available to testify.  Plaintiffs’ counsel argued that no adverse inference
should be drawn. He suggested that her evidence would have lengthened the
trial, and would have increased the cost of the trial, particularly given the
need for an interpreter.  He suggested that perhaps she was nervous and
reluctant to testify for that reason.  However, I am not persuaded that there
are reasonable excuses for her failure to testify.  I infer, once again, that the
evidence of Mrs. Lau would have been contrary to the plaintiffs’ case, or
at least would not have supported it.

[59]       
The plaintiffs argue that ICBC has not produced eyewitness testimony to
support its contention that Victa Lau was the principal operator of the
vehicle, unlike the situation in some of the other case authorities that ICBC
relied upon in its submissions.  By its nature, that kind of evidence would not
usually be easy for ICBC to obtain. For their part, the plaintiffs also did not
provide evidence concerning actual use of the vehicle in the roughly two months
in question, other than through the testimony of Yu Jung Lau.   I must decide
the case on the whole of the evidence adduced at trial, while of course being mindful
of the evidence that was in the power of the parties to adduce.  I consider the
lack of eyewitness testimony from third parties to be a neutral factor in the
circumstances of this case.

[60]       
The plaintiffs relied on the decision in Deol v. Insurance Corporation
of British Columbia, 2007 BCSC 1307 [Deol]. In that case, on an
appeal from the Provincial Court, D. Smith J. cited Rai v. ICBC, 2005
BCSC 92 [Rai], for the proposition that the court must determine who has
driven the vehicle the most during the term of the owner’s certificate in order
to determine who the principal operator was at the time of the accident.  I
have had some difficulty finding that proposition in Rai.  D. Smith J. held
in Deol that ICBC had failed to establish who the principal operator of
the vehicle was at the time of the accident.  As the accident occurred on the
second day of the policy term, there was insufficient opportunity for ICBC to
establish that the identity of the principal operator was not the person
declared as such in the insurance application.

[61]       
Relying on Deol, the plaintiffs argue that in this case, a period
of only slightly more than two months had elapsed since the insurance was
obtained, and this was an insufficient amount of time to firmly establish that
Victa Lau was the principal operator, rather than Yu Jung Lau.

[62]       
On the basis of such reasoning, ICBC could never establish a knowing
misrepresentation of the principal operator until well into the policy term.

[63]       
Section 75(a)(ii) of the Act refers to a knowing
misrepresentation of or failure to disclose a fact required to be stated by the
applicant in the application for insurance coverage.  It is well established
that the relevant time to consider whether the insurance was obtained on the
basis of a misrepresentation of fact is the time of the application for
insurance: Rai, at para. 14; Demontigny v. Insurance Corp. of British
Columbia (1989), 16 M.V.R. (2d) 103 at 111.  In that context, evidence as
to who drove the vehicle the most during the term of the insurance could in a
given case be highly material to the issue to be determined, but ICBC is not
required as a matter of law to establish the identity of the principal operator
during the term of the insurance in order to establish a misrepresentation of
the intended principal operator under s. 75(a)(ii).  As I read it, this is
essentially the interpretation of Deol as applied in Lexis Holdings,
at para. 21.

[64]       
In any event, however, I am satisfied that Victa Lau was in fact the
principal operator of the vehicle prior to the accident.  That conclusion is strongly
supported by his admissions to ICBC, in the context of all of the other
evidence in the case.

[65]       
On the evidence, I conclude that the extended definition of “operate”,
which includes “care, custody or control” of the vehicle, is not material in
the circumstances of this case.  No argument was made that it is.  The evidence
was that when not in use, the Subaru was kept in a fenced yard at the
residence.  Obviously, then, it would have been placed there by whoever last
drove it.  According to Yu Jung Lau’s testimony on cross examination, he and
Victa drove to work together in the Lexus most of the time.  The discovery evidence
of Victa is contradictory to this.  He stated that most of the time they drove
to work in the Subaru, with his father driving. On this point I prefer the
evidence of Yu Jung Lau, who testified at trial.  In the result, the scant
evidence that might go to issues of care, custody or control of the vehicle as
distinct from driving the vehicle makes no difference to the result.

[66]       
I conclude that when Yu Jung Lau applied for the insurance coverage, he
knew that he was not the intended principal operator of the vehicle, and that
he knowingly misrepresented that fact by stating that he would be the principal
operator of the vehicle.  Accordingly, the insurance coverage is forfeited
based upon s. 75(a)(ii) of the Act.

Wilfully False Statement With Respect to a Claim

[67]       
Given my conclusion with respect to s. 75(a)(ii), it is not strictly
necessary that I deal with ICBC’s alternative argument that coverage is also
forfeited on the basis of s. 75(c) of the Act because Yu Jung Lau
made a wilfully false statement with respect to the claim.  This aspect of the
defence was clearly secondary.

[68]       
In order to succeed on this aspect of its defence, ICBC must prove that
(1) the insured made a false statement with respect to the claim, (2) the false
statement was made wilfully, and (3) the wilfully false statement was material:
Bolen v. ICBC, 2006 BCSC 1749, at para. 63 [Bolen].

[69]       
ICBC’s pleading with respect to s. 75(c) is deficient, as it refers
only to a “false statement to the defendant”, without particulars.  This does
not comply with Rule 3-7(18) of the Civil Rules.

[70]       
In its final submission, ICBC contended that the wilfully false
statement relied upon was the portion of Yu Jung Lau’s statement concerning the
intended principal operator of the vehicle when the insurance was obtained. 
This does not add to ICBC’s case, as the same facts support its case under
s. 75(a)(ii).

[71]       
Yu Jung Lau was not examined or cross examined at trial concerning his
statement to ICBC.

[72]       
On the evidence, ICBC decided to deny coverage based upon the false
declaration of principal operator, not the statement to ICBC.  It sent a letter
to Victa Lau dated June 1, 2010 referring only to the false declaration of
principal operator.

[73]       
There is no evidence that Yu Jung Lau’s statement to ICBC was material,
in the sense that it was capable of affecting the mind of the insurer in
relation to its management and decision-making regarding the claim: see Bolen,
at para. 78.  On the evidence, the ICBC adjuster handling the claim
intended to have Victa Lau attend to give a statement confirming that Yu Jung
Lau was not the principal operator, which he considered would be sufficient to
deny coverage.  By the time Yu Jung Lau attended, ICBC already had the
statement from Victa Lau upon which it relies.

[74]       
In the circumstances, I conclude that ICBC has not succeeded in proving
forfeiture of the insurance under s. 75(c).

Conclusion

[75]       
The plaintiffs’ case is dismissed.  ICBC is entitled to costs.

“Verhoeven
J.”