COURT FILE NO.: CV-22-00060577-0000 DATE: 20230228
ONTARIO SUPERIOR COURT OF JUSTICE
In the Matter of the Construction Act, R.S.O. 1990, c.C.30, as amended
BETWEEN:
Arcamm Electrical Services Ltd. Plaintiff – and – Avison Young Real Estate Management Services LP Defendant/Moving Party and 4342 Queen St Niagara Holdings Inc. Defendant/Responding Party
Counsel: Michael C. Mazzuca, for Plaintiff/Moving Party (Observing) Frank Costantini, for Defendant/Responding Party, Avison Young James R. Smith, for Defendant/Responding Party, 4342 Queen St Niagara
Heard: February 1 and 10, 2023
L. Sheard J.
REASONS FOR JUDGMENT ON AVISON SUMMARY JUDGMENT MOTION v. QUEEN
Overview
The Parties
1The defendant, Avison Young Real Estate Management Services LP (“Avison”), is a limited partnership and carries on business as a commercial property manager.
2The defendant, 4342 Queen St Niagara Holdings Inc. (“Queen”), is an Ontario corporation and the registered owner of 4342 Queen St., Niagara Falls, ON (the “Property”).
3Pursuant to the Real Estate Management Services Agreement dated December 30, 2020 (the “REMSA”), Queen engaged Avison as property manager of the Property.
4On June 8, 2021, there was a sudden electrical failure of the high-voltage electrical system at the Property that caused a complete power outage. Avison retained the plaintiff, Arcamm Electrical Services Ltd. (“Arcamm”), to restore power to the Property.
5Arcamm was able to restore power to the Property through temporary generators. Arcamm also submitted quotes to replace Queen’s damaged switch gears, and, later, to supply replacement transformers, when it was discovered that the original transformers could not be re-energized.
6Arcamm was not paid for its services. It registered a lien against the Property and commenced this action, seeking payment on its invoices.
7Avison and Queen have defended Arcamm’s action and crossclaimed against each other, each asserting that the other is liable to Arcamm.
The Summary Judgment Motions
8Arcamm and Avison each brought their own motion for summary judgment (“SJM”), returnable on January 12, 2023.
9On its SJM, Arcamm sought judgment on its invoices against both Avison and Queen. Arcamm was successful as against Queen, for reasons set out in my Reasons for Judgment, released February 17, 2023 (the “Arcamm Reasons”) [1].
10On its SJM, Avison sought judgment on its crossclaim against Queen “for indemnification of any judgment and payment of legal costs in relation to” Arcamm’s claim, pursuant to the REMSA.
11Time did not permit both SJMs to be heard on January 12, 2023, and Avison’s SJM was adjourned. The hearing of Avison’s SJM took place on February 1 and 10, 2023.
12These are my Reasons for Judgment on Avison’s SJM.
Preliminary Issues to be Decided
13Before addressing the substantive issues on the SJM, two preliminary issues must be decided:
(i) Should leave to bring this motion be granted under the Construction Act?
(ii) Is summary judgment appropriate?
Issue 1: Should leave be granted to bring this SJM?
14Queen submits that under the Construction Act, R.S.O. 1990, c.C.30 (the “Act”), O. Reg. 301/18, s. 13, Avison must seek leave to bring this SJM.
15For reasons given orally, I granted Avison leave to bring this SJM. I supplement those reasons by repeating and adopting the following from the Arcamm Reasons:
47As noted above, Queen submitted that leave to bring a SJM was required under the Act. Section 13 of O. Reg 301/18 under the Act, reads as follows:
- Interlocutory steps, other than those provided for under the Act, shall not be taken without the consent of the court on proof that the steps are necessary or would expedite the resolution of the issues in dispute.
49In granting leave, I adopted the reasoning of Di Luca J. in Concord Plumbing & Heating Ltd. v. Canadian Tire Real Estate Limited, 2018 ONSC 6361, in which he granted the plaintiff leave to move for summary judgment on unpaid invoices. At para. 13, he adopted the following test for leave, as enunciated by Perell J. in Industrial Refrigerated Systems Inc. v. Quality Meat Packers Ltd., 2015 ONSC 4545, at paras. 72 to 75. Perell J.’s comments at paragraph 73 have particular application to this case:
[73] I shall discuss the caselaw about s. 67(2) momentarily but, speaking practically or pragmatically, unless a motion for leave is brought as a preliminary motion, it is hollow to discuss the leave requirement once the court schedules or approves a timetable for the summary judgment motion. Of course, the court cannot abrogate a statutory leave requirement, but where the moving party does not bring a preliminary motion for leave or the responding party does not move to quash the motion for want of leave having been obtained, the court, having prepared for the motion being argued, should grant leave and hear the motion, which is what I did in the case at bar. After preparing for and hearing the motion on its merits, it would be specious to refuse leave, because refusing leave would just be a pretense for dismissing the motion on its merits. Refusing to grant leave in the circumstances of the case at bar is to close the judicial barn door after the parties’ horses have gone to run their race.
50At para. 75, Perell J. states that “case law tends toward the proposition that the leave requirement is a statutory anomaly and rarely should be refused.” I accept that proposition and find that the SJMs will accomplish the stated objective of the Act: to expedite the resolution of the issues in dispute.
50There was a significant record before the court on the SJMs and ample court time was provided to allow the parties to make full oral argument.
53As with many motions for summary judgment, in this case the “horses” left the barn long ago. Unless and until a procedure is adopted by the court to triage motions for summary judgment while the horses are still in the barn, I agree with the view expressed by Perell J. that “refusing to grant leave would just be a pretense for dismissing the motion on its merits”.
54… Avison’s SJM will dispose of its liability vis-à-vis Arcamm’s claim.
55I also note, as found by the court at para. 22 of Concord, even partial summary judgment is appropriate in a case in which the “discrete legal and factual issues can be readily ascertained and determined so as to avoid the risk of inconsistent findings and duplicative proceedings” and when summary judgment is “a fair, proportionate and just means of resolving the action” (citations omitted). As will be explained, I find that SJMs satisfy those parameters.
Issue 2: Is Summary Judgment Appropriate?
16On this SJM, the court must determine whether Avison’s SJM can be fairly and justly adjudicated on a SJM. Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
17As set out in Hryniak v. Mauldin, 2014 SCC 7 [2], there will be no genuine issue requiring a trial:
…when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.” [3]
18To be appropriate, summary judgment must provide a “fair and just adjudication” that allows the judge to “find the necessary facts and resolve the dispute. [T]he standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.” [4]
19Rule 20.04(2.1) of the Rules of Civil Procedure sets out the powers of the court on a motion for summary judgment:
(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
(1) Weighing the evidence.
(2) Evaluating the credibility of a deponent.
(3) Drawing any reasonable inference from the evidence.
20Hryniak offers a “roadmap” for a summary judgment motion, at para. 66:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interests of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
Disposition: Summary Judgment is appropriate
21Although the hearing of the two SJMs ultimately proceeded separately, the materials had been filed with the understanding that both SJMs would be heard together. Therefore, for the purposes of my decisions on both SJMs, I have treated the materials filed as comprising one record (the “Comprehensive Record”).
22Based on the Comprehensive Record, I find that there is no genuine issue for trial and that Avison’s crossclaim can be decided on this SJM.
23I also find that I can make that determination without using the fact-finding powers available to the court under r. 20.
24I have also considered Queen’s submissions, citing Concord Plumbing & Heating Ltd. v. Canadian Tire Real Estate Limited, (2018) 94 CLR (4th) 178, par. 25, that summary judgment must be denied if the decision will create “a clear risk of inconsistent and contradictory findings”.
25In Concord, the court considered whether partial summary judgment should be granted, given the risk of inconsistent findings on the balance of the action. As explained later in these reasons, I am not persuaded that the decision the court is being asked to make on this SJM will create a clear risk that an inconsistent and contradictory finding would, or could, be made in any related proceedings arising from the events surrounding the power outage. In addition, as Avison’s SJM is not for partial summary judgment, Concord does not clearly apply here.
THE REMSA
26The central issue to be decided on Avison’s SJM is whether under the REMSA, Avison is entitled to be indemnified and held harmless from Arcamm’s claim in this action. Avison places particular reliance on Queen’s obligations found in sections 4.11 and 5.4 of the REMSA. Queen argues that s. 11.1 of the REMSA immunizes it from those obligations, at least until Queen’s crossclaim has been determined.
27Set out below are key sections of the REMSA:
Section 3. Authority
3.2 Specific Authority. Owner hereby grants to Agent the power and authority to manage and operate the property; to purchase supplies therefore, to negotiate contracts therefore; to open bank accounts in the name of the Property; to pay on behalf of owner Property Expenses set forth in the Approved Budget or otherwise allowed pursuant to this Agreement. Agent agrees to secure Owner’s approval for all extraordinary expenses that are not included in the Approved Budget, except (a) as otherwise allowed pursuant to this Agreement, (b) expenditures not over $5000 that are of a routine operational nature, and (c) emergency repairs, if such repairs are necessary, in the opinion of the Agent, to protect the Property from immediate risk of damage or to maintain services Owner is required to provide. (emphasis added)
Section 4. Responsibilities of Agent as Property Manager
4.11 Debts and Liabilities to Third Parties. All debts and liabilities arising in connection with the ownership and operation of the Property are and shall be the obligations of the Owner and, provided such debts and liabilities have been incurred in accordance with the terms of this Agreement, the Agent shall not be responsible or liable for any of such obligations by reason of its management, supervision and operation of the Property for and on behalf of the Owner.
Section 5. Responsibilities of Owner
5.4 Obligations under Contracts. Owner expressly assumes all obligations under any contract which Agent executes on behalf of owner under the terms of this Agreement and shall indemnify and hold agent harmless from all liabilities, costs and expenses arising in connection with such contracts. Agent shall not be liable for any failure of performance by any third-party contractor and shall not be liable to Owner for any defects and any workmanship for services rendered by such third-party contractor.
28Queen identifies the following section from the REMSA as having specific application here.
Section 11. Indemnification
11.1 Indemnification by the Owner. The Owner agrees to indemnify, defend, and hold the Agent, its officers, directors and employees harmless to the fullest extent permitted by law from and against any and all liabilities, losses, interest, damages, costs or expenses (including, without limitation, reasonable attorneys’ fees, whether suit is instituted or not, and if instituted, whether incurred at any trial or appellate level or post judgment) threatened or assessed against, levied upon, or collected from, the Agent, arising out of, from, or in any way related to, the management of the Property, including without limitation any and all liabilities, losses, damages, costs or expenses incurred by the Agent arising out of, from or relating to, any event or occurrence which may have taken place during, prior or subsequent to the term of this Agreement, as well as those arising out of, from or relating to the acts or omissions of Owner. Notwithstanding the foregoing, Owner shall not be required to indemnify the Agent with respect to any liability, loss, damages, cost or expense to the extent suffered as a result of the gross negligence or willful misconduct of the Agent or of the employees of the Agent. Agent shall not be liable for any good faith error of judgment or for any mistake of fact or law, or for anything which it may do or refrain from doing in good faith and in pursuance of its duties and activities hereunder, except in cases of, and to the extent of, the willful misconduct or gross negligence of agent or its employees.
Positions of the Parties
29Avison submits that pursuant to ss. 4.11 and 5.4 of the RESMA, any debt owed to Arcamm is the obligation of Queen and that Avison is entitled to be indemnified and held harmless from all liabilities, costs and expenses arising in connection with any contracts entered into between Avison, as agent for Queen, and Arcamm.
30Queen disagrees with the position taken by Avison.
31Queen says that there was no written or “executed” contract with Arcamm and, consequently, s. 5.4 and its indemnity provisions do not apply.
32Queen also disputes that Avison was acting within the terms of the RESMA when it engaged Arcamm and for that reason also, s. 5.4 does not apply.
33Queen says that ss. 4.11 and 5.4 must be read together with section 11.1 of the REMSA. Under s. 11.1, Queen is required to indemnify, defend and hold Avison harmless from and against all liabilities, losses, interest, damages, etc. related to the management of the Property except with “respect to any liability, loss, damages, costs or expense to the extent suffered as a result of Avison’s “gross negligence or willful misconduct”.
34At paragraph 26. of its crossclaim against Avison, Queen asserts:
Arcamm commenced the within action seeking payment of $989,496.33, which would have otherwise not resulted but for the gross negligence and/or willful misconduct of the Defendant, Avison Young.
35Queen also asserts that Avison’s SJM ought not to be granted because there are other proceedings involving other parties relating to the same transactions, and that to grant summary judgment in this matter would risk inconsistent findings. Set out below is a brief summary of those other proceedings.
Other Proceedings
36In addition to Arcamm’s action, the Comprehensive Record discloses the existence of two other proceedings commenced in relation to the power outage on the Property.
(i) Queen’s claim against Aviva
37One of the “other proceedings” referenced by Queen, is the action Queen brought against Aviva, its own insurer, Aviva Insurance Company of Canada (“Aviva”) for payment of Arcamm’s invoices.
38Aviva initially approved Queen’s proofs of loss and provided Queen with funds from which Queen paid some of Arcamm’s invoices. However, when Aviva later denied coverage to Queen, Queen, in turn, stopped paying Arcamm. That non-payment led to Arcamm registering its lien and bringing this lien/debt action.
39On June 29, 2022, Queen sued Aviva [5] for Aviva’s refusal to pay the proofs of loss submitted by Queen (the “Queen Action”). In the Queen Action, Queen seeks a declaration that Queen is entitled to full payment from Aviva of the repair and replacement costs it incurred (including Arcamm’s unpaid invoices) and/or amounts that may be found due and owing by Queen in respect of the damage to the electrical equipment on the Property that occurred on and after June 8, 2021.
40In the Queen Action, Queen alleges that, as a result of the failure of the original transformers and the disconnection of the electrical supply, its property manager, Avison, engaged Arcamm to assist in the repairs to the electrical distribution system in the Property. Queen says that it incurred costs for the rental of the temporary generators, the provision of fuel to power the generators, and the cost of two replacement transformers required when the existing transformers could not be re-energized. Queen also claims that it incurred costs to Arcamm related to the disassembly of the temporary generators and the restoration of the Property to its pre-existing condition. This work was performed by Arcamm and is the subject of the invoices on which Arcamm sued for payment.
41The Queen Action has not progressed and is only at the preliminary pleadings stage.
(ii) Aviva’s subrogated claim
42The second “other” proceeding is the subrogated claim brought by Aviva on July 29, 2022, which issued a claim in Queen’s name as against Niagara Peninsula Energy Inc., Arcamm, Horizon High Voltage Services Inc., Avison’s four various legal entities and Power Engineering Services Ltd. (the “Aviva Subrogated Action”) [6].
43In the Aviva Subrogated Action, Queen (Aviva) claims $2,500,000, asserting that one or more of the named defendants caused the original power outage at the Property and the damage that was allegedly suffered by the transformers, while they were de-energized.
44Stated broadly, in the Aviva Subrogated Action, the claim against Avison is that it failed to perform its duties under the REMSA in a “professional manner”; failed to protect the Property from “the immediate risk of damage” related to the electrical failure and power outage; failed to retain competent agents in response to the electrical failure “to ensure the timely restoration of electrical services to the Property and…the preservation” of the transformers to prevent them from being exposed to humidity and moisture, resulting in damage to the transformers; and failed to “subcontract and oversee the proper maintenance, inspection and servicing” of the Property’s electrical infrastructure and to “train or supervise their employees, agents, and/or subcontractors”.
45Notably, as currently drafted, the Aviva Subrogated Action does not allege “gross negligence” or “willful misconduct” as against Avison – despite that those allegations are central to Queen’s position on this SJM.
46The heart of the Aviva Subrogated Action against the named defendants is the assertion that one or more of them should have prevented the initial power outage and damage to the switch gear, and that one or more of them should have prevented damage allegedly suffered by the transformers while they were de-energized for several months following the power outage.
47A determination of the issues raised in the Aviva Subrogated Action - namely, what caused the original power outage and the subsequent failure of the transformers and which, if any of the named defendants, was at fault, - will require a full evidentiary record put forth by the parties. As set out in the Arcamm Reasons, I determined that those issues went well beyond the scope of Arcamm’s claim, which was, essentially, a debt collection claim.
48I have little doubt that the Aviva Subrogated Action will require the evidence of experts to determine both liability and damages. A proper record on those many issues is not only not before the court on the SJMs, there is no record yet available, as the pleadings in the Aviva Subrogated Action are, like the Queen Action, still in the preliminary stages.
Evidence and Factual Findings
49The findings of fact set out in the Arcamm Reasons are binding upon the parties and apply to this SJM. Where necessary to understand these reasons, some of those factual findings are repeated here.
50As more fully discussed in the Arcamm Reasons, the Comprehensive Record was comprised of affidavits sworn by principals of Arcamm, Avison and Queen; transcripts from the cross-examinations on the affidavits; answers given to undertakings; thorough and multiple facta, and briefs of authorities. Each party was given the opportunity to put its best foot forward in written materials and in oral submissions.
51The Property is a six-storey, 13,800 square metre, commercial building. It is described by Queen as a federal building that requires power 24 hours per day, seven days per week, with some of its 10 commercial tenants designated as essential service providers during the Covid-19 pandemic.
52In the REMSA, Avison is defined as “Agent” and Queen is defined as “Owner”. Avison was appointed as “the sole and exclusive management and operating agent for the Property” with the “power and authority to manage and operate the Property”.
53Section 4 of the REMSA, as acknowledged by Queen, describes the work that Avison was expected to do as property manager and as agent for Queen.
54The REMSA authorizes Avison to negotiate contracts with third parties if within the “Approved Budget”. With some exceptions, Avison was required to seek Queen’s approval for all extraordinary expenditures. One such exception related to expenditures for emergency repairs, for which Avison did not need to seek Queen’s approval, provided that the expenditures were necessary to protect the Property “from immediate risk of danger or to maintain services Owner is required to provide”.
55It is undisputed that the loss of power to the Property on June 8, 2021, constituted an “emergency” and that electricity was a service that Queen, the Owner, was required to provide to its tenants. It is also undisputed that Avison, as property manager for the Property, communicated with Arcamm; there was no direct communication between Queen and Arcamm.
56While the REMSA did not require Avison to seek Queen’s approval to retain Arcamm, Queen did so. The Comprehensive Record shows that Zoran Cocov, for Queen, reviewed and approved Arcamm’s quotes for the repair of the switch gear, the rental of the temporary generators and the supply of fuel, and the supply and installation of transformers, all of which falls under s. 3.2 of the REMSA.
57Queen acknowledged that, by email of June 10, 2021, Avison informed Queen of the emergency situation and that it had arranged for an electrician to begin repairs and restore power using temporary generators. With respect to that email, on cross-examination, Mr. Cocov (on behalf of Queen), was asked the following questions and answered as follows:
- Q. … So, at this point, you would agree with me, the day after the incident, that you were aware that there was something serious going on at the building, right? A. It is possible. I mean, I may have missed this e-mail, and just, you know...I trusted Avison that they would do whatever it takes to make sure the building is operating in a safe manner.
- Q. Well, in this case, in less than 24 hours, Avison arranged for an electrician to come to the building to begin repairs, to install temporary generators, to ensure that those temporary generators provided sufficient amperage to power the entire building to fully service all of the contents in the building. Would you agree with me that they performed in an exemplary fashion in this case? A. Yes, that a good response. I mean, that is expected. The building is a federal building. It does require power 24 hours a day, seven days a week. So, you know, that is pretty much...that should be their normal duty, to react quickly. That is why they have staff there all the time.
58When asked on what Queen relied for its allegation that Avison was “grossly negligent” in the performance of its duties, Queen’s lawyers (on behalf of their client) responded that Queen relied on the delays in completing the repairs and the failure to ensure that the equipment was properly maintained in the interim. In my view, this is the substance of the Aviva Subrogated Action.
59Mr. Cocov testified that it was Avison’s duty to deal with any emergency and that he was glad “they acted on it quickly” “if there is no power in the building, that is an emergency” (Transcript, at q.157 and q.258). He also testified that Queen accepted Avison’s guidance concerning the repairs required: that Avison was never “turned down on anything especially in an emergency situation, they would be automatic that they were entitled to do whatever they felt was appropriate measures, as per the management agreement [the REMSA]” (Transcript, q. 260).
60Mr. Cocov also agreed that Avison was doing everything it could to get everything restored and repaired (Transcript, q.272). He also acknowledged that because of Covid-19, it took longer to manufacture the replacement electrical equipment, which caused a delay in the completion of the repair work (Transcript, qq.282 – 284).
61Finally, Mr. Cocov agreed that he had signed off on the proofs of loss submitted to Aviva and, when Aviva was honouring those, he joined with Avison to authorize the release of those funds to Arcamm.
62Mr. Cocov’s understanding was that Queen’s insurer, Aviva, stopped paying on the proofs of loss because of delays in completing the repairs and was “blaming Avison for the delays” (Transcript, q.301).
63When asked what Avison had done to cause delay, Mr. Cocov admitted that he had no firsthand knowledge of why it took so long for the replacement equipment to arrive and accepted Avison’s explanation that delays were caused by Aviva’s slow approval of the repairs and by the Covid-19 supply chain issues.
64Mr. Cocov added that it was his understanding that the dispute Aviva has is that the transformers were not properly ventilated or dehumidified while waiting for the arrival of the replacement parts. Again, this allegation is central to the Aviva Subrogated Action.
65Queen’s evidence, through Mr. Cocov, supports the findings made in the Arcamm Reasons that, until Aviva refused payment, Queen took no issue with the services and materials supplied by Arcamm, whose retainer had been arranged through Avison. Cocov authorized payment of Arcamm’s invoices from the Aviva insurance funds and acknowledged that if Aviva had continued to fund payment of Arcamm’s invoices, Arcamm’s claim would have been “moot”.
66Mr. Cocov also admitted that under the RESMA, Avison had the authority to do what needed to be done to restore power to the Property, which was restored within 24 hours of the initial power outage. In cross-examination, he also agreed that no property manager would have the same skill as an electrical engineer, from whom the property manager would need advice. There is no evidence in the Comprehensive Record that, at any material time, Avison had been told by Arcamm, or by any of the engineers on site after the outage (including Aviva’s engineers), or was otherwise aware, that the transformers could be damaged if they sat, de-energized, in a humid environment.
Findings of Fact and Analysis
67Queen submits that, as pleaded at para. 26 of its crossclaim, Arcamm’s claim results from Avison’s gross negligence and/or willful misconduct.
68Avison submits that the evidence does not support Queen’s allegations. On that basis of Queen’s admissions, Avison submits that Arcamm’s claim was not caused by Avison’s alleged gross negligence or willful misconduct, but by the failure of Queen to pay its debt to Arcamm. Moreover, Avison urged Queen to pay Arcamm, warning that Queen would “suffer another lien” if Arcamm was not paid (Avison email to Queen, March 8, 2022). Queen chose not to do so and, as predicted by Avison, Arcamm registered a lien and sued for payment.
69Avison also submits that by their wording, ss. 4.11 and 5.4 of the REMSA - which specifically address the responsibilities of Avison as property manager and of Queen - govern Arcamm’s claim and not the general indemnification language found in s. 11.1 of the REMSA.
70Avison’s submissions are supported by the findings in the Arcamm Reasons: that Arcamm’s contractual relationship was with Queen (at para. 86) and that Avison was not liable to Arcamm either in contract or as an “owner” as defined under the Act (at para. 91).
71In the Arcamm Reasons, I found that Queen, but not Avison, was liable to Arcamm. I also made it clear that I had not made any determination as to who, if anyone, might be liable to Queen for the power outage and/or for the damage that might be found to flow from that event: see, Arcamm Reasons, at para. 34:
[34] A determination of the issues raised in the Aviva Subrogated Action namely, what caused the transformers to fail and who, if anyone, was at fault, will require a full evidentiary record put forth by all the named parties, many of whom are not party to Arcamm’s claim here, which is essentially a debt collection claim. The Aviva Subrogated Action will undoubtedly require the evidence of experts to determine both liability and damages. A record on those many issues is not only not before the court on the SJMs, it is not yet available, as the pleadings in the Aviva Subrogated Action are still in the preliminary stages.
72As per the Arcamm Reasons, the contractual dealings were between Arcamm and Queen; in its dealings with Arcamm, Avison was at all times acting as Queen’s agent and contracting for services and materials for the Property, of which Queen was both the legal, registered owner and the “owner” as defined under the Act.
73Queen argues that s. 5.4 of the REMSA, which sets out Queen’s responsibility to indemnify and hold the Agent [Avison] harmless from all liabilities, costs and expenses arising in connection with “any contract which Agent executes on behalf of Owner made under the terms of this Agreement [the REMSA]” does not apply because there was no signed or “executed” contract with Arcamm. Queen says that its obligation to indemnify or hold Avison harmless only applies in respect of “executed” or written contracts entered into by Avison on behalf of Queen.
74Avison disagrees with Queen and asserts that the REMSA does not define what is meant by “executes” under s. 5.4 and that the ordinary meaning of that word should be applied.
75I agree. I can find no principled basis to impose the narrow definition of “executes” as meaning only a contract in writing, as suggested by Queen, as a condition precedent to the applicability of the provisions s. 5.4.
Ordinary Meaning of “executes”
76The Merriam-Webster Dictionary defines “execute” to include these meanings:
- To carry out fully: put completely into effect (execute a command);
- To do what is provided or required by (execute a decree); or
- To perform what is required to give validity to (execute a deed)
77These definitions are consistent with what is found in other dictionaries. If any one of these three definitions were to be applied to the facts here, I would have no hesitation in finding that Avison “executed” a contract with Arcamm on behalf of Queen. Arcamm submitted written quotes that laid out the services and materials to be provided and the amount to be charged. Avison received approval from Queen to accept Arcamm’s written quotes, following which Arcamm provided the services and materials as quoted. The email exchanges document the contractual terms between Arcamm and Queen; the emails evidence Arcamm’s “offer(s)” and Queen’s “acceptance” of the offer(s).
78In my view, given the documentary, and other evidence of communication between Queen and Arcamm, to require there also to be a signed contract as a prerequisite to the application of s. 5.4 would be an overly strict interpretation of the language found in s. 5.4, which would not reflect current commercial reality or practice, particularly when dealing with an emergency power outage.
79Queen submitted that an ambiguity in the REMSA should be resolved in favour of Queen pursuant to the contra proferentem rule. There is no evidentiary basis before this court to support this submission and I give no effect to that submission.
80I conclude that the findings as set out at s. 107 of the Arcamm Decision are sufficient to establish that Avison “executed’ a contract on behalf of Queen. I repeat and rely upon those findings here.
81Queen also takes the position that s. 11.1 of the REMSA takes precedence over ss. 4.11 and 5.4. Specifically, Queen relies on the portion of s. 11.1 which reads: “Notwithstanding the foregoing, Owner shall not be required to indemnify the Agent with respect to any liability, loss, damages, cost or expense to the extent suffered as a result of the gross negligence or willful misconduct of the Agent or of the employees of the Agent.”
82Avison submits that s. 11.1 of the REMSA applies to different circumstances.
83Avison submits that by its language, s. 11.1 is intended to cover an “event” or “occurrence” – for example, a power outage and damage to equipment. Avison also concedes that s. 11.1 could apply to a claim such as is brought in the Aviva Subrogated Action, but not a claim of the sort advanced by Arcamm. Notwithstanding, Avison specifically reserves any and all rights it has to defend the allegations against it made in the Aviva Subrogated Action.
84On this SJM, Avison has been clear that the relief it seeks in its crossclaim and the SJM relates only to Avison’s assertion that, under the RESMA, Queen is to protect Avison from claims in debts or contracts that are properly the responsibility of Queen, for whom Avison was acting as agent.
Meaning of “indemnify and hold harmless”
85Avison submits that to determine whether an indemnity triggers a duty to defend, the court should look to the true nature of the claim; if proven, do the facts as alleged in the pleadings require that a party be indemnified (the “pleadings rule”).
86As noted in Sellappah v. Ivanhoe Cambridge Inc., 2022 BCSC 1258, at paras. 8 and 12, the so-called “pleadings rule” as stated in Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, at para. 28, applies such that the duty to defend, both in the context of insurance and in a “commercial indemnity scenario”, arises where the facts alleged in the pleadings would require indemnification; a duty to defend arises if there is a “mere possibility” that the claim is covered.
87Queen acknowledges that Arcamm’s action is a debt claim. As per the Arcamm Reasons, Arcamm’s claim is properly characterized as a third-party claim for payment of a debt and pursuant to a contract entered into by Avison on behalf of Queen. Avison submits that Arcamm’s claim falls squarely within the scope of s. 5.4, under which Queen is obligated to hold Avison harmless. Avison submits that to give effect to that obligation, Queen is required to indemnify and hold Avison harmless from Arcamm’s claim, including the costs incurred by Avison to defend Arcamm’s claim.
88It follows from the finding that the contracts with Arcamm were “executed’ by Avison on behalf of Queen, that s. 5.4 clearly applies to Arcamm’s claim. As a result, Queen’s obligation to indemnify and hold Avison harmless “from all liabilities, costs and expenses arising in connection with such contracts” is also triggered.
S. 11.1 of the REMSA
89Queen asserts that the RESMA must be read in a way so as to give effect to all of its terms. On that basis, Queen submits that the allegations in its crossclaim - that Avison was guilty of gross negligence and willful misconduct - require the court to look at and apply the provisions of s.11.1 and to determine Queen’s indemnity obligations, if any, under ss. 4.11 and 5.4, only after Queen’s crossclaim has been determined.
90Queen also submits that Avison has not asked for summary judgment dismissing Queen’s crossclaim, which must yet be determined.
91Avison submits that on this SJM, Queen has failed to establish Avison’s gross negligence or willful misconduct and, in fact, has admitted that in respect of its dealings with Arcamm, Avison did what was expected of it under the RESMA. Therefore, even if s.11.1 were relevant to a determination of Queen’s obligations under ss. 4.11 and 5.4, which Avison disputes, Queen has not succeeded in proving those allegations.
92Avison also submits that Avison’s alleged negligence or gross misconduct are not triable issues in this action. Those last three words are significant. At issue in this action is Arcamm’s claim and not whether Avison (and/or others) may have caused or contributed to losses suffered by Queen, and for which Aviva has brought a subrogated action in Queen’s name (the Aviva Subrogated Action). In other words, whether Arcamm is entitled to judgment and, in turn, whether Avison is entitled to indemnity from that judgment and the associated costs of defending Arcamm’s claim.
93For clarity: in keeping with my findings on Arcamm’s SJM, on this SJM, I also make no determination of liability for any alleged losses suffered by Queen and/or whether Avison’s alleged negligence or willful misconduct is involved in that loss. Those issues are not the subject matter of Arcamm’s claim nor of the SJMs brought by Arcamm and Avison.
Contractual Interpretation
94The ordinary principles of contractual interpretation apply to the interpretation of the REMSA. In Paulin v. Keewatin Patricia District School Board, 2019 ONCA 286, the Court of Appeal provides guidance on how a court is to interpret a commercial contract. At para. 24 the Court stated:
[24] A court is to interpret a commercial contract “as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective”. [Citations omitted.]
95Avison submits that ss. 4.1 and 5.4 of the REMSA apply to Arcamm’s claim. That interpretation is easily reached when the principles in Paulin are applied: to give meaning and effect of the provisions found in ss. 4.11 and 5.4, those sections must apply to contractual obligations and debts owed to third parties.
96Similarly, the language in s. 5.4 is unambiguous and clearly relieves the Agent from any liability for any “failure of performance by any third-party contractor”. Thus, even if Arcamm had failed to perform, for example, by not keeping the transformers de-humified, to give meaning or effect to the clear language found in s. 5.4, no liability rests with Avison for any alleged failings of Arcamm.
97Queen’s view of the REMSA is that ss. 4.11 and 5.4 must be read in conjunction with s. 11.1 such that the clear provisions of s. 5.4 are qualified or limited in the event that Queen alleges gross negligence or willful misconduct.
98I find that the interpretation urged upon the court by Queen, would render the clear language and terms in ss. 4.11 and 5.4 ineffective and meaningless: s. 11.1 could be used by Queen to limit or extinguish its obligation to indemnify Avison, even for “any failure of performance by any third-party contractor” by alleging that Avison was grossly negligent (for example, by choosing a contractor who failed to perform). Those limitations are not only absent from ss. 4.11 but, as mentioned, s. 5.4 specifically relieves Avison from liability even if the contractor Avison hires has failed in its performance of its duties.
99I do not accept Queen’s submissions that its obligations under ss. 4.11 and 5.4 must be read and interpreted in conjunction with s. 11.1.
100Applying the principles set out in Paulin, to give meaning to s. 11.1, requires an interpretation that distinguishes the broadly-defined circumstances described in that section, from the specific circumstances described in ss. 4.11 and 5.4.
101I conclude that the provisions of s. 11.1 have no application to the Arcamm claim and that Queen’s crossclaim cannot succeed.
Conclusions
102Based on the wording of the REMSA, I find that Avison is entitled to be indemnified and held harmless from “all liabilities, costs and expenses” arising in connection with Arcamm’s claim.
103As noted earlier in these reasons, courts have interpreted contracts that state that a party is entitled to be “held harmless” to require that the party not be required to put its hand in its own pocket. I agree with and apply that reasoning here. I find that under ss. 4.11 and 5.4 of the RESMA, Queen is obligated to pay not only any judgment that Arcamm might have been awarded against Avison, but also to ensure that Avison is made whole in respect of Arcamm’s claim such that Avison might not have to reach into its own pocket at all.
104In addition to finding that s. 11.1 does not apply to Arcamm’s claim, I also conclude that on this SJM, Queen has failed to establish that Avison was grossly negligent or engaged in willful misconduct. As a result, Queen’s crossclaim must be dismissed, without prejudice to Queen’s right to pursue similar allegations against Avison in the Aviva Subrogated Action and Avison’s right to defend those allegations.
105For greater certainty, as made clear in the Arcamm Reasons, in these reasons no findings are made as to Avison’s liability for any damages Queen alleges to have suffered respecting damage to the transformers. Those allegations were made in the Aviva Subrogated Action, where they may continue to be pursued and defended.
Order Made
106I dismiss Queen’s crossclaim and grant Avison’s SJM on its crossclaim. Queen is ordered to pay Avison’s past and future legal costs, fees, expenses and/or disbursements associated with its defence of the Arcamm Action.
Costs of the SJM
107As the successful party, Avison is presumptively entitled to its costs from Queen on this SJM.
108I would urge the parties to attempt to reach an agreement on costs. However, if they are unable to do so, then costs submissions shall be made as follows:
- Within 21 days of the date of the release of this decision, Avison shall serve and file its written costs submissions, not to exceed three pages, double-spaced, together with a draft bill of costs, evidence of docketed time, and copies of any relevant offers to settle and file these with the court.
- Within 14 days of service of Avison’s costs submissions, Queen may serve and file its responding submissions, not to exceed three pages, double-spaced, together with its draft bill of costs, evidence of docketed time, and copies of any relevant offers to settle.
- Within 7 days of service of the responding submissions, Avison may deliver reply submissions, not to exceed one page in length.
- If no submissions are received within 35 days of the date of the release of these reasons, the parties shall be deemed to have resolved the issue of the costs and costs will not be determined by the court.
L. Sheard J. Released: February 28, 2023
COURT FILE NO: CV-00060577-0000 DATE: 20230228 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Arcamm Electrical Services Ltd. Plaintiff - and - Avison Young Real Estate Management Services LP Defendant/Moving Party and 4342 Queen St Niagara Holdings Inc. Defendant/Responding Party REASONS FOR JUDGMENT ON AVISON’S MOTION FOR SUMMARY JUDGMENT AGAINST QUEEN, ON AVISON’S CROSSCLAIM L. Sheard J. Released: February 28, 2023
[1] Arcamm v. Avison et al., 2023 ONSC 1151 [2] Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. [3] Ibid, at para. 49. [4] Ibid, at para. 50. [5] Commenced at St. Catharines, CV-22-00060841-0000 [6] Commenced at St. Catharines, CV-22-00060909-0000