COURT OF APPEAL FOR ONTARIO

CITATION: Neely v. MacDonald, 2014 ONCA 874

DATE: 20141208

DOCKET: C58903

Blair, Pepall and Lauwers JJ.A.

BETWEEN

Sandi Neely

Plaintiff

and

Kelly MacDonald, Bond Head Golf Resort Inc., and ClubLink Corporation ULC

Defendants

(Respondents)

and

Canadian Litigation Counsel and Paul McCague

Third Party

(Appellant)

Christopher R. Dunn, for the appellant

Mark Elkin, for the respondents

Heard: November 24, 2014

On appeal from the order of Justice F.L. Myers of the Superior Court of Justice, dated May 12, 2014 with reasons reported at 2014 ONSC 2866.

By The Court:

[1] In 2010, the appellant, Canadian Litigation Counsel (“CLC”), hosted a golf tournament at Bond Head Golf Resort. CLC signed a “Special Function Contract” with ClubLink Corporation ULC, which owned the golf course. CLC paid approximately $28,000 for 180 guests for breakfast, dinner, and golf.

[2] Sandi Neely attended the tournament. She was the passenger in a golf cart driven by the defendant Kelly MacDonald, another guest. Ms. MacDonald lost control of the golf cart while driving down a steep hill, injuring Ms. Neely. Ms. Neely sued Ms. MacDonald for negligence in the operation of the cart.

[3] Ms. Neely also sued Bond Head and ClubLink. There had been past complaints about carts going too fast down the hill where the accident occurred, but ClubLink only remodeled the course to reduce the hill’s grade after Ms. Neely’s injury. She alleged that ClubLink was negligent in failing to remedy the hill’s grade earlier.

[4] The respondents, Bond Head and ClubLink, brought a third party action against CLC for indemnity under the Special Function Contract. The motion judge granted summary judgment to the respondents against CLC, obliging it to indemnify ClubLink for all of the plaintiff’s personal injury claims. CLC appeals from that judgment.

[5] For the reasons set out below, we allow CLC’s appeal.

Analysis

[6] There is a significant distinction between the negligence of a guest in the operation of a golf cart, and the negligence of ClubLink relating to the design and operation of the golf course.

[7] For ClubLink to shift the risk of its own negligence to CLC successfully, the contract must say so in the clearest terms. Fenn v. Peterborough (City) (1979), 1979 CanLII 77 (ON CA), 25 O.R. (2d) 399 (C.A.), aff’d 1981 CanLII 66 (SCC), [1981] 2 S.C.R. 613, was a decision of a five-judge panel of this court which was affirmed by the Supreme Court. This court’s statement at paras. 35 and 36 was adopted by the Supreme Court:

As we have agreed with the trial Judge in his finding that Consumers owed a duty of care, not only to the plaintiffs but also to the Commission, we know of no authority which allows a party to be indemnified for its own negligence in the absence of a contractual right thereto and we were referred to none.

If one is to be protected against and indemnified for one's own negligence there would have to be an indemnity clause spelling out this obligation on the other party in the clearest terms. [Emphasis added]

[8] The basis for ClubLink’s indemnification claim against CLC is the following provision in the Special Function Contract:

CUSTOMER IS LIABLE FOR ALL DAMAGE CAUSED BY CUSTOMER AND/OR THEIR GUEST(S)

The Customer and/or their guest(s) agree to hold ClubLink Corporation and its officers and employees free and harmless from any damage or claims of any nature whatsoever that may arise from or through the use of a golf cart.

It is the Customer’s and/or their guest(s) responsibility to fully understand the safe operating instructions of the golf cart and to return it immediately following the completion of the round of golf in as good condition as it was received.

[9] The motion judge drew a distinction between what he called the “title” of the provision and what he called the provision’s “wording”:

[10] While the title of the clause could be seen to suggest a limitation of liability to damage caused by guests, the wording actually used carries with it claims made against Clublink in tort in connection with the use of a golf cart. (Para. 16.) The motion judge distinguished Fenn, at para. 10, on the basis that “in that case, there was no indemnity agreement at all between the parties.” His point of distinction is not persuasive. In our view, in Fenn this court expressed a general principle of law that remains valid and applicable.

[11] The clause heading that reads “CUSTOMER IS LIABLE FOR ALL DAMAGE CAUSED BY CUSTOMER AND/OR THEIR GUEST(S)” is at once a title and a provision, and has been emphasized within the contract. The headings contained in a contract are part of the language chosen by the parties and can properly be considered in interpreting the provisions that follow, provided the wording of the contract is not inconsistent with such an interpretation: Cathcart Inspection Services Ltd. v. Purolator Courier Ltd. (1981), 1981 CanLII 1628 (ON SC), 34 O.R. (2d) 187 (S.C.), at para. 29, aff’d 1982 CanLII 2056 (ON CA), 39 O.R. (2d) 656 (C.A.); Toronto (City) v. Toronto Railway, 1906 CanLII 5 (SCC), [1907] A.C. 315 (P.C.). Failure to read an agreement in accordance with its headings may lead a court to misconstrue the contractual provisions (Solway v. Lloyd’s Underwriters (2006), 2006 CanLII 17254 (ON CA), 80 O.R. (3d) 401 (C.A.), at para. 44).

[12] Based on the indemnity provision as well as its accompanying heading, we agree with the motion judge that the wording "claims of any nature that may arise from or through the use of a golf cart" is broad enough to oblige CLC to indemnify ClubLink for damages arising from the operation of a cart by a guest, including personal injury. However, we do not agree that this provision clearly extends to ClubLink’s own negligence.

[13] In our view, the motion judge did not give due effect to the principle in Fenn. A similar principle is also reflected in Potvin v. Canadian Museum of Nature, [2003] O.T.C. 449 (S.C.), at paras. 4-6.

[14] He also did not properly consider the provision in its entirety. Read as a whole, the provision is ambiguous and must be construed against the drafter, ClubLink.

[15] In short, we are unable to find that the contract clearly shifted to CLC the risk of ClubLink’s own negligence.

[16] The heading of the indemnity provision makes it clear that it is only “damage caused by the customer and/or their guest” (emphasis added) that is the subject of any indemnity by CLC. It is arguable that the hill was negligently designed and maintained by ClubLink, and that this caused or contributed to the accident. If so, this would lead naturally to an apportionment of liability by the jury between ClubLink and CLC. Perhaps the jury will find, as the motion judge stated, that the “liability claimed in this case arises out of the normal use of a golf cart as driven every day by thousands of golfers at golf courses.” Perhaps it will find that the design of the hill was negligent, which contributed to the accident. Those issues are matters for the jury and cannot be decided on a motion.

[17] We invited counsel to make submissions on the application of Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, 373 D.L.R. (4th) 393, to the standard of appellate review. Counsel for the appellant submitted that the motion judge’s approach reflected a palpable and overriding error. The respondents’ counsel made no submissions.

[18] Although the Supreme Court, at para. 52 of Sattva, stated that appellate deference to first instance deciders on points of contractual interpretation is desirable, the court also noted, at para. 53, that legal errors made in the course of contractual interpretation continue to be properly subject to appellate review. The court listed some examples of legal errors, such as "the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor". In our view, the motion judge’s interpretation of the indemnity provision, and particularly the failure to apply the principle in Fenn, are errors that meet the standard in Sattva and justify appellate intervention.

Disposition

[19] The appeal is allowed with costs to the appellant fixed, as agreed, at $10,000 all-inclusive. As also agreed, the appellant is entitled to costs in the same amount for the motion below.

Released: December 8, 2014 “RAB”

“R.A. Blair J.A.”

“S.E. Pepall J.A.”

“P. Lauwers J.A.”