Court of Appeal for Ontario

Date: 20210628 Docket: C65881

Judges: Doherty, Benotto and Brown JJ.A.

Between: Rinku Deswal and Tajinder Oberoi Plaintiffs (Appellants)

And: ADT LLC c/o/b as ADT Security Services, and ADT Security Services Canada Defendants (Respondents)

Counsel: Mark A. Klaiman, for the appellants Chad M. Leddy, for the respondents

Heard: June 25, 2021 by video conference

On appeal from the judgment of Justice Lucy K. McSweeney of the Superior Court of Justice, dated August 27, 2018.

Reasons for Decision

Overview

[1] In 2013, the appellants, Rinku Deswal and her husband, Tajinder Oberoi, purchased a house already equipped with a security alarm system provided by the respondents, ADT LLC and ADT Security Services Canada (“ADT”). They entered into a six-page Residential Alarm Services Agreement with ADT to activate and upgrade the system. In March 2015 their house was robbed. The appellants filed a proof of loss with their insurer for $139,330.73, consisting of claims for loss of contents and repairs to the house. As well, they commenced this action against ADT seeking damages of $500,000, plus $100,000 for aggravated, exemplary, or punitive damages. In their action, the appellants claim the security system did not operate when thieves broke into their house. ADT moved for summary judgment dismissing the action, which the motion judge granted.

[2] In her reasons, the motion judge noted that the appellants advanced three arguments in opposition to the respondents’ motion for summary judgment:

1. the respondents’ failure to inform the appellants about a cellular backup option amounted to negligence;
2. the respondents’ sales agent was under a duty to draw the appellants’ attention to limitation of liability and entire agreement clauses in the Agreement, which he failed to do; and
3. the limitation of liability clause, which stated that “ADT is not an insurer” and limited any liability to 10% of the annual service charge of $335 or $250, whichever was greater, was unenforceable as it was unconscionable and contrary to public policy.

The motion judge rejected each of the appellants’ submissions and granted summary judgment dismissing their action.

[3] The appellants appeal. At the hearing, we dismissed the appeal, with reasons to follow. These are those reasons.

Issues on Appeal

[4] The appellants submit that the motion judge erred in: (i) holding that the respondents had no duty to advise the appellants of the alarm system’s vulnerabilities and how they could be mitigated; and (ii) concluding that the limitation of liability clause was enforceable.

Duty to Advise

[5] In their first submission, the appellants argue that the motion judge erred in her analysis of the alleged acts of commission and omission by the respondents’ sales agent when he met the appellants at their home. Specifically, they contend the agent committed negligence by: failing to tell them about a cell-backed communication option for their alarm system; assuring them that their house would be monitored 24/7, with no possibility of interruption, when, in fact, an interruption happened at the time of the robbery; and failing to explain how a security system could be circumvented. The appellants contend that these were material details that the respondents were under a duty to disclose to them and the trial judge erred by failing to find such a duty.

[6] The motion judge did not accept this submission because the appellants did not adduce legal authority to support their contention that the respondents had a duty to advise them about other offered services. As well, she found that the appellants’ position was not “consistent with the general obligations between parties that are found in a written contract entered into between them.” The Agreement contained an “entire agreement” clause that stated, in part: “This agreement constitutes the entire agreement between the customer and ADT. In executing this agreement, customer is not relying on any advice or advertisement of ADT.”

[7] In Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 34 O.R. (3d) 1 (C.A.), this court emphasized that, in a commercial setting, in the absence of fraud or other improper conduct that induced a plaintiff to enter the alarm services contract, the plaintiff bore the onus to review the contract and satisfy itself of its advantages and disadvantages before signing it. As this court stated at para. 32, “[t]here is no justification for shifting the plaintiff’s responsibility to act with elementary prudence onto the defendant.”

[8] Although the Agreement in this case arose in a consumer setting, not a commercial one, the appellants are sophisticated individuals: Ms. Deswal is a practicing litigation lawyer who runs her own practice; Mr. Oberoi has a Master’s Degree in Finance and his aviation consulting work involves the drafting of business and leasing contracts. Significantly, Ms. Deswal acknowledged that she signed the Agreement without reading it.

[9] Had the appellants taken the time to read the Agreement, they would have understood from the first page that a cellular back-up service was available. As well, the following clauses pointed out that the operation of the system could be interrupted:

(i) The entire agreement clause just above the signature line stated: “Customer acknowledges that he/she is aware that no alarm system can guarantee prevention of loss, that human error on the part of ADT or the municipal authorities is always possible, and that signals may not be received if the transmission mode is cut, interfered with, or otherwise damaged”;

(ii) On page 5, the Agreement stated, in capital letters: “Customer understands that ADT will not receive alarm signals when the telephone line or other transmission mode is not operating or has been cut, interfered with or is otherwise damaged …” That clause continued: “Customer understands that ADT recommends that customer also use an additional back-up method of communication to connect customer’s alarm system to ADT’s alarm monitoring center regardless of the type of telephone service customer uses.”

[10] The motion judge held that, in the circumstances, it was the appellants’ responsibility to read the agreement and ask about its terms. That was a conclusion open to the motion judge on the record before her.

The Limitation of Liability Clause

[11] The Agreement contained a limitation of liability clause that read, in part, as follows:

Limit of liability - It is understood that ADT is not an insurer, that insurance, if any, shall be obtained by the customer and that the amounts payable to ADT hereunder are based upon the value of the services and the scope of liability as herein set forth and are unrelated to the value of the customer’s property or property of others located in customer’s premises. Customer agrees to look exclusively to customer's insurer to recover for injury or damage in the event of any loss or injury and releases and waives all right of recovery against ADT arising by way of subrogation ... if ADT should be found liable for loss, damage or injury due to a failure of service or equipment in any respect, its liability shall be limited to a sum equal to 10% of the annual service charge or $250 whichever is greater, as the agreed upon damages and not as a penalty, as the exclusive remedy …

[12] We are not persuaded that the motion judge erred in her application of the three-part analysis set out in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, to determine the enforceability of the limitation clause for the following reasons:

(i) The Agreement’s limitation of liability clause applied in the circumstances;

(ii) When the motion judge’s oral reasons are read as a whole, it is clear that she held the clause was not unconscionable. That finding was open to her on the evidence: the contractual limitations on liability were clearly set out in several provisions of the Agreement; they were not hidden or concealed in ways that would make it unfair to treat them as part of the contract; immediately above the signature line the contract contained language that the customer had read the entire agreement, including the limitation of liability clause; there was no pre-existing relationship between the appellants and ADT in which the appellants looked to the company for advice; the appellants are sophisticated and educated individuals; there was no evidence of duress or limits placed on the appellants’ time to review the Agreement at the time of its execution; and Ms. Deswal chose not to read the Agreement presented to her, notwithstanding the provision, in bold capital letters just above her signature line, acknowledging that she had “read both sides of this agreement and understands all terms and conditions of both this and the reverse side of this agreement, in particular, paragraph 1, Limited Warranty, and paragraph 7, Limit of Liability”; and

(iii) The motion judge held that public policy favoured upholding the contract on its terms, relying on decisions of this court in Fraser Jewellers and Suhaag Jewellers Ltd. v. Alarm Factory Inc. (AFC Advance Integration), 2016 ONCA 33, at para. 4, leave to appeal to S.C.C. refused, 36887 (June 23, 2016) the latter a post-Tercon decision. The motion judge adopted the public policy rationale supporting the limitation of liability clauses in alarm system service contracts set out by this court in Fraser Jewellers, at paras. 38 and 39, specifically that the service provider is not an insurer and its monitoring fee bears no relationship to the area of risk and the extent of exposure ordinarily taken into account in the determination of insurance policy premiums. We see no error in her so doing.

[13] Finally, in both written and oral submissions, the appellants argued that the circumstances of their case are analogous to those of the plaintiffs in the decision of this court in Singh v. Trump, 2016 ONCA 747, 408 D.L.R. (4th) 235, leave to appeal refused, [2016] S.C.C.A. No. 548. We see no such analogy.

Disposition

[14] For the reasons set out above, the appeal is dismissed.

[15] In accordance with the parties’ agreement on costs, the appellants shall pay the respondents their costs of the appeal fixed in the amount of $6,000, inclusive of disbursements and applicable taxes.

“Doherty J.A.”

“M.L. Benotto J.A.”

“David Brown J.A.”