CITATION: Suhaag Jewellers Ltd. v. The Alarm Factory Inc., 2015 ONSC 3542
COURT FILE NO.: CV-13-476520
DATE: 20150604
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUHAAG JEWELLERS LTD.
Plaintiff
– and –
THE ALARM FACTORY INC. carrying on business as AFC ADVANCE INTEGRATION
Defendant
Marek Z. Tufman, for the Plaintiff
Jordan M. Black, for the Defendant
HEARD: May 26, 2015
REASONS FOR DECISION
Diamond j.:
Overview
[1] In this proceeding, the plaintiff seeks damages from the defendant arising out of a theft of jewellery which allegedly occurred at the plaintiff’s place of business on or about August 28, 2012. Since April 2004, the defendant had been supplying security and alarm monitoring services to the plaintiff’s jewellery store pursuant to a written agreement.
[2] The original statement of defence denied that any such theft of jewellery took place, and maintained the position that the defendant did not breach any term or obligation under the agreement.
[3] On February 23, 2015, the defendant formally amended its statement of defence to specifically plead and rely upon an exclusion clause contained within the agreement, and took the position that the plaintiff’s claim was barred by virtue of the terms and scope of that clause.
[4] The defendant brings this motion for summary judgment seeking an order dismissing the claim by reason of the operation and application of that exclusion clause.
The Facts
[5] The plaintiff is a company incorporated pursuant to the laws of the Province of Ontario and carries on business as a jewellery store. The principal of the plaintiff is Satish Verma (“Satish”), who immigrated to Ontario from his native country of India.
[6] Satish claims to be “virtually illiterate” in the English language. In his affidavit, Satish stated that he “understands some basic spoken English and can say basic everyday phrases”. He further stated that he has “very little ability in written English, and certainly never read any legal documents in English”.
[7] On cross-examination, Satish confirmed that he obtained a Bachelor’s degree after taking a four year B.A. program at a college in India, where he studied English, political science and economics. During his over twenty years in Canada, Satish has rented two homes and purchased another. He has also entered into a commercial lease arrangement for the premises operated by the plaintiff.
[8] The defendant has carried on business in the security systems industry since 1989. The defendant’s principal is Anil Kapoor (“Anil”). Both Satish and Anil speak Punjabi.
[9] The plaintiff opened its doors for business in or around 2004. Given the nature of the plaintiff’s business, Satish was interested in obtaining security and alarm monitoring services for the premises. After speaking with other Indian jewellers known to Satish, he was referred to Anil as a Punjabi speaking security system provider.
[10] According to Satish, Anil was or must have been aware that “many East Indian jewellers did not purchase insurance due to the associated high cost, and that reliance upon security systems would have been greater in Anil’s East Indian jeweller customer base”.
[11] For his part, Anil stated in his affidavit that while he was aware that many East Indian jewellery store proprietors do not obtain insurance, armed with that knowledge and experience, Anil consistently recommends property insurance to all his customers.
[12] There appears to be no dispute that the conversation between Satish and Anil which led to the execution of the agreement took place in the Punjabi language. Unfortunately, both Satish and Anil differ on their specific recollection of what was discussed with respect to the defendant’s standard form agreement, which was ultimately signed by both Satish and Anil on behalf of their respective companies on April 18, 2004 (the “contract”).
[13] The contract signed by the parties is a pre-printed, one page, double-sided, legal size document. It is a standard form agreement prepared by the defendant. On the front page are several boxes wherein information can be inputted, such as the customer’s contact information, the type of service(s) being purchased by the customer and the payment method for those services. Of the approximately eight boxes contained on the front page, three are highlighted with a yellow background.
[14] The contract’s terms and conditions commence at the bottom of the front page, with the balance of those terms and conditions, and the signatory lines, continuing on the back page of the contract. None of those terms are highlighted with a yellow background. On this motion, the defendant relies upon the provisions of Clause 2, which is located in a box at the very bottom of the front page. Clause 2 states as follows:
- “Liability: The Alarm Factory Inc.’s business is the installation, servicing and monitoring of security systems. As such, The Alarm Factory Inc. endeavours to produce the highest quality security systems available. Both the Customer and The Alarm Factory Inc. recognize that no matter how good the system is or how carefully it is installed and serviced the possibility of failure still exists. In respect to this the Customer and The Alarm Factory Inc. agree that The Alarm Factory Inc. is not an insurer. The annual Customer payment is for rental/monitoring and service only, and must not be construed as an insurance premium. Notwithstanding any statute or rule of law to the contrary. (sic) The Alarm Factory Inc. shall not be liable in any way for any claim, loss, damage or expense, including without limitation claim, loss, damage or expense relating to personal injury of the Customer or any employee, agent or independent contractor of or with the Customer, on whose behalf the Customer hereby contracts as agent, arising, either directly or indirectly, from the provision of products and services. Nor can The Alarm Factory Inc. guarantee that no loss will occur. Further, The Alarm Factory Inc. will not assume responsibility for losses associated with failure of the system or service in any respect even if due to negligent performance (including gross negligence) or fundamental breach of this agreement by The Alarm Factory Inc., its employees or authorized agents.
The Customer agrees to indemnify The Alarm Factory Inc. with respect to any claim, loss, damage or expense, including without limitation any claim by a third party. It is The Alarm Factory Inc.’s recommendation that the Customer obtain a separate insurance policy to cover personal injury, property loss or damage in this regard.”
[15] Originally, Anil gave evidence that he explained all clauses set out in the contract to both Satish and his wife Kiran Verma (“Kiran”), although Kiran subsequently testified that she had never met Anil until after the theft occurred. In any event, Anil’s evidence is that he explained the entire contract to Satish, including the exclusion clause which is the subject matter of this motion. On cross-examination, when asked whether he told Satish that the defendant “would not be liable if it failed to give you what it promised to sell you”, Anil responded in the affirmative. I note that I do not necessarily agree with counsel for the plaintiff’s characterization of the exclusion clause as set out in his question to Anil.
[16] Anil further confirmed on his cross-examination that there were no Punjabi phrases for terms such as “gross negligence”, “negligent performance” or “fundamental breach” as set out in the exclusion clause.
[17] In contrast, Satish stated in his affidavit that the contract was not explained to him at all, and that he completely relied upon Anil when he represented to Satish that the defendant’s agreement was a “standard one” and that it was “okay” to sign it. Satish testified that the exclusion clause was not even discussed during his conversation with Anil.
[18] Counsel for Satish directed me to several other clauses on the back page of the contract, all with a view to supporting Satish’s position that the exclusion clause is not enforceable. In particular, the following clauses were brought to my attention:
All risk of loss or damage to the Security System, however caused, including normal wear and tear and causes outside the control of The Alarm Factory Inc. shall be the responsibility of the Customer and the Customer shall pay to The Alarm Factory Inc. the cost of repair or replacement at The Alarm Factory Inc.’s then prevailing rates for labour and/or material.
Notwithstanding Section 12, The Alarm Factory Inc. warrants the Security System to be free of manufacturing or material defects for a period of one year from the date of installation during which time The Alarm Factory Inc. shall make all repairs, replacements and adjustments to the Security System required by reason of said defects without charge to the Customer.
Notwithstanding Section 12 & 13, if the Customer has contracted herein for Maintenance Services or Extended Warranty, all repairs, replacements and adjustments to the Security System required by reason of normal wear and tear during continuance of the Agreement shall be made by The Alarm Factory Inc. without charge to the Customer. In the event the Customer calls for service under the Warranty and upon inspection by The Alarm Factory Inc. representative, it is found that the inoperability or apparent inoperability of the System is due to any condition other than the defect in material or workmanship including any of the conditions listed below, a charge will be made for the service call of The Alarm Factory Inc. representative at The Alarm Factory Inc.’s then applicable rates for labour and/or material.
Conditions not covered by Warranty:
(a) damage resulting from accidents, acts of God, alterations, misuse, tampering and abuse.
(b) failure of the Customer to properly close or secure a door, window or other point protected by burglar alarm device.
(c) failure of Customer to properly follow operating instructions provided by The Alarm Factory Inc. at time of installation.
(d) trouble in leased telephone lines.
(e) trouble due to interruption of commercial power.
- Any action against The Alarm Factory Inc. in connection with this Agreement must be commenced within one year after the cause of action has arisen, remaining provision shall not be impaired and the Agreement shall be interpreted as far as possible so as to give effect to its stated purposes.
[19] While it is questionable what “Warranty” is being referenced in Clause 15 (the defendant’s warranty of the Security System being free of manufacturing or material defects for a one year period, the maintenance services warranty, the extended warranty or perhaps some other warranty), what appears clear is that “trouble due to interruption of commercial power” is an excluded condition not covered by any warranty. Although this point was not argued before me, I note that at paragraph 7 of the plaintiff’s statement of claim, it is alleged that on the date of the theft the defendant’s Security System “sensed a power interruption, and the defendant deliberately or negligently disregarded this signal.” While it is arguable that the plaintiff’s claim could be precluded by operation of Clause 15(e), that clause has not been explicitly pleaded in the statement of defence nor did it form the basis of the defendant’s argument on this motion.
[20] Finally, between 2004 and 2012 (i.e. between the date that the contract was signed and date the burglary allegedly took place), the plaintiff received and paid for security and monitoring services as outlined in the contract.
Summary Judgment
[21] Rule 20.04(2)(a) of the Rules of Civil Procedure now 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”. As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.
[22] In Hryniak v. Mauldin 2014 SCC 7, the Supreme Court of Canada established a road map in terms of how a motions judge should approach a motion for summary judgment. The Court must first determine whether there is a genuine issue requiring a trial based only upon the evidence filed with the Court and without using the new fact finding powers set out in the 2010 amendments. Summary judgment will thus be available if there is sufficient evidence to justly and fairly adjudicate the dispute, with the motion being an affordable, timely and proportionate procedure.
[23] If the Court finds the presence of a genuine issue requiring a trial, the motions judge must then determine if the need for a trial can be avoided by using the new, enhanced powers under Rules 20.04(2.1) and (2.2).
[24] It is important to remember that the applicable evidentiary principles developed under the previous incarnation of Rule 20.04 continue to apply. The motions judge must still take a “hard look” at the evidence to determine whether it raises a genuine issue requiring a trial, and as a result each party must still put its “best foot forward” and submit cogent and compelling evidence to support or oppose the relief sought. As I stated in Forestall v. Carroll 2015 ONSC 2732, a moving party has both a legal and evidentiary onus to satisfy the Court that there is no genuine issue requiring a trial. It is the moving party’s obligation to present a record that can enable the Court to avail itself of the enhanced powers under Rule 20.04 if the record warrants the exercise of such discretion.
Exclusion Clauses
[25] The defendant takes the position that Clause 2 precludes the plaintiff from bringing this proceeding. The plaintiff does not appear to dispute the validity of the contract itself, but rather the validity and enforceability of Clause 2.
[26] In Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) 2010 SCC 4, [2010] 1 S.C.R. 69, the Supreme Court of Canada set out a three-part analysis to be undertaken by the Court when asked to determine the enforceability of an exclusion clause contained in a valid agreement. In summary, the three-part analysis is as follows:
(a) As a matter of contractual interpretation, does the exclusion clause apply to the circumstances as established by the evidence in the case?
(b) If the exclusion clause applies, was the clause unconscionable at the time the contract was made, as might arise from situations of unequal bargaining power between the parties?
(c) If the exclusion clause is held to be valid and applicable, should the Court nevertheless refuse to enforce the clause because of the existence of an overriding public policy concern?
[27] In Tercon, the appellant successfully sued the Province of British Columbia for, inter alia, breach of contract arising from a request for proposals (“RFP”) for the design and construction of a highway. The following clause was contained within that contract:
“Except as expressly and specifically permitted in these Instruction to Proponents, no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim.”
[28] Unlike a limitation clause, which seeks to reduce or limit a contracting party’s liability to (typically) a nominal amount, the exclusion clause in Tercon sought to preclude a contracting party from initiating any claim whatsoever arising under the contract. In comparing that exclusion clause with Clause 2 under the agreement in this proceeding, while the terms of both clauses are obviously quite different, they appear to share a similar purpose.
[29] Interestingly, in Tercon the Supreme Court was unanimous in establishing the analysis for exclusion clauses, but was divided as to whether the exclusion clause barred the appellant’s claims for compensation against the Province of British Columbia. The majority found that the exclusion clause did not apply to the circumstances established by the evidence in that proceeding. As a result, the majority’s analysis essentially concluded after the first stage of the three part test.
[30] The minority would have upheld the exclusion clause, finding that it not only applied to the circumstances established by the evidence in that proceeding, but the clause was also not unconscionable and its enforcement did not run contrary to public policy.
Does the Exclusion Clause apply?
[31] As stated by Justice Binnie in Tercon, the Court must assess the intention of the parties as expressed in the contract itself. While Satish and Anil disagree as to their respective recollections of the April 2004 meeting, there is no doubt that both parties understood that what was being presented for review and execution was the Defendant’s standard form agreement for alarm installation and monitoring services for the plaintiff’s premises. Having previously executed commercial agreements, including the commercial lease for the plaintiff’s premises, it cannot lie in Satish’s mouth to claim that he failed to understand the nature of the contract.
[32] Satish was not pressured by Anil, nor is there evidence that he was in a rush to sign the contract. The plaintiff received the benefit of the services provided by the defendant under the contract for approximately eight years without incident. As stated by the Court of Appeal for Ontario in Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 1997 CanLII 4452 (ON CA), 34 O.R. (3d) 1:
“Failure to read a contract before signing it is not a legally acceptable basis for refusing to abide by it. A business man executing an agreement on behalf of a company must be presumed to be aware of its terms and to have intended that the company would be bound by that.”
[33] In a commercial setting, it is expected that a party who executes a document will exercise reasonable care before doing so, and that parties who are careless enough to execute a document without reviewing it will do so at their peril. In the circumstances of this case, I do not find any presence of inequality of bargaining power. As stated by Justice Robins in Fraser, “this is an ordinary commercial contract between business people”.
[34] The decision of Justice Firestone in Clarke v. Alaska Canopy Adventures 2014 ONSC 6816 (S.C.J.) is of assistance:
“Therefore, if the contents of the document, in this case the agreement, are contrary to what the ordinary person would expect (for example, unusually onerous), or the circumstances are such that it should be clear that the person signing it did not know the terms (for example, it was clear the person signing it had not read the terms because they were not afforded enough time or proper conditions to do so), and the party seeking to rely on the document will have reason to know that the party signing did not intend to agree to the terms.”
[35] The plaintiff argues that the exclusion clause relieves the defendant of the very responsibility which the contract intended to impose, and as such the exclusion clause is sufficiently and unusually onerous to warrant a finding that it is invalid. I disagree. The text of Clause 2 was not obscured. The terms of Clause 2 are drafted, for the most part, in a straightforward manner, absent of “legal jargon”, and using language which is understandable to a reasonable person. I do not find the language used in Clause 2 to be ambiguous.
[36] The message conveyed by Clause 2 is clear: as the defendant is not an insurer, all customers are urged to obtain proper insurance coverage in the event the Security System fails.
[37] Clause 2 is the first, and arguably only, substantive term or condition listed on the first page of the contract, albeit at the bottom of the page. This is not a situation as in Clarke where Ms. Clarke executed a Participant Agreement immediately prior to participating on a zipline tour in Alaska and unfortunately suffered injuries during that tour. In Clarke, the Participant Agreement contained a release and waiver which were drafted in potentially confusing language, and combined with the Partition Agreement itself.
[38] As previously stated, counsel for the plaintiff took the position that Clause 2 did not make commercial sense when read in conjunction with other clauses on the back page of the contract. Again, I disagree. The defendant provides a warranty of the Security System being free of manufacturing or material defects for a period of up to one year from the date of installation, during which time the defendant would make all repairs (if necessary) at its own cost. There is no evidence of the plaintiff’s Security System experiencing such manufacturing or material defects during the first year of operation in the record filed before this Court.
[39] I therefore find that on the record before this Court, I am satisfied that the plaintiff reasonably understood the terms of Clause 2. I am also satisfied that as the exclusion clause is valid, it also applies to exclude the defendant’s alleged negligence and/or breach of contract as pleaded in the Statement of Claim.
Is the Exclusion Clause unconscionable?
[40] Having found that the exclusion clause applies to the circumstances of this case, I must now determine whether the contents of Clause 2 are unconscionable and therefore unenforceable.
[41] As the jurisprudence has held since the release of the Court of Appeal for Ontario’s decision in Fraser, the difference between unconscionability and unfairness is, essentially, not very large. The Fraser decision involved a limitation clause on facts somewhat similar to the case at bar. The following excerpt from Fraser is noteworthy:
“Having regard to the potential value of property kept on a customer’s premises, and the many ways in which a loss may be incurred, the rationale underlying this type of limitation clause is apparent and makes sound commercial sense. ADT is not an insurer and its monetary 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. Limiting liability in this situation is manifestly reasonable. The clause, in effect, allocates risk in a certain fashion and alerts the customer to the need to make its own insurance arrangements. ADT has no control over the value of its customer’s inventory and can hardly be expected, in exchange for a relatively modest annual fee, to insure a jeweller against negligent acts on the part of its employees up to the value of the entire jewellery stock whatever that value, from time to time, may be.”
[42] While I am cognizant of the fact that the clause at issue in Fraser limited the security company’s liability to a nominal amount (as opposed to the defendant’s exclusion clause which, according to the plaintiff, seeks to shelter the defendant from any liability), in my opinion such a distinction does not result in any substantive difference under the Tercon analysis. I do not believe that Clause 2 relieves the defendant from any and all responsibilities whatsoever. As previously stated, there are still warranties set out on the back page of the contract which are enforceable against the defendant.
[43] Prior to signing the contract on behalf of the plaintiff, Satish was well aware of the need to obtain proper insurance coverage given the nature of the plaintiff’s industry. Satish chose not to obtain such insurance coverage, and sought to explain his decision to this Court by reason of (a) the associated increased costs of doing so, and (b) a purported “custom” among East Indian jewellers not to purchase such proper insurance coverage. Whether there is such a custom or not (and I have insufficient evidence before me to make any such conclusion), the fact remains that Satish made an active decision to retain the defendant’s services, and these services were clearly disclosed as not equating to a substitution for insurance coverage.
[44] For the reasons expressed herein, I find that Clause 2 in not unconscionable and thus enforceable against the plaintiff.
Should the Court nevertheless refuse to enforce the Exclusion Clause for public policy reasons?
[45] There is obviously a very strong public interest supporting the enforcement of contracts, and in particular commercial contracts made between business corporations.
[46] I do not find that the plaintiff has met its burden of demonstrating any abuse of its freedom of contract which could outweigh the aforesaid strong public interest in the contract’s enforcement. There is no conduct akin to criminality or egregious fraud which could disentitle the defendant from relying upon Clause 2.
[47] I therefore grant the defendant’s motion for summary judgment, and the plaintiff’s claim is, accordingly, dismissed.
Costs
[48] I would urge the parties to agree upon the costs of this motion. In the event such an agreement cannot be achieved, I would ask that the parties exchange and file written submissions, limited to four pages including a Costs Outline, in accordance with the following schedule:
(a) The defendant shall serve and file its submissions within 10 business days of the release of these Reasons; and
(b) the plaintiff’s responding costs submissions shall be served and filed within 10 business days thereafter.
Diamond J.
Released: June 4, 2015
CITATION: Suhaag Jewellers Ltd. v. The Alarm Factory Inc., 2015 ONSC 3542
COURT FILE NO.: CV-13-476520
DATE: 20150604
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUHAAG JEWELLERS LTD.
Plaintiff
– and –
THE ALARM FACTORY INC. carrying on business as AFC ADVANCE INTEGRATION
Defendant
REASONS FOR DECISION
Diamond J.
Released: June 4, 2015