ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-437794
DATE: 20150819
BETWEEN:
DCMS GP (DUFFERIN-STEELES) INC., DCMS REALTY (DUFFERIN-STEELES) LTD. PARTNERSHIP and FRAM R.H. MANAGEMENT INC.
Plaintiffs
– and –
CARIBBEAN TOWER CRANES LIMITED, OUTSPAN CONCRETE STRUCTURES LTD., 1263305 ONTARIO INC. operating as MAGNA-TECH NDT SERVICES, RALPH PERRI and DENIS LEE
Defendants
No one appearing for the Plaintiffs
Fatima M. Vieira for the Defendant, Outspan Concrete Structures Ltd.
Vincent G. Burns, for the Defendant, Caribbean Tower Cranes Limited
Peter J. Mitchell, for the Defendant Denis Lee
No one appearing, for the Defendants Ralph Perri and Magna-Tech NDT Services
HEARD: June 25, 2015
M. D. FAIETA, j
reasons for decision
INTRODUCTION
[1] DCMS is the owner and developer of a retirement residence.[^1] DCMS hired Outspan Concrete Structures Ltd. to supply all labour and equipment for the concrete forming of this residence. Outspan agreed to provide, erect and dismantle a construction crane that was required to perform the work as well as to hoist other mechanical and equipment on the construction site.
[2] Under the DCMS agreement, DCMS covenanted to obtain an “All Risks Property Insurance” policy for the project to cover “trade contractors, subcontractors and others having an insurable interest in the work, engaged in or connected with the construction, site preparation and related operations”. DCMS obtained this coverage from the Aviva Insurance Company of Canada.
[3] Outspan hired Caribbean Tower Cranes Limited (“CTC”) to provide a crane and a crane operator for the purposes of performing its agreement with DCMS. CTC hired Magna Tech NDT Services (which is owned by Ralph Perri) to inspect the crane before and after its erection at the construction site. Magna Tech hired Denis Lee, a professional engineer, to review and certify its inspection reports.
[4] On October 23, 2009, the crane fell onto the partially completed residence. The crane caused significant damage that was covered by Aviva who later commenced this subrogated action.
[5] The action by DCMS against Outspan and CTC was discontinued in July 2013.
[6] Outspan and CTC bring this motion for summary judgment in order to be entirely removed from this action. Outspan and CTC ask that this Court dismiss the crossclaim brought by Magna Tech, Perri and Lee.
[7] This motion raises the following issues:
(1) Does the insurance covenant found in the DCMS agreement operate to bar DCMS from seeking compensation from Outspan and CTC for the loss covered by the Aviva insurance policy?
(2) Do the terms of the Aviva insurance policy bar DCMS from seeking compensation against Outspan and CTC for the loss covered by the policy?
(3) Should the crossclaim by Lee against Outspan and CTC for $2 million in damages for breach of independent duties in tort be dismissed?
(4) Should the crossclaim by Magna Tech and Perri against Outspan and CTC for breach of the implied terms of their oral agreement be dismissed?
[8] For the reasons given below, I have granted this motion for summary judgment.
[9] Outspan, CTC and Lee filed a great of deal of material in respect of this motion. Perri filed a Responding Motion Record; however, no one appeared on his behalf or on behalf of his company, Magna Tech, at the hearing of this motion.
ANALYSIS
[10] This motion for summary judgment is brought pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. When considering a motion for summary judgment, the following principles are applicable:
A 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.[^2] This will occur “…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]
In determining whether there is a genuine issue requiring a trial, a court shall consider the evidence submitted by the parties.[^4]
A court “…is entitled to assume that the parties have respectively advanced their best case and that the record contains all the evidence that the parties will present at trial…The onus is on the moving party to show that there is no genuine issue requiring a trial, but the responding party must present its best case or risk losing…".[^5]
A court may exercise any of the following powers for the purpose of determining whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers to be exercised only at a trial.
Weigh the evidence.
Evaluate the credibility of a deponent.
Draw any reasonable inference from the evidence.[^6]
Order that oral evidence be presented by one or more parties for the purposes of exercising the above powers.[^7]
- The use of the above discretionary powers “…will not be against the interest 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.”[^8]
[11] In Sanofi v. Pasteur Ltd. v. UPS SCS, Inc.,[^9] the Ontario Court of Appeal upheld the use of a summary judgment motion in very similar circumstances where the Court was asked to determine the effect of an insurance covenant on claims by a contracting party.
[12] No party objected to this motion proceeding by way of summary judgment.
Issue #1: Does the insurance covenant found in the DCMS agreement operate to bar DCMS from seeking compensation from Outspan and CTC for the loss covered by the Aviva insurance policy?
[13] The crossclaims filed by Lee, Perri and Magna-Tech seek contribution and indemnity against Outspan and CTC pursuant to section 2 of the Negligence Act, R.S.O. 1990, c. N.1, which states:
Recovery as between tortfeasors
- A tortfeasor may recover contribution or indemnity from any other tortfeasor who is, or would if sued have been, liable in respect of the damage to any person suffering damage as a result of a tort by settling with the person suffering such damage, and thereafter commencing or continuing action against such other tortfeasor, in which event the tortfeasor settling the damage shall satisfy the court that the amount of the settlement was reasonable, and in the event that the court finds the amount of the settlement was excessive it may fix the amount at which the claim should have been settled. R.S.O. 1990, c. N.1, s. 2.
[14] However, the DCMS agreement provides the following “insurance covenant” whereby DCMS agree to provide and maintain:
All Risks Property Insurance, subject to the exclusions of the policy, against all risks of physical loss or damage occurring, including but not restricted to: earthquake, flood and will cover all materials, property, structures and equipment purchased for, entering into, or forming part of the work while at the site of the work and during construction, erection and installation. … [Emphasis added.]
[15] The DCMS agreement further provides that the insurance covenant shall benefit trade contractors, subcontractors and others as described below:
The insurance shall cover the Owner on its behalf, the construction manager acting as agent or representative of the owner, all consultants and engineers (except for their professional liability), trade contractors, subcontractors and others having an insurable interest in the work, engaged in or connected with the construction, site preparation and related operations all as related to the project. … [Emphasis added.]
[16] Outspan and CTC submit that because DCMS covenanted to obtain insurance, it thereby assumed all risk of damage caused by the insured perils. As a result, DCMS cannot commence an action to recover any loss that it has suffered from any person who has the benefit of that covenant. The rationale for this approach was described by the Ontario Court of Appeal in Madison Developments Ltd. v. Plan Electric Co., at para. 11, as follows:
This is a sizeable building construction project in which the contractor has agreed with the owner to obtain comprehensive fire insurance covering losses arising from any cause. The anticipation was that a group of subcontractors would contribute their efforts to the overall project and it was undoubtedly expected that if a fire occurred it would most likely be caused by the negligence of one of those subcontractors. Given the contractor’s obligation in favour of the owner to obtain comprehensive fire insurance it makes no business sense for each subcontractor to pay premiums to duplicate that coverage. There would be no purpose for Article VI in the subcontract if it was not to protect the subcontractor from claims of fire damage caused by its negligence.[^11] [Emphasis added]
[17] Outspan submits that it stands in the position of a “trade contractor” under the insurance covenant. In my view, Outspan is clearly a beneficiary of the insurance covenant and entitled to rely upon it as a bar to a claim by the plaintiff for damages as a result of the collapse of the crane.
[18] I accept CTC’s submission that CTC is entitled to enforce the insurance covenant against DCMS as it satisfies the two-part test in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd. In my view: (1) the parties to the DCMS agreement intended to extend its benefit to CTC given that it is a “subcontractor” within the meaning of the insurance covenant; and, (2) the activities performed by CTC were within the scope of the DCMS agreement as it supplied the crane for the project which Outspan was required to provide under the DCMS agreement.
[19] Accordingly, there can be no claim for contribution against Outspan and CTC by the other defendants as they are protected from liability by reason of the agreement between DCMS and Outspan. This principle is well-established.
[20] In Giffels Associates Ltd. v. Eastern Construction Ltd. the Supreme Court of Canada stated:
…I am of the view that it is a precondition of the right to resort to contribution that there be liability to the plaintiff. I am unable to appreciate how a claim for contribution can be made under s. 2(1) [now s. 1 of the Negligence Act] by one person against another in respect of loss resulting to a third person unless each of the former two came under a liability to the third person to answer for his loss. …
[21] Giffels has been applied in numerous contexts.
[22] In 1997 307 (SCC), [1997] 3 S.C.R. 1210, the Supreme Court of Canada found that a contractor had supplied an oil rig to the plaintiff pursuant to a contract with an exclusion of liability. The Court dismissed a claim for contribution against the contractor on the basis that a “…contractor which has protected itself against liability cannot be said to have contributed to any actionable loss suffered by the plaintiff…”
[23] In 2014 ONSC 2695, 119 O.R. (3d) 789, at para. 36, aff’d 2015 ONCA 88, 124 O.R. (3d) 81, the Court stated:
Likewise, since SCS has protected itself against any claim by the Plaintiff or its insurer, it “does not lie in the mouth of the other [Defendants] to claim contribution in such a case”…SCS cannot be exposed through the back door by virtue of contribution and indemnity claims by its co-Defendants when it has protected itself against liability through the front door by means of its contract with the Plaintiff.
[24] The defendant Lee submits that neither Outspan nor CTC negotiated an express limitation of liability with DCMS and therefore the insurance covenant should not be a barrier to a claim for contribution by Lee against Outspan and CTC. In my view, this is an inaccurate submission as it relates to Outspan which did negotiate this contract with DCMS. In any event, Lee draws an immaterial distinction. In my view, a narrow interpretation of the insurance covenant proposed by Lee would result in an inefficient method of risk allocation on a construction project that would unnecessarily increase the cost of a construction project as each contractor, subcontractor and trade would have to obtain liability insurance for the full amount of value of the project, which in this case was $31.7 million, in order to fully protect themselves from liability.
[25] Accordingly, the claim by the defendants Lee, Perri and Magna-Tech for contribution from Outspan and CTC is dismissed. I will turn to briefly address whether such a claim would also be barred by reason of the waiver subrogation clause found in the insurance policy purchased by DCMS.
Issue #2: Do the terms of the Aviva insurance policy bar DCMS from seeking compensation against Outspan and CTC for the loss covered by the policy?
[26] An insurer cannot pursue a subrogated action against its own insured. Outspan and CTC submit that they are protected by the waiver of the subrogation clause found in the policy purchased by DCMS from Aviva because they are unnamed insureds under that policy.
[27] The Aviva policy provides the following waiver of subrogation:
The Insurer hereby waives the transfer of such [subrogation] rights…of any Insured included in this policy against any other Insured, including their employees, except as stipulated in Clause 9.a.
[28] In turn, the Aviva policy identifies the Insured as DCMS. There is nothing in the Aviva policy which defines or extends the meaning of Insured. In particular, there is no express reference in the Aviva policy to an expanded definition of Insured to include subcontractors or anyone else.
[29] In my view, Outspan and CTC, as contractor and subcontractor respectively, are unnamed insureds under the Aviva policy because they had an insurable interest in the construction project. The rationale for this conclusion was explained by the Supreme Court of Canada in Commonwealth Construction Company Limited v. Imperial Oil Limited:
On any construction site, and especially when the building is being erected is a complex chemical plant, there is ever present the possibility of damage by one tradesman to the property of another and to the construction as a whole. Should this possibility become reality, the question of negligence in the absence of complete property coverage would have to be debated in court. By recognizing in all tradesmen an insurable interest based on that very real possibility, which itself has its source in the contractual arrangements opening the doors of the job site to the tradesmen, the courts would apply to the construction field the principle expressed so long ago in the area of bailment. Thus all the parties whose joint efforts have one common goal, e.g., the completion of the construction, would be spared the necessity of fighting between themselves should have accident occur involving the possible responsibility of one of them. [Emphasis added.]
[30] Accordingly, the claim by the defendants Lee, Perri and Magna-Tech for contribution from Outspan and CTC is dismissed on the basis that Aviva has no right of subrogation against Outspan and CTC.
Issue #3: Should the crossclaim by Lee’s against Outspan and CTC for $ 2 million in damages for breach of independent duties in tort be dismissed?
[31] I dismiss Lee’s crossclaim for the following two reasons.
[32] For reasons already given, Lee cannot dress up a claim for contribution from Outspan and CTC as damages for “breach of independent duties in tort” which seems to be another way for describing a claim in negligence. I adopt the statement of Justice Morgan in Marsh v. Century, at para. 24:
Moreover, regardless of its being dressed up as an “independent tort”, there is no logical explanation of how Oxford Management, as a property manager, could have caused damage to Century, as plumbing contractor, other than by way of contribution with respect to injury suffered by the Plaintiffs as tenants. Such an allegation, even if there were evidence to support it, would not support an independent damages claim by Century since Century did not suffer independent damages; rather it could only support a claim for contribution and indemnity with respect to losses suffered by the Plaintiffs. [Emphasis added.]
[33] Further, no evidence was filed on this motion to establish any other claim for damages, such as the claim for loss of reputation.
Issue #4: Should the crossclaim by Magna Tech and Perri against Outspan and CTC for breach of the implied terms of their oral agreement be dismissed?
[34] Magna Tech and Perri crossclaim against Outspan and CTC for $2 million for breach of contract. They allege that Outspan and CTC are liable to it for breaching implied terms in the oral contract related to the inspection of the crane. Magna-Tech and Perri allege that they relied upon Outspan and CTC to advise it of any circumstances that could affect its inspection and to operate the crane in accordance with its operating manual.
[35] Neither Magna-Tech nor Perri appeared at the hearing of this motion for summary judgment. The observations of Justice Morgan in Marsh are equally applicable to this crossclaim.
[36] Leaving aside the claim for contribution, there was no evidence filed on this motion to support their claim for damages.
[37] I dismiss the crossclaim brought by Magna-Tech and Perri.
CONCLUSION
[38] For the reasons given above, this motion for summary judgment is granted.
[39] I encourage the parties to attempt to come to an agreement on costs. If the parties are unable to reach an agreement, then the Outspan and CTC shall provide the Court with their written costs submissions, not to exceed three pages in length, exclusive of an outline of costs, within two weeks of today’s date. Lee shall provide the Court with his responding submissions within four weeks of today’s date.
Mr. Justice M. Faieta
Released: August 19, 2015
COURT FILE NO.: CV-11-437794
DATE: 20150819
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DCMS GP (DUFFERIN-STEELES) INC., DCMS REALTY (DUFFERIN-STEELES) LTD. PARTNERSHIP and FRAM R.H. MANAGEMENT INC.
Plaintiffs
– and –
CARIBBEAN TOWER CRANES LIMITED, OUTSPAN CONCRETE STRUCTURES LTD., 1263305 ONTARIO INC. operating as MAGNA-TECH NDT SERVICES, RALPH PERRI and DENIS LEE
Defendants
REASONS FOR JUDGMENT
Mr. Justice M. D. Faieta
Released: August 19, 2015
[^1]: The plaintiffs are related entities and for purposes of this motion no distinction between them is material or required. I will refer to them collectively as DCMS.
[^2]: Rule 20.04(2)(a).
[^3]: Hryniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49.
[^4]: Rule 20.04(2.1).
[^5]: Lopez v. Dr. M. Douris Dentistry Professional Corp., 2015 ONSC 3675, 23 C.C.E.L. (4th) 71, at para. 9.
[^6]: Rule 20.04(2.1).
[^7]: Rule 20.04(2.2).
[^8]: Hryniak, at para. 66.
[^9]: 2015 ONCA 88, 124 O.R. (3d) 81.
[^11]: Under Article VI of the contract between the contractor and subcontractor, the contractor agreed to obtain comprehensive insurance coverage on the “…buildings, materials, equipment…to be used in or incidental to the fabrication, installation and completion of the work.”