SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-462053-00A1
DATE: 2015-07-16

RE: 111 ST. CLAIR AVENUE WEST INVESTMENTS, Plaintiff

AND;

THE RON BOYKO GROUP INC., ZEREM ELECTRICAL SERVICES LTD., and G4S SECURE SOLUTIONS (CANADA) LTD., Defendants

AND:

MIDTOWN BUILDING GROUP INC., Third Party

BEFORE: K. HOOD J.

COUNSEL:
J. T. MacQuarrie, for the Third Party

Andrew McCoomb, for the Defendant, G4S Secure Solutions (Canada) Inc.

HEARD: June 25, 2015

ENDORSEMENT

[1] Midtown moves to have the third party claim against it in this action dismissed pursuant to Rule 20. The respondent on the motion is one of the defendants in the action, G4S. Both parties agree that the evidence before me is sufficient for a summary judgment motion and that summary judgment is appropriate in the circumstances.

[2] The plaintiff owns a property in Toronto which it is converting to residential condominiums. The third party Midtown is a related company to the plaintiff and was incorporated to “develop” the property. No evidence was provided as to whether there was a contract between Midtown and the plaintiff or how Midtown was “developing” the property.

[3] Midtown signed a contract with G4S for the latter to provide security services for the property during the construction.

[4] The property was damaged by flooding during the course of construction.

[5] The damage was covered by a Builder’s Risk Insurance Policy with the plaintiff as the named insured. The insurer paid the loss and commenced this action against G4S and others as a subrogated claim. In this action the plaintiff alleges that this loss was partially due to the negligence of G4S. It claims that G4S failed to properly monitor the property when the sprinkler alarm went off. The G4S personnel ignored the alarm rather than investigating the cause. The plaintiff also claims that G4S breached its contract, and negligently misrepresented its abilities during the formation of the contract.

[6] G4S named Midtown as a third party. It relied on its contract with Midtown and certain wording contained therein, specifically the indemnity provisions in paragraphs 3.10 and 5.1.

[7] Midtown makes two arguments for the dismissal of the third-party claim:

i) that the anti-subrogation rule prevents this claim, and

ii) that the contractual provisions at 3.10 and 5.1 do not allow G4S to seek indemnity against Midtown.

[8] True anti-subrogation does not apply in this case. This is not a situation such as Lacombe v. Don Philips Heating Ltd., 2005 33036 (ON SC), [2005] O.J. No. 3936 (Sup. Ct.), where all of the potentially liable parties were insured by the same insurer.

[9] Midtown’s real argument is a slight variation on the anti-subrogation rule. Midtown argues that because it has a Builder’s Risk policy, an action between two insureds under the policy (here, the plaintiff and Midtown) would be the same as a party suing itself. A Builder’s Risk policy is designed to prevent various contractors, who have the common goal of completing the construction of a project, from fighting among themselves should an accident occur and one contractor be held responsible. (See Commonwealth Construction v. Imperial Oil [1987] 1 S.C.R. 317 at para 16.)

[10] If anything, I would have thought that this would have prevented the plaintiff from suing G4S, as arguably it too was part of the common goal of completing the construction of the project.

[11] However, I fail to see how a Builder’s Risk policy prevents G4S from suing whomever it wants. G4S is not an insured under the policy. The plaintiff is not suing Midtown. Midtown is a third party to a claim brought by the plaintiff.

[12] Midtown then argues that G4S, in trying to circumvent the anti-subrogation rule, is caught by Dominion Chain v. Eastern Construction 1978 39 (SCC), [1978] 2 S.C.R. 1346. I find that this case does not apply. The statement in Dominion Chain relied upon by Midtown at paragraph 12 – “it is a precondition of the right to resort to contribution that there be liability to the plaintiff” – must be considered in the context of the facts of Dominion Chain, which are set out in the remainder of paragraph 12 (that Eastern’s guarantee had expired). The Court added the following at paragraph 14:

“it is open to any contractor …to protect itself from liability under its contract by a term thereof, and it does not then lie in the mouth of the other to claim contribution in such a case …. In either case there is a contractual shield which forecloses the plaintiff against the protected contractor, and the other contractor cannot assert a right to go behind it to compel the former to share the burden of compensating the plaintiff for its loss.”

[13] Further, the reasoning of Master McLeod in Chinook Group v. Foamex International (2004), 2004 33017 (ON SC), 72 O.R. (3d) 381 (Sup. Ct.) applies. There at paragraph 9 he held that the case of Dominion Chain did not apply where there is a contractual indemnity:

If the defendant has a claim against a third party that is not based on the allegation that the proposed third party caused the plaintiff’s damages but had an independent duty to the defendant, either in contract or in tort, the rationale in Giffels or in Canada Colors would not apply.

[14] This leaves the contractual provisions, and whether they allow G4S to seek indemnity from Midtown. I find that they do not.

[15] It must be remembered what G4S was contracting to do. It had provided security services to Imperial Oil, the previous owner of the property. It was for this reason that Midtown continued with G4S. While contracting with Midtown, G4S was providing security services to the “Premises” at 111 St. Clair Avenue West. The customer was irrelevant, other than being the one responsible for payment of G4S’s invoices. The security officers were assigned solely to the Premises.

[16] Paragraph 5.1 I find to be inapplicable in support of G4S’s third party claim. G4S knew what premises it was providing security services for – 111 St. Clair Avenue West. This clause is there to protect G4S if a claim is made against it with respect to another location, or to other property not within the Premises, or to property owned by someone else. It was not providing services to any other property, but only to this building. Nor was there any damage to other property, belonging to a tenant or a contractor, in which case this clause might apply. This was a building under construction. The relationship as between the plaintiff and Midtown I find to be irrelevant. G4S’s concern was the building, not who ultimately owned it.

[17] G4S argues it is entitled to shift any liability to the plaintiff, arising out of its alleged negligence, breach of contract and negligent misrepresentation, onto Midtown because of paragraph 3.10.

[18] I doubt that this clause even applies to the situation herein. My view is that this clause applies to a situation where G4S is sued for something outside the “scope” of G4S’s liability, which arises from the provision of its security services. In other words, if the claim by the “third party” does not relate to G4S’s security services, then arguably G4S is entitled to be indemnified. I also question whether “third party” applies to the plaintiff herein.

[19] However, what was argued before me by the parties was not how this paragraph should be interpreted, but whether paragraph 3.10 allowed G4S to seek indemnity from Midtown for its own negligence. I find that it does not.

[20] As stated in Fenn v. Peterborough (City) (1979), 1979 77 (ON CA), 25 O.R. (2d) 399 (C.A.) at paragraph 36: “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.” This was followed in Neely v. MacDonald, 2014 ONCA 874.

[21] Paragraph 3.10 does not spell out the obligation claimed by G4S. Nor does the reference to Limits of Liability and “tort” in paragraph 3.7 assist. It is too much of a stretch to argue that the limit on a tort claim against G4S in one paragraph should somehow absolve it of its own negligence in another. This is far from being “in the clearest of terms.”

[22] G4S relies upon the case of Coulter v. Canadian National Railway Co. [2007] O.J. No. 4277 (C.A.) for its argument that clause 3.10 covers its own negligence. In that case the MNR had agreed to indemnify CN for all loss arising at a level crossing. There was an accident and CN was found to be 35% liable. The trial judge found that MNR was contractually bound to indemnify CN for the railway’s negligence. This finding was upheld on appeal.

[23] The Coulter case is quite different from the one before me. Not only did the indemnity clause being relied on in Coulter clearly spell out MNR’s obligation to indemnify for CN’s own negligence; the clause also made sense because CN, without the indemnity clause, would have closed the level crossing. The MNR wanted the crossing left open for its own reasons so it was prepared to provide the indemnity.

[24] Dismissing the third-party claim does not prevent G4S from continuing with any defences arising under the contract which it may consider appropriate.

[25] It had been agreed by the parties that I could make an order setting aside the noting in default against Midtown and granting leave to Midtown to serve and file its third party defence and crossclaim. In light of my order dismissing the third party claim this is no longer necessary.

[26] As to costs: while Midtown provided a Bill of Costs and G4S a costs outline, no actual submissions were made to me. The time spent on the motion is almost identical as between the two sides. The amount being sought by Midtown for the motion itself, being less than what is sought by G4S, must clearly be within G4S’s contemplation. I would hope that the parties can reach an agreement on the costs. If not they may make brief submissions of no more than three pages, with Midtown providing their submissions within 20 days of the release of these reasons and G4S within 20 days thereafter.

K. HOOD J.

Date: July 16, 2015