Court File and Parties

COURT FILE NO.: CV-16-562073 DATE: 20170720 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DESTARON PROPERTY MANAGEMENT LTD. and 1260 MARLBOROUGH COURT HOLDINGS LIMITED, Plaintiffs AND: ROBERT HINDMARSH, Defendant

COUNSEL: Miranda Serravalle, for the Plaintiffs Robert Dowhan and James Prosser, for the Defendant

BEFORE: Monahan, J.

HEARD: June 23, 2017

Endorsement

[1] Robert Hindmarsh (“Hindmarsh”) was a tenant in a 14-storey residential apartment building owned by 1260 Marlborough Court Holdings Limited (“Marlborough”) and managed by Destaron Property Management Ltd. (“Destaron”) (collectively, the “Plaintiffs”). On October 22, 2014, a fire erupted in Hindmarsh’s apartment unit, causing extensive damage to his unit as well as to other apartments and common areas in the apartment building. On October 12, 2016, the Plaintiffs commenced an action against Hindmarsh, alleging that the fire was caused by his negligence and seeking damages of $300,000 plus costs.

[2] Hindmarsh claims that a letter from Destaron dated October 28, 2014, as part of an agreement to terminate his tenancy which he executed on that date, constitutes a release from liability for the fire. He brings a motion for summary judgment dismissing the Plaintiffs’ action.

[3] For the reasons that follow, I would grant Hindmarsh’s motion and dismiss the Plaintiffs’ action, with costs in favour of Hindmarsh.

Facts

[4] Hindmarsh commenced his tenancy in the Plaintiffs’ building on October 1, 2010. The lease for Hindmarsh’s unit required him to maintain insurance on his personal property and for general public liability in and about the rented premises.

[5] The fire that broke out in Hindmarsh’s apartment on October 22, 2014 was investigated by the Fire Marshall’s office. Although the Fire Marshall could not determine the exact cause of the fire, the Fire Investigation Report found that the fire commenced from gasoline present in the bathtub of Hindmarsh’s unit. [^1]

[6] On October 29, 2014, Hindmarsh returned to the apartment to retrieve his personal items. He was approached by an employee and provided with a letter from Destaron’s Portfolio Accountant, Nora Anderson (the “Destaron Letter”), which stated as follows:

“In light of the fire on October 22, 2014 in your unit, we would like to suggest an alternative to the legal proceedings that we would normally pursue.

Our intent is to file applications with the Landlord and Tenant Board an N5, N6 and N7. The N5 to restore the unit and other units with damage (total costs). The N6 which is for early eviction due to illegal activity (using flammable and combustible materials). The N7 giving ten days’ notice to evict based on endangering others, damaging the unit, and improper use of the unit. You will be personally responsible for court fees and any orders given by the Board.

However, if you wish to enter into an agreement that you will voluntarily terminate your tenancy with us, we will not proceed to evict and no further charges will be applied to your account and damages will be dealt with between the insurance companies. Technically, the contract between yourself and Destaron for this unit is closed as the unit has been destroyed.

I have attached an N11 – Agreement to Terminate a Tenancy for you to review and if in agreement to sign. Please note that you have no last month’s rent deposit so we want to finalize this before October 31, 2014.”

[7] The attached form N11 was a document entitled “Agreement to Terminate a Tenancy”, providing for the termination of Hindmarsh’s tenancy as of October 31, 2014 (the “Termination Agreement”). Hindmarsh executed the Termination Agreement as requested, removed his personal effects from the unit and asserted no further right to continue the tenancy.

[8] Hindmarsh heard nothing further from the Plaintiffs until they commenced the present action against him on October 12, 2016.

Analysis

[9] The sole issue for determination is the legal effect of the Termination Agreement, including the Destaron Letter. Hindmarsh claims that the Destaron Letter constituted a release from liability for the fire in his unit, while the Plaintiffs argue that the Destaron Letter was not a release or, alternatively, that it was a partial release that does not bar the present action.

[10] First, it is evident that the Destaron Letter and the Termination Agreement must be read as a single agreement. The Destaron Letter sets out the terms upon which the Termination Agreement is to be entered into by the parties. It sets out, in writing, important commitments by Destaron in return for the execution of the Termination Agreement by Hindmarsh. It was provided to Hindmarsh together with the Termination Agreement and was intended to be relied upon by the parties. As such the Destaron Letter and the Termination Agreement form an integrated whole and must be read as part of a single agreement.

[11] Hindmarsh relies on the following elements of the Destaron Letter in arguing that it constitutes a release from liability for the fire:

(i) The opening paragraph indicates that Destaron would normally pursue “legal proceedings” in respect of the fire, but that it wanted to present “an alternative to…legal proceedings…”;

(ii) Destaron explains that it currently intends to initiate proceedings before the Landlord and Tenant Board, in which they will be claiming the “total cost” of restoring the units damaged by the fire; [^2]

(iii) Destaron also states that in such proceedings they will be seeking to evict Hindmarsh from his unit “due to illegal activity” and based on Hindmarsh “endangering others, damaging the unit, and improper use of the unit”;

(iv) Hindmarsh is informed that in any such proceeding he will be “personally responsible for court fees and any orders given by the Board”;

(v) The letter then sets out the ‘alternative to legal proceedings’ referenced in the opening paragraph, namely to “enter into an agreement to voluntarily terminate your tenancy with us…” In return for executing such an agreement, Destaron states that “we will not proceed to evict and no further charges will be applied to your account and damages will be dealt with between the insurance companies”; and

(vi) The Termination Agreement is attached and Hindmarsh is informed Destaron wishes “to finalize this before October 31, 2014”.

[12] Counsel for Hindmarsh argues the Destaron Letter is a binding promise not to initiate legal proceedings against Hindmarsh for the damage resulting from the fire, provided he executes the Termination Agreement. This would include not just proceedings before the Landlord and Tenant Board but any other proceedings in which Destaron seeks damages from Hindmarsh. Although there is a general reference to damages being dealt with “between the insurance companies”, there is no indication that Hindmarsh would be involved in any such proceedings. As such, although the document does not use the term “release”, in law this is its legal effect.

[13] Counsel for the Plaintiffs rely on the fact that the document does not use the word ‘release’. They further rely on the reference to “damages will be dealt with between the insurance companies.” They argue that even if the Destaron Letter does operate as a release, it is only in respect of claims for eviction or for rent, and does not bar a subrogated claim by their insurer for damages up to the policy limits in Hindmarsh’s insurance policy.

[14] In my view, apart from the phrase referring to damages being dealt with “between the insurance companies”, the Destaron Letter plainly purports to release Hindmarsh from liability for the fire in his unit. Destaron indicates that its normal procedure would be to commence legal proceedings in which they would seek, inter alia, damages from Hindmarsh for the cost of restoring the units damaged by fire. Destaron proposes the Termination Agreement as an alternative to commencing such legal proceedings. As such, Destaron is promising to forego a claim for damages, in addition to a proceeding to evict Hindmarsh, in return for his execution of the Termination Agreement.

[15] The reference to “damages will be dealt with between the insurance companies” is not inconsistent with this reading of the Destaron Letter, as there is no suggestion that Hindmarsh would be implicated in any such proceedings. Rather, the plain and ordinary meaning of phrase in question is that any remaining issues over damages will be dealt with between the insurance companies without the need for Hindmarsh to become involved.

[16] Destaron argues that even if the Destaron Letter operates as a release from liability, it should be read as a limited release, with Destaron (or its insurer) being permitted to pursue a claim against Hindmarsh up to the policy limits in his insurance policy. Otherwise, they suggest, the reference in the Destaron Letter to damages being dealt with between the insurance companies will not have any legal effect.

[17] There are a number of difficulties with this argument.

[18] First, there is nothing in the Destaron Letter to support this reading of the document. The plain and ordinary meaning of the words used is that, if Hindmarsh executes the Termination Agreement, he will not be involved in any further discussions regarding damages. There is no suggestion that he would remain liable for damages up to the policy limits in his insurance policy.

[19] Second, the Plaintiffs have not acted in accordance with any such reading of the document. They have commenced proceedings in which they claim $300,000 in damages, and specifically plead in paragraph 9 of the Statement of Claim that, under his lease, Hindmarsh is liable for “all damage caused by the Defendant to the Apartment and Property.”

[20] Finally, the fact that the Plaintiffs may have had a subjective intention to preserve a right to pursue a claim against Hindmarsh in order to ultimately recover from his insurer cannot overcome the plain and ordinary meaning of the words used. It is trite law that courts cannot create a new agreement in place of the written agreement that has been entered into between the parties. [^3] Hindmarsh was not told that “damages will be dealt with by the insurance companies who will retain a right to sue you.” Instead, the Plaintiffs promised Hindmarsh that he would not be pursued for damages if he agreed to terminate his tenancy. A vague reference in the Destaron Letter to “insurance companies” was legally irrelevant to the substantive promise that Hindmarsh would face no further personal liability.

Conclusion

[21] In my view, the plain and ordinary meaning of the Termination Agreement, including the Destaron Letter, is to release Hindmarsh from liability for the fire in his unit. The facts are not in dispute, making this a matter suitable for disposition on a motion for summary judgment. Accordingly I grant summary judgment in favour of Hindmarsh dismissing the Plaintiffs’ action against him, with costs on a partial indemnity basis. If the parties cannot settle the quantum of costs, they may make submissions on costs of up to three (3) pages, exclusive of any bills of costs or offers to settle, with 30 days of today’s date.

Monahan, J.

Date: July 20, 2017

[^1]: See Fire Investigation Report, Responding Motion Record, Tab 1(B) at pp. 7-11. [^2]: This is set out paragraph two of the Destaron Letter as well as in “Form N5” referenced in that paragraph. See Supplementary Motion Record, Tab 1(B), pp. 1-2. [^3]: Preston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 at paragraph 57.