Court File and Parties
COURT FILE NO.: 51145/09 DATE: 2018/09/21 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Kristen Cass Rosemary Book, counsel for the Plaintiff Plaintiff
- and -
1410088 Ontario Inc., c.o.b. as My Cottage BBQ & Brew and Port Dalhousie Vitalization Corporation Eli Lipetz, counsel for the Defendants Defendants
HEARD: July 18, 2018
JUDGMENT ON MOTION
The Honourable Mr. Justice A. C. R. Whitten
I. Introduction
[1] On September 2, 2007, the plaintiff (Cass) accompanied her brother and his friend to a public tavern operated by the numbered corporate defendant, known as "My Cottage BBQ & Brew" (My Cottage). My Cottage was the tenant of the defendant Port Dalhousie Vitalization Corporation (PDVC) which owned and partially occupied the building in which the tavern was located.
[2] Sometime after 11:00 p.m. Cass slipped on liquid which had accumulated on the floor in the bar area of My Cottage. Unfortunately, her consequential fall resulted in significant injury to her ankle, requiring an open reduction and internal fixation. At the time of this fall Cass apparently had only two beer.
[3] The building located at 16 Lock Street in Port Dalhousie was a heritage building. It comprised of three stories, a basement area and patio. My Cottage occupied the ground floor. Access to the ground floor and the floors above was by means of a main door which opened into a vestibule. Two doors on the left and right led to the tavern and a centre locked door allowed access to the second floor, where the PDVC maintained an office and My Cottage had an office simply for its staff. The third floor contained residential units who would have to access that floor by yet another stairwell between the second and third floors.
[4] According to the lease which shall be discussed, My Cottage was to purchase third party liability insurance for itself and PDVC, and pay for similar insurance on behalf of PDVC. My Cottage at the time, placed its own insurance with Leeds Insurance Company (Leeds), an offshore insurance company based in Barbados. Leeds was not licenced to do business in Ontario and is now insolvent. PDVC purchased a general liability policy with Optimum Insurance Company.
[5] My Cottage failed to defend the plaintiff's claim and has been noted in default.
II. The Issues
[6] Both plaintiff and surviving defendant, PDVC have moved for summary judgment pursuant to Rule 20.04(2)(a) of the Rules of Civil Procedure.
[7] The plaintiff is essentially moving for a series of declarations that would effectively reduce any trial to a matter of the damages being proven. In particular, Cass seeks declarations that:
a) My Cottage was insured under the PDVC Optimum policy;
b) that PDVC was holding the policy in trust for Cass;
c) that PDVC and My Cottage were both 'occupiers' within the definition contained in the Occupier's Liability Act;
d) that Cass is the third party beneficiary of the insurance contemplated by Section 8 of the lease;
e) that PDVC failed to perform certain enumerated tasks with respect to the tavern premises; and
f) that PDVC failed its duty to Cass to monitor the insurance obligations under the lease that My Cottage was subject to.
[8] PDVC has asserted that there is no triable issue for trial.
[9] The essential issues to be determined within the context of Rule 20.04(2) are:
(a) is the landlord, PDVC liable as an "occupier" within the meaning of the Occupier's Liability Act, and if so was it negligent in the discharge of its duties?
(b) is the plaintiff a third party beneficiary to the lease agreement and its insurance provisions between the defendants and consequently able to receive indemnification from PDVC?
(c) is the defendant negligent for failing to ensure the fulfillment of the tenant's insurance obligations, and is that alleged negligence causally connected to the injuries of Cass.
III. Background
The Lease Agreement
[10] In the prevailing lease agreement set out in Schedule A the "leased premises" is described in the following fashion:
The premises means the lands and premises known municipally as 16 Lock Street, St. Catharines, Ontario and compromising ONLY the following: (underline mine)
(i) The whole of the main floor;
(ii) Two offices on the second floor;
(iii) The whole of the basement including washrooms, storage rooms, furnace room and banquet room;
(iv) The third terrace level including the hut;
(v) Second terrace level, including the stage; and
(vi) First terrace level, including the area currently used as a volleyball court.
[11] For greater clarity, the premises do not include the residential portion located at the same municipal address, however the premise does include all of the patio areas.
The relevant portions of the Lease Agreement include, but are not limited to, the following:
2. RENT
(4) The Tenant further covenants to pay all other sums required by this Lease to be paid by him and agrees that all amounts payable by the Tenant to the Landlord or to any other party pursuant to the provisions of this Lease shall be deemed to be additional rent ("Additional Rent') whether or not specifically designated as such in this lease.
(5) The Landlord and the Tenant agree that it is their mutual intention that this Lease shall be a completely carefree net lease for the Landlord and that the Landlord shall not, during the Term of this Lease, be required to make any payments in respect of the premises other than charges of a kind personal to the Landlord (such as income and estate taxes and mortgage payments and the Landlord agrees that the Tenant is not responsible for any expenses, rents or fees respecting the area used for residential purpose located at the same municipal address):
(a) and to effect the said intention of the parties the Tenant promises to pay the following expenses related to the Premises as Additional Rent; '
(1) utilities (including but not limited to gas, electricity, water, heat, air-conditioning);
(2) maintenance;
(3) insurance premiums;
(4) any tax or duty imposed upon, or collectable by the Landlord which is measured by or based in whole or in part directly upon the Rent including...; and
(5) real property taxes, rates, duties and assessments ...
(b) and if any of the foregoing charges are invoiced directly to the Tenant, the Tenant shall pay same as and when they become due and produce proof of payment to the Landlord immediately if requested to do so, but the Tenant may contest or appeal any such charges at the Tenant's own expense;
(c) and the Tenant hereby agrees to indemnify and protect the Landlord from any liability accruing to the Landlord in respect of the expenses payable by the Tenant as provided herein;
(d) and if the Tenant fails to make any of the payments required by this Lease then the Landlord may make such payments and charge to the Tenant as Additional Rent the amounts paid by the Landlord, and if such charges are not paid by the Tenant on demand the Landlord shall be entitled to the same remedies and may take the same steps for recovery of the unpaid charges as in the event of Rent in arrears;
(e) and if the Tenant enjoys the use of any common areas and facilities not included in the Premises, the Tenant shall pay his proportionate share of the foregoing expenses relating to such common areas and facilities.
(6) Prior to the commencement of each lease year, the Landlord shall notify the Tenant of its reasonable and bona fide estimate of Additional Rent for that lease year...
3. TERM, POSSESSION AND RENEWAL
(2) Subject to the Landlord's rights under this Lease, and as long as the Lease is in good standing the Landlord covenants that the Tenant shall have quiet enjoyment of the Premises during the ;Term of this Lease without any interruption or disturbance from the Landlord or any other person or persons lawfully claiming through the Landlord...
5. USE
(1) During the term of this Lease, the Premises shall be used for the purpose of carrying on a business of Bar, Tavern, Restaurant and Banquet Hall...
6. REPAIR AND MAINTENANCE
(1) The Tenant covenants that during the term of this Lease and any renewal thereof the Tenant shall keep in good condition the Premises.
(2) The Tenant shall permit the Landlord or a person authorized by the Landlord to enter the Premises to examine the condition thereof and view the state of repair provided that the Tenant is· given 24 hours' notice of such examination...
(3) The Tenant shall permit the Landlord or a person authorized by the Landlord to enter the Premises to access the utilities for the remainder of the building located in the basement of the premises provided that the Tenant is given 24 hours' notice that such access is requested, or on no notice if access is immediately necessary in an emergency situation.
7. ALTERATIONS AND ADDITIONS
(1) If the Tenant during the Term of this Lease or any renewal of it, desires to make any work requiring a building permit or exterior work, the Tenant may do so at his own expense, at any time and from time to time, if the following conditions are met:
(a) before undertaking any alteration or addition, the Tenant shall submit to the Landlord a plan showing the proposed alterations or additions ...
(b) any and all alterations or additions to the Premises made by the Tenant must comply with all applicable building code standards and by-laws of the municipality ...
(c) notwithstanding anything in this Agreement, it is agreed to and acknowledged by the Landlord that the Tenant will be erecting necessary furnishings and partitions on the patios as the Tenant deems fit.
(2) The Tenant shall be responsible for and pay the cost of any alterations, additions, installations or improvements that any .governing authority... may require...to the Premises.
8. INSURANCE
(1) During the Term of this Lease and any renewal thereof the Landlord shall maintain with respect to the Premises, insurance coverage insuring against:
(b) liability for bodily injury or death or property damage sustained by third parties up to such limits as the Landlord in his sole discretion deems advisable.
(2) The Tenant covenants to keep the Landlord indemnified, against all claims and demands whatsoever by any person, whether in respect of damage to person or property, arising out of or occasioned by the maintenance, use or occupancy of the Premises or the subletting or assignment of same or any part thereof.
(5) The Tenant shall carry public liability and property damage insurance in which policy the Landlord shall be an additional insured and the policy shall include a cross-liability endorsement.
IV. Additional Facts
[12] The plaintiff was examined in discovery April 9, 2018. Ms. Cass stated that she may have grabbed a drink, went out to the back deck, was dancing by the back door and being informed by her brother that they were leaving, started walking. It was within the tavern and between the dance floor and the main entrance where she fell. She was not aware of any defect in the flooring where she fell. Furthermore, she had no knowledge of PDVC having any responsibility for the activities enumerated in paragraph 10 of the plaintiff's statement of claim ie: failing to clean, mop, otherwise remove liquid substances on the floor, failing to warn patrons of such a hazard, failure to provide adequate lighting etc.
[13] Dan Rosetta, a representative of PDVC deposed that PDVC was not required to perform or be responsible for any of the activities enumerated in paragraph 10 of the plaintiff's statement of claim. He did not resile from that assertion in his cross-examination upon affidavit, conducted April 11, 2018. Notwithstanding that the assertions of counsel for the plaintiff there is no positive evidence that PDVC had any obligation to perform any of the functions of the tavern or was involved in that operation, nor can it be said that PDVC was in possession of the premises.
[14] In the same cross-examination he re-iterates that the lease was a completely carefree lease (Q. 63) and consequently the landlord did not pay any expenses (Q. 64).
[15] Mr. Rosetta agreed that the reference to third party liability in the lease would encompass patrons at the tavern. The tenant’s insurance was separate from that of the landlord’s, aside from the fact that the landlord would be an additional insurer on the tenant's policy (Q. 105). The point of that requirement was "to layer up our liability protection for our company. And it is a standard procedure in most commercial leases" (Q. 124). It was designed to "add another layer of liability protection for the landlord" (Q. 125).
V. Applicable Law and Analysis
A. Summary Judgment Motion
[16] Paraphrasing the applicable wording of Rule 20.04(1) it is mandated that a jurist grant summary judgment if "there is no genuine issue requiring a trial with respect to a claim or defence". In so determining, the presiding jurist may: 1) weigh the evidence; 2) evaluate the credibility of a deponent; and 3) draw any reasonable inferences from the evidence. Before exercising these latter powers, the jurist should determine whether there is a genuine issue for trial. If there is sufficient evidence to allow for a fair and just adjudication, the process is invariably timely, affordable (at least much more so than a full blown trial) and proportionate. Ref. Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 at para. 566.
[17] Justice Karakatsanis cautions jurists who contemplate using the powers set out in 20.04(2.1) to consider whether their use is justified in the interests of justice at this juncture or at the trial itself keeping in mind the cost-cutting efficiencies of such a motion.
[18] The observations of Justice Karakatsanis were consistent with those of the court in Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372. At paragraph 10 the court stated:
The summary judgment rule serves an important purpose in the civil litigation system. It prevents claims or defences that have no chance of success proceeding to trial. Trying unmeritorious claims imposes a heavy price in terms of time and cost on the parties to the litigation and on the justice system. It is essential to the proper operation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage. Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial.
[19] Obviously, there has to be a sufficient factual basis, sometimes referred to as a "constellation of facts" in order to found the decision to proceed at this point.
[20] It is in their interest that the parties put their best foot forward in this potential opportunity to narrow the issues or eliminate the action in its entirety. Therefore, given the evidentiary burden of establishing "There being no genuine issue for trial", the mantra is "Lead trump or risk losing". Therefore a court is entitled to assume that the evidentiary picture is not going to expand or improve at trial. (Ref: Rogers Cable TV Limited v. 373041 Ontario Limited at para. 4.)
B. Is Port Dalhousie Vitalization Corporation an "occupier" within The Occupier's Liability Act?
[21] The Occupier's Liability Act, R.S.O. 1990, c. O.2 is the statutory framework which sets the obligations of an occupier, which include the following:
Definitions
1. In this Act,
“occupier” includes,
(a) a person who is in physical possession of premises, or
(b) a person who has responsibility for and control over the condition of premises or the activities there carried on, or control over persons allowed to enter the premises, despite the fact that there is more than one occupier of the same premises; (“occupant”)
“premises” means lands and structures, or either of them, and includes,
(a) water,
(b) ships and vessels,
(c) trailers and portable structures designed or used for residence, business or shelter,
(d) trains, railway cars, vehicles and aircraft, except while in operation. (“lieux”) R.S.O. 1990, c. O.2, s. 1.
Common law duty of care superseded
2. Subject to section 9, this Act applies in place of the rules of the common law that determine the care that the occupier of premises at common law is required to show for the purpose of determining the occupier’s liability in law in respect of dangers to persons entering on the premises or the property brought on the premises by those persons. R.S.O. 1990, c. O.2, s. 2.
Occupier’s duty
3 (1) An occupier of premises owes a duty to take such care as in all the circumstances of the case is reasonable to see that persons entering on the premises, and the property brought on the premises by those persons are reasonably safe while on the premises.
Idem
(2) The duty of care provided for in subsection (1) applies whether the danger is caused by the condition of the premises or by an activity carried on the premises.
Idem
(3) The duty of care provided for in subsection (1) applies except in so far as the occupier of premises is free to and does restrict, modify or exclude the occupier’s duty. R.S.O. 1990, c. O.2, s. 3.
Risks willingly assumed
4 (1) The duty of care provided for in subsection 3 (1) does not apply in respect of risks willingly assumed by the person who enters on the premises, but in that case the occupier owes a duty to the person to not create a danger with the deliberate intent of doing harm or damage to the person or his or her property and to not act with reckless disregard of the presence of the person or his or her property. R.S.O. 1990, c. O.2, s. 4 (1).
Restriction of duty or liability
5 (1) The duty of an occupier under this Act, or the occupier’s liability for breach thereof, shall not be restricted or excluded by any contract to which the person to whom the duty is owed is not a party, whether or not the occupier is bound by the contract to permit such person to enter or use the premises.
Obligations of landlord as occupier
8 (1) Where premises are occupied or used by virtue of a tenancy under which the landlord is responsible for the maintenance or repair of the premises, it is the duty of the landlord to show towards any person or the property brought on the premises by those persons, the same duty of care in respect of dangers arising from any failure on the landlord’s part in carrying out the landlord’s responsibility as is required by this Act to be shown by an occupier of the premises.
Idem
(2) For the purposes of this section, a landlord shall not be deemed to have made default in carrying out any obligation to a person unless the landlord’s default is such as to be actionable at the suit of the person entitled to possession of the premises.
Definitions
(3) For the purposes of this section, obligations imposed by any enactment by virtue of a tenancy shall be treated as imposed by the tenancy, and “tenancy” includes a statutory tenancy, an implied tenancy and any contract conferring the right of occupation, and “landlord” shall be construed accordingly.
Preservation of higher obligations
9.(3) The Negligence Act applies with respect to causes of action to which this Act applies, R.S.O. 1990, c. 0.2, s. 9.
[22] From the definitions of Section 1 and the obligations of a landlord as an occupier in Section 8(1), it is imperative that the factual nature of a case be examined to determine, the nature of the possession of a landlord (if any), the control (if any) manifested by the landlord of the space, and what responsibilities were assumed by the landlord (if any).
[23] Mere ownership of the space is not enough. Otherwise, as Justice Reilly quipped in Musselman et al v. 875667 Ontario Inc. et al, 2010 ONSC 3177, the statute would be entitled "the Landlord's Liability Act". It is noted that in Walduck v. Malcolm, [1991] 2 S.C.R. 456 Justice Iacobucci not once considered the actual owners of the farmhouse rented out in its entirety to the Malcolms as "occupiers" or as a landlord possessing a responsibility for repair and maintenance.
[24] On the basis of Mr. Rosetta's evidence, PDVC occupied an unrelated part of the building. Yes, there were the offices on the second floor of the building used by PDVC and My Cottage staff, but the real business of the tavern and where the incident took place was on the ground floor area which, like a horseshoe, surrounded the common vestibule area. As Justice Manderscheid noted in Prunkl v. Tammy Jean's Diner Ltd., 2014 ABQB 338:
It is indisputable that by virtue of the Lease, the Defendants have contracted away their right to physical possession of the “Demised Premises,” and cannot therefore be found to be an “occupier” under the first criterion of the definition. (Ref. para. 37).
[25] There's no evidence that the landlord had any repair and maintenance or other responsibilities with respect to the tavern area, in fact, clause six of the lease stipulates that repair and maintenance is the responsibility of the tenant, and if the landlord wanted to inspect these premises, they had to advance 24 hours' notice of such a request.
[26] Whatever duty of repair and maintenance the landlord retained, presumably with respect to the second and third floor it is irrelevant as the plaintiff's mishap did not occur there. It would appear that PDVC does not come within the second criteria of the definition of "occupier".
[27] Cases founded on factual proximity or symbiotic relationships between landlord and tenant, such as Prunkl v. Tammy Jean's Diner Ltd. and Aviscan Inc. v. Sutton Place Hotels Ltd., [1993] Carswell Ont. 644 are not helpful. In Prunkl the diner occupied a part of the Devon Hotel. In a way the diner was at service to the hotel guests. Justice Manderscheid observed in paragraph 51:
If it can be established by the evidence that the Defendants by virtue of the nature of their operation of the hotel and the restaurant, did so in such a fashion that a reasonable person in the place of the Plaintiff could not differentiate between the hotel and the restaurant operations of Tammy Jean, then in such case, there is a triable issue as to whether or not the Defendants owed a duty of care to the Plaintiff by virtue of their care and control of the Premises to ensure that Tammy Jean as Lessee maintained in force and effect the liability insurance as required by the Lease.
[28] This quote also goes to the duty of care argument advanced by the applicant but it is primarily of value in that there are some relationships between landlord and tenant, where the patrons would be hard pressed to say who was responsible for what.
[29] Another such example, proximity or merged relationship is in Aviscan Inc. v. Sutton Place Hotels. Sutton Place leased part of its premises to another defendant whose staff (ie: valets) would park guest cars in its leased premises attached to or available to the hotel. McNeely J. wrote:
In my view, the care, custody or control of the doorman in that situation would be in the business of the hotel and it would also be in the business of a parking lot. The whole purpose of the entire exercise and the whole purpose of the doorman taking 'care, custody and control' of the motor vehicle was the first step in getting that motor vehicle into the parking lot and parking garage. (Ref. para. 728)
[30] The lease between PDVC and My Cottage was "A completely carefree lease". There was no evidence of a symbiotic relationship, the areas of control and possession would delineate it. In fact, whatever contact it was, was in areas physically unrelated to the tavern business. Being office neighbours is insufficient evidence of proximity or shared enterprise or responsibility.
[31] PDVC is not an occupier as defined by the statute, nor did it have maintenance and repair responsibilities as contemplated by Section 8(1). Additionally, there is no connection between the area occupied by PDVC and the actionable event as per Section 8(2).
[32] Given that there is no evidence that PDVC was responsible for the staff at the tavern, nor its regular clean-up (the list of activities listed in paragraph 10 of the plaintiff's statement of claim) there is no evidentiary basis of negligence or breach of the occupier's duty as contained in Section 3 of the statute.
C. Is the Plaintiff Third Party Beneficiary to the Lease between My Cottage and PDVC?
[33] The two seminal cases for when privity of contract can be pierced to create benefits for third parties beneficiaries are: London Drugs Ltd. v. Kuehne and Nagel International Ltd., [1992] 3 S.C.R. 299 and Fraser River Pile and Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108. Justice Iacobucci was the principal architect of both decisions. Both decisions have unique contracts and fact scenarios. The importance of the factual matrix on which a contract is created, remains as a continuing focus in the interpretation of contracts. (Ref. Ledcore Construction Ltd. v. Northbridge Indemnity Insurance Company, 2016 SCC 37, [2016] 2 S.C.R. 23 at para. 27).
[34] Justice Iacobucci commences his discussion of privity of contract at page 69 of London Drugs:
Broadly speaking, it stands for the proposition that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it…It is now widely recognized that this doctrine has two very distinct components or aspects. On the one hand, it precludes parties to a contract from imposing liabilities or obligations on third parties. On the other hand, it prevents third parties from obtaining rights or benefits under a contract; it refuses to recognize a jus quaesitum tertio or a jus tertii.
It is this latter aspect that pertains to third party beneficiaries.
[35] In his review of the authorities, Justice Iacobucci notes that there are certain exceptions to the concept of privity namely, agency and trust (Ibid p. 70).
Closely related to the doctrine but distinct, "Is the rule that consideration for a promise must move from the person entitled to sue or rely on that promise". (Ibid p. 70)
[36] In London Drugs, warehouse people employed by the storage facility had damaged a transformer owned by London Drugs. There was a limitation of liability in the standard form storage contract, which limited the warehousemen's liability to 40 dollars. The transformer was worth far much more. London Drugs sued the employees of the storage company for breach of contract and negligence. The issue became the extent to which the employees could claim the benefit of their employee's contractual limitation of liability clause.
[37] Justice Iacobucci concurred with the appellant "That the major obstacle to the employees' claim was that they were not parties to the contract from which they sought to benefit".
[38] Citing Professor Trentel's The Law of Contract 8th edition London; Stevens & Sons 1991, Justice Iacobucci isolates the most popular (in terms of case law and academic writing) justifications for privity of contract:
- a contract is a very personal affair, affecting only the parties to it, 2) it would be unjust to allow a person to sue on a contract on which he or she could not be sued, 3) if third parties could enforce contracts made to their benefit, the rights of the parties to the contract to rescind or vary the contract would be unduly hampered, and 4) the third party is often merely a donee and a “system of law which does not give a gratuitous promisee a right to enforce the promise is not likely to give this right to a gratuitous beneficiary who is not even a promise”. (Ibid p. 70)
[39] One of the precedents reviewed by Justice Iacobucci was that of Greenwood Shopping Plaza Ltd. v. Beattie, [1980] 2 S.C.R. 228. This case concerned a lease between a shopping centre landlord and retail tenants. Employees of the latter had caused fire damage to the centre. The question was, could those employees claim the benefit of limitations of liability provisions of the lease? Justice Iacobucci observed that there was little or no evidence that the lease was to confer a benefit to a third party namely, the employees. (Ibid p. 78).
[40] Justice McIntyre who wrote the judgment stated:
It must be observed that the clear and precise words of paragraphs 14 and 15 limit the application of the insurance provisions to the parties to the lease, the appellant and the company. Courts must, in cases of this sort, be wary against drawing inferences upon vague and scanty evidence, where the result would be to contradict the clear words of a written agreement and where rectification is not sought or may not be had. (Justice Iacobucci had underlined the above).
[41] At page 79 of his review, Justice Iacobucci commented that Greenwood Shopping Plaza was not with reference to possible third party beneficiaries but with reference to complete strangers to the contract.
[42] As to whether the doctrine of privity should be relaxed, His Honour states at page 82:
Privity of contract is an established principle in the law of contracts and should not be discarded lightly.
[43] His Honour noted that the London Drugs contract spoke of "Warehousemen". There was similarity of identity of interest shared between the employer and the employees in the warehouse, the latter are effectively performing the contract. In this instance, there would be little or no impediment on the ability of the contracting parties to vary or rescind the contract by including the employees as third party beneficiaries. To hold the employees liable would be to cause a serious injustice to the employees. (Ibid p. 83 – 87).
[44] Justice Iacobucci concluded that the employees of the warehouse should be able to benefit from the limitation of the liability clause in the contract because: "1) that clause either expressly or implicitly extended its benefit to the employees seeking to rely on it, and 2) the employees were acting in the course of their employment." (Ibid p. 88).
[45] His Honour wrote that "This exception to privity is dependent upon the intention of the contracting parties. There needs to be in the contract language which conveys an intention, either expressed or implied to extend the benefit of the limitation of liability to the employees." This extension was consistent with the exception allowed by reasons of the concepts of agency and trust. His Honour viewed this extension, namely, of third party employees benefiting from the limitation of liability clause as a "shield" to actions against those employees. (Ibid p. 89)
[46] In Fraser River, the issue was whether a waiver or subrogation clause was available to a "charterer" of a barge which, as a result of negligence, had sunk. The owner of the barge was a party to the original insurance contract and had been paid out by the insurer for the loss of the barge. After the event the insurer and the owner entered into another contract which permitted the insurer to pursue its subrogation interests against the charterer. In that contract, Fraser, the owner waived any right to subrogation it may have had pursuant to the original waiver of subrogation clause in the original insurance policy.
[47] The charterer, defendant Can-Dive defended by relying on the original waiver subrogation clause, although it was not a party it was included within the category of "additional insured" as defined in the original policy. That clause extended coverage to charterers.
[48] Justice Iacobucci commenced his analysis in a similar fashion to what he had in London Drugs, by noting "As a general rule…the doctrine of privity provides that a contract cannot confer rights, nor oppose obligations on third parties". (Ibid para. 21)
[49] The court dealt with a non-traditional exception to privity, which is the case with other third party beneficiary exceptions "Courts may nonetheless undertake the appropriate analysis, bounded by common sense and commercial reality, in order to determine whether the doctrine of privity with respect to third party beneficiaries should be relaxed in the given circumstances". (Para. 24)
[50] The starting point for such an analysis is that, "In order to distinguish mere strangers to a contract from those in a position of third party beneficiaries, the court must first establish a requirement whereby the parties to the contract must have intended the relevant provisions to confer or benefit on the third party". (Para. 27) (underline mine)
[51] The second requirement is that the actions of the purported third party beneficiary come within the scope of the agreement between the initial parties. (Para. 28) (underline mine)
[52] Examples of latter requirement are the employees of the warehouse in London Drugs moving the stored item within the warehouse, and in Fraser River, the charterer operating the leased boat, being an insured party within the original contract of insurance and able to access the waiver of subrogation.
[53] These examples do not limit the two requirements set out above, but are illustrative of the practical approach of the requirements.
[54] In the matter at hand, the lease required that both the tenant My Cottage and the landlord PDVC have third party liability insurance. The landlord was to be named as an insurer in the policy acquired by the tenant. The obvious benefit being that both parties would have insurance coverage for incidents such as the plaintiff experienced. There's absolutely no evidence of the intention of these two parties to provide that coverage to strangers. The plaintiff did not have the same or shared identity of interest with the contracting parties.
[55] The argument is starting to become nonsensical, the plaintiff is not seeking to be protected or insured against such claims, in other words that the insurance is "a shield", the plaintiff is seeking to be able to make a claim under the policies. The plaintiff is seeking to utilize the existence of a provision in a lease for third party liability insurance, as a "sword" as a basis for action against PDVC and its insurer. The third party beneficiary exemption to privity (for which the plaintiff does not qualify) only operates to protect a party from liability, not to permit a party to sue. (Ref: Arora v. Whirlpool Canada Ltd., 2013 ONCA 657 at para. 39).
[56] That My Cottage had an insurance policy which would not benefit from FSCO provisions in the province is an irrelevancy. The plaintiff is advancing the concept that because the contracting parties to the lease were jointly concerned about a particular risk, namely, third party liability and consequently obtained insurance that somehow the plaintiff, a complete stranger to the lease, should be able to tap into that insurance.
[57] The first requirement to the third party beneficiary exception to privity of contract as established in London Drugs and Fraser River is simply not met. The language of the lease contract and the surrounding circumstances do not support this exception.
[58] The fact that the plaintiff's mishap may be an activity, which evokes the potential for third party liability on the part of the contracting parties, does not carry the day in the absence of the first requirement. It would be tantamount to saying that because the landlord has such insurance, the injured party can make a claim, leaving aside for a moment that Section 132 of The Insurance Act requires that the plaintiff first succeed in a finding of liability against the landlord. As counsel for the defendant remarks, the plaintiff is essentially seeking a declaration of coverage.
D. Is the defendant liable in negligence, in particular, for its failure to monitor the tenant's satisfaction of the insurance provisions of the lease?
[59] Although London Drugs is a seminal case with respect to third party beneficiary exception to the doctrine of privity of contract, there was considerable discussion amongst the members of the court and the members of the British Columbia Court of Appeal with respect to the tort concept of a duty to care. The obligation of an alleged tortfeasor is to do something to prevent a particular harm. In London Drugs it was the duty of care of warehousemen to move, store and retrieve a customer's item in such a fashion that the item is not damaged.
[60] Justice Iacobucci observed having reviewed precedent that "It is now well established that the question of whether or not a duty of care arises will depend on the circumstances of each particular case, not on a pre-determined category and blanket rules as to who is and, who is not under a duty to exercise reasonable care". (Ref. 1992 3 S.C.R. p. 408)
[61] The plaintiff presents a blended argument that it is in the main contract based, i.e.: that because the lease provides for a third party liability insurance and that the plaintiff is a third party beneficiary under the lease contract, PDVC owes the plaintiff a duty to monitor the fulfillment of the insurance requirement by the tenant My Cottage.
[62] The failure to monitor, the tenant's compliance with the insurance requirement has no casual connection to what happened with the plaintiff. In other words, that failure, if it was such, did not contribute in any way to her falling. If there was a failure, it would mean that the landlord would bear the brunt of any damages, if successfully sued. If there was an omission to monitor, it only had consequences vis-à-vis the parties to the lease, even then the landlord would have to have been found liable. That liability could have existed if under The Occupier's Liability Act, however the landlord was not found to have been an occupier or in breach of its duty of its Section 8(1) obligations.
[63] There is, according to this court, no evidentiary basis for such findings as the statute which extends common law notions of negligence with respect to those who come on the property of another does not help, in this case, to create a duty of care.
[64] Privity of contract excludes the plaintiff from any benefit to the lease.
[65] The relationship between the landlord and the tenant was not of such proximity and what has been referred to before as "being symbiotic" as was found in Prunkl v. Aviscan. The landlord had a completely carefree lease. The landlord basically exercised "a hands-off" approach. There may have been some social interaction given the fact that PDVC and My Cottage had offices on the second floor, but that interaction would not generate a duty of care vis-à-vis the plaintiff. The landlord is too far removed from the circumstances of the fluid near the bar. There is no duty of care to the plaintiff.
Conclusions
[66] Therefore for all of the above reasons, the declaratory relief sought by the plaintiff by way of summary judgment is dismissed in its entirety as there is no genuine issue for trial. The motion for the defendant for dismissal of the action on the basis that there is no genuine issue for trial is granted. This finding eliminates the necessity for a trial presently scheduled for the trial blitz in October 2018 at St. Catharines.
[67] Counsel are to exchange costs submissions and if unable to agree as to quantum and liability for costs, to submit submissions and a bill of costs to this court no later than October 31, 2018. The submissions to be no greater than seven pages.
Whitten J. Released: September 21, 2018