Court File and Parties

COURT FILE NO.: CV-18-7548

DATE: 2021-08-18

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Vista Hospitality Co., Canada, Inc. and Vista Sudbury Hotel Inc., Plaintiffs

AND:

SST Group of Construction Companies Limited, T.H.A.T. Group Inc., and Read Jones Christoffersen Ltd. o/a RJC Engineers, Defendants

BEFORE: The Honourable Madam Justice K.E. Cullin

COUNSEL: Adam Grant, for the Plaintiffs Sarah Reisler, for the Defendant, SST Group of Construction Companies Limited Adam Dunlop, for the Defendant, T.H.A.T. Group Inc.

HEARD: August 18, 2021

DECISION ON MOTION FOR SUMMARY JUDGMENT

[1] This matter appeared before me as a motion in writing. It is a motion for summary judgment, seeking a determination regarding the effect of a Settlement and Release Agreement between some of the parties to the action. There is no dispute between the involved parties that the issues raised in the motion can and should be addressed in writing and by way of summary judgment; whether that is in fact the case is also an issue for determination by the court.

Parties to the Motion

[2] This motion has been initiated by the defendant, SST Group of Construction Companies Limited (“SST”). The plaintiffs, Vista Hospitality Co., Canada, Inc. and Vista Sudbury Hotel Inc. (collectively the “Plaintiffs”), responded to the motion.

[3] The defendant, T.H.A.T. Group Inc. (“T.H.A.T.”) did not respond to the motion or otherwise take a position. The defendant, Read Jones Christoffersen Ltd. o/a RJC Engineers (“RJC”) was released from this action pursuant to a Consent Order, dated April 11, 2019.

Overview of Undisputed Facts

[4] The plaintiff, Vista Sudbury Hotel Inc. (“Vista Sudbury”), hired SST to act as a general contractor on a parking garage rehabilitation project at the Rainbow Centre located at 40 Elm Street (the “Premises”), in Sudbury, pursuant to the terms of a contract dated March 11, 2015.

[5] SST hired T.H.A.T., a sub-contractor, in or around March of 2016. RJC was retained by the plaintiffs to provide engineering and consulting services throughout the project.

[6] The plaintiff, Vista Hospitality Co., Canada, Inc. (“Vista Hospitality”), was not a named party to the contract between SST and Vista Sudbury, or between SST and T.H.A.T. Vista Hospitality was the property manager of the Premises. Vista Sudbury was a subsidiary of Vista Hospitality and was the registered owner of the Premises.

[7] On May 13, 2016, a flood incident occurred at the Premises (the “Flood”). It is substantially agreed that the Flood occurred due to the actions, errors, and omissions of SST and T.H.A.T., although their respective degrees of liability are the subject of dispute.

[8] On May 13, 2016, the plaintiffs’ principal, Amin Visram, reported the Flood to AIG, the insurer for Vista Hospitality. There is no evidence in the record before me that Vista Sudbury was a named insured under the policy, although it is undisputed that AIG responded to the Flood claim.

[9] Sometime between May 13, 2016 and May 16, 2016, SST’s principal, Jason Gheda, reported the Flood to his insurance broker, Hubb International. On May 16, 2016 SST’s insurer, Aviva, retained an adjuster to investigate the claim.

[10] The plaintiffs and AIG took the lead in initiating and completing the repair and remediation work related to the Flood. The AIG policy was subject to a deductible of $10,000 USD ($13,089 CDN). AIG paid the costs of the repair and remediation, subject to the deductible which was paid by the plaintiffs.

[11] On February 22, 2017, Vista Hospitality signed a Proof of Loss, valuing the Flood claim at $71,189.76, net of its deductible. The Proof of Loss assigned Vista Hospitality’s rights of recovery to AIG.

[12] On June 21, 2017, Cunningham Lindsey, AIG’s insurance adjuster, sent a copy of the Proof of Loss to Aviva. Its correspondence set out AIG’s position regarding SST’s liability, provided contact information for T.H.A.T.’s insurer, and expressed AIG’s intention to work with Aviva to resolve the claim.

[13] On July 7, 2017, Vista Sudbury and SST entered into a Settlement and Release Agreement (the “Agreement”) settling all claims under what was described as the Part B Contract arising prior to July 7, 2017. That Contract included the work giving rise to the Flood. The Agreement described the claims that it was settling as follows:

"Settled Claims" includes all existing Disputes and Claims related to the Project to the date of this Settlement and Release Agreement, and arising from or in any way related to any breaches of the Part B Contract, whether the disputes or claims are asserted in contract or otherwise, including without limitation, all claims by Vista for flood damages, other damages, legal fees incurred in connection with the Part B Contract to date (including legal fees in connection with the LiUNA Jurisdictional Dispute), as well as fees claimed by the Consultant, Read, Jones, Christoffersen Ltd., for schedule extension, save and except the Excluded Claims.

"Excluded Claims" means any and all future claims and disputes that may arise between Vista and SST after the date of this Settlement and Release Agreement and certain claims arising from the LiUNA Jurisdictional Dispute as described in paragraph 3 of this Settlement and Release Agreement.

[14] The wording of the release in the Agreement is as follows:

(1) Vista and SST do hereby mutually release and forever discharge each other from any and all actions, causes of action, applications, debts, dues, accounts, bonds, covenants, contracts, complaints, obligations, duties, breaches of contract, breaches of duty or any relationship, acts, omissions, compensations, promises, damages, costs, losses, expenses, claims for interest or disbursements, remedies for losses, choses in action, entitlements, liabilities, demands, rights of indemnity and all other claims and rights related to or in any way arising from the "Settled Claims".

(2) This Release shall be binding upon and shall enure to the benefit of the respective successors and assigns of Vista and SST.

(3) Vista and SST agree not to take any steps or initiate any proceedings against any person, partnership, corporation, or other such entity which might be entitled to claim contribution, indemnity or other relief over or against Vista or SST, under the provisions of any statute or otherwise, with respect to any of the Settled Claims.

Proceedings and the Motion

[15] These proceedings were commenced in the name of the plaintiffs on May 11, 2018. The named defendants were SST, T.H.A.T. and RJC. The claim is a subrogated claim by AIG against the defendants’ insurers. SST has been defended in the proceedings by its insurer, Aviva.

[16] In this motion, SST submits that the Agreement operates to bar the plaintiffs’ action; it seeks a ruling summarily dismissing the plaintiffs’ claim against it. The plaintiffs submit that the Agreement does not operate to bar the plaintiffs’ claim; they seek a ruling dismissing SST’s motion on the basis that the Agreement is not a defence to the claim.

Issues

[17] The issues to be determined in this motion are as follows:

a. Are the issues raised in this motion appropriately determined by a motion in writing?

b. Are the issues raised in this motion appropriately determined by summary judgment?

c. Are Vista Hospitality and AIG bound by the Agreement signed by Vista Sudbury?

d. Does the Agreement act as a bar to the subrogated claim against SST?

The Law and Analysis

Are the issues raised in this motion appropriately determined by a motion in writing?

[18] Pursuant to Rule 37.12.1(4), the moving party to an opposed motion may propose in the Notice of Motion that the motion be heard in writing. The responding party may either agree to have the motion heard in writing or serve notice that intends to make oral argument.

[19] In the present case the moving party, SST, requested in its Fresh as Amended Notice of Motion that this motion be heard in writing as an opposed motion, and the responding party, the plaintiffs, agreed to have this motion heard in writing. In his Endorsement, dated July 30, 2021, Justice Cornell Ordered that this motion be considered in writing, subject to the hearing Judge requiring that oral submissions be provided.

[20] In reviewing the materials, I find that they are thorough and provide the information that I require to determine the motion. I have no questions that would require oral submissions from counsel. This motion shall therefore proceed in writing as requested by counsel.

Are the issues raised in this motion appropriately determined by summary judgment?

[21] Rule 20.04(2) of the Rules of Civil Procedure requires that a court grant summary judgment if:

a. the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or,

b. the parties agree to have all or part of the claim determined by summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

[22] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada confirmed that the ultimate question in a summary judgment motion is whether there is a genuine issue requiring a trial. The court held that a genuine issue requiring trial does not exist if the motion:

a. allows a judge to make the necessary findings of fact;

b. allows the judge to apply the law to the facts; and,

c. is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.

[23] In this case, the parties agree that the issue before the court is appropriately adjudicated by a summary judgment motion. This leaves remaining the issue of whether the court is satisfied that it is appropriate to grant summary judgment.

[24] While there are a core set of facts that are undisputed in this matter and are supported by documentary evidence, which I have outlined above, there are other facts which are in dispute.

[25] The relevant facts in dispute may be summarized as follows:

a. The plaintiffs submit that SST was aware that AIG had responded to the Flood claim and that it intended to pursue Aviva for a subrogated claim. SST denies that it was aware of this.

b. The plaintiffs submit that it was the intention of the parties in negotiating the Agreement to address all claims by the plaintiffs against SST arising from the Flood, other than the claims which had been paid by AIG and were subject to subrogation. SST submits that it was the intention of the parties to address all claims against SST arising from the flood, with no exceptions.

[26] In its factum, SST acknowledges that in considering the motion the court may be required to weigh disputed facts and the credibility of the parties’ evidence. It submits, however, that none of the disputed facts or potential credibility issues are central to the legal questions before the court.

[27] The plaintiffs submit in their factum that the court has the benefit of reviewing fulsome evidence of the negotiation process regarding the Agreement, much of which was reduced to writing. They submit that there is sufficient evidence with which to interpret the terms of the Agreement and render a final determination on its effect.

[28] I find that there is sufficient evidence to permit the court to render a determination regarding the effect of the Agreement. While the disputed facts and credibility issues provide context, they are not determinative of the legal issues in the motion.

[29] I also concur with the submissions of counsel that summary judgment is the most expeditious and cost-effective procedure to resolve the parties’ dispute regarding the impact of the Agreement. A determination of this motion will either resolve this matter in its entirety or will significantly narrow the issues in dispute at trial.

[30] The court will therefore render a summary judgment with respect to the issues raised in this motion.

Are Vista Hospitality and AIG bound by the Agreement signed by Vista Sudbury?

[31] SST has noted in its argument that Vista Hospitality was not a named party to the contract between SST and Vista Sudbury, or between SST and T.H.A.T. It notes that Vista Hospitality was the property manager of the Premises, not an owner or a tenant, and as such has no cause of action in respect of the damages and losses alleged in the statement of claim.

[32] Alternatively, SST argues that Vista Hospitality and Vista Sudbury are so intertwined that Vista Hospitality ought to be bound by the Agreement notwithstanding the fact that it is not explicitly identified as a party to it.

[33] I prefer SST’s alternative argument.

[34] I find that, throughout the transactions giving rise to these proceedings, Vista Hospitality and Vista Sudbury conducted themselves as one entity. Vista Hospitality was the named insured on the AIG policy that responded to the claim for the Premises, notwithstanding the fact that the Premises were owned by Vista Sudbury. In their pleadings, and throughout their submissions in response to this motion, the plaintiffs referred to themselves as one entity.

[35] I would also note that the plaintiffs have made no submissions that Vista Hospitality (and by extension its insurer AIG) ought to be extricated from the Agreement by virtue of the fact that it was not a named party. This leads to me to conclude that Vista’s own assessment of its operations determined that the corporations were sufficiently intertwined so as to preclude the viability of such an argument.

[36] I therefore find that, if the Agreement is interpreted to encompass the insurer’s subrogated claims, then Vista Hospitality and its insurer AIG are bound by the releases set out in the Agreement.

Does the Agreement act as a bar to the subrogated claim against SST?

[37] I would note at the outset that I concur with the plaintiffs’ submission that Rule 49.09 is neither engaged nor relevant to this motion.

[38] In Donaghy v. Scotia Capital Inc./Scotia Capitaux Inc., 2009 ONCA 40, the Court of Appeal noted in obiter that, “The weight of judicial authority is that Rule 49.09 only applies to settlements arrived at after a proceeding, that is, an action or application, has been initiated.” In that case, the Court noted that Rule 49.09 was likely not the appropriate method to enforce the settlement at issue, which was a pre-litigation settlement.

[39] Rule 49 provides a specific, codified procedure for preparing, accepting, withdrawing, and enforcing offers to settle during litigation. It is intended to add certainty to the process of resolving litigated claims, and to aid in the assessment of costs in the event that a claim is not resolved in advance of a hearing. It is not intended to provide a dispute resolution framework for settlements outside of litigation.

[40] The Agreement at issue in this proceeding is a contract, enforceable at common law. As noted by the Court of Appeal in Donaghy (para. 11) the Court’s authority to enforce settlement agreements negotiated outside of litigation arises pursuant to ss. 96 and 97 of the Courts of Justice Act, R.S.O. 1990, c.C.43.

[41] With respect to the effect of the Agreement, SST argues that it operates to extinguish AIG’s subrogated claim based on the common law rules pertaining to subrogation. Citing the Court of Appeal’s decision in Douglas v. Stan Fergusson Fuels Ltd., 2018 ONCA 192, SST argues that, because the right of subrogation is derivative, any restriction or limit on the insured’s rights of recovery against a third party apply equally to the insurer (Douglas, para. 55).

[42] The plaintiffs argue that there is an exception to the rule cited by SST. That is, a settlement agreement entered into between an insured and a tortfeasor does not bind a subrogating insurer where the tortfeasor had knowledge of the subrogated claim to be advanced by the insurer (Busgos v. Khamis, [1990] O.J. No. 179 (Dist. Ct.), Stairs v. CFM Corporation et al., 2017 NBCA 8). They submit that to find otherwise would undermine the core principle of subrogation that the responsible tortfeasor should ultimately bear the entirety of the loss (Somersall v. Friedman, 2002 SCC 59).

[43] On the record before me, while it is clear that the principal of SST, Jason Gheda, was aware that the Flood had been reported to AIG and Aviva, it is his evidence that he was not aware of the progress of the insurance claims or the existence of any subrogated claims when he negotiated the Agreement with the principal of Vista Sudbury.

[44] It is arguable that SST, through its employee Ron Harrison, had constructive knowledge regarding the insurance claims involving AIG and Aviva. It is also arguable that it is inconceivable that Jason Gheda, as the CEO of SST, would not have at least sought some information about the status of those claims as the availability of coverage would have impacted SST’s exposure to damages. I find, however, that it is not necessary for me to make these determinations for the purpose of resolving this motion.

[45] I therefore decline to find that the Agreement was not binding on Vista Hospitality and/or AIG as a result of any knowledge by SST about the existence of a subrogated claim.

[46] The plaintiffs submit that the critical issue to be determined by the court on this motion is the correct interpretation of the scope of the Agreement. I concur with this submission.

[47] In Salah v Timothy’s Coffees of the World Inc., 2010 ONCA 673 (para. 16), the Court of Appeal identified the following principles to be applied when interpreting a commercial contract:

a. Aim to determine the intentions of the parties in accordance with the language used in the written document, with the presumption that the parties have intended what they have said;

b. Construe the contract as a whole, in a manner that gives meaning to all its terms, and avoids an interpretation that would render one or more of its terms ineffective;

c. Have regard for the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties;

d. Interpret in accordance with sound commercial principles and good business sense and avoid commercial absurdity.

[48] In Busgos v Khamis, [1990] O.J. No. 179 the court, quoting from 9 Hals. (4th Edition) p. 412 para. 595, noted:

[G]eneral words of release will be construed with reference to the surrounding circumstances and as being controlled by recitals and context so as to give effect to the object and purpose of the document

[49] In interpreting a commercial contract, the court must take care to conduct its analysis objectively. The court cannot consider evidence of the subjective intentions of the parties which were not communicated to one another (Kentucky Fried Chicken v. Scott's Food Services Inc., 1998 CanLII 4427 (ON CA), paras. 24-27).

[50] I agree that a review of the “factual matrix” surrounding the negotiation and drafting of the Agreement is required to render a decision regarding its interpretation.

[51] On the evidentiary record and undisputed evidence before me, I am able make the following findings of fact:

a. The CEO of SST, Jason Gheda, became aware of the Flood through an email received from either Ron Harrison or Dennis Lalonde. Mr. Harrison and Mr. Lalonde were SST employees who were on-site at the time of the Flood.

b. SST was responsible for the Flood damages to Dollarama. No party has taken the position that the plaintiffs were responsible for the Flood or its resulting damages.

c. When the Flood came to Mr. Gheda’s attention, he immediately notified his insurance broker, Sharon Bacon, at Hubb International, “And [he] left it with her to notify whoever needs to be notified.” It was his undisputed evidence that he, “just put it on notice saying that there was an (sic) potential claim here and left it with her.”

d. Prior to signing the Agreement, Mr. Gheda was aware that the plaintiffs would have to pay a $10,000 USD deductible if they advanced an insurance claim. As a business owner, he was aware that the plaintiffs would be responsible for paying the deductible, but he was not specifically aware of when in the claim process that responsibility would arise.

e. SST’s responsibility to pay the plaintiffs’ insurance deductible was raised by the plaintiffs at their first meeting with SST after the Flood. The issue was discussed at the parties’ progress meetings regarding their construction project.

f. The Agreement resolved several outstanding miscellaneous claims between SST and the plaintiffs before progressing to the next phase of their construction project, including several flood incidents. Specifically, it addressed, “possible back charges” and “potential claims against future progress draws”.

g. One of the miscellaneous claims addressed during the parties’ negotiations was the Flood. Mr. Gheda described that they addressed, “the costs that were imposed on [SST] in relation to the flood events.”

h. The plaintiffs’ insurance deductible was one of the back charges presented to SST regarding the Flood and represented a component of the consideration paid by SST pursuant to the Agreement.

i. Mr. Gheda was aware that the expenses with respect to the property damage to the Dollarama and its associated areas caused by the Flood exceeded the amount of the plaintiffs’ insurance deductible and would have to be paid by somebody.

j. There is nothing in any of the documents exchanged during the negotiation of the Agreement which demonstrates or suggests that SST or the plaintiffs specifically put their mind to the existence of a subrogated claim between the insurers.

[52] Accepting Mr. Gheda’s evidence at face value, after contacting his insurance broker, he left the investigation and resolution of the insurance claims to the insurers and their adjusters. At the time of the negotiation of the Agreement, he had no knowledge regarding the status of any insurance claims, and specifically no knowledge regarding any subrogated claims between SST’s insurers and the plaintiffs’ insurers.

[53] To suggest that an object and purpose of the Agreement was to release subrogated insurance claims flies in the face of Mr. Gheda’s own evidence that he took no interest or role in the insurance claims beyond reporting the matter to his insurer. It is clear from the evidence that the insurance claim and the negotiations between the parties regarding their liabilities to one another beyond the insurance claim were conducted parallel to one another.

[54] In reviewing the correspondence and the schedules of damages addressed by SST and the plaintiffs when negotiating the Agreement, it is apparent that all of the items addressed were out-of-pocket, uninsured expenses which the plaintiffs planned to back charge directly to SST out of future progress draws in the absence of an agreement. The object and purpose of the Agreement was to resolve these claims and disputes between the corporations themselves to permit them to commence the next phase of their project with a clean ledger.

[55] I therefore find that the Agreement does not operate to bar any subrogated claims by the plaintiffs or their insurer AIG against SST and its insurer.

Orders

[56] For the reasons given above, I hereby make the following declarations and orders:

a. This court declares that the Settlement and Release Agreement between Vista Sudbury Hotel Inc. and SST Group of Construction Companies Limited, dated July 7th, 2017, does not bind, or extinguish, any subrogated claim advanced by the plaintiffs or by their insurer AIG against the defendants or their insurers.

b. This court orders that the motion for summary judgment brought by the defendant, SST Group of Construction Companies Limited, shall be and is hereby dismissed.

c. This court orders that, in the event the parties cannot agree upon costs, either may make written submissions regarding costs within (30) days of the date of this endorsement.

The Honourable Madam Justice K.E. Cullin

Date: August 18, 2021