Agnew-Surpass v. Cummer-Yonge

Agnew-Surpass v. Cummer-Yonge
Collection
Supreme Court Judgments
Date
1975-04-21
Report
[1976] 2 SCR 221
Judges
Laskin, Bora; Martland, Ronald; Judson, Wilfred; Ritchie, Roland Almon; Spence, Wishart Flett; Pigeon, Louis-Philippe; Dickson, Robert George Brian; Beetz, Jean; de Grandpré, Louis-Philippe
On appeal from
Ontario
Subjects
Lease
Decision Content
Supreme Court of Canada
Agnew-Surpass v. Cummer-Yonge, [1976] 2 S.C.R. 221
Date: 1975-04-22
Agnew-Surpass Shoe Stores Limited (Defendant) Appellant;
and
Cummer-Yonge Investments Ltd. (Plaintiff) Respondent.
1974: November 12, 13; 1975: April 22.
Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.
ON APPEAL FROM THE SUPREME COURT OF ONTARIO.
Landlord and tenant—Insurance—Fire insurance—Interpretation of lease—Liability of tenant for fire loss—Exculpatory provision applicable to fire caused by negligence—Not applicable to loss of rental income—Entitlement of tenant to benefit from insurance—Waiver of subrogation by insurer—The Conveyancing and Law of Property Act, R.S.O. 1970, c. 85, ss. 30, 33—The Short Forms of Leases Act, R.S.O. 1970, c. 436, Sch. B, cl. 9—The Insurance Act, R.S.O. 1970, c. 224, s. 126.
Appellant was tenant of premises in a shopping centre of which respondent was owner landlord. The lease did not contain the usual tenant’s repairing covenants, but instead required the landlord to insure the shopping centre, including the building in which the tenant had its premises, “against all risk of loss or damage caused by or resulting from fire”. It required the tenant to take good and proper care of the leased premises, “except for reasonable wear and tear…and damage to the building caused by perils against which the lessor is obligated to insure hereunder”. The fire insurance policy taken out by respondent on the shopping centre provided indemnity against fires, without exception for fires resulting from negligence whether of respondent as landlord or of a tenant or third party. The insurance policy also covered part, but not all, of the loss of rental income. A fire broke out in the premises occupied by appellant as a result of appellant’s negligence. Thereafter a subrogated action was pursued in respondent’s name by the insurer and the issue of the tenant’s (appellant’s) liability turned on whether by the terms of the lease respondent had accepted an obligation to effect fire insurance on the shopping centre which would, inter alia, have protected the tenant from liability which it would otherwise have had to suffer if a fire occurred by reason of its own negligence. Respondent admitted that in terms of the lease it had assumed an obligation to insure against loss by fire but contended that it had not covenanted to insure for the benefit of the appellant. Hartt J. at trial dismissed the action but the Court of Appeal imposed liability on the tenant.
Held (Laskin C.J. and Judson and Spence JJ. dissenting in part and Martland and de Grandpré JJ. dissenting): The appeal should be allowed in part.
Per Ritchie, Pigeon, Dickson and Beetz JJ.: It ought to be considered as settled by the judgment in United Motors Service, Inc. v. Hutson et al., [1937] S.C.R. 294, that an exculpatory clause substantially in the terms of cl. 9, in Sch. B of The Short Forms of Leases Act (now R.S.O. 1970, c. 436) should be read as leaving the lessee liable for damage by a fire caused through his negligence. However the governing principle as to what is required to absolve a lessee from liability for his negligence is simply that such intention be adequately expressed. Explicit reference to negligence is not necessary, and even a clause in general terms may sometimes cover negligence. The exculpatory clause in the present case was not in the form of The Short Forms of Leases Act, supra, or an equivalent form. Appellant’s exoneration fell to be defined by reference to respondent’s obligation to insure in express terms. As the fire insurance policy, unlike an exculpatory clause, is to be read as covering negligence, the clause operated by way of reference to perils to be insured against, including fire however occurring, whether by negligence or otherwise. By the insurance policy the insurers had authorized the owner to release third parties from liability prior to any loss. However the exculpatory clause did not extend to the claim for loss of rental income because it covered “damage to the building” only. As the tenant could not claim the benefit of insurance taken by the respondent owner beyond what the lease required, which was insurance of the shopping centre against named perils, there was no distinction to be made between the insured and uninsured portions of the rental income loss. Appellant was liable in that respect notwithstanding that property damage was not recoverable due to the exculpatory clause.
Per Laskin C.J. and Judson and Spence JJ. dissenting in part: The relevant provisions of the lease when read together forced the conclusion that the lessee was to have the benefit of fire insurance to be effected by the lessor in respect of loss or damage arising from the lessee’s negligence. Canada Steamship Lines Ltd. v. The King, [1952] A.C. 192 and United Motors Service, Inc. v. Hutson, supra, had no bearing on the issues in this case. As to the claim for rental loss, the appellant was in no different position in respect of that than in respect of the other portions of the claim. This loss was within the ambit of the landlord’s covenants to provide coverage for the tenant “against all risks of loss or damage caused by or resulting from fire”. The landlord had obtained partial coverage in its policy against loss of rental income, and its failure to obtain full protection could not be laid at the appellant’s door.
Per Martland and de Grandpré JJ. dissenting: The submission by the tenant was that the lease created an exception to the general rule of liability for his negligence governed by ss. 30 and 33 of The Conveyancing and Law of Property Act. This submission had however to be examined in light of the general principle that an exception must be read restrictively and in light of both Canada Steamship Lines Ltd. v. The King, supra and United Motors Service, Inc. v. Hutson, supra. The lease as a whole, as well as various particular clauses, leads to the conclusion that the words used by the parties were not wide enough to exclude the liability of the tenant where its negligence was clearly established.
[United Motors Service, Inc. v. Hutson, [1937] S.C.R. 294 distinguished; Alderslade v. Hendon Laundry Ld., [1945] 1 K.B. 189; Rutter v. Palmer, [1922] 2 K.B. 87; Canada Steamship Lines Ltd. v. The King, [1952] A.C. 192; Salmon River Logging Co. Ltd. v. Burt Bros., [1953] 2 S.C.R. 117; Shaw v. Robberds (1837), 6 Ad. & E. 75; Attorney-General v. Adelaide Steamship Co., [1923] A.C. 292; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189 referred to.]
APPEAL from a judgment of the Court of Appeal for Ontario[1] allowing an appeal from a judgment of Hartt J. at trial. Appeal allowed in part with costs, Laskin C.J. and Judson and Spence JJ. dissenting in part and Martland and de Grandpré JJ. dissenting. John P. Bassel, Q.C., and J. Murray Davison, for the appellant.
Brendan O’Brien, Q.C., and L.P. Shannon, Q.C., for the respondent.
The judgment of Laskin C.J. and Judson and Spence JJ. was delivered by
THE CHIEF JUSTICE (dissenting in part)—The question in this appeal is whether the appellant, a tenant for a term of years of premises in a shopping centre, is answerable, under its lease of those premises, to the respondent, the owner-landlord of the shopping centre, for loss and damage from a fire originating in the tenant’s premises and caused by its negligence. Substantially, the action out of which this appeal arises is a subrogated one, pursued in the respondent’s name by its insurer; and the issue of the tenant’s liability, in whole or in part, turns on whether by the terms of the lease the respondent had accepted an obligation to effect insurance on the shopping centre, including the building in which the tenant carried on its business, which would, inter alia, protect the tenant from liability which it would otherwise have to suffer if a fire occurred by reason of its negligence.
It is conceded that the fire policy taken out by the respondent on the buildings in its shopping centre provided indemnity against fires resulting from negligence, whether of the respondent or the appellant or a third party. The present appeal does not, however, fall to be decided on the terms of the policy but rather on the terms of the lease. The insurer’s subrogated claim against the tenant is sustainable only on that footing; the insurer’s liability under the policy is not in issue in this appeal. The respondent admitted that under the terms of the lease, hereinafter referred to, it had assumed an obligation to insure both its own and the appellant’s interest against loss by fire, but it contended that it had not covenanted to insure for the benefit of the appellant; the obligation, according to its counsel, was only to make manifest its ability to replace the shopping centre premises for the benefit of all tenants, if those premises should be destroyed by fire, but without in any way giving the tenants themselves, or at least this appellant, any benefit from the insurance by way of protection from liability for negligence. I do not read the terms of the lease this narrowly. I am of the opinion that Hartt J. who dismissed the action was right and that the Ontario Court of Appeal was wrong in imposing liability upon the appellant.
I turn to the relevant terms of the lease and say, by way of preface, that it is common ground that, under any general repairing covenants given by a tenant which except damage by fire, the tenant remains liable for such damage if it arises from its negligence. Nothing in my opinion turns on the fact that ss.30 and 33 of The Conveyancing and Law of Property Act, R.S.O. 1970, c.85 make a tenant for years impeachable for waste and liable for damages accordingly. These provisions are merely echoes of history, and are completely irrelevant to a modern commercial lease which sets out, as does the one in issue here, reciprocal obligations and sets limits to obligations to repair and to reinstate premises destroyed by fire.
The heart of the lease between the parties (apart from the provisions as to the length of the term and the rent) lies in two paragraphs, numbered 8 and 9, which contain numerous subparagraphs. Paragraph 8 begins with these telling words:
“The Lessee covenants and agrees with the Lessor as follows:”
Similarly, para. 9 begins:
“The Lessor covenants with the Lessee as follows:”
I emphasize this because of the respondent’s contention that certain obligations, admittedly resting on the lessor under para. 9, do not run to the benefit of the lessee. If I am reduced to technicality, which I would prefer to avoid in an arm’s length lease between business corporations, say simply that where a convenant runs to the lessee from the lessor it goes beyond mere promise at large or statement of intention and enures to the lessee’s benefit according to its terms. The stand- ard of appraisal is business efficacy, not conveyancing preciosity. The covenant obligations are, in my opinion, firmly stated in the present case.
Subparagraphs 10(1) and (2), 12, 14, 22 and 25 of para. 8 contain the material provisions of the lessee’s covenants, and subparas. 2 and 5 of para. 9 embody the material provisions of the lessor’s covenants relevant to the disposition of the present case. They read, respectively, as follows:
8.(10)
(1) The Lessee shall take good and proper care of the interior of the leased premises and appurtenances thereof (including all plate glass installed in or upon the leased premises) and any improvements now or hereafter erected therein and make all needed repairs and replacements thereto except for reasonable wear and tear, repairs to the four side walls, roof skylights, foundation, floors and the bearing structure of the Building forming part thereof, damage to the Building caused by water damage and damage to the Building caused by perils against which the Lessor is obligated to insure hereunder.
(2) The Lessee will repair according to notice and upon the determination hereof the leased premises shall be surrendered in the condition in which the Lessee is required to maintain the same except for reasonable wear and tear subject to the insurance provisions hereof.
(12) [This term authorizes the tenant at its own expense to decorate and to make improvements subject to certain improvements being conditioned on the lessor’s consent and compliance with relevant statutes and regulations. The subparagraph then continues as follows:]…provided further that the Lessee shall pay to the Lessor the amount of the increase of any insurance premium or policy covering the Building and appurtenances thereto to the extent that such increase is directly attributable to an action by the Lessee under this paragraph and that such insurance shall not thereby be made liable to avoidance or cancellation by the insurer…
(14) It is understood and agreed that the Lessee shall from and after the date upon which it takes possession of the leased premises hereunder, be responsible for the payment of rent and for all services as stipulated in paragraphs 5, 6 and 7 of this lease and also for the repair of any damage caused to the leased premises or to any other portion of the lands or the Building or of other buildings comprising the Shopping Centre whether caused by the Lessee, its employees, servants, agents, workmen or invitees and whether caused while the Lessee is installing fixtures in the leased premises or stocking the leased premises or otherwise.
(22) The Lessee shall take out and keep in force during the term hereof insurance upon all glass and plate glass in the leased premises and property damage insurance and public liability insurance all in amounts and with policies in form satisfactory from time to time to the Lessor and all in recognized insurance companies and shall upon the written request of the Lessor provide a certificate from its insurers stating the amounts of such coverage. Each such policy shall name the Lessor as an additional insured and the cost or premium for each and every such policy shall be paid by the Lessee and not by the Lessor and the Lessee shall obtain from the insurance Companies involved undertakings to notify the Lessor in writing at least ten (10) days prior to any cancellation thereof. The Lessee agrees that if the Lessee fails to take out or to keep in force such insurance the Lessor will have the right to do so and to pay the premium therefor and in such event the Lessee shall repay to the Lessor the amount paid as premium, which repayment shall be deemed to be additional rent payable on the first day of the next month following the said payment by the Lessor. The Lessee shall take out and keep in force during the term hereof fire insurance covering his stock-in-trade, furniture and fixtures in an amount equal to the full insurable value thereof.
(25) That the Lessee will not do or permit to be done, or omitted upon the leased premises, anything which shall cause the rate of insurance upon the said building or any part thereof to be increased and if the insurance rate shall be thereby increased the Lessee shall pay to the Lessor the amount by which the insurance premiums shall be so increased. It is agreed that if any insurance policy upon the leased premises shall be cancelled by the insurer by reason of the use and occupation of the leased premises or any part thereof by the Lessee or by any assignee or sub-lessee of the Lessee or by anyone permitted by the Lessee to be upon the said premises, the Lessor may at its option determine this lease forthwith by leaving upon the leased premises a notice in writing of its intention so to do and thereupon rent and any other payments for which the Lessee is liable under this lease shall be apportioned and paid in full to the date of such determination of the lease and the Lessee shall immediately deliver up vacant possession of the leased premises to the Lessor.
9(2) The Lessor covenants to insure the Shopping Centre including the said Building, excluding foundations in each case, against all risk of loss or damage caused by or resulting from fire, lightning or tempest or any additional peril defined in a standard fire insurance additional perils supplemental contract. All such insurance shall to the best of the ability of the Lessor be to the full insurable value of the property insured.
(5) Except for reasonable wear and tear to repair the four side walls, roof, skylights, foundations, floors and bearing structure of the Building of which the leased premises form part, the sidewalls and parking areas of the Shopping Centre and damage to the Building, sidewalks and parking areas of the Shopping Centre caused by water and damage to any of them caused by perils against which the Lessor is obligated to insure, without being liable for any direct or consequential damage to person or property for any failure to do so.
Paragraph 5 of the lease is also of relevance to the issue of insurance coverage having regard to the words thereof that the parties stroked out. It is as follows:
5. The Lessee shall pay for its own water (on a separate meter), electricity or other power (separate meter), janitor service, window cleaning, cleaning of sidewalks, and snow and ice removal on sidewalks, adjacent to its premises and insurance covering all its obligations to repair and such other risks as it may insure against (except such insurance as is herein required to be carried by the Lessor) and shall pay all taxes, rates, duties and assessments whatsoever whether municipal, parliamentary or otherwise now charged or hereafter charged upon and/or in respect of the contents of the leased premises and/or upon and/or in respect of any business or other activity carried on upon and/or in connection with the leased premises and/or upon the Lessee on account of the leased premises or such contents, business or other activity.
I may refer also to para. 11(2) which provides that if the premises are so badly destroyed by fire or other casualty as, in the opinion of the parties, not to be repairable within nine months of the happening of the damage the lease is to be void as from the date of such happening and possession of the premises is to be surrendered accordingly.
After a consideration of various clauses of the lease and of a number of authorities, the trial judge, Hartt J., found that the parties had agreed that the lessor would assume the duty of purchasing fire insurance on the leased premises to protect the interests of both the lessor and lessee and that such insurance would cover loss by fire, however caused, whether by negligence of the tenant or otherwise. This view of the matter was rejected by the Ontario Court of Appeal which considered the case should be resolved by the legal principles governing exculpatory clauses, namely, that where such a clause would exonerate from liability for negligence as well as from contractual liability, it must expressly relieve from liability for negligence (unless it would otherwise have no subject matter) since otherwise it will be construed as exonerating only from contractual liability. Canada Steamship Lines v. The King[2], was cited and I shall return to it later. Kelly J.A. could not find that the lease clearly relieved the appellant from liability for fire caused by its negligence. It was also his opinion that “the ordinary concept” of fire insurance did not embrace insurance effected by a lessor to protect against its lessee’s negligence; and he added this:
I can find nothing in the policy of insurance, read singly or in conjunction with the lease itself, to indicate any intention to insure against the peril of the Lessee’s negligence. I think the policy has the usual effect only, namely, entitlement in the Lessor to indemnity (in addition to indemnity against any loss suffered by accidental fire) against fire loss arising from the Lessee’s negligence to the extent to which the Lessor may be unable to recover that loss from the Lessee, and to a similar extent against fire loss occasioned by the negligence of third parties.
The “ordinary concept” of fire insurance does embrace fires caused by negligence and the fact is that the policy taken out by the lessor did insure against negligence, whether that of the lessee or others. Even so, the question of the scope of the indemnity as it arises in this case is not dependent on the policy but, rather, so far as the lessor and lessee are concerned, on the terms of the lease.
What is significant about the lease in this case is that nowhere in it is there found the usual tenant’s repairing covenant, which generally reads “to repair, reasonable wear and tear and damage by fire, lightning and tempest only excepted”. Instead, the lease (as in para. 8(10)(1)) requires the tenant to take good and proper care, and make needed repairs and replacements, except for reasonable wear and tear and damage to the building caused by perils against which the lessor is obliged to insure; and again (as in para. 8(10)(2)), the tenant must repair according to notice, and surrender the premises in the required condition of maintenance, except for reasonable wear and tear subject to the insurance provisions of the lease. The excepted liability, referable to the lessor’s insurance obligation, is reinforced by para. 5, in which the words “insurance covering all its obligations to repair”, which refer to the tenant, are stroked out; and it is undeniable that ordinarily the obligations to repair would include obligations to repair damage from fire caused by the tenant’s negligence. Again, para. 8(22) shows the words “insurance upon all glass and plate glass in the leased premises and property damage insurance” stroked out in a clause otherwise referring to the tenant’s obligation to effect insurance; the obligation is limited to public liability insurance.
The connection between these matters and the lessor’s insurance obligations under para. 9 are very clear under the terms of subparas. (2) and (5) of para. 9. There is an express undertaking by the lessor to the lessee to insure the shopping centre, including the building which embraces the leased premises, an undertaking explicitly directed to all risk of loss or damage by fire (the emphasis is mine); and further, and of great significance is the lessor’s obligation, reasonable wear and tear excepted, to repair the other side walls, roof, floors and foundation of the building of which the leased premises form part, and damage to the building caused by perils against which the lessor is obliged to insure. These perils include, as already indicated, all risk of loss or damage by fire. The qualification to this obligation to repair and reinstate the leased premises where damaged by fire is found in para. 11(2), which provides for termination of the lease only if the building in which the tenant’s premises are located is not repairable within nine months.
Reinforcing the wide scope of the lessor’s insuring obligation is para. 8(12), under which the tenant must pay to the lessor any increase in insurance premiums in respect of the building in which the lessee has its premises, where such increase was directly attributable to structural changes or improvements made by the tenant.
When all the foregoing provisions of the lease are read together, they force the conclusion that the lessee is to have the benefit of fire insurance to be effected by the lessor in respect of loss or damage arising from the lessee’s negligence. Paragraph 8(14) of the lease does not alter this conclusion because it is referable to an obligation of repair which arises upon the taking of possession and which must be read in the light of the general repairing covenants in para. 8(10); otherwise it would be inconsistent therewith since it would, read literally and separately, oblige the lessee in respect of repairs from which it is expressly excepted under subpara. (10) and which the respondent had undertaken to effect under para. 9(5). I did not understand counsel for the respondent to urge that para. 8(14) had any dominating effect in this litigation.
The respondent’s reliance on the principle governing exculpatory clauses is, in my view, misconceived; and even if those principles were appli- cable, I doubt that they would lead to the result reached by the Ontario Court of Appeal. To take this last point first, I have noted earlier that the lease does not contain the usual tenant’s repairing clause which associates a covenant to repair with an exception of damage by fire. Rather, the lessor is obliged to insure against all risks of loss by fire, and the tenant’s obligation to repair excepts damage caused by perils against which the lessor is obliged to insure. The tenant would not, ordinarily, be liable for an accidental fire where it was not caused by negligence. The lease in this case recites that it is made pursuant to The Short Forms of Leases Act. Under that Act (as it appears in R.S.O. 1970, c. 436) the standard tenant’s repairing covenant reads “to repair, reasonable wear and tear and damage by fire, lightning and tempest only excepted”. Variations are permitted, and it appears to me that the parties in the present case, in replacing the usual tenant’s covenant to repair, which excludes liability for accidental fire, with a provision excluding liability for all risks of damage by fire, made it clear that the only subject matter which can be assigned to this exception so far as the tenant is concerned is coverage for fire arising from its negligence.
But be that as it may, we are not faced in this case with an exculpatory clause which is predicated upon the existence of some liability which that clause would reduce or eliminate. We are faced instead with a series of clauses under which the limits of particular liabilities are drawn ab initio. If this is to be regarded as falling within the principles governing exculpatory clauses, then every question of construction of a commercial document under which the range of liability is contested can be turned into a question of the limits of inculpability and exculpability. Canada Steamship Lines Ltd. v. The King[3] involved a lease but that is its only affinity with the present case. The Crown had leased a freight shed to the appellant and, while repairs were being made by servants of the Crown who were using an oxy-acetylene torch, a fire broke out which destroyed the shed and contents. There was an exculpatory clause in the lease in favour of the lessor, and among the questions litigated was whether this clause, taken in relation to others, gave the lessor an immunity from liability for negligence with respect to damage or loss of the lessee’s goods stored in the shed. The Privy Council held that the exculpation of the lessor did not extend to negligence but the considerations which led it to this conclusion have no bearing on the construction of the related clauses on which the present case turns.
Considerable reliance was placed by the respondent on the judgment of this Court in United Motors Service Inc. v. Hutson[4], where the lease contained a covenant by the lessor to pay all taxes and all premiums of insurance upon the buildings erected on the demised premises. The lessee gave the usual repairing covenants which excepted reasonable wear and tear and damage by fire, lightning and tempest. The issue which arose in the case was mainly whether there was negligence on the lessee’s part which caused the fire that damaged the leased building. In connection with this point, the Court reaffirmed the legal liability of a tenant under its repairing covenants where a damaging fire occurred by reason of its negligence. There is not a word in the reasons of this Court, nor indeed in those of the Ontario Court of Appeal, the Court below (see [1936] O.R. 225), which relates to the effect of the lessor’s undertaking to pay all insurance premiums upon the tenant’s liability for a fire arising from its negligence. There was no covenant by the lessor to insure as there is in the present case, and, in any event, I refuse to speculate from the result in the Hutson case (holding the tenant liable) that the Court must have concluded that (1) the lessor’s covenant to pay insurance premiums was equivalent to a covenant to insure and (2) if so, the covenant did not extend to any benefit to the lessee from such insurance. There is simply no correspondence, nothing remotely comparable between the spare provisions of the lease in the Hutson case and the related insurance and repairing covenants in the present case.
Counsel for the appellant and for the respondent referred to competing lines of American cases on the problem under consideration. In so far as any of these cases turn simply on the scope of an exception of fire in a repairing covenant, they are of no assistance here, no matter on which side of the line dividing liability and no liability they fall: contrast General Mills Inc. v. Goldman[5] and Morris v. Warner[6] and see also Sears, Roebuck & Co. Inc. v. Poling[7]. Whether there should be a shift in the scope given to a fire exception clause in a tenant’s repairing covenant, in the light of standard fire insurance policies covering negligence and which are generally carried by an owner of property, need not be determined here. Where, in the American cases, the exception from liability for fire in the tenant’s repairing covenants (especially the covenant to yield up in repair) is reinforced by a covenant on the lessor’s part to insure, or to pay for insurance, the weight of the authority appears to be that the tenant is not liable for loss or damage from fire caused by its negligence: see Fry v. Jordan Auto Co.[8]; Cerny-Pickas & Co. v. C.R. John Co.[9]; Fred A. Chapin Lumber Co. v. Lumber Bargains Inc.[10]; contra, Winkler v. Appalachian Amusement Co.[11] The case of Wichita City Lines Inc. v. Puckett[12], cited by the respondent, does not carry beyond the general rule that an exception of fire does not relieve a tenant of liability for negligence. The lessor in that case had retained possession of part of the building covered by the lease and had agreed therein to carry his own insurance. It was held that this reference to insurance provided no basis upon which the tenant could claim protection against liability for negligence.
None of the American cases that I have examined, which have held the lessee to be protected from liability for negligence causing loss or damage by fire, contained lease clauses that were as explicit as those in this case in placing upon the landlord the risk of loss or damage by fire arising from the tenant’s negligence. These clauses are quite inconsistent with the position of the respondent that it was protecting only its own interest without benefit to the appellant. There would be no need of covenants running to the appellant if that was the case.
The respondent contended that even if it was wrong as to the appellant’s liability for the subrogated claim of the respondent’s insurer, there was still a liability of the appellant for $10,105 in loss of rental income because the insurance covered only $15,000 of a loss of $25,105. The respondent contended that there was no covenant by it to insure against loss of rents. The trial Judge had this question before him, as is evidenced by his reference to the item of loss of rental income as a head of damage, but rejected the entire claim of the respondent. I can come to no other conclusion, but I think it desirable to spell out the considerations which move me to this result.
The sum of $25,105 claimed as loss of rental income was made up of the loss of rent from each tenant in the shopping centre whose rent abated because of the fire for the six months or so during which the premises of those tenants were not usable. What was claimed in respect of each such tenant was the minimum monthly rent, and such a claim was also made in respect of the minimum rent of the appellant, which was $489 per month, the total claim being $3,734. Although there was a clause in the lease with the appellant, namely para. 11(2), providing for abatement of rent in case the premises were destroyed by fire, the theory of the claim against the appellant in respect of its minimum rent was that it could not claim abatement where the fire was caused by its negligence. As stated in 52 Corpus Juris Secundum (1968), at p. 415, “as a general rule it is necessary that the tenant should have been free from fault in order to be relieved from liability under a provision of the lease”. It was on the same theory that the main claim in this case was made.
The insurance policy taken out by the respondent covered loss of rental income up to $275,000 subject to a co-insurance provision. No dispute was taken as to amount with the claimed rental loss of $25,105 or with the fact that of this sum $15,000 was within the insurance coverage. I do not see, however, that the appellant is in any different position in respect of the respondent’s loss of rent than in respect of the other portions of the claim.
The question whether there should be recovery in this case by the landlord for loss of rental income does not depend on the repairing covenants or on the fact that in sub-para. 10(1) of para. 8 the exceptions from liability to repair include “damage to the building caused by perils against which the lessor is obligated to insure hereunder”. This exception must be related to its subject matter in the paragraph, which concerns repair and exceptions therefrom, and cannot qualify the scope of the insuring covenant given by the lessor under para. 9(2) so as to exclude loss of rental income resulting from fire from the ambit of the duty to provide coverage “against all risks of loss or damage caused by or resulting from fire”.
The matter may be tested in a simple way. If there had been no insuring obligation upon the lessor and there had been a fire resulting from the lessee’s negligence, thus bringing into play the lessee’s obligation to repair damage caused by the negligence, is there any doubt but that the lessee would have been liable as well for the lessor’s loss of rental income? That would have been one of the risks of liability for loss or damage by fire arising from negligence. Just as obviously, that is a risk which was included, in exoneration of the lessee, under para. 9(2) of the policy under which the lessor covenanted “to insure the Shopping Centre including the said Building…against all risk of loss or damage caused by or resulting from fire…”. The lessor in this case had obtained partial coverage for loss of rental income. Its failure to obtain full protection cannot be laid at the appellant’s door.
I would, accordingly, allow the appeal, set aside the judgment of the Ontario Court of Appeal and restore the judgment of Hartt J., with costs to the appellant throughout. However, in view of the differences of opinion exhibited in this case, the formal judgment of the Court must be to allow the appeal in part in accordance with the disposition proposed in the reasons of Pigeon J.
The judgment of Martland and de Grandpré JJ. was delivered by
DE GRANDPRE J. (dissenting)—The sole question to be determined on this appeal is the liability of the tenant, appellant in this Court, for a fire caused by its negligence and having entailed for the landlord (respondent) a loss alleged to be in the following amounts:
$208,648 for the building;
$25,105 for loss of rentals.
The negligence of the tenant must be taken as established although appellant submits that it has not been proven. On this point, there are concurrent findings of facts against appellant and I can see no reason to disturb this unanimous conclusion of the Courts below.
It is on the question stated at the outset of these reasons that there has been a difference of opinion in the Courts of Ontario, the trial judge having come to the conclusion that the contractual arrangements between the parties constitute a valid answer to the claim whereas the Court of Appeal unanimously reached a different conclusion. Both these decisions having now been reported [1970] I.L.R. 1-380 and [1972] 2 O.R. 341, there is no need for me to quote at length from the lease at the outset. It will be sufficient to refer thereto in the course of these reasons.
There is no doubt that if the relations between the landlord and the tenant were to be examined in the sole light of the relevant statute, the tenant would be responsible to the landlord. As underlined by Kelly J.A., speaking for the Court, the matter would then be governed by ss. 30 and 33 of The Conveyancing and Law of Property Act, R.S.O. 1960, c. 66, which read:
30. A tenant by the curtesy, a dowress, a tenant for life or for years, and the guardian of the estate of an infant, are impeachable for waste and liable in damages to the person injured.
33. Lessees making or suffering waste on the demised premises without licence of the lessors are liable for the full damage so occasioned.
The tenant, however, submits that the lease to which detailed reference will be made later, creates an exception to that general rule of liability. This submission must be examined not only in the light of the general principle that an exception must be interpreted restrictively but also in the light of the decision of the Privy Council in Canada Steamship Lines Ltd. v. The King[13]. In the speech of Lord Morton of Henryton, we find the following oft quoted guidelines to be followed when a person wishes to avoid the consequences of his negligence by placing reliance on a contract: (at p. 208)
Their Lordships think that the duty of a court in approaching the consideration of such clauses may be summarized as follows:—
(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called ‘the proferens’) from the consequence of the negligence of his own servants, effect must be given to that provision. Any doubts which existed whether this was the law in the Province of Quebec were removed by the decision of the Supreme Court of Canada in The Glengoil Steamship Company v. Pilkington (1897), 28 S.C.R. 146. (2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants or the proferens. If a doubt arises at this point, it must be resolved against the proferens in accordance with article 1019 of the Civil Code of Lower Canada: ‘In cases of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation.’
(3) If the words used are wide enough for the above purpose, the court must then consider whether ‘the head of damage may be based on some ground other than that of negligence,’ to quote again Lord Greene in the Alderslade case [1945] 1 K.B. 189. The ‘other ground’ must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene’s words, the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants.
Although this statement of the relevant principles is to be found in a case having originated in the province of Quebec, they have their roots in the common law and have been applied b