Boardwalk Reit Properties Holdings Ltd v Crystal Mountain Water Cooler Corporation, 2016 ABQB 237

Court of Queen ’ s Bench of Alberta Citation: Boardwalk Reit Properties Holdings Ltd v Crystal Mountain Water Cooler Corporation, 2016 ABQB 237 Date: 20160426 Docket: 1003 18273, 1003 21571 Registry: Edmonton Between: Boardwalk Reit Properties Holdings Ltd. et al Plaintiffs - and – Crystal Mountain Water Cooler Corporation, Culligan of Canada Ltd., John Doe I, John Doe II, John Doe III, MTN Products Inc., IGO Consolidated Corporation SDN BHD., Product Solutions International Inc. carrying on business as Product Solutions International and John Brooks Company Limited/John Brooks Compagnie Limitee and XYZ Corporation Defendants - and – Crystal Mountain Water Cooler Corporation, John Doe I, John Doe II, John Doe III, MTN Products Inc., Appli-Tech Inc., Applitech, Applitech Canada, IGO Consolidated Corporation SDN BHD., Product Solutions International Inc. carrying on business as Product Solutions International and John Brooks Company Limited/John Brooks Compagnie Limitee and XYZ Corporation and 606528 Alberta Ltd., carrying on business as Brite Beginnings Day Care and Out of School Care Third Party And Between: Docket: 1003 21571 606528 Alberta Ltd., carrying on business as Brite Beginnings Day Care and out of School Care Plaintiffs - and –

Culligan of Canada Ltd., and Culligan of Canada Ltd., carrying on business as Culligan Culligan MTN Products Inc., MTN Products Inc., carrying on business as MTN Products, Appli-Tech Inc., Applitech, Appli-Tech Canada, IGO Consolidated Corporation SKN. BHD, Product Solutions International Inc., carrying on business as Product Solutions International, and John Brooks Company Limited, carrying on business as John Brooks Company Ltd. Defendants - and – MTN Products Inc., MTN Products Inc., carrying on business as MTN Products, Appli-Tech Inc., IGO Consolidated Corporation SDN.

BHD., Product Solutions International Inc., carrying on business as Product Solutions International, John Brooks Company Limited, carrying on business as John Brooks Company Ltd., Boardwalk Reit Properties Holdings Ltd., Boardwalk Reit Properties Holdings (Alberta) Ltd., and Boardwalk Reit Property Holdings Ltd., carrying on business as Boardwalk General Partnership. Third Party _______________________________________________________ Reasons for Judgment of L.A.

Smart , Master in Chambers _______________________________________________________ Introduction [ 1 ] Boardwalk Reit Properties Holdings Ltd (Boardwalk) leased a commercial building to 606582 Alberta Ltd (Daycare). A fire that occurred in the building on May 6, 2009 is alleged to have been caused by a faulty water cooler located in the Daycare’s premises. Boardwalk has commenced an action against Culligan of Canada Ltd (Culligan) for damages arising out of the fire.

The Daycare has also commenced an action against Culligan for recovery of damages to its property located on the premises and for loss of income. [ 2 ] Boardwalk has not named the Daycare as a defendant in its action. Culligan has defended and taken Third Party proceedings against the Daycare. The Daycare has not named Boardwalk as a defendant in its action.

Culligan has defended that action and counterclaimed as against the Daycare. [ 3 ] Under the terms of the lease between Boardwalk and the Daycare, Daycare pays occupancy costs that includes the cost of all insurance placed and maintained by Boardwalk under the provisions of that agreement. Boardwalk is required to insure the building against loss under a standard fire insurance policy with extended coverage endorsement. [ 4 ] The Daycare applies to strike the claims of Culligan advanced in the Boardwalk action or alternatively for

summary dismissal of the claim. It also seeks dismissal of the counterclaim in its action against Culligan. Discussion [ 5 ] In effect, Boardwalk and the Daycare agreed that Daycare be treated as a named insured under the fire insurance policy with the extended coverage endorsement. A consequence is that the insurance company is prevented from initiating a subrogated suit against the Daycare as it is effectively an insured and paid premiums under the policy.

Furthermore, as Boardwalk covenanted to insure it has also impliedly covenanted to the Daycare to give it the benefit of that insurance ( Howalta Electrical Services Inc. v CDI Career Development Institutes Ltd , 2011 ABCA 234 ). The very nature of these agreements is said to prevent a third-party from exposing the covenantee to the covenantor’s loss claims through third-party pleadings ( Howalta ). Applying that principle to this case, Culligan cannot seek relief from Daycare as Boardwalk cannot sue Daycare directly. [ 6 ] Culligan does not dispute this

interpretation and analysis to the extent that it applies to a third-party claim for indemnity for tortious conduct of Daycare. It argues that Culligan’s entitlement to indemnity arises from the contractual terms contained in the Residential Bottled Water/Cooler Agreement dated August 4, 2005 (Cooler Agreement) with Daycare.

[ 7 ] Specifically, the relevant Terms and Conditions are as follows: Culligan Agrees: 3. To keep the Equipment in good working order, and to make all necessary repairs and/or replacements except those caused by the default or negligence of the Customer or a third party. The Customer Agrees: 5.

To take reasonable care of the Equipment, shall use and operate the Equipment only for the purposes for which it was manufactured and in accordance with all operating and/or other instructions applied with the Equipment, to pay Culligan a reasonable amount for all repairs and/or replacements caused by the default or negligence of the Customer, and not to remove or deface any marks, plates, stickers or serial numbers on the Equipment by which such Equipment is identified as the property of Culligan. The Customer and Culligan Agree: 17. The Customer assumes all the risks of an owner of the Equipment.

Culligan shall not be liable for any injuries (including death) or damages occasioned to or suffered by any person or property, and the Customer shall indemnify Culligan against any and all claims and liability for injury or death of persons or damage to property, caused by or happening in connection with the Equipment or the condition, maintenance, possession, operation or use their of or any other cause whatsoever, including, without limitation, the negligence of Culligan, water leakage, condensation or fundamental breach of contract by Culligan, subject to The Consumer Protection Act or similar legislation in other jurisdictions, if applicable. [ 8 ] In the Agreement Daycare is identified as the Customer, and the Equipment as the watercooler supplied by Culligan.

Paragraph 17 of the Agreement is marked with an X and initialed by a representative of Daycare. Analysis [ 9 ] The Tort-Feasors Act , RSA 2000,c.T-5 (the “ Act ”) states the following: 3

(1) When damages suffered by any person as a result of a tort, whether a crime or not, (

c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is or would, if sued, have been liable in respect of the same damage, whether as a joint tort-feasor or otherwise, but no person is entitled to recover contribution under this

section from any person entitled to be indemnified by the person first mentioned in respect of the liability regarding which the contribution is sought. [ 10 ] The purpose of tort-feasor legislation is to avoid the common law rule that there is no contribution between joint tort-feasors. Assuming that we have a circumstance where there are joint tort-feasors, it is necessary to focus upon the words “liable in respect of the same damage,” and “whether as a joint tort-feasor or otherwise”.

Whether the entitlement to seek contribution or indemnity arises by virtue of the legislation or as a consequence of a contractual indemnity, in this case the damage in my view remains the same. Simply put, Boardwalk seeks compensation for damage to its building against Culligan which is precisely the same damage Boardwalk would seek from Daycare if it were able. Seeking of contribution for that damage does not recharacterize it.

Furthermore, the adding of the words “or otherwise” makes the legislation broad enough to engage it when one seeks contribution by way of a contractual indemnity as Culligan does in this case. The basis for the foregoing is set out in the careful reasoning and a detailed discussion in Howalta . As noted by Justice Cote many of the principles which he applies are based on authorities that bind all courts in Alberta.

I need not be reminded that authorities binding upon the Court of Appeal of Alberta are most certainly binding upon me as is the decision in Howalta . [ 11 ] However, in my view this does not end the matter. Culligan has defended the action by Boardwalk and by Daycare by alleging among other things liability of Daycare in whole or in part based on its negligence. Should Culligan succeed in that argument then Daycare and Culligan may well be joint tort-feasors. As noted above Section 3(1) (

c) of the Act would then apply and there would be no entitlement to contribution or indemnity. But the finding of negligence or other tortious conduct of Daycare, or for that matter of Culligan, has yet to be made. In the event that either one is found not to be liable in tort, the Act may not apply and the contractual indemnity provision may well have legitimate application to these proceedings. Conclusion [ 12 ] In this case to the extent that there is an undisputed basic fact pattern, I am able to apply s 3(1)(

c) of the Tort-Feasors Act as it has been interpreted in Howalta . Accordingly, references in Culligan’s pleadings to the Tort- Feasors Act in both actions are struck. At this stage, I am not prepared to strike the counterclaim of Culligan in the Daycare action as although in many respects it duplicates the Statement of Defence, the contractual provisions in the Cooler Agreement may give rise to a cause beyond a mere defence. Nonetheless, Culligan should consider rationalizing its pleadings in the two actions. [ 13 ] In light of the mixed success, the parties will each bear their own costs of this application. Dated at the City of Edmonton, Alberta this 25 th day of April, 2016.

L.A. Smart M.C.C.Q.B.A. Appearances: Angela Kos Brownlee LLP for the Boardwalk Reit Properties Dimitrios (Jim) Chronopoulos Chatwin LLP for 606528 Alberta LTD. carrying on business as Brite Beginnings Day Care and Out of School Care Brent Cooper McLeod Law LLP for Culligan of Canada Ltd. Kyle Stowkowy Parlee McLaws LLP John Brooks Company Limited