GRAYSBROOK CAPITAL LTD. PLAINTIFF - v. -, 2023 NBKB 237

SJC/311/2022 IN THE COURT OF KING’S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF SAINT JOHN Citation: 2023 NBKB 237 BETWEEN: GRAYSBROOK CAPITAL LTD. PLAINTIFF - and - VIVA DEVELOPMENT INC., JOSEPH VAUTOUR, MARIE VAUTOUR, and MATHIEU VAUTOUR DEFENDANTS -and- GREAT AMERICAN INSURANCE COMPANY, SEARS INSURANCE LTD., and ANDERSON-MCTAGUE & ASSOCIATES LTD. THIRD PARTIES BEFORE: Justice William T. Grant HEARING HELD: Saint John DATE OF HEARING: October 31, 2023 DATE OF DECISION: December 20, 2023 SUBJECT MATTER:

Summary Judgment COUNSEL: Nadia M. MacPhee, for the plaintiff Yanis Khiari for the defendants Josie Marks for Sears Insurance Ltd.

Christopher Morrison for Great American Insurance Company Nathan Sutherland and Nicola Watson for Anderson-McTague & Associates DECISION GRANT, J BACKGROUND [ 1 ] This action arises from the construction of a building at 134 Taylor Avenue in the City of Saint John by the defendant, Viva Development Inc. (“the project”), that was financed by a loan from the plaintiff, Graysbrook Capital Ltd.

That loan was guaranteed by the other defendants, Joseph Pierre, Marie Cecile and Mathieu Vautour. [ 2 ] At the request of Viva, Sears Insurance Ltd. (“Sears”) placed a Builders’ Risk insurance policy on the project on September 18, 2020 for a period of one year (“the policy”). The policy was issued by Great American Insurance Company (“GAIC”) and underwritten by Anderson-McTague and Associates Ltd.(“Anderson”). [ 3 ] As is customary with Builders’ Risk insurance the policy had an expiry date meant to coincide with the anticipated date of completion of the project.

When construction wasn’t complete on that date Viva needed an extension of the policy. [ 4 ] On September 14, 2021 Isabelle Gaudet of Sears emailed the defendants to advise them, inter alia, that the policy was about to expire. The defendant, Joseph Pierre Vautour (“Mr. Vautour”) responded and requested an extension of the policy until December 31, 2021. [ 5 ] Ms. Gaudet then contacted Anderson which arranged for the extension and advised her of the cost. She then told Mr. Vautour the cost and he said it would be paid the following day.

The extension to December 31, 2021 was issued on September 15, 2021; the premium has yet to be paid. [ 6 ] During the term of that extension Sears made numerous attempts, which included five emails and two phone conversations, to collect the premium as detailed at paragraph 12 of the affidavit of Scott Embree of Sears sworn December 19, 2022. [ 7 ] When Mr. Vautour called Ms. Gaudet on December 21, 2021 for reasons unrelated to the policy, Ms. Gaudet reminded him that the policy was about to expire on December 31, 2021. [ 8 ] Mr. Embree deposes, confirmed by Ms.

Gaudet in her affidavit also sworn on December 19, 2022, that Mr. Vautour then asked for a quote for a three-month extension of the policy. [ 9 ] In an email to Mr. Vautour of the same date Ms. Gaudet wrote: To extend the builders risk and the liability the cost would be $2,984 + the old balance of $3,514 for a total of $6,498 would need to be paid prior to us being able to extend. [ 10 ] Mr. Embree further deposes that Sears received no response to either this email or a further reminder sent on December 31, 2021. He also deposes that Viva did not request an extension of the policy.

[ 11 ] Sears did not submit a request to Anderson to extend the policy beyond December 31, 2021 and there was a fire on March 16, 2022 in which Viva suffered a loss. [ 12 ] In his affidavit sworn on October 24, 2023 Mr. Vautour deposes that in his phone call on December 21, 2021 with Isabelle Gaudet he asked her to extend the policy until March 31, 2022 and believed that she had done so in accordance with his instructions. He further deposes, in part: [46] Before the loss occurred, I was not very responsive to emails. I conducted most of my business over my cell phone.

I was particularly not responsive to emails in December of 2021 as I was in the hospital with my father who was dying of cancer. [47] I believe Sears was aware that contacting me on the phone was the best way to reach me as it had been my insurance broker for hundreds of insurance policies for the past 23 years. [48] As indicated above, on or around December 21, 2021, I spoke to Isabelle Gaudet of Sears Insurance on the phone, and during this call asked her to extend the Policy for an additional three months to March 31, 2022. …. [49] My instructions to renew the Policy were clear, and were not subject to the price of a quotation.

I was building an apartment building worth over a million dollars and needed insurance for it at all costs. [50] On December 21, 2021, Sears sent me an email with a quote to renew the policy. …. [51] I did not see the December 21, 2021, email from Sears at that time.

I was not responsive to emails at that time and was in the hospital with my father who was dying of cancer. [52] No one at Sears even bothered to call me on December 21, 2021, or any time thereafter with respect to the renewal. [53] In any event, and as previously stated, my instructions to Sears were to renew the policy, not to provide me with a quote so that I could make a decision. [54] Sears waited until the very last day, and on December 31, 2021, sent me another email with respect to the quote on the Policy. …. [55] Again, I did not see this email.

December 31, 2021, was the date the Policy was due to expire. No one at Sears even bothered to call me about this urgent situation. [56] On December 30, 2021, Denise Scott of Anderson McTague sent an email to Sears asking whether to renew the Policy because it was set to expire. ….

[57] The following day, Denise Scott of Sears simply replied, “I did not receive a response from the insured.” …. [58] Denise Scott of Sears did not even bother to call me on December 31, 2021. [59] Sears knowingly left me without insurance on an incomplete project despite my explicit request to renew the Policy. ….

PLEADINGS [13] In the main action Graysbrook Capital Ltd. sued the defendants for the balance owing on the loan it advanced to them to assist in the construction of the project. [14] The defendants filed a statement of defence denying liability to Graysbrook as well as a third party claim against GAIC, Sears and Anderson, (collectively “the insurers”) alleging, inter alia , that they were negligent in failing to provide Builders’ Risk insurance on the project. [15] In those claims they allege that the insurers:

a) owed them a duty of care and failed to meet the standard of care for companies providing insurance coverage to an insured as a result of which they suffered a loss;

b) are thereby jointly and severally liable to them in both negligence and contract for their failure to renew the policy despite Mr. Vautour’s instructions to them to do so; and

c) failed to fulfill their duty to notify Graysbrook that they were not renewing the policy as required by the Mortgage Holder’s Endoresment clause in the policy thereby causing their indebtedness to Graysbrook. [16] They claim indemnity from the insurers for that loss or, in the alternative, contribution towards it pursuant to the Contributory Negligence Act , S.N.B. 2011 c. 131. [17] In its third party defence Sears says that the policy expired as per its terms on December 31, 2021 and requests that the third party claim against it be dismissed with costs. [18] In its third party defence Anderson also denies the defendants’ allegations that it was liable in negligence or at all including for breach of contract and denies that it owed any duty to the defendants in tort or contract. [19] In its third party defence GAIC denies that it was negligent and states that it discharged all obligations it owed to the defendants – statutory, contractual or otherwise – and denies that there is any other basis for a claim by the defendants against it.

It too requests that the third party claim against it be dismissed with costs. THE MOTIONS [20] On January 27, 2023 Graysbrook sought and obtained

summary judgment in the main action. Sears also sought

summary judgment at that time but its motion was dismissed on the grounds that it was for partial

summary judgment as it was largely fact-driven and consequently was not severable from the claims against the other two third parties. As a result this court concluded that granting

summary judgment to Sears would not result in any meaningful reduction of the length of the ultimate trial since evidence from Sears of their involvement would be required at that trial to determine whether or not the other third parties are liable to the defendants. Sears was also granted leave to re-file its motion if the other third parties did so as well.

[21] The three third parties now bring motions for

summary judgment against the defendants claiming that there are no genuine issues requiring a trial in respect to the third party claims. The defendants oppose all of the motions. [22] The insurer for Graysbrook submits that there are overlapping issues in this action and another action (SJC-90-2-23) in which it sues GAIC for failing to give it notice that the policy was not being renewed which, it submits, GAIC was obligated to do under the Mortgage Holders Endorsement in the policy. LAW [23] The test to be applied in a

summary judgement motion as set out in Rule 22.04(1)(

a) is whether or not there is a genuine issue requiring a trial with respect to a claim or defence. [24] In Russell et al. v. Northumberland Cooperative Ltd . 2019 NBCA 70 LeBlond J.A. outlined a two-step process for dealing with

summary judgment motions at paragraphs 22-3 where he stated, in part, as follows: 22 In step one, the judge must determine if the evidence put before him reveals a genuine issue requiring a trial. At this point, there is no need to resort to the fact-finding powers contained in Rules 22.04(2) and (3). Adjudication under step one may include cross-examination on any affidavit (Rule 39.03). Any such cross-examination does not trigger the mini trial prescribed by Rule 22.04(3). If, on the filed evidence alone, the judge can fairly and justly adjudicate the dispute, there will be no genuine issue requiring a trial and the judge must grant

summary judgment. There is no discretion under the Rule to refuse to do so (see 22 King St. Inc. et al. v. The Bank of Nova Scotia , 2018 NBCA 16 , [2018] N.B.J. No. 42 (NBCA) ). … 23 A judge only proceeds to step two if the assessment of the filed evidence leads to the conclusion that there may be a genuine issue requiring a trial. In that case, the judge then needs to determine if that trial can be avoided by resorting to the fact-finding powers of Rule 22.04(2) and (3).

The guiding principle is that it will always be in the interest of justice for the judge to make use of these fact-finding powers if, applying the principles of timeliness, affordability and proportionality the judge believes a trial can be avoided and a fair and just result can be obtained. The discretion vested in the judge under the second step will provide the flexibility required to fashion an appropriate course to follow. [25] In these three motions the parties filed eight affidavits which raise a number of issues which are critical to the determination of these third-party claims including:

a) in his conversation with Ms. Gaudet on December 21, 2021, did Mr. Vautour request a quote as Ms. Gaudet says or did he request an extension of the policy, as he says?

b) did the policy,

i) expire according to its terms as the third parties allege; or ii) did Sears refuse to extend it as alleged by the defendants; or iii) did it elect not to extend/renew it as alleged by Graysbrook in its action?

c) if he asked for an extension, did Sears,

i) agree unconditionally; ii) agree on terms as it alleges; iii) refuse as the defendants allege; or iv) elect not to extend/renew as Graysbrook alleges?

d) if Sears agreed to extend it on terms, did it clearly and effectively communicate that conditional response to Mr. Vautour or was it obliged to do more? [26] The positions of the parties on those issues which, I find, may be genuine issues, are diametrically opposed and the determination of them will involve findings of fact based on credibility which cannot be assessed based solely on affidavit evidence. None of the parties requested the opportunity to cross-examine on the affidavits as permitted under Rule 39. In the circumstances, then, I find that those issues cannot be resolved on the basis of the filed evidence alone.

[27] That leads to the issue of whether this is an appropriate case for conducting a mini-trial. I find that it is not for the following reasons. [28] As noted earlier, with the consent of the other parties, Graysbrook made submissions on these motions in which it advised the court that there is another action – SJC – 90 – 2023 – in which it is plaintiff and GAIC is the defendant.

That action concerns the issue of GAIC’s obligation, if any, under the Mortgage Holder’s Endorsement (“the MHE”) in the policy to notify Graysbrook at least 10 days before the expiration of the policy. [29] The MHE reads as follows: If we elect not to renew this policy, we will give written notice to the mortgage holder at least 10 days before the expiration date of this policy. [30] In that action Graysbrook alleges that the wording of the endorsement is clear and that if the insurer elects not to renew the policy, as it did in this case, the obligation to notify it as the mortgagee is triggered.

It claims against GAIC for the whole of the principal and any accrued interest up to the date of payment. [31] GAIC alleges that the MHE only applies if it elects not to extend/renew the policy but not where, as here, the policy simply expires. It further alleges that it was the insured that elected not to renew it by failing to pay the outstanding premiums and that the policy simply lapsed on December 31, 2021.

It submits that the wording of the MHE, i.e. “… elect not to renew …” should be given its plain and ordinary meaning because it could not possibly notify mortgage holders every time a policy lapsed/expired as occurred here. It also alleges that since it made no election to not renew the policy it was under no obligation to notify Graysbrook pursuant to the MHE. [32] As can be seen GAIC raises the same defence in both this action and cause number SJC-90-2023.

For that defence to succeed it requires a finding of fact in respect to a common issue, viz. , whether the policy was not renewed by the third parties or allowed to lapse by the defendants in accordance with its terms. The outcome of both actions depends on that finding of fact which will be based on precisely the same evidence. [33] For

summary judgment to be granted to GAIC in this action would require a finding of fact that the policy expired/lapsed as opposed to a finding that the third parties elected not to renew it. That is precisely the finding that GAIC requires in cause number SJC- 90-2023 to defend Graysbrook’s claim that it had an obligation under the MHE to notify Graysbrook. However, that finding in this motion would not be binding on the court hearing cause number SJC–90–2023 which could result in conflicting findings of fact based on the same evidence. [34] Given that possibility, then, I find that conducting a mini trial on GAIC’s motion would not be appropriate. I further find that

summary judgment in favour of GAIC is not appropriate in this action. Its motion is therefore dismissed with costs of $1,500.00 all inclusive. [35] The effect of the dismissal of GAIC’s motion is that the other two motions are now motions for partial

summary judgment. [36] In Babin v. C.J.M. Dieppe Investments Ltd. et al , 2019 NBCA 44 where the Court of Appeal adopted the Supreme Court’s statement in Hyrniak v. Mauldin , 2014 SCC 7 at para. 60 that caution should be used in applications for partial

summary judgment. The Court in Babin also adopted the statement of Pepall, J.A. in Butera v. Chown, Cairns LLP 2017 ONCA 783 that partial

summary judgment “… should be considered to be a rare procedure reserved for issues that may be readily bifurcated from those in the main action …”. [37] The third party claims in this action include joint and several claims in negligence against all of the third parties. All the allegations of negligence are made against the third parties collectively. [38] The claim against the third parties is fact-driven and largely based on evidence that involves the actions or inactions of Sears’ employees. The defendants allege that all of the third parties are liable for those actions or inactions. The issue of whether or not any one

of the third parties is liable to the defendants is not severable from the issue of whether or not the other two are liable to them. Therefore, in order to avoid partial

summary judgment, the dismissal of GAIC’s motion mandates the dismissal of the motions of Sears and Anderson for

summary judgment. [39] Moreover, because the claim against GAIC must proceed to trial and will require evidence from Sears employees, granting

summary judgment in the other two motions would not achieve any judicial economy in my view. [40] For those reasons I also dismiss Sears’ and Anderson’s motions with costs of $1,500.00 all inclusive payable by each to the defendants. ___________________________________________ William T. Grant Judge of the Court of King’s Bench of New Brunswick