In Williams-Sonoma Inc. v. Oxford Properties Group
Inc., 2013 ONCA 441, WilliamsSonoma was a tenant at Yorkdale
Shopping Centre when the mall was undergoing certain construction
work. The landlord, Oxford Properties Group Inc., hired EllisDon
Corporation as an independent contractor to perform the
construction work. During the course of their work a vandal broke
into Williams-Sonoma's third floor office space and opened a
fire hose, leading to extensive damage of their premises and
property. The resulting water damage was alleged to be
approximately $7 million. Williams-Sonoma sued EllisDon for breach
of commonlaw and statutory duty owed to the Tenant by failing to
properly secure the area where the fire hose was located.
However, the Lease between the Landlord and all of the
mall's tenants included a provision requiring tenants to obtain
independent insurance for water damage. In addition, the Lease
contained an exclusionary clause, s.8.3.1, which provided
that "subject to 8.3.2 and 8.3.3, each of the Landlord and
Tenant hereby releases the other and waives all claims against the
other and those for whom the other is in law responsible with
respect to occurrences insured against or required to be insured
against by the releasing party, whether any such claims arise as a
result of the negligence or otherwise of the other or those for
whom it is in law responsible." [Emphasis addedJ. Based
on this provision, EllisDon argued that the Landlord was
responsible for their actions and the clause extended to them as a
The main analysis undertaken by the Courts (both Superior Court
of Justice and the Court of Appeal) pertained to the doctrine of
privity and interpretation of the phrase "in law
responsible." Two cases, London Drugs Ltd. v. Kuehne
6- Nagel International Ltd., [1992J 3 SCR 299 (SCC) and
Fraser River Pile 6- Dredge Ltd. v. Can-Dive Services
Ltd., [1999J 3 SCR 108 (SCC) analyzed the doctrine of privity
of contract and determined that the doctrine should be relaxed in
certain circumstances. Fraser River adopted and modified a
test established in London Drugs and considered two
factors in extending the doctrine of privity to a third party:
Did the parties to the contract intend to extend the benefit in
question to the third party seeking to rely on the contractual
Are the activities performed by the third party seeking to rely
on the contractual provision the very activities contemplated as
coming within the scope of the contract in general or the provision
in particular, again as determined by reference to the intentions
of the parties?
In considering the test established in
Fraser, the motions judge concluded that the intention of
the parties (Landlord and Tenant) was to extend s. 8.3.1 of the
Lease to those parties involved in the renovation of the mall.
EllisDon was contracted to do work in the mall, therefore the
Landlord was responsible in law for them within the meaning of 2-
MINDEN GROSS LLP - FALL 2013 the Lease. Furthermore, EllisDon was
performing the very activities contemplated in the impugned clause
in the Lease. Therefore both parts of the test in Fraser were
satisfied. The Court of Appeal agreed with the motions judge, and
further analyzed the term "in law responsible." Under s.
8.4, the Landlord indemnified the tenants from loss occasioned by
the Landlord's "officers, agents, servants, employees,
contractors, customer or licensees," therefore taking
responsibility for EllisDon, the contractor. Had water damage not
been excluded by s. 8.3, the Landlord would have indemnified the
Tenant and been responsible for the damage caused by the
contractor. As a result, the Court determined that EllisDon was the
responsibility of the Landlord and thus protected by the Lease.
This case demonstrates that the doctrine of privity may extend
beyond the scope of the parties to a Lease and that a third party,
who is not a party to the Lease, may be exculpated from liability
by an exclusionary clause. Although the Landlord and Tenant
contemplated water damage, evidenced by the provisions in the Lease
requiring Tenants to purchase water damage insurance, the Tenant
could not seek additional damages from a non-party. By way of
including an exclusionary clause in a Lease, a nonparty such as
EllisDon, can be safeguarded by the Landlord from any liability
arising from damage that stemmed from the non-party. Furthermore,
language such as "in law responsible" can cast a wide
scope and does not need to be accompanied by language specifically
identifying parties that should fall within the parameters of the
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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