In Williams-Sonoma Inc. v. Oxford Properties Group
Inc., Williams-Sonoma was a tenant at Yorkdale Shopping Centre
when the mall was undergoing renovations. The Landlord, Oxford
Properties Group Inc., hired EllisDon Corporation
("EllisDon"), an independent contractor, to perform the
construction work. During the course of their work, a vandal opened
a fi re hose in a vacant area that was being used by EllisDon and,
as a result, the Tenant's premises suffered extensive water
damage of approximately $7 million. Williams-Sonoma sued EllisDon
for breach of common-law and statutory duty owed to the Tenant by
failing to properly secure the area where the fire hose was
located. EllisDon brought a motion for summary judgment arguing
that in the Lease the Tenant had waived its rights to claim against
the contractor. The motion judge granted summary judgment and
dismissed the Tenant's claims, holding that the benefit of the
exculpatory clause in the Lease should extend to the
The Lease required the Tenant to maintain insurance coverage for
water damage. The Lease also contained an exclusionary clause,
whereby the Tenant released the Landlord and waived all claims
against the Landlord and "those for whom the [Landlord] is in
law responsible" with respect to occurrences insured against
or required to be insured against by the Tenant, 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.
The motions judge focused on the doctrine of privity and
interpretation of the phrase "in law responsible" and
applied the two-part test established in Fraser River Pile
& Dredge Ltd. v. Can-Dive Services Ltd., to determine
whether the doctrine should extend to a third party:
1. Did the parties to the contract intend to extend the benefit
in question to the third party seeking to rely on the contractual
2. 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, as determined by reference to the
intentions of the parties.
The motions judge concluded that the Landlord and Tenant did
intend to extend the exclusionary clause to those parties involved
in the mall renovation, and since EllisDon was performing the very
activities contemplated in the Lease, both prongs of the Fraser
River test were satisfied.
The Court of Appeal agreed with the motions judge, and further
analyzed the term "in law responsible". If not for the
exculpatory clause, the Landlord would have been responsible for
the damage caused by the contractor and liable under the indemnity
clause. The Court concluded that the Landlord had made itself
"in law responsible" for EllisDon as its contractor and
as a result, EllisDon was 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. This case appears to be consistent with
the lower court decision in Harlon Canada Inc. v. Lang
Investment Corporation, where the Court held that a claim
against the Landlord's independent contractor was barred by the
Lease. The decisions in both Harlon Canada and
Williams-Sonoma imply that a third party contractor is a
person for whom a landlord is in law responsible, which is not
correct in the author's opinion.
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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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