Canada: Quebec Superior Court: Tenant Cannot Rely On A Lease To Avoid Liability For Gross Negligence

Contracts such as leases or insurance contracts are generally governed by the will of the contracting parties. The Quebec Superior Court recently affirmed, however, that parties to a contract cannot purport to do indirectly through a contract that which the law prohibits them from doing directly.1

Pursuant to Article 1474 of the Civil Code of Québec (the CCQ), a contracting party may not exclude or limit its liability resulting from gross negligence or an intentional wrongful act. In this recent case, the court rejected a tenant's motion to dismiss an action instituted by its landlord and the landlord's insurer in subrogation, as granting this motion would risk contravening Article 1474 CCQ.

Facts

The plaintiffs in this case were Corporation Immobilière Timex as landlord, and Royal & Sun Alliance of Canada (RSA), as Timex's insurer. Timex and RSA were suing the tenant Services Professionels Brio Inc. for damages caused by a fire that took place at the property owned by Timex and leased to Brio. RSA, as Timex's insurer, was subrogated in its insured's rights after having indemnified Timex for its loss following the fire, while Timex was claiming from Brio the uninsured portion of its loss.

In support of its motion to dismiss, Brio relied in part on the terms of the lease it had signed with Timex and what the parties had agreed that Brio would pay in additional rent in part to cover "building insurance." Relying on a trilogy of cases rendered by the Supreme Court of Canada2 years ago and subsequently applied by Quebec courts3, Brio argued that since it had paid a portion of the insurance premiums to Timex through the cost of the lease, neither RSA nor Timex could take action against Brio.

The plaintiffs in turn contended that the lease terms were ambiguous and did not specifically provide for Brio paying the insurance premiums. In any event, the plaintiffs argued that the interpretation of the lease should be left to the judgment on the merits (as opposed to being decided at a preliminary stage, i.e., the hearing of Brio's motion to dismiss). Furthermore, the plaintiffs argued that Article 1474 CCQ, which is of public order, prevented Brio from relying on the lease to exclude its liability for its gross negligence in relation to the fire.

Decision by the Superior Court of Quebec

The court considered the submissions by the parties in two parts. First, the court dealt with Brio's argument that the plaintiffs were not entitled to pursue Brio given Brio's contributions towards the insurance premiums. The court cited with approval a Quebec Court of Appeal decision which held that, when a landlord undertakes to insure the leased premises against the risk of fire, this undertaking prevents the landlord from subsequently pursuing the tenant who may be responsible for same.4 Furthermore, the Court of Appeal in another decision considered that such an undertaking need not be explicit to be recognized, and may even be implicit in the terms of the lease (when, for example, a portion of the rent goes towards paying the building's insurance policy).5

In considering the lease between Timex and Brio, the court concluded that Timex had implicitly undertaken to procure insurance coverage for the premises leased by Brio and Brio had agreed to pay insurance premiums in this regard. As a result, the court determined the insurance policy was for the benefit of both Timex and Brio, notwithstanding the fact that only Timex was listed as an insured under the policy. The court therefore held that this first consideration militated in favour of granting Brio's motion to dismiss not only against Timex's action but against RSA's as well.

The court then considered the plaintiffs' submissions with respect to Article 1474 CCQ, which provides that a party may not exclude its liability in a contract for injury caused to another through gross negligence or an intentional wrongful act. Shortly after the hearing on Brio's motion to dismiss, the plaintiffs amended their proceedings to allege that Brio had been grossly negligent and this negligence caused the fire.

Given that this determination was an issue to be decided by the court on the merits (since no evidence had yet been presented in support of this new allegation), the court held that granting Brio's motion to dismiss would risk contravening Article 1474 CCQ. In other words, if Brio did in fact commit gross negligence, dismissing the action at this stage of the proceedings would serve to exclude Brio's liability that resulted from this gross negligence. The court therefore rejected Brio's motion to dismiss the plaintiff's action and the case is now moving forward.

This judgment is noteworthy in that it demonstrates the cautious approach taken by the court with regard to motions to dismiss. Although the court cited with approval case law in favour of restricting the rights of landlords and their insurers in pursuing tenants who contributed to paying insurance premiums, the court was unwilling to grant the motion to dismiss for risk of contravening a rule of public order. Moreover, the late amendment by plaintiffs (one day after the hearing of the motion to dismiss) was sufficient to bring Article 1474 CCQ into play and require the parties to proceed to trial on the merits.

Footnotes

1. Royal & Sun Alliance du Canada, société d'assurances v. Services professionnels Brio inc., 2015 QCCS 4215.

2. Agnew-Surpass Shoe Stores v. Cummer-Yonge Investments, [1976] 2 S.C.R. 221; Ross Southward Tire v. Pyrotech Products, [1976] 2 S.C.R. 35; T. Eaton v. Smith, [1978] 2 S.C.R. 749.

3. La St-Maurice, Compagnie d'assurances v. Les Importations Sava internationales, EYB 1989 – 63181 (Que. C.A.); Lewis Shoes Store v. S.B.I. Holding Inc., J.E. 84-616 (Que. C.A.); Axa Assurances inc. v. Club de golf Summerlea inc., 2013 QCCA 708 (Que. C.A.).

4. Axa Assurances inc. v. Club de golf Summerlea inc., 2013 QCCA 708 (Que. C.A.).

5. Lewis Shoes Store v. S.B.I. Holding Inc., J.E. 84-616 (Que. C.A.).

Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global legal practice. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members ('the Norton Rose Fulbright members') of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions