The upcoming Appeal to the Supreme Court of Canada in Arcamm Electrical Services Ltd. v Avison Young Real Estate Management Services LP 1 is expected to clarify whether the defence of contributory fault can reduce damages in contract cases, an issue in Canadian contract law that is currently unsettled.
Background of the Case
The Defendant, 4342 Queen St. Niagara Holdings Inc. ("Queen"), owned a commercial property (the "Property") managed by Avison Young Real Estate Management Services LP ("Avison"). In June 2021, there was a complete power outage at the Property. Avison hired Arcamm Electrical Services Ltd. ("Arcamm") to restore the power. During the repairs, Arcamm removed two transformers and stored them at the Property. In September 2021, the transformers failed to meet the standard for re-energization, requiring Arcamm to replace them.
Queen paid Arcamm for its initial services with funds received from its insurer, Aviva Insurance Company of Canada ("Aviva"). Aviva ceased payment to Queen when it received reports that questioned liability for the power outage and the damages associated with Arcamm's storage of the transformers.
As a result, Arcamm's invoices ceased being paid. Arcamm sued Queen and Avison for its unpaid invoices and moved for summary judgment. Queen's defence alleged that Arcamm had contributed to the incident and improperly stored the transformers, causing them to be damaged beyond repair.
Aviva also brought a subrogated claim against Arcamm and others, alleging that one or more of them caused the power outage and the irreparable damage to the original transformers ("Subrogated Claim").
The Summary Judgment Motion
Queen opposed the motion for summary judgment on the grounds that Arcamm had caused or contributed to the damages it was claiming and that granting summary judgment risked inconsistent findings between Arcamm's action and the Subrogated Claim.
In granting the motion, Justice Sheard held that Arcamm's claim was essentially a debt collection claim and rejected Queen's submission that liability for Arcamm's invoices could not be determined until the Subrogated Claim was decided (which would determine if Arcamm contributed to the damages).
The Court of Appeal Allows the Defence of Contributory Fault
In granting Queen's appeal, the Court of Appeal concluded that although the Negligence Act does not apply to contractual disputes, "damages in contract cases can be apportioned based on fault."2 Therefore, Queen was entitled to seek a reduction of the contractual damages claimed by Arcamm based on Arcamm's alleged contributory fault.
The Court also agreed with Queen that granting the summary judgment motion risked inconsistent findings with the Subrogated Claim. The Court held that the facts, issues, and damages associated with the summary judgment motion were "inextricably intertwined"3 with Arcamm's alleged contributory fault. The Court of Appeal set aside most of the motion judgment and ordered Arcamm's action to be tried with the Subrogated Claim.
Issues Before the Supreme Court
On July 17, 2025, the Supreme Court granted leave to hear Arcamm's appeal. This appeal is expected to allow the Supreme Court to definitively rule on the availability of the defence of contributory fault in contract cases. Appellate courts across Canada have rendered diverging rulings on the issue, signalling the need for guidance from the Supreme Court. Further, it is expected that the Supreme Court may also provide guidance on how the principle of proportionality should be applied by appellate courts on summary judgment motions considering the opposing views of the motions judge and the Court of Appeal in this case.
The determination of these issues may have far-reaching impacts for litigants.
Footnotes
1 Arcamm Electrical Services Ltd. v Avison Young Real Estate Management Services LP, 2024 ONCA 925 ("Arcamm").
2 Arcamm at para 45.
3 Arcamm at para 50.
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