By: Zachary Sherman
Edited by Grant Ferguson and Thomas Russell
In Arcamm Electrical Services Ltd. v. Avison Young Real Estate Management Services LP (“Arcamm”),[1] the Ontario Court of Appeal overturned a summary judgment motion where the issue of “contributory fault” in a contract dispute remained unsettled. Justice Gillese, writing for a panel of judges, which included Justice Simmons and Justice Coroza, denied the availability of summary judgment when the apportionment of fault in contract had not yet been fully determined. In a case involving three sets of actions, the implications of the alternative would include potentially inconsistent findings. This decision outlines the basis for shared fault in contract cases and serves as a cautionary tale for an attempt at summary judgment when the fault of the parties cannot be clearly ascertained.
Factual Background
The defendant, 4342 Queen St. Niagara Holdings Inc. (“Queen”), was the owner of a commercial property in Niagara Falls Ontario, (the “Property”).[2]
On June 8, 2021, the Property sustained a significant failure to its electrical system causing a complete power outage (the “Incident”).[3] The plaintiff was Arcamm Electrical Services Ltd. (“Arcamm”), who was hired to restore power to the Property on an emergency basis and sought payment for its invoices from Queen.[4]
Arcamm’s initial services included de-energizing and removing the two original transformers, connecting the Property to temporary generators, and replacing the damaged electrical switch gear. Arcamm was also allegedly tasked with storing the original transformers in the Property’s electrical room.[5]
Several months later, when the original transformers Arcamm was storing were tested, they were found not to have met the standard for re-energization.[6] As a result, the Property remained off the power grid and continued to run on temporary generators until new transformers could be procured and installed.[7]
By November 1, 2021, Arcamm had installed new transformers, and power to the Property was permanently restored.[8] They also moved the original transformers to a storage facility and paid associated storage fees.[9]
Based on invoices for Arcamm’s initial services, Queen paid Arcamm approximately $700,000 through funds it received from its insurer, Aviva Insurance Company of Canada (“Aviva”). However, Aviva ceased paying Queen and Queen stopped paying Arcamm when Aviva received reports that liability remained in issue for the original incident and that the improper storage by Arcamm irreparably damaged the transformers.[10]
Without payment from its insurer, Queen refused to pay Arcamm’s invoices for the supply and installation of the replacement transformers and other related services due to alleged “contributory fault” under Arcamm’s obligations.[11]
Procedural History
In January of 2022, Arcamm sued Queen for unpaid invoices and ongoing costs associated with its work on the Property.[12] In its defence, Queen alleged that Arcamm failed to adequately investigate the cause of the Incident and failed to properly store the original transformers.[13] These allegations formed the basis of Queen’s contributory fault defence and its denial of a right of full payment on Arcamm’s invoices.[14]
In June of 2022, Queen commenced a coverage action against Aviva for the payment of all amounts which Queen may be found liable as a result of the Incident.[15]
In July of 2022, Aviva brought a subrogated claim against Arcamm and other defendants for $2.5 million (the “Subrogated Claim”).[16] At issue was what caused the original transformers to fail, and who was at fault. Also, as against Arcamm, Aviva alleged that it failed to preserve and maintain the original transformers, which resulted in them being irreparably damaged and required new transformers to be supplied and installed.[17]
The Decision Under Appeal
In June of 2022, in the Arcamm Action, Arcamm brought a motion for summary judgment seeking payment of its outstanding invoices.[18] Queen responded to the motion, arguing that it should not need to pay the invoices until its contributory fault defence had been decided and liability for the allegedly negligent storage of the original transformers had been determined and apportioned.[19]
The Motion Judge disagreed with Queen. She found that while Aviva’s Subrogated Claim required a full evidentiary record to fairly adjudicate, Arcamm’s entitlement to payment of its invoices could be determined on a summary basis.[20] The Motion Judge reasoned that because Queen was enjoying the benefits of Arcamm’s services and materials, Queen ought to assume those costs while Queen was engaged in its insurance dispute with Aviva.[21]
The Motion Judge further held that Queen’s claim for contributory fault against Arcamm ought to be made in the Subrogated Claim, and could not be used as a defence to the payment of Arcamm’s invoices.[22] In granting the motion for summary judgment, the Motion Judge concluded that requiring Queen to pay Arcamm’s invoices had no bearing on whether Arcamm had any liability to Queen for damages to the original transformers.[23]
Appeal
Contributory Fault
The Court of Appeal overturned the summary judgment finding. In engaging the issue of contributory fault (applicable to contract as contributory negligence is in tort), Justice Gillese found that the issue of contributory fault of Arcamm was a genuine issue requiring a trial.[24]
Justice Gillese did not see the claim for the payment of invoices as severable from the issues in the Subrogated Claim. Justice Gillese found that the Motion Judge erred in law by granting summary judgment, as she failed to address Queen’s contributory fault defence to determine whether it raised a triable issue.[25]
Justice Gillese accepted that courts can apportion damages in a breach of contract case based on a consideration of the “contributory negligence” of the parties. While recognizing that the Negligence Act does not apply to actions in contract, a number of decisions, beginning with Tompkins Hardware Ltd. v. North Western Flying Services Ltd (1982)[26] and most recently in Parkhill Excavating Limited v. Robert E. Young Construction (2017) that damages in contract cases can be apportioned based on fault.[27]
Risk of Inconsistent Findings
Justice Gillese also accepted Queen’s argument that granting summary judgment created a risk of inconsistent findings between the Arcamm action and the Subrogated Claim.[28]
The Subrogated Claim would require the determination of issues such as what caused the original transformers to fail, whether Arcamm contributed to those failures and if so, how damages ought to be apportioned.[29] Therefore, Justice Gillese found there could be no doubt that the Arcamm Action and the Subrogated Claim would have issues of law and fact in common arising out of the Incident.[30] Justice Gillese further held that these issues and the damages associated with Arcamm’s alleged contributory fault were “inextricably intertwined.”[31]
Given the existence of a defence of contributory fault that would require apportionment between Arcamm and Queen, inconsistent findings would arise “unless she found Queen liable for the services for which Arcamm claimed in its invoices.”[32]. Therefore, without the resolution of that issue, summary judgment could not be granted.
As the motion judge accepted that the Subrogated Claim would involve a more complicated set of evaluations on a full evidentiary record, she could not have been sure that Arcamm was entitled to full payment of its claims and so should not have granted summary judgment.[33]
Justiceb Gillese therefore allowed Queen’s appeal and ordered that the Arcamm Action and Subrogated Claim either be tried together or one after the other.[34]
Takeaways
The Court of Appeal’s decision in Arcamm provides two key takeaways.
First, Arcamm holds that contributory fault in contract claims is analogous to contributory negligence in tort claims and that apportionment of fault is a necessary step in contract cases. This recognizes that a plaintiff whose conduct results in fault should face a corresponding reduction in what is recoverable by them in contract.
When bringing a summary judgment motion, even in contract, the apportionment of fault is a key element that must be determined. Where a genuine issue of apportionment of fault arises in a contract case, summary judgment is no longer an option.
Secondly, where multiple related actions are ongoing and contributory fault or contributory negligence exists as a genuine issue, the court cannot make an order in one action without determining the contribution for those parties across all actions. Where a full evidentiary record is needed to determine fault, that fault, be it in contract or tort, would be a genuine issue requiring trial. This precludes summary judgment in matters where fault crosses multiple actions and cannot be summarily determined.
[1] Arcamm Electrical Services Ltd. v. Avison Young Real Estate Management Services LP, 2024 ONCA 925 (CanLII)
[2] Ibid at para 1.
[3] Ibid at para 11.
[4] Ibid.
[5] Ibid at para 11.
[6] Ibid at para 12.
[7] Ibid.
[8] Ibid at para 14.
[9] Ibid.
[10] Ibid at para 15.
[11] Ibid.
[12] Ibid
[13] Ibid at para 17.
[14] Ibid.
[15] Ibid at para 19.
[16] Ibid at para 20.
[17] Ibid.
[18] Ibid at para 21.
[19] Ibid at para 22.
[20] Ibid at para 26.
[21] Ibid at para 27.
[22] Ibid at para 28.
[23] Ibid at para 29.
[24] Ibid at para 33.
[25] Ibid at para 39.
[26] Tompkins Hardware Ltd. v. North Western Flying Services Ltd., 1982 CanLII 3160 (ON SC) at para 34.
[27] Parkhill Excavating Limited v. Robert E. Young Construction Limited, 2017 ONSC 6903 (CanLII) at para 212.
[28] Ibid at para 48.
[29] Ibid.
[30] Ibid at para 50.
[31] Ibid.
[32] Ibid at para 51.
[33] Ibid at para 52.
[34] Ibid at para 58.