Condominium Corp. No. 9813678 et al. v. Statesman Corp. et al., (2007) 409 A.R. 152 (CA)

• Judge: Côté, Picard and Paperny, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: May 07, 2007
• Citations: (2007), 409 A.R. 152 (CA);2007 ABCA 216

Condo Corp. 9813678 v. Statesman Corp. (2007), 409 A.R. 152 (CA);

      402 W.A.C. 152

MLB headnote and full text

Temp. Cite: [2007] A.R. TBEd. JL.003

Condominium Corporation No. 9813678, Condominium Corporation No. 0013062, Condominium Corporation No. 9911158, Condominium Corporation 9911560, Condominium Corporation No. 0112632, Mary Vanderogt, Catherine Sliwa, Trevor MacFarlane, Kirk McFee, Terry S. Shibley, Rob Watson, Charles Gray, Norma Gray, Lloyd B. MacDonald, Scott James Francis, Harry Radomsky, Danielle Marchant, Michael Klassen, Douglas A. Pounder, Pierre Schrifee, Paul Foley, Leo Bouckhout, Richard Dyjack, James Smith, Pamela Smith, Stephanie Bischsel, Bernie Rabwowich, Susan Rabwowich, Ryan Birmingham, Alberta Wireless 2002 Inc., John Boehm, David MacMartin, Jack Clayton, Audrey Clayton, Tom Pearson, Kathleen Millard, Jason Salmon, Michael Morrison, Michael Johnson-Stewart, Tanya Johnson-Stewart, Raymond Daniels, Andrew Course, Cathy O'Bright, and Brian David Hassett (respondents/applicants) v. Statesman Corporation, 893137 Alberta Ltd. formerly known as Statesman Construction Corporation and the said Statesman Construction Corporation (appellant/respondent) and The City of Calgary, Burgener Kilpatrick Design International also known as BKDI Architects and formerly known as BLK Architects and the said BKDI Architects and BLK Architects, Peter G. Burgener, GHL Consultants Ltd. formerly known as Graham Harmsworth Lai & Associates Ltd. and the said GHL Consultants Ltd. and Graham Harmsworth Lai & Associates Ltd., David Graham, the Advanced Group Calgary Ltd., Advanced Waterproofing Inc. carrying on business under the trade name and/or style of the Advanced Group Calgary and the said Advanced Waterproofing Inc., Michael Adams carrying on business under the trade name and/or style of the Advanced Group Calgary, Michael Adams carrying on business under the trade name and/or style of Delta-Protech Membrane Installations, Calvin Schieve carrying on business under the trade name and/or style of Delta-Protech Membrane Installations, Dean Sziva carrying on business under the trade name and/or style of Cactus Waterproofing & Roofing, and Karl Swan (not parties to the appeal/defendants)

(0701-0040-AC; 2007 ABCA 216)

Indexed As: Condominium Corp. No. 9813678 et al. v. Statesman Corp. et al.

Alberta Court of Appeal

Côté, Picard and Paperny, JJ.A.

June 28, 2007.

Summary:

Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units. A fire in the fourth property, negligently started by a subcontractor during construction, caused extensive damage. The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation. As a preliminary issue, the parties sought the determination of whether the claim against Statesman was barred by provisions of the Condominium Property Act, the condominium bylaws and/or policies.

The Alberta Court of Queen's Bench, in a decision reported at (2006), 410 A.R. 168, held that the insurer could subrogate against Statesman. Statesman appealed.

The Alberta Court of Appeal allowed the appeal, holding that a subrogation action would fail.

Insurance - Topic 2886

Subrogation - Insurer limited to rights of insured - Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units - A fire in the fourth property during construction caused extensive damage - The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation - A trial court determined that Statesman could be subrogated against although it was insured under the policies - Statesman was insured as a unit-owner, but not as a contractor - Statesman appealed - The Alberta Court of Appeal allowed the appeal - The court indicated that even if policy and the ordinary law of insurance did not prohibit the subrogation action, there was a contractual barrier because the condominium corporation bylaws expressly waived subrogation and required the condominium corporation to purchase no-fault insurance for the unit-owners' benefit - The corporation could not sue a unit-owner for a loss because that would breach those covenants - Thus, even if the insurer had a right to the condominium corporation's causes of action, the corporation had no cause of action against Statesman as a unit holder and manager - See paragraphs 69 to 76.

Insurance - Topic 2892

Subrogation - Action by insurer - Bars - Defendant an "insured" - Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units - A fire in the fourth property during construction caused extensive damage - The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation - A trial court determined that Statesman could be subrogated against although it was insured under the policies - Statesman was insured as a unit-owner, but not as a contractor - Statesman appealed - The Alberta Court of Appeal allowed the appeal - An insurer had no subrogation rights against an insured - The court rejected the arguments that an exception existed here because (i) Statesman had only a trivial interest in the loss, (ii) it was a coincidence that the alleged tortfeasor was also an insured and (iii) Statesman had paid only a small fraction of premiums - Stateman's interest or the effect of coincidence were irrelevant - The question was the application of the rule of law - Further, the policy expressly waived subrogation against each of the many insured - A bargain was a bargain, even if cheaply bought - The subrogation action was bound to fail - See paragraphs 8 to 25.

Insurance - Topic 2892

Subrogation - Action by insurer - Bars - Defendant an "insured" - Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units - A fire in the fourth property during construction caused extensive damage - The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation - A trial court determined that Statesman could be subrogated against although it was insured under the policies - Statesman was insured as a unit-owner, but not as a contractor - Statesman appealed - The Alberta Court of Appeal allowed the appeal - Avoiding overpayment of the insured was the basis for subrogation - An important reason not to allow an insurer to sue its insured was that such a suit did not fulfill the aims of subrogation - The present case lay outside the policy reasons for giving an insurer a right of subrogation - There was no overpayment or unjust enrichment here - See paragraphs 26 to 30.

Insurance - Topic 2892

Subrogation - Action by insurer - Bars - Defendant an "insured" - Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units - A fire in the fourth property during construction caused extensive damage - The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation - A trial court determined that Statesman could be subrogated against although it was insured under the policies - Statesman was insured as a unit-owner, but not as a contractor - Statesman appealed - The Alberta Court of Appeal allowed the appeal - The court considered whether an exception to the well-settled law that an insurer had no subrogation rights against an insured was fair and workable and concluded that it was not, particularly in the case of any kind of commercial builder or developer - Such a company was typically many times over an owner, vendor and contractor - To distinguish between those roles for insurance purposes was artificial and would lead to arbitrary or paradoxical results - See paragraphs 36 to 45.

Insurance - Topic 2892

Subrogation - Action by insurer - Bars - Defendant an "insured" - Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units - A fire in the fourth property during construction caused extensive damage - The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation - A trial court determined that Statesman could be subrogated against although it was insured under the policies - Statesman was insured as a unit-owner, but not as a contractor - Statesman appealed - The Alberta Court of Appeal allowed the appeal - The court discussed policy reasons for barring subrogated suits by insurers against an insured - The most basic reason was that the insurer had contracted to take onto itself the risk - A subrogated suit was backwards, seeking to undo a payment made under policy coverage - Whether the risk materialized in an unexpected way was inconsequential - Further, allowing such actions penalized any party who relied on the insurer's good faith and gave any insurer with two or more co-insureds a conflict of interest - See paragraphs 46 to 57.

Insurance - Topic 2894

Subrogation - Action by insurer - Bar - Waiver - Exception - Statesman Corp. was the developer and general contractor of four condominium properties, three of which were completed and in which Statesman owned several unsold units - A fire in the fourth property during construction caused extensive damage - The condominium corporations' insurer paid out the full amount and sought to recover over $25 million from Statesman through subrogation - The policy provided that the insurer waived its right of subrogation where the loss was caused by "individual condominium unit owners" - A trial court determined that Statesman was not entitled to the waiver's benefit for construction activities - Statesman appealed - The Alberta Court of Appeal allowed the appeal - Since there was no express term allowing a subrogation suit against insureds and one clause forbidding them, an implied term would be necessary for the insurer's subrogation action to succeed - But there was no ground on which to imply such a term - It was not necessary to give business efficacy to the policy and was not too obvious to spell out - Further, as the subrogated suit arose in unusual circumstances, the parties could not have assumed such an exception - See paragraphs 58 to 66.

Cases Noticed:

Rowlands (Mark) Ltd. v. Berni Inns Ltd., [1986] Q.B. 211 (C.A.), refd to. [para. 8].

Petrofina (U.K.) Ltd. v. Magnaload Ltd., [1984] Q.B. 127, refd to. [para. 9].

Imperial Oil Ltd. and Wellman-Lord (Alberta) Ltd. v. Commonwealth Construction Co., [1978] 1 S.C.R. 317; 12 N.R. 113; 1 A.R. 161, refd to. [para. 10].

Canbra Foods Ltd. v. C & L Transport Ltd. (1981), 36 A.R. 477 (Q.B.), refd to. [para. 10].

Interested Underwriters at Lloyds v. Ducor's Inc. (1984), 103 A.D.2d 76; 478 N.Y.S.2d 285 (N.Y. App. Div.), affd. (1985), 65 N.Y.2d 647 (N.Y.C.A.), dist. [para. 14].

National Oilwell (UK) Ltd. v. Davy Offshore Ltd., [1993] 2 Lloyd's L.R. 582 (Q.B. Com. Ct.), refd to. [para. 15].

GPS Power PéL & Ors v. Gardiner Willis & Assoc PéL, [2001] 2 Qd. R. 586; 2000 QCA 495 (Qd. S.C.), dist. [para. 15].

One Beacon Ins. Co. v. French Inst. Alliance Française NYC, 2007 NY Slip Op 5009 U; 14 Misc3d 1213A; 2007 NY Misc Lexis 29 (N.Y.), refd to. [para. 20].

Ledingham v. Hospital Service Commission - see Ledingham v. Minister of Transport.

Ledingham v. Minister of Transport, [1975] 1 S.C.R. 332; 2 N.R. 32; 46 D.L.R.(3d) 699, refd to. [para. 27].

Castellain v. Preston (1883), 11 Q.B.D. 380 (C.A.), refd to. [para. 27].

Woodside Petroleum Development Pty. Ltd. v. H&R-E&W Pty. Ltd. (1999), 20 W.A.R. 380 (C.A.), refd to. [para. 30].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 33].

Peel Condo Corp. No. 16 v. Vaughan, [1996] I.L.R. 1-3335; 1 R.P.R.(3d) 299 (Ont. Gen. Div.), refd to. [para. 35].

Sherritt Gordon Ltd. v. Dresser Canada Inc. et al. (1996), 187 A.R. 1; 127 W.A.C. 1 (C.A.), refd to. [para. 35].

Baugh-Belarde Constr. Co. v. College Utils. (1977), 561 Pac.2d 1211 (Alaska S.C.), refd to. [para. 35].

Foot v. Rawlings, [1963] S.C.R. 197, refd to. [para. 50].

Ingram v. C.I.R., [2000] 1 A.C. 293; [1999] 1 All E.R. 297; [1998] UKHL 47, refd to. [para. 50].

Atchison v. Manufacturer's Life Insurance Co. et al. (2002), 332 A.R. 72; 2002 ABQB 1121, refd to. [para. 55].

702535 Ontario Inc. et al. v. Non-Marine Underwriters, Lloyd's London et al. (2000), 130 O.A.C. 373 (C.A.), leave to appeal refused (2000), 264 N.R. 400; 145 O.A.C. 400 (S.C.C.), refd to. [para. 55].

Simpson & Co. v. Thompson, Burrell (1877), 3 App. Cas. 279 (H.L.), refd to. [para. 57].

Métropolitaine compagnie d'assurance-vie v. Frenette, Hôpital Jean-Talon et un autre, [1991] 1 S.C.R. 647; 134 N.R. 169; 46 Q.A.C. 161, refd to. [para. 59].

Eagle Star & Br. Doms. v. Tadlock (1938), 22 F. Supp. 545, refd to. [para. 61].

Harvey's Wagon Wheel v. MacSween (Ian) (1980), 96 Nev. 215; 606 Pac.2d 1095 (Nev. S.C.), refd to. [para. 62].

Larson-Juhl v. Jaywest, [2001] N.S.W.C.A. 260, refd to. [para. 64].

Owners, Strata Plan No. NW651 v. Beck's Mechanical Ltd. (1980), 20 B.C.L.R. 12 (S.C.), refd to. [para. 65].

Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108; 245 N.R. 88; 127 B.C.A.C. 287; 207 W.A.C. 287, refd to. [para. 67].

Clark (J.) & Son Ltd. v. Finnamore (1972), 5 N.B.R.(2d) 467; 32 D.L.R.(3d) 236 (C.A.), refd to. [para. 67].

Madison Developments Ltd. et al. v. Plan Electric Co. et al. (1997), 104 O.A.C. 194; 36 O.R.(3d) 80 (C.A.), leave to appeal refused (1998), 228 N.R. 97; 111 O.A.C. 199 (S.C.C.), refd to. [para. 69].

Cummer-Yonge Investments Ltd. v. Agnew-Surpass Shoe Stores Ltd., [1976] 2 S.C.R. 221; 4 N.R. 547, refd to. [para. 70].

Pyrotech Products Ltd. et al. v. Ross Southward Tire Ltd. et al., [1976] 2 S.C.R. 35; 5 N.R. 541, refd to. [para. 70].

Smith et al. v. Eaton (T.) Co. et al., [1978] 2 S.C.R. 749; 15 N.R. 315, refd to. [para. 70].

Tony and Jim's Holdings Ltd. et al. v. Silva, [1999] I.L.R. 1-3669; 118 O.A.C. 236 (C.A.), refd to. [para. 71].

Authors and Works Noticed:

Brown, Craig, and Menezes, Julio, Insurance Law in Canada (2006 Looseleaf Update), §§ 10.4(a) [para. 55]; 13.1 [para. 27]; 13.2 [para. 70]; 13.7 [paras. 27, 58].

Clarke, Malcolm A., Law of Insurance Contracts (2nd Ed. 1994), pp. 801 [para. 27]; 816 [para. 70]; 817 [paras. 70, 71]; 818 [para. 70]; 821 [para. 9]; 822 [paras. 9, 52]; 823 [para. 9]; 824 [para. 50]; 832 [para. 27].

Colinvaux, Raoul Percy, Law of Insurance (8th Ed. 2006), §§ 11-01, 11-02 [paras. 8, 27]; 11-25 [para. 9]; 11-26 [paras. 9, 50, 53]; 11-37 [para. 70].

Corpus Juris Secundum, vol. 30A, p. 214, § 42 [para. 50].

Corpus Juris, vol. 11, p. 767,21, para. 82 [para. 50].

Couch on Insurance (3rd Ed.) (2000 Looseleaf Update), §§ 224:1 [para. 9]; 224:2 [paras. 9, 49, 56]; 224:3 [paras. 49, 56]; 224:12 [para. 9]; 224:32 [para. 56]; 224:33, 224:42, 224:43 [para. 70]; 224:60 [paras. 69, 70].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (5th Ed. 2006), p. 466, fn. 206 [para. 59].

Goff, Robert, and Jones, Gareth, The Law of Restitution (6th Ed. 2002), §§ 3-001 [para. 28]; 3-004 to 3-008, 3-030 [para. 27]; 3-035 [para. 51].

Ivamy, Edward Richard Hardy, General Principles of Insurance Law (6th Ed. 1993), pp. 494 [para. 27]; 497 [paras. 9, 51]; 498, 503, 507 [para. 70].

MacGillivray, Insurance Law (10th Ed. 2003), §§ 2-100 [para. 53]; 22-1 [para. 27]; 22-12 [para. 70]; 22-18 [para. 59]; 22-25 [para. 8]; 22-29 [para. 8]; 22-33, 22-39, 22-40, 22-93 [para. 70]; 22-98 to 22-100 [para. 9]; 22-99 [para. 50]; 22-102 [para. 9].

Counsel:

N.K. Machida, Q.C., and M.X. James, for the appellant;

J.W. Rose, Q.C., and D.B. Kitchen, for the respondents.

This appeal was heard on May 7, 2007, by Côté, Picard and Paperny, JJ.A., of the Alberta Court of Appeal. Côté, J.A., filed the following reasons for judgment reserved for the Court on June 28, 2007.