Grafton Connor Property Inc. v. Murphy et al., (2015) 368 N.S.R.(2d) 233 (SC)

• Judge: LeBlanc, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: October 19, 2015
• Jurisdiction: Nova Scotia
• Citations: (2015), 368 N.S.R.(2d) 233 (SC);2015 NSSC 368

Grafton Connor Prop. v. Murphy (2015), 368 N.S.R.(2d) 233 (SC);

    1160 A.P.R. 233

MLB headnote and full text

Temp. Cite: [2015] N.S.R.(2d) TBEd. DE.045

Grafton Connor Property Incorporated, a body corporate, c.o.b. Grafton-Connor Group and Beauforth Investments Incorporated, a body corporate, c.o.b. North End Beverage Room (plaintiffs) v. Sean Murphy, in his quality as Attorney in Fact in Canada for Lloyd's of London Underwriters and Marsh Canada Limited, a body corporate (defendants)

(Hfx. No. 293148; 2015 NSSC 368)

Indexed As: Grafton Connor Property Inc. v. Murphy et al.

Nova Scotia Supreme Court

LeBlanc, J.

December 18, 2015.

Summary:

The insured's pub was destroyed by fire. The insurer of the insured's eight separate commercial properties, including the pub, denied coverage on the basis of material misrepresentation respecting the pub having a sprinkler system and being entirely of masonry construction. The insured sued for indemnity, seeking consequential damages for the delay in rebuilding, and aggravated and punitive damages. The insured argued that Endorsement 10 of the policy precluded the insurer from voiding coverage for unintentional misrepresentations. Alternatively, the insured argued that the insurer negligently assessed the risk of the pub. If the insurer was entitled to void the policy, the insured claimed against the broker in contract and tort. The insurer counterclaimed for the monies it spent to have debris removed from the site after the fire. The insurer claimed that it was not liable to do so and that the insured had been unjustly enriched.

The Nova Scotia Supreme Court, in a judgment reported (2015), 362 N.S.R.(2d) 290; 1142 A.P.R. 290, held that the insurer was entitled to void the policy for material misrepresentation. Endorsement 10 did not excuse unintentional material misrepresentations. The insurer was not liable for negligently failing to assess the risk, as it had no duty to investigate the accuracy of the information provided by the insured to ensure that there were no material misrepresentations. The broker was negligent in failing to determine whether the insured had the necessary training and experience to accurately complete the insurance application on its own. However, the insured was contributorily negligent in failing to ensure that its representative placing the insurance had sufficient knowledge of the properties to place coverage. The court apportioned liability equally between the insured and broker. Consequential damages against the insurer were denied, as there was no breach of the duty of good faith. Damages were assessed against the broker and the claim for aggravated and punitive damages was denied. Respecting the value of the claim under the policy, the co-insurance provision did not apply. The policy was a blanket policy, not a scheduled policy. The court allowed the insurer's counterclaim against the insured for the return of monies paid to remove debris. Now at issue was pre-judgment interest and costs.

The Nova Scotia Supreme Court determined the entitlement to and the amount of pre-judgment interest, and the entitlement to and liability for costs of the respective parties.

Interest - Topic 5009

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Calculation of (incl. rate) - The insured's business was destroyed by fire in 2007 - The insured sued its insurer and broker for $7,145,291.16 in contract and negligence, including aggravated and punitive damages - The broker cross-claimed against the insurer, who denied liability based on material misrepresentations - The insurer counter-claimed to recover clean-up costs it had paid - The trial judge found the broker liable in negligence - The insured was contributorily negligent and 50% at fault - The broker's cross-claim was dismissed and the insurer's counterclaim was allowed - The insurer was not liable - Judgment of $3,799,921.74 was awarded to the insured, less a 50% reduction for its contributory negligence ($1,899,607.87) - The insured sought 5% prejudgment interest from 30 days after filing its Proof of Loss based on its claim being primarily for "liquidated damages" - The Nova Scotia Supreme Court held that awards calculated with reference to the insurance policy constituted liquidated damages - If not adjusted for inflation, they attracted 5% prejudgment interest - The court awarded 2.5% prejudgment interest on the value of the destroyed building, the increased cost of construction and the replacement cost of contents, less a 50% reduction for the insured's contributory negligence - The lower interest rate resulted from inflation already being factored into those awards - The award for business interruption and loss of income attracted 5% prejudgment interest, from the date they would have been earned, less a 50% reduction for the insured's contributory negligence - Prejudgment interest totalled $366,848.36 - See paragraphs 4 to 20.

Interest - Topic 5118

Interest as damages (prejudgment interest) - Breach of contract - Liquidated damages - [See Interest - Topic 5009 ].

Interest - Topic 5490

Interest as damages (prejudgment interest) - Particular claims - Insurance - [See Interest - Topic 5009 ].

Practice - Topic 6963

Costs - Definitions - Amount involved - The insured's business was destroyed by fire in 2007 - The insured sued its insurer and broker for $7,145,291.16 in contract and negligence, including aggravated and punitive damages - The broker cross-claimed against the insurer, who denied liability based on material misrepresentations - The insurer counter-claimed to recover clean-up costs it had paid - The trial judge found the broker liable in negligence - The insured was contributorily negligent and 50% at fault - The broker's cross-claim was dismissed and the insurer's counterclaim was allowed - The insurer was not liable - Judgment of $3,799,921.74 was awarded to the insured, less a 50% reduction for its contributory negligence ($1,899,607.87) - The Nova Scotia Supreme Court held that the insured was entitled to 50% of its costs against the broker and the broker was entitled to 50% of its costs against the insured - The court rejected the broker's submission that two different amounts involved should be used - The amount involved was $3,799,921.74 (damages before 50% reduction for contributory negligence) - However, the costs award also had to reflect the success of the broker and insurer in defending the significant aggravated and punitive damages claims - Accordingly, the court exercised its discretion under rule 77.07 to add a significant sum due to the substantial difference between the amount claimed and the amount awarded - The successful insurer was awarded its costs - The court granted a Sanderson order whereby the unsuccessful defendant (broker) was ordered to pay 45% of the costs awarded to the successful defendant (insurer) - The insurer was also awarded minimal costs on successfully defending the broker's cross-claim - See paragraphs 21 to 94.

Practice - Topic 7030

Costs - Party and party costs - Entitlement to party and party costs - Where success or fault divided - [See Practice - Topic 6963 ].

Practice - Topic 7155

Costs - Party and party costs - Liability for party and party costs - Bullock order or Sanderson order - Where success divided - The Nova Scotia Supreme Court discussed the prerequisites to making a Sanderson order whereby an unsuccessful defendant was ordered to pay all or part of the costs awarded to a successful defendant - See paragraphs 69 to 88.

Practice - Topic 7155

Costs - Party and party costs - Liability for party and party costs - Bullock order or Sanderson order - Where success divided - [See Practice - Topic 6963 ].

Cases Noticed:

All-Up Consulting Enterprises Inc. et al. v. Dalrymple et al. (2013), 327 N.S.R.(2d) 41; 1036 A.P.R. 41; 2013 NSSC 46, refd to. [para. 8].

Bush v. Air Canada (1992), 109 N.S.R.(2d) 91; 297 A.P.R. 91 (C.A.), refd to. [para. 11].

Flynn v. Halifax (Regional Municipality) et al. (2006), 245 N.S.R.(2d) 177; 777 A.P.R. 177; 2006 NSSC 106, refd to. [para. 13].

Mielke v. Harbour Ridge Apartment Suites Ltd. (2011), 306 N.S.R.(2d) 352; 968 A.P.R. 352; 2011 NSSC 313, refd to. [para. 13].

Pick O'Sea Fisheries Ltd. v. National Utility Service (Canada) Ltd. (1995), 146 N.S.R.(2d) 203; 422 A.P.R. 203 (C.A.), refd to. [para. 16].

Flatley v. Denike and Gelbart (1997), 87 B.C.A.C. 127; 143 W.A.C. 127 (C.A.), refd to. [para. 25].

Sydney Cooperative Society Ltd. v. Coopers & Lybrand (2006), 248 N.S.R.(2d) 83; 789 A.P.R. 83; 2006 NSSC 276, refd to. [para. 26].

Shelburne Marine Ltd. v. MacKinnon & Olding Ltd. (1997), 163 N.S.R.(2d) 257; 487 A.P.R. 257 (S.C.), refd to. [para. 32].

Armstrong v. Baker and McCrindle (1992), 113 N.S.R.(2d) 420; 309 A.P.R. 420 (T.D.), refd to. [para. 32].

Boutilier v. Pearcey (2011), 306 N.S.R.(2d) 281; 968 A.P.R. 281; 2011 NSSC 307, refd to. [para. 33].

Willis v. Mailman (Bernard L.) Projects Ltd. et al. (2008), 264 N.S.R.(2d) 1; 847 A.P.R. 1; 2008 NSSC 94, refd to. [para. 34].

Keizer v. Portage LaPrairie Mutual Insurance Co. et al. (2013), 335 N.S.R.(2d) 173; 1060 A.P.R. 173; 2013 NSSC 321, refd to. [para. 74].

Dynamic Medical Concepts Inc. v. DiBenedetto, [2008] O.J. No. 1452 (Sup. Ct.), refd to. [para. 78].

Persaud v. Bratanov et al., [2012] O.T.C. Uned. 6870; 2008 ONSC 6870, refd to. [para. 78].

Universal Stainless Steel & Alloys Inc. v. JP Morgan Chase Bank et al. (2009), 256 O.A.C. 109; 2009 ONCA 801, refd to. [para. 79].

Eichmanis v. Wawanesa Mutual Insurance Co. (2007), 278 D.L.R.(4th) 15 (Ont. C.A.), leave to appeal denied [2007] S.C.C.A. No. 178, refd to. [para. 81].

Rooney (Litigation Guardian) v. Graham, 2001 CarswellOnt 877 (C.A.), refd to. [para. 84].

Statutes Noticed:

Civil Procedure Rules (N.S.), rule 77.07 [para. 38].

Rules of Civil Procedure (N.S.) - see Civil Procedure Rules (N.S.).

Rules of Court (N.S.) - see Civil Procedure Rules (N.S.).

Counsel:

John P. Merrick, Q.C., for the plaintiffs;

Michael S. Ryan, Q.C., for the defendant, Sean Murphy;

Christopher C. Robinson, Q.C., Kevin Gibson and Ian Dunbar, for the defendant, Marsh Canada Ltd.

This matter was heard on October 19, 2015, at Halifax, N.S., before LeBlanc, J., of the Nova Scotia Supreme Court, who delivered the following judgment on December 18, 2015.