Kruger Products Ltd. v. First Choice Logistics Inc. et al., (2013) 332 B.C.A.C. 1 (CA)

• Judge: Newbury, Hall and Garson, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: December 03, 2012
• Jurisdiction: British Columbia
• Citations: (2013), 332 B.C.A.C. 1 (CA);2013 BCCA 3

Kruger Products v. First Choice Logistics (2013), 332 B.C.A.C. 1 (CA);

    569 W.A.C. 1

MLB headnote and full text

Temp. Cite: [2013] B.C.A.C. TBEd. JA.014

Kruger Products Limited/Produits Kruger Limitée (respondent/plaintiff) v. First Choice Logistics Inc. and Terrance Bodnar (appellants/defendants)

(CA038662; 2013 BCCA 3)

Indexed As: Kruger Products Ltd. v. First Choice Logistics Inc. et al.

British Columbia Court of Appeal

Newbury, Hall and Garson, JJ.A.

January 9, 2013.

Summary:

A fire destroyed a warehouse in which Kruger Products Ltd. (formerly Scott Paper Ltd. and referred to herein as "Scott"), was storing large rolls of paper. The warehouse was being operated by First Choice Logistics Inc. (FCL) pursuant to a warehousing agreement (the "WMA") with Scott. Scott sued FCL and its employee, Bodnar, alleging that FCL breached terms of the WMA, its common law duty of care, and its duty of care under the Warehouse Receipt Act and the Occupiers Liability Act. The claim was a subrogated claim brought by Scott's insurer. FCL denied the alleged breaches of duty and pleaded that Scott had been negligent in certain respects. FCL also pleaded that the WMA included provisions requiring Scott to obtain insurance on its inventory and property in the warehouse and to name FCL as an additional insured and that Scott was barred from claiming against FCL to the extent of the indemnity which such insurance would have provided if it had been placed by Scott.

The British Columbia Supreme Court, in a decision reported at [2010] B.C.T.C. Uned. 1242, found that the fire was caused by paper debris coming into contact with the unwrapped exhaust system of a forklift. The court concluded that Scott's losses and damages were caused by negligence on the part of FCL and that Scott's subrogated claim against FCL was not barred by the application of the insurance provisions in the WMA. The action was allowed against both defendants, with damages to be assessed at a later date. The defendants appealed.

The British Columbia Court of Appeal allowed the appeal, granted a declaration that Scott's subrogated claim against the defendants was barred, and dismissed the action.

Torts - Topic 65

Negligence - Causation - Evidence and proof - A fire destroyed a warehouse in which the plaintiff ("Scott") was storing large rolls of paper - The warehouse was being operated by First Choice Logistics Inc. (FCL) pursuant to a warehousing agreement with Scott - Scott sued FCL and its employee, Bodnar - The trial judge allowed the action - The defendants appealed - The defendants submitted that the trial judge made a palpable and overriding error in finding that the fire occurred when paper debris came into contact with the unwrapped exhaust system of a forklift, while at the same time finding that paper had not been "sucked up into the forklift" - The defendants said these findings required that some part of the exhaust system must have been "external" to the forklift - The defendants contended that the entire exhaust system was inside the machine and there was no evidence of any external portion that could cause paper to ignite - The British Columbia Court of Appeal stated that "... there was substantial evidence that the fire began, as fires or near-fires had on previous occasions known to Toyota [the manufacturer of the forklift], when paper came into contact with the extremely hot exhaust system of the forklift. Whether one sees this as 'internal' or 'external' to the engine is not in my view material. FCL was of course also aware of this problem which, in combination with the fact that paper debris was all around the warehouse, created a 'perfect storm' of dangerous conditions. I would dismiss FCL's appeal on the question of causation" - See paragraphs 25 to 32.

Torts - Topic 6994

Defences - Particular defences - Agreement by plaintiff to obtain insurance coverage - A fire destroyed a warehouse in which the plaintiff ("Scott") was storing large rolls of paper - The warehouse was being operated by First Choice Logistics Inc. (FCL) pursuant to a warehousing agreement (the "WMA") with Scott - Scott sued FCL and its employee, Bodnar, alleging that FCL breached terms of the warehousing agreement, its common law duty of care, and its duty of care under the Warehouse Receipt Act and the Occupiers Liability Act - The claim was a subrogated claim brought by Scott's insurer - FCL pleaded that para. 17A of the WMA included provisions requiring Scott to obtain insurance on its inventory and property in the warehouse and to name FCL as an additional insured and that Scott was barred from claiming against FCL to the extent of the indemnity which such insurance would have provided had it been placed - The trial judge found that Scott's losses and damages were caused by negligence on the part of FCL and that Scott's subrogated claim against FCL was not barred by the application of the insurance provisions in the WMA - The action was allowed - The defendants appealed, arguing that the trial judge erred in declining to apply the "covenant to insure" principle established by a trilogy of Supreme Court of Canada cases - The British Columbia Court of Appeal allowed the appeal - The trial judge erred in failing to apply the trilogy and North Newton (2005 BCCA) among other authorities - Scott's obligations under para. 17A of the WMA were clearly intended for the benefit of FCL - The trial judge erred in ruling that FCL did not have an insurable interest in the property that was destroyed by the fire - The court also did not see any conflict between a general covenant to indemnify given by a warehouser and insurance provisions such as para. 17A - Nor did it agree that the application of the "covenant to insure" defence in the case at bar would make meaningless the warehouser's obligation to maintain the warehouse premises to the standard specified in the Warehouse Receipt Act, or impair the duty of care owed to Scott as the owner of the goods - The court declared that Scott's subrogated claim was barred and dismissed the action - See paragraphs 33 to 64.

Cases Noticed:

Hanke v. Resurfice Corp. et al., [2007] 1 S.C.R. 333; 357 N.R. 175; 404 A.R. 333; 394 W.A.C. 333; 2007 SCC 7, refd to. [para. 18].

Greenwood Shopping Plaza Ltd. v. Beattie and Pettipas, [1980] 2 S.C.R. 228; 32 N.R. 163; 39 N.S.R.(2d) 119; 71 A.P.R. 119, refd to. [para. 34].

Cummer-Yonge Investments Ltd. v. Agnew-Surpass Shoe Stores Ltd., [1976] 2 S.C.R. 221; 4 N.R. 547, appld. [para. 35].

Pyrotech Products Ltd. et al. v. Ross Southward Tree Ltd. et al., [1976] 2 S.C.R. 35; 5 N.R. 541, appld. [para. 35].

Smith et al. v. Eaton (T.) Co. et al., [1978] 2 S.C.R. 749; 15 N.R. 315, appld. [para. 35].

Madison Developments Ltd. et al. v. Plan Electric Co. et al. (1997), 104 O.A.C. 194; 36 O.R.(3d) 80 (C.A.), consd. [para. 37].

1044589 Ontario Inc. v. AB Autorama Ltd. (2009), 265 O.A.C. 223; 98 O.R.(3d) 263; 2009 ONCA 654, refd to. [para. 37].

Tony and Jim's Holdings Ltd. et al. v. Silva (1999), 118 O.A.C. 236; 43 O.R.(3d) 633 (C.A.), refd to. [para. 38].

Orange Julius Canada Ltd. v. Surrey (City) - see Laing Property Corp. et al. v. All Seasons Display Inc. et al.

Laing Property Corp. et al. v. All Seasons Display Inc. et al. (2000), 140 B.C.A.C. 203; 229 W.A.C. 203; 2000 BCCA 467, refd to. [para. 38].

London Drugs Ltd. v. Brassart and Vanwinkle, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 38].

North Newton Warehouses Ltd. v. Alliance Woodcraft Manufacturing Inc. (2005), 213 B.C.A.C. 172; 352 W.A.C. 172; 2005 BCCA 309, leave to appeal refused (2005), 349 N.R. 400 (S.C.C.), appld. [para. 39].

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, consd. [para. 40].

Rose v. Borisko Brothers Ltd. (1981), 33 O.R.(2d) 685 (H.C.), affd. (1983), 41 O.R.(2d) 606 (C.A.), dist. [para. 44].

Lafarge Canada Inc. v. JJM Construction Ltd. (2011), 312 B.C.A.C. 253; 531 W.A.C. 253; 2011 BCCA 453, refd to. [para. 47].

Brown v. Sloan's Moving & Storage Co. (1956), 296 S.W.2d 20 (S.C. Mo.), refd to. [para. 49].

Kimberley-Clark Corp. v. Lake Erie Warehouse, Division of Lake Erie Rolling Mill Inc., 375 N.Y.S.2d 918; 49 A.2d 492 (S.C. App. Div.), refd to. [para. 49].

Smith v. Stevenson, [1942] 1 D.L.R. 681 (Ont. C.A.), refd to. [para. 52].

Waters et al. v. Monarch Fire and Life Assurance Co., [1843-60] All E.R. Rep. 654 (Q.B.), refd to. [para. 53].

Phoenix Insurance Co. v. Eerie and Western Transportation Co. (1886), 117 U.S. 873, refd to. [para. 53].

Hepburn v. A. Tomlinson (Hauliers) Ltd., [1963] 1 All E.R. 418 (H.L.), refd to. [para. 53].

Economical Mutual Insurance Co. et al. v. 1072871 Ontario Ltd. (1998), 77 O.T.C. 161; 20 R.P.R.(3d) 154 (Sup. Ct.), affd. (1999), 122 O.A.C. 94; 9 C.C.L.I.(3d) 224 (C.A.), refd to. [para. 56].

Evans Products Co. v. Crest Warehousing Co., [1980] 1 S.C.R. 83; 28 N.R. 148, consd. [para. 57].

Leung v. Takatsu, [1992] 3 W.W.R. 129 (B.C.C.A.), refd to. [para. 61].

Authors and Works Noticed:

Kent, Nigel, Tort Immunity; Covenants to Insure and Waivers of Subrogation, www.cwilson.com/publication/insurance/tort-immunity.pdf, generally [para. 61].

Legh-Jones, Nicholas, Birds, John, and Owen, David C., MacGillvray on Insurance Law (10th Ed. 2003), ྷ1-137 [para. 53].

Palmer, Norman, Palmer on Bailment (3rd Ed. 2009), c. 39, ྷ1-060 [para. 53].

Palmer, Norman, and McKendrick, Ewan, Interests in Goods (2nd Ed. 1998), c. 4 [para. 53].

Counsel:

W.G. Wharton and N.J. Tuytel, for the appellant;

M. Skorah, Q.C., and R. Bailey, for the respondent.

This appeal was heard on December 3, 2012, at Vancouver, B.C., before Newbury, Hall and Garson, JJ.A., of the British Columbia Court of Appeal. The following judgment of the Court of Appeal was delivered by Newbury, J.A., on January 9, 2013.