Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. et al., (2016) 487 N.R. 1 (SCC)

• Judge: McLachlin, C.J.C., Abella, Cromwell, Moldaver, Karakatsanis, Wagner, Gascon, Côté and Brown, JJ.
• Court: Supreme Court (Canada)
• Case Date: March 30, 2016
• Jurisdiction: Canada (Federal)
• Citations: (2016), 487 N.R. 1 (SCC);2016 SCC 37

Ledcor Constr. v. Northbridge Indemnity Ins. (2016), 487 N.R. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2016] N.R. TBEd. SE.009

Ledcor Construction Limited (appellant) v. Northbridge Indemnity Insurance Company, Royal & Sun Alliance Insurance Company of Canada and Chartis Insurance Company of Canada (respondents)

Station Lands Ltd. (appellant) v. Commonwealth Insurance Company, GCAN Insurance Company and American Home Assurance Company (respondents)

(36452; 2016 SCC 37; 2016 CSC 37)

Indexed As: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. et al.

Supreme Court of Canada

McLachlin, C.J.C., Abella, Cromwell, Moldaver, Karakatsanis, Wagner, Gascon, Côté and Brown, JJ.

September 15, 2016.

Summary:

Station Lands Ltd. (owner) retained Ledcor Construction Ltd. as construction manager to co-ordinate construction of the EPCOR Tower in Edmonton. Station Lands obtained an "all risks" insurance policy from the defendant insurers, covering all "direct physical loss or damage except as hereinafter provided". The policy contained certain exclusions, including clause 4(A)(b) which provided that the policy did not insure "(b) The cost of making good faulty workmanship, construction materials or design unless physical damage not otherwise excluded by this policy results, in which event this policy shall insure such resulting damage". As construction of the EPCOR Tower neared completion, Station Lands and Ledcor contracted with Bristol, a cleaning company, to clean the debris from the exterior of the building including the building's windows. In the course of cleaning the building, Bristol scratched and damaged the building's windows by using inappropriate tools and methods. Station Lands and Ledcor claimed under the all risks policy, but the insurers denied the claim. At issue was whether damage that occurred to the windows in the EPCOR Tower was excluded from coverage under clause 4(A)(b) (i.e., whether the damage resulted from "poor workmanship" or "resulting damage").

The Alberta Court of Queen's Bench, in a decision reported [2013] A.R. Uned. 624, held that the policy was ambiguous and, applying the doctrine of contra proferentem, held that the damage to the windows was covered by the policy. The insurers appealed.

The Alberta Court of Appeal, in a decision reported (2015), 599 A.R. 363; 643 W.A.C. 363, allowed the appeal and declared that the damage to the windows in the EPCOR Tower was not covered. The appeal court found it unnecessary to apply the doctrine of contra proferentem, holding that the case could be decided based on the proper interpretation of the scope of coverage provided by the policy wording. Station Lands and Ledcor appealed.

The Supreme Court of Canada allowed the appeal. The court found that the exclusion clause was ambiguous, but on the application of the general principles of contract interpretation, the court found that the cost of replacing the damaged windows was covered under the "resulting damage" exception to the cost of making good faulty workmanship exclusion. The court held that even if it had determined that the general rules of contractual interpretation did not clarify the ambiguous exclusion clause, the court would have reached the same conclusion on the basis of the contra proferentem rule.

Contracts - Topic 7400

Interpretation - General principles - General - The Supreme Court of Canada clarified how Sattva Capital Corp. v. Creston Moly Corp. (SCC 2014) applied to the interpretation of standard form contracts (contracts of adhesion) - The majority, per Wagner, J., stated, inter alia, that "Sattva should not be read as holding that contractual interpretation is always a question of mixed fact and law, and always owed deference on appeal. I would recognize an exception to Sattva's holding on the standard of review of contractual interpretation. Where, like here, the appeal involves the interpretation of a standard form contract, the interpretation at issue is of precedential value, and there is no meaningful factual matrix specific to the particular parties to assist the interpretation process, this interpretation is better characterized as a question of law subject to correctness review ... Depending on the circumstances, however, the interpretation of a standard form contract may be a question of mixed fact and law, subject to deferential review on appeal. For instance, deference will be warranted if the factual matrix of a standard form contract that is specific to the particular parties assists in the interpretation. Deference will also be warranted if the parties negotiated and modified what was initially a standard form contract, because the interpretation will likely be of little or no precedential value. There may be other cases where deferential review remains appropriate. As Iacobucci J. recognized in Southam, the line between questions of law and those of mixed fact and law is not always easily drawn. Appellate courts should consider whether 'the dispute is over a general proposition' or 'a very particular set of circumstances that is not apt to be of much interest to judges and lawyers in the future'" - See paragraphs 19 to 48.

Contracts - Topic 7400

Interpretation - General principles - General - [See Insurance - Topic 1851 ].

Insurance - Topic 1851

The insurance contract - Interpretation of contract - General - A window cleaning company damaged the windows in a building during a construction clean - The owner and contractor claimed under an "all risks" insurance policy - The policy excluded "the cost of making good faulty workmanship, construction materials or design unless physical damage not otherwise excluded by this policy results, in which event this policy shall insure such resulting damage" - The trial judge held that the damage was covered by the policy, notwithstanding the exclusion - The insurers appealed - The Alberta Court of Appeal allowed the appeal, holding that the damage was not covered - The owner and contractor appealed - The Supreme Court of Canada held that the appropriate standard of review in this case was correctness - "Where, like here, the appeal involves the interpretation of a standard form contract, the interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the particular parties to assist the interpretation process, this interpretation is better characterized as a question of law subject to correctness review" - See paragraphs 4 and 19 to 48.

Insurance - Topic 1851

The insurance contract - Interpretation of contract - General - [See Contracts - Topic 7400 ].

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - [See Insurance - Topic 6603 ].

Insurance - Topic 6516

Multi-peril property insurance - Exclusions - Faulty workmanship or design - [See Insurance - Topic 6603 ].

Insurance - Topic 6592

Multi-peril property insurance - Contractor's or builder's policies - Exclusions - Faulty work, materials or design - [See Insurance - Topic 6603 ].

Insurance - Topic 6603

Multi-peril property insurance - Exclusions - Exception for "resulting damage" - A window cleaning company damaged the windows in a newly constructed building during a construction clean by using inappropriate tools and cleaning methods - The owner and contractor (plaintiffs) claimed under an "all risks" insurance policy - The policy excluded "the cost of making good faulty workmanship, construction materials or design unless physical damage not otherwise excluded by this policy results, in which event this policy shall insure such resulting damage" (i.e., a faulty workmanship exclusion) - At issue was whether damage that occurred to the windows was excluded from coverage because of the faulty workmanship exclusion - The Supreme Court of Canada, per Wagner, J., stated that "Regarding the appropriate interpretation of the faulty workmanship exclusion in all builders' risk policies, I am of the view that the exclusion clause serves to exclude from coverage only the cost of redoing the faulty work. This interpretation is dictated by the general rules of contractual interpretation. It best represents the parties' reasonable expectations, as informed by the purpose of builders' risk policies, aligns with commercial reality, and is consistent with the jurisprudence on the matter. In this case, the cost of redoing the faulty work is that of recleaning the windows. Therefore, I would allow the appeals and hold that the windows' replacement cost is covered under the insurance policy" - See paragraph 5 and 49 to 97.

Insurance - Topic 6641

Multi-peril property insurance - Interpretation - General - [See Insurance - Topic 1851 and Insurance - Topic 6603 ].

Practice - Topic 8800.1

Appeals - General principles - Duty of appellate court regarding findings of mixed law and fact by a trial judge - [See Contracts - Topic 7400 ].

Practice - Topic 8808

Appeals - General principles - Duty of appellate court respecting conclusions or interpretation of trial judge (incl. contractual interpretation) - [See Contracts - Topic 7400 ].

Counsel:

Eugene Meehan, Q.C., and Stacey Boothman, for the appellant, Ledcor Construction Limited;

Dennis L. Picco, Q.C., and Marie-France Major, for the appellant, Station Lands Ltd.;

Gregory J. Tucker, Q.C., and Scott H. Stephens, for the respondents.

Solicitors of Record:

Supreme Advocacy, Ottawa, Ontario and Stacey Boothman, Vancouver, British Columbia, for the appellant, Ledcor Construction;

Dentons Canada, Edmonton, Alberta and Supreme Advocacy, Ottawa, Ontario, for the appellant, Station Lands Ltd.;

Owen Bird Law Corporation, Vancouver, British Columbia, for the respondents.

This appeal was heard on March 30, 2016, before McLachlin, C.J.C., Abella, Cromwell, Moldaver, Karakatsanis, Wagner, Gascon, Côté and Brown, JJ., of the Supreme Court of Canada The decision of the court was delivered in both official languages on September 15, 2016, and included the following opinions:

Wagner, J. (McLachlin, C.J.C., Abella, Moldaver, Karakatsanis, Gascon, Côté and Brown, JJ., concurring) - see paragraphs 1 to 97;

Cromwell, J., concurring reasons - see paragraphs 98 to 128.