[2001] 1 F.C. 192
T-841-97
Jim Dryburgh, Pete Engstad, Sydney Mallon, Arthur Mountain, Morris Hankey, Peter Adams, the Estate of Bruce Aikman, William Cairns, Jim Hopkins, David Holmes, Ken Joyce, Jim Provan, William Lenihan, Warren Hong, J. Bridle, John Celona, M. Coldren, Bernie Dahl, Murray Fallen, Paul Fletcher and Ralph Jones (Plaintiffs)
v.
Oak Bay Marina (1992) Ltd., Oak Bay Marina Ltd., Robert Wright, The Corporation of the District of Oak Bay, Newport Yacht Sales (1996) Ltd. and Newport Yacht Charters Ltd. (Defendants)
Indexed as: Dryburgh v. Oak Bay Marina (1992) Ltd. (T.D.)
Trial Division, Hargrave P.—Vancouver, April 27 and August 17, 2000.
Maritime law — Contracts — Plaintiff claiming damages for negligence, breach of contract, duty as bailee for reward, despite exculpatory clause in moorage contract — Dock at which plaintiff’s yacht moored breaking up, resulting in damage to yacht — Under moorage contract vessels moored solely at owner’s risk, defendant not liable under any circumstances for loss, damage — Court ought intervene only if exculpatory provision unconscionable — Damage must fit within four corners of provision — Moorage contract must be interpreted according to true intention of parties to achieve sensible commercial result — Whether exculpatory clause extending to president of corporate defendant — Narrow exception to doctrine of privity of contract in case of employer-employee relationships exempting president from liability — Intent to extend protection of exculpatory clause must be mutual — Exculpatory clause covering corporate defendant as well as president.
Contracts — Exculpatory clause in standard form moorage agreement — Plaintiff’s vessel damaged when dock breaking up in heavy weather — While courts generally hostile to clauses excluding liability, provision should be upheld if not unconscionable, unfair or unreasonable — If exculpatory clause clearly expressed, usual rules for construction of contracts apply and language not to be given strained, artificial meaning to avoid exclusion of liability — In case of company wholly owned by president, absurd if corporation exempt from liability but president liable — Common law privity of contract doctrine having been relaxed incrementally.
This was a motion for summary judgment under rule 213 seeking a declaration that certain of the defendants were not protected by an exculpatory clause in a moorage contract. Plaintiff’s claim was for damages for negligence, breach of contract and breach of duties by the defendants as bailees for reward, following the break up, in heavy weather, of the marina at Oak Bay, near Victoria, B.C., which resulted in damage to a number of vessels, including the plaintiff’s yacht. Prior to that incident, the plaintiff, Dryburgh, had signed with the defendant, Oak Bay Marina Ltd., a standard form moorage contract, on an annual basis, whereby vessels were moored solely at their owner’s risk. Under that clause, the corporate defendant was not liable under any circumstances for loss or damage even if caused by the defendant itself, its servants or agents. The plaintiff sought a declaration that no protection was afforded to Oak Bay Marina Ltd. and to its president, Robert Wright, by an exculpatory clause in a standard form moorage agreement. The issues raised on this motion were: (1) whether the exclusion clause in the moorage contract exempts Oak Bay Marina Ltd. from liability to the plaintiff and, (2) if so, whether that exemption also extends to the corporate president, for the claims alleged in the amended statement of claim.
Held, the motion should be dismissed.
(1) Because they generally look at clauses which exclude liability with hostility, courts strictly construe such clauses against the party seeking to invoke them. While the moorage contract is a contract of adhesion and purports to exclude all liability, even that resulting from negligence, it was clearly written and not one between an all powerful service provider and an unsophisticated clientele. Moreover, the moorage rate made it clear that Oak Bay Marina Ltd. was not acting as a port-risk insurer. Therefore, the contract was not unconscionable, unfair or unreasonable. So long as the exculpatory provision is on point regarding the negligence or breach which in fact occurred, a court ought only to intervene if the exculpatory provision is unconscionable. The damage must fit within the four corners of the exculpatory provision. In this instance, the moorage contract is a broad agreement for the provision of suitable moorage for vessels. The exculpatory provision is also broad, referring to “any loss or damage” whether or not caused by negligence. The contract is not so specific that the exclusion clause must refer only to the day to day provision of suitable premises; rather, it refers to any loss or damage, without a limitation. As to the plaintiffs’s argument, that negligence in the design of the marina, which took place in 1994 and 1995, should not be protected by the exculpatory clause, the Court assumed that there was negligence in the marina design, including in placing and driving the piling, a task undertaken by Robert Wright on behalf of Oak Bay Marina Ltd. As a result of the 1994 and 1995 renovations to the marina, both of them owed a duty to future marina users to provide them with a properly built marina.
The rules of construction which apply to any written contract are equally applicable to exemption clauses in order to determine the meaning the words were intended to bear. If a clause is expressed clearly and unambiguously, there is no justification for placing upon its language a strained and artificial meaning to avoid the exclusion or restriction of liability. The doctrine of contra proferentem should be invoked only if there is an ambiguity. It was necessary to look at the entire moorage agreement and to interpret it consistently with the true intention of the parties thus achieving a sensible commercial result. To hold that the exculpatory clause is bound by some time constraint and to exclude past neglect in a duty owed to the plaintiff as a later occupier would distort the four corners rule and bring about an unrealistic result. The exculpatory clause protected Oak Bay Marina Ltd. from liability for the negligence and breaches of duty and contract set out in the statement of claim.
(2) The second issue was whether the exculpatory clause which protected the corporate defendant, Oak Bay Marina Ltd., extended to its president. Under the doctrine of privity of contract, a person who is not a party to a contract, such as Mr. Wright, could not benefit from that clause. However, the Supreme Court of Canada decision in London Drugs Ltd. v. Kuehne & Nagel International Ltd. recognized a narrow exception to the doctrine of privity of contract, in the case of employer-employee relationships where there is an intent to extend the protection of an exculpatory clause. The London Drugs case set out two requirements. The first requirement, applicable here, is whether, by implication, the benefit of the exculpatory clause extends to Robert Wright who, while president of the company, was also an employee in that he redesigned the marina when the renovations were made. Mr. Wright’s intent that he have the same exemption from liability as his company was bona fide, for it would be absurd, in the case of a company wholly owned by its president, that the corporation would be exempt from liability but that the president or the insurers be open to the same liability. The intention must also be mutual. The second requirement set out in the London Drugs case is that an employee seeking the benefit of the contract must have acted in the course of his employment and must have performed the very services provided for in the contract. This requirement was also met. Wright had been directly involved in the building of the marina and he had the full and final say in its reconstruction. This work, intended to produce a properly and safely built marina, was part of what the plaintiff contracted for. The negligent conduct alleged need not comprise all of the services contracted for. Wright should have the benefit of the exculpatory clause, along with his company, as the negligent conduct alleged against him was in the course of his work with the company and in the discharge of the very services which Oak Bay Marina Ltd. not only undertook under the contract but also was expected to provide in the plaintiff’s view. This relaxation of the doctrine of privity of contract is consistent with the incremental change which that common law doctrine has undergone. Given that corporations perform their services through employees, it is sensible that a party to a contract not be able to avoid the incidence of loss by suing individuals doing the actual work as employees or as hands-on executives and owners.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Rules, 1998, SOR/98-106, rr. 50(1)(c), (2), 213.
CASES JUDICIALLY CONSIDERED
APPLIED:
Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426; (1989), 57 D.L.R. (4th) 321; [1989] 3 W.W.R. 385; 35 B.C.L.R. (2d) 145; 92 N.R. 1; MacKay v. Scott Packing and Warehousing Co. (Canada) Ltd., [1996] 2 F.C. 36 (1995), 192 N.R. 118 (C.A.); Alderslade v. Henson Laundry, Ld., [1945] K.B. 189 (C.A.); Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; (1979), 112 D.L.R. (3d) 49; [1980] I.L.R. 595; 32 N.R. 488; London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299; (1992), 97 D.L.R. (4th) 261; [1993] 1 W.W.R. 1; 18 B.C.A.C. 1; 73 B.C.L.R. (2d) 1; 43 C.C.E.L. 1; 13 C.C.L.T. (2d) 1; 143 N.R. 1; Laing Property Corp. v. All Seasons Display Inc. (1998), 53 B.C.L.R. (3d) 142, 53 B.C.L.R. (3d) 142; 29 B.L.R. (2d) 153; 3 C.C.L.I. (3d) 241 (S.C.); revd sub nom. Orange Julius Canada Ltd. v. Surrey (City), [2000] B.C.J. No. 1655 (C.A.) (QL).
CONSIDERED:
Salmon River Co. v. Burt Bros., [1953] 2 S.C.R. 117; [1954] 1 D.L.R. 1; Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85; (1995), 121 D.L.R. (4th) 193; [1995] 3 W.W.R. 85; 23 C.C.L.T. (2d) 1; 18 C.L.R. (2d) 1; 100 Man. R. (2d) 241; 176 N.R. 321; 43 R.P.R. (2d) 1; 91 W.A.C. 241; Bombardier Inc. v. Canadian Pacific Ltd. (1992), 7 O.R. (3d) 559; 85 D.L.R. (4th) 558; 6 B.L.R. (2d) 166; 52 O.A.C. 30 (C.A.).
REFERRED TO:
Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210; (1997), 158 Nfld. & P.E.I.R. 269; 153 D.L.R. (4th) 385; 221 N.R. 1; Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.); Pense v. Northern Life Assurance Co. (1907), 15 O.L.R. 131; affd (1908), 42 S.C.R. 246; Adler v. Dickson and Another, [1954] 2 Lloyd’s Rep. 267 (C.A.); Midland Silicones Ltd. v. Scruttons Ltd., [1962] A.C. 446 (H.L.); ITO—International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752; (1986), 28 D.L.R. (4th) 641; 34 B.L.R. 251; 68 N.R. 241; Greenwood Shopping Plaza Ltd. v. Beattie et al., [1980] 2 S.C.R. 228; (1980), 39 N.S.R. (2d) 119; 111 D.L.R. (3d) 257; 10 B.L.R. 234; [1980] I.L.R. 914; 32 N.R. 163; Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108; (1999), 176 D.L.R. (4th) 257; [1999] 9 W.W.R. 380; 127 B.C.A.C. 287; 67 B.C.L.R. (3d) 213; 50 B.L.R. (2d) 169; 11 C.C.L.I. (3d) 1; 47 C.C.L.T. (2d) 1; 245 N.R. 88.
AUTHORS CITED
Chitty on Contracts, 28th ed. London: Sweet & Maxwell, 1999.
MOTION for summary judgment under rule 213 seeking a declaration that certain defendants are not protected by an exculpatory clause in a standard form moorage agreement. Motion dismissed.
APPEARANCES:
Douglas G. Schmitt for plaintiff Jim Dryburgh.
John W. Bromley for defendants Oak Bay Marina Ltd. and Robert Wright.
Michael R. Tinker for defendant Pacific Pile Driving Ltd.
SOLICITORS OF RECORD:
McEwen, Schmitt & Co., Vancouver, for plaintiff Jim Dryburgh.
Bromley Chapelski, Vancouver, for defendants Oak Bay Marina Ltd. and Robert Wright.
Killam, Whitelaw & Twining, Vancouver, for defendant Pacific Pile Driving Ltd.
Carfra & Lawton, Victoria, for defendant The Corporation of the District of Oak Bay.
The following are the reasons for order rendered in English by
[1] Hargrave P.: These reasons arise out of a test case which in effect is a question of law, brought by way of a rule 213 summary judgment motion [of the Federal Court Rules, 1998, SOR/98-106] and as provided for under paragraph 50(1)(c) and subsection 50(2) of the Rules, which provide prothonotaries with an appropriate jurisdiction. The issue is the effect of an exculpatory clause in a moorage contract on the claim of one of the plaintiffs, Mr. Jim Dryburgh. Mr. Dryburgh, as owner of the yacht Three Martletts claims against the defendants in negligence, breach of contract and breach of duty as bailees for reward, for damages suffered when the marina at Oak Bay, near Victoria, B.C., broke up during heavy weather. This resulted in damage to a number of vessels moored at the marina, including the Three Martletts.
[2] A number of the individual defendants has been let out of the action by agreement. The plaintiff, Mr. Dryburgh, now seeks a declaration that no protection is afforded to Oak Bay Marina Ltd. and to Mr. Robert Wright by an exculpatory clause in a standard form moorage agreement. The two defendants stand in different relationships to Mr. Dryburgh. Thus some background is in order. Here counsel have been able to agree on the basic facts, to which I now turn.
FACTS
[3] The Three Martletts, a yacht of about 30 feet in registered length, had been moored at the Oak Bay Marina since 1979. On 17 October 1996, the dock at which the Three Martletts was moored broke loose and drifted aground, resulting in damage to the yacht.
[4] Mr. Dryburgh alleges that the dock broke loose by reason of the negligence, breach of contract and breach of duty as bailees for reward. More specifically the shortcomings are said to be in design, construction, maintenance and supervision of the marina.
[5] The defendants now participating in this proceeding, as I have indicated, are Oak Bay Marina Ltd. and Robert Wright, who say that Mr. Dryburgh is party to a moorage contract exempting these two defendants from liability. Here I would note that following the hearing, Dean Strongetharm, Randy Wright and George Moore were let out of the action.
[6] Mr. Dryburgh had at one time been the proprietor of an adjacent ship repairing and building business. Well after the time Mr. Dryburgh began mooring the Three Martletts at the Oak Bay Marina, in 1994 and 1995, the whole marina was rebuilt by way of an expansion and modification. Mr. Dryburgh signed a standard form moorage contract, on an annual basis, and particularly the moorage contract from 1 April 1996 running to 31 March 1997, a document called “Oak Bay Marine Group Annual Moorage License and Invoice”. It was a document sent out by mail each year by the defendant Oak Bay Marina Ltd. For the purpose of this motion Mr. Dryburgh admits that he is bound by the terms of the standard moorage contract, here waiving any arguments based on lack of notice of the exclusion clause.
[7] The contractual clause at issue is that contained in the Oak Bay Marine Group Annual Moorage License and Invoice, being one of the Moorage License Conditions set out on the reverse.
EXCLUSIONS ON LIABILITY
All vessels, boathouse and ancillary equipment of the Owner stored or moored on the Company’s premises shall be solely at the Owner’s risk, and the Company shall not be responsible under any circumstances for any loss or damage caused thereto whether caused by the negligence of the Company, its servants or agents or the acts of third parties, or otherwise. All vehicles parked on the Company’s premises and the contents therein are left at the Owner’s risk. All persons using the Company’s facilities, floats and ramps do so at their own risk and the Company assumes no responsibility whatsoever for the personal injury in the Owner or his invitees occurring within the Company’s premises for any cause whatsoever.
The document, to which I will refer to as the moorage contract, defines the owner as the person named on the face of the contract: Mr. Dryburgh’s name appears in the box on the face of the contract labelled “owner’s name”. The face of the moorage contract, as I have already said, refers to the Oak Bay Marina Group. Along the top of the contract are the names of three entities, Oak Bay Marina Ltd., North Saanich Ltd. and Pedder Bay Marina: the box in front of Oak Bay Marina Ltd. has in it a type written “X”. Mr. Dryburgh agreed that he was obtaining his moorage space from Oak Bay Marina Ltd.
[8] The Oak Bay Group and thus, indirectly, Oak Bay Marina Ltd., is owned by the defendant Robert Wright, who is it’s president.
[9] It is fair to say that Mr. Dryburgh believed that he should look after his vessel while it was at the marina, that he should make certain it was properly tied up and overall he believed he was responsible for the Three Martletts while it was tied at the dock, although he also knew that, from time to time, employees of Oak Bay Marina Ltd. checked vessels at the marina, particularly during stormy weather.
[10] When asked, on discovery, as to his understanding of the standard to which the marina had been built, Mr. Dryburgh agreed that he believed it would meet prevailing Canadian safety standards and would withstand all reasonably foreseeable weather and sea conditions. These were the services and conditions for which he contracted.
[11] As for the intention of Oak Bay Marina Ltd., regarding its facility, it was to provide a properly and safely built and maintained marina that would withstand all reasonably foreseeable weather conditions. Mr. Wright sets out, in an affidavit of 14 April 1999, that he had the full and final say in the redesign and reconstruction of the marina in 1994 and 1995 and that no other employees exercised any decision making in that regard. Mr. Wright chose the size, number and location of the piling, taking into account the depth of the overburden into which the piling might be driven. Here it is pertinent to note the allegations of negligence in the amended statement of claim which include constructing the dock with inadequate pilings and anchors, failing to drive the pilings deeply enough, failing to correct weakened piling installation when it became apparent that the pilings were moving during normal conditions and designing and equipping the docks in such a manner that when the wind blew the piling moved and deteriorated.
[12] It is Mr. Wright’s evidence that virtually all marinas have moorage contracts containing an exclusion clause and he understood it excluded liability for the company, his employees and himself:
With respect to the moorage contract itself, I have read it in the past and it has always been my understanding that it excluded liability for myself and for all employees of the company, as well, of course, as excluding liability for the company. That was certainly always my intention.
That the Oak Bay Marina Group, of which Mr. Wright was owner, was never asked, by Mr. Wright himself, to specifically include Mr. Wright as a beneficiary, is not inconsistent with his view that in fact he had the benefit of immunity from liability as did his marina operating companies.
POINT IN ISSUE
[13] At issue is whether the exclusion clause on the reverse of the moorage contract exempts Oak Bay Marina Ltd. from liability to Mr. Dryburgh and, if so, does that exemption also extend to Mr. Robert Wright, for the claims alleged in the amended statement of claim.
ANALYSIS
Exculpatory Clauses Generally
[14] To begin, courts generally look at clauses which exclude liability with some hostility. The result is that they strictly construe such clauses against the party seeking to invoke the clause: Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210, at page 1232, where Madam Justice McLachlin, as she then was, referred to Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426, at page 497. The Federal Court of Appeal relied extensively upon Syncrude Canada Ltd. in MacKay v. Scott Packing and Warehousing Co. (Canada) Ltd., [1996] 2 F.C. 36 (C.A.), a useful case, not because it contains anything new, but rather because it considered the scope of the clause at issue, pointing out that an effective clause need not explicitly exempt negligence or fundamental breach and then went on to look at the fairness and reasonableness of the clause.
[15] In the present instance the clause explicitly provides that vessels moored are not only solely at the owner’s risk, but that the company is not responsible for loss or damage “whether caused by the negligence of the Company, its servants or agents, or the acts of third parties, or otherwise”. This is a clearly written and reasonably visible provision. While the moorage contract is a contract of adhesion and purports to exclude all liability, even that resulting from negligence, it is not a contract between an all-powerful service provider and an unsophisticated clientele. Moreover, Oak Bay Marina Ltd. is not acting as a port-risk insurer: the moorage rate makes that clear. Taking these factors into consideration the contract is not one which is unconscionable, unfair or unreasonable. Here I would turn to Syncrude Canada, supra, at page 462, where Chief Justice Dickson pointed out:
If on its true construction the contract excludes liability for the kind of breach that occurred, the party in breach will generally be saved from liability. Only where the contract is unconscionable, as might arise from situations of unequal bargaining power between the parties, should the courts interfere with agreements the parties have freely concluded. The courts do not blindly enforce harsh or unconscionable bargains and, as Professor Waddams has argued, the doctrine of “fundamental breach” may best be understood as but one manifestation of a general underlying principle which explains judicial intervention in a variety of contractual settings.
Key here is that so long as the exculpatory provision is on point, vis-à-vis the negligence or breach which in fact occurred, a court ought only to intervene if the exculpatory provision is unconscionable. In this instance, the agreement is not unconscionable and it would not be unfair or unreasonable to enforce the exclusion clause, so long as it is on point. There are several aspects to examine in this latter regard.
Identity of the Corporate Beneficiary
[16] First, there was a suggestion that the reference to “Company” in the exculpatory clause was, to some degree, ambiguous. On the face of the agreement it would appear that the moorage contract might be with any one of three providers, however there is a mark in the box immediately before the name of Oak Bay Marina Ltd.: that is a good indication of the identity of the company in the moorage contract. Moreover, Mr. Dryburgh’s evidence, at page 9 of his discovery, is that the moorage contract was with Oak Bay Marina Ltd. It is clear that the moorage contract is between Mr. Dryburgh and Oak Bay Marina Ltd.
Scope of the Exculpatory Clause
[17] Next there is the consideration of whether the exculpatory language deals with the particular causes of action raised by the plaintiff. In short, the damage must fit within the four corners of the exculpatory provision (Alderslade v. Henson Laundry, Ld., [1945] K.B. 189 (C.A.), at page 192):
It must be remembered that a limitation clause of this kind only applies where the damage, in respect of which the limitation clause is operative, takes place within the four corners of the contract.
Alderslade was applied by the Supreme Court in Salmon River Co. v. Burt Bros., [1953] 2 S.C.R. 117. Salmon River offers a good example of negligence which fell outside of the exculpatory clause. There the clause would have been effective, in a claim for damage during loading of a logging truck had the loading resulted in damage: instead, the damage had nothing to do with the loading operation and thus was held not to come within the four corners of the contract. Thus the exculpatory clause did not apply: See Mr. Justice Cartwright’s decision in Salmon River, at pages 125 and 126.
[18] Counsel for Mr. Dryburgh acknowledges that there is a duty of care on the part of a designer or a builder of a structure to make certain that the structure is safe for future occupants, here citing to Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85 and referring to the decision of the Court rendered by Mr. Justice La Forest, at pages 115-116. In effect the responsibility of the builders and designers extends to every user of the structure during its useful life. At this point counsel for the plaintiffs refers to the alleged negligence of the defendants, which comes down to pilings which may have been inadequately driven and a failure to correct weakened piling which moved and deteriorated during storms, it being clear, on discovery, that Robert Wright made the final decision as to the size, number and placement of the pilings. Counsel for the plaintiffs then focusses on a portion of the discovery transcript which he submits sets out the purpose of the marina renovations as taking place in order to make a more economically viable marina:
359 Q. The overall plan for the redesign was to put in a new renovated marina of high quality and, also, to accommodate a changing population of boat sizes; is that right? Powerboats had gotten bigger than when the marina was first built?
359 A. To build a high-quality marina, yes. To get ride of the original B dock, where there was 14 or 15-foot boats on. Because the market and the prices were such that prices were going up, they were taking them home, there was no market for it and we’d have empty docks, we decided to look at what the market was going to be for the next 15 years, the centre point of our 30-year lease. Are they going to get bigger, smaller or whatever. And it was out of that forward planning, that this, we believed, would answer the needs for that.
360 Q. All right. So it’s to make a renovated and economically viable marina?
360 A. Well, people buy a product. We wanted to have a product that would be bought. And we made it, and it’s full, with a waiting list, so our decision was the right one.
There are two things which might be read into this. First, there is the concept, put by counsel at question 360, that the aim in the renovation was to produce an economically viable marina. Robert Wright did not answer the question directly, but merely said that he wanted a product, that is a marina in which people would buy moorage and that the result was a full marina with a waiting list. Second, is the concept of building a high quality marina, being answer 359. Also bearing on the issue and not in conflict with either of these concepts, is the evidence of Robert Wright, set out in his affidavit, which includes information on his experience in building and designing marinas in British Columbia and in Oregon over the past 37 years. In that affidavit he sets out that:
It was the company’s intention and certainly my intention to construct a marina which was well built and maintained, met prevailing Canadian safety standards and would be capable of withstanding reasonably foreseeable weather and sea conditions.
In this same train of thought, the plaintiff, Jim Dryburgh, acknowledged on discovery that he thought the berth space would be in a marina which was properly and safely built and maintained, up to prevailing Canadian safety standards, able to withstand all reasonably foreseeable weather and sea conditions and that was what he was contracting for: questions 134 through 137.
[19] At this point counsel for Mr. Dryburgh submits that the only reasonable interpretation of the exclusion clause is that it was intended to apply only to contractual services rendered from year to year in the operation and supervision of the marina and that the phrases in the exclusion clause, taking into account the moorage contract overall, do not address past acts or omissions. Particularly, counsel submits that nothing addresses the duty of care arising out of the design and construction of the marina, here referring back to the Winnipeg Condominium case, supra, in effect severing design and building from day to day moorage. By way of analogy counsel refers to Bombardier Inc. v. Canadian Pacific Ltd. (1992), 7 O.R. (3d) 559 (C.A.) in which exculpatory provisions, referring to carriage of cargo, did not extend to damage done by the carriers employees during a negligent salvage operation following a derailment. That is a clear example of an exculpatory clause designed specifically for a carriage situation, with the Ontario Court of Appeal giving it a properly narrow interpretation, refusing to extend it to something well outside the contract, being a salvage operation. The present instance is not so clear cut and indeed, the clause is broader than that, for example, in Bombardier which covered the movement of goods by rail or motor vehicle. In the present instance the moorage contract is a broader agreement for the provision of suitable moorage for vessels. The exculpatory provision is also broad, referring to “any loss or damage” whether or not caused by negligence. I do not see the contract as being so specific that the exclusion clause must refer only to the day to day provision of suitable premises. Rather it refers to any loss or damage, without a limitation. Moreover, in a marina situation damage caused by the breaking up of a marina, in heavy weather and as a result of construction inadequate to withstand that stress, does happen from time to time.
[20] The plaintiffs submit that negligence in the design of the marina, an activity that took place in 1994 and 1995, should not be protected by the exculpatory clause at this juncture, referring again to the Winnipeg Condominium case, supra. For the purpose of this argument, I will assume that there was negligence in the marina design, including in placing and driving the piling, a task undertaken by Robert Wright on behalf of Oak Bay Marina Ltd. Winnipeg Condominium involved a tort claim by a subsequent owner for repair costs resulting from negligent construction work done for a previous owner. The Manitoba Court of Appeal had struck out the claim as a pure economic loss not recoverable against the original general contractor for, according to the Court of Appeal, in the absence of a contractual relationship, remedial repairs, done before there had been any physical damage or personal injury from falling masonry, was not recoverable by a remote buyer of the building as against the original builder. In contrast Mr. Justice La Forest, writing for the Supreme Court, at pages 102-103, came to the view that a contractor should be held to a reasonable standard of care if negligent construction might cause harm to other persons and property in the community:
… where a contractor (or any other person) is negligent in planning or constructing a building, and where the building is found to contain defects resulting from that negligence which pose a real and substantial danger to the occupants of the building, the reasonable cost of repairing the defects and putting the building back into a non-dangerous state are recoverable in tort by the occupants. The underlying rationale for this conclusion is that a person who participates in the construction of a large and permanent structure which, if negligently constructed, has the capacity to cause serious damage to other persons and property in the community, should be held to a reasonable standard of care.
Mr. Justice La Forest went on to point out, at page 106, that contractual provisions between the original builder and the original owner could protect the contractor, but that “such a contract cannot absolve the contractor from the duty in tort to subsequent owners to construct the building according to reasonable standards”. This led to a consideration of whether there was a close enough relationship between the parties so that, in the reasonable contemplation of the original builder, carelessness on its part might cause damage to a subsequent purchaser. It is here that counsel for the plaintiffs refers me to a passage, at pages 115-116:
In my view, it is reasonably foreseeable to contractors that, if they design or construct a building negligently and if that building contains latent defects as a result of that negligence, subsequent purchasers of the building may suffer personal injury or damage to other property when those defects manifest themselves. A lack of contractual privity between the contractor and the inhabitants at the time the defect becomes manifest does not make the potential for injury any less foreseeable. Buildings are permanent structures that are commonly inhabited by many different persons over their useful life. By constructing the building negligently, contractors (or any other person responsible for the design and construction of a building) create a foreseeable danger that will threaten not only the original owner, but every inhabitant during the useful life of the building.
Clearly enough, as a result of the 1994 and 1995 renovations to the marina, Oak Bay Marina Ltd. and Robert Wright owed a duty to future marina users to provide them with a properly built marina. The plaintiffs’ point here is that there is nothing in the exculpatory clause, or in the balance of the moorage agreement, to address or protect anyone relying upon the moorage agreement from liability for past omissions in the design and installation of new docks and berths in the marina when it was expanded in 1994 and 1995.
[21] In dealing with this line of argument it is useful to review some basic principles of construction of exculpatory provisions. To begin, the rules of construction which apply to any written contract are equally applicable to exemption clauses in order to determine the meaning the words were intended to bear: Chitty on Contracts, 28th ed., 1999, Sweet & Maxwell, London, at page 664. Moreover, Chitty on Contracts goes on to point out, relying upon Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.), at pages 846 and 851, that “If the clause is expressed clearly and unambiguously, there is no justification for placing upon the language of the clause a strained and artificial meaning so as to avoid the exclusion or restriction of liability contained in it” (loc. cit.). In effect there is nothing in an exclusionary provision which is inherently evil. I therefore ought to interpret an exculpatory clause, subject to it being unconscionable or unreasonable, just as I would any other contractual provision, giving effect to the intention of the parties and if, and only if, there is an ambiguity, should I invoke the doctrine of contra proferentem. Here I have been referred to Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888, a decision of the Supreme Court of Canada. There, Mr. Justice Estey, writing for the majority of the Court, considered exclusionary provisions in an insurance policy and referred to a proposition from Pense v. Northern Life Assurance Co. (1907), 15 O.L.R. 131 (C.A.), at page 137, subsequently adopted by the majority of the Supreme Court on appeal, (1908), 42 S.C.R. 246, at page 248:
There is no just reason for applying any different rule of construction to a contract of insurance from that of a contract of any other kind; and there can be no sort of excuse for casting a doubt upon the meaning of such a contract with a view to solving it against the insurer, however much the claim against him may play upon the chords of sympathy, or touch a natural bias. In such a contract, just as in all other contracts, effect must be given to the intention of the parties, to be gathered from the words they have used.
After quoting this passage Mr. Justice Estey continued in Consolidated-Bathurst, at page 900:
Such a proposition may be referred to as step one in the interpretative process. Step two is the application, when ambiguity is found, of the contra proferentem doctrine.
and that, at page 901:
Even apart from the doctrine of contra preferentem as it may be applied in the construction of contracts, the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result.
In effect, I should, looking at the whole of the moorage agreement, determine an interpretation consistent with the true intention of the parties, an interpretation which results in a sensible commercial result.
[22] Here Mr. Dryburgh, on his own admission, was aware of the terms of the moorage contract, including the exculpatory clause. He agreed, on examination for discovery, that he had no expectation that the Oak Bay Marina would look after the Three Martletts, did not expect Oak Bay Marina Ltd. to insure the vessel and that he expected the marina would be properly built and maintained, would meet prevailing Canadian safety standards, and would withstand all reasonably foreseeable weather. These are reasonable expectations.
[23] From the point of view of Oak Bay Marina Ltd. it is clear, looking at the per-foot per-month rate and the resulting yearly moorage figure set out on the face of the contract, that they did not, for that rate, consider themselves to be insurers. There is also the plain wording of the exculpatory clause. The word “any”, modifying “loss or damage” in the exculpatory clause should be reasonably interpreted. To circumscribe the term, preventing its application to events falling outside the moorage contract year, is an artificial constraint. It would distort the agreement, producing an unrealistic result, to interpret the exculpatory provision to cover only events during the day to day operation of the marina during the contract year and to exclude past negligence in the construction of the marina, construction and moorage of the floats and berths, and placement and driving of piling. To hold that the exculpatory clause is bound by some time constraint, to cut off past neglect in a duty owed to Mr. Dryburgh as a later occupier, would be to distort the four corners rule and bring about an unrealistic result, a result not contemplated in the commercial atmosphere between Oak Bay Marina Ltd. and Mr. Dryburgh. The exculpatory clause protects Oak Bay Marina Ltd. from liability for the negligence and breaches of duty and contract set out in the statement of claim. The more difficult issue is whether the exculpatory clause extends to protect Robert Wright, a point to which I now turn.
Extension of the Exculpatory Clause to Individuals
[24] The defence sets out that Robert Wright is exempt from liability by reason of the exculpatory clause in the moorage contract between Mr. Dryburgh and Oak Bay Marina Ltd. That is not explicit on the plain wording of the clause. Indeed, traditionally the doctrine of privity of contract would prevent this benefit going to Mr. Wright, president of Oak Bay Marina Ltd., but a person not a party to the contract. However, the courts have, under certain limited circumstances, provided relief, by involving the concepts of trust, agency and the fairly narrow exemption to the doctrine of privity of contract set out in London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299.
[25] There is nothing to suggest a trust relationship between the contracting corporate entity, Oak Bay Marina Ltd. and Mr. Wright. Indeed, while this point is touched upon by counsel for the plaintiffs, it is not one argued by counsel for the defendants. The same may be said for the concept of agency giving rise to third party benefits, a concept originating in Adler v. Dickson and Another, [1954] 2 Lloyd’s Rep. 267 (C.A.), more fully explored in Midland Silicones Ltd. v. Scruttons Ltd., [1962] A.C. 446 (H.L.) and adopted by the Supreme Court of Canada in ITO—International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752, at page 793 whereby there must be a clear intent to protect a third party in a contract made by an authorized agent for the third party, for which the third party had provided consideration. Clearly none of these tests are met in the present instance, for Robert Wright neither provided consideration nor asked Oak Bay Marina Ltd. to contract on his behalf. He merely had the intention or understanding that he was protected by the exculpatory clause. This brings us to the London Drugs exception, a narrow exception to the doctrine of privity of contract, relating to employer-employee relationships in which there is an intent to extend the protection of an exculpatory clause. Here I would note that the language of the exculpatory clause in London Drugs did not restrict the benefit of the clause to Kuehne & Nagel, but neither did it expressly extend the benefit to its employees.
[26] London Drugs, at page 448 sets out two requirements:
1) The limitation of liability clause must, either expressly or impliedly, extend its benefit to the employees (or employee) seeking to rely on it; and
2) the employees (or employee) seeking the benefit of the limitation of liability clause must have been acting in the course of their employment and must have been performing the very services provided for in the contract between their employer and the plaintiff (customer) when the loss occurred.
In commenting on these requirements Mr. Justice Iacobucci notes that it is the intention of the contracting parties which will determine whether the first requirement, the extension of the benefit to employees, has been met, although that extension may be either express or implied. Mr. Justice Iacobucci looks upon these requirements and the departure from the strict application of the privity of contract doctrine, as incremental changes in the common law.
[27] In London Drugs the right of employees to rely upon an exculpatory provision which did not name them as beneficiaries, was held to exist first, because there was an identity of interest with respect to contractual obligations and second, because London Drugs Ltd. knew that employees of Kuehne & Nagel would be involved in performing the contractual obligations. As such, those employees were not complete strangers to the exculpatory clause, rather they were held to be “unexpressed or implicit third party beneficiaries with respect to this clause” (at page 452).
[28] The plaintiffs submitted that the London Drugs exception to the privity of contract principle is a narrow one, referring to Laing Property Corp. v. All Seasons Display Inc. (1998), 53 B.C.L.R. (3d) 142, a decision of the B.C. Supreme Court in which the employees of a landlord were not able to rely upon an exculpatory clause in a lease. While the landlord’s employees were acting in the course of their employment, there was, in the view of the Trial Judge, no intention to give the employees the benefit of insurance as extended to the landlord by the exculpatory provisions. However, after the hearing of this matter, the B.C. Court of Appeal reversed the decision in sub nom. Orange Julius Canada Ltd. v. Surrey (City), [2000] B.C.J. No. 1655 (QL) [hereinafter Laing Property] and specifically found that the employees met both parts of the London Drugs test, showing both an implied contractual intention that they benefit from the insuring clause in favour of their employer and that the negligent conduct alleged against them was performed in the course and scope of their employment and in the discharge of the services that the landlord was provided to give under the contract in question, a lease. However, the Court of Appeal, in extending the third party benefits, made no new law, but merely emphasized some aspects of London Drugs and differed from the Trial Judge as to the application of London Drugs to the facts.
[29] Dealing with the first portion of the requirements in London Drugs, that there must be an express or an implied extension of the benefit to the employees, Mr. Justice Finch, in writing the reasons for the Court of Appeal, noted, at paragraph 100, that:
A question to be asked is whether the contracting parties would normally expect that the service obligation of the contractor would be performed by its employees. Where there is an identity of interest between the employer and the employee and where the other party is aware of that identity of interest and would in the normal course of events expect the service to be performed by the employees, an intention to extend the benefit of any contractual protection to the employees will be implied. If it were not, the plaintiff would generally be able to circumvent the employer’s contractual protection by suing the employees in tort. Such a result, in the language of London Drugs, “would be absurd”.
Mr. Justice Finch [at paragraphs 104-105] went on to point out that the tenants in Laing Property knew that the services under the contract would be performed by employees of the landlord. This, in his view, showed an implied mutual intention, by the tenants and the landlord, that the landlord’s employees would benefit from any protection under the leases and indeed that it would make no commercial sense to infer otherwise as the contract made it clear how the parties intended the risk of loss should be borne:
The fact is that the tenants paid for, and the owner provided, services under the leases, and the tenants knew that those services would be performed by employees of the landlord.
In these circumstances there was, in my view, an implied mutual intention on behalf of the tenants and the landlord that the landlord’s employees would have the benefit of any contractual protection afforded by the leases. It would make no commercial sense to infer otherwise, as the insuring clauses clearly show how the parties intended the risk of loss should be borne. If the employees could be sued for their negligence in performing services provided for under the contract, the tenant (or their insurers) would be able to avoid the clear meaning of the leases. Employees, who would then bear the risk, would have had no opportunity to protect themselves by contract with the tenants or by insuring themselves against those risks which the contracting parties had already agreed would be borne by the tenants.
The Court of Appeal was of the view that this was a case in which it might properly be implied that the parties intended the landlord’s employees to have the benefit of the contract. The Court then turned to the second part of the London Drugs test, being whether the employees were performing the very services provided for in the contract when the loss occurred. Mr. Justice Finch summed this up by saying, at paragraph 108:
As I have said, I do not see how the employees can be said to have been negligent as alleged while acting in the course and scope of their employment, and at the same time be said to be performing services that were not the very services which the employer had contracted to provide.
[30] Mr. Justice Finch [at paragraph 109] then makes a pertinent comment to the effect that the negligent conduct need not comprise all of the services contracted for:
As I understand the reasoning in London Drugs, I do not think it matters that the negligent conduct alleged does not comprise all of the services for which the landlord contracted, nor that the services provided were discretionary on the part of the landlord. For example, where the contract required one party to “inspect and maintain”, and the only negligence complained of was in failing to maintain, it could not be said that the maintenance services were not the very services called for by the contract. Similarly, where, as here, the contract confers a discretion on the landlord to provide some or all of a variety of services for which the tenants pay and the landlord chooses to provide some of those services and not others, it could not be said that the services so provided at the landlord’s discretion were not the very services called for under the lease. [Emphasis added.]
Mr. Justice Finch concluded that the employees met both parts of the London Drugs test and would have the benefit of the insuring clauses, thus making them immune to suit.
[31] Mr. Justice Finch went on to consider Greenwood Shopping Plaza Ltd. v. Beattie et al., [1980] 2 S.C.R. 228, however the application of that analysis, to the present situation, adds nothing. I now turn to an application of all of this, both London Drugs and Laing Property, to the present instance.
[32] The first London Drugs requirement, applicable here, is whether, by implication, the benefit of the exculpatory clause extends to Robert Wright. Mr. Wright, while president of the company, was also an employee in that he, himself, redesigned the marina when the renovations were made, including giving instructions for and taking responsibility as to the placement of the piling. Mr. Wright’s evidence is that there was an intent, on his part, that he have the same exemption from liability as his company. I believe this intent to be bona fide, for it would be absurd, in the case of a company wholly owned by its president, that the company be exempt from a major liability but that the president, who was closely involved in a company’s operations, or for that matter the insurers, be open to the same liability. But the second half of the equation is whether the intention was mutual. Here there was some good discovery conducted on the part of the defendants.
[33] Mr. Dryburgh acknowledges that Oak Bay Marina Ltd. would act through its employees. As Mr. Justice of Appeal Finch pointed out in Laing Property, where there is a contract to provide services and where the employees have the primary responsibility for performing those contractual obligations, the employees’ interests are the same as those of the employer. That is the case here.
[34] The second factor that Mr. Justice Finch considered was whether the contracting parties would expect the services under the contract to be performed by the contractor’s employees. That again is the situation here, for Mr. Dryburgh not only expected that Oak Bay Marina Ltd. would act through its employees, but indeed he knew Robert Wright very well, as the owner of Oak Bay Marina Ltd. All of this goes at least as far as the first London Drugs requirement, either as applied in London Drugs itself at page 452 or as applied by Mr. Justice Finch in Laing Property.
[35] Turning to the second requirement that an employee seeking the benefit of the contract must have acted in the course of his or her employment and must have performed the very services provided for in the contract, the facts here establish that to be the case in the instance of Robert Wright. Mr. Dryburgh did not look to the employees to be responsible for the Three Martletts and indeed the moorage contract makes it clear that such is the duty of the vessel owner. The contract was for the provision of moorage, in effect a license to use a designated berth or boathouse. However, both parties were in agreement that there was more to what Mr. Dryburgh expected to receive and Oak Bay Marina Ltd. expected to provide. As I have pointed out, Mr. Dryburgh expected berths that were properly and safely built and maintained, to meet prevailing Canadian safety standards, such that they would withstand all reasonably foreseeable weather and sea conditions. Mr. Robert Wright had been directly involved in the building of the marina as it presently stands. His evidence is that, on redesigning the marina, he wanted to build a high quality marina, a product which would be bought (discovery, at page 75) and that he had the full and final say in the reconstruction, including where the pilings would go, with no other employees exercising any decision making in that regard (paragraph 8 of 14 April 1999 affidavit). This work by Robert Wright, going toward the properly and safely built marina is, as I say, part of what Mr. Dryburgh contracted for. As Mr. Justice of Appeal Finch pointed out in Laing Property the negligent conduct alleged need not comprise all of the services contracted for.
[36] All of the circumstances taken into account and London Drugs applied, including as applied in Laing Property, I am of the view that Mr. Robert Wright should have the benefit of the exculpatory clause, along with his company for the negligent conduct alleged against him was in the course of his work with the company and in the discharge of the very services which Oak Bay Marina Ltd. not only undertook under the contract but also was expected to provide in the view of Mr. Dryburgh.
CONCLUSION
[37] I am not particularly an advocate of artificially extending exculpatory clauses beyond their intended scope. However, there is sense in having losses fall where the parties to a contract so designate. This relaxation of the doctrine of privity of contract is consistent with the view of London Drugs expressed by the Supreme Court of Canada in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108 and particularly the Court’s views as to the incremental change to the common law doctrine of privity of contract at page 124. Given that corporate parties perform their services through employees, at least to some degree, here excepting contracted work performed by some undesignated subcontractor, a situation outside of the London Drugs case, it is sensible that a party to a contract not be able to avoid the incidence of loss by suing individuals doing the actual work as employees or as hands-on executives and owners. Otherwise one has the absurd situation, referred to by Mr. Justice Iacobucci at page 444 of London Drugs, of a party to a contract going “around the limitation of liability clause by suing the respondent employees in tort”.
[38] In the present instance the exculpatory clause in the mooring agreement covers Oak Bay Marina Ltd. It also covers Mr. Robert Wright, an officer and hands-on owner of the company, who performed, in part, the work and services and designed and built the structures which the parties intended be provided under the moorage agreement. Thus, the motion for summary judgment is dismissed, with one set of costs in favour of Oak Bay Marina Ltd. and Robert Wright.
[39] I thank counsel for the effort put into the preparation of material and for their excellent argument.