Agnew-Surpass v. Cummer-Yonge, [1976] 2 SCR 221

Supreme Court of Canada

Agnew-Surpass v. Cummer-Yonge, [1976] 2 S.C.R. 221

Date: 1975-04-22

Agnew-Surpass Shoe Stores Limited (Defendant) Appellant;

and

Cummer-Yonge Investments Ltd. (Plaintiff) Respondent.

1974: November 12, 13; 1975: April 22.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.

ON APPEAL FROM THE SUPREME COURT OF ONTARIO.

Landlord and tenant—Insurance—Fire insurance—Interpretation of lease—Liability of tenant for fire loss—Exculpatory provision applicable to fire caused by negligence—Not applicable to loss of rental income—Entitlement of tenant to benefit from insurance—Waiver of subrogation by insurer—The Conveyancing and Law of Property Act, R.S.O. 1970, c. 85, ss. 30, 33—The Short Forms of Leases Act, R.S.O. 1970, c. 436, Sch. B, cl. 9—The Insurance Act, R.S.O. 1970, c. 224, s. 126.

Appellant was tenant of premises in a shopping centre of which respondent was owner landlord. The lease did not contain the usual tenant’s repairing covenants, but instead required the landlord to insure the shopping centre, including the building in which the tenant had its premises, “against all risk of loss or damage caused by or resulting from fire”. It required the tenant to take good and proper care of the leased premises, “except for reasonable wear and tear…and damage to the building caused by perils against which the lessor is obligated to insure hereunder”. The fire insurance policy taken out by respondent on the shopping centre provided indemnity against fires, without exception for fires resulting from negligence whether of respondent as landlord or of a tenant or third party. The insurance policy also covered part, but not all, of the loss of rental income. A fire broke out in the premises occupied by appellant as a result of appellant’s negligence. Thereafter a subrogated action was pursued in respondent’s name by the insurer and the issue of the tenant’s (appellant’s) liability turned on whether by the terms of the lease respondent had accepted an obligation to effect fire insurance on the shopping centre which would, inter alia, have protected the tenant from liability which it would otherwise have had to suffer if a fire occurred by reason of its own negligence. Respondent admitted that in terms of the

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lease it had assumed an obligation to insure against loss by fire but contended that it had not covenanted to insure for the benefit of the appellant. Hartt J. at trial dismissed the action but the Court of Appeal imposed liability on the tenant.

Held (Laskin C.J. and Judson and Spence JJ. dissenting in part and Martland and de Grandpré JJ. dissenting): The appeal should be allowed in part.

Per Ritchie, Pigeon, Dickson and Beetz JJ.: It ought to be considered as settled by the judgment in United Motors Service, Inc. v. Hutson et al., [1937] S.C.R. 294, that an exculpatory clause substantially in the terms of cl. 9, in Sch. B of The Short Forms of Leases Act (now R.S.O. 1970, c. 436) should be read as leaving the lessee liable for damage by a fire caused through his negligence. However the governing principle as to what is required to absolve a lessee from liability for his negligence is simply that such intention be adequately expressed. Explicit reference to negligence is not necessary, and even a clause in general terms may sometimes cover negligence. The exculpatory clause in the present case was not in the form of The Short Forms of Leases Act, supra, or an equivalent form. Appellant’s exoneration fell to be defined by reference to respondent’s obligation to insure in express terms. As the fire insurance policy, unlike an exculpatory clause, is to be read as covering negligence, the clause operated by way of reference to perils to be insured against, including fire however occurring, whether by negligence or otherwise. By the insurance policy the insurers had authorized the owner to release third parties from liability prior to any loss. However the exculpatory clause did not extend to the claim for loss of rental income because it covered “damage to the building” only. As the tenant could not claim the benefit of insurance taken by the respondent owner beyond what the lease required, which was insurance of the shopping centre against named perils, there was no distinction to be made between the insured and uninsured portions of the rental income loss. Appellant was liable in that respect notwithstanding that property damage was not recoverable due to the exculpatory clause.

Per Laskin C.J. and Judson and Spence JJ. dissenting in part: The relevant provisions of the lease when read

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together forced the conclusion that the lessee was to have the benefit of fire insurance to be effected by the lessor in respect of loss or damage arising from the lessee’s negligence. Canada Steamship Lines Ltd. v. The King, [1952] A.C. 192 and United Motors Service, Inc. v. Hutson, supra, had no bearing on the issues in this case. As to the claim for rental loss, the appellant was in no different position in respect of that than in respect of the other portions of the claim. This loss was within the ambit of the landlord’s covenants to provide coverage for the tenant “against all risks of loss or damage caused by or resulting from fire”. The landlord had obtained partial coverage in its policy against loss of rental income, and its failure to obtain full protection could not be laid at the appellant’s door.

Per Martland and de Grandpré JJ. dissenting: The submission by the tenant was that the lease created an exception to the general rule of liability for his negligence governed by ss. 30 and 33 of The Conveyancing and Law of Property Act. This submission had however to be examined in light of the general principle that an exception must be read restrictively and in light of both Canada Steamship Lines Ltd. v. The King, supra and United Motors Service, Inc. v. Hutson, supra. The lease as a whole, as well as various particular clauses, leads to the conclusion that the words used by the parties were not wide enough to exclude the liability of the tenant where its negligence was clearly established.

[United Motors Service, Inc. v. Hutson, [1937] S.C.R. 294 distinguished; Alderslade v. Hendon Laundry Ld., [1945] 1 K.B. 189; Rutter v. Palmer, [1922] 2 K.B. 87; Canada Steamship Lines Ltd. v. The King, [1952] A.C. 192; Salmon River Logging Co. Ltd. v. Burt Bros., [1953] 2 S.C.R. 117; Shaw v. Robberds (1837), 6 Ad. & E. 75; Attorney-General v. Adelaide Steamship Co., [1923] A.C. 292; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189 referred to.]

APPEAL from a judgment of the Court of Appeal for Ontario[1] allowing an appeal from a judgment of Hartt J. at trial. Appeal allowed in part with costs, Laskin C.J. and Judson and Spence JJ. dissenting in part and Martland and de Grandpré JJ. dissenting.

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John P. Bassel, Q.C., and J. Murray Davison, for the appellant.

Brendan O’Brien, Q.C., and L.P. Shannon, Q.C., for the respondent.

The judgment of Laskin C.J. and Judson and Spence JJ. was delivered by

THE CHIEF JUSTICE (dissenting in part)—The question in this appeal is whether the appellant, a tenant for a term of years of premises in a shopping centre, is answerable, under its lease of those premises, to the respondent, the owner-landlord of the shopping centre, for loss and damage from a fire originating in the tenant’s premises and caused by its negligence. Substantially, the action out of which this appeal arises is a subrogated one, pursued in the respondent’s name by its insurer; and the issue of the tenant’s liability, in whole or in part, turns on whether by the terms of the lease the respondent had accepted an obligation to effect insurance on the shopping centre, including the building in which the tenant carried on its business, which would, inter alia, protect the tenant from liability which it would otherwise have to suffer if a fire occurred by reason of its negligence.

It is conceded that the fire policy taken out by the respondent on the buildings in its shopping centre provided indemnity against fires resulting from negligence, whether of the respondent or the appellant or a third party. The present appeal does not, however, fall to be decided on the terms of the policy but rather on the terms of the lease. The insurer’s subrogated claim against the tenant is sustainable only on that footing; the insurer’s liability under the policy is not in issue in this appeal. The respondent admitted that under the terms of the lease, hereinafter referred to, it had assumed an obligation to insure both its own and the appellant’s interest against loss by fire, but it contended that it had not covenanted to insure for the benefit of the appellant; the obligation, according to its counsel, was only to make manifest its ability to replace the shopping centre premises for the benefit of all tenants, if those premises should be destroyed by fire, but without in any way giving the tenants themselves, or at least this appellant,

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any benefit from the insurance by way of protection from liability for negligence. I do not read the terms of the lease this narrowly. I am of the opinion that Hartt J. who dismissed the action was right and that the Ontario Court of Appeal was wrong in imposing liability upon the appellant.

I turn to the relevant terms of the lease and say, by way of preface, that it is common ground that, under any general repairing covenants given by a tenant which except damage by fire, the tenant remains liable for such damage if it arises from its negligence. Nothing in my opinion turns on the fact that ss.30 and 33 of The Conveyancing and Law of Property Act, R.S.O. 1970, c.85 make a tenant for years impeachable for waste and liable for damages accordingly. These provisions are merely echoes of history, and are completely irrelevant to a modern commercial lease which sets out, as does the one in issue here, reciprocal obligations and sets limits to obligations to repair and to reinstate premises destroyed by fire.

The heart of the lease between the parties (apart from the provisions as to the length of the term and the rent) lies in two paragraphs, numbered 8 and 9, which contain numerous subparagraphs. Paragraph 8 begins with these telling words:

“The Lessee covenants and agrees with the Lessor as follows:”

Similarly, para. 9 begins:

“The Lessor covenants with the Lessee as follows:”

I emphasize this because of the respondent’s contention that certain obligations, admittedly resting on the lessor under para. 9, do not run to the benefit of the lessee. If I am reduced to technicality, which I would prefer to avoid in an arm’s length lease between business corporations, say simply that where a convenant runs to the lessee from the lessor it goes beyond mere promise at large or statement of intention and enures to the lessee’s benefit according to its terms. The stand-

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ard of appraisal is business efficacy, not conveyancing preciosity. The covenant obligations are, in my opinion, firmly stated in the present case.

Subparagraphs 10(1) and (2), 12, 14, 22 and 25 of para. 8 contain the material provisions of the lessee’s covenants, and subparas. 2 and 5 of para. 9 embody the material provisions of the lessor’s covenants relevant to the disposition of the present case. They read, respectively, as follows:

8.(10)

(1) The Lessee shall take good and proper care of the interior of the leased premises and appurtenances thereof (including all plate glass installed in or upon the leased premises) and any improvements now or hereafter erected therein and make all needed repairs and replacements thereto except for reasonable wear and tear, repairs to the four side walls, roof skylights, foundation, floors and the bearing structure of the Building forming part thereof, damage to the Building caused by water damage and damage to the Building caused by perils against which the Lessor is obligated to insure hereunder.

(2) The Lessee will repair according to notice and upon the determination hereof the leased premises shall be surrendered in the condition in which the Lessee is required to maintain the same except for reasonable wear and tear subject to the insurance provisions hereof.

(12) [This term authorizes the tenant at its own expense to decorate and to make improvements subject to certain improvements being conditioned on the lessor’s consent and compliance with relevant statutes and regulations. The subparagraph then continues as follows:]…provided further that the Lessee shall pay to the Lessor the amount of the increase of any insurance premium or policy covering the Building and appurtenances thereto to the extent that such increase is directly attributable to an action by the Lessee under this paragraph and that such insurance shall not thereby be made liable to avoidance or cancellation by the insurer…

(14) It is understood and agreed that the Lessee shall from and after the date upon which it takes possession of the leased premises hereunder, be responsible for the payment of rent and for all services as stipulated in paragraphs 5, 6 and 7 of this lease and also for the repair of any damage caused to the leased premises or to

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any other portion of the lands or the Building or of other buildings comprising the Shopping Centre whether caused by the Lessee, its employees, servants, agents, workmen or invitees and whether caused while the Lessee is installing fixtures in the leased premises or stocking the leased premises or otherwise.

(22) The Lessee shall take out and keep in force during the term hereof insurance upon all glass and plate glass in the leased premises and property damage insurance and public liability insurance all in amounts and with policies in form satisfactory from time to time to the Lessor and all in recognized insurance companies and shall upon the written request of the Lessor provide a certificate from its insurers stating the amounts of such coverage. Each such policy shall name the Lessor as an additional insured and the cost or premium for each and every such policy shall be paid by the Lessee and not by the Lessor and the Lessee shall obtain from the insurance Companies involved undertakings to notify the Lessor in writing at least ten (10) days prior to any cancellation thereof. The Lessee agrees that if the Lessee fails to take out or to keep in force such insurance the Lessor will have the right to do so and to pay the premium therefor and in such event the Lessee shall repay to the Lessor the amount paid as premium, which repayment shall be deemed to be additional rent payable on the first day of the next month following the said payment by the Lessor. The Lessee shall take out and keep in force during the term hereof fire insurance covering his stock-in-trade, furniture and fixtures in an amount equal to the full insurable value thereof.

(25) That the Lessee will not do or permit to be done, or omitted upon the leased premises, anything which shall cause the rate of insurance upon the said building or any part thereof to be increased and if the insurance rate shall be thereby increased the Lessee shall pay to the Lessor the amount by which the insurance premiums shall be so increased. It is agreed that if any insurance policy upon the leased premises shall be cancelled by the insurer by reason of the use and occupation of the leased premises or any part thereof by the Lessee or by any assignee or sub-lessee of the Lessee or by anyone permitted by the Lessee to be upon the said premises, the Lessor may at its option determine this lease forthwith by leaving upon the leased premises a notice in writing of its intention so to do and thereupon rent and any other payments for which the Lessee is liable under this lease shall be apportioned and paid in full to the date of such determination of the lease and the Lessee shall

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immediately deliver up vacant possession of the leased premises to the Lessor.

9(2) The Lessor covenants to insure the Shopping Centre including the said Building, excluding foundations in each case, against all risk of loss or damage caused by or resulting from fire, lightning or tempest or any additional peril defined in a standard fire insurance additional perils supplemental contract. All such insurance shall to the best of the ability of the Lessor be to the full insurable value of the property insured.

(5) Except for reasonable wear and tear to repair the four side walls, roof, skylights, foundations, floors and bearing structure of the Building of which the leased premises form part, the sidewalls and parking areas of the Shopping Centre and damage to the Building, sidewalks and parking areas of the Shopping Centre caused by water and damage to any of them caused by perils against which the Lessor is obligated to insure, without being liable for any direct or consequential damage to person or property for any failure to do so.

Paragraph 5 of the lease is also of relevance to the issue of insurance coverage having regard to the words thereof that the parties stroked out. It is as follows:

5. The Lessee shall pay for its own water (on a separate meter), electricity or other power (separate meter), janitor service, window cleaning, cleaning of sidewalks, and snow and ice removal on sidewalks, adjacent to its premises and insurance covering all its obligations to repair and such other risks as it may insure against (except such insurance as is herein required to be carried by the Lessor) and shall pay all taxes, rates, duties and assessments whatsoever whether municipal, parliamentary or otherwise now charged or hereafter charged upon and/or in respect of the contents of the leased premises and/or upon and/or in respect of any business or other activity carried on upon and/or in connection with the leased premises and/or upon the Lessee on account of the leased premises or such contents, business or other activity.

I may refer also to para. 11(2) which provides that if the premises are so badly destroyed by fire or other casualty as, in the opinion of the parties, not to be repairable within nine months of the happening of the damage the lease is to be void as from

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the date of such happening and possession of the premises is to be surrendered accordingly.

After a consideration of various clauses of the lease and of a number of authorities, the trial judge, Hartt J., found that the parties had agreed that the lessor would assume the duty of purchasing fire insurance on the leased premises to protect the interests of both the lessor and lessee and that such insurance would cover loss by fire, however caused, whether by negligence of the tenant or otherwise. This view of the matter was rejected by the Ontario Court of Appeal which considered the case should be resolved by the legal principles governing exculpatory clauses, namely, that where such a clause would exonerate from liability for negligence as well as from contractual liability, it must expressly relieve from liability for negligence (unless it would otherwise have no subject matter) since otherwise it will be construed as exonerating only from contractual liability. Canada Steamship Lines v. The King[2], was cited and I shall return to it later. Kelly J.A. could not find that the lease clearly relieved the appellant from liability for fire caused by its negligence. It was also his opinion that “the ordinary concept” of fire insurance did not embrace insurance effected by a lessor to protect against its lessee’s negligence; and he added this:

I can find nothing in the policy of insurance, read singly or in conjunction with the lease itself, to indicate any intention to insure against the peril of the Lessee’s negligence. I think the policy has the usual effect only, namely, entitlement in the Lessor to indemnity (in addition to indemnity against any loss suffered by accidental fire) against fire loss arising from the Lessee’s negligence to the extent to which the Lessor may be unable to recover that loss from the Lessee, and to a similar extent against fire loss occasioned by the negligence of third parties.

The “ordinary concept” of fire insurance does embrace fires caused by negligence and the fact is that the policy taken out by the lessor did insure

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against negligence, whether that of the lessee or others. Even so, the question of the scope of the indemnity as it arises in this case is not dependent on the policy but, rather, so far as the lessor and lessee are concerned, on the terms of the lease.

What is significant about the lease in this case is that nowhere in it is there found the usual tenant’s repairing covenant, which generally reads “to repair, reasonable wear and tear and damage by fire, lightning and tempest only excepted”. Instead, the lease (as in para. 8(10)(1)) requires the tenant to take good and proper care, and make needed repairs and replacements, except for reasonable wear and tear and damage to the building caused by perils against which the lessor is obliged to insure; and again (as in para. 8(10)(2)), the tenant must repair according to notice, and surrender the premises in the required condition of maintenance, except for reasonable wear and tear subject to the insurance provisions of the lease. The excepted liability, referable to the lessor’s insurance obligation, is reinforced by para. 5, in which the words “insurance covering all its obligations to repair”, which refer to the tenant, are stroked out; and it is undeniable that ordinarily the obligations to repair would include obligations to repair damage from fire caused by the tenant’s negligence. Again, para. 8(22) shows the words “insurance upon all glass and plate glass in the leased premises and property damage insurance” stroked out in a clause otherwise referring to the tenant’s obligation to effect insurance; the obligation is limited to public liability insurance.

The connection between these matters and the lessor’s insurance obligations under para. 9 are very clear under the terms of subparas. (2) and (5) of para. 9. There is an express undertaking by the lessor to the lessee to insure the shopping centre, including the building which embraces the leased premises, an undertaking explicitly directed to all

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risk of loss or damage by fire (the emphasis is mine); and further, and of great significance is the lessor’s obligation, reasonable wear and tear excepted, to repair the other side walls, roof, floors and foundation of the building of which the leased premises form part, and damage to the building caused by perils against which the lessor is obliged to insure. These perils include, as already indicated, all risk of loss or damage by fire. The qualification to this obligation to repair and reinstate the leased premises where damaged by fire is found in para. 11(2), which provides for termination of the lease only if the building in which the tenant’s premises are located is not repairable within nine months.

Reinforcing the wide scope of the lessor’s insuring obligation is para. 8(12), under which the tenant must pay to the lessor any increase in insurance premiums in respect of the building in which the lessee has its premises, where such increase was directly attributable to structural changes or improvements made by the tenant.

When all the foregoing provisions of the lease are read together, they force the conclusion that the lessee is to have the benefit of fire insurance to be effected by the lessor in respect of loss or damage arising from the lessee’s negligence. Paragraph 8(14) of the lease does not alter this conclusion because it is referable to an obligation of repair which arises upon the taking of possession and which must be read in the light of the general repairing covenants in para. 8(10); otherwise it would be inconsistent therewith since it would, read literally and separately, oblige the lessee in respect of repairs from which it is expressly excepted under subpara. (10) and which the respondent had undertaken to effect under para. 9(5). I did not understand counsel for the respondent to urge that para. 8(14) had any dominating effect in this litigation.

The respondent’s reliance on the principle governing exculpatory clauses is, in my view, misconceived; and even if those principles were appli-

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cable, I doubt that they would lead to the result reached by the Ontario Court of Appeal. To take this last point first, I have noted earlier that the lease does not contain the usual tenant’s repairing clause which associates a covenant to repair with an exception of damage by fire. Rather, the lessor is obliged to insure against all risks of loss by fire, and the tenant’s obligation to repair excepts damage caused by perils against which the lessor is obliged to insure. The tenant would not, ordinarily, be liable for an accidental fire where it was not caused by negligence. The lease in this case recites that it is made pursuant to The Short Forms of Leases Act. Under that Act (as it appears in R.S.O. 1970, c. 436) the standard tenant’s repairing covenant reads “to repair, reasonable wear and tear and damage by fire, lightning and tempest only excepted”. Variations are permitted, and it appears to me that the parties in the present case, in replacing the usual tenant’s covenant to repair, which excludes liability for accidental fire, with a provision excluding liability for all risks of damage by fire, made it clear that the only subject matter which can be assigned to this exception so far as the tenant is concerned is coverage for fire arising from its negligence.

But be that as it may, we are not faced in this case with an exculpatory clause which is predicated upon the existence of some liability which that clause would reduce or eliminate. We are faced instead with a series of clauses under which the limits of particular liabilities are drawn ab initio. If this is to be regarded as falling within the principles governing exculpatory clauses, then every question of construction of a commercial document under which the range of liability is contested can be turned into a question of the limits of inculpability and exculpability. Canada Steamship Lines Ltd. v. The King[3] involved a lease but that is its only affinity with the present case. The Crown had leased a freight shed to the

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appellant and, while repairs were being made by servants of the Crown who were using an oxy-acetylene torch, a fire broke out which destroyed the shed and contents. There was an exculpatory clause in the lease in favour of the lessor, and among the questions litigated was whether this clause, taken in relation to others, gave the lessor an immunity from liability for negligence with respect to damage or loss of the lessee’s goods stored in the shed. The Privy Council held that the exculpation of the lessor did not extend to negligence but the considerations which led it to this conclusion have no bearing on the construction of the related clauses on which the present case turns.

Considerable reliance was placed by the respondent on the judgment of this Court in United Motors Service Inc. v. Hutson[4], where the lease contained a covenant by the lessor to pay all taxes and all premiums of insurance upon the buildings erected on the demised premises. The lessee gave the usual repairing covenants which excepted reasonable wear and tear and damage by fire, lightning and tempest. The issue which arose in the case was mainly whether there was negligence on the lessee’s part which caused the fire that damaged the leased building. In connection with this point, the Court reaffirmed the legal liability of a tenant under its repairing covenants where a damaging fire occurred by reason of its negligence. There is not a word in the reasons of this Court, nor indeed in those of the Ontario Court of Appeal, the Court below (see [1936] O.R. 225), which relates to the effect of the lessor’s undertaking to pay all insurance premiums upon the tenant’s liability for a fire arising from its negligence. There was no covenant by the lessor to insure as there is in the present case, and, in any event, I refuse to speculate from the result in the Hutson case (holding the tenant liable) that the Court must have concluded that (1) the lessor’s covenant to pay insurance premiums was equivalent to a covenant to insure and (2) if so, the covenant did

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not extend to any benefit to the lessee from such insurance. There is simply no correspondence, nothing remotely comparable between the spare provisions of the lease in the Hutson case and the related insurance and repairing covenants in the present case.

Counsel for the appellant and for the respondent referred to competing lines of American cases on the problem under consideration. In so far as any of these cases turn simply on the scope of an exception of fire in a repairing covenant, they are of no assistance here, no matter on which side of the line dividing liability and no liability they fall: contrast General Mills Inc. v. Goldman[5] and Morris v. Warner[6] and see also Sears, Roebuck & Co. Inc. v. Poling[7]. Whether there should be a shift in the scope given to a fire exception clause in a tenant’s repairing covenant, in the light of standard fire insurance policies covering negligence and which are generally carried by an owner of property, need not be determined here. Where, in the American cases, the exception from liability for fire in the tenant’s repairing covenants (especially the covenant to yield up in repair) is reinforced by a covenant on the lessor’s part to insure, or to pay for insurance, the weight of the authority appears to be that the tenant is not liable for loss or damage from fire caused by its negligence: see Fry v. Jordan Auto Co.[8]; Cerny-Pickas & Co. v. C.R. John Co.[9]; Fred A. Chapin Lumber Co. v. Lumber Bargains Inc.[10]; contra, Winkler v. Appalachian Amusement Co.[11] The case of Wichita City Lines Inc. v. Puckett[12], cited by the respondent, does not carry beyond the general rule that an exception of fire does not relieve a tenant of liability for negligence. The lessor in that case had retained possession of part of the building covered by the lease and had agreed therein to carry his own insurance.

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It was held that this reference to insurance provided no basis upon which the tenant could claim protection against liability for negligence.

None of the American cases that I have examined, which have held the lessee to be protected from liability for negligence causing loss or damage by fire, contained lease clauses that were as explicit as those in this case in placing upon the landlord the risk of loss or damage by fire arising from the tenant’s negligence. These clauses are quite inconsistent with the position of the respondent that it was protecting only its own interest without benefit to the appellant. There would be no need of covenants running to the appellant if that was the case.

The respondent contended that even if it was wrong as to the appellant’s liability for the subrogated claim of the respondent’s insurer, there was still a liability of the appellant for $10,105 in loss of rental income because the insurance covered only $15,000 of a loss of $25,105. The respondent contended that there was no covenant by it to insure against loss of rents. The trial Judge had this question before him, as is evidenced by his reference to the item of loss of rental income as a head of damage, but rejected the entire claim of the respondent. I can come to no other conclusion, but I think it desirable to spell out the considerations which move me to this result.

The sum of $25,105 claimed as loss of rental income was made up of the loss of rent from each tenant in the shopping centre whose rent abated because of the fire for the six months or so during which the premises of those tenants were not usable. What was claimed in respect of each such tenant was the minimum monthly rent, and such a claim was also made in respect of the minimum rent of the appellant, which was $489 per month, the total claim being $3,734. Although there was a clause in the lease with the appellant, namely para.

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11(2), providing for abatement of rent in case the premises were destroyed by fire, the theory of the claim against the appellant in respect of its minimum rent was that it could not claim abatement where the fire was caused by its negligence. As stated in 52 Corpus Juris Secundum (1968), at p. 415, “as a general rule it is necessary that the tenant should have been free from fault in order to be relieved from liability under a provision of the lease”. It was on the same theory that the main claim in this case was made.

The insurance policy taken out by the respondent covered loss of rental income up to $275,000 subject to a co-insurance provision. No dispute was taken as to amount with the claimed rental loss of $25,105 or with the fact that of this sum $15,000 was within the insurance coverage. I do not see, however, that the appellant is in any different position in respect of the respondent’s loss of rent than in respect of the other portions of the claim.

The question whether there should be recovery in this case by the landlord for loss of rental income does not depend on the repairing covenants or on the fact that in sub-para. 10(1) of para. 8 the exceptions from liability to repair include “damage to the building caused by perils against which the lessor is obligated to insure hereunder”. This exception must be related to its subject matter in the paragraph, which concerns repair and exceptions therefrom, and cannot qualify the scope of the insuring covenant given by the lessor under para. 9(2) so as to exclude loss of rental income resulting from fire from the ambit of the duty to provide coverage “against all risks of loss or damage caused by or resulting from fire”.

The matter may be tested in a simple way. If there had been no insuring obligation upon the lessor and there had been a fire resulting from the lessee’s negligence, thus bringing into play the lessee’s obligation to repair damage caused by the negligence, is there any doubt but that the lessee would have been liable as well for the lessor’s loss of rental income? That would have been one of the risks of liability for loss or damage by fire arising

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from negligence. Just as obviously, that is a risk which was included, in exoneration of the lessee, under para. 9(2) of the policy under which the lessor covenanted “to insure the Shopping Centre including the said Building…against all risk of loss or damage caused by or resulting from fire…”. The lessor in this case had obtained partial coverage for loss of rental income. Its failure to obtain full protection cannot be laid at the appellant’s door.

I would, accordingly, allow the appeal, set aside the judgment of the Ontario Court of Appeal and restore the judgment of Hartt J., with costs to the appellant throughout. However, in view of the differences of opinion exhibited in this case, the formal judgment of the Court must be to allow the appeal in part in accordance with the disposition proposed in the reasons of Pigeon J.

The judgment of Martland and de Grandpré JJ. was delivered by

DE GRANDPRE J. (dissenting)—The sole question to be determined on this appeal is the liability of the tenant, appellant in this Court, for a fire caused by its negligence and having entailed for the landlord (respondent) a loss alleged to be in the following amounts:

                  $208,648 for the building;

                  $25,105 for loss of rentals.

The negligence of the tenant must be taken as established although appellant submits that it has not been proven. On this point, there are concurrent findings of facts against appellant and I can see no reason to disturb this unanimous conclusion of the Courts below.

It is on the question stated at the outset of these reasons that there has been a difference of opinion in the Courts of Ontario, the trial judge having come to the conclusion that the contractual arrangements between the parties constitute a valid answer to the claim whereas the Court of Appeal unanimously reached a different conclusion. Both these decisions having now been reported [1970] I.L.R. 1-380 and [1972] 2 O.R. 341,

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there is no need for me to quote at length from the lease at the outset. It will be sufficient to refer thereto in the course of these reasons.

There is no doubt that if the relations between the landlord and the tenant were to be examined in the sole light of the relevant statute, the tenant would be responsible to the landlord. As underlined by Kelly J.A., speaking for the Court, the matter would then be governed by ss. 30 and 33 of The Conveyancing and Law of Property Act, R.S.O. 1960, c. 66, which read:

30. A tenant by the curtesy, a dowress, a tenant for life or for years, and the guardian of the estate of an infant, are impeachable for waste and liable in damages to the person injured.

33. Lessees making or suffering waste on the demised premises without licence of the lessors are liable for the full damage so occasioned.

The tenant, however, submits that the lease to which detailed reference will be made later, creates an exception to that general rule of liability. This submission must be examined not only in the light of the general principle that an exception must be interpreted restrictively but also in the light of the decision of the Privy Council in Canada Steamship Lines Ltd. v. The King[13]. In the speech of Lord Morton of Henryton, we find the following oft quoted guidelines to be followed when a person wishes to avoid the consequences of his negligence by placing reliance on a contract: (at p. 208)

Their Lordships think that the duty of a court in approaching the consideration of such clauses may be summarized as follows:—

(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called ‘the proferens’) from the consequence of the negligence of his own servants, effect must be given to that provision. Any doubts which existed whether this was the law in the Province of Quebec were removed by the decision of the Supreme Court of Canada in The Glengoil Steamship Company v. Pilkington (1897), 28 S.C.R. 146.

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(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants or the proferens. If a doubt arises at this point, it must be resolved against the proferens in accordance with article 1019 of the Civil Code of Lower Canada: ‘In cases of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation.’

(3) If the words used are wide enough for the above purpose, the court must then consider whether ‘the head of damage may be based on some ground other than that of negligence,’ to quote again Lord Greene in the Alderslade case [1945] 1 K.B. 189. The ‘other ground’ must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene’s words, the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants.

Although this statement of the relevant principles is to be found in a case having originated in the province of Quebec, they have their roots in the common law and have been applied by this Court in appeals under both the civil law and the common law: Salmon River Logging Company Limited v. Charles Harvey Burt et al.[14]; Dame Virginie Beauchamp v. Consolidated Paper Corporation Limited[15].

Quite apart from the foregoing, it is my opinion that the submission of the appellant should not succeed in the light of the judgment of this Court in United Motors Service, Inc. v. Hutson[16]. In that case, the explicit conclusion of the Court was that a stipulation in the lease that a tenant must return the leased premises in their original condition, wear and tear and fire excepted, does not relieve the tenant of its liability for damage by a fire caused by its negligence. However, it is also my view that this decision implicitly established the principle that the undertaking by the landlord in the lease to pay “all premiums of insurance upon

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the buildings” does not constitute the tenant a co-insured so as to permit it to escape liability for fire damage caused by its negligence. It is interesting to note that in the Hutson case, the action was in so many words by the landlord’s insurers, who obviously had no greater rights than the landlord and who nevertheless were granted full recovery. In that case, the insurance clause read:

And the said Lessor covenants to pay all taxes in connection with the demised premises and all premiums of insurance upon the buildings erected thereon.

It is quoted at the outset of the reasons delivered by Kerwin J., as he then was, who then proceeds to examine the facts in the light of the relevant statutes and of the “terms of the lease”. His conclusions are to be found in the following paragraphs:

certain exceptions to the obligation to repair are contained in the covenant, viz.:

reasonable wear and tear and damage by fire, lightning and tempest, riot or public disorder or act on the part of any governmental authority only excepted;

and by the last of the clauses extracted from the lease it is provided that if the building is

so damaged by fire or other casualty or happening as to be substantially destroyed

then the lease should cease,

but in case the building or buildings are not substantially destroyed, then the demised premises shall be restored…by the Lessor.

and a provision is added for the proportionate abatement of the rent until such restoration. The effect of these various clauses is to leave the appellant liable for damage by a fire caused through its negligence. Even without the clause last referred to, the appellant could not be relieved from such liability under the exception in the covenant to repair. It would require much stronger language to permit the apellant to escape payment for damages caused by its negligence; and while the terms ‘casualty or happening’ in the last clause may be susceptible of an innocuous meaning in this connection, so

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far as the appellant is concerned, they may certainly not be treated as assisting it in any contrary interpretation.

With this background, let us turn to the stipulations of the lease. The first step is to determine whether there is a clause therein relieving the tenant of liability in case of negligence. A careful examination of the lease has convinced me that no such clause exists. On the contrary, the general rule of responsibility is expressed in clear terms, in para. 8, cl. 14:

It is understood and agreed that the Lessee shall from and after the date upon which it takes possession of the leased premises hereunder, be responsible for the payment of rent and for all services as stipulated in paragraphs 5, 6 and 7 of this lease and also for the repair of any damage caused to the leased premises or to any other portion of the lands or the Building or of other buildings comprising the Shopping Centre whether caused by the Lessee, its employees, servants, agents, workmen or invitees and whether caused while the Lessee is installing fixtures in the leased premises or stocking the leased premises or otherwise.

Paragraphs 6 and 7 therein mentioned deal with fuel and additional taxes respectively and do not have any pertinency here.

Paragraph 5 invoked by appellant in support of its submissions will be examined later but I should say immediately that, in my view, it does not affect the generality of the terms used in the clause just noted.

Of course, even after such a clear statement, it is possible that an exception has been created. For purposes of convenience, the submissions of appellant are summarized by me under three headings. Is this exception to be found

a) in the obligation of the landlord to insure the building?

b) in the stipulations of the lease dealing with the obligation of the tenant to repair and to return the demised premises in their original state, wear and tear and other circumstances excepted?

c) in various other clauses of the lease?

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I am unable to find that any exception has been granted under one or the other of these three headings.

The first of these is based on para. 9, cl. 2 of the lease:

The Lessor covenants to insure the Shopping Centre including the said Building, excluding foundations in each case, against all risk of loss or damage caused by or resulting from fire, lightning or tempest of any additional peril defined in a standard fire insurance additional perils supplemental contract. All such insurance shall to the best of the ability of the Lessor be to the full insurable value of the property insured.

The covenant thus stated does not by itself mean that the landlord is ready to waive its recourse in damages should a fire be due to the negligence of its tenant. As I have underlined above, this is clearly implied in the decision of Hutson and I see no reason to arrive at any different conclusion.

If the appellant’s submission on this point were the only possible reading of the clause, I would, of course, have to agree with it. However, a more obvious reading, which to me is in accord with the business relationship between the parties, is that this tenant, in particular, and all the tenants of the Shopping Centre generally, have a major interest in making sure that should a fire occur, the landlord will be financially able to repair the damages thus permitting all tenants to continue in business, presumably with a profit. Given the test of the Canada Steamship Lines case, I cannot but conclude that the natural reading of para. 9(2) does not bring us necessarily to the conclusion that a waiver of liability is implied therein.

One cannot in that connection fail to mention that by para. 11, cl. 2 of the lease, there is an obligation imposed upon the landlord to repair after a fire or other casualty unless it is total destruction or such a partial destruction that the repairs cannot be effected within nine months.

Quite apart from the solvency angle, it seems to me that para. 9, cl. 2, must be read in conjunction

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with para. 9, cl. 5, the latter stipulating what repairs are to be considered as lessor’s repairs. This brings us to the second heading under which appellant’s submissions are being examined. On this point, appellant invokes para. 8, cl. 10 of the lease. To have a better comprehension of the general picture, I am reproducing side by side those parts of the lease dealing with the repairs assumed by the tenant and with those assumed by the landlord:

8.(10)

(1) The Lessee shall take good and proper care of the interior of the leased premises and appurtenances thereof (including all plate glass installed in or upon the leased premises) and any improvements now or hereafter erected therein and make all needed repairs and replacements thereto except for reasonable wear and tear, repairs to the four side walls, roof, skylights, foundation, floors and the bearing structure of the Building forming part thereof, damage to the Building caused by water damage and damage to the Building caused by perils against which the Lessor is obligated to insure hereunder.

(2) The Lessee will repair according to notice and upon the determination hereof the leased premises shall be surrendered in the condition in which the Lessee is required to maintain the same except for reasonable wear and tear subject to the insurance provisions hereof.

9.

(5) Except for reasonable wear and tear to repair the four side walls, roof, skylights, foundations, floors and bearing structure of the Building of which the leased premises form part, the sidewalks and parking areas of the Shopping Centre and damage to the Building, sidewalks and parking areas of the Shopping Centre caused by water and damage to any of them caused by perils against which the Lessor is obligated to insure, without being liable for any direct or consequential damage to person or property for any failure to do so.

These two texts dovetail perfectly and one possible reading of them is that they are meant to cover the contractual field of repairs and nothing more.

Appellant submits that this reading does not represent the intention of the parties and that the wear and tear exclusion in cl. 8.(10) includes the fire caused by the negligence of the tenant. This

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would be the result of the reference in the exclusion to the “perils against which the lessor is obligated to insure” read in the light of the basic principle of insurance law that a negligent fire is one of the insured perils.

The short answer to that submission is that the wear and tear exception in the case at bar, to all intents and purposes, is not substantially different from that examined by this Court in the Hutson case. As mentioned above, the exceptions in that case were the following:

fire, lightning and tempest, riot or public disorder or act on the part of any governmental authority.

Here, if we read into the lease the perils mentioned in the insurance policy, we have a list that is longer but not different in substance. Without being too technical, it is fair to say that these perils are:

fire, lightning, explosion, impact, riot, smoke, sprinkler’s leakage, windstorm and hail.

It does not matter in my mind that the exceptions instead of being listed by name are listed by reference to a document which is standard in scope and well-known to the business world. On the authority of Hutson, if the excepted risks had been listed specifically, the tenant would not be successful in its contention that a negligent fire is part and parcel of the exclusion. In my view, the fact that the exceptions are listed by reference does not make any difference in the result.

The third heading under which I propose to examine appellant’s case is really a submission that the two main arguments must be studied against the background of various other clauses in the lease. We have in particular been referred to para. 5:

The Lessee shall pay for its own water (on a separate meter), electricity or other power (separate meter), janitor service, window cleaning, cleaning of sidewalks, and snow and ice removal on sidewalks adjacent to its premises and insurance-covering all its obligations to repair

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and such other risks as it may insure against (except such insurance as is herein required to be carried by the Lessor) and shall pay all taxes, rates, duties and assessments whatsoever whether municipal, parliamentary or otherwise now charged or hereafter charged upon and/or in respect of the contents of the leased premises and/or upon and/or in respect of any business or other activity carried on upon and/or in connection with the leased premises and/or upon the Lessee on account of the leased premises or such contents, business or other activity.

The deletion of the words “insurance covering all its obligations to repair and” does not, in my view, achieve any other result than to re-affirm that the solvency of the tenant was satisfactory to the landlord, a point already established through the waiver by the landlord of the tenant’s obligation to present a guarantor. To read into this deletion an agreement that the tenant has no obligation to repair whatsoever (a submission that appellant has not really made) is to erase para. 8, cl. 10 of the lease. As to the words between brackets in para. 5 “(except such insurance as is herein required to be carried by the Lessor)”, they certainly do not by themselves relieve the tenant of the normal consequences of its negligence.

In the same fashion, I do not see that the opening sentence of para. 8, cl. 22, is of any help to appellant:

The Lessee shall take out and keep in force during the term hereof insurance upon all glass and plate glass in the leased premises and property damage insurance and public liability insurance all in amounts and with policies in form satisfactory from time to time to the Lessor, and all in recognized insurance companies and shall upon written request of the Lessor provide a certificate from its insurers stating the amounts of such coverage.

Although the tenant is relieved of its obligation to insure the glass in the leased premises, the pencilling out of the words in the sentence just quoted does not remove the tenant’s obligation to repair the glass as expressed in para. 8.(10). The text just quoted merely reinforces my view that these agree-

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ments deal with solvency and not with liability, a point which also is clearly made by the deletion of the last ten words in the following sentence appearing at the end of para. 8.(22):

The Lessee shall take out and keep in force during the term hereof fire insurance covering his stock-in-trade, furniture and fixtures in an amount equal to the full insurable value thereof.

We have also been referred to two further clauses (8.(12) and 8.(25)) dealing in substance with the obligation of the tenant to pay the increase in insurance premiums when its conduct is the cause of the increase. I do not see that these stipulations help to solve the problem under consideration.

Looking at the lease as a whole, as well as at the various clauses to which we have been especially referred, I have no hesitation coming to the conclusion that the words used by the parties to the contract of lease are not wide enough to exclude the liability of the tenant when its negligence is established as in the present case. I find support for that view in the following:

(1) the question of fire was very much in the forefront of the parties’ thinking; in the circumstances, if such had been their intention, it would have been very easy for them to say that, in the case of a fire caused by the negligence of the tenant, there would be no recovery by the landlord;

(2) the question of insurance was also very much in the mind of the parties, to such an extent that when it came to another type of insurance, namely that described in the second sentence of para. 8, cl. 22, it was spelled out that the public liability insurance to be taken by the tenant would “name the lessor as an additional insured”; here again, if such had been the agreement, it would have been very simple when dealing with the insurance of the buildings (para. 9, cl. 2) to state in so many words that the lessee would be named as an additional insured, a statement that the clause does not contain.

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For these reasons, I would dismiss this appeal with costs.

The judgment of Ritchie, Pigeon, Dickson and Beetz JJ. was delivered by

PIGEON J.—The facts and the questions of law are stated in the reasons of the Chief Justice. I agree with his conclusion save with respect to the claim for loss of rental income.

In my view, it ought to be considered as settled by the judgment of this Court in United Motors Service, Inc. v. Hutson[17] that an exculpatory clause substantially in the terms of clause 9 in Schedule B of The Short Forms of Leases Act (now R.S.O. c. 436) is to be read as leaving the lessee liable for damage by a fire caused through his negligence. In that case the clause read:

And that it will leave the premises in good repair, reasonable wear and tear and damage by fire, lightning and tempest only excepted.

Kerwin J. (as he then was) said speaking for the majority (at p. 303):

It would require much stronger language to permit the appellant to escape payment for damages caused by its negligence;...

In the present case, the question is essentially what stronger language is required. The rule is not that an explicit reference to negligence is necessary. All that is required is that the intention be adequately expressed. The governing principle was stated as follows by Lord Greene M.R. in Alderslade v. Hendon Laundry Ld.[18] at p. 192:

…where the head of damage in respect of which limitation of liability is sought to be imposed by such clause is one which rests on negligence and nothing else, the clause must be construed as extending to that head of damage, because it would otherwise lack subject-matter. Where, on the order hand, the head of damage may be based on some other ground than that of negligence, the general principle is that the clause must be confined in its application to loss occurring through that other cause, to the exclusion of loss arising through negligence. The reason is that if a contracting party

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wishes in such a case to limit his liability in respect of negligence, he must do so in clear terms in the absence of which the clause is construed as relating to a liability not based on negligence.

This means that even a clause in general terms may sometimes cover negligence, as was actually decided in that case and in other previous cases cited such as Rutter v. Palmer[19] where it read: “Customers’ cars are driven by your staff at customers’ sole risk”.

Lord Greene’s statement was quoted and relied on by Lord Morton of Henryton in Canada Steamship Lines Ld. v. The King[20], at p. 207, on the basis that the special principle was equally valid under the law of Quebec. It was also relied on by the majority in this Court in Salmon River Logging Co. Ltd. v. Burt Bros.[21]

In the present case, the exculpatory clause is not in the form of The Short Forms of Leases Act or an equivalent form as in the Hutson case. Here, the lessee’s exoneration is defined by reference to the lessor’s obligation to insure the building. The material part of the clause reads:

Except…damage to the Building caused by water damage and damage to the Building caused by perils against which the Lessor is obligated to insure hereunder.

The lessor’s obligation to insure is in the following terms:

9(2) The Lessor covenants to insure the Shopping Centre including the said Building, excluding foundations in each case, against all risk of loss or damage caused by or resulting from fire, lightning or tempest or any additional peril defined in a standard fire insurance additional perils supplemental contract. All such insurance shall to the best of the ability of the Lessor be to the full insurable value of the property insured.

Nothing could be better settled than that, unlike an exculpatory clause, a fire insurance policy is to be read as covering negligence whether of the insured himself or of his servants or of third

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parties. In Shaw v. Robberds[22] Lord Denman C.J. said (at p. 84):

There is no doubt that one of the objects of insurance against fire is to guard against the negligence of servants and others; and therefore, the simple fact of negligence has never been held to constitute a defence. But it is argued that there is a distinction between the negligence of servants or strangers and that of the assured himself. We do not see any ground for such a distinction; and are of opinion that, in the absence of all fraud, the proximate cause of the loss only is to be looked to.

Similarly, Lord Wrenbury said in Attorney-General v. Adelaide Steamship Co.[23], at p. 308:

So if I insure my house against fire, or my carriage or car against road risks, the risk that my servant may negligently set the house on fire, or that my driver may drive negligently and cause a collision, is exactly one of the risks against which I sought insurance. I insured against fire or collision. The fire or collision occurred and the insurance office is to bear that risk to my indemnity. The fire or the collision is that causa proxima of the loss—the negligence is a cause more remote. As regards sea peril, I may perhaps express it by saying that the underwriter insures against the sea peril, however it may happen—including, therefore, negligence of the master. It is otherwise if the loss occurs through the wilful negligence or wilful act of the assured. In that case the loss does not “happen,” but is caused by the assured himself, and, consequently, he cannot recover.

Counsel for the respondent did not contend that the fire insurance contract to be obtained by the lessor would not be expected to cover loss by fire or additional peril occurring by negligence. However, it was submitted that the effect of the clause was the same as in Hutson. In my view, there is a basic difference. In Hutson, the clause could readily be construed as not including damage caused by negligence, it did not have reference to any insurance policy and stood apart from the lessor’s covenant to pay “all premiums of insurance upon the buildings” without any express obligation to insure

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against specified perils. In the present case, on the contrary, the clause operates by way of reference to perils to be insured against by the lessor and these perils include fire however occurring, by negligence or otherwise.

In view of the reference to insurance, it appears to me that consideration can properly be given to the effect of the insurer’s statutory right to subrogation (R.S.O. c.224, s.126). The consequence is obviously that the lessor is liable to lose the benefit of the policy if the fire is due to the tenant’s negligence and the latter has been relieved from that responsibility. An insurer is entitled not to be deprived of the benefit of subrogation without his consent. Of course, this consequence can be avoided either by the insurer contracting to insure the tenant’s interest as well as the owner’s or by the insurer waiving subrogation. The necessity of such special stipulation to avoid undesirable consequences is an added reason for not lightly construing an exculpatory clause as releasing a tenant from negligence. In the Salmon River Logging case, the agreement provided:

…the trucks and the personnel operating such trucks, shall, at all times during the life of the within contract, be at the risk of and the responsibility of the Truckers and that the Truckers will provide their own insurance,

Rand J. said (at p. 119):

The Truckers are to be insured generally. Insurance would cover loss from accident and the negligence of themselves as well as that of third persons; but what of damage caused by the Company? Being of the nature of indemnity, insurance gives rise to subrogation against the wrongdoer: is this subrogation to be negatived in relation to the Company by insuring for its benefit where the damage is the result of its negligence but not so in the case of other wrongdoers? How can we imply such a significant provision?

Cartwright J., with whom Estey J. concurred, excluded the application of the clause on another basis.

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In the present case, it clearly appears from the evidence of respondent’s secretary-treasurer Silverberg quoted by Kelly J.A., that the lessor was aware of the necessity of obtaining insurance that would cover the interests of its tenants and dealt with its insurer accordingly. I fail to see how such protection could be different from the owner’s. When a building in construction is insured for the joint benefit of the owner and contractor, certainly the latter is not expected to be held liable for loss caused by the negligence of his workmen. Here, instead of having the tenants named as joint insureds, there was inserted the following clause:

12. SUBROGATION CLAUSE: Any release from liability entered into by the Insured prior to any loss or damage shall not affect the validity of this Policy, or the right of the Insured to recover hereunder, and it is further agreed that if the Insured, prior to any loss or damage, has executed any agreement whereby a third party shall be held harmless for loss or damage to the property covered under this policy, the Insurers shall have no right of recovery against such third party.

As a result of this stipulation, the right to recover from the respondent’s insurer is not affected whatever the extent of the exculpatory clause may be. I see no reason to construe it otherwise than literally and so construed it extends to all damage from fire however occurring, seeing that this is what insurance against loss by fire means.

This does not dispose of the whole case because the plaintiff claimed as damage caused by the fire not only the damage to the building, but also loss of rental income. According to the trial judge, the evidence was that the gross loss of rental income after deducting realty tax rebates amounted to $25,105. Of this, it would appear that $15,000 was within the insurance coverage.

In my view, the exculpatory clause provides no defence against this claim both insured and uninsured. The release of liability is from “damage to

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the building” only, and the lessor’s covenant is to insure the shopping centre from the “risk of loss or damage caused by or resulting from fire or any additional peril from fire, lightning or tempest or any additional peril defined in a standard fire insurance additional perils supplemental contract”. This wording does not extend to loss of rental income. Such loss is not covered by those stipulations. In the policy obtained by the respondent, it is covered by what is entitled “Rent or Rental Value Form” which covers not the building, but the “rents” and “rental value”.

I can see no reason for extending the exculpatory clause beyond its words which, as above stated, cover only damage to the building. Similarly, I can see no reason to extend the obligation to insure beyond its terms to cover what is not damage to the building. The tenant cannot claim the benefit of any insurance which the owner took beyond what the lease required and its relief from liability cannot protect it beyond the actual wording of the stipulation in the lease. There is, therefore, no distinction to be made between the insured and the uninsured portions of the rental income loss.

It is now settled by the judgment of this Court in Rivtow Marine Ltd. v. Washington Iron Works[24] that recovery for economic loss caused by negligence is allowable without any recovery for property damage. I can therefore see no objection to the plaintiff recovering on this account, although property damage is not recoverable due to the exculpatory clause. As the amount due under that head appears to be well establised, there is no necessity for a reference as directed by the Court of Appeal in the judgment allowing full recovery.

With respect to costs, I would think that because the trial was essentially for the purpose of

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establishing responsibility for the fire, the plaintiff, although recovering only for loss of rental income, ought to have the costs of the action, the amount obtained being substantial. In view of the divided success in the Court of Appeal, I would allow no costs. In this Court the appellant succeeds on the essential point and is entitled to costs.

For those reasons, I would allow the appeal with costs and vary the judgment of the Court of Appeal to provide that the plaintiff recover from the defendant Agnew-Surpass Shoe Stores Limited the sum of $25,105, with interest from April 9, 1965, and costs in the trial Court as provided in the said judgment of the Court of Appeal, without costs in that Court.

Appeal allowed with costs, LASKIN C.J. and JUDSON and SPENCE JJ. dissenting in part, MARTLAND and DE GRANDPRE JJ. dissenting.

Solicitors for the appellant: Bassel, Sullivan & Lawson, Toronto.

Solicitors for the respondent: Phelan, O’Brien, Rutherford, Lawer & Shannon, Toronto.