2005 BCCA 309 North Newton Warehouses Ltd. v. Alliance Woodcraft Manufacturing Inc.

Before:	The Honourable Madam Justice Southin
	The Honourable Madam Justice Prowse
	The Honourable Mr. Justice Hall

N. J. Tuytel and J. L. S. Hodes	Counsel for the Appellant
R. B. Lindsay, Q.C. and J. J. Kim	Counsel for the Respondent
Place and Date of Hearing:	Vancouver, British Columbia
14th April, 2005
Place and Date of Judgment:	Vancouver, British Columbia
6th June, 2005

Dissenting Reasons by:

The Honourable Madam Justice Southin

Written Reasons by:

The Honourable Mr. Justice Hall (P. 10, para. 20)

Concurring Reasons by:

The Honourable Madam Justice Prowse (P. 23, para. 47)

Reasons for Judgment of the Honourable Madam Justice Southin:

[1] I have had the privilege of reading in draft the reasons for judgment of my colleague, Hall J.A., allowing the appeal.

[2] Unlike my colleague, I would dismiss the appeal.

[3] My first reason is procedural: the application of the appellant being wholly irregular, it ought not to have been entertained.

[4] My second is substantive: I see no error in the reasons of the learned trial judge.

[5] I shall address only the first.

[6] The order from which the appellant appeals was pronounced the 23rd February, 2004. It says only:

THIS COURT ORDERS that:

1. The Defendant's application is dismissed.

[7] Although this Court, from time to time, in order to save litigants from the financial and other consequences of procedural errors of their solicitors, will take steps to make regular that which is irregular, here it is plain that the litigants are not the parties named in the style of cause but, in fact, two insurance companies quarrelling over which one of them shall bear a fire loss. That being so, I see no reason why this Court should not hold the parties to the Rules. The solicitors will have to explain matters to their clients as best they can.

[8] The application which came before the learned judge was in these terms:

TAKE NOTICE that an application will be made by the Defendant to the presiding judge or master at the Courthouse at 800 Smithe Street, Vancouver, British Columbia, at a date and time to be set for an order that:

1. A Declaration that the Plaintiff is precluded by the terms of the lease dated April 15, 1997 between the Plaintiff and the Defendant, and by operation of law, from advancing its claim herein.

2. An Order that the Plaintiff's claim be dismissed with costs.

The applicant will rely on Rule[s] 33 and 57 of the Rules of Court.

At the hearing of the application, the applicant will rely on the following affidavit(s) and other documents:

1. Agreed Statement of Facts dated January 15, 2004;

2. the pleadings and proceedings herein.

[9] The claim of the plaintiff was expressed thus in its amended statement of claim:

1. The plaintiff North Newton Warehouses Ltd. ("North Newton") is a company incorporated pursuant to the laws of British Columbia and has its registered office at 2100 – 1075 West Georgia Street, Vancouver, British Columbia.

2. The defendant Alliance Woodcraft Manufacturing Inc. ("Alliance Woodcraft") is a company incorporated pursuant to the laws of British Columbia and has its registered office at 1279 Derwent Way, Unit 2, Delta, British Columbia.

3. At all material times, North Newton was the owner of a commercial warehouse complex located at 8125 130th Street, Surrey, British Columbia. ("Warehouse Complex")

4. On or about April 15, 1997, Alliance Woodcraft entered into a lease with North Newton. This lease was extended on or about May 10, 2001. Pursuant to the lease, Alliance Woodcraft leased four warehouse units, namely Units 11 – 14 in the Warehouse Complex. ("Leased Premises")

5. During the term of the lease, the defendant Alliance Woodcraft, constructed a spray booth for the finish of wood products in the Leased Premises. The lease provided among other things:

a) that Alliance Woodcraft would comply with any laws, statutes, by-law, ordinance, regulations, or lawful requirements during the period of its tenancy;

b) that Alliance Woodcraft would indemnify the landlord for all manner of damages arising out of any act or omission of the tenant;

c) that Alliance Woodcraft would ensure that any alterations to their premises would be in compliance with all applicable standards.

6. On or about August 20, 2001, a fire occurred in the Warehouse Complex which resulted in substantial damages to the Warehouse Complex and its contents, thereby causing the plaintiff to suffer loss, damage and expense.

7. The fire which occurred on or about August 20, 2001, was caused by the negligence of the Alliance Woodcraft, and/or its agents and employees, the particulars of which are as follows:

a. Alliance Woodcraft stored flammable material in a negligent manner;

b. Alliance Woodcraft improperly disposed of combustible material;

c. Alliance Woodcraft stored material without preventing flammable vapour build up;

d. Alliance Woodcraft failed in achieving cross ventilation when using materials known to be subject to spontaneous combustion;

e. Alliance Woodcraft failed to exercise reasonable care in all circumstances.

f. Alliance Woodcraft failed to properly construct a spray booth in accordance with the British Columbia Electrical Code, the British Columbia Building Code, and the British Columbia Fire Code and away [sic] other applicable regulatory standard;

g. Alliance Woodcraft negligently applied and/or stored a flammable product;

h. Alliance Woodcraft failed to properly instruct its employees in the safe handling of flammable material;

i. Such further and other particulars as counsel may advise.

8. Further and in the alternative, the plaintiff's loss, damage and expense were caused solely by or contributed to by the breach of contract of the defendant Alliance Woodcraft. Particulars which include, but are not limited to:

a. Construction of improvements in the Leased Premises in violation of lawful statute or regulations;

b. Construction of improvements in the Leased Premises without use of proper experts or trade persons; and

c. Such further and other particulars as counsel may provide.

9. The plaintiff will rely upon the provisions of the Negligence Act, R.S.B.C. 1996, c. 333, as amended.

WHEREFORE THE PLAINTIFF claims against the Defendant for:

a. Damages for property damage and economic loss;

b. Special damages;

c. Interest pursuant to the Court Order Interest Act;

d. Costs, and

e. Such further and other relief as to this Honourable Court shall seem just.

[10] This was the Agreed Statement of Facts mentioned in the notice of motion:

1. On April 15, 1997, the Plaintiff as landlord and the Defendant as tenant entered into an agreement (the "Lease") for the lease of space in a commercial warehouse complex located at 8125 – 130th Street, in the City of Surrey, British Columbia (the "Warehouse").

2. Attached as Exhibit "A" to this Agreed Statement of Facts is a copy of the Lease.

3. The original term of the Lease was from April 15, 1997 to April 14, 2001.

4. On or about May 10, 2001, the term of the Lease was extended for a period of three years.

5. On August 20, 2001, during the Defendant's tenancy, a fire occurred in the Warehouse.

6. In this Action, the Plaintiff claims against the Defendant for damages arising out of the fire. The Defendant denies liability.

7. The cause of the fire is not at issue on this application, nor are the damages resulting therefrom.

8. This Action is a subrogated claim brought in the Plaintiff's name by the Plaintiff's insurer for amounts paid to the Plaintiff pursuant to a policy of insurance (the "Policy").

[11] This is Rule 33:

RULE 33 – SPECIAL CASE

33(1) The parties to a proceeding may concur in stating a question of law or fact, or partly of law and partly of fact, in the form of a special case for the opinion of the court.

(2) The court may order a question or issue arising in a proceeding, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be stated in the form of a special case.

(3) A special case must

(a) be divided into paragraphs numbered consecutively,

(b) state concisely such facts and set out or refer to such documents as may be necessary to enable the court to decide the questions stated, and

(4) On the hearing of a special case, the court and the parties may refer to any document mentioned in the special case, and the court may draw from the stated facts and documents any inference, whether of fact or law, that might have been drawn from them if proved at a trial or hearing.

(5) With the consent of the parties, on any question in a special case being answered, the court may grant specific relief or order judgment to be entered.

[12] What the appellant put before the learned judge does not conform with the requirements of the Rule. The parties did not "concur in stating a question" as required by Rule 33(1), nor did they give any consent "on any question in a special case being answered" to the court granting specific relief or ordering judgment to be entered.

[13] I comment that generally there is no point to a special case unless relief is to follow from the answer.

[14] A version of Rule 33 has been in the Rules of the Supreme Court of British Columbia since at least 1890.

[15] Although no form of special case is shown in the appendix of forms to the present rules of the Supreme Court, the proper way to do it can be found in Daniell's Chancery Forms, a copy of which, if not in the Law Courts library, may be found, so I am told, at the University Law Library under call number KN363.E35, in Atkin's Encyclopaedia of Court Forms and Precedents, vol. X, (London: Butterworth & Co., 1948) at 133 et seq., and in the Second Edition, vol. 23(2) (London: Butterworths, 1998) at 59. A properly drawn Special Case (the joint work of Mr. Bruce Laughton, Q.C. and Mr. Tim Louis) may be found in Gumpp v. Co-operators Life Insurance Co. (2004), 27 B.C.L.R. (4th) 1, 2004 BCCA 217 ¶ 4.

[16] As I indicated at the outset, it is my opinion that the learned judge below ought to have dismissed this application, not on the substance of the issues between the appellant and the respondent but on the ground of irregularity. With respect, I have observed that some of the judges of the Supreme Court are indulgent of non-observance of the Rules by solicitors who should know better. Well-crafted documents, whether pleadings, special cases, or petitions for the construction of instruments, assist the court to come efficiently to grips with the real issues, whether of fact or law, arising between the parties.

[17] A similar difficulty arose in Schober v. Walker (2004), 26 B.C.L.R. (4th) 43, 2004 BCCA 303.

[18] In that case, we said:

[6] What then should the order say? While ordinarily this Court does not make "speaking" orders, such an order appears appropriate here.

[7] Therefore, the first paragraph of the order, after the usual recital of counsel and so forth, should say:

AND UPON IT APPEARING that the application below is irregular and ought not to have been entertained;

[8] The operative part of the order will then be:

THIS COURT ORDERS that this appeal be and it is hereby dismissed without costs to either party.

[19] I would make the same order in this case.

“The Honourable Madam Justice Southin”

Reasons for Judgment of the Honourable Mr. Justice Hall:

[20] This case raises issues about insurance coverage. In April 1997, North Newton Warehouses Ltd. ("North Newton") and Alliance Woodcraft Manufacturing Inc. ("Alliance") entered into a four-year lease (the "Lease") under which North Newton leased space in its Surrey warehouse complex to Alliance. On 10 May 2001, the parties extended this Lease for a further three years.

[21] On 20 August 2001, a fire caused substantial damage to the warehouse. North Newton alleges Alliance or its employees negligently caused the fire. Alliance denies liability but argues in any event the claim brought against it by North Newton is not sustainable as a matter of law. The action involves a subrogated claim brought by North Newton's insurer against Alliance seeking to recover amounts it paid to North Newton for the damage caused by the fire.

[22] Alliance applied before the Supreme Court pursuant to Rule 33 of the Rules of Court for a declaration that North Newton is precluded by the terms of the Lease from advancing this claim and for an order dismissing the action. On 23 February 2004, Madam Justice Ross dismissed the application: 2004 BCSC 230. From that dismissal Alliance has appealed to this Court.

[23] It is necessary to consider certain clauses contained in the Lease. Under clause 8.3(a):

The Landlord shall, during the Term and any renewal thereof, take out and maintain in full force and effect insurance against all risks of physical loss or damage to the Building, and such fixtures and improvements as the Landlord shall determine, including the perils of flood and earthquake and including gross rental value insurance, in amounts equal to the full insurable value thereof calculated on a replacement cost basis, and subject to such deductibles as the Landlord may reasonably determine. Provided however that the full insurable value shall not include, and the insurance shall not cover, any property of the Tenant, whether owned by the Tenant or held by it in any capacity, nor Leasehold Improvements nor any other property of whatsoever kind and description located at the Premises whether made or installed by or on behalf of the Tenant. The Landlord shall, upon 30 days' written notice from the Tenant, advise the Tenant of the amount of the deductible referred to in this subclause.

There is no suggestion North Newton failed to comply with its obligation to obtain insurance coverage, and the parties agree Alliance paid premiums under the insurance North Newton obtained as Alliance covenanted to do in clause 4.1(b) as a component of "additional rent".

[24] Clause 8.3(d) provides:

Notwithstanding any contribution by the Tenant to any Insurance Costs as provided for herein, no insurable interest shall be conferred upon the Tenant under policies carried by the Landlord.

"Insurance costs" is defined in clause 1 as "all premiums and other amounts which the Landlord may expend in effecting or maintaining insurance coverage under the provisions of this Lease".

[25] Clause 8.1 deals with the insurance coverage Alliance covenants to obtain. This coverage includes in clause 8.1(a)(iii) comprehensive bodily injury and property damage liability insurance and in clause 8.1(a)(iv) all-risks liability insurance in an amount not less than the replacement cost of the premises.

[26] Alliance's covenants to insure are modified by clause 8.1(b):

All policies of insurance referred to in this paragraph shall include the following provisions:

* * *

(ii) subject to subclause 10.1(b), all property damage policies written on behalf of the Tenant shall contain a waiver of any subrogation rights which the Tenant's insurers may have against the Landlord and against those for whom the Landlord is, in law, responsible, whether any insured loss or damage is caused by the act, omission, or negligence of the Landlord, or by those for whose acts the Landlord is, in law, responsible, or otherwise;

[27] Clause 8.2 requires Alliance to indemnify North Newton from all loss and damage caused by any act or omission of the tenant or by anyone for whom the tenant is responsible.

[28] Clause 10.1(b), which is of significance in this case, requires the tenant to repair at its expense all damages caused to the premises by its negligence:

Except as provided in subclause 10.1(c), if the Premises are damaged by fire or other casualty not caused by the negligence of the Tenant or those for whom it is responsible in law, and the damage is covered by insurance held by the Landlord under this Lease, then the damage to the Premises shall be repaired by the Landlord at its expense provided that the Tenant shall, to the limits of insurance it ought to have received under the terms of this Lease, be responsible for any costs in excess of insurance proceeds received. The Tenant shall, at its expense, repair all Leasehold Improvements and any installations, alterations, additions, partitions, improvements, and fixtures made by or on behalf of the Tenant and all damage caused by its negligence or the negligence of those for whom it is responsible in law.…

[Emphasis added.]

The respondent relies upon the portion of the clause above emphasized.

[29] Finally, clause 4.7 provides in part:

It is the intention of the parties that this Lease shall be a net lease… Save as specifically set forth in this Lease, all costs, expenses, and obligations of every kind and nature whatsoever relating to the Premises whether or not herein referred to and whether or not of a kind now existing or within the contemplation of the parties, shall be paid by the Tenant.

[30] The chambers judge, in dismissing the application of the tenant Alliance, stated at para. 17:

I have concluded that the covenant to insure, in the context of the Lease read as a whole, does not constitute a bar to the claim. The terms of the Lease, as outlined above, in my view reflect an intention that the Landlord will be entitled to recover from the tenant or its insurer in the event of loss caused by the tenant's negligence.

I take it that in the passage from her reasons above, the judge was referring to the covenant of the landlord to insure found in clause 8.3(a) of the Lease.

[31] The chambers judge appears to have placed considerable reliance upon a judgment of the Ontario courts, Lee-Mar Developments Ltd. v. Monto Industries Ltd. (2000), 32 R.P.R. (3d) 83, 18 C.C.L.I. (3d) 224 (Ont. S.C.J.), aff'd (2001), 146 O.A.C. 360. The appellant suggests in argument that this case does not support the conclusion of the learned chambers judge and it further submits that the decision of the learned chambers judge, in any event, is out of accord with previous Supreme Court of Canada authority. It appears that certain of the authorities cited to this Court were not before the chambers judge. The appellant argues that the chambers judge erred in holding that the clauses contained in the Lease modified what it terms the immunizing effect of the plaintiff landlord's covenant to insure and also erred in failing to consider the immunizing effect of the tenant's covenant to pay the insurance premiums for the insurance coverage obtained by North Newton. The appellant submits that, properly construed, the terms of the Lease immunize the appellant from being successfully sued by the respondent in this action.

Discussion

[32] In this Court's decision in Laing Property Corp. v. All Seasons Display Inc. (2000), 79 B.C.L.R. (3d) 199, 2000 BCCA 467, Finch J.A. (as he then was) stated the general rule which applies where a party to a lease covenants to insure property subsequently damaged by the other party's negligence at para. 22:

…It is well established that a covenant to obtain fire insurance will relieve the beneficiary of the covenant from any liability for the fire losses that may be suffered by the covenantor....

[33] This statement appears to accord with the leading decisions on this issue, a trilogy of Supreme Court of Canada decisions: Ross Southward Tire Limited v. Pyrotech Products Limited, [1976] 2 S.C.R. 35, 57 D.L.R. (3d) 248; Agnew-Surpass Shoe Stores Limited v. Cummer-Yonge Investments Ltd., [1976] 2 S.C.R. 221, 55 D.L.R. (3d) 676; and T. Eaton Company v. Smith, [1978] 2 S.C.R. 749, 92 D.L.R. (3d) 425. These cases afford support for the proposition that where there is in a lease a covenant by a landlord to insure, the tenant should benefit from it unless there is something inconsistent with such a result contained in the lease document. The rationale for this role was well explained in the judgment of Carthy J.A. in Madison Developments Ltd. v. Plan Electric Co. (1997), 36 O.R. (3d) 80, 152 D.L.R. (4th) 653 (C.A.). Carthy J.A. said at 84:

…The law is now clear that in a landlord-tenant relationship, where the landlord covenants to obtain insurance against the damage to the premises by fire, the landlord cannot sue the tenant for a loss by fire caused by the tenant's negligence. A contractual undertaking by the one party to secure property insurance operates in effect as an assumption by that party of the risk of loss or damage caused by the peril to be insured against. This is so notwithstanding a covenant by the tenant to repair which, without the landlord's covenant to insure, would obligate the tenant to indemnify for such a loss. This is a matter of contractual law not insurance law, but, of course, the insurer can be in no better position than the landlord on a subrogated claim. The rationale for this conclusion is that the covenant to insure is a contractual benefit accorded to the tenant, which, on its face, covers fires with or without negligence by any person. There would be no benefit to the tenant from the covenant if it did not apply to a fire caused by the tenant's negligence....

Carthy J.A. referred in his reasons to the trilogy of cases referred to above. I note that although Madison did not involve a landlord and tenant situation but rather a contractor and a subcontractor, it seems to me the contract at issue in that case is analogous to landlord-tenant agreements. Carthy J.A. concluded in the Madison case that a covenant of the contractor to provide and maintain fire insurance on certain buildings insulated a subcontractor from a subrogated claim for a fire caused by negligence of two employees of the subcontractor. Carthy J.A. stated in his reasons at 85 that this conclusion accorded with business sense. I would make the same observation in this case.

[34] In the case of T. Eaton, the tenant, Eaton's, had rented premises from the respondent landlords. The buildings were destroyed in a fire caused by the negligence of an Eaton's employee. The landlords' insurers paid the amounts of the fire loss to the landlords and thereafter brought a subrogated claim against Eaton's to recover the amounts paid out. At issue in the case was whether the insurers were precluded by the terms of the leases from successfully asserting a claim in view of the fact that the landlords had each covenanted in the two leases to insure the premises against fire. A majority of the Supreme Court of Canada found that the action of the insurer was barred. Laskin C.J.C. said this at 754-55:

Had the landlord insured without giving a covenant to that effect in the lease, the tenant's risk of liability for fire resulting from negligence would be unquestionable; and if the landlord collected from his insurer, the latter would have an equally unquestionable right of recovery from the tenant in a subrogated action. The contention of the respondents is that the insuring covenant in the present case does not alter that result because, as I understand the submission of the respondents, the covenant to insure has subject matter without relating it to coverage against the risk of fires caused by the tenant's negligence. The appellant, although recognizing the differences in the repairing and insuring covenants of lessee and lessor respectively in the Cummer-Yonge case, urges that where the covenant to insure is not at large but is, as in this case, a covenant with the lessee that the landlord will keep the buildings on the premises insured against loss by fire, it must be given effect against liability for fires arising from the tenant's negligence because otherwise, as a covenant expressly running to the benefit of the tenant, it would have no subject matter.

Counsel for the appellant seeks to draw support from the judgment of this Court in the Pyrotech case where the lease contained repairing covenants similar to those in the present case. There the tenant was also under a covenant to pay insurance premiums immediately when due, and did pay them on being billed by the landlord. This Court held that the effect of this insurance obligation was to entitle the tenant to protection against the risk of loss by fire caused by its negligence, and this notwithstanding the repairing covenants which, if they stood alone, would have saddled the tenant with liability for losses from such fires. In short, the tenant was entitled to the advantage of its payment of insurance premiums for a policy under which indemnity was given for loss by fire, including fire arising from some person's negligence, be it that of the tenant or someone else. Counsel asked this Court to apply the principle here in respect of a covenant to insure given by the two landlords for the benefit of the tenant. There was no need for the covenant, so it was contended, if it was only for the benefit of the two landlords.

I think this contention should prevail unless there is another explanation for the landlords' covenant to insure which would dispel it.

[Emphasis added.]

A similar result to T. Eaton had been reached in the Ross Southward case. It was the emphasized portion of the above excerpt that was referred to and relied upon by Carthy J.A. in the Madison case.

[35] The respondent submits that the results in the above authorities should not govern this case because the Lease in the case at bar contains provisions that should lead to a different result. The Lease provides that no insurable interest shall be conferred upon the tenant under policies carried by the landlord (clause 8.3(d)) and that insurance of the landlord shall not cover any of the tenant's property (clause 8.3(a)). The Lease is also structured as a net lease (clause 4.7). The respondent submits that it is significant that the tenant appellant has covenanted in the Lease to insure for all risks up to replacement value of the warehouse building (clause 8.1(a)(iv)).

[36] In my opinion, the fact that no insurable interest is given to the tenant under the landlord's policy is not determinative. That issue was considered in the case of Amexon Realty Inc. v. Comcheq Services Ltd. (1998), 37 O.R. (3d) 573, 155 D.L.R. (4th) 661 (C.A.). That was a case in which, as in the case at bar, the landlord was required to insure and the tenant was obliged to contribute to the premiums. The Ontario Court of Appeal held that the insurer could not pursue a subrogated claim against the tenant. Reference was made to the Supreme Court of Canada trilogy. On the question of insurable interest, Goudge J.A. said this at 576:

It is true that the lease provides that the tenant has no insurable interest under the landlord's policy. While this provision would presumably preclude the tenant from asserting a claim for his own loss under that policy, it does not speak to the claim asserted by the appellant in this case. It is the bargain I have referred to rather than the tenant having an insurable interest under the landlord's policy that is the basis upon which this action is precluded.

I agree with this reasoning.

[37] It does not appear to me that the clause stating the insurance of the landlord is not to cover property of the tenant has much relevance in the circumstances of this case. This case is concerned with damage to the building.

[38] As regards the covenant of the tenant to take out all-risks liability insurance up to replacement value of the premises, I do not consider that such obligation of the tenant should result in a conclusion different from that reached in cases such as T. Eaton, supra.

[39] The respondent relies upon clause 8.1(a) of the Lease which provides:

The Tenant shall, at its sole cost and expense during the Term and during such other period of time that the Tenant occupies the Premises, take out and maintain in full force and effect, the following:

* * *

(iv) tenant's all-risk legal liability insurance in an amount not less than the replacement costs of the Premises.

The respondent submits the wording of this clause suggests that the tenant should be found liable to indemnify the landlord for the costs of the fire and that therefore the present suit is maintainable.

[40] I agree with the submission of Alliance that the insurance required by this particular clause should be held to have a different purpose than the insurance coverage North Newton covenanted to obtain because it indemnifies for a negligence claim against Alliance by third parties, which could include North Newton, and it only insures Alliance. In my opinion, this additional insurance Alliance covenanted to obtain under clause 8.1(a) does not affect North Newton's covenant to insure and the resultant benefits flowing to the tenant appellant pursuant to such covenant.

[41] Although North Newton argues that the case of Economical Mutual Insurance Co. v. 1072871 Ontario Ltd. (1998), 77 O.T.C. 161, 20 R.P.R. (3d) 154, aff'd (1999), 122 O.A.C. 94, 9 C.C.L.I. (3d) 224, is distinguishable because of what are alleged to be different covenants found in the lease in that case, where the tenant was only required to carry fire insurance in its own name to cover its own stock and equipment unlike here, where the tenant was required to insure generally against all risks, I have found in that case a helpful analysis and statement of principle. There the insurer was seeking to recover against a tenant in circumstances quite similar to the instant case. The chambers judge noted that the substantive issue before the court was whether under the terms of a lease the tenant was protected from a claim by the insured landlord for loss as a result of a fire caused by the tenant's negligence. The suit was, as here, being pressed by the insurer of the landlord. In that case also there was a requirement for the tenant to pay for fire insurance premiums. The chambers judge found that the principle in the T. Eaton case was applicable and found the action barred. This decision was sustained by the Ontario Court of Appeal in an endorsement without extended reasons. It does not appear that the judge had this case placed before her.

[42] Here the tenant Alliance has paid the landlord an amount for the insurance obtained by North Newton covering fire damage to the building. It seems to me that, as Laskin C.J.C. observed in the Ross Southward case at 39, a tenant who has paid for an expected advantage as between itself and its landlord should benefit from those payments, and loss issues thereafter are between the landlord and its insurer. In such circumstances, to allow the insurer of North Newton to pursue its subrogated action against Alliance would render nugatory benefits accruing to the tenant under the covenant of the landlord to insure.

[43] North Newton provides only one authority to support its submission that a net lease will shift the obligation to repair damage by fire to the tenant: a comment of Chapnik J. in Lee-Mar, supra. The basis of Chapnik J.'s comment is an observation by Laskin C.J.C. in Ross Southward, supra, at 39 that it "may" have been a tenable view in that case that a landlord intended the tenant to cover all expenses including loss by fire because the landlord intended to get a fixed amount for rent, if the expenses to be covered were not specifically listed in the lease. In my view, the cost of repairing damage by fire is not in the nature of "costs, expenses, and obligations of any kind" a tenant would be expected to cover under a net lease like the one in this case, and in any event the principles requiring a clear statement to displace the responsibility of a landlord via its insurer for damages where the landlord covenants to insure should govern.

[44] The judge appears to have placed reliance upon the case of Lee-Mar, supra, but I consider that that case can be distinguished on the basis that in it, there was no express covenant that fire insurance would be obtained by the landlord.

[45] Ultimately, the policy rule underpinning the proposition that the insurer cannot pursue a tenant for damages in circumstances such as those present in the instant case is based on the proposition that it makes little business sense for a landlord to covenant to insure and for a tenant to pay the premiums if the tenant is not to derive some benefit from the insurance. One might properly say that there is something approaching a presumption in favour of a tenant benefiting from a landlord's covenant to insure. That is the legal principle that I take to be established from the trilogy of cases decided by the Supreme Court of Canada. As I noted, the cases of Madison and Amexon referred to above are consistent with the trilogy and the principle has been referred to with approval by this Court in Laing Property Corp. If a different result is to obtain, it seems to me that quite clear language would be requisite in a lease to achieve such a result. In my opinion, the instant Lease does not contain such language. I consider that on the settled authority of the trilogy of cases decided by the Supreme Court of Canada, the tenant Alliance is entitled to succeed in its application. I would make an order to that effect in the terms enunciated by Prowse J.A. in her concurring reasons.

[46] I would therefore allow the appeal. The appellant should be awarded its costs throughout.

“The Honourable Mr. Justice Hall”

Reasons for Judgment of the Honourable Madam Justice Prowse:

[47] I have had the privilege of reading, in draft form, the reasons for judgment of Madam Justice Southin and Mr. Justice Hall. In the result, I agree with Mr. Justice Hall that the appeal should be allowed, substantially for the reasons given by him.

[48] I concur with Madam Justice Southin that counsel did not comply with Rule 33 of the Rules of Court, B.C. Reg. 221/90, in presenting their stated case. In the event further proceedings are taken with respect to this matter, I would frame the question to be answered on the stated case as "whether the plaintiff, North Newton Warehouses Ltd., is precluded by the terms of the lease dated April 15, 1997 between the plaintiff and the defendant, Alliance Woodcraft Manufacturing Inc., from advancing its claim." Based on the analysis of Mr. Justice Hall, the answer to this question is "yes". I would, therefore, allow the appeal, set aside the order of the chambers judge and dismiss the plaintiff's action, with costs to the defendant/appellant throughout.

“The Honourable Madam Justice Prowse”