Frustration of Contract by Fire (LTB)

Caselaw.Ninja, Riverview Group Publishing 2021 ©
Date Retrieved:	2024-11-01
CLNP Page ID:	1952
Page Categories:	[Termination of Tenancy Because of Fire], [Category:Interference of Reasonable Enjoyment (LTB)], [Section 19 (RTA)], [Section 61 (RTA)], [Section 62 (RTA)], [Section 66 (RTA)]
Citation:	Frustration of Contract by Fire (LTB), CLNP 1952, <https://rvt.link/44>, retrieved on 2024-11-01
Editor:	Sharvey
Last Updated:	2023/05/18

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Madison Developments Ltd. v. Plan electric Co., 1997 CanLII 1277 (ON CA)

Let me begin with an analogous circumstance. 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: see Agnew Surpass Shoe Stores Ltd. v. Cummer-Yonge Investments Ltd., 1975 CanLII 26 (SCC), [1976] 2 S.C.R. 221 at pp. 230 and 248-49, 55 D.L.R. (3d) 676 at pp. 683 and 689-90; Ross Southward Tire Ltd. v. Pyrotech Products Ltd., 1975 CanLII 25 (SCC), [1976] 2 S.C.R. 35 at p. 39, 57 D.L.R. (3d) 248 at p. 251; T. Eaton Co. v. Smith, 1977 CanLII 39 (SCC), [1978] 2 S.C.R. 749 at p. 755, 92 D.L.R. (3d) 425 at p. 429

TET-67067-16 (Re), 2016 CanLII 72234 (ON LTB)

1. At 4:30 a.m. on Sunday, October 11, 2015, the Tenant was sleeping on the couch when she was woken by the police and evacuated from the rental unit along with her adult son and 7 year old granddaughter. The unit was on fire. The ignition point was the balcony. The family was transported to a local hospital and released shortly after. The Tenant has been staying in a hotel ever since, waiting for the rental unit to be repaired so she can return.

2. The Landlord takes the position that the tenancy was terminated as a result of the fire based on the doctrine of frustration of contract. (See section 19 of the Residential Tenancies Act, 2006 (the 'Act').) If the tenancy was terminated at the time of the fire then the Landlord cannot be held responsible for what happened to the Tenant afterwards.

3. In the alternative, it argues that the Tenant, an occupant or guest caused the fire and the Tenant or her insurer should be liable for the damage that occurred and all of the Tenant’s losses.

4. In the further alternative, the Landlord argues that it has addressed the disrepair in the rental unit in a timely and effective manner and no remedy should flow to the Tenant from the breach of subsection 20(1).

5. For the reasons that follow the Board finds that the tenancy agreement between the Landlord and Tenant was not terminated as a result of the application of the doctrine of frustration; the evidence is insufficient to establish that it is more likely than not that the Tenant, an occupant or guest wilfully or negligently caused the fire; and the Landlord has not responded to the disrepair to the rental unit in a timely or effective manner.

11. With respect to the first definition of frustration, it cannot be said that the rental unit was utterly destroyed. It was not. It was seriously damaged but there is no question that the unit was capable of being renovated and restored.

12. With respect to the second definition of frustration it cannot be said that the fire was unforeseeable. The Tenant had fire insurance for just such an eventuality. The Landlord’s Site Supervisor estimated he had been involved in maybe ten fire restorations in his career.

13. So the evidence simply does not support the conclusion that the tenancy agreement was frustrated as a result of the fire.

It is ordered that:

1. The Landlord shall forthwith complete the repairs to the rental unit.

2. The Landlord shall return vacant possession to the Tenant as soon as the unit is habitable.

3. The Landlord shall pay to the Tenant $45.00 for the cost of filing the application.

4. If the Landlord does not pay the Tenant the full amount owing by August 13, 2016, the Landlord will owe interest. This will be simple interest calculated from August 14, 2016, at 2.00% annually on the outstanding balance.

SWL-20529-18-RV (Re), 2019 CanLII 89686 (ON LTB)

16. Furthermore, the cause of the fire was relevant to the Member’s decision in the Tenant’s application because the Landlord claimed frustration of contract. The Member quoted the Divisional Court decision in Dhillon v. PM Management Systems Inc. (2014) ONSC 5407 at para. 14 stating that “an event is not a frustrating event if it is foreseen or provided for in the contract or the frustrating event was caused by the fault of a party to the contract”. Therefore, the cause of the fire was a relevant issue in the Board’s consideration of the Landlord’s argument that the tenancy had been frustrated, and hence terminated, due to the fire.

17. While I agree with the Landlord that the Courts have indicated that issue estoppel should not be applied rigidly in a manner that results in an injustice, I do not find that to be the case here. The Landlord had a chance to present its arguments and evidence to support its position that the Tenant was responsible for the fire during the hearing of the Tenant’s application.

CET-55930-16-RV (Re), 2016 CanLII 88098 (ON LTB)

2. Section 19 of the Residential Tenancies Act, 2016 (the 'Act') states that the doctrine of frustration and the Frustrated Contracts Act apply to tenancy agreements.

3. The doctrine of frustration (or impossibility of performance as it is also sometimes referred to) requires that a number of conditions be met before the doctrine will apply as identified in the Dictionary of Canadian Law, 3rd edition, D. D, pages 513-514.

4. First, an unexpected event that was not contemplated in the contract or foreseeable must occur.

5. Second, the unexpected event cannot be self-induced or the fault of one of the parties. A frequently quoted case on frustration states that the event cannot be the fault of either party (National Carriers Ltd. V. P (Northern) Ltd. [1981]1 A11 E.R. 161 (H.L.).

6. If it were otherwise, a party could undertake a destructive act (such as destroying a rental unit by fire or flood) in order to get themselves out of their obligations under a contract. This would be a self-induced frustration and an unjust result would occur if a party could rely on their own negligent acts or fault to get themselves out of an otherwise binding contract.

7. Third, the event must drastically change the nature of the contract so that it is impossible (not just difficult or expensive) to perform the obligations under the contract. The impossibility of performance must be of a long term nature and not temporary or transient.

8. The court in Re S and J et al., 1984 CanLII 2014 (ONSC) quoted the case of Lord S S.S. Co. Ltd. v. D C Co., Ltd., 1925 CanLII 330 (UK JCPC), (1926) 1 D.L.R. 873, (1926) A.C. 108 at p. 114, (1926) 1 W.W.R. 273, which held that:

... frustration can only be pleaded when the events and facts on which it is founded have destroyed the subject matter of the contract, or have, by an interruption of performance thereunder so critical or protracted as to bring to an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.

9. All the conditions must be met for the doctrine of frustration to apply. If it is determined that one condition does not apply, it is not necessary to do a further analysis of whether the other conditions were met.

D.L.G. & Associates Ltd. v. Minto Properties Inc., 2014 ONSC 7287 (CanLII)

[52] In Cummer-Yonge Investments, supra, the landlord was contractually required to insure the property against fire damage. The landlord’s insurer sought to recover the amount it paid to the landlord under the landlord’s insurance policy after a fire caused by the tenant’s negligence. Even though the damage was attributable to the tenant’s negligence, the Supreme Court held that the contractual language negotiated by the landlord and tenant was sufficient to protect the tenant from liability for the property damage. Further, the Court noted that in the circumstances of a covenant to insure, explicit reference to the negligence of the party is not required to absolve the negligent party of liability, and even a covenant to insure in general terms will cover negligence.

[53] In Pyrotech Products, supra, the Supreme Court noted that the covenant to insure modified the relationship between the landlord and tenant. In that case, the tenant was held not liable despite negligently causing a fire. The Court held that in the context of a lease, the liability for a fire caused by negligence must be determined on the basis of the lease, not by reference to insurance policy considerations.

[54] In Smith v. T. Eaton Co., supra, the Supreme Court held that despite the fact that the fire was caused by the tenant’s negligent actions, as the landlord had covenanted to insure against fire damage, therefore, the landlord could not recover against the tenant, nor could the landlord’s insurer advance a subrogated claim against the tenant. The landlord's covenant to insure benefitted the tenant by lifting from it the risk of liability for fire arising from its negligence and bringing that risk under insurance coverage: Smith v. T. Eaton Co. at p. 754.

TEL-32649-12 (Re), 2013 CanLII 51226 (ON LTB)

Evidence:

The following evidence was given at the hearing. There was an agreement between the parties that the Tenants would rent the unit from the Landlord. The Tenants did pay rent for the right to occupy the rental unit commencing June 1, 2012. On December 1, 2012 there was a fire in the rental unit that rendered the unit uninhabitable. The fire was caused by a cooking incident involving the Tenants. The damage was extensive and still has not been fixed. The lower unit was also damaged and had to be vacated by the tenants in that unit. It will be several months before the complex can be habitable.

The Tenants have been living in a Hotel and their insurance company is paying for the repairs as well as their current expenses related to housing.

Determinations:

1. The Residential Tenancies Act, 2006 did apply to this unit from June 1, 2012 until December 1, 2012. At that time the unit was deemed uninhabitable and the tenancy agreement became frustrated pursuant to the Frustrated Contracts Act and as permitted under section 19 of the Residential Tenancies Act, 2006 (RTA).

2. As a result of the lengthy period of time required to make repairs to the unit there is no foreseeable date that the Tenants would be permitted back into the rental unit. There is no requirement under the RTA for the Landlord to offer the Tenants first right of refusal when the unit does become habitable.

3. Based on the evidence provided and the fact this vacancy of the rental unit is not for a short period of time I have deemed the rental contract to be frustrated as of December 1, 2012.

It is ordered that:

1. The Act applies to the unit from June 1, 2012 until December 1, 2012.

March 4, 2013

SWL-32360-12 (Re), 2012 CanLII 27932 (ON LTB)

AF (the 'Landlord') applied for an order to terminate the tenancy and evict AW (the 'Tenant') because she, or another occupant of the rental unit wilfully or negligently caused undue damage to the premises. The Landlord has also applied for an order requiring the Tenant to compensate the Landlord for the damage.

This application was heard in Waterloo on March 14, 2012. Only the Landlord and his representative, PS, attended the hearing. As of 11:03 a.m., the Tenant was not present or represented at the hearing although properly served with notice of this hearing.

Determinations and Reasons:

1. The Tenant moved into the rental unit, which is one of fourteen townhouses in the residential complex, in February of 2010.

2. Recently, the Landlord came to believe that as many as ten people were occupying the rental unit, in violation of the tenancy agreement and municipal by-laws. An N5 termination notice was served by the Landlord on February 17, 2012.

3. Two days later, a fire broke out in the rental unit. A report prepared for insurance purposes, and entered into evidence, concluded that the fire was started by children playing with matches in a bedroom closet.

4. The fire rendered the rental unit uninhabitable. The Landlord will need to repair extensive fire and water damage. However, the Tenant has left furniture and cluttered piles of other personal possessions in the rental unit, which are obstructing repair efforts.

5. While the Landlord’s insurer will cover the repair costs, the Landlord has paid a $1,000.00 deductible on the damage claim.

6. I am satisfied that an occupant permitted into the rental unit by the Tenant has negligently caused undue damage, for which the Landlord has incurred costs of $1,000.00.

7. There are no circumstances present to deny termination of the tenancy. However, the termination will be delayed to allow the Tenant to remove her personal possessions.

It is ordered that:

1. The tenancy between the Landlord and the Tenant is terminated, as of March 23, 2012. The Tenant must move out of the rental unit on or before March 23, 2012.

2. The Tenant shall on or before March 23, 2012 remove all her belongings from the rental unit. If the Tenant fails to remove her belongings from the rental unit as set out in this paragraph, the Landlord may dispose of the Tenant’s belongings.

3. The Tenant shall pay to the Landlord $1,000.00, which represents the reasonable costs of repairing the damage.

4. The Tenant shall also pay to the Landlord $170.00 for the cost of filing the application.

5. If the Tenant does not pay the Landlord the full amount owing on or before March 21, 2012, she will start to owe interest. This will be simple interest calculated from March 22, 2012 at 3.00% annually on the balance outstanding.

6. If the unit is not vacated on or before March 23, 2012, then starting March 24, 2012, the Landlord may file this order with the Court Enforcement Office (Sheriff) so that the eviction may be enforced.

7. Upon receipt of this order, the Court Enforcement Office (Sheriff) is directed to give vacant possession of the unit to the Landlord on or after March 24, 2012. The Sheriff is requested to expedite the enforcement of this order.

SWT-34622-12 (Re), 2012 CanLII 45068 (ON LTB)

Order under Sections 30, 31 and 135 Residential Tenancies Act, 2006 File Number: SWT-34622-12

5. On March 6, 2012, the residential complex was destroyed by fire and became uninhabitable, which made the terms of the tenancy agreement impossible to perform. Pursuant to section 19 of the Act, the doctrine of frustration of contract and the Frustrated Contracts Act apply. As a result, the Tenant is entitled to recover, from the Landlord, the sums he paid in pursuance of the tenancy agreement, specifically the rent deposit of $750.00 and pro-rated rent totalling $206.88 for the eight-day period from March 7, 2012 to March 14, 2012.

2. The tenancy between the Landlord and the Tenant was terminated as of March 6, 2012, as a result of the tenancy agreement being frustrated by fire.