In Williams-Sonoma Inc. v. Oxford Properties Group Inc., Williams-Sonoma was a tenant at Yorkdale Shopping Centre when the mall was undergoing renovations. The Landlord, Oxford Properties Group Inc., hired EllisDon Corporation ("EllisDon"), an independent contractor, to perform the construction work. During the course of their work, a vandal opened a fi re hose in a vacant area that was being used by EllisDon and, as a result, the Tenant's premises suffered extensive water damage of approximately $7 million. Williams-Sonoma sued EllisDon for breach of common-law and statutory duty owed to the Tenant by failing to properly secure the area where the fire hose was located. EllisDon brought a motion for summary judgment arguing that in the Lease the Tenant had waived its rights to claim against the contractor. The motion judge granted summary judgment and dismissed the Tenant's claims, holding that the benefit of the exculpatory clause in the Lease should extend to the contractor.

The Lease required the Tenant to maintain insurance coverage for water damage. The Lease also contained an exclusionary clause, whereby the Tenant released the Landlord and waived all claims against the Landlord and "those for whom the [Landlord] is in law responsible" with respect to occurrences insured against or required to be insured against by the Tenant, whether any such claims arise as a result of the negligence or otherwise of the other or those for whom it is in law responsible.

The motions judge focused on the doctrine of privity and interpretation of the phrase "in law responsible" and applied the two-part test established in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., to determine whether the doctrine should extend to a third party:

1. Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision; and

2. Are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general or the provision in particular, as determined by reference to the intentions of the parties.

The motions judge concluded that the Landlord and Tenant did intend to extend the exclusionary clause to those parties involved in the mall renovation, and since EllisDon was performing the very activities contemplated in the Lease, both prongs of the Fraser River test were satisfied.

The Court of Appeal agreed with the motions judge, and further analyzed the term "in law responsible". If not for the exculpatory clause, the Landlord would have been responsible for the damage caused by the contractor and liable under the indemnity clause. The Court concluded that the Landlord had made itself "in law responsible" for EllisDon as its contractor and as a result, EllisDon was protected by the Lease.

This case demonstrates that the doctrine of privity may extend beyond the scope of the parties to a Lease and that a third party, who is not a party to the Lease, may be exculpated from liability by an exclusionary clause. This case appears to be consistent with the lower court decision in Harlon Canada Inc. v. Lang Investment Corporation, where the Court held that a claim against the Landlord's independent contractor was barred by the Lease. The decisions in both Harlon Canada and Williams-Sonoma imply that a third party contractor is a person for whom a landlord is in law responsible, which is not correct in the author's opinion.

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