Subrogated claim by the insurer of the owner of a commercial building that was damaged by a fire, allegedly intentionally set by a friend of an officer and shareholder of a company that was a tenant in the building

Insurance law – Subrogation – Right of insurer to subrogation – Property insurance – Landlord and tenant – Intentional torts – Conspiracy – Directors and officers – Doctrine of corporate identification

Austeville Properties Ltd. v. Josan, [2016] B.C.J. No. 2230, 2016 BCSC 1963, British Columbia Supreme Court, October 26, 2016, T.W. Bowden J.

The plaintiff owned a nine‑storey commercial building that was damaged by fire. The plaintiff leased space in the building to Nandha Enterprises Ltd., a company that owned a Taco Del Mar franchise. Nandha Enterprises Ltd. had two principals, Mr. and Mrs. Nandha, who were both directors and officers and each held 50% of the company’s common shares.

On February 13, 2008, there was an explosion and fire at the Taco Del Mar and the building was extensively damaged. Mrs. Nandha committed suicide on February 15, 2008.

The plaintiff alleged Kamaljeet Josan intentionally set the fire after being asked to do so by Mrs. Nandha. At trial, Mr. Josan testified that it was Mrs. Nandha’s idea to set the fire because she wanted to walk away from Nandha Enterprises Ltd.’s lease in the building. She told Mr. Josan that the restaurant was too much for her to deal with and was suffering financial losses.

The plaintiff alleged Mr. Josan and Mrs. Nandha were liable for the fire based on the tort of conspiracy and the actions of Mrs. Nandha could be attributed to Nandha Enterprises Ltd. under the doctrine of corporate identification.

The Court found Mrs. Nandha was involved in a conspiracy with Mr. Josan to cause the fire; however, there was no evidence Mr. Nandha was involved in the conspiracy. In R. v. Canadian Dredge & Dock Co., [1985] 1 S.C.R. 662, the Supreme Court of Canada found the doctrine of corporate identification only operates where it is demonstrated that the action taken by the directing mind of the corporation was within the field of operation assigned to her, was not totally in fraud of the corporation, and was by design or result partly for the benefit of the company. The doctrine of corporate identification ceases to exist when the acts are directed to the destruction of the company. Mrs. Nandha’s acts were directed at destroying the restaurant and the doctrine of corporate identification ceased to operate.

In the result, Mr. Josan and Mrs. Nandha’s estate were found liable and the claims against Nandha Enterprises Ltd. and Mr. Nandha were dismissed.

This case was digested by Aaron D. Atkinson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at aatkinson@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.

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