Executive Summary: Key Legal and Evidentiary Issues

• The cause of the explosion and fire at 399 Markham was admitted to be the negligence of certain defendants and third/fourth parties, excluding Enbridge Solutions Inc. and Enbridge Inc.

• Plaintiffs claimed substantial consequential economic losses, including high vacancy rates, inability to increase rents, and lost opportunities for additional revenue, all allegedly resulting from the explosion and fire.

• The credibility and sufficiency of the plaintiffs’ evidence, particularly regarding the connection between the explosion and long-term economic losses, were central issues.

• Disputes arose over whether damages should be assessed at the time repairs were completed or at the later date of the building’s sale, with legal principles on mitigation and crystallization of damages at play.

• The court scrutinized whether claimed losses, such as increased insurance premiums, management fees, and lost development opportunities, were causally connected to the explosion or were speculative and unsupported.

• Ultimately, the plaintiffs failed to prove most of their asserted losses, and the court found that insurance payments already received exceeded any proven damages.

Facts of the case

In Avedian et al. v. Enbridge Gas Distribution Inc. et al., the plaintiffs—three individuals acting through a holding company, 1815212 Ontario Inc. (“1815”)—purchased a 15-story apartment building at 399 Markham Road, Toronto, in August 2010. Their plan was to generate retirement income through rental operations, with further revenue expected from renovations, rent increases, and potentially constructing 17 new units. Shortly after acquisition, on September 14, 2010, an explosion and fire occurred in the building’s laundry room during installation of new gas equipment by one of the defendants. The incident caused significant damage to the laundry room, adjacent units, and some common areas. Repairs, paid for by the building’s insurer (Intact Insurance), took about ten months, with a temporary laundry room provided in the interim.

Litigation background and claims

The plaintiffs claimed that the explosion and fire resulted in long-term economic losses far exceeding the insurance payout. They alleged that the incident led to higher vacancy rates, inability to raise rents or charge for parking and storage, increased management and staffing costs, higher insurance premiums, and prevented the construction of additional rental units. They also claimed the building’s value was diminished by approximately $10 million at the time of its sale in 2015. The action was initially brought by 1815, but after the plaintiffs sold their shares in 2015, they received an assignment of the right to continue the action and collect any proceeds.

Policy terms and clauses at issue

While insurance policy terms were discussed, the main issue was whether losses claimed by the plaintiffs were covered or had already been compensated by insurance. The insurer, Intact, had paid $162,457.81 for business interruption, lost income, and other expenses. The court considered whether further losses were “uninsured” and thus recoverable in this action. The plaintiffs also argued for damages based on increased insurance premiums, but the court found that premium increases were due to higher replacement cost coverage, not the explosion itself.

Assessment of evidence and causation

The court found that the plaintiffs’ evidence, particularly from Mr. Avedian, was largely self-serving, unsupported by contemporaneous records, and contradicted by other witnesses and documents. The claim that the explosion caused persistent high vacancies, inability to raise rents, or prevented additional unit construction was not substantiated. The court noted that elevator modernization, which caused significant disruption, was planned before the explosion and was not a result of the incident. The plaintiffs failed to produce key evidence, such as elevator logbooks or tenant complaints, and did not call witnesses with direct knowledge, such as the building superintendent or elevator technicians.

Legal analysis and outcome

The court applied established principles requiring plaintiffs to prove, on a balance of probabilities, that claimed losses were causally connected to the defendants’ negligence and were reasonably foreseeable. The court determined that only immediate losses and a $100,000 diminution in value (as of April 12, 2011, shortly after repairs should have been completed) were attributable to the explosion. All other losses were found to be speculative, unsupported, or unrelated to the incident. The court also held that insurance payments already received by the plaintiffs exceeded any proven damages.

Ruling and overall outcome

Justice Schabas dismissed the plaintiffs’ action in its entirety. The court found that the proven damages ($156,631, including $100,000 diminution in value and $56,631 in economic losses) were fully offset by the $162,457.81 already paid by Intact Insurance. As a result, the plaintiffs were not entitled to any further damages. The successful parties were the defendants, and no additional monetary award was granted to the plaintiffs. If the parties could not agree on costs, the court invited them to arrange a case conference to address the issue.