BC Supreme Court determines whether a third-party claim can be commenced by way of a separate notice of civil claim

November 15, 2022 | Karen L. Weslowski, Caitlin VanDuzer, Michelle Eng

Introduction

In Prime Time (Abby Lane) Inc. v. DGBK Architects, 2022 BCSC 1799 (“Prime Time”), the BC Supreme Court answered the long-standing question of whether it is appropriate to commence a third-party claim by way of a separate notice of civil claim. The court ultimately decided that third-party claims can indeed be brought by way of a separate notice of civil claim.

Background facts

This matter involved three actions, with the main action concerning alleged breaches of contract and negligence by multiple consultants in connection with the construction of a building in Surrey. Eckford Tyacke + Associates and Eckford & Associates Landscape Architecture Inc. (“Eckford”) and DGBK Architects, Greg Dowling Architect Inc., Sebastian Butler Architect Inc., Ralf Janus Architect Incorporated, Robert Lange Architect Inc., and Sebastian Butler ( collectively, “DGBK”) were two of the defendants in the main action. They filed separate notices of civil claim seeking contribution and indemnity with respect to the main action, instead of first seeking leave from the court to file a third-party notice in the main action. Eckford and DGBK did this in order to avoid issues with respect to the limitation period.

Nemetz (S/A) & Associates Ltd. (“Nemetz”), a defendant in all three actions, filed three applications seeking to have the two contribution and indemnity claims and main action consolidated into one action by compelling Eckford and DGBK to file third-party notices in the main action, raising the issue of whether a defendant to an action may bring a contribution and indemnity claim by way of a parallel notice of civil claim, rather than by first filing, or seeking leave to file, a third-party notice in the underlying action.

Nemetz argued that Eckford’s and DGBK’s actions were contrary to Rule 21-9(1)(b) of the Supreme Court Civil Rules (the “Rules”). Specifically, Nemetz argued that Rule 21-9(1)(b) requires a defendant who is seeking contribution and indemnity to file a third-party notice, or seek leave to do so, and that it does not allow a defendant to claim contribution and indemnity simply by way of a separate notice of civil claim. Accordingly, Nemetz sought to have the court consolidate the two contribution and indemnity claims and the main action into one action, and compel Eckford and DGBK to file third-party notices in the main action.

The BC Supreme Court’s decision

The court disagreed with Nemetz’s submissions, referring to Sohal v. Lezama, 2021 BCCA 40 (“Sohal”) where the BC court of Appeal held that a contribution and indemnity claim can be brought in multiple ways, including by way of a separate action:

The purpose of the claim for contribution is to remedy the defendant’s loss in paying too much of the plaintiff’s judgment as a result of the act or omission of the co-defendant or other third-party in failing to pay its proper share, thereby being unjustly enriched. The act or omission on which the claim for contribution is based thus remains that failure, which is something quite different from the act or omission giving rise to the tort claim. That is why tortfeasors may bring their claims for contribution independently of the tort claim, in a separate action, and are not obliged to attach them to the tort action by way of third-party proceedings.

Claims for contribution and indemnity can be brought in more than one way. Of relevance to this case, they can be brought by a defendant in an existing action by way of third party notice (as in the Scott Management case). Alternatively, that same defendant could bring the claim as a plaintiff in a separate and independent action… [emphasis added].

Although Nemetz argued that the above comments from Sohal were made in obiter (i.e., they are not binding), the court disagreed, in part because the above comments had formed part of the BC Court of Appeal’s reasoning process in Sohal. The court further provided that, even if the above comments were obiter, they were persuasive and the court would nevertheless follow them.

Additionally, the court held that a contribution and indemnity claim is a substantive cause of action that flows from section 4(2) of the Negligence Act, RSBC 1996, c 333, and noted that it must be commenced within two years from the date the claim is discovered pursuant to sections 6(1) and 22(2) of the Limitation Act, SBC 2012, c 13. The court added that, on the other hand, the Rules are generally procedural in nature, and as such, they cannot restrict one’s ability to exercise a substantive cause of action. Accordingly, the court disagreed with Nemetz’s interpretation of Rule 21-9(1)(b), concluding that interpreting Rule 21-9(1)(b) to mean that a notice of civil claim cannot be brought for a contribution and indemnification claim would be to improperly restrict the ability to exercise a substantive cause of action.

In further interpreting Rule 21-9(1)(b), the court also applied the modern principle of interpretation, which provides that the words of an enactment must be read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.” In light of this, the court held that Rule 21-9(1)(b) “mandates the procedural course that a defendant in an action must take if it claims contribution and indemnity in that action: it must do so by third party notice,” but that this rule “does not expressly restrict a person from commencing a notice of civil claim for contribution and indemnity.” The court then noted that this makes sense practically as a defendant seeking to avoid the expiration of a limitation period should be able to do so by filing a notice of civil claim, absent clear statutory language to the contrary.

Finally, the court held that it had no discretion to authorize third-party notice filings after the relevant limitation period had expired, as was the case here. The court held that it also could not consolidate the proceedings by exercising its inherent jurisdiction as the court’s inherent jurisdiction is “circumscribed by legislative intent, and should not be exercised in a way which would undermine a limitation period or legislation at issue,” which would have occurred here if the court consolidated the proceedings and compelled Eckford and DGBK to file third-party notices.

Accordingly, the court dismissed Nemetz’s applications, rejecting the proposition that a defendant to an action could not file a separate notice of civil claim to commence a contribution and indemnity claim unless and until they file or seek leave to file a third-party notice in the action.

Takeaway

The court’s decision in Prime Time confirms that a defendant in an action may elect to commence a third party claim seeking contribution in respect of the action by filing a separate notice of civil claim as a plaintiff, rather than seeking leave of the court to file a third-party notice in the action.

Should you have any questions, please feel free to reach out to a member of Miller Thomson’s Insurance Defence group.

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