In a recent decision, The Owners, Strata Plan EPS 677 v ASPAC Developments Ltd., the B.C. Supreme Court clarified the limits of third and even “fourth party” claims in the context of a multi-party construction dispute as well as the application of the principles of joint and several liability. 

Pointing fingers

The plaintiff, a strata corporation, sued multiple defendants over alleged deficiencies in the design, development and construction of a strata complex. One of the defendants, O Inc., filed a third party notice against C Ltd., seeking contribution and indemnity pursuant to British Columbia’s Negligence Act (the “Act”). C Ltd. then filed a third party notice against D Corp., also for contribution and indemnity under the Act. As a result, D. Corp. became a “fourth party.” In an effort to shield itself from potential liability, D Corp. applied to the Court for leave to file its own third party notice against O Inc., already a named defendant and third party.

D Corp. characterized the claims of both the plaintiff and C. Ltd. as vague, bald and unparticularized pleadings of fault. The Court agreed that the action was progressing very slowly and that D Corp. remained “in the dark as to its exposure.” D Corp. submitted that, given this uncertainty, it had no choice but to pursue the application as a means to preserve its cause of action against O Inc. before the limitation period for filing a third party notice expired.  O Inc. opposed the application.

Arguments on application

The question before the Court was whether D Corp.’s proposed third party notice against O Inc. disclosed a cause of action. D Corp. argued that it would be open to the trial judge to find it jointly and severally liable under the Act. Accordingly, D Corp. was at risk of being required to pay more than its proportionate share of damages. O Inc. argued that D. Corp.’s concerns were legally unfounded as D Corp. could never be required to pay more than its proportionate share as determined by the trial judge and therefore, could have no claim against O Inc. for contribution and indemnity.

The Court’s reasoning

The Court reviewed the applicable provisions of the Act and noted that, pursuant to section 4-2(a) of the Act, a claim may be commenced by a person or entity who suffered damage or loss against multiple defendants who are liable on a joint and several basis. This means that the plaintiff can pursue any of those defendants for the full amount awarded. When multiple defendants are at fault, section 4-2(b) provides that they can only seek contribution and indemnity to the extent of their relative degree of fault. A party from whom contribution or indemnity is sought is only severally liable. In short, “a third party is only severally liable to contribute to the joint and several liability of the defendant.”

Since D Corp. was not a defendant, it could not be held jointly and severally liable to the plaintiff. Moreover, since D Corp. could not be liable, it also could not seek contribution or indemnity from O Inc. As such, there was no legal basis for the Court to grant leave to D Corp. to file a third party notice against O Inc. D Corp. argued that leave should be granted to avoid a multiplicity of proceedings but the Court decided that allowing D. Corp to pursue a fifth-party proceeding in an effort to recover that which could not be recovered would increase the complexity of an already complex proceeding.

Takeaways

This ruling confirms that only those who are defendants—and thus potentially jointly and severally liable to the plaintiff—can seek contribution and indemnity from others. Third parties cannot issue third party notices to involve a “fourth party” if they themselves are not exposed to joint and several liability under the Act.