Faulkner v. Duncan (City)

2015 BCSC 1763 Faulkner v. Duncan (City)

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Faulkner v. Duncan (City), 2015 BCSC 1763 Date: 20150930 Docket: 12807 Registry: Duncan Between: Susan Leigh Faulkner doing business as "The Red Balloon Toy Shop" and the said Susan Leigh Faulkner Plaintiff And: The City of Duncan, Michael McKinlay and Chew Excavating Ltd. Defendants And: Rock Steady Contracting Ltd., C.N. Ryzuk & Associates Ltd. doing business as Ryzuk Geotechnical and AAE Structural Ltd. Third Parties Before: The Honourable Mr. Justice Johnston Reasons for Judgment (In Chambers) Applications by The City of Duncan and Chew Excavating Ltd. Application for leave to file and serve as Third Parties: Rock Steady Contracting Ltd., C.N. Ryzuk & Associates Ltd. doing business as Ryzuk Geotechnical, and AAE Structural Ltd. Counsel for the Plaintiff: R.B. McDaniel Counsel for the Defendant: Chew Excavating Ltd. M.R. Mark Counsel for the Defendant: The City of Duncan J.D. Martin Counsel for the Third Party: C.N. Ryzuk & Associates Ltd. doing business as Ryzuk Geotechnical S.H. Haakonson Counsel for the Third Party: Rock Steady Contracting Ltd. P.C. Dawson Counsel for the Third Party: AAE Structural Ltd. N.A. Mosky Counsel for the Defendants in Action S13073: Peace Hills General Insurance Company and Duncan Regis R.G. Boswall Place and Date of Hearing: Duncan, B.C. July 28, 2015 Place and Date of Judgment: Duncan,

B.C. September 30, 2015 [1] In these applications, the defendants to a civil action for damages seek leave to file and serve Third Party Notices against Rock Steady Contracting Ltd. ("Rock Steady"), C.N. Ryzuk & Associates Ltd., doing business as Ryzuk Geotechnical ("Ryzuk"), and AAE Structural Ltd. ("AAE"). [2] There is another action that will be heard at the same time as this one, in which the plaintiff sues her insurer Peace Hills General Insurance Company ("Peace Hills"), and in which Peace Hills makes similar applications. [3] The plaintiff's Notice of Civil Claim asserts that she owns a lot in downtown Duncan on which there was a building. The plaintiff ran a toy store in part of the building, and rented out other parts. [4] The plaintiff pleads that in January of 2009, an employee of the City of Duncan ("City") was operating a backhoe, clearing snow from the streets, when he negligently drove into her building and caused it sufficient damage that she and her tenants had to relocate. The plaintiff claims against the City damages that flow from that alleged negligence. [5] The plaintiff's woes did not end there. [6] She pleads that between June 1 and November 15, 2009, the City hired a contractor, Chew Excavating Ltd. ("Chew"), to do substantial road work on the street outside her already damaged building. She pleads that the contractor negligently caused further damage

to her building by the way it went about its work for the City, and that the negligence of the City and its agents and servants contributed to this damage. [7] The plaintiff's woes did not end there. [8] She pleads that the City has since July 1, 1997, leased a vacant lot behind her building that it turned into a green space or a park, which it watered using a sprinkler system. She pleads that the water either leaked from the system or otherwise escaped onto her lot and caused further damage to her building, perhaps before the City backhoe hit it, or after, I am not clear. She sues the City in negligence and nuisance for the water damage. [9] The plaintiff's woes did not end there. [10] In a May 8, 2015, amendment to her Notice of Civil Claim, the plaintiff pleads: 37. Between January of 2009 and August 2014 the Plaintiff, with the financial assistance of her insurer, Peace Hills General Insurance Company, the engineering advice of the Third Party, AAE Structural Ltd., and construction services provided by the Third Party, Rock Steady Contracting Ltd., undertook extensive repairs to the Building. The repairs included but are not limited to The pleading goes on to list matters that include bracing, lifting, excavating beneath for new foundations, lowering the building, removing hazardous materials and "such further particulars of repair work as may be provided at trial." [11]

The plaintiff then pleads that the repair work was ongoing in August 2014 when the City ordered her to demolish her building because it was unsafe, and in January 2015 the City knocked down the building and took it away. [12] The plaintiff sued the City and Chew Excavating in one action, and when Peace Hills declined to pay more, sued it in a second action. [13] The actions will be heard together. [14] In March 2014 a case management judge granted approval to the City and Chew Excavating to issue and serve third party notices against Rock Steady, Ryzuk and AAE at a case planning conference, and the defendants did so, which may explain the reference to at least Rock Steady and AAE as Third Parties in the portion of the amended pleading set out above. [15] When served with the Third Party Notices, Rock Steady, Ryzuk and AAE objected that they had no notice of an application to involve them in the action, and that there was no jurisdiction to grant the order as part of the case planning process. [16] The judge assigned to hear the trial agreed, and on application of Rock Steady, Ryzuk and AAE, set aside the third party notices, with leave to the City and Chew to apply on notice. [17] They have done so, leading to this application, brought pursuant to Rules 3-5, the relevant portions of which provide: Making a third party claim (1) A party against whom relief is sought in an action

may, if that party is not a plaintiff in the action, pursue a third party claim against any person if the party alleges that (a) the party is entitled to contribution or indemnity from the person in relation to any relief that is being sought against the party in the action, (b) the party is entitled to relief against the person and that relief relates to or is connected with the subject matter of the action, or (c) a question or issue between the party and the person (i) is substantially the same as a question or issue that relates to or is connected with (A) relief claimed in the action, or (B) the subject matter of the action, and (ii) should properly be determined in the action. When leave is required (4) A party may file a third party notice (a) at any time with leave of the court, or (b) without leave of the court, within 42 days after being served with the notice of civil claim or counterclaim in which the relief referred to in subrule (1) is claimed. Application for leave (6) Notice of an application for leave under subrule (4)(a) must be served on (a) the third party, and (b) all parties of record. Application of rules (11) Except to the extent that this rule otherwise provides, Rules 3-1 and 3-3 apply to a third party notice as if it were a notice of civil claim and to a response to third party notice as if it were a response to civil claim. [am. B.C. Reg. 119/2010,

Sch. A, s. 5 (b).] Powers of court (14) The court may impose terms on any third party procedure to limit or avoid any prejudice or unnecessary delay that might otherwise be suffered by a party as a result of that third party procedure. Third party issues (15) An issue between the party filing the third party notice and the third party may be tried at the time the court may direct. Relief (17) On an application under subrule (16), the court may grant any or all of the relief claimed in the third party notice. [18] The two proposed Third Party Notices are similar in content. They each assert as fact that the plaintiff contracted with Rock Steady to repair her property, and that Rock Steady in turn contracted with Ryzuk and AAE to provide geotechnical and structural engineering advice. Each alleges as fact that in June 2012 Rock Steady, on the advice of Ryzuk and AAE, did some work that resulted in subsidence of soil under an adjoining building, and an increase in the damages suffered by the plaintiff. [19] Each of the City and Chew then allege that "at all material times Rock Steady owed the plaintiff a duty to take reasonable care to ", and each then goes on to particularize the duties Rock Steady owed to the plaintiff, before alleging that Rock Steady breached the duties alleged. [20] Each proposed Third Party Notice does the same with respect to Ryzuk and AAE, alleging each

owed duties to the plaintiff, particularizing the duties, and alleging breach. [21] Each proposed Third Party Notice alleges as fact that each proposed third party, by breaching duties each owed to the plaintiff, contributed to the plaintiff's damage and loss. [22] Each proposed Third Party Notice seeks relief that includes: A declaration that the plaintiff's loss, if any, was caused in whole or, alternatively, in part by the fault of Rock Steady, AAE Structural and Ryzuk Geotechnical or any of them. A declaration that [City/Chew] is entitled to contribution or indemnity from Rock Steady, AAE Structural and Ryzuk Geotechnical or any of them pursuant to s. 4 of the Negligence Act, R.S.B.C. 1996, c. 333, to the degree to which they are or any of them is found by the court to have been at fault in respect of the plaintiff's claims, for any amount that may be found due from [City/Chew] to the plaintiff, and judgment for same. [23] The principles that apply to applications such as these were summarized by Abrioux J. in Steveston Seafood Auction Inc. v. Bahi, 2013 BCSC 1072 at para. 19, as follows: (a) The test on this application is the same as under Rule 9-5. The proposed third party must establish beyond doubt that the pleadings discloses no cause of action. The court is permitted to reject proposed claims only if the action is "bound to lose" or there is no bona fide triable

issue. Drummond v. Moore, 2012 BCSC 496 at para. 25. (b) In exercising its discretion as to whether leave ought to be granted, the court can consider factors such as prejudice to the parties, the expiration of a limitation period, the merits of the proposed claim, any delay in the proceedings and the timeliness of the application. Clayton Systems 2001 Ltd. v. Quizno's Canada Corporation, 2003 BCSC 1573 at para. 9. (c) The court is required to assume that all pleaded facts are true. Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 at 980. Dhillon v. Coape and Hockaday, 2004 BCSC 1208 at paras. 17-18. (d) An important consideration is whether it is "just and convenient" in all the circumstances of the case to grant leave to file the third party notice. Symes v. Knooihuizen, 1998 B.C.J. No. 611 at paras. 38-39. Clayton Systems 2001 Ltd. at para. 9. (e) A third party claim will not lie against another person with respect to an obligation belonging to the plaintiff which the defendant can raise directly against the plaintiff by way of defense. Adams v. Thompson et al. (1987), 15 B.C.L.R. (2d) 51 at para.

20. Laidar Holdings Ltd. v. Lindt & Sprungli (Canada) Inc., 2012 BCCA 22 at para.

1. See also: Tyson Creek Hydro Corp. v. Kerr Wood Leidal Associates, Ltd., 2013 BCSC 174, Kennedy v. 180 University Residential Limited Partnership, 2014 BCSC 28. The bulk of the argument on these applications centered around (a) and (e) above, where the issues spill over into the merits question raised in (b). [24] There is good reason for this: although there was some attempt by one or more of the third parties to argue prejudice, based on time that has elapsed since they provided the services now sought to be questioned, as well as the cost if they are forced to participate in these actions, the real issue is whether the third party claims are bound to lose because what the defendants allege against the third parties are defences that they can raise against the plaintiff, and, if they succeed, they will defeat or at least reduce damages they might otherwise have to pay to the plaintiff. [25] Each of the third parties point out that in the proposed Third Party Notices, neither defendant alleges that a third party owed a duty to either defendant. In that they are right: the proposed pleadings allege only that each proposed third party breached a duty they owed to the plaintiff. In that event the third parties argue that if they breached any duty they owed to the plaintiff that caused damage to the plaintiff, their acts will be attributable to the plaintiff, and the plaintiff

will be prevented from recovering any such damages from either defendant, citing Adams v. Thompson, Berwick, Pratt & Partners (1987), 15 B.C.L.R. (2d) 51 (B.C.C.A.) and Laidar Holdings Ltd. v. Lindt & Sprungli (Canada) Ltd., 2012 BCCA 22. [26] As in this case, in Adams the defendant sought to claim over against third parties - a lawyer and his law firm - on the basis of a duty owed by the third parties to the plaintiff, as their client. The general principle is stated at para. 12 of Adams: The authorities establish that where a plaintiff contracts with two separate parties, such as a contractor and an engineer, and later sues one of them, the one sued cannot claim contribution or indemnity from the other on the ground that the other failed to properly execute his duties, where the substance of the third party claim can be raised against the plaintiff by way of defence. [27] The difference between this case and Adams is that in Adams the plaintiff had contracted with the defendant engineers to subdivide land, and had retained the third party lawyers to advise her with respect to the project. In this case, the only connection between the defendants who are alleged to have damaged the plaintiff's building and the third parties she contracted to repair the damage is the building itself. [28] The court in Adams points out that what the authorities it considered had in common was

that the proposed third party acted as agent of the plaintiff, before arriving at the following proposition, relied on by the third parties here: It thus may be stated with confidence, in my view, that a third party claim will not lie against another person with respect to an obligation belonging to the plaintiff which the defendant can raise directly against the plaintiff by way of defence. Where the only negligence alleged against the third party is attributable to the plaintiff, there is no need for third party proceedings since the defendant has the full remedy against the plaintiff. On the other hand, where the pleadings and the alleged facts raise the possibility of a claim against the third party for which the plaintiff may not be responsible, the third party claim should be allowed to stand. [Emphasis added.] The first two sentences of this passage were referred to as the first branch of the Adams rule by Newbury J.A. in Laidar at para. 1, and the last sentence, without the emphasis, as the second branch, although she allowed that it could as readily be taken as an exception to the first. The emphasized passage refers to the decision in Quintette Coal Ltd. v. Bow Valley Resource Services Ltd., [1986] B.C.J. No. 2008 (B.C.S.C.), where the court had before it affidavit evidence supporting the assertions set out in a third party notice that was in issue. It was on the

basis of the evidence and the third party notice reflecting that evidence that McEachern C.J.S.C., as he then was, in Quintette was able to distinguish authorities that pre-dated Adams but were to the same effect by saying: ... it appears to me that what [the Defendant] relies upon is not [the third party] Kilborn's breach of its contract to [the plaintiff], if any, but rather its conduct as an actor in this particular construction neighbourhood when Kilborn knew there were other legal neighbours who might be injured by its lack of care, if any. [29] The defendants in this case make much the same argument. Their arguments fail to recognize, however, that their pleadings allege only a duty owed by the third party to the plaintiff, and leave no room to argue the existence of a separate and independent duty owed by any of the third parties to either defendant. The court in Quintette went on to state: In this case, however, the Defendant seeks contribution from [the third party] Kilborn for Kilborn's own alleged independent negligence and I am not satisfied that Kilborn's negligence must necessarily be imputed to the Plaintiff. [30] I note as well that the court in Quintette had recourse to evidence, and that the practice seems to have developed in the meantime so that questions such as these are considered on the basis of pleadings alone. In any event, no evidence capable of

supporting an independent duty was offered in either application before me. [31] This is a case very much like that described hypothetically by the judge in chambers who heard and decided the motion to strike a third party notice in Adams v. Thompson, Berwick, Pratt & Partners, [1986] B.C.J. No. 2417 (B.C.S.C.): But to me this is not a case of concurrent acts producing a single result whether this is an action in tort or in contract or both. Let us take a similar problem: A contracts with B to prepare lumber at A's mill to be picked up by B on the 13th February and in circumstances where A knows that B proposes to sell the lumber. Normally the journey from A's mill to B's lumber yard takes fifteen days. A fails to have the lumber ready for shipment until the 28th February. Because of an act of negligence of the carrier hired by B, the journey takes twenty days instead of fifteen. The prices of lumber per thousand board feet were on 1st March, two hundred dollars, on the 15th March, one hundred dollars, on the 20th March, seventy-five dollars. Although B, speaking without considering the legal implications, might say that his loss was one hundred and twenty-five dollars per thousand board feet, the loss in consequence of A's breach was one hundred dollars per thousand board feet and in consequence of the carrier's breach, was twenty-five dollars per thousand board feet. [32] If

the third parties breached a duty, such breach occurred after the breaches alleged against the City and Chew. [33] The defendants also argued that the plaintiff might not be held responsible, so as to reduce her damages, for any breach by the third parties she hired; that she might be shielded by showing that she acted reasonably in selecting the third parties. A similar argument succeeded in the Ontario decision 478649 Ontario Ltd. v. Corcoran (1994), 118 D.L.R. (4th) 682 (O.N.C.A.), but in Laidar, Newbury J.A. points out that she could find no case authority in support of such a proposition in this province (para. 37), and then that later decisions in Ontario have restricted the application of the reasoning in Corcoran. [34] The reasoning of the later Ontario decisions, accepted by the court in Laidar, is that if the claims the defendant wishes to bring against third parties are essentially based on a failure to act reasonably in mitigation of damages, that would be a defence to the plaintiff's claims, thereby reducing the damages the plaintiff might claim against the defendant. [35] On the other hand, third party process may be supportable if the third party is "implicated in the very events that gave rise to the loss" - language used by the Ontario Court of Appeal to distinguish Corcoran in its later decision in Davey Estate v. CIBC World Markets Inc., 2009 ONCA 763 at

para. 22. [36] After reviewing these authorities in some detail, Newbury J.A., in Laidar concludes at para. 46 that the proposed third (actually fourth in that case) party notice "does not disclose 'events giving rise to the initial loss', but simply alleges a failure to protect the interests of Lindt." [37] The decision also deals with the argument that a defendant may be at increased risk, or at risk of greater damages, where a plaintiff might seek to avoid reduction in damages caused by the acts of third parties retained by the plaintiff by arguing that reasonable care had been employed in the selection of the third parties. The court points out that this argument takes its validity where the plaintiff was under a pre-existing duty, which it attempted to discharge by retaining qualified advisors. In this case, there was no such pre-existing duty, either alleged in the third party notices, or at all, and these words from Laidar are apt: Lindt was not performing a pre-existing obligation or duty; its only responsibility in the circumstances was to act reasonably to protect itself. In the words of Adams, that was an obligation "belonging to" Lindt, which can be raised by the defendant by way of defence, making third party proceedings unnecessary. [38] The City and Chew argue that the damages they may have caused are indivisible from damages they say the third parties have

caused, and their presence in the action is necessary in order that they are not fixed with the portion of damage attributable to the third parties. In WorleyParsons Canada Ltd. v. David Nairn and Associates, 2013 BCCA 513, the Court of Appeal considered indivisible damages in the context of a third party notice, and upheld an order setting aside a third party notice because in its view the damages claimed against the defendant were distinct from damages that might be laid at the feet of the third party. [39] Here, the damages claimed against the City and Chew arose in 2009, when their consecutive actions are alleged to have caused loss. The third party notices allege acts or omissions in 2012 that are alleged to have caused, or added to, the loss. In my view, these alleged damages are distinct from the damages alleged to have arisen in 2009. [40] The applications are dismissed. "R.T.C. Johnston, J." The Honourable Mr. Justice Johnston