Halifax Insurance Nationale-Nederlanden North America Corporation v. Snair

Halifax Insurance Nationale-Nederlanden North America Corporation v. Snair Court Court of Appeal Date 1994-05-26 Citation 1994 NSCA 105 Docket SCA 103487 Judge/Registrar/Adjudicator Freeman, Gerald B. (Honourable Justice) (CA); Hallett, J. Doane (Honourable Justice) (CA); Matthews, Kenneth M., (Honourable Justice) Document Type Decision Decision Content S.C.A. No. 103487 NOVA SCOTIA COURT OF APPEAL Cite as: Halifax Insurance Nationale-Nederlanden North America Corporation v. Snair , 1994 NSCA 105 Hallett, Matthews and Freeman, JJ.A. BETWEEN: HALIFAX INSURANCE NATIONALE- ) NEDERLANDEN NORTH AMERICA ) CORPORATION, a body corporate ) Cathy L. Dalziel ) for the Appellant ) Appellant ) ) - and - ) ) Gordon Proudfoot ) for the respondent Snair ) ) Malcolm MacLeod ) for the respondent Snow ) ) D.A. Kerr, Q.C. ) for the plaintiffs Shelley ) Anne Conrad et al JAMES SNAIR and DONALD SNOW ) ) Respondent ) Appeal Heard: ) May 18, 1994 ) ) ) Judgment Delivered: ) May 26, 1994 THE COURT: Leave to appeal granted, the appeal allowed and the order set aside adding Halifax Insurance as a third party to the proceedings per reasons for judgment of Matthews, J.A. Hallett and Freeman, JJ.A. concurring. MATTHEWS, J.A.: The defendant Snair applied to a chambers judge of the Supreme Court who is the case manager of this proceeding, to add the Halifax Insurance Nationale-Nederlanden North America Insurance Company, as a party to the main action, pursuant to Civil Procedure Rule 17.02. He granted that application. Halifax Insurance now appeals that decision. Civil Procedure Rules 17.02 and 17.03(1) are pertinent: 17.02(1) A defendant may commence a third party proceeding against any person who is not a party to the main proceeding and who, (a) is or may be liable to the defendant for all or part of the plaintiff's claim; (b) is or may be liable to the defendant for an independent claim for damages or other relief arising out of, (i) a transaction or occurrence or a series of transactions or occurrences involved in the main proceeding, or (ii) a related transaction or occurrence or a series of transactions or occurrences; or (c) should be bound by the determination of an issue arising between the plaintiff and the defendant. 17.03(1) A third party proceeding shall be in form 17.03(A) and shall be issued. (a) within ten days after the time prescribed by Rule 11.02 for delivery of the statement of defence in the main proceeding or at any time before the defendant is in default; or (b) subsequently with leave, which the Court shall grant unless the plaintiff shall be prejudiced thereby. Subparagraph (b) of Civil Procedure Rule 17.03 is applicable here. It is undoubtedly that provision which led the chambers judge to comment: Other than that provision in the agreement, the test is whether or not it causes any prejudice to the plaintiff, and it is clear from the representations of everybody, that there is no prejudice to the plaintiff. In his short, 2 1/2 page decision, the chambers judge explained his reasons for adding the third party, in this fashion: I have tried to make sure that the record would show that this accident which gave rise to this matter occurred over five years ago, and that the matter is still not brought to trial, although the trial has been scheduled for June of this year. That for five years plus The Halifax Insurance had been providing defence through Mr. Wrathall, Q.C., and at no time during Mr. Wrathall's period as counsel was there any indication of any denial of coverage under the policy until October of last year, and at that time Mr. Wrathall advised me, as the judge who was assigned to manage the case, that there was a denial of coverage. This is an unusual situation because of the passage of time and the fact that The Halifax Insurance was in effect providing the defence as though there was coverage for such a long period of time, and I am satisfied now that an order joining them as a third party should be granted. No reasons, other than have been here set out, were given for the chambers judge's decision. The chambers judge did not find reasons for the five year delay nor did he assess any blame to the third party for it. Halifax Insurance has in the past and has promised to continue to fund the defence of Snair, through counsel chosen by Snair. The chambers judge did say that there would be two conditions to his order: ...that the trial of the issue of the third party's liability to the defendant will be severed from the trial of the issue of the defendant's liability to the plaintiffs, which has been set down for the month of June, 1994; and the joinder of the third party will not prejudice the plaintiff's right to have the issue of the defendant's liability tried before a jury. Those conditions have been agreed to by counsel for the applicant, and will be included. He also said: Although the matter is done this way and the trial at the time of the insurance issue will be severed, since I am managing the case I will be directing that Halifax Insurance will be present at each of the case management meetings from now on. We will take into account their denial of coverage, but I think they should be present and I so direct. The severed matter will be heard immediately after the determination of the jury in the main trial. Trial of the issues between the plaintiff and the defendants will be by judge and jury. That, of course, complicates the problem of what will be the unexplained presence and participation of counsel for the insurance company at time of trial. Contrary to the statement of the chambers judge that "there is no prejudice to the plaintiff", counsel for the plaintiff, in his factum, correctly perceived problems which would adversely affect his client flowing from the form of the decision: 6. The words "Halifax shall not participate in the trial" do not appear in the decision. Nevertheless, in his search for a procedure which would avoid prejudice to the Plaintiffs, His Lordship stated in two places on page 43 that the trial of the "insurance issue" would be "severed" from the principal trial. The only possible construction which those comments can bear is that His Lordship intended that the third party would be precluded from participating in the trial in any way. It is hard to imagine a procedure which would be more prejudicial to the Plaintiff than to have the third party examining and cross-examining witnesses at trial on an issue which was not directly connected to the issues between the Plaintiffs and the Defendants. Surely the jury would be baffled by the appearance of Counsel who was not identified with any of the parties, and who was asking questions which did not appear to have any relevance to the issues. 7. The only matter which causes the Plaintiff some concern is that the third-party issue will be tried (without a jury, presumably) "immediately after" the main trial. It is clear that Justice Nunn considers himself seized of the third-party issue which is appropriate since some evidence relating to the third-party issue will necessarily be adduced during the course of the trial, i.e., the general relationship between the Plaintiff Conrad and the Defendant Snair. While it is in the Plaintiffs' best interest to have the third-party issue disposed of as soon as possible, it is submitted that if this Honourable Court is inclined to direct any change to the procedural guidelines laid down by Justice Nunn, it might be prudent to consider a minor gap in time - say two or three weeks - between the conclusion of the main trial and the hearing of the third-party issue. Unfortunately, the chambers judge made no ruling as to whether "the third party would be precluded from participating in the trial in any way". With deference to plaintiff's counsel it does not follow that having been added as a party to the proceedings it would be so precluded. Indeed, persuasive argument is to the contrary: if the insurer is a party, then a party should not be denied participation in the trial. Before us, plaintiffs' counsel frankly stated that there was force to that position and he did not want representation by the Halifax Insurance at trial at all. Indeed, Civil Procedure Rule 17.04 speaks to the rights of the third party who delivers a defence in the main proceeding: 17.04(1) Where appropriate, the third party may defend against the plaintiff's claim against the defendant by delivering a statement of defence in the main proceeding in which the third party may raise any defence open to the defendant. Consequence of Defending Main Proceeding (2) A third party who delivers a statement of defence in the main proceeding, (a) has the same rights and obligations in the main proceeding, including those in respect of discovery, trial and appeal, as the defendant in the main proceeding; and (b) is bound by any order or determination made in the main proceeding between the plaintiff and the defendant who initiated the third party proceeding. For the reasons expressed by plaintiff's counsel, if the third party were added and permitted to participate in the main trial in any manner, the result would be prejudicial to the plaintiff. All counsel, other than counsel for the respondent Snair, agree. The third party rule does not exist simply to provide a method of adding insurers to an action. Its sweep is much broader than that. The rule is there for good reason. A multiplicity of proceedings is thereby prevented. The time to resolve all claims is shortened. In addition and importantly society as a whole and litigants in particular have a distinct interest in not having the administration of justice brought into disrepute by the possibility of inconsistent decisions as to the liability of the defendant in the claim by the plaintiff and in the claim of the defendant for indemnity against the insurer. Further, expenses of trial are reduced. Comment to this effect has been made in many cases and in The Law of Civil Procedure, Williston and Rolls, vol. 1, p. 426. The following clause in the policy providing, among other things, indemnity to Snair by Halifax Insurance, is relevant: Action Against Us You shall not bring suit against us until you have fully complied with all the terms of this policy, nor until the amount of your obligation to pay has been finally determined, either by judgment against you or by an agreement which has our consent. In respect to that clause, commonly called the "no action" clause, the chambers judge remarked: I am aware of the paragraph entitled Actions Against Us in the policy. I think in the circumstances of this case it would be inequitable to apply that paragraph, whatever its meaning, and I think it is appropriate in the circumstances to join the Halifax Insurance as a third party. The "no action" clause is in conflict to the philosophy of the third party rule. There is a clash between two principles. This has led some courts to consider whether the discretion of a chambers judge as enunciated in the rule may or may not be removed by the "no action" clause. The thrust of the argument in favour of the predominance of the rule is the assertion that an insurer in writing the insuring document cannot contract out of the rules of court. Thus some courts have held that a chambers judge must exercise her/his discretion with regard to all of the factors involved including that "no action" clause. That is not to say that the "no action" clause should not be given significant consideration in a decision whether or not to set aside a third party notice. It must also be considered for good reason. Firstly, it is contained in the contract between the parties. Freedom to contract, within certain bounds, is an important precept. Secondly, the relevant part of that contract is one of indemnity, that is to indemnify the insured should the insured be obligated to pay another party in respect to a claim covered by the insuring agreement. As we are concerned with the third party application on appeal from a chambers judge we are mindful of the fact in so ordering the chambers judge was exercising his discretion. The authorities presented to us have been studied. The difficulty with many is that they do not have a clause in the insuring contract such as in the instant case: BODILY INJURY OR PROPERTY DAMAGE We will pay all sums which you become legally liable to pay as compensatory damages because of bodily injury or property damage. The amount of insurance is the maximum amount we will pay, under one or more Sections of this coverage, for all compensatory damages in respect of one accident or occurrence. Because of that clause there can be no concern of duplication of proceedings in a third party action. Halifax Insurance will be bound by any judgment against Snair in the main action. Svetlichny et al v. Overend (1982), 131 D.L.R. (3d) 664 (B.C.C.A.) is a case with a similar clause and a "no action" clause. There the chambers judge set aside the third party notice. The Court of Appeal reversed that order. The essence of the judgment is that where issues are common to both proceedings (in Svetlichny-five) and there is a danger of inconsistent findings. the third party notice should not be set aside. The court in Svetlichny commented upon the conflict between the two principles earlier discussed. The court recognized that there was a discretion in the chambers judge whether the third party proceedings should be set aside. However, on analysis of all of the facts it did reverse the decision of the chambers judge. Taggart, J.A. explained at p. 665: ...I would think that the existence of a "no action" clause like the one in this case would be of major significance in deciding the matter. But, even though that contractual provision be of considerable significance, there will be cases like the present one where the issues in the third party proceedings are so extensively identified with the issues in the main action as to require the Chambers Judge to exercise his discretion by permitting the third party proceedings to continue. He continued at p. 666: ...What is of importance is that there will not be a duplication of proceedings in relation to issues common to the main action and to the third party proceedings with the possibility of differing results. He agreed with the reasons of Lambert, J.A. Justice Lambert also spoke of the "no action" clause at p. 672: I think that where an application is made under Rule 22, subrule (4) to set aside a third party notice, the Court is entitled to consider all the relevant matters, even where the insurer has inserted in his standard form contract a "no action" clause and the insured has bought the insurance on the basis of that contract. I think that the existence of the clause is one of the relevant matters. But it is not the only relevant matter. The other considerations that guide the exercise of the discretion under the subrule must still be considered and weighed. I propose to turn now to the facts of this case. Counsel for the insured has said that there are five issues that will be significant both in the trial between the plaintiffs and the defendants and in the proceedings for indemnity by the insured against the insurer. After setting out those issues he commented: If any of these five issues was decided differently in the proceedings for indemnity, than it was decided in the principal action, that different decision could result in an injustice to the insured. Counsel for the insurer does not dispute that those five issues are common to both proceedings. Nor does he indicate any willingness on the part of the insurer to restrict its defence to the issue of non-co-operation by the insured in breach of an obligation under the policy. The insurer may wish to dispute any or all of those five issues in any proceedings by the insured against the insurer. In my opinion the Chambers Judge did not apply the correct principle in deciding the scope of his discretion. It is therefore open to me to exercise the discretion that, in my opinion, was granted to the Chambers Judge under subrule 22(4). In my opinion the balance of justice falls in favour of permitting the third party proceedings to go ahead. The insurer has much more than a trivial interest in the third party proceedings. The issues are difficult and may require the assessment of a considerable body of evidence. Very little of that evidence will relate to issues in which the insurer has no interest. The insurer is not limiting his defence to issues that involve only or primarily the insurer and the insured. In my opinion this is a case where the third party notice should not be set aside, notwithstanding the "no action" clause. A similar result was achieved in Mufford v. Wind (1989), 41 C.C.L.I., (1989), I.L.R. #1-2471 (B.S.S.C.) and Mangion v. Manogen Project (1988), 96 A.R. 122, 33 C.C.L.I. 239 (Alta. Q.B.). See also Canada Permanent Trust Co. v. Rao et al (1981), 46 N.S.R. (2d) 336. (S.C.T.D.). See the comments of Hart, J.A. respecting third party procedure in Burry et al v. Centennial Properties Ltd et al (1980), 38 N.S.R. (2d) 450. Here the facts differ. The defendant Snair's statement of claim against Halifax Insurance does not mention any issues other than those between insured and insurer. In its factum Halifax Insurance alleges that at the relevant times the plaintiff was a resident in Snair's household: 4. Halifax's position is that it is not liable to indemnity Mr. Snair in respect of the plaintiff's action, as it is a claim for bodily injury brought by a person who, at the relevant time, resided in Mr. Snair's household, and this is therefore a claim beyond the insuring terms of the policy. ... 13. James Snair's third party claim is for a declaration that he is entitled to be indemnified by Halifax under the terms of an insurance policy. The only issue between James Snair and Halifax, then, is whether Halifax is required to provide indemnity or contribution to Mr. Snair. Halifax's position is that the insuring agreement in the policy expressly states that there is no indemnity in respect to the insured's liability for personal injury to persons residing in the insured's household. The indemnity issue between Halifax and James Snair will thus focus on this question. As between the plaintiff and James Snair in the main action, however, there is no issue at all concerning the plaintiff's residence or not, and no issue at all as to the existence or non-existence of Mr. Snair's insurance coverage. 14. ... The issue as to whether Mr. Snair has or has not insurance coverage has nothing at all to do with any transaction or occurrence arising in the plaintiff's action or related to it. ... 22. Herein, none of the evidence and issues relevant to the main action are relevant to the third party action. There is no threat of duplication or conflicting decisions on the same issues. That is, the only issue it asserts is one which is in respect to the policy conditions and it is not an issue common to both actions. Effect must be given to the "no action" clause. The words "where appropriate" in Civil Procedure Rule 17.04(1) do not affect the reasoning here set out, for in my opinion, on the facts of this case, if the third party action were to be permitted, then it would be appropriate to permit the third party to defend. Counsel for Halifax Insurance made it clear, if added, it will defend. SUMMARY: Counsel for Snair desires that the chambers judge's decision be interpreted to mean that counsel for Halifax Insurance be prevented from taking part in the main action. However, the chambers judge made no such ruling. To do so would result in an abrogation of a third parties rights under Civil Procedure Rule 17.04. To repeat, recognizing the difficulties by the presence of the third party in the main proceeding, counsel for the plaintiff asserted, for good reason, that he did not want Halifax Insurance to have counsel present in the main proceeding: that would only result in prejudice to his client. He rejected argument of Snair's counsel to the contrary. He agrees with counsel for Halifax Insurance there are no issues in common between the main action and that of insured and insurer. In my opinion it is clear there are no issues in common between those actions. Thus there is good reason for those actions to be tried separately, that is, severed. That, in effect is what the chambers judge did when he ordered severance, with the main action to precede the action for indemnity. Those desiring Halifax Insurance to be added as a third party, do so because they want to be able to demand payment immediately from Halifax Insurance should Snair be found liable and if his policy provides indemnity. They do not want further delay. The chambers judge attempted to accede to their wishes by ordering that the issues between Snair and Halifax Insurance be heard "immediately" after the main action and, in attempting to achieve that goal, ordered Halifax Insurance to be added as a third party. The difficulty with that solution is that under Rule 17.04, a third party who delivers a defence has "the same rights... as the defendant in the main proceeding". Counsel for Halifax Insurance has stated that, if added, her client will insist upon those rights. If that be so, then, as counsel for the plaintiff clearly and definitely stated: his client will be prejudiced. That prejudice will result even if the role of counsel for Halifax Insurance is somewhat restricted. The difficulty is exacerbated because the main action is before a jury. The jury is to decide the issues of liability, but after that determination, the assessment of damages is to be heard by the judge alone. Thus should the plaintiffs succeed in their claim against Snair, there will be an hiatus after the determination of liability before demand for payment may be made against him. It is agreed, the issue between Snair and Halifax Insurance is indeed narrow: it is based upon the clause in the insuring policy. That issue should be quickly determined. Undoubtedly the case manager will insist upon that. Having gone through this application before the chambers judge and this Court, Halifax Insurance is now on notice and without doubt delays will not be countenanced. Such procedure should allay the concerns of those who wish Halifax Insurance to be added as a third party; would not trample upon the rights of a third party as earlier expressed; would sever the issues which have no commonality; and would ensure that the plaintiff is not prejudiced by the presence of a third party in the main action. I would grant leave to appeal, allow the appeal and set aside the order adding Halifax Insurance as a third party to the proceedings. Costs, both here and before the chambers judge, will be paid by the respondent Snair to the Halifax Insurance in the amount of $1000.00 inclusive of disbursements. There will be no costs respecting the other parties. J.A. Concurred in: Hallett, J.A. Freeman, J.A. S.C.A.. No. 103487 NOVA SCOTIA COURT OF APPEAL BETWEEN: HALIFAX INSURANCE NATIONALE- NEDERLANDEN NORTH AMERICA ) Appellant ) - and - ) REASONS FOR ) JUDGMENT BY: JAMES SNAIR ) ) MATTHEWS, ) J.A. Respondent ) ) ) ) ) ) )