Canada: Apportioning Liability: Third Party Claims vs. Notices To Co-Defendants

Last Updated: August 28 2014
Article by Catrina Webster

When a defendant is sued, there is often another person who may be partially or wholly responsible for the loss of the plaintiff. A plaintiff may choose to sue one party even though more than one party is potentially liable. This is made possible by the common law which places responsibility for the entire loss on each person individually, and is even more likely to happen if one defendant is both wealthy and clearly liable.

The legislation in Alberta has provided some relief to defendants permitting both third party claims and claims against co-defendants. Despite having similar goals, these two statutory mechanisms are fundamentally different in both substance and application.

Third Party Claims

The Alberta Rules of Court broadened the scope of third party claims under rule 3.44. The former rule was limited to claims of indemnity or contribution. This option is still available to a defendant under rule 3.44(a) which allows a defendant to file a third party claim where the third party is or could be liable to the defendant for all or part of the plaintiff's claim. For example, a driver said to have negligently caused an injury to a plaintiff may pursue a third party claim against a doctor if they believe the doctor exacerbated the initial injury through negligent treatment. This increases efficiency because it reduces multiplicity of proceedings.

The changes under 3.44(b) permit a defendant to file an independent claim against a third party, so long as the claim relates to transactions or occurrences involved in the action between the plaintiff and the defendant. An independent third party claim arises when the third party breaches a duty owed to the defendant, which causes the defendant to suffer losses that are factually related to the losses suffered by the plaintiff.

Finally, rule 3.44(c) enables a defendant to file a third party claim where the third party should be bound by a decision between the plaintiff and the defendant. While this has not yet been extensively explored in the jurisprudence, the court noted in O'Connor Associates Environmental Inc. v. MEC OP LLC, 2014 ABCA 140 (O'Connor) that 3.44(c) is "flexible" and that, at this early stage, it should not be "undermined by rigid rules about when it can or cannot be used."

Recently, in O'Connor, the Alberta Court of Appeal identified a baseline requirement for the application of rule 3.44. It was determined that "at a minimum, the third party notice must disclose a legally recognized claim by either the plaintiff or the defendant against the third party."

In addition, the Court identified at least two situations where the use of third party claims would be inappropriate.

1. A third party claim cannot be used, in substance, as a defence. If a defendant believes that the plaintiff's damage was caused by the actions of a third party and not by the defendant, then a defendant should plead that evidence as a defence. It is not necessary and also inappropriate to attempt to bring a third party claim.

2. It is inappropriate for a defendant to bring a third party claim against a party where the plaintiff is legally responsible for the conduct alleged against the third party. If the proposed third parties were agents of the plaintiff, and the plaintiff must bear the responsibility of their actions, then no duty is owed to the defendant and the use of a third party claim would be inappropriate.

Claims against Co-Defendants

When pursuing a third party claim it is essential to consider whether a claim against a co-defendant is better suited. If a defendant wishes to seek contribution or indemnity from another defendant in the same proceeding, the defendant must issue a notice to co-defendant. This is not a mechanism to add a party to litigation, but merely to allow a defendant to recover from the other defendants the amounts reflecting their portion of liability.

According to rule 3.43 in the Alberta Rules of Court, in order to make a claim against a co-defendant the defendant must be seeking contribution or indemnity, or both, against a co-defendant under the Tort-Feasors Act or the Contributory Negligence Act.

A claim against a co-defendant is a simple written notice and the receiving co-defendant need not file a pleading in response. Although the procedure is very different, the effect is much the same as a third party notice, as it allows a defendant to apportion liability between their co-defendants.

While both third party claims and claims against co-defendants allow for the apportionment of liability between other parties, they are meant for very different circumstances. A third party claim can be served where the third party is or could be liable to the defendant for all or part of the plaintiff's claim. A defendant can also file a third party claim for separate relief related to transactions or occurrences related to the action between the plaintiff and defendant, or where that third party should be bound by a decision between the plaintiff and defendant. A claim against a co-defendant on the other hand, allows a defendant to seek contribution and indemnity from another defendant in the same proceeding, so long as the claim was brought under the Tort-Feasors Act or the Contributory Negligence Act.

Limitation Period

The Tort-Feasors Act currently does not state when a claim for contribution arises. This has resulted in uncertainty in determining when the limitation period begins to run. The leading case in the area is Howalta Electrical Services Inc. v. CDI Career Development Institutes Ltd., 2011 ABCA 234 (Howalta). The court held that the defendant tort-feasor's claim for contribution is barred if the plaintiff's claim against the other tort-feasor is barred. For these cases the limitation period runs from the date the plaintiff knew or ought to have known of their claim against the other tort-feasor.

This creates the issue of a late suing plaintiff. A defendant would have very little time to file a third party claim if the plaintiff didn't file their statement of claim until just before the end of the limitation period. This issue has been left unresolved and the Alberta Court of Appeal has left the issue to be corrected by the legislature. While Howalta is the leading case in the area, the issue is also discussed in Dean v. Kociniak, 2001 ABQB 412 (Dean). The court commented that the defendant would suffer injury by having to pay more than their share to the plaintiff if a third party does not contribute for the loss it caused to the plaintiff. Due to this potential injury to the defendant, the court decided the two year limitation period actually runs from when the defendant tort-feasor knew or ought to have known of the contribution claim against the other tort-feasor. While the Dean case has not been expressly overturned by the court of appeal, it would be best to follow the Howalta case to ensure the limitation period has not expired.

Third party claims are a great tool for defendants and they are still evolving as the legislature broadens their utility and case law reigns them in. It remains to be seen whether more clarity will be given to the issues surrounding third party claims and their limitation periods.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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