Canada: Third Party Notices Must Be Filed Fast: BC Court Pronounces That Expediency Does Not Trump Notices

Fault in construction claims is rarely black or white.  Claims usually begin with multiple defendants and, as the litigation progresses, the existing parties often discover that additional potentially at-fault entities should be added.

In British Columbia, the proper way to add a party is by the issuance of a Third Party Notice ("TPN").  Prior to the coming into force of the 2010 Supreme Court Civil Rules (or, as they are commonly referred to, the "New Rules"), a party could issue a TPN without leave, at any time before a Notice of Trial was delivered or, if a Notice of Trial had been delivered, at least 120 days before the trial date.  It would not have been unusual for an action to be active for a year or more before a party filed a Notice of Trial, so this protracted period would have provided more than adequate time to consider whether a TPN was warranted. 

Under the New Rules, however, a party must act quickly if it wants to avoid the expense of seeking leave to file a TPN.  Rule 3-5(4) of the New Rules provides that a party has only 42 days after being served with a Notice of Civil Claim or Counterclaim to file a TPN.  Practically speaking, this creates a problem, as the facts and circumstances relating to the underlying claim often do not become available to defence counsel until after this 42-day window has expired.

It is not surprising, therefore, that the court has had to address the issue of parties attempting to circumvent the problem by applying alternative methods in order to try to avoid seeking and obtaining leave to issue a TPN. 

In the case of Faulkner v. The City of Duncan, 2015 BCSC 825 ("Faulkner"), a construction case, the plaintiff sued multiple parties for damages.  The defendants issued TPNs against various contractors and engineering consultants, seeking contribution or indemnity, but well past the 42-day deadline.  Rather than seek leave of the court to issue the late TPNs, the defendants sought an order at an informal Case Planning Conference ("CPC"), which was granted.

One of the third parties applied to have the TPNs set aside, referring the court to the requirement of the New Rules that potential third parties had to be given notice of an intention to seek leave to file a TPN, as well as the opportunity to respond.  The third party also emphasized that the right to notice and the opportunity to be heard were important, and should not have been "swept aside" in the name of expediency. 

The defendants, on the other hand, took the position that the lack of leave was simply a technical irregularity that could be cured, and that it would be inefficient and expensive to go through the process of a court application when surely leave to issue TPNs would ultimately be granted.

The court held that a Case Planning Order could not properly override the requirement for seeking leave and giving proper notice, and that Case Planning judges did not have the authority to do away with those requirements.  In that regard, Justice Thompson emphasized:

The right to notice and the right to be heard are thoroughly fundamental and in my view justify the conclusion in this case that the failure to observe those rights results in a nullity.

Though Justice Thompson was urged to invoke a cure for the nullity, he refused to do so, stating that to do so would "result in the abrogation of the third parties' right to be heard on the question of leave".

The Faulkner decision is a reminder to insurers and counsel that, in British Columbia at least, there is no longer the luxury of time when it comes to filing a TPN.  Upon receipt of a Notice of Civil Claim, it is important to try to identify all potentially at-fault parties, and take the necessary steps to file TPNs within the 42-day window.  This imperative would require that defence counsel be assigned, and be provided with all available information and materials relating to the claim, as soon as possible.  If the deadline has expired, counsel should start drafting an application rather than simply hope that a technical proceeding like a CPC can be utilized to quickly fix the problem. 

Despite the tight deadline under the New Rules, however, counsel should be careful not to use a 'scatter-gun' approach to issuing TPNs: there ought to be a solid factual basis for commencing third party proceedings.

When a party wants to claim contribution or indemnity against existing parties, a CPC would be the proper venue to seek such an order, as parties can rely on their allegations in their existing Responses, rather than having to issue TPNs.  This type of order would save costs and time for all parties involved, and is almost always obtained by way of consent of the parties.

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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