In Sun Life Assurance Company of Canada v. 482147 B.C. Ltd. Justice Butler considered an application to dismiss third party claims in a construction context on the basis that the claims were properly raised only as defences against the plaintiff. The successful application, argued by Alexander Holburn’s Construction Group Leader Chris Hirst, provides a basis for third parties to resist being forced to participate in protracted litigation.
The plaintiff, Sun Life Assurance Company of Canada (“Sun Life”) is the current owner of the buildings comprising the Westgate Shopping Centre in Maple Ridge, British Columbia. In the main action, Sun Life alleges that the defendants negligently designed and constructed the Shopping Centre. The numerous defendants include the developers, contractors, suppliers and consultants who were involved with the construction.
The Applicants, Morrison Hershfield Limited (“MH”) and Pierre Gallant, a Senior Principal of MH, were added as third parties by the defendants Norson Construction Ltd. (“Norson”), Timberline Construction Group (“Timberline”) and 482147 B.C. Ltd., formerly Westbank Projects Corp. (“Westbank”) (collectively the “Three Defendants”). Norson was the general contractor for the Save-On-Foods building, one of the larger units in the Shopping Centre. Timberline was the general contractor for the other buildings and Westbank was part of the developer group. Neither of the Applicants was a defendant in the action and neither was involved with the original construction of the Shopping Centre.
The Shopping Centre was constructed between 1997 and 1998. Sun Life purchased the Shopping Centre from the owner, Westgate Shopping Centre Ltd., in late November, 2000.
MH was hired by Sun Life to perform limited inspection of the roofs of the Shopping Centre just prior to the November 2000 purchase. Subsequently, significant problems with the Shopping Center’s wall cladding system were discovered, requiring millions of dollars in repair.
Sun Life commenced the proceedings against the Defendants for negligent construction and design, and failure to warn. The Three Defendants denied negligence, and alleged that Sun Life failed to protect itself by obtaining adequate pre-purchase inspections and failing to detect the defects. The Defendants then brought third party proceedings against MH, alleging that it failed to provide proper advice to Sun Life.
MH relied on the principle in Adams v. Thompson, Berwick, Pratt & Partners (1987), 15 B.C.L.R. (2d) 51 (C.A.) that 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 his full remedy against the plaintiff. The Courts in B.C. have applied this principle in two situations, first where the negligence alleged involves acts of the third party where the third party is acting as an agent of the plaintiff, and second where the third party claim is based on an allegation that the proposed third party should have advised or assisted the plaintiff to mitigate a loss.
The Court held that the allegations against MH fell into this second category. The fault alleged against MH in the third party claims was that MH should have warned Sun Life about the risks associated with the design and construction of the Shopping Centre. The Court found that this was essentially an allegation that Sun Life failed to protect itself, and noted that the same claims were made as defences against Sun Life directly. Justice Butler held:
To quote the language in those cases, this is an obligation “belonging to” Sun Life. Accordingly, it can be raised in defence by the Three Defendants. Indeed, it already has been raised in defence, and there is no need for a third party proceeding.
The Court concluded that the allegations against MH were properly raised as a mitigation defence, despite the fact that the alleged negligent advice was provided prior to the Plaintiff’s purchase of the Shopping Centre. The Court found that the obligation to protect itself is an obligation for which the Plaintiff must be responsible, and “the fact that the advice was rendered before the loss occurred does not change the nature of the plaintiff’s obligation”.
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