On April 19, 2001, the Supreme Court of Canada denied the Defendants’ application for leave to appeal in Orange Julius et al v. Surrey et al (1998), 53 B.C.L.R. (3d) 142 (B.C.S.C.); 2000 B.C.C.A. 0467 (B.C.C.A.); Leave to Appeal to Supreme Court of Canada dismissed, April 19, 2001, effectively bringing uniformity across Canada to the issue of whether there must be liability of a Third Party to the Plaintiff as a pre-condition of the right to contribution from the Third Party.
The Orange Julius case involved a fire at a shopping mall. The Landlord had protected itself from liability to tenants in its leases. The tenants commenced action against various Defendants for having caused the fire but did not sue the Landlord because of the covenants in the leases. The Defendants issued Third Party proceedings against the Landlord seeking contribution pursuant to Section 4 of the British Columbia Negligence Act. The Landlord applied to dismiss the Third Party proceedings on the basis that, as the leases precluded any liability of the Landlord to the tenants, the Defendants could not seek contribution from the Landlord by way of Third Party proceedings. The Landlord relied upon Giffels Associates Ltd. v. Eastern Construction Co. (1978), 84 D.L.R. (3d) 344 (S.C.C.), a decision of the Supreme Court of Canada interpreting the Ontario Negligence Act.
The Defendants argued that Giffels was distinguishable in that the Ontario Negligence Act expressly requires liability to the Plaintiff while the B.C. Negligence Act does not have a similar provision.
The trial Court judgment in Orange Julius rejected the Defendants’ argument, holding that the pre-condition enunciated in Giffels also applied to the B.C. Negligence Act. The trial Court drew a distinction between those situations where the Third Party never could have been liable to the Plaintiff (as in Orange Julius) and where, subsequent to the cause of action arising, the liability to the Plaintiff had been extinguished either as a result of the expiry of a limitation period or by reason of a settlement. The B.C. Court of Appeal agreed with the trial judgment that the pre-condition of liability set out in the Giffels decision applied to the B.C. Negligence Act and did not comment upon the issue as to how liability came to be extinguished between the Third Party and the Plaintiff.
Leave to appeal to the Supreme Court of Canada in the Orange Julius case was denied.
In the circumstances, the law in relation to Third Party proceedings for contribution under the various Negligence Acts in Canada is now consistent. That is, unless a Third Party is liable to the Plaintiff, there can be no Third Party claim for contribution by a Defendant. This appears to be the case regardless of when the liability to the Plaintiff was extinguished. It does not matter whether, as in Giffels, a contract precluded there ever being liability to the Plaintiff or, as in County of Parkland No. 31 v. Stetar et al,  2 W.W.R. 441 (S.C.C.), the liability to the Plaintiff was extinguished at some point after the cause of action arose.
Neither the trial Court nor the Court of Appeal in Orange Julius commented on the Supreme Court of Canada decision in County of Parkland. That case involved a motor vehicle collision between two vehicles entering an intersection in opposite directions. The Defendants were the driver of one of the vehicles and the County. At trial, the action against the County was dismissed and 100% of the liability was found against the Defendant driver. On appeal, it was held that the Defendant driver was 75% liable and the County 25%. As the Plaintiffs had not taken an appeal against the County, they were barred from proceeding against the County on the new apportionment. In those circumstances, the County was not liable to the Plaintiffs.
The issues before the Supreme Court of Canada were whether the Plaintiffs could recover 100% of their damages from the Defendant driver even though he was only 75% responsible for the accident and, if so, whether the Defendant driver could seek 25% contribution from the County. The Supreme Court of Canada applied the Contributory Negligence Act of Alberta in allowing the Plaintiff 100% recovery against the Defendant driver and further found, on the basis of the Tort-Feasors Act of Alberta (which also requires liability of the Third Party to the Plaintiff), that the Defendant driver had no enforceable claim for contribution against the County because the County could not be held liable to the Plaintiff.
While the B.C. decision in Tucker v. Asleson (1991), 62 B.C.L.R. (2d) 78 would suggest that a settlement against one Defendant does not preclude Third Party proceedings, arguably the trial decision in Tucker proceeded on a misunderstanding of the result in County of Parkland which was fundamental to the decision in Tucker. Given that misunderstanding, it is likely that the Tucker decision will be disregarded on that issue and the Supreme Court of Canada decision in County of Parkland will prevail.
These decisions are significant in that they can lead to inequities between parties.
The Courts have now decided that the Plaintiff’s unilateral acts or omissions can determine whether Defendants are entitled to contribution from Third Parties. For example, where a Plaintiff does not commence action for a personal injury until just before the expiry of the limitation period (in British Columbia – two years) and, for whatever reason, chooses not to sue all potential Defendants, by the time the Writ of Summons is served on the Defendants sued, the limitation period for the Plaintiff to commence action against the other Defendants may have already expired. Consistent with the County of Parkland case, as there is no liability by the other Defendants to the Plaintiff, it can be argued that there can be no right of contribution by the Defendants who were sued against those other parties. Further, as a result of the County of Parkland decision, it is questionable whether a Plaintiff settling with one Defendant and proceeding against the remainder would preclude Third Party proceedings against that settling Defendant. In theory, whether a Plaintiff misses a limitation or chooses to settle with one Defendant should not matter. In either case, the Plaintiff lost its right of action after the cause of action arose.
These examples illustrate the hardship to non-settling Defendants who have no control over who the Plaintiff sues or with whom the Plaintiff chooses to settle. Further, these cases could result in a windfall for the Plaintiff who is able to recover 100% of its loss against the Defendants sued.
In our respectful view, the recent decision of the Ontario Supreme Court in P.D.C. 3 Limited Partnership v. Bergman and Hammond Architects  O.J. No. 2604 (Ont. S.C.) presents an equitable solution to the apparent inequitable results flowing from the Giffels and County of Parkland decisions. In P.D.C., the Plaintiff commenced action for damages arising out a defective roof. The Defendants named were the architects, engineer, general contractor and maintenance company responsible for the roof. The contract between the architects and the Plaintiff limited any claim related to the architects’ work to a maximum of $250,000.00. At issue was whether the Plaintiff, who had accepted the contractual limitation, was prevented from recovering from the other tortfeasors the damages in excess of $250,000.00 caused or contributed to by the fault or neglect of the architects.
The Ontario Supreme Court held that as a result of the Plaintiff contractually limiting the liability of the architect, it had waived its right to claim damages which could be attributable to the architects in excess of $250,000.00. The Court held that the Plaintiff could not “collaterally claim against the other tortfeasors’ damages which it voluntarily agreed to limit”. As a result, to the extent that the architects caused or contributed to damages in excess of $250,000.00, the Plaintiff was found to be precluded from recovering. The Ontario Court of Appeal endorsed the trial judgment as dealing “succinctly and thoroughly with the legal issues and arrived at findings of law which determined clear answers to the questions” but set the judgment aside on the basis that it was inappropriate to determine those issues by way of summary application. It remains to be seen whether the result in the case will be the same when it is heard in the normal course. As matters currently stand, it is the only decision which fairly addresses the inequitable windfall which can flow to a Plaintiff as a result of the Giffels and County of Parkland decisions.
In view of the P.D.C. decision, the Defendants in Orange Julius have plead that the tenants are limited in their right of recovery. However, it remains to be seen whether the British Columbia Courts will be persuaded by the reasoning of the Court in P.D.C..
Prepared by Director, William G. Neen (Retired)