THE FIRST CANADIAN GROUP LIMITED PLAINTIFF / DEFENDANT BY Counterclaim And: CITY OF ST. JOHN’S Defendant / PLAINTIFF BY COUNTERCLAIM And: ALLIED CONSTRUCTORS INC. INTENDED First Third Party (Discontinued) And: CH2M HILL CANADA LIMITED INTENDED Second Third Party And: NEWFOUNDLAND DESIGN v. ASSOCIATES LIMITED, 2022 NLSC 5

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : First Canadian Group Limited v. St. John’s (City) , 2022 NLSC 5 Date : January 13, 202 2 Docket : 201601G4168 Between: THE FIRST CANADIAN GROUP LIMITED PLAINTIFF / DEFENDANT BY Counterclaim And: CITY OF ST. JOHN’S Defendant / PLAINTIFF BY COUNTERCLAIM And: ALLIED CONSTRUCTORS INC. INTENDED First Third Party (Discontinued) And: CH2M HILL CANADA LIMITED INTENDED Second Third Party And: NEWFOUNDLAND DESIGN AND ASSOCIATES LIMITED INTENDED Third Third Party Before: Justice Robert P. Stack Place of Hearing: St. John’s, Newfoundland and Labrador

Date of Hearing: December 15, 2021

Summary: The First Canadian Group Limited, the plaintiff/defendant by counterclaim, commenced a construction claim against the City of St.John’s, the defendant/plaintiff by counterclaim (the “City”), for disputed extra work costs and delay costs in respect of phase III of theconstruction of a water treatment facility (the “Project”). The City applied pursuant to Rule 12.02(1) of the Rules of the Supreme Court,1986, S.N.L. 1986, c. 42, Sch. D, for leave to commence third party proceedings against CH2M Hill Limited (“CH2M”) andNewfoundland Design Associates Limited (“NDAL”), two project consultants.

The Court ruled that the City may add each of CH2M and NDAL as a third party to the action. The claim against each of CH2M andNDAL is a proper claim for a third party proceeding. Neither third party has established prejudice that would warrant denying the City’sapplication. Although the City’s pleadings are deficient, a claim against each of the third parties is sufficiently identified for the purposesof the application. Nevertheless, better particulars of the individual claims may be required by amendment or the supply of particulars. Appearances: Robert R.

Bradbury Appearing on behalf of the Plaintiff / Defendant by Counterclaim Gregory M. Smith, Q.C. Appearing on behalf of the Defendant / and Travis Payne Plaintiff by Counterclaim Adam Foote Appearing on behalf of the Intended Second Third Party F. Richard Gosse Appearing on behalf of the Intended Third Third Party Authorities Cited: CASES CONSIDERED: Ryan v. Dew Enterprises Ltd., 2014 NLCA 11; Stanford v. Lawton’s Drug Stores Ltd., 2013 NLTD(G) 161; STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; Limitations Act, S.N.L. 1995, c.

L-16.1 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D REASONS FOR JUDGMENT Stack J.: INTRODUCTION [1] The First Canadian Group Limited, the plaintiff/defendant by counterclaim (the “Plaintiff”), has commenced a constructionclaim against the City of St. John’s, the defendant/plaintiff by counterclaim (the “City”), for disputed extra work costs and delay costs inrespect of phase III of the construction of a water treatment facility (the “Project”). The City has applied pursuant to Rule 12.02(1) of theRules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch.

D, (the “Rules”) for leave to commence third party proceedings againstCH2M Hill Limited (“CH2M”) and Newfoundland Design Associates Limited (“NDAL”)[1], two project consultants.

[2] I have decided that the City may add each of CH2M and NDAL as a third party to the action for the reasons set out below. Procedural History [3] The following steps have been taken in the action to date:

(1) The Plaintiff filed its statement of claim on July 4, 2016;

(2) The City filed its defence and counterclaim on September 2, 2016;

(3) The Plaintiff filed its defence to the counterclaim on March 3, 2017;

(4) The Plaintiff and the City filed and exchanged lists of documents in 2017;

(5) An examination for discovery of Arlene Collins, Project Manager for the Plaintiff, occurred on November 22, 23 and 29,2017, and June 22, 2018;

(6) An examination for discovery of Martin Roberts, an employee of NDAL, occurred on October 3 and 4, 2018;

(7) In the period from about October 4, 2018, to November 26, 2019, the City and the Plaintiff pursued a course of alternativedispute resolution;

(8) On March 17, 2020, the City applied for leave to add Allied Constructors Inc. (“Allied”), CH2M and NDAL as third parties;

(9) On April 5, 2021, the City filed an amended application seeking leave to add the same three entities as third parties;

(10) On August 20, 2021, an affidavit of Linda S. Bishop, Q.C., an employee of the City, was filed in support of the amendedapplication; and

(11) On August 30, 2021, the City discontinued the third party application against Allied. issues [4] I must decide whether the third party claims fall within the scope of Rule 12.02, which governs third party procedure, and, ifthey do, whether it would be fair and just in the circumstances to join each of CH2M and NDAL to the action. the law [5] Rule 12.02(1) of the Rules provides: Where a defendant claims against any person, who is a co-defendant or who is not a party to the proceeding, that the latter is or may beliable to the defendant for all or any part of the plaintiff's claim against the defendant, the defendant may, before the defendant files adefence or appears on a hearing under an originating application, issue and serve a third party notice without the leave of the Court, andthereafter with leave. [6] Because the City’s defence has been filed, leave of the Court is required to add CH2M and NDAL as third parties to thePlaintiff’s action. [7] The leading decision on third party procedure in this jurisdiction is that of Green C.J.N.L. in Ryan v.

Dew Enterprises Ltd.,2014 NLCA 11. Third party claims were traditionally thought to be limited to claims for contribution and indemnity. Green C.J.N.L.rejected this narrow approach and found that Rule 12.02 should be applied more expansively.

He addressed the expanded scope of apotential third party claim at paragraph 68: 68 Accordingly, I conclude, … the question is, as a practical matter, can the defendant, by asserting a separate claim arising out ofthe same factual circumstances and by recovering damages from the third party on the basis of the third party’s involvement in thosecircumstances, effectively make the third party ultimately answer in whole or in part for the losses that have occurred? … [8] A court begins its examination of the third party application by looking at the statement of claim and the defence (Ryan atparagraphs 87 and 88).

The third party notice and draft statement of claim against the intended third party are then examined.

From asubstantive perspective, therefore, based upon the pleadings, I must decide whether, as against either or both of CH2M and NDAL, byasserting a claim arising out of the same factual circumstances as the statement of claim, the City can effectively make one or both ofthem ultimately answer in whole or in part for the losses that are alleged to have occurred. [9] From a procedural point of view, Ryan noted that the onus on a third party application rests with the applicant, here the City(paragraph 78). [10] Although it is common practice for a defendant who wishes to third party another person to set out in the statement of defencethe factual circumstances that justify the claim, subject to any irremediable prejudice that may be caused to other parties, failure to do sois not fatal to the application (Ryan at paragraph 71). [11] Ryan went on at paragraph 72 to say: 72 The nature of the third party claim and “the facts upon which the third party notice is based” must, however, at the very least, beset out in the affidavit supporting the third party application: rule 12.03(2)(c).

Furthermore, the facts so relied on must not be inconsistentwith the facts pleaded in the defence (rule 14.10) unless they are pleaded in the alternative (rule 14.08: Montana Band v. R., 1991

13618 (FC), [1991] 2 F.C. 273 (Fed. T.D.), aff’d on appeal (1992), [1993] 2 C.N.L.R. 134 (Fed. C.A.)).

Failing that, a party must seekleave to amend the factual substratum of the defence before proceeding with the third party application. [12] The basis for the third party claim must ultimately be identified in the third party notice and supporting affidavit as stated inRyan at paragraph 90: 90 Although there is nothing in Dew’s defence that pleads any position in the alternative to Dew’s stated position that it has nocontractual or tortious relationship with Ryan Designs, that is not, as indicated previously, fatal to Dew’s position. The basis for a thirdparty claim need not be stated in the defence.

It is necessary, however, for a basis for a claim to be disclosed and asserted in the thirdparty notice that is ultimately issued (especially where it can be issued without leave of the court) and as well in the affidavit supportingan application for leave to issue a notice: rule 12.03(2)(c). [13] As a result, if the third party claim and supporting affidavit set out a basis for the third parties to respond to the claim againstthe defendant, it is not fatal that the defence to that claim is a bald denial of liability. [14] Ryan at paragraph 75 held that a plaintiff, although not directly involved in the application, has a stake in its outcome, “becausehe or she might be adversely affected both with respect to delay of the proceedings and costs”.

A third party application may therefore bedenied because it would unduly delay or overly complicate the proceeding, especially where there is an impending trial date.

Here, I notethat the Plaintiff does not object to the joinder of the potential third parties and so I will not address this consideration further. [15] Ryan addressed other factors to be considered by a judge in exercising discretion under Rule 12.02 at paragraph 76: 76 Factors other than delay of the proceeding and proximity to an existing trial date that may be considered include the possibilitythat the inclusion of third party issues in the trial would unduly complicate the disposition of the trial (Bow Valley Husky (Bermuda) Ltd.v. Saint John Shipbuilding Ltd. (1991), (NL SC), 93 Nfld. & P.E.I.R. 104 (Nfld.

T.D.) or would “embarrass or delaythe trial or [be] otherwise inconvenient” within the meaning of rule 40.13. It has also been suggested in some cases that a lack of anexplanation for delay in making an application to join the third party may justify exercising the discretion to deny the application(Stanford v. Lawton’s Drug Stores Ltd., 2013 NLTD(G) 161 (N.L. T.D.) at para 20); in most cases, however, delay in applying wouldnot normally, in itself, result in refusal unless another party can show prejudice as a result of the joinder (Congregation of the Sisters ofMercy of Newfoundland v.

Stokes Management Ltd. (2002), (NL SC), 217 Nfld. & P.E.I.R. 153 (Nfld. T.D.) at para.22; Churchill v. Eveleigh, (NL SC), 2012 NLTD(G) 39, 320 Nfld. & P.E.I.R. 342 (N.L. T.D.) at paras. 25-27), suchas substantial increased cost or interference with an existing trial date or significantly prolonging the time before the matter would get totrial. [16] In a case decided prior to Ryan, Orsborn C.J.N.L. dismissed a third party application. The application in Stanford v. Lawton’sDrug Stores Ltd., 2013 NLTD(G) 161, was grounded in a solicitor’s affidavit.

No other affidavit in support of the application was filed.At paragraphs 15 to 17, it was held that the timing of the application was also problematic. Taking all of the factors into consideration,including that it was not a complex case, the application was denied. In Stanford, therefore, there were factors present, other than delayalone, that militated against granting the application.

Ryan has subsequently confirmed that in most cases, delay in applying would notnormally, in itself, result in refusal unless another party can show prejudice as a result of the joinder. factual background and lack of clarity in the city’s claim [17] The Plaintiff was the prime contractor to the City for the Project. The statement of claim and the defence both say that the Citycontracted with each of CH2M and NDAL as consultants on the Project (because they are often referred to collectively in the pleadings,where convenient I will refer to CH2M and NDAL as the “Consultants”).

There is agreement that they were jointly named“Engineer/Architect” on the contract documents between the City and the Plaintiff. [18] The amended third party application also says that CH2M and NDAL were both contracted by the City. The subsequentaffidavit of Ms. Bishop says, however, that the City contracted with NDAL, which in turn contracted with CH2M. This is consistent withthe affidavits filed on behalf of each of CH2M and NDAL.

Notwithstanding this change in the City’s position, the amended applicationto add CH2M and NDAL as third parties was not further amended to reflect the current understanding of the facts. Nor was it amended toreflect the discontinuance against Allied. [19] The third party statement of claim appended to the amended application also does not address the current understanding of therelationship between the City and the Consultants or the discontinuance against Allied. The result is a lack of clarity in the City’sposition vis-à-vis CH2M and NDAL. [20] At the hearing, the City presented its position first.

Then, following the submissions by each of CH2M and NDAL in response,the City applied to further amend its application and the draft third party statement of claim to make them conform to the evidence as tothe nature of its relationship with CH2M and NDAL and to the discontinuance against Allied. I denied the application because at that latestage, when the hearing was complete, it would be tantamount to moving the target after all the shots had been fired.

The circumstancesaround the contractual arrangements involving CH2M and NDAL were known to the City for some months prior to the hearing of theamended application. The same is true of the discontinuance in favour of Allied. The deficient pleadings were what CH2M and NDALhad responded to. I ruled that it would be unfair to CH2M and NDAL for me to permit a different set of pleadings at that late stage in theproceeding. The result of my ruling was that the amended application would either stand or fall as filed.

However, since I have allowedthe application based upon the pleadings as filed, subsequent amendments may nevertheless be required. I address this more fully later inthis decision. [21] The lack of clarity around the contractual arrangements in question are exacerbated by the inability of the parties to locate awritten contract between the City and NDAL. Nevertheless, it is conceded that a contract, whether written or verbal, did exist betweenthem. The onus will be on the City to prove its terms. [22] The Plaintiff presented a claim to the City prior to issuing the statement of claim.

The City sought to resolve the claim at an

early stage and to this end met with its counsel and counsel for NDAL as early as May 17, 2016. A subsequent meeting was held on June 16, 2016, attended by the City’s counsel, counsel for NDAL, representatives of NDAL, and other City staff. [ 23 ] The claim was not resolved, and the statement of claim was issued. NDAL’s representatives assisted the City in the preparation of the City’s defence and counterclaim. [ 24 ] The City asserts that it relied on NDAL to maintain the files for the Project and to deal with Project contractors, including the Plaintiff.

It is agreed that counsel for NDAL provided the majority of Project documents that were later produced as the City’s list of documents. [ 25 ] After NDAL was placed in receivership, Martin Roberts, a representative of NDAL, was examined for discovery.

Counsel to NDAL attended his preparation meetings and the examination itself. [ 26 ] Counsel to NDAL was kept aware of the City’s efforts to resolve the Plaintiff’s claim, including by mediation. [ 27 ] Although no reservation of rights agreement was entered into between the City and NDAL, there was also no promise or representation made to NDAL or its insurer that it would not later be added to the action if the mediation was not successful. the statement of claim and the defence [ 28 ] The statement of claim alleges that the City breached its contract with the Plaintiff by which the Plaintiff suffered damages of $8,523,416.82 plus other amounts.

For the most part, where the Plaintiff says the City is liable for breach of contract, it alleges that the fault lies with it, CH2M and NDAL, or unspecified others. The allegations of wrongdoing include: consultant response times, delayed drawings and revisions, turnover of Consultants’ key personnel, and delays by the Consultants in developing and overseeing pre- commissioning and commissioning of the Project. The Plaintiff also claims damages arising from disputed changes to the work and the role of the Consultants.

The Plaintiff specifically pleads the doctrine of agency as between the City and the Consultants. [ 29 ] The roles of CH2M and NDAL are front and centre of the allegations in the statement of claim – essentially, the claim is that any damages suffered by the Plaintiff for which the City may be found liable most likely result from the wrongful actions of CH2M or NDAL. [ 30 ] In its defence and counterclaim, the City agrees that it contracted with CH2M and NDAL and that they were collectively referred to as the Engineer/Architect on the contract with the Plaintiff.

The City denies that it was at fault and expressly denies that either or both of CH2M and NDAL was at fault. The counterclaim claims that the City suffered damages resulting from breach of the contract by the Plaintiff and seeks unspecified damages. [ 31 ] In the amended third party application, the City claims that it contracted with CH2M and NDAL collectively. CH2M was responsible for “instrumentation, process and process mechanical”, and NDAL was responsible for “civil, structural, electrical and building material”.

CH2M and NDAL were each responsible for design, preparation of drawings, preparation of tender packages and specifications, responding to requests for information, and approving shop drawings. NDAL was responsible for contract administration, including communications between the general contractors and the City, and site supervision for all three phases of the water treatment plant. [ 32 ] As mentioned, the draft third party statement of claim includes a claim against Allied and claims that CH2M and NDAL were contracted to act as “consultant”.

It goes on to say that if the City is found liable to the Plaintiff, then it is entitled to contribution or indemnity from the three third parties. [ 33 ] Specifically, the draft third party statement of claim says that any incomplete or inadequate design was the fault of the Consultants and any delay was caused by Allied, or by NDAL in supervising Allied. The City says that it relied upon the Consultants for design and other services and for managing change orders. The City identifies all the other allegations of fault made by the Plaintiff and lays them at the feet of the Consultants.

It must be noted, however, that except in certain limited instances, the City does not specify how each of CH2M and NDAL breached a contract or a duty of care. That is, for the most part, CH2M and NDAL are treated as a single entity with no distinction made as to how one or the other would be liable to the City in whole or in part for the losses that have occurred.

Should CH2M be added as a third party? [ 34 ] In support of its position, CH2M filed an affidavit of Andre Bourque, an employee of CH2M, sworn on July 6, 2021. [ 35 ] CH2M says that the only claim for indemnity or contribution asserted in the amended application is in the draft statement of claim attached to the solicitor’s affidavit of Travis Payne, counsel for the City. [ 36 ] Further, CH2M submits that the respective pleadings by the Plaintiff and the City are deficient because:

(1) The City’s defence to the Plaintiff’s claim is not consistent with the City's draft third party statement of claim against CH2M;

(2) The City has not set out a sufficient factual matrix with respect to CH2M as distinct from NDAL and Allied; and

(3) The pleadings, as between the Consultants, are too general and vague, and they lack the specificity necessary to distinguish which facts relate to CH2M and which to NDAL. [ 37 ] CH2M asserts that it was a sub-consultant to NDAL pursuant to a Master Services Agreement dated May 25, 2007 (the “MSA”) between NDAL and CH2M by which it agreed to provide consulting services to NDAL upon request. Delay and Acquiescence

[ 38 ] CH2M says that it has been prejudiced by the City’s delay in bringing the third party application against it. In any event, it says, the City’s actions constitute acquiescence and the application should be dismissed even in the absence of prejudice. Acquiescence [ 39 ] For the latter proposition, CH2M relies on TD General Insurance Co. and Zurich Insurance Co., Re , 2014 ONSC 3191 at paras. 40-41 . That case involved an insurance company that, despite an industry directive to act promptly, waited ten years after an accident to request indemnification from another insurance company.

The applications judge found acquiescence in the “unique circumstances” of the case and said at paragraph 47: 47 Given the directive in the Bulletin, the fact that TD is a sophisticated insurer that had knowledge, capacity and freedom with respect to its rights, and perhaps most importantly, the almost 11-year delay, I find that TD’s delay in requesting loss transfer gave rise to an inference that it had abandoned or waived its rights to the claim. [ 40 ] Here, the delay between filing the defence on September 2, 2016, and the application to add CH2M on March 17, 2020, is approximately three-and-a-half years.

It does not give rise to an implication that the City has abandoned or waived its right to claim against CH2M. Prejudice Lack of early engagement [ 41 ] CH2M says that it has been placed at a disadvantage because the City did not engage with it at the outset of the Plaintiff’s claim as it did with NDAL.

Combined with the passage of time, says CH2M, such exclusion will materially prejudice the ability of CH2M to fairly defend the City’s intended claim against it, particularly in matters as between CH2M and NDAL. [ 42 ] There was no requirement that the City engage with CH2M prior to seeking to have it added as a third party. Certainly, CH2M would have been aware from at least March of 2020, when the application to join it was filed, that it might be added as a party to the litigation. [ 43 ] I recognize that employees of CH2M who worked on the Project may no longer be with CH2M.

This makes the management of its defence more challenging. It is, however, a factor that often comes into play in complex litigation, particularly construction litigation. NDAL’s bankruptcy [ 44 ] CH2M says that NDAL’s bankruptcy has further prejudiced its ability to respond to the City’s third party claim. It is true that some of NDAL’s Project records may no longer be available to assist in CH2M’s defence to the City’s claim. Nevertheless, at least a portion of the Project documents were provided by NDAL to the City for the purposes of its list of documents.

As well, one would expect that CH2M would have its own copies of some documents relating to the Project (in fact, some of these documents are exhibits to Mr. Bourque’s affidavit). In any event, any lack of documentation from the perspective of CH2M arises from what may be an unreasonable reliance by it on the maintenance of the records by NDAL. I was made aware that CH2M was joined by the City in litigation relating to another water treatment plant. It would have been prudent for CH2M to consider that the Project might also give rise to litigation to which it could be made a party.

CH2M ought to have taken precautions to ensure that it could defend itself in such a circumstance. [ 45 ] The fact that NDAL’s former employees may no longer be available to assist or collaborate with CH2M is the same issue that CH2M faces with respect to its own former employees. I note that a former representative of NDAL has been examined for discovery in the matter; another provided an affidavit in support of NDAL’s position on the amended application.

Presumably, they would be available for further examination if CH2M felt it was warranted, as would be other former or current representatives of either of CH2M or NDAL. Indemnification provision in the MSA [ 46 ] CH2M says that it in the event the City is successful in its claim against it, pursuant to the MSA with NDAL it is unable to seek indemnification from NDAL. This is a matter as between CH2M and NDAL and is not occasioned by any delay in the filing of the application by the City to join it as a third party. Limitations Act [ 47 ] CH2M points to

section 5(

b) of the Limitations Act , S.N.L. 1995, c. L-16.1 (the “ Act ”), which states that an action cannot be brought after the expiration of two years for claims of professional negligence, whether based on contract or tort. Aside from any issue of discoverability, I note that section 11(1) (

b) of the Act provides that where an action has been commenced, the lapse of time limited for bringing an action is no bar to a third party claim connected to the subject matter of the original claim. The City’s claim against CH2M is connected to the Plaintiff’s claim. These provisions contemplate some delay between the bringing of an action (within the limitations period) and the bringing of a third party claim (possibly outside of the limitations period). The expiry of what would have been the limitation period if the City had sued CH2M directly is not the issue.

The issue is whether CH2M has been materially prejudiced by the delay in the commencement of the third party claim. Conclusion on prejudice [ 48 ] As we have seen from Ryan , delay by itself it not a reason to deny a third party application. I have found that there has been no acquiescence on the part of the City. Furthermore, although there is some prejudice to CH2M, it is not sufficiently material to warrant not permitting the issues among the parties to be addressed in the action.

Deficiencies in the pleadings [49] CH2M is correct that an application to add third parties should not rely solely on a solicitor’s affidavit (see Stanford). Althoughsuch affidavits may speak to purely procedural matters within the knowledge of counsel, they do not provide an appropriate evidentiarybasis for substantive allegations of fact such as the allegations of breach of contract and negligence made by the City here. Nevertheless,in this case, the affidavit of Ms. Bishop was subsequently filed.

As an employee of the City, she is in a position to set out certain facts,even if she relies on information from other City employees in doing so. [50] As we saw from paragraph 90 of Ryan, the fact that the City’s defence is a bald denial of wrongful conduct, both on its partand on the part of the Consultants, is not a bar to bringing the third party proceeding.

The claims against CH2M and NDAL in the thirdparty statement of claim set forth an alternate position vis-à-vis CH2M and NDAL (although imperfectly). [51] Contrary to what is alleged in the third party statement of claim, I find that CH2M was not under contract to the City. CH2Mwas a sub-consultant to NDAL, through the MSA. How this deficiency affects the City’s application to join CH2M as a third party willbe addressed below. [52] In his affidavit, Mr. Bourque deposed that NDAL was entirely responsible to, and reported to the City on, the design, tender,construction and commissioning phases of the Project.

NDAL was also responsible for contract administration. NDAL made the finaldecisions and recommendations to the City and was the contact point for any discussions with the Plaintiff. These assertions wereunchallenged on the application, and I accept them for the purposes of this decision. Should they become relevant for trial purposes,however, they will have to be proven in the normal course. [53] The issues raised by CH2M with respect to the pleadings in this case are not dissimilar to what the Court of Appeal was facedwith in Ryan.

There neither the statement of claim nor the defence adequately identified the issues to be resolved as between thedefendant and the proposed third parties. Nor was the application to add them as third parties much better. With reservation, therefore,the Court of Appeal granted leave to add one of the third parties. Because there was a “very thin pleading indeed” (paragraph 94), thecourt also granted the defendant leave to amend the pleading to provide better particulars of the claim. [54] Here, the City bases its claim against CH2M in contract and in negligence.

We know now that there was no privity of contractbetween them, but can the City make a claim against CH2M in negligence? That is, can a sub-consultant owe a duty of care to an owner?The British Columbia Court of Appeal in British Columbia v. R.B.O.

Architecture Inc., (1994), (BC CA), 46 B.C.A.C.108, 48 A.C.W.S. (3d) 528 at para. 44, asked this question: 44 … Where there is no physical damage and no contractual relationship between a sub-consultant to an architect and the owner of the project,can a duty of care arise such that the sub-consultant owes a duty to take care that the owner, or those that stand in a like position to theowner, are not damaged? [55] In R.B.O., the answer was that such a duty might exist dependent on the relationship of the sub-consultant and the plaintiff.

Thequestion must be answered, however, within the factual matrix between the parties. The court in R.B.O. emphasized the importance ofthe plaintiff’s “reasonable reliance” on the sub-consultant. In the third party statement of claim, the City alleges that it relied on theConsultants in respect of their scopes of work. Ultimately, therefore, it will be for the trial judge to decide whether the City can prove itsclaim against CH2M.

I am satisfied for the purposes of the amended application, however, that a claim in negligence such as the City hasasserted against CH2M falls within the scope of Rule 12.02 as defined at paragraph 95 of Ryan. [56] Having concluded that the City has an arguable case against CH2M, I agree with it that the pleadings by the Plaintiff and theCity are deficient. They generally fail to identify the distinct role played by each of CH2M and NDAL in the Project and how the actionsof each of them contributed to the damages suffered.

This failure is exacerbated in the draft third party statement of claim, as describedabove. This, however, is not fatal to the third party claim. Conclusion on deficiencies in the pleadings [57] I am satisfied that the pleadings before me provide enough of an indication as to the nature of the claim that the City isasserting against CH2M. The deficiency in the pleadings is in the identification of specific allegations against CH2M and NDAL.However, the general nature of those allegations is clear.

I note that I do not agree with the City that each of CH2M and NDAL knowswhich of the allegations applies to it and can therefore respond; a defendant (or third party in this case) is entitled to know what specificallegations it must defend. If CH2M determines that it cannot file a defence based upon the current pleadings, then it can take whateversteps may be available to it under the Rules to put itself in a position to do so.

Particulars of, or amendments to, the third party statementof claim, the statement of claim (and consequently to the defence) may also be required to make them conform to the contractualarrangements as we now know them and to what each of CH2M and NDAL did, or did not do, that allegedly contributed to the loss. Should NDAL be added as a third party? [58] I have concluded that NDAL’s arguments against being added as a third party are less forceful that those of CH2M. For themost part, the reasons I have given above relating to CH2M apply to NDAL as well.

To the extent that NDAL’s circumstances aredifferent, however, I will address them now. The claim against NDAL [59] NDAL was contracted directly by the City to act on its behalf regarding the Project and the Plaintiff. As a result, the City’sthird party claim against it for breach of contract and negligence falls squarely within the scope of Rule 12.02.

Prejudice [ 60 ] NDAL also claims prejudice caused by the delay in bringing the third party claim. However, I find that the third party claim ought not to have come as a surprise to it. As confirmed by the affidavit of Ken Drover, one of its principals, in 2016 the City advised NDAL that the Plaintiff alleged wrongdoing on the part of NDAL and CH2M relating to the Project. As a result, NDAL advised its insurer of the possibility of a claim. According to Mr.

Drover, its insurer engaged NDAL’s legal counsel to assist the City in managing and defending the Plaintiff’s claim in order to mitigate the possibility of a claim against NDAL. Mr. Drover further confirms that NDAL and its legal counsel provided input into the City’s defence and counterclaim. NDAL and its counsel reviewed and collected documents for the City in 2017 that form part of the City’s list of documents.

Notwithstanding its receivership in August 2018, NDAL and its counsel assisted in the preparation and attendance of Martin Roberts, a former NDAL employee, at an examination for discovery in October of 2018. Mr. Drover confirms that the allegations against NDAL by the City “mirror” the claims made by the Plaintiff in 2016. [ 61 ] As referred to above, a review of the Plaintiff’s claim against the City alerted NDAL to the possibility of a third party claim. As a result, at the outset NDAL alerted its insurer to a potential professional liability claim.

It says, however, that because no actual claim was made prior to its receivership and bankruptcy, no steps were taken to preserve documents or other evidence. This was a choice made by NDAL (and possibly by its insurer). The claim by the Plaintiff against the City was well advanced by the time NDAL was placed into receivership. NDAL cannot now be heard to claim that it has been prejudiced. The City attempted to resolve the claim without adding CH2M or NDAL. That it failed in that attempt does not preclude it from joining NDAL now.

Conclusion on adding NDAL as a third party [ 62 ] For the reasons that I have allowed CH2M be joined as a third party, as amplified by the factors specifically relating to NDAL, it would be fair and just for NDAL to be joined as a third party. In the circumstances of this case, it is appropriate to permit the City seek to have NDAL ultimately answer, in whole or in part, for the losses that have occurred. Again, it will be open to NDAL to take whatever steps under the Rules that it determines to be appropriate prior to responding to the claims.

summary and disposition [ 63 ] Leave is granted to the City to issue and serve a third party notice and statement of claim against each of the intended third parties, CH2M and NDAL, in the form attached to the amended application. It may then either apply to amend the third party statement of claim or one or both of the third parties may seek better and further particulars of the City’s claims.

These are but examples of steps that may be available to the parties under the Rules to put the third parties in a better position to defend the claims. [ 64 ] Because of the deficiencies in the pleadings that were not corrected prior to the amended application being heard, the third parties will be put to additional time and expense in defending the claims against them. Consequently, I exercise my discretion not to order costs in favour of the City. Each party shall bear its own costs.

The plaintiff did not meaningfully participate in the application and so I would order it to bear its own costs in any event. _____________________________ Robert P. Stack Justice