Ryan v. Dew Enterprises Limited, 2014 NLCA 11

Date: 201402 20 Docket: 10/120 Citation: Ryan v. Dew Enterprises Limited , 2014 NLCA 11 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN: OTTO RYAN, OPERATING AS RYAN DESIGNS FIRST APPELLANT AND: CARL KNIGHT SECOND APPELLANT AND: DEW ENTERPRISES LIMITED RESPONDENT AND: PAKARA APARTMENTS LIMITED COURT-REQUESTED PARTICIPANT (PLAINTIFF AT TRIAL) Coram: Green C.J.N.L., White and Harrington JJ.A.

Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division (G) 200705T0065 Appeal Heard: September 14, 2011 Judgment Rendered: February 20, 2014 Reasons for Judgment by Green C.J.N.L. Concurred in by White and Harrington JJ.A. Counsel for the First Appellant, Otto Ryan: Michael Griffin

Counsel for the Second Appellant, Carl Knight: David Moores Counsel for the Respondent, Dew Enterprises Limited: Gerry Wentzell Counsel for Pakara Apartments Limited: Gerald Ralph and Stacy MacDonald Green C.J.N.L.: [ 1 ] This appeal requires the Court to re-examine the principles applicable to joinder of third parties. [ 2 ] The challenge on the appeal is to an application judge’s decision to authorize the issuance and service of third party notices by a defendant contractor against a building designer and engineer in circumstances where the contractor was being sued by the building owner for breach of contract and negligence.

Case History A. Relevant Pleading History [ 3 ] The pleading history is tangled and confusing. [ 4 ] Pakara Apartments Limited (Pakara) sued Dew Enterprises Limited (Dew) for breach of contract and negligence as a result of alleged delays and deficiencies in the construction of a septic system designed to service an apartment building being constructed for Pakara.

Pakara alleged that Dew subcontracted the design of the sewage disposal system to Otto Ryan, operating as a sole proprietorship under the name “Ryan Designs.” Both the proprietorship and Ryan personally were named as additional defendants. [1] The statement of claim made allegations of both negligence and (even though no privity of contract was alleged between Pakara and Ryan Designs) breach of contract against Ryan Designs. [ 5 ] In its defence, Dew took the position that it did not subcontract the design of the sewage disposal system to Ryan Designs and that, in fact, Pakara contracted directly with Ryan Designs for the performance of this work, thereby asserting that there was privity of contract between Pakara and Ryan Designs.

Dew further denied any negligence with respect to the design or the choice of designer. [ 6 ] Ryan Designs filed a defence in which they asserted that there was no contract between them and Pakara and that their contractual relationship with Dew was limited to providing drafting, not design, services. They then issued a third party claim against Dew claiming “indemnity and contribution” for damages for which they might be held liable to Pakara assuming (but not conceding) that there was a contract between them and Pakara as alleged by Dew.

They took this position because they claimed that the drafting (but not the design) of the drawings was done by them at the request of Dew.

Dew responded by reasserting that it was merely the “intermediary” between Pakara and Ryan Designs for the purpose of assisting Pakara to engage a sewage system designer. [ 7 ] Ryan Designs subsequently issued a further third party claim against Carl Knight, an engineer and the Second Appellant in this appeal, alleging that Knight directed them to make changes to the drawings, which were stamped and approved by Knight, and that if the drawings were deficient, the responsibility lay with Knight.

They claimed that if, as alleged by Dew, there was a contract between Pakara and them for the preparation of the drawings and they were in some manner responsible to Pakara for any deficiencies, Knight should indemnify them because the drawings were changed at Knight’s direction. Knight responded by denying any contractual relationship with any of the parties. [ 8 ] Subsequently, Ryan Designs applied to be removed as defendant in the action.

That would have involved the incidental discontinuance of their third party claims against Dew and Knight. [ 9 ] By Order dated June 28, 2010, over the objection of Dew but with the consent of the other parties, Pakara’s claim against Ryan Designs was discontinued, with respect to both the negligence and breach of contract claims. This Court was not told the reason for Pakara’s consent to removal of Ryan Designs as a defendant.

It would be improper, therefore, to speculate that Pakara concluded it had no direct claim against Ryan Designs, or perhaps had reached an undisclosed Perringer-style settlement agreement with Ryan Designs, or was animated by some other motive. [ 10 ] As a result of the removal of Ryan Designs as a defendant, Ryan Designs’ third party claims against Dew and Knight for contribution and indemnity were necessarily also discontinued. In addition, Dew was given leave to “make application” to join Ryan Designs, as well as Knight, as third parties in respect of a claim by Dew against them. B.

The Result of the Pleading History [ 11 ] When the dust settled from this convoluted pleading history, what remained was a claim by Pakara against Dew for breach of contract and negligence. Although Ryan Designs was no longer named as a defendant, Pakara’s statement of claim still alleged that Dew subcontracted the sewerage design work to Ryan Designs. The body of the statement of claim also continued – inconsistently with the removal of Ryan Designs as defendant and the absence of any allegation of a contractual relationship with them – to claim breach of contract (as well as negligence) against them.

Counsel for Pakara confirmed during the appeal hearing, however, that it was his client’s intention to amend the statement of claim to remove all claims and allegations of negligence and breach of contract against Ryan Designs. [ 12 ] For the purposes of this appeal, it will be assumed that Pakara’s proposed amendments are effective, thus leaving Pakara’s claim simply as one in contract or negligence against Dew on the basis that Dew subcontracted the work to Ryan Designs. Counsel for

Pakara confirmed that Pakara was pursuing claims against Dew for both breach of contract and negligence. [ 13 ] Dew’s defence continued to maintain that the contract for the provision of septic design services was between Pakara and Ryan Designs and not between Dew and Ryan Designs, as Pakara alleged. There remained, therefore, a fundamental factual disagreement between the parties as to the nature of the contractual and business relationship among Pakara, Dew and Ryan Designs and, to a lesser extent, Knight. It does not appear that any of these relationships were documented in writing. C.

The Interlocutory Application [ 14 ] In accordance with the Order of June 28, 2010, Dew applied to bring Ryan Designs and Knight back into the litigation as third parties to a claim by Dew “to ensure that all parties having potential liability in this matter be brought in as parties before the Court so that the matter may be fully adjudicated” (paragraph 7 of the Application). [ 15 ] The application was brought under Rule 12 of the Rules of the Supreme Court, 1986 , which reads in pertinent part as follows: 12.02(1) 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 be liable to the defendant for all or any part of the plaintiff’s claim against the defendant, the defendant may, before the defendant issues a defence or appears on a hearing under an originating application, issue and serve a third party notice without the leave of the Court, and thereafter with leave. … 12.03(2) An application for leave to issue a third party notice shall be supported by an affidavit stating (

a) the nature of the claim made by the plaintiff in the proceeding; (

b) the stage which the proceeding has reached; (

c) the nature of the claim made by the applicant and the facts upon which the third party notice is based; and (

d) the name and address of the person against whom the third party notice is to be issued and served. [ 16 ] Dew described the basis for the application in this way: In essence [Dew] claims that [Ryan Designs] … and Carl Knight were the parties who designed [Pakara’s] septic disposal system and were accountable directly to [Pakara ]. Further, Ryan Designs, Otto Ryan and Carl Knight are the parties responsible for the preparation and certification of the design. They were also the parties responsible for any flaws, correction of errors and the timely submission of the design to [Pakara].

Therefore, [Dew] is claiming indemnity from the proposed Third Parties should any of the claims by [Pakara] against [Dew] for breach of contract and negligence be successful. [Application, paragraph 8; underlining added.] [ 17 ] Ryan Designs opposed the application, as did Knight. Ryan Designs submitted that the claim was “a contract case and not one of fault or negligence”.

On this basis, they argued that because Dew took the position in its defence that it was not contractually obligated to Pakara to design the sewer system nor to subcontract out the work to anyone, and that the contract was between Pakara and Ryan Designs directly, Dew could not, on its pleadings, have any liability to Pakara and therefore there were no potential damages which Dew could pass on by way of indemnity to Ryan Designs.

Accordingly, the stated objective of Dew to have all parties with potential liability before the court was not a justification to add a third party, because Pakara itself discontinued any direct claim against Ryan Designs. [ 18 ] Knight, for his part, took the position that in addition to Ryan Designs’ arguments (which he adopted), there was no pleaded relationship at all between Dew and him that could justify any third party claim. D. The Ruling under Appeal [ 19 ] In an oral judgment, the applications judge granted the application and ordered that Ryan Designs and Knight be joined as third parties.

The formal order did not state the basis upon which the third party claims could be made. [ 20 ] The judge explained the purpose of Rule 12 as follows: …The purpose of rule 12 in large

part is to avoid several difficulties in procedure, one of which is the multiplicity of actions…[T]he procedure…provides a substitute for multiple actions and disposes of issues that have some common thread to a transaction that’s before the court, a transaction where there is a common thread between the plaintiff and the defendant and then the defendant and a third party and then further down, if necessary, by a third party against a fourth party and so on.

It’s also meant to avoid the possibility that there could be multiple actions with inconsistent findings in the different actions based on the same transaction or set of facts. It’s also meant to try and avoid and save costs to the litigants. [Transcript, p. 46] He then described the scope of the Rule: The rule, as I understand it, is divided into two parts and…the applicant…would have to either fall under the category of qualifying as… claiming a contribution or, in the alternative that he is claiming or falling under the category of an indemnity. The rule is split in two.

It can be either/or that would ground the right of the applicant to proceed with the third party notice.

[Transcript, pp. 46-47] [ 21 ] Dealing with “the indemnity situation,” the applications judge adopted the comments of Goodridge J. in Memorial University of Newfoundland v. Lundrigan Group Ltd. (1985), 57 Nfld. & P.E.I.R. 85 (Nfld. S.C.T.D.) as stating the current law: [15] Referring to indemnity, Lamonte J.A. mentioned the case of Wynne v. Tempest , [1897] 1 Ch. 110 , and said that a right to indemnity is a right to be saved from loss.

In the great majority of cases the right arises from a contract, express or implied, but it may be statutory or it may arise out of a relationship existing between the parties which make[s] it equitable that one should save the other from loss. [ 22 ] The judge then explained his conclusion that a third party claim for indemnity existed in this case: In the present case, it appears to me that a relationship existed between all of the parties that are now before the court. [Pakara] was involved with [Dew] in the construction of a building. [Ryan Designs and Knight] in some manner provided a service for the completion of that building, all related to the same area.

It wasn’t like an electrician and a plumber. These were people who worked on the same design, the sewer disposal field or the sewer design, septic design and the things that went along with it. Each one of them played a role in that which is alleged by [Pakara] to have been performed wrong by [Dew]. They’re saying they’re primarily responsible.

Initially, they’ve said the plaintiff [sic; should be the defendant, Dew?] was responsible as well as [Ryan Designs] but have come to an accommodation or have somehow discontinued that… Clearly, since 2007, when the first defence was filed…and then the third party notices went out, [Ryan Designs] and then later…Knight were all aware that there were allegations swirling that they had a contract with [Pakara] to do this work and they were responsible for this loss… I say that because that’s part of…looking at something that arises out of the relationship between the parties which makes it equitable, that one should save the other from the loss.

It’s not just dealing with what’s right or wrong in equity and not in a vacuum. In the context of this particular set of facts, as I know them to be from the pleadings that have been filed, there was a construction project in which all three parties, and the fourth party being [Dew], played a role in the provision of the same type of service to [Pakara] which [Pakara] is alleging went wrong. So there could be a multiplicity of actions and individual costs.

There could be, on the same facts, the possibility of different findings in a situation where actions are not either amalgamated or if they’re not, as in this case, the parties brought before the court in the form of third party action. … … I have to weigh it on the basis that I believe Goodridge J. outlined [in Memorial University of Newfoundland v. Lundrigan Group Ltd. ], that if there is a relationship arising and existing between the parties which in equity, in fairness, could save one from loss, then that third party notice should be granted . [Transcript, pp. 48-50; 52; underlining added.] E.

The Third Party Notices [ 23 ] It is apparent from the reasoning of the applications judge that the application to issue the third party notices was based on the notion that Dew had a potential claim to be indemnified by either Ryan Designs or Knight or both.

However, the judge’s reasons did not make it clear what the basis of the cause of action in indemnity was. [ 24 ] The third party notice issued against Ryan Designs following the judge’s order [2] alleged-contrary to what Pakara alleged in its original statement of claim-that Pakara contracted with Ryan Designs, not Dew, to design the sewage disposal system for Pakara’s building, and Ryan Designs contracted with Knight to “review and place his professional stamp” on Ryan Designs’ drawings.

It alleges, further, that Ryan Designs and Knight “are solely responsible for the sewage system design that [Pakara] alleges was defective…” [and] that “it (Dew) has no liability for any of the delays and damages claimed by [Pakara] in relation to the sewage disposal system…”.

On those allegations, the third party notice claims : Indemnity from [Ryan Designs] with respect to any damages, costs or interest which [Dew] may be ordered to pay to [Pakara] in relation to the damages, interest or costs arising from the faulty design or approval of the septic sewage disposal system for [Pakara’s] building. [ 25 ] The Third Party Notice issued against Knight contains similar allegations, to the effect that Ryan Designs engaged Knight to review and certify the drawings, following which Ryan Designs submitted the plans to Pakara.

It further alleges that as a result of errors of Ryan Designs and Knight, the approval of the sewage disposal design by government authorities was delayed but that Pakara is claiming damages and costs against Dew for those delays that were caused by Ryan and Knight. The Notice then asserts that “in the event [Dew] is found liable for any damages to [Pakara],” Dew claims indemnity from Knight with respect to those damages. Leave to Appeal [ 26 ] This case involves an appeal from an interlocutory order that requires leave to appeal pursuant to rule 57.02(1)(

a) of the Rules of the Supreme Court, 1986 . The parties were content to argue the issue of leave at the time of hearing of the appeal itself, as is permitted by rule 57.02(5)(c). [ 27 ] I am satisfied that this case involves issues that require further consideration by this Court. The appellants have submitted that the applications judge did not apply the proper criteria for determining whether leave to issue a third party notice should be granted.

As will become evident from the analysis contained later in these reasons, there is reason to doubt whether the applications judge described or applied the proper test. As well, other decisions in the Trial Division have expressed concern as to whether the practice followed in the course of joining third parties in some cases has in fact been within the scope of the rules. For example, Goodridge J. in Collavino v. Newfoundland (1985), 56 Nfld. & P.E.I.R. 265 (Nfld. S.C.T.D.) , commenting on the operation of the pre-1986 rules of court, observed:

[19] There certainly have been cases heard in this Court where claims against third parties were not strictly claims for eithercontribution or indemnity. The prevalence of the practice does not justify it… [28] Cases from this jurisdiction relied on by the parties in this appeal discuss the issue of joining third parties in the context of thelanguage of the pre-1986 rules. That language is different from the current Rule 12. Those cases cannot now be said to be controlling onthe issue of joinder in the current context. [29] There is a further reason for dealing with this interlocutory appeal at this juncture.

As is evident from the foregoing discussion,the parties are mired in a morass of confusing, and in some cases inconsistent, pleadings. Each step in the process so far has compoundedthe number of permutations and combinations the parties have to consider and argue in the alternative whenever a further procedural stepis taken.

If the third party proceedings are allowed to stand at all or in their present form, it would be helpful, in my view, to attempt todefine with clarity what issues are in fact at stake so that future proceedings and the resulting trial itself may operate with a clearer focus. [30] Accordingly, leave to appeal should be granted pursuant to rule 57.02(4)(a), (

b) and (

e) as well as rule 57.02(6). The Appeal A. Issues [31] The parties each expressed the issues on appeal differently. The essence of the appeal, however, can be expressed in thefollowing question: Did the applications judge err in his application of the applicable principles in exercising his discretion to join Ryan Designs and CarlKnight as third parties in respect of claims by Dew? B.

Standard of Appellate Review [32] Issuance of a third party notice may be made as of right if the defendant does so before filing a defence (subject, of course, to asubsequent application by the third party to strike out the notice on the ground that no cause of action is disclosed or its issuance isotherwise improper). Thereafter, application for leave must be made to the court.

Such an application involves a judicially-exerciseddiscretion. [33] On appeal, the court will only interfere with such a discretionary order where the judge who made it has exceeded his or herjurisdiction, has failed to apply or has misapplied an applicable principle or made a palpable and overriding error in his or herappreciation of the facts, or the failure to interfere would otherwise cause a manifest injustice: Langor v. Spurrell (1997), (NL CA), 157 Nfld. & P.E.I.R. 301 (NFCA) at para. 33. Analysis A.

Scope of the Authority to add Third Parties [34] This application in front of the applications judge and the argument in this Court were presented on the basis of the applicabilityof Rule 12. No arguments were made on the basis of the relevant provisions of the Judicature Act, RSNL 1990, c. J-4 or theContributory Negligence Act, RSNL 1990, c. C- 33. It is necessary, however, to consider the statutory basis of the scope of third partyprocedure before proceeding to the rules. i. Statutory Jurisdiction a.

Judicature Act [35] The starting point in considering the power of the court to authorize the issuance of a third party notice is the interrelation ofsections 93 and 94 of the Judicature Act: 93. The court may grant to a defendant (

a) in respect of an equitable estate or right, or other matter of equity; and (

b) in respect of a legal estate, right or title claimed or asserted by that defendant, all the relief against a plaintiff or petitioner that the defendant has properly claimed and that the court might have granted in a proceedinginstituted for that purpose by the same defendant against the same plaintiff or petitioner. [36] This section, which is not directly related to the disposition of the current appeal, provides the authority for a defendant in aproceeding to counterclaim against the plaintiff in the same proceeding instead of commencing a separate action.

There is nothing in thisprovision that restricts the ability of a counterclaiming defendant to raise issues arising out of the subject matter of the plaintiff’s initialclaim. Thus, as against a plaintiff, as opposed to a subsequently- joined third party who is not also a plaintiff, a defendant can make anyunrelated counterclaim (subject, of course, to the power of the court to sever such a counterclaim and order that it be tried separately, ifthe original claim and counterclaim cannot be conveniently tried together: Rule 40.12; Bank of Montreal v. H. O. House Ltd. (1978), 15Nfld. & P.E.I.R. 33 (NFCA)). [37]

Section 94, which is more directly relevant to the current appeal, provides: 94.

(1) Relief

(

a) claimed under

section 93; (

b) related to or connected with the original subject matter of the proceeding; and (

c) in a similar manner claimed against another person whether a party to the same proceeding or not, may be granted against a person who has been served with written notice of the claim under a rule or an order of the court, and that might have been granted against that person if that person had been made a defendant to a proceding instituted by the defendant seeking relief under

section 93 for a similar purpose.

(2) A person served with a notice under subsection (1) is considered to be a party to the proceeding with the same rights in respect of that person’s defence against the claim as if that person had been sued in the ordinary way by a defendant seeking relief under

section 93. [ 38 ]

Section 94 is the provision that authorizes a defendant to include in existing litigation a separate issue involving a claim by him or her against a person not then a party to that litigation, i.e. a third party claim. The right is not open-ended, however. Such a third party claim must be, as section 94(1)(

b) indicates, “related to or connected with the original subject matter of the proceeding”. Thus, unlike the right to counterclaim, which could involve a claim completely unrelated to the original action, a third party claim must arise out of, in the sense of being “related to or connected with”, the original litigation. The classic situation where this connection exists is where a defendant seeks, by way of a claim for indemnity or contribution, to pass any liability to which he or she might be subject at the hands of the plaintiff on to another person. [ 39 ] Other aspects of

section 94 are problematic from an

interpretation point of view. It will be noted that the section, by its terms, only authorizes third party proceedings where relief is being “claimed under

section 93 ”. Read literally, that would mean that a defendant wishing to claim against a third party must also be making a counterclaim against the plaintiff and it is only that relief that can also be claimed against the third party. Read this way, the

section makes no sense, since the purpose of third party proceedings is usually not to make a claim against an existing plaintiff but against someone not already a party, and such a claim, e.g. a claim for indemnity or contribution, by its nature will not be the same cause of action forming the basis of the counterclaim. [ 40 ] The answer to this conundrum is found in the legislative history of sections 93 and 94. Their genesis is found in the English Judicature Act, 1873 , 36 & 37 Vict., c. 66, which essentially encompassed the essence of both sections 93 and 94 in one provision.

The English provision found its way into section 13(3) of the Newfoundland Judicature Act of 1889, 52 Vict., c. 29 which under the heading “Counterclaims and third parties” provided: 13… (3.) The said Court and every Judge thereof, shall also have power to grant to any defendant in respect of any equitable estate or right, or other matter of equity, and also in respect of any legal estate, right, or title claimed or asserted by him, all such relief against any plaintiff or petitioner as such defendant shall have properly claimed by his pleading, and as the said Court, or any Judge thereof, might have granted in any suit instituted for that purpose by the same defendant against the same plaintiff or petitioner; and also all such relief relating to or connected with the original subject of the cause or matter, and in like manner claimed against any other person, whether already a party to the same cause or matter or not, who shall have been duly served with notice in writing of such claim pursuant to any rule of Court or any order of the Court, as might properly have been granted against such person if he had been made a defendant to a cause duly instituted by the same defendant for the like purpose; and every person served with any such notice shall thenceforth be deemed a party to such cause or matter, with the same rights in respect of his defence against such claims as if he had been duly sued in the ordinary way by such defendant. (Italics added.) [ 41 ] The non-italicized words correspond to the current

section 93. The italicized words correspond to

section 94. It will be seen that the original

section was attempting to deal with two related but different issues: the assertion of counterclaims between existing parties and the assertion of third party claims against non-parties. It did not tie the scope of one jurisdiction to that of the other. [ 42 ] This provision remained unchanged in all material respects through the statutory consolidations of 1896 (CSN 1896, c. 50, s. 13(3)), 1916 (CSN 1916, c. 83, s. 25(3)), 1952 (RSN 1952, c. 114, s. 25(3)) and 1970 (RSN 1970, c. 187, s. 21(c)). At the time of the re- enactment of the judicature provisions in 1986, however, the

section was split into the two related sections that today are sections 93 and 94 : Judicature Act , SN 1986, c. 42, ss. 91 and 92. It was at this point that the reference to relief claimed under what is now

section 93 was inserted. This is the only substantial change in the language of the sections. [ 43 ] When viewed from this historical perspective, it appears that, in the effort by the consolidator to divide a very long one-sentence

section into two, the reference in

section 94 to relief claimed under

section 93 was an attempt to maintain some linguistic continuity between the two sections in accordance with the original legislative scheme. Arguably, the change in the structure of the provisions was not intended to affect the substance of the original language. The infelicitous manner in which it was done should not be allowed to effect a major substantive change to the original intent as to the scope of third party procedure.

Where a statute is consolidated or re-enacted, the presumption is that the legislature did not intend to make any substantive change in the law; rather, it is treated as declaratory of the existing law. See Sullivan on the Construction of Statutes , 5th ed. (Markham, ON: Lexis Nexis, 2008), pages 653-659; Pierre-André Coté, The

Interpretation of Legislation in Canada , 4th ed. (Toronto, ON: Carswell, 2011), pages 112-113;

Interpretation Act , RSNL 1990, c. I-19, s. 31(2); Statutes and Subordinate Legislation Act , RSNL 1990, c. s-27, s. 5(1)(

d) and (g). While the 1986 enactment was not technically undertaken as part of a general statutory consolidation and revision, the 1986 statute did involve a general consolidation and reorganization of all Supreme Court judicature provisions that had been enacted since 1970, including the previous creation of appeal and trial divisions of the Court, and, as well, provided for the merger of the District Court into the Supreme Court. In so doing, it did not appear to change substantively any of the other foundational provisions of the Court relating to its procedural jurisdiction. [ 44 ] I am satisfied, therefore, that the insertion of the references to relief being claimed under

section 93, in

section 94, was not intended to attenuate substantively the scope of the previous jurisdiction of the Supreme Court to permit third party proceedings. I would

read the reference to relief being claimed in

section 93 as meaning simply that relief of the type (“such relief”) that could be claimed in a counterclaim can also be claimed against a third party (“against any other person, whether a party to the same cause or matter or not”) provided it is “relating to or connected with” the original subject of the action. Alternatively, had I not reached this conclusion, I would have been prepared, in the special circumstances of this case, to treat paragraph 94(1)(

a) as being omitted from the statute completely on the ground that to retain it would produce an absurdity in that it would virtually eliminate the possibility of utilizing third party proceedings, a result that would make the procedural law in this jurisdiction completely out of step with that in every other Canadian jurisdiction. That could not have been intended by such an incidental linguistic change. Where it appears that the words chosen by the drafter of the statute lead to an absurd result or one that could not have been intended, the court is entitled to disregard them. See Sullivan , supra , pages 173-177. [ 45 ] I conclude, therefore, that

section 94 of the Judicature Act continues to confer jurisdiction on the Supreme Court to allow for independent claims to be initiated by third party procedure regardless of whether they amount to claims for indemnity or contribution, provided the claim is related to or connected with the original subject matter of the action. b. Contributory Negligence Act [ 46 ] The other statutory provision that is tangentially relevant to the issues engaged here is the Contributory Negligence Act , which provides: 3.

Where damage or loss has been caused by the fault of 2 or more persons, the court shall determine the degree in which each was at fault, and where 2 or more persons are found at fault they shall be jointly and individually liable to the person suffering damage or loss, but as between themselves, in the absence of a contract express or implied, they shall be liable to make contribution to and indemnify each other in the degree in which they are respectively found to have been at fault. … 7.

Where it appears that a person not a party to an action is or may be wholly or partly responsible for the damages claimed, that person may be added as a party defendant or may be made a 3 rd party to the action, upon the terms that are considered just. [ 47 ] At common law, there was no contribution between tortfeasors: Merryweather v. Nixon (1799), 8 T.R. 186; 101 E.R. 1337 (K.B.) ; Churchill v. Young (1981), 35 Nfld. & P.E.I.R. 412 (NFCA) .

In other words, a concurrent tortfeasor did not acquire any rights, merely by paying the whole of the judgment, against any other tortfeasor who was partly responsible for the damage.

The right to claim contribution or indemnity as between concurrent tortfeasors therefore depends solely on the Contributory Negligence Act . [ 48 ] These provisions create a right to contribution between two or more tortfeasors who cause damage by their “fault” (section 3) and provide the procedural mechanism by which the right can be asserted and adjudicated if all tortfeasors have not been brought before the court at the suit of the plaintiff (section 7).

Section 7 allows a non-party in a tort claim to be brought in as a third party with a view to ensuring that the person so brought in will contribute to any judgment that might ultimately be made, if the third party is also found to be at fault. This procedure exists outside of the procedures set out in the Rules of Court which apply in other circumstances. [ 49 ] A defendant seeking to invoke the provisions of

section 7 must allege in his defence that the putative third party is at least partly at fault. Alleging simply that the defendant is not responsible at all and that the putative third party is wholly responsible is not sufficient: Seabord Construction Ltd. v. Pack & Noel Ltd. & Canadian National Railway (1970), 1 Nfld. & P.E.I.R. 331 (Nfld. S.C.) ; Churchill v. Young .

There must be an issue, even if it is an alternative claim, of some kind of potential joint responsibility for the tort alleged by the plaintiff. (It may be possible to have joinder of a non-party as an additional defendant where it is alleged that that person is wholly responsible for the damage or loss claimed by the plaintiff, but it is not necessary to say any more about this in the context of the current case.) ii.

Rules [ 50 ] Rule 12.02 (1) provides that where a defendant claims against any person “who is not a party to the proceeding” that that person is or may be liable to the defendant “for all or any part of the plaintiff’s claim against the defendant”, the defendant may (with or without leave, depending on the circumstances) join that person as a third party. [ 51 ] It is to be noted that the rule is not limited in express terms to claims for indemnity or contribution from the third party.

There is only a requirement that the defendant assert some sort of claim “for all or any part of the plaintiff’s claim against the defendant”. [ 52 ] The wording of this provision is to be contrasted with the pre-1986 rule. Order XV, rule 43 provided in pertinent part: 43.

Where a defendant claims to be entitled to contribution, or indemnity over against any person not a party to the action, he may, by leave of the Court or a Judge issue a notice (hereinafter called the third party notice) to that effect, stamped with the seal of the Court. [ 53 ] Under the former rule, the only basis for asserting a third party claim was if the claim could be fitted under the rubric of a claim for indemnity or contribution. This was the ruling of Goodridge J. in Canadian Acceptance Corp. v.

Victoria Insurance Co. of Canada et al. (1983), 46 Nfld & P.E.I.R. 44 (Nfld S.C.T.D.) where he wrote at paragraph 161 that “third party procedures under the rules of this court involve contribution and indemnity only”, and in Collavino Inc. v. Newfoundland (1985), 56 Nfld. & P.E.I.R. 265 (Nfld. S.C.T.D.) at paragraph 19 where he observed, as quoted earlier, “the prevalence of the practice [ of making third party claims that were not strictly claims for either contribution of indemnity] does not justify it.” See also Memorial University of Newfoundland v. Lundrigan Group Ltd. (1985), 57 Nfld. & P.E.I.R. 85 (Nfld.

S.C.T.D.) at paras. 6-11 and 35 . [ 54 ] A claim for indemnity is a claim that another party save the indemnity-claimant harmless against loss or damage which the indemnity-claimant has incurred or suffered or will incur or suffer at the hands of another, and to reimburse the claimant in respect of such loss or damage. The claim may arise from an express contract, by implication of law or from statute. An example of a claim to indemnity arising from implication of law is where

an act is done at the request of another, the act turns out to be injurious to a third

party and in consequence of doing the act the doer incurs liability to the third party (Birmingham and District Land Co. v. London andNorth Western Railway Co. (1886), 34 Ch. D. 261 (C.A.)). Other diverse examples include: (

i) where an agent incurs loss while lawfullycarrying out the mandate of his or her principal; (ii) where a principal suffers loss by incurring liability to a third party as a result of thewrongful actions of his or her agent or employee; (iii) where a trustee causes a co-trustee to incur costs through the trustee’s negligentmanagement of the trust; and (iv) where an obligation arises in equity from the relationship between the parties, such as between trusteeand beneficiary. While the circumstances where an obligation to indemnify arises by implication of law are diverse, they are not open-ended.

The obligation cannot be imposed simply by the exercise of ad hoc discretion. As noted by Goodridge J. in Collavino, atparagraphs 18-21, just because a party may have a claim for damages over against a third party does not entitle him or her to a claim inindemnity or contribution. This was the traditional English position as enunciated in Birmingham and District Land Co. v.

London andNorth Western Railway Co, supra., at pages 272 and 274-275, which was cited and relied on by Goodridge J. in Collavino at paragraphs15-16 and Lundrigan at paragraphs 18-19. [55] A claim for contribution, on the other hand, is in one sense a claim to a partial indemnity. However, the basis of the right isdifferent. As noted by Goodridge J. in Collavino at paragraph 18, the right to contribution is based on general principles of justiceinvolving the equitable sharing of responsibility among persons who are jointly responsible for a claimed loss.

It usually arises asbetween joint debtors, contractors, trustees, sureties or tortfeasors. In the case of contribution between joint tortfeasors, that type of thirdparty claim is now governed by the Contributory Negligence Act. [56] The application of the former rule respecting joinder of third parties therefore focused on whether a recognized category ofindemnity or contribution was claimed. If not, the rule was inapplicable and the procedure was unavailable even if there was potentiallya claim over against a third party for damages in negligence or under a separate contract.

The question now arises whether the scope ofthe right to join someone as a third party is so limited under the current rule. [57] The current rule does not, as noted, refer to the words “contribution or indemnity”. It does, however, focus on circumstanceswhere the putative third party “is or may be liable to the defendant for all or any part of the plaintiff’s claim against the defendant”(emphasis added).

It could be said, therefore, that the only circumstance where a person could be brought into the litigation as a thirdparty is where the defendant is claiming to pass on to the third party all or a part of what the defendant is found liable for to the plaintiff.The traditional way in which that could be done was, of course, by way of claims for contribution or indemnity.

On this analysis, thephrase “is or may be liable to the defendant for all or any part of the plaintiff’s claim against the defendant” is simply another way ofsaying “contribution or indemnity” and the scope of the current rule has not been effectively expanded. [58] I do not accept this

interpretation. In the first place, there appears to have been a conscious change in use of language in thedrafting of the rule. That is normally taken as an indication of an intention to change the law. Secondly, a more expansive

interpretationis consistent with the broader language of

section 94 of the Judicature Act . As noted, this

section is the statutory authorization for thirdparty procedure. It contemplates a person being joined as a third party whenever the defendant is making a claim “related to or connectedwith the original subject matter of the proceeding”. That language extends beyond contribution or indemnity claims, inasmuch as it doesnot require the defendant to claim to pass on liability for the plaintiff’s claim to the third party.

All that would appear to be required is toshow that the defendant’s cause of action against the third party arises out of the same general factual and/or legal matrix of the extantissues between the plaintiff and defendant. [59] In England the case law recognized that the English equivalent of

section 94 was broader in scope than was specificallyauthorized by their “contribution and indemnity” rule (which was essentially the same as Newfoundland’s previous rule). However, theEnglish Court of Appeal regarded the rules of court as limiting the application of the broader statutory language. See McCheane v. Gyles,[1901] 1 Ch. 287 (C.A.) and Wynne v. Tempest, [1897] 1 Ch. 110. In this jurisdiction, the decisions in Collavino and Lundrigans canalso be said to stand implicitly for the same proposition, although there was no express reference to

section 94 in those decisions. [60] With all due respect to the early English authorities (the English rules were amended in 1929 to allow third party claims, inaddition to contribution and indemnity, where the defendant claimed relief “relating to or connected with the original subject matter ofthe action”, i.e. in substantially the same terms as the authorizing statute), I would approach the matter differently.

In my view, if thestatutory provision confers jurisdiction on the Court to allow third party procedure where the claim is “related to or connected with theoriginal subject matter of the proceeding”, then that is the scope of the third party jurisdiction that the Court has. The rules of court aremerely the means whereby the Court purports to give guidance as to how the Court’s adjudicative jurisdiction will generally beexercised.

If the rules are expressed or interpreted to circumscribe more narrowly the circumstances where third party proceedings willbe allowed, that would effectively involve the Court in wrongfully declining its jurisdiction. Thus, even if the rule is expressed in amanner that, if literally applied, would be tantamount to declining jurisdiction, that does not mean that the Court cannot exercise itsjurisdiction in other circumstances not contemplated by the rule. [61] Accordingly, the provisions of

section 94 are controlling and should inform the

interpretation and application of the current rule12.02. The touchstone for determining whether the court should exercise its discretion to allow a third party claim should therefore bewhether the third party claim is related to or connected with the original subject matter of the proceeding. [62] A third reason why the rule should be given a more expansive

interpretation is found in case law construing similarly wordedprovisions in other jurisdictions. In Burry et al. v. Centennial Properties Ltd.et al. (1979), (NS CA), 38 N.S.R. (2d)450 (N.S.S.C., App. D.), motion for leave to appeal to SCC refused (1979), 35 N.S.R. (2d) 630, a condominium corporation sued thedeveloper under a homeowner’s warranty for building deficiencies. The developer-defendant third partied the contractor for damages forbreach of contract and negligence, claiming the deficiencies were attributable to the contractor’s faulty workmanship.

There was noexpress contract of indemnity between the developer and the contractor. The contractor argued that it could be found liable as a thirdparty only when the third party was bound by an agreement to indemnify the defendant from liability to the plaintiff (which was not thecase on the facts) and not when their claim was based merely on a contractual obligation which happened to be similar to the one underwhich the defendant was liable to the plaintiff.

This argument was rejected. [63] The Nova Scotia Court of Appeal held that Nova Scotia’s rule 17.02, the equivalent of our rule 12.02, should be construed toallow the claim. After tracing the history of the linguistic development of the English and Nova Scotian judicature provisions and rules,

Hart J.A. explained: [31] I am unable … to confine the rule so narrowly [i.e. to encompass only claims for indemnity and contribution]. There are no words, as in the former rule, that limit proceedings to cases of “contribution or indemnity”, and, in my opinion, the wording of s. 17.02 is broad enough to cover the situations envisaged by the rule adopted in this province in 1960 [i.e. a provision similar to the revised English rule which contemplated, in addition to contribution or indemnity claims, claims for relief “related to or connected with the original subject- matter of the action”].

All the defendant must show is that the plaintiff is claiming against him something for which the third party is liable to the defendant and it then becomes convenient to have the common issues tried at the same time unless good reason is shown by one of the parties to convince the Court that it would be unfair to have a joint trial of the two causes.

The wording of our present rule encompasses not only situations in which contribution or indemnity is involved but also those other circumstances referred to in…the modern English rule. [32] The only real limitation on the use of third party proceedings is contained in the Judicature Act where the second cause of action must be “relating to or connected with the original subject of the proceeding”, but once that connection is established then procedurally all common issues should be tried and disposed of at the one time. … [35] Surely, as here, where one party undertakes an obligation to provide a housing unit to its customer “constructed in a thorough and workmanlike manner” and then contracts with another party to construct that unit in a similar manner, and it was subsequently alleged that the unit was not properly constructed, there are sufficient common issues to justify the holding of a single trial in which all parties may participate and in which the rights of all parties will be determined in accordance with the findings of the Judge. [36] The defendant would simply know that if he was liable for failure to live up to his contractual obligation to the plaintiff he could pass this obligation over to the third party, who did not agree to indemnify him, but did agree to do all the things necessary to enable him to meet his obligations to the plaintiff.

This, in my opinion, is the plain meaning of the words in rule 17.02. (Emphasis added.) [ 64 ] Although the conclusion reached in Burry was helped by the fact that the Nova Scotia Judicature Act had been amended in 1960, in language which tracked English amendments, to refer not only to indemnity and contribution claims but also other claims for relief “relating to or connected with the original subject-matter of the action”, the reasoning in the case – to the effect that the language of Nova Scotia’s rule 17.02 encompassed more than indemnity and contribution – is equally applicable to the Newfoundland rule.

Furthermore,

section 94 of our Judicature Act contains the same critical language as the Nova Scotia and English statutory provisions both before and after their 1960 amendment. [ 65 ] Burry stands, at the least, for the proposition that a rule of court in the words of our rule 12.02 encompasses claims by a defendant against a third party where the defendant is seeking to recoup from the third party for losses to which the defendant is exposed as a result of a claim by the plaintiff regardless of whether, technically, the defendant’s claim is for indemnity or contribution (see paragraphs 35 and 36 in Burry quoted above).

In fact, the analysis and comment in paragraphs 31 and 32 reproduced above can also support an even broader

interpretation which gives primacy to the statutory language rather than to the language in the rule, namely, that a claim could be made against a third party by a defendant even though he is not seeking to pass on to the third party the losses associated with the plaintiff’s claim against the defendant but instead wishes to assert a completely separate cause of action that happens to arise out of the same factual matrix of the claim made by the plaintiff and the defendant and to use that claim to offset his losses associated with the plaintiff’s claim against him. [ 66 ] It should also be noted that Hart J.A. in Burry also commented by way of obiter dicta that had a claim been made by the defendant against the third party in negligence as well as in contract, third party joinder might well have been justified on that basis as a claim of apportionment of liability, or contribution, under the Nova Scotia equivalent of our Contributory Negligence Act on the basis that both the defendant and third party owed a duty of care to the plaintiff .

See paragraphs 20 and 34. Since negligence had not been pleaded against the third party, however, it was not necessary to decide that point in that case. [ 67 ] A fourth reason to construe rule 12.02 to encompass claims additional to those of contribution and indemnity is that such a construction is more consonant with the underlying purpose of third party procedure.

The purpose of the procedure is to prevent multiplicity of actions and to enable the Court to prevent the same question or claims resulting from the same factual circumstances from being tried twice with possibly different results. (See also Fitzpatrick v. A. Harvey & Co. Ltd. et al. (1986), 59 Nfld. & P.E.I.R. 144 (Nfld.

S.C.T.D.) at para. 147 where the additional related purposes of allowing the third party to defend the plaintiff’s claim saving costs and preventing the plaintiff from enforcing a judgment against the defendant before the third party issue is determined, are mentioned at paragraph 14.) Claims against third parties arising out of the circumstances surrounding the plaintiff’s claim against the defendant but not strictly involving claims for contribution and indemnity can also fall within these policy objectives.

This is certainly the view expressed in Burry , when the Court concluded on the facts of that case that “there are sufficient common issues to justify the holding of a single trial in which all the parties may participate and in which the rights of all parties will be determined…” (paragraph 35). [ 68 ] Accordingly, I conclude, contrary to the assertion in Canadian Acceptance Corp. v.

Victoria Insurance Co. of Canada et al., supra to the effect that third party procedure “should not be used in ‘claims over’ grounded in negligence” (paragraph 161), (or, I would add, claims for damages under a separate contract that did not provide for indemnity), the current rule now allows for those types of claims to be asserted within the third party procedure contemplated by rule 12.02.

This means that one does not approach the question of whether the claim is “for all or any part of the plaintiff’s claim against the defendant” on the basis of whether, within the rules relating to contribution or indemnity, such liability as a matter of law can be passed on to the third party.

Rather, the question is, as a practical matter, can the defendant, by asserting a separate claim arising out of the same factual circumstances and by recovering damages from the third party on the basis of the third party’s involvement in those circumstances, effectively make the third party ultimately answer in whole or in part for the losses that have occurred? To the extent that Canadian Acceptance, Collavino and Lundrigan stand for the narrower proposition that third party claims are limited to contribution and indemnity, they should now be regarded as overruled.

[69] Whether third party procedure as contemplated by

section 94 of the Judicature Act would also allow, outside the words of rule12.02, a third party claim that is not “for all or any part of the plaintiff’s claim against the defendant” and not dependent in any sense onliability between plaintiff and defendant (provided it still can be said to be “related to or connected with the original subject-matter of theproceeding”) is not necessary to be decided in this case and is better left for another day. B.

Procedure for Making a Third Party Claim [70] The current rules allow a defendant to issue and serve a third party notice without leave of the Court at any time before thedefendant files a defence. Once a defence has been filed, however, leave of the Court must be obtained. In situations where leave is notrequired, therefore, it is possible that a third party notice that makes claims that do not fall within the scope of rule 12.02 may be issued.

In those cases, the appropriateness of making a third party claim may nevertheless be raised on an application for directions under rule12.06(1) or on an application to strike the notice under rule 14.24. In situations where leave to issue is required, the appropriateness ofthe proposed third party procedure may be dealt with on the leave application. In either situation the considerations are the same. [71] It is common practice for a defendant who wishes to third party another person to set out in the statement of defence the factualcircumstances that justify the claim. Dew has not done so here.

However, subject to any irremediable prejudice that may be caused toother parties, that is not fatal to its position. There is nothing in the rules that makes it mandatory. [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,be set out in the affidavit supporting the third party application: rule 12.03(2)(c). Furthermore, the facts so relied on must not beinconsistent with the facts pleaded in the defence (rule 14.10) unless they are pleaded in the alternative (rule 14.08: Montana Band v.Canada, (FC), [1991] 2 F.C. 273 (Fed.

T.D.), aff’d on appeal [1993] 2 C.N.L.R. 134 (FCA)). Failing that, a partymust seek leave to amend the factual substratum of the defence before proceeding with the third party application. [73] On the third party application, the Court must address whether the nature of the claim falls within the scope of third partyclaims allowed by the rules (or by the Contributory Negligence Act where the claim alleges joint tortfeasors).

Although the rules requirethat all existing parties be given notice of the application, the intended third party (unless already a party in another capacity) need not begiven notice or be heard at that stage. This means that if, following service of the notice, the third party believes the procedure is notappropriate, the objection can be raised on an application for directions or for striking out. In practice, notice to the intended third partyis often given and the third party appears and may be heard.

In the current case, the third parties were heard on the application. [74] In addition to determining whether the nature of the claim is within the scope of third party procedure, the Court must alsoconsider practical questions related to whether, from a logistical and timing point of view, the third party claim can be accommodatedwithin the contemplated litigation between the plaintiff and defendant. The granting of leave, or the determination of whether a thirdparty claim should be set aside, is a discretionary matter.

In exercising the discretion the court must be animated by considerations ofjustice and fairness to all parties or potential parties. Thus, if the timing of the application to join the third party may compromise a trialbetween the plaintiff and defendant that is imminent, the Court may exercise its discretion to refuse joinder even if the claim is such thatit falls within the scope of the rule: Chain Stores Limited v.

Blundon’s Realty Limited et al. (1976), 17 Nfld. & P.E.I.R. 327 (Nfld.S.C.T.D.). [75] Although the third party issues substantively only involve the defendant and third party, the plaintiff nevertheless has an interestin the outcome of a third party joinder application because he or she might be adversely affected both with respect to delay of theproceedings and costs: Canadian Paraplegic Assn. (Newfoundland and Labrador) Inc. v.

Sparcott Engineering Ltd. (1997), (NL CA), 150 Nfld. & P.E.I.R. 203 (NFCA) at para. 20. [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. S.C.T.D.) or would “embarrass ordelay the trial or [be] otherwise inconvenient” within the meaning of rule 40.13.

It has also been suggested in some cases that a lack ofan explanation 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 at para 20); in most cases, however, delay in applying would not normally,in itself, result in refusal unless another party can show prejudice as a result of the joinder (Congregation of the Sisters of Mercy ofNewfoundland v. Stokes Management Ltd. (2002), (NL SC), 217 Nfld. & P.E.I.R. 153 (Nfld. S.C.T.D.) at para. 22;Churchill v.

Eveleigh, (NL SC), 2012 NLTD(G) 39, 320 Nfld. & P.E.I.R. 342 at paras. 25-27), such as substantialincreased cost or interference with an existing trial date or significantly prolonging the time before the matter would get to trial. [77] On an application to join a third party, the accompanying affidavit should not be “limited to a perfunctory recitation of thechronology of events that have occurred to date but [should encompass] a requirement that the applicant make serious efforts to providethe judge information to enable the judge to have as good an overall sense as possible of the impact of the application on the futureprogress of the proceeding” (Canadian Paraplegic Assn. at paragraph 20). [78] At the end of the day, the burden is on the applicant for the issuance of the third party notice to justify its issuance.

Considerations A. Positions of the Appellant [79] Ryan Designs and Knight take the position that Dew, as the applicant for the issuance of the third party notice, did not showand could not have shown any reason for joining them as a third party. They argue that the judge’s expressed reasoning for orderingjoinder (because a relationship existed between all parties which makes it fair and equitable that the third parties save Dew from loss)cannot form a sufficient basis of a decision to join them.

It is not simply a sense of perceived fairness and equity which can provide ajustification; there must, instead, be a recognized cause of action that is apparent from the pleadings. Without that, it is not enoughmerely allow third party proceedings solely because it might be more convenient to have all parties involved before the court.

[ 80 ] Essentially, Ryan Designs claims, citing Collavino , that Dew must show that there was a contract, either express or implied by law, between Dew and Ryan Designs whereby Ryan Designs was obligated to indemnify Dew with respect to any potential claims made by Pakara, the plaintiff, against Dew. Relying on Dew’s defence, to the effect there was no sub-contract between Dew and Ryan Designs but, rather, a direct contract between Pakara and Ryan Designs, Ryan Designs submits that no possible claim for indemnity could be made out.

Again relying on Collavino , Ryan says there must be an obligation to indemnify and not simply a right to claim damages over against the third party.

Implicit in this argument is that rule 12.02 is limited to claims for contribution and indemnity. [ 81 ] Ryan Designs also submits that Dew could not claim contribution from Ryan Designs on the basis that they were joint tortfeasors because “the parties in this case are not joint tortfeasors as it is a contract case” (Appellant’s Factum, paragraph 8). [ 82 ] While supporting Ryan Designs’ submissions, Knight additionally submits that on the pleadings and in the affidavit supporting the application there is even a more tenuous connection between Knight and Dew and/or Pakara than there is involving Ryan Designs.

The absence of a pleaded relationship of responsibility is, Knight submits, fatal to any claim by Dew that would justify being dragged in as a third party. B. Analysis of Applications Judges’ Approach [ 83 ] The applications judge erred when he concluded that “the applicant…would have to either fall under the category of qualifying as…claiming contribution or, in the alternative that he is claiming or falling under the category of indemnity”. For reasons expressed above, rule 12.02 is not limited to claims for indemnity or contribution.

That said, it does not follow that the judge had an open-ended discretion to join parties based solely on a perception that it would be “equitable”, based on the relationships of the parties and intended third parties, to join a person as a third party even if it might have the incidental effect of eliminating a multiplicity of actions and possible inconsistent findings. [ 84 ] The applications judge ultimately concluded that a third party claim for indemnity existed in this case. He reached that conclusion on the basis of the quotation from Wynne v.

Tempest referred to by Goodridge J. in Lundrigan to the effect that a right to indemnity “may arise out of a relationship existing between the parties which makes it equitable that one should save the other from loss.” Read in context, that statement does not allow a judge, whenever he thinks it equitable, to declare a right to indemnity to exist just because there is a close relationship between or among the parties.

There are established relationships where the principles of equity recognize that a person may, because of the relationship, be obligated in conscience, i.e. in equity, to indemnify another from loss.

An example given by Chitty J. in Wynne was: Such an obligation [to indemnify] arises in equity from the relation of the parties where two trustees are liable for a breach of trust and one has applied the trust fund to his own use; in that case the trustee who has so misapplied the fund is liable to indemnify his co-trustee. (p. 113). [ 85 ] By concluding that a right to indemnity existed on the pleaded facts without considering whether the relationship was one which was recognized in equity as imposing on the conscience of the potential third party an obligation to save the defendant from loss, the applications judge also erred. [ 86 ] It does not follow from these conclusions of error, however, that the decision reached by the applications judge was necessarily incorrect.

There may be other bases, considering the true scope of rule 12.02 or the application of the Contributory Negligence Act , on which the issuance of third party notices could be justified. It is necessary to consider the third party claims against Ryan Designs and Knight separately. C. Third Party Claim Against Ryan Designs [ 87 ] The starting point in determining whether a third party claim by a defendant is supported by a recognized cause of action is the initial statement of claim.

That pleading identifies the nature of the claim to which the defendant is exposed and which the defendant wishes to pass on, in whole or in part, to the putative third party or for which the defendant wishes the third party to face ultimate responsibility. In this case, Pakara claims damages from Dew based on breach of contract and negligence with respect to the construction and design of the apartment septic system by engaging Ryan Designs by way of subcontract to design the system.

Pakara therefore claims that Dew engaged Ryan Designs by contract to do the work at issue. [ 88 ] The second place of focus is the defence of the defendant. This defines the position of the defendant and helps identify whether the defendant is asserting that there is a risk of liability to him or her which could be passed on to the third party or for which the defendant considers the third party is ultimately responsible in a chain of responsibility. In this case, Dew’s fundamental position is that it did not agree to subcontract the impugned work to Ryan Designs but that Pakara contracted directly with Ryan.

That is an assertion that Dew had nothing to do by way of contract or breach of tortious duty with respect to the septic design work. Dew’s position is summarized in paragraphs 8 and 19 of its Defence as follows: 8. … [Dew] denies it ever had any responsibility for the subcontracting of the sewage disposal design or for ensuring the sewage disposal design was put through the proper government approval process. [Dew] states that responsibility for preparing a sewage disposal system for [Pakara’s] apartment complex was the sole and exclusive responsibility of [Ryan Designs]. 19.

In summation, [Dew] denies that his work on the design of [Pakara’s] apartment building was done negligently or in breach of contract with [Pakara]. The defence is a straightforward denial of any liability with a request for dismissal of the action. In essence, Dew is saying that Pakara has sued the wrong party. [ 89 ] Viewed in isolation, this position does not justify any third party pleading. There is nothing to which, on Dew’s position, it can be exposed that needs to be passed on to anyone else.

Viewed against Pakara’s statement of claim, however, it is obvious that there is a risk of exposure to Dew because the court might ultimately side with Pakara’s version of the facts. In that scenario, Dew would face

potential liability which it might wish to try to pass on. [ 90 ] Although there is nothing in Dew’s defence that pleads any position in the alternative to Dew’s stated position that it has no contractual or tortious relationship with Ryan Designs, that is not, as indicated previously, fatal to Dew’s position. The basis for a third party 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 third party notice that is ultimately issued (especially where it can be issued without leave of the court) and as well in the affidavit supporting an application for leave to issue a notice: rule 12.03(2)(c). [ 91 ] It is necessary therefore to examine Dew’s third party application to see if a potential third party claim has been set up. The only assertions in Dew’s Interlocutory Application, which was verified by affidavit, that are germane to the current discussion involve four points: (

i) a reference to Pakara’s statement of claim against Dew (paragraph 1); (ii) the assertion that Ryan Designs and Knight should be joined “to ensure that all parties having potential liability in this matter be brought in as parties before the Court so that the matter can be fully adjudicated” (paragraph 7); (iii) the assertion that Ryan Designs and Knight were “directly accountable” to Pakara and were “the parties responsible for the preparation and certification of the design” and “for any flaws and correction of errors” (paragraph 8); and (iv) a conclusory statement that “therefore” Dew claims indemnity from Ryan Designs and Knight “should any of the claims by [Pakara] against [Dew] for breach of contract and negligence be successful” (paragraph 8). [ 92 ] Item (

i) is relevant because it indicates the potential exposure of Dew to liability at the hands of Pakara, if Pakara’s version of the facts is ultimately accepted, on the basis that Dew engaged Ryan Designs by virtue of a subcontract and requested them to do the septic design work. Item (ii) is irrelevant because, as noted previously, the prospect of having all involved parties before the court so that the matter can be “fully adjudicated” is not in itself a sufficient justification for joining third parties.

Item (iii) does not, by itself, assist a third party claim because it is in effect a disclaimer of all responsibility; although it could be said to assert a possible tortious duty of care (“directly accountable”) owed by Ryan Designs to Pakara, it does not also assert that a duty of care is owed jointly by Ryan Designs to Dew as well as Pakara.

Item (iv) is an assertion of a right to indemnity as an alternative position if Pakara is successful in its claim that there was a contract between it and Dew and a corresponding subcontract between Dew and Ryan Designs. [ 93 ] The third party notice may also be looked at to glean how the applicant conceptualizes the third party claims. Regrettably, in this case, it is of little help. The notice asserts that Dew has “no liability” for the damages claimed by Pakara and that Pakara’s claims “are entirely the responsibility” of Ryan Designs and Knight.

It does go on, however, and claim “indemnity” from Ryan Designs for damages, costs and interest “which [Dew] may be ordered to pay to [Pakara]”, without stating the basis on which the right to indemnity is being asserted. [ 94 ] This is very thin pleading indeed. It may well leave Dew open to being required to respond to a demand for particulars. It would have been preferable for the applications judge to have required Dew to submit particulars of its proposed third party claim before considering the application further.

Nevertheless, it is enough of an indication as to the nature of the type of claim that Dew is asserting.

While Dew does not state anywhere the basis on which the indemnity claim is made, it is a fair inference from a reading of Pakara’s statement of claim, Dew’s defence and the third party application as a whole that Dew is claiming, in the alternative to its view of the facts , that if Pakara’s assertions of a contract with Dew, followed by a request by Dew, by way of subcontract with Ryan Designs, that Ryan Designs prepare the septic system design, a right of indemnity arises in the event Ryan Designs did not do the design properly.

It is this assertion, which is implicit in the approach Dew has taken to this matter in the pleadings, that must be evaluated as to whether a basis for third party proceedings exists. [ 95 ] In the first place, there is no basis for Dew to claim that it has a claim for damages over against Ryan Designs for negligence (which even though such a claim does not fall within the concept of indemnity is nevertheless covered, in principle, by the scope of rule 12.02 as discussed earlier).

Dew does not plead, even in the alternative, a duty of care in tort owed by Ryan Designs to Dew nor are any particulars of negligence asserted. Furthermore, there is nothing in Pakara’s statement of claim which could be said, even on Pakara’s version of the facts, to allege any tortious relationship between Dew and Ryan Designs as the basis of a duty of care owed by Ryan Designs to Dew.

The pleadings are completely deficient with regard to setting up such a claim. [ 96 ] Secondly, in the circumstances, the contribution provisions of the Contributory Negligence Act do not provide a basis for a third party claim here. Those provisions depend on their being alleged, either directly or in the alternative, that the claimed loss was caused “by the fault of 2 or more persons” (section 3). It is only in such circumstances that it could be argued that one tortfeasor can claim contribution from the other for losses to which both contributed.

In this case, that would mean there must be a possibility that both Dew and Ryan Designs could be held jointly responsible on the basis of a duty of care owed by each of them to Pakara. See Stanford v. Lawton’s Drug Stores Ltd. , 2013 NLTD(G) 161 at para. 13. No duties of care have been pleaded by Dew, even in the alternative, as owing by Dew and Ryan Designs to Pakara.

Dew has supplied no pleaded facts which would go to support the scenario of fault of both Dew and Ryan Designs contributing to the loss to Pakara. [ 97 ] While it is true that Pakara, in its yet-unamended statement of claim, alleges negligence against both Dew and Ryan Designs, thereby setting up a potential for contribution claims between Dew and Ryan Designs if Pakara’s version of the facts is ultimately accepted, Pakara has since discontinued its action against Ryan Designs and has, as indicated earlier, stated its intention to amend the statement of claim to remove all allegations of negligence and breach of contract against Ryan Designs.

This appeal proceeded on that basis. There is nothing arising from Pakara’s pleading, therefore, that can be relied on by Dew to raise the possibility of a contribution claim against Ryan Designs (indeed, Dew based its application on indemnity alone, not contribution) without Dew amending its own pleadings and re-applying to make a third party claim on this basis. [ 98 ] Thirdly, no express or contractual indemnity is pleaded, simply an obligation to indemnify without asserting how such obligation arises on the facts.

Consequently, there is no basis for claiming an express right of indemnity. [ 99 ] That leaves two questions: (

i) whether it can be said Dew has sufficiently claimed an indemnity arising by operation of law, and (ii) whether Dew may third party Ryan Designs on the basis of a claim of breach of contract not amounting to an indemnity. While, as I have said, the pleadings leave a lot to be desired, the indemnity claim may be able to be supported on the basis of a claim by Dew, in the alternative, that if Dew is responsible to Pakara under a contract between them, and Dew in fact requested Ryan Designs to perform

the design work, a right to claim indemnity from Ryan Designs arose if Ryan Designs did not perform their work adequately, thereby causing Dew to breach its contract with Pakara.

While the evidence at trial might well not establish this factual scenario, it remains a possible conclusion to which the court might come. [ 100 ] In Birmingham and District Land Co., Cotton, L.J. observed in obiter at p. 272: [I]f A. requests B. to do a thing for him, and B. in consequence of his doing that act is subject to some liability or loss, then in consequence of the request to do the act the law implies a contract by A. to indemnify B. from the consequences of his doing it. [ 101 ] The situation thus described is, of course, the reverse of the situation here, where the indemnity is being sought from the requested party.

It does not follow in the reverse situation, however, that an implied obligation to indemnify would necessarily arise simply from the party being requested undertaking the work. In Birmingham, Fry L.J. observed at p. 276: When a man contracts that he will do a thing, it can hardly be taken as implying a contract as to what will arise if he does not do the thing. In the same manner with regard to tort, the right to damages for tort does not arise from any implied contract that if I do wrong I will indemnify the person wronged for the wrong I have done.

It is the common law right which everyone has to damages for a wrong which has been done to him. Therefore the right to such damages is not a right to indemnity… Something more is required before a right to indemnity can arise. The situation has to be such that from the relationship of the parties, it was understood or implied that by doing the work the requested party was undertaking that if it was done incorrectly, he or she would stand behind the work and indemnify the requestor from resulting loss.

It was put this way by Bowen L.J. in Birmingham at p. 274: [A right to indemnity arises] by implied contract if the true inference to be drawn from the facts is that the parties intended such indemnity, even if they did not express themselves to that effect, or if there is a state of circumstances to which the law attaches a legal or equitable duty to indemnify, there being many cases in which a remedy is given on an assumed promise by a person to do what, under the circumstances, he ought to do. [ 102 ] While it is impossible to tell at this point whether this scenario is a likely result, it cannot be discounted entirely.

Even if such an implied indemnity cannot be said to have been contemplated, however, a claim by Dew against Ryan Designs for damages for breach of contract for failing to design the septic system properly clearly remains a possibility on Pakara’s version of the facts and as an alternative claim by Dew. As noted previously, rule 12.02 permits a claim over for damages even if the claim does not amount to a claim for indemnity.

This is recognized in Burry , where Hart J.A. commented: [35] Surely, as here, where one party undertakes an obligation to provide a housing unit to its customer “constructed in a thorough and workmanlike manner” and then contracts with another party to construct that unit in a similar manner, and it was subsequently alleged that the unit was not properly constructed, there are sufficient common issues to justify the holding of a single trial in which all parties may participate and in which the rights of all parties will be determined in accordance with the findings of the judge. [ 103 ] In the current context, therefore, depending on how the evidence unfolds and what findings the trial judge makes, it is possible that Dew could have a claim against Ryan Designs to be indemnified for losses Dew faces at the hands of Pakara on the basis that, having been requested to undertake the work in a competent manner and undertaking it, Ryan Designs was implicitly undertaking that if it was not competently performed, Ryan Designs would indemnify Dew from any resulting loss.

Alternatively, and perhaps more likely, Dew could have a claim against Ryan Designs for damages for breach of contract. Either of these types of claims can be the subject of third party proceedings. [ 104 ] Of course, at this point all of this is speculative. One of the reasons for this is the high level of abstraction with which all of the claims have been made and the fundamental disagreement between Dew and Pakara as to who contracted with whom (presumably - and surprisingly - because the engagements were not reduced to writing or evidenced in writing).

The result has been an absence of particulars that might better define the scope of claims being advanced, especially against third parties in the event alternative scenarios come to pass. [ 105 ] Nevertheless, given the state of the pleadings and the possibility that a third party claim could arise for the reasons earlier expressed, it would be inappropriate not to allow the third party claim to proceed against Ryan Designs on the bases mentioned.

It would be important, however, for further particulars of the claim to be provided on the alternative basis that Dew will not be able to establish its claim of lack of any responsibility.

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