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CIVIL PROCEDURE - Parties - Third party procedure - Striking out or setting aside

Monday, July 16, 2018 @ 9:03 AM  

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Application by the third party law firm Ahlstrom, Wright, Oliver & Cooper LLP (AWOC) to strike the third party notice. The 139 plaintiffs in the action were survivors of sexual abuse perpetrated on them by a teacher or social worker who were employees of the government of the Northwest Territories when they committed their crimes. Many years later, groups of survivors came together to sue the governments of the Northwest Territories and Nunavut, seeking damages for the abuse they suffered. The plaintiffs retained the legal services of the defendant lawyer Budden and his law firm to represent them in five civil actions. The defendants negotiated out-of-court settlements for each of the plaintiffs. In 2011, some or all of the plaintiffs retained AWOC to sue the defendants for negligence in the way they handled the plaintiffs’ original claims. One part of the plaintiffs’ claim against the defendants related to whether the defendants were in breach of trust and fiduciary duties by negligently deducting HST from the settlement proceeds. The defendants alleged that AWOC had a duty to apply to the Canada Revenue Agency (CRA) on behalf of its clients, the plaintiffs, to get back the HST. The defendants therefore said that AWOC was negligent and ought to be added as a party to the civil lawsuit. AWOC took the position that the third party notice disclosed no cause of action, would delay a fair trial of the action and was an abuse of process.

HELD: Application dismissed. AWOC did not apply to the CRA to have the HST reimbursed to its clients. Therefore, it could have been argued that AWOC was wholly or partly responsible for the lost HST funds. The Contributory Negligence Act alone permitted the defendants to issue and serve the third party notice. The court was concerned about the power imbalance between the plaintiffs and AWOC. The plaintiffs were survivors of sexual abuse who resided in isolated and remote Arctic communities. The court determined that branch one of the BC Adams test did not fit Nunavut. The strict confines of that branch of the test prohibited the court from exercising its inherent and prescribed discretion when determining the justness of a third party pleading. The court found that the Ontario Corcoran test was responsive to the unique circumstances of this case. The pleadings demonstrated that the plaintiffs arguably shared a reasonable expectation that AWOC would give them sound legal advice and would take all necessary steps to get their HST back. The third party procedure would not unreasonably delay the trial or affect its fairness, and it was not an abuse of the court’s process.

JD1HI v. Budden, [2018] Nu.J. No. 17, Nunavut Court of Justice, P. Bychok J., June 12, 2018. Digest No. TLD-July162018001