Lessons Learned
- Procedural efficiency is usually possible, but cannot be arrived at by brute-forcing past the plain meaning of the controlling legislation.
- Legislation isn’t just the statute, it’s also the regulations appended to the statute. Read the regulations, know the regulations, don’t attempt to evade the regulations to make your life easier.
Litigation
Mirella Cesario-Valela and Vito Valela are owners of property involved in a thinly-described construction dispute with Backyard XP Inc., the plaintiff and lien claimant. The Valelas sought leave to issue a third-party claim against Garrison Creek Construction Inc., alleging that Garrison is an alter ego, agent, and de facto plaintiff – as the Valelas put it, the “puppet master” of Backyard.
The Court found that the accusations had at least prima facie merit, given that the two corporations are admittedly related and that documentary evidence showed that Garrison played an active role in construction of the property.
Analysis
The Court was, however, troubled by the procedural availability of the proposed third-party order, which the Valelas requested pursuant to section 4 of the Procedures for Actions Under Part VIII regulation of the Construction Act, which deals with third party claims in lien actions.
The Court distilled section 4 into three requirements in order to obtain leave to issue a third-party claim:
- The motion must be on notice to the owner, as well as all persons who have subsisting preserved or perfected liens at the time of the motion.
- The proposed claim must be for contribution or indemnity from the third party in respect of the claim against the party seeking to add the third party.
- The court must be satisfied that the trial of the proposed third party claim will not unduly prejudice the ability of the third party or of any lien claimant or defendant to prosecute a claim or conduct a defence, or unduly delay or complicate the resolution of the action.
The Court had no trouble finding that notice was provided to all relevant parties, with the note that while not strictly required, it’s good practice to notify the proposed third party, as was done here.
The second requirement proved more difficult. The Court referenced a line of case law for the proposition that the claim must be a true claim for contribution or indemnity, not a veiled claim for damages, and observed that the Valelas included no draft of their proposed claim in their application materials and refused to answer questions posed on cross-examination as to what form of relief would be sought, before conceding during submissions that the claim against Garrison was intended to be as against a “proper party”, i.e. seeking damages and not merely contribution or indemnity.
Parties cannot be added to a lien action by way of counterclaim, the Court bluntly stated. There is no judicial discretion, regardless of any obvious litigation economies. As the Court explained, per sections 2 and 4 of the relevant regulation, the Valelas “may counterclaim against Backyard for any claim that they have against Backyard. They are not entitled advance their counterclaim against other parties.”
The Court suggested instead that the appropriate procedure was for the Valelas’ claims against Garrison to proceed in a separate action brought under the Rules of Civil Procedure, and for the parties to then “discuss”, a verb one might reasonably suspect contains a hint, whether Backyard’s lien action and the Valelas’ non-lien action against Garrison should proceed in parallel and be tried together.