Legal Blog

Complex

Life is complicated, as is litigation, which is just a reflection of life’s complications. Our latest case, Pentland v. Anderson, a 2001 decision of the Ontario Superior Court of Justice, is an example.

Scorecard

The issues in the main action are relatively simple; the interweaving of the players is not.

Vendors purchased raw land in 1987 and retained a contractor to build a house on it. The vendors sold the house in 1997 and, in that sale, represented to the purchasers that the vendors were not aware of any “land filling in the immediate area.” The same solicitors acted for the vendors on their purchase and the subsequent sale.

The purchasers took possession and ultimately commenced an action against the vendors, the contractor, and the municipality claiming that the soil on the lands was bad and that this resulted in various deficiencies in the house. The vendors crossclaimed against the municipality and the contractors for contribution and indemnity under the Negligence Act.

In 1969, there were two documents registered on title disclosing that the land had been used as a gravel pit. We presume that the municipality was joined based on an allegation that the municipality should have known of the landfill operations and, accordingly, should not have issued a building permit without insisting on proper soils investigation reports.

The municipality and the contractor each issued a third party action against the solicitors. The municipality claimed contribution and indemnity under the Negligence Act regarding the purchasers’ claim for damages. The contractor claimed contribution and indemnity under the Negligence Act regarding the purchasers’ claim for damages and the vendors’ crossclaim.

You will note that the vendors did not issue a third party action against the solicitors. This is not surprising, considering that the solicitors were acting on behalf of the vendors in the litigation.

The solicitors moved to strike out the third party actions, contending that they contained no viable causes of action. The vendors moved to strike out that the third party actions on the basis that the actions were frivolous and vexatious. We are not sure how the vendors had standing to bring this motion, but bring it they did.

The third party actions of the municipality and the contractor also claimed against the purchasers’ lawyers but, since those lawyers made no motion to strike, we will not refer to them any further.

Nature of Claims

The contractor and the municipality alleged that the solicitors conducted an improper title search in 1987. Consequently, the solicitors did not notify the vendors of the landfill operations and therefore did not warn the vendors of the possibility of adverse soil conditions. As a result of this omission, the argument goes, the vendors did not warn the contractor and, additionally, the solicitors did not ensure that that the vendors gave a different representation to the purchasers than the landfill representation given as part of the sale.

Municipality’s Claim

The motions judge noted that there was no allegation that the solicitors acted for both the purchasers and the vendors or had a special arrangement in which it could be said that the solicitors had some special duty to the purchasers. Accordingly, any allegation that the solicitors had somehow breached a duty to the purchasers was bound to fail. Similarly, if the solicitors had no duty to the purchasers, there could be no right of contribution or indemnification in favour of another party for the purchasers’ damages. Accordingly, the claims of both the municipality and the contractor under the Negligence Act for contribution and indemnity regarding the purchasers’ claim against them were bound to fail.

Since the municipality’s third party action only dealt with contribution and indemnity regarding the purchasers’ claim, the judge struck out this third party claim in its entirety.

Contractor’s Claim

The contractor had also claimed for contribution and indemnity regarding the vendors’ crossclaim. The theory was that the solicitors contributed to the vendors’ damages because, had they done their job and warned the vendors, the vendors would not have been potentially liable for damages to the purchasers. As long as the solicitors could be liable to the vendors, then, another tortfeasor, such as the contractor, could claim contribution and indemnity against the solicitors. The judge held that although section 5 of the Negligence Act refers to damages, this includes contribution and indemnity.

The solicitors argued that the third party action was unnecessary because the solicitors were the agents of the vendors and, therefore, everything that the solicitors knew or did could be attributed back to the vendors. Accordingly, the contractor’s defence to the crossclaim would produce the same results as its third party action against the solicitors.

The judge agreed with that concept but disagreed that the result was a foregone conclusion. She felt that there was a possibility that the special knowledge of the solicitors, or the fact that that the solicitors did not have that special knowledge because of their failure to properly search title, might not be attributed back to the vendors. Accordingly, since it was not “plain and obvious”, the test to be met when moving to strike a claim based on pleadings alone, that the vendors would be attributed with the knowledge or lack of knowledge of the solicitors, the third party action would have to stand.

As a last gasp argument, the vendors’, in their own motion, complained that the third party action was frivolous and vexatious because the third party action would put the solicitors in conflict with the solicitors’ clients, the vendors. The solicitors might have to divulge information that would prejudice the vendors. The judge made short shrift of this argument in two ways. First, she stated that the result could not make an otherwise reasonable claim frivolous. Second, she stated, without deciding the point, that even without the solicitors being joined, the vendors might still have to produce their files to the contractor. After all, the vendors had put their state of mind in issue in the litigation and might therefore not be able to hide behind solicitor-client privilege.

Consequence

The solicitors are now joined into the fray, even though their clients did not want them there. The practice of law is complicated.

We assume that the solicitors will no longer be acting for the vendors in the litigation. They were close to the line for conflict of interest when they acted for the vendors in the initial stages of the litigation. They recognised that they had clearly crossed the line once the defendants issued the third party actions.

Will the solicitors be unsuccessful? We do not know. It depends on the facts. Did the solicitors know of the old landfill use? Was it necessary for the lawyers to search back to 1969 in order to certify title? Did the solicitors tell the vendors of the old landfill use? There are too many questions and, at this early stage in the proceedings, not enough answers.