Legal Blog

Net Widening

Lawyers often attempt to join as many defendants as they reasonably can to an action. They worry that if they miss a prospective defendant, their plaintiff could be prejudiced. For example, the plaintiff includes person “A” as the sole defendant and it turns out at trial that the real culprit is person “B”; or person “A” is found liable at trial but has no assets to satisfy the judgment.

In F.W. Hearns/Actes v. University of B.C., a 2000 decision of the B.C. Supreme Court, the general contractor sued the owner for, we presume, money due on contract. The owner counterclaimed for delay. In addition, the owner joined in its counterclaim a group of the general’s subs claiming that they were liable to the owner for delay. The owner was likely worried that its delay claim against the general was so strong that the general might not have sufficient funds to pay the award. The owner, therefore, wanted to widen its net to catch other fish.

No Contract 

Of course, the owner had only contracted with the general. It had no contract with the subs. The owner, therefore, claimed that the subs were liable to it in tort, that they had a duty of care to do their work on a timely basis and failed to meet that duty. In essence, the owner wanted the court to extend the exceptions to the rule that one cannot claim in tort for pure economic loss. Property damage, yes; personal injury, yes; economic loss, no. We covered this concept in our analysis of the Supreme Court of Canada decision in Martel Building Ltd. v. Canada (see newsletter of March 2001).

Uphill Battle 

The owner had to demonstrate that the subs owed a duty of care to the owner. Before there could be a duty of care, there had to be a sufficiently close relationship between the owner and the subs that in the reasonable contemplation of the parties, carelessness on the part of the subs would cause damage to the owner. We think the subs conceded that there might be a sufficiently close relationship. However, the owner still had to demonstrate that there were no considerations to limit or negative the scope of the duty, the class of persons to whom it was owed, or the damages to which a breach would give rise.

No Way 

The judge held that policy reasons militated against a cause of action. The rationale to disallow a cause of action for pure economic loss outside of a contractual situation is that a person could become liable to an indeterminate class for an indeterminate time in an indeterminate amount. If the subs were liable to the owner, why could they also not be liable to the potential occupiers of the building, other contractors and other subs, and anyone else affected by the delay – in short, an indeterminate class of persons.

Further, on a construction project, the owner is the best person to organise its affairs to protect itself against delay. It could have used the project management method of building its project and contracted directly with its subcontractors. It could have required, and ultimately paid for, bonding to cover the possibility of delay. It chose the manner in which contractual provisions were put in place and could not ignore them when it suited its convenience.

The judge dismissed the owner’s claims against the subs.