(the Rules) that the Plaintiff’s Statement of Claim be
struck against each one of them on the grounds it is scandalous, frivolous or
vexatious or an abuse of process.
[2]
Texada and
Pacific say the Statement of Claim should be struck against each of them since
they both are Defendants in another action filed in this Court the previous
year (“the 07 Action”) pleading, in each case, the same cause of action and
factual matrix which gives rise to their alleged liability: the negligent
loading in the case of Texada and the negligent storing in the case of Pacific,
of two barges, the NA 194 and the NA 195 (the Barges) owned by the Plaintiff
Hodder Tugboat Co. Ltd. (Hodder) which had been placed under charter with JJM
Construction Ltd. (JJM) who then contracted with Pacific to tow the Barges from
Texada Island to Vancouver where JJM has a wharf or ramp.
[3]
It
happened that, when in tow, the NA 194 capsized near the city of Vancouver on November 2, 2006. The NA 195 was handed off in
English Bay by Pacific to a Hodder
tug which towed it to the JJM ramp where it was secured on November 3,
2006, but began to list and subsequently sunk after efforts to remove its cargo
of rocks failed to avert its being submerged.
[4]
The
Plaintiffs in the 07 Action, filed on November 9, 2007, are Hodder and JJM; the
Defendants are Texada, Pacific and its ship the “Pacific Mariner II”. In the 07
Action, the Plaintiffs claim: (a) damages to the Barges in the sum of
$1,200,000 and (b) damages for loss of the use of the Barges in the amount of
$1,000,000.
[5]
In the 08
Action, the sole Plaintiff is Hodder with the Defendants being JJM, Texada and
Pacific and its ship the “Pacific Mariner II”. Hodder’s claim against the three
defendants is: (a) for damages for loss of hire and business loss resulting
from the loss of the NA 194 and NA 195 and (b) damages to the deck of the NA
194.
[6]
Counsel
before me do not dispute the fact the grounds for liability asserted against
Texada and Pacific, as Defendants, are essentially the same in the 08 Action as
they are in the 07 Action. In addition, in the 08 Action, Hodder claims
against JJM that it improperly secured the NA195 to its ramp in or around False
Creek in such as way as to result in the grounding of the NA 195 causing damage
to the bottom of its hull, with the result that on the morning of November 5,
2006, it was discovered to have sunk and rolled. Hodder asserts against JJM
that Hodder’s resulting loss, damage and expenses were all caused or
contributed to by the fault, negligence, breach of duty of care and/or breach
of contract by the Defendants and also by the breach of the charter agreement
by JJM.
[7]
It should
be made clear that the solicitor for the Plaintiff in the 08 Action is
different from the solicitor for the Plaintiffs in the 07 Action. Moreover, I
permitted counsel for the Plaintiffs in the 07 Action to make written
representations and appear before me on these motions.
[8]
The motion
records reveal the following additional facts which are not in dispute:
(1) JJM,
pursuant to the provisions of the charter agreement, was obligated to ensure
the Barges and to name Hodder as a co-assured. Navigators Insurance Company
(Navigator) issued the required policy on January 25, 2006.
(2) Navigators
indemnified Hodder, within the terms of the policy, for the damages incurred as
a result of the damages to the Barges in consideration for which Hodder executed
on various dates prior to the commencement of the 07 Action on November 5,
2007, a Subrogation Receipt and Release for each barge whereby Hodder’s rights
and remedies in respect of the damages suffered were transferred and subrogated
to Navigators who was authorized to use Hodder’s name to effectively exercise
its subrogation rights.
(3) Each
Subrogation Receipt and Release signed by Hodder also contained the following
provisions:
It is further agreed that the
undersigned will not make any claim or take any proceedings, respecting
physical damage to the Barge NA 194, against other person or corporation who
might claim contribution or indemnity under the provisions of the Negligence
Act and the amendments thereto, at common law, or at Canadian Maritime Law,
from the person, persons or corporation discharged by this release.
It is understood that this
Subrogation Receipt and Release does not affect, alter or change any rights the
payee has, or may have, against JJM construction Ltd., for hire under the
charter agreement in force on the date of loss, or for any business loss claims
that the payee has, or that may arise.
(4) On
January 29, 2009, after Texada’s and Pacific’s motion to strike had been
launched, the solicitors for the Plaintiffs in the 07 Action wrote to Texada
and Pacific’s solicitor (who is the same in both actions) “that it should be
clear to everyone that at the present time we are only proceeding with the
portion of the claim in the above-noted action [the 07 Action] with respect to
subrogated recovery of the monies paid to Hodder / JJM by their insurers and
will not be continuing with the portion of the action with respect to the
unidentified portion of Hodder’s loss.”
(5) Counsel
for Navigators advised the Court that, while it will not be proceeding with the
portion of the claim with respect to the un-indemnified portion of Hodder’s
loss, it would be pursuing on behalf of JJM its uninsured portion and
deductibles.
(6) In
the alternative, counsel for Hodder in the 08 Action argued if both actions
cannot continue, it should control the 07 Action. However, counsel for the
Plaintiffs in the 07 Action urged the Court, in that circumstance, the
Underwriters (Navigators) should control the 07 Action. Control of the
proceedings covers the giving of instructions on selection of counsel, on any
procedural matters in the conduct of the proceedings, acceptance of offers to
settle or accept monies paid into court, the launching of appeals and costs.
II. The Legal Principles
and Arguments
[9]
Texada and
Pacific’s motions to strike were argued together and invoke Rule 221(c), the
striking of a pleading which is scandalous, frivolous or vexatious and Rule
221(f), the striking out of a pleading which is an abuse of process. The
foundation of their motion is they are unnecessarily defending two actions and
are facing two different sets of legal counsel in the same cause of action against
each of them. They argue courts are against unjustified multiplicity of
proceedings and sanction the splitting up of a cause of action into two
separate actions – one in respect of an insured subrogated loss and another
action for the uninsured loss as was done here citing Kellar v. Jackson,
[1961] O.W.N. 89 and [1962] O.W.N. 106 [Kellar].
[10]
Counsel
for Hodder in the 08 Action did not disagree with the principle that the policy
of the law is against the multiplicity of actions, but he argues the law
recognizes an exception and the 08 Action qualifies for that exception. He
relies on the Ontario High Court of Justice decision in Arrow Transit
Limited v. Tank Truck Transport Ltd. (1968), 65 D.L.R. (2d) 683 [Arrow
Transit] where Wilson J. who had decided the Kellar case wrote the
following at paragraphs 5 to 7:
5 While the Court is opposed too
multiplicity of actions, there are real problems arising out of conflicts
between an insured and the insurer when they do not co-operate to bring one
action which would suffice for all purposes. The difficulties in the various
situations which arise have not yet all been resolved by judicial decision. In
an appropriate an order has been made dismissed a second action as was done in Kellar
v. Jackson, [1962] O.W.N. 34 (H.C.), leave to appeal to H.C. refused,
[1962] O.W.N. 106 (H.C.). In that case the plaintiff had brought an action in
this Court for damages to his property and for personal injuries. In a second
action in a County Court he sued for damages for personal injuries arising out
of the same accident which was the basis of the claim in this Court. The second
action was removed to this Court and dismissed with costs. As was pointed out
by Schatz, J., in his judgment (p. 106) in which leave to appeal from that
decision was refused, there was only one cause of action and the insured was
entitled to have control of the action until he had been completely indemnified
by his insurer and there should be co-operation between the insured and the
insurer. However, not necessarily at all costs but where possible, the Court
must endeavour to prevent an injustice being done by dismissing an action so as
to deprive a party who has a proper cause of action from recovering.
6 It is quite apparent from the facts as
they are now known, that there should only be one trial in this case. The jury
notice having been struck out I think the proper direction to be given here is
that after the pleadings have been closed the second action should be placed on
the list immediately after the first action and that it be tried at the same
time as the first action, subject to the directions of the trial Judge. In this
particular case the element which moves me to make this disposition is the fact
that in the second action the Registrar of Motor Vehicles is an additional
party and if Joyce is unable to recover his property damage in the first
action, if he is entitled to any, he may be entitled to recover against the
Registrar of Motor Vehicles in the second action damages for personal injuries.
7 The trial Judge, I think, will be able
to take care of any inequities as the result of two actions being brought in
this case.
[11]
Counsel
for Hodder in the 08 Action also relied on Justice Clement’s decision in Vaughan
v. Scott (1979), 107 D.L.R. (3d) 153 which followed Arrow Transit
and the Federal Court of Appeal decision in Freighters (Steamship Agents)
Co. v. Number Four (The), [1983] 1 F.C. 852 where the Court refused to
strike out an action in Canada and vacate the arrest of the ship “The Number
Four” on the ground an identical action had been commenced in Korea. Justice
Pratte was of the view the action in Canada
will not be dismissed as vexatious if that action can provide a benefit to the
plaintiff which it cannot obtain in the foreign proceeding.
[12]
Counsel
for Hodder in the 08 Action argued if both actions cannot continue Hodder and
not the underwriters should control the proceeding, namely the 07 Action.
He cited the British Columbia Court of Appeal decision in Farrell Estates
Ltd. v. Canadian Indemnity Co. (1990), 69 D.L.R. (4th) 767
[Farrell Estates].
[13]
For the
purposes of these motions, I take from the Farrell Estates case, the
following proposition:
Where an insurer has paid the full amount
required by a fire policy, but that amount does not completely indemnify the
insured for his fire loss it is the insured who is entitled to control any
litigation against the person said to have caused the fire. This is the
position at common law, and it has not been changed by s. 224 of the
Insurance Act. If an insurer wishes to control the litigation then the contract
of insurance must provide for complete indemnity of the insured, and the
complete indemnity must be paid. Further, the clause in the proof of loss
form did not constitute an assignment of the insured’s cause of action to the
insurers. The clause constituted only a reminder to the insured of the
provisions of s. 224.
[14]
The
reference to section 224 of the Insurance Act of B.C. should in this
case be a reference to section 81 of the Marine Insurance Act passed by
Parliament in 1993, which defines the rights of an insurer on payment – the
right of subrogation. Counsel did not disagree that this federal statute
dealing with subrogation did not change the common law.
[15]
The Farrell
Estates case was followed by Justice Cullity in Mayer v. 134312 Ontario
Inc., 58 O.R. (3d) 226 [Mayer] where he stayed a subrogated action
endorsing the proposition “there can be no such thing as subrogation to the
right of a party whose claim is not wholly satisfied.” The same proposition
applies in the U.K. see Bennett, The Law of
Maritime Insurance, 2d. ed. (Oxford:
Oxford University Press, 2006) at paragraph
25.16.
[16]
A fair
summary of the legal concepts set out above leads to the conclusion that the
courts seek to avoid a multiplicity of proceedings, for example, by not
permitting the splitting of a subrogated insured claim from an uninsured claim
where only one cause of action exists expecting the insurer and the uninsured
to co-operate in the prosecution of all claims in one action, but in the case
of lack of co-operation, attributing the control of the action to the insured
unless totally indemnified in respect of all loss suffered yet imposing a duty
on that insurer to protect the insurer’s interests.
[17]
However,
the courts do not apply the avoidance of multiple actions arising out of a
single cause of action blindly. There are recognized exceptions to the general
rule; one which qualifies is if not permitting the second action to
continue would cause a real injustice to the plaintiff.
III. Application and Conclusions
[18]
In
listening to the parties, it became evident none were advocating that Hodder’s
claim against JJM be foreclosed which the Navigators and Hodder had preserved
in the Subrogation and Release. However, a solution had to be found to overcome
the procedural difficulties and inherent conflicts of interest in the situation
where Hodder and JJM are co-plaintiffs on the 07 Action but Hodder is also
suing JJM as a Defendant in the 08 Action. Counsel for the Plaintiffs in the 07 Action
recognized as much when he advised he would not pursue Hodder’s uninsured claim
against Pacific and Texada.
[19]
Hodder in
the 08 Action and counsel for the Plaintiffs Hodder and JJM in the 07 Action
suggested the solution was to let both actions continue, case-managed to avoid
procedural difficulties and be heard together, but not consolidated. I am not
inclined to adopt this course of action. It commits the Court to an unchartered
course of action and potentially significant resources which can be avoided if another
less prejudicial solution is found.
[20]
I do not
agree with counsel for the Plaintiffs in the 07 Action that Navigators has been
granted the right to proceed and control the subrogated action either through
the authority of the Marine Insurance Act (Canada) or through the
Subrogation Receipt and Release. Farrell Estates is against him on
both propositions and, in any event, Navigators specifically recognized the
co-plaintiff Hodder could pursue the co-plaintiff JJM in another action, creating
procedural and other conflicts in this case for which Navigators is
responsible.
[21]
Counsel
for Texada and Pacific suggested another solution which this Court views as
more appropriate in the circumstances because it is more procedurally clean and
avoids the difficulties identified by the parties. This course of action is
reflected in the Court’s order below. I was advised by counsel no limitation
issues arise from this proposal.
ORDER
THIS COURT ORDERS that:
(1) Counsel
for Hodder in the 08 Action and counsel for the Plaintiffs in the 07 Action
co-operate to achieve the restructuring of the two actions in such a manner
that the Plaintiff in the 07 Action becomes JJM pursuing its subrogated
and uninsured claims and the Defendants remain Pacific and Texada, and the
Plaintiff in the 08 Action remains Hodder pursuing both the subrogated and
uninsured claims against JJM, Pacific and Texada.
(2) Both the 07 Action and the 08 Action shall
continue as a specially-managed proceeding.
(3) The 07 Action and the 08 Action shall be heard
together, but not be consolidated.
(4) JJM in
the 08 Action has leave of the Court to issue third party notices to Pacific
and Texada.
(5) A copy
of this Order shall be placed in Court file T-1908-07.
(6) Upon
the performance of steps 1 to 4 above, the motions by Texada and by Pacific to
strike as Defendants in the 08 Action are dismissed without costs.
“François
Lemieux”
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