Simpler Is Better: Third Party Claims Struck For Efficiency And Proportionality In Recent Court Of Appeal Decision

The "culture shift" to a more accessible civil justice system, as championed in Hryniak v. Mauldin, is alive and well. Courts are increasingly sensitive to the economy of cases, taking into account the efficiency and proportionality of substantive and procedural rights. Today's emphasis is on reasonable not exhaustive measures.

In O'Connor Associates Environmental Inc. v. MEC OP LLC, the Alberta Court of Appeal overturned the decision of a case management judge who permitted the joinder of third party advisors to a main action between a purchaser and vendor of oil and gas assets. This appellate decision incorporates the Hryniak policy rationale of more efficient judicial processes in its decision strike out all claims against the third parties.

BACKGROUND

This appeal was brought by third party advisors to an agreement of purchase and sale between the plaintiff, NEP Canada ILC, and the respondents/vendors, Merit Group. The third party advisors were retained by the plaintiff to complete due diligence prior to the close of transaction.

Following the close of transaction, the plaintiff discovered inaccuracies in the assets purchased from the respondents, and sued the respondents for deceit, negligent misrepresentation, breach of contract and unjust enrichment.

The respondents pleaded in the Statement of Defence that the assets were sold "as is, where is", without any representations. The respondents further pleaded that the plaintiff had expressly covenanted that it would not rely on any representations made by the respondents, but would rely on its own due diligence.

The respondents also issued a Third Party Claim against three of the advisors who had assisted the plaintiff during the due diligence process. The Third Party Claim alleged that the advisors were in breach of contracts between themselves and the plaintiff, for negligently performing their services and for failing to communicate to the plaintiff their actual knowledge about the assets.

The appellants brought an application to have the Third Party Claim struck on the basis that it failed to disclose a reasonable cause of action and that they were not properly added under Rule 3.44 of the Alberta Rules of Court.

The respondents then brought a subsequent application to amend the Third Party Claim to include a claim of contribution in the event that both the respondents and the third parties are found to have been negligent. The amended Third Party Claim alleged inter alia a new cause of...