The Supreme Court of British Columbia granted leave to Canada to file a third party notice against British Columbia in regards to pre-Confederation liability. The principal issue in the third party notice is whether, pursuant to the Terms of Union, 1871, Canada or British Columbia is responsible for any loss or damage arising from the acts of the Colony of British Columbia prior to Confederation in 1871.

The underlying action involves a claim by three bands of the Sto:lo Nation for possession of 120 acres of land formerly part of the Canadian Forces Base Chilliwack. They claim Aboriginal title to the lands, and also that the lands formed part of a reserve set aside in 1864 by the Colony but then wrongfully reduced in 1868. They seek compensation for portions of the lands that cannot be restored to them. They named Canada and the Canada Lands Company as defendants. British Columbia was added as a defendant due to the Aboriginal title claim but the plaintiffs do not seek any damages from the province. They allege that, pursuant to the Terms of Union, Canada is the successor of the Colony and responsible for obligations and liabilities owed to the plaintiffs by the Colony.

In July 2014, Canada filed an Amended Statement of Defence in which it alleged that, pursuant to the Terms of Union, Canada only became liable for debts and liabilities of the Colony that were known to exist in 1871. Canada also alleged that Article 2 of the Terms of Union set an upper limit on any debts or liabilities. In the proposed third party notice, Canada seeks a declaration that British Columbia is solely responsible for any liabilities arising from the actions of the Colony.

A trial of this action is set for 80 days beginning in February 2015. Canada has not yet produced documents relating to the Terms of Union, and would require an amendment to the Case Plan Order to file any expert evidence.

The Court granted leave to Canada to file the third party notice. The proposed claim falls within Rule 3-5(1)(b) of the Civil Rules in that the declaratory relief sought by Canada “relates to or is connected with the subject matter of the action”. Both the pleadings of the plaintiffs and the proposed third party claim raise the issue of whether Canada is the successor of the Colony, and the meaning and effect of the Terms of Union.

The Court rejected the argument of British Columbia that the third party proceeding is unnecessary. The relief sought in the third party notice is not hypothetical, or made in the absence of a real dispute such as the Cheslatta case. Rather, the dispute about whether Canada or British Columbia is responsible for the alleged pre-Confederation wrongdoing is raised on specific facts and is a live issue.

British Columbia pointed to the fact that Canada has already raised the issues of Crown successorship and the Terms of Union in its defence. If Canada succeeds in establishing that it is not liable under the Terms of Union, then it has a complete remedy and there is no need for the declaratory relief sought in the third party notice. Pearlman J. held that cases stating that a third party action cannot ordinarily be maintained upon a pleading that a defendant can raise as a defence has no application here. In those cases, the third party claim concerned duties which belonged to the plaintiff. Here, the proposed third party notice seeks declarations concerning British Columbia’s responsibility for any loss or damage caused by the Colony. Pearlman J. stated:

Here, by its proposed third party notice, Canada seeks declaratory relief to resolve the issue of which emanation of the Crown is responsible for any loss caused by any breach of duty by the Colony of British Columbia relating to the subject lands. I have found the relief sought by Canada is related or connected with the subject matter of this action. In the event that the plaintiffs establish a reserve interest in the subject lands, and loss of use of the lands as a result of wrongful acts or omissions of the Colony of British Columbia, it will be necessary for the Court to decide the issue of Crown successorship for pre-Confederation liabilities.

The Court also distinguished cases in which third party notices have been struck due to the plaintiffs waiving any claims against the proposed third parties, and restricting their claims to the liability of Canada. In this case, the plaintiffs have not expressly waived any claim against British Columbia. Further, Canada is not seeking contribution or indemnity from British Columbia, or a determination of the apportionment of damages amongst multiple tortfeasors, but a determination of the meaning of a constitutional agreement.

Pearlman J. noted that the same issue has been raised in other litigation, such as the Songhees Nation case set for trial in March 2015. In that case, the plaintiffs claim damages against both Canada and British Columbia, and a third party claim has been made against British Columbia by Canada. Pearlman J. commented:

I agree with the submission of British Columbia that this is not a case where the issues raised in the proposed third party notice must be tried in this action if they are to be tried at all. However, if this Court is required to determine whether or not Canada is responsible for any loss or damage in relation to the subject lands caused by the Colony of British Columbia, then in my view, the Court should hear and decide the issues raised in the proposed third party notice, including Canada’s claim for declaratory relief related to or connected with the subject matter of this action.

Pearlman J. held that it was appropriate to exercise his discretion to grant leave to file the third party notice. There would be no prejudice to the plaintiffs or British Columbia by the filing of the claim. There had been no objection to the timeliness of filing the third party claim. Pearlman J. noted that Canada would produce historical documents about the Terms of Union later in the month. The third party claim was not bound to fail, and there was no issue of the expiry of a limitation period for the declaratory relief. (Pearlman J. noted that the plaintiffs’ claim for damages could be statute-barred).

Canada also applied for an order that the third party claim be tried separately, following a final determination of the issues raised in the plaintiffs’ action. The Court found there would be prejudice to the plaintiffs if the resolution of their claims for damages was delayed until the final determination of all other claims. There was no evidence that a severance order would save time or expense for the parties. The trial of the third party claim is unlikely to complicate or significantly lengthen the trial of this action. Pearlman J. noted again that the plaintiffs have already put in issue the interpretation of the Terms of Union. The issues raised in the third party claim are not sufficiently distinct to warrant a separate trial. Pearlman J. further noted:

The issue of which emanation of the Crown is responsible for any wrongful act of the Colony of British Columbia in relation to the subject lands is interwoven with the plaintiffs’ claims in the main action. The main action and the third party claim raise related issues concerning both the interpretation of the Terms of Union and the principles governing any Crown responsibility for pre-Confederation liabilities. Because the plaintiffs must establish Canada is the successor to the Colony in order to succeed in their claim for damages for loss of use of the subject lands, they intend to participate in the argument concerning the interpretation and application of the Terms of Union. The overlap of issues raised by the plaintiffs and the issues raised in the third party claim is a factor that weighs against bifurcation of these proceedings.

The Court therefore granted leave to Canada to file the third party notice, but dismissed the application for an order that the issues of fact and law raised in the third party notice be tried separately. The parties would have the opportunity to make submissions on any amendments to the Case Plan Order in light of this result.

Scott Kerwin and Ken Tyler of BLG’s Vancouver office represented the Province of B.C. on this application.

http://courts.gov.bc.ca/jdb-txt/SC/14/23/2014BCSC2361.htm