Designating parties in legal proceedings can be tricky, especially where you encounter parent companies with similar names. However, if you mistakenly name the wrong party, and find out about it after prescription has run out, keep calm: you can possibly carry on if you remember a recent ruling by the Quebec Court of Appeal.

Last January, it "resuscitated" a subrogation action[1] filed by Intact against a company which was misnamed in the proceedings. The action was to recover the indemnity paid to its insured for damages. At trial, the Superior Court dismissed the insurer's action, contending that when it filed the amended proceeding against the alleged culprit, Constructions Cholette, Foley, Lapointe inc., it was time-barred.

That’s because Intact filed its action against Groupe Cholette inc. and Union canadienne (Royal & Sun Alliance of Canada appeared instead at the resumption of the proceedings, referred to as "RSA" throughout) only days before the three-year prescription ran out. Though blasting performed by Constructions Cholette allegedly caused the damages, Intact incorrectly designated Groupe Cholette as the guilty party. RSA instructed an attorney who appeared on its behalf and that of Groupe Cholette. Shortly thereafter, discontinuance was filed in respect of Groupe Cholette, as it was not insured with RSA.

Another attorney appeared for Groupe Cholette, and informed the parties that the action should have been filed against Groupe Cholette's subsidiary, Constructions Cholette. As a result, Intact amended its motion to add Constructions Cholette as a joint defendant.

At the hearing of the Motions to dismiss, Groupe Cholette successfully argued that the action was doomed to fail, since it could not be held jointly and severally liable with Constructions Cholette of the damages sought by Intact. As for Construction Cholette's motion, the trial judge found that Intact's action was prescribed since the motion was amended after prescription ran out.

On appeal, the Court noted that both Groupe Cholette and Constructions Cholette are closely connected. Both share the same head office. Groupe Cholette was the developer of the project in which Constructions Cholette performed the alleged blasting. The evidence showed that the same person acknowledged receipt of the service of the original and amended motions, respectively on behalf of Groupe Cholette and then of Constructions Cholette. What’s more, RSA, the latter's insurer, instructed its attorneys to appear for Groupe Cholette.

In short, the Court of Appeal found that Constructions Cholette and RSA knew from the beginning that Intact wanted to sue them both. The incorrect designation of Groupe Cholette in the original motion was simply a mistake that should not have prevented Intact from correcting it to the extent where there are sufficient indications that Intact intended to sue Constructions Cholette, which is the proper party. Such correction is allowed, even if the amendment can amount "to no more than correcting a name despite the fact that it entailed substitution of a party, though in the formal sense of the word only."[2]

The Court of Appeal considered that Constructions Cholette and RSA were parties to the proceedings since the service of the original motion.

Finally, the Court of Appeal also set aside Groupe Cholette's motion to dismiss. In concluding prematurely that the action was doomed to fail due to lack of solidarity, the trial judge did not allow Intact the chance to establish evidence with regard to allegations of liability of both defendants.