Bartucci et al. v. John Doe et al. [Indexed as: Bartucci v. John Doe]

68 O.R. (3d) 599

[2003] O.J. No. 5087

Court File No. 115/03

Ontario Superior Court of Justice

Divisional Court

Dunnet, Carnwath and Jennings JJ.

December 5, 2003

Civil procedure -- Adding or substituting parties -- Third party swerving to avoid unidentified driver and colliding with plaintiff's vehicle -- Plaintiffs suing unidentified third party and their automobile insurer -- Insurer bringing third party claim against third party -- Plaintiffs moving successfully to add third party as party defendant under rule 5.04(2) -- Third party's appeal allowed -- Third party significantly prejudiced by amendment -- Motions judge erring in finding that special circumstances existed -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 5.04(2).

B swerved to avoid an unidentified driver and collided with the plaintiffs' vehicle in April 1999. The unidentified driver left the scene and remained unidentified. The plaintiffs issued a statement of claim against John Doe and their automobile insurer in February 2001. They described the collision with B in the statement of claim but made no allegation of fault, negligence or liability against him. The insurer made a third party claim against B in April 2001. There was no evidence that B knew of any allegations of fault, negligence or liability against him before that date. In May 2002, the plaintiffs brought a motion to add B as a defendant in the main action. The motion was granted. The motions judge found that B pleaded negligence by the plaintiffs in his defence to the third party claim and that he participated in discoveries of the plaintiffs. The motions judge was satisfied that special circumstances existed and that there was no real prejudice to B. B appealed.

Held, the appeal should be allowed.

As long as B remained only a third party and not a party defendant, he was only liable if the insurer was liable. The insurer was liable only if the unidentified motorist was 100 per cent liable. If B was one per cent to 100 per cent liable for the accident, the insurer had no liability to the plaintiffs and, therefore, had no occasion to seek to recover from B under its third party claim. However, if B was a party defendant and was one per cent to 100 per cent liable, the insurer paid nothing to the plaintiffs and B paid 100 per cent to the plaintiffs (absent any contributory negligence on their part), with the right to seek contribution under s. 1 of the Negligence Act, R.S.O. 1990, c. N.1 from the unidentified driver on any split of liability between B and the unidentified driver. This resulted in considerable prejudice to B. An amendment under rule 5.04(2) of the Rules of Civil Procedure is not to be made unless there is an absence of non-compensable prejudice and [page600] there are "special circumstances". Sufficient special circumstances did not exist in this case to support the requested amendment.

APPEAL from an order adding a party defendant.

Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 2001 8620 (ON CA), 56 O.R. (3d) 768, 207 D.L.R. (4th) 492, [2001] O.J. No. 4567 (QL), 15 C.P.C. (5th) 235, 152 O.A.C. 201 (C.A.), consd Other cases referred to Battersea General Store Inc. v. Ontario, [1998] O.J. No. 5298 (QL), 85 O.T.C. 135 (Gen. Div.); Robertson v. O'Rourke (1998), 1998 2918 (ON CA), 35 M.V.R. (3d) 252, [1998] O.J. No. 1999 (QL), 110 O.A.C. 167 (C.A.), affg (1997), 31 M.V.R. (3d) 102, 14 C.P.C. (4th) 182 (Ont. Gen. Div.) Statutes referred to Highway Trafic Act, R.S.O. 1990, c. H.8, s. 206(1) Insurance Act, R.S.O. 1990, c. I.8, s. 265(1) Negligence Act, R.S.O. 1990, c. N.1, s. 1 Rules and regulations referred to R.R.O. 1990, Reg. 676, s. 2(1)(c) Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 5.04(2)

Derek V. Abreu, for appellant (third party), J. Allan Bauldry. David H. Sookram, for respondents/plaintiffs.

[1] Endorsement BY THE COURT: -- The appeal is granted. The order adding Mr. Bauldry as a party defendant is set aside. Costs to the appellant on a partial indemnity scale fixed at $5,000, inclusive of fees and disbursements plus GST payable within 30 days.

Background

[2] On April 4, 1999, Mr. Bauldry was driving southbound on Highway 27 in the Township of King. An unidentified driver travelling eastbound on the 17th Sideroad failed to stop at the intersection with Highway 27 and entered the southbound lane. Mr. Bauldry swerved to avoid the unidentified driver and collided with the plaintiffs' northbound vehicle. The unidentified driver left the scene and remains unidentified to this day.

[3] The plaintiffs issued their Statement of Claim on February 26, 2001 against John Doe and State Farm, their automobile insurer. In the Statement of Claim, the plaintiffs described the collision with Mr. Bauldry, but made no allegation of fault, negligence or liability against him.

[4] Mr. Bauldry's involvement in the accident was known to the plaintiffs at the time of the accident. He is listed as an involved driver in the motor vehicle accident report which notes details of his insurance coverage. [page601]

[5] Pursuant to s. 206(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8, as amended, the plaintiffs had until April 4, 2001, to commence their action.

[6] On April 17, 2001, State Farm delivered its Statement of Defence and Crossclaim.

[7] On April 24, 2001, State Farm served Mr. Bauldry with its Third Party Claim. There is no evidence he knew of any allegations of fault, negligence or liability against him before April 24, 2001.

[8] Mr. Bauldry prepared his defence to the Third Party Claim on January 2, 2002, and served the plaintiffs on April 16, 2002.

[9] In early May of 2002, the plaintiffs served and filed their motion to add Mr. Bauldry as a defendant in the main action.

[10] The Motion to add Mr. Bauldry as a party defendant was heard January 16, 2003.

[11] Leave to appeal from the order of the motion judge was granted by Matlow J. on Wednesday, March 5, 2003.

The Motion Judge's Endorsement

[12] The Motion judge found that Mr. Bauldry pleaded negligence by the plaintiffs in his defence to the Third Party Claim. He further found that the Third Party participated in discoveries of the plaintiffs.

[13] The motion judge then endorsed as follows:

I am satisfied that special circumstances exist and no real prejudice has occurred to Bauldry. I adopt the principles in Robertson v. O'Rourke and Mazzuca v. Silvercreek Pharmacy Ltd., particularly Laskin J.A. at p. 792-793.

No Real Prejudice

[14] Rule 5.04(2) [Rules of Civil Procedure, R.R.O. 1990, Reg. 194] provides as follows:

5.04(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just unless prejudice would result that could not be compensated for by costs or an adjournment.

[15] The State Farm policy issued to the plaintiffs must contain the standard unidentified motorist endorsement contemplated by s. 265(1) of the Insurance Act, R.S.O. 1990, c. I.8, Part VI as amended, and by s. 2(1)(c) of Part C of Reg. 676, R.R.O. 1990, as amended. Certain conditions follow.

As long as Mr. Bauldry remained only a Third Party and not a party defendant, he was only liable if State Farm was liable. State Farm is liable only if the unidentified motorist is 100 per cent liable. If Mr. Bauldry is one per cent-100 per cent liable for the accident, State Farm has no liability to the plaintiffs and, therefore, [page602] has no occasion to seek to recover from Mr. Bauldry under its Third Party Claim. This set of circumstances is often referred to as the "one percent rule".

[16] However, if Mr. Bauldry is a party defendant and is one per cent-100 per cent liable, State Farm pays nothing to the plaintiff and Mr. Bauldry pays 100 per cent to the plaintiffs (absent any contributory negligence on their part) with the right to seek contribution under s. 1 of the Negligence Act, R.S.O. 1990, c. N.1 from the unidentified driver on any split of liability between Mr. Bauldry and the unidentified driver. This results in considerable prejudice to Mr. Bauldry.

[17] The policy reasons advanced to support limitation periods include:

(a) at some point, a defendant is entitled to peace of mind;

(b) with the passage of time, the quality and availability of evidence declines;

(c) the uncertainty of potential litigation has adverse economic consequences;

(d) the quality and acceptability of adjudicated outcomes decline with passage of time.

Battersea General Store Inc. v. Ontario, [1998] O.J. No. 5298 (QL), 85 O.T.C. 135 (Gen. Div.)

"Special Circumstances"

[18] The presence or absence of "special circumstances" is the second part of a two-step test when a discretion is exercised to add or not add a party to an action under rule 5.04(2). Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 2001 8620 (ON CA), 56 O.R. (3d) 768, [2001] O.J. No. 4567 (QL) (C.A.)

[19] Under rule 5.04(2), the court's discretion "must be sparingly exercised and is very much the exception rather than the rule": Robertson v. O'Rourke (1997), 14 C.P.C. (4th) 182, 31 M.V.R. (3d) 102 (Ont. Gen. Div.), affirmed 1998 2918 (ON CA), [1998] O.J. No. 1999 (QL), 35 M.V.R. (3d) 252 (C.A.).

[20] The Motion judge's finding of "special circumstances", coupled with his reliance on Laskin J.A.'s decision in Mazzuca causes us concern. In the majority decision, Cronk J.A., joined by Rosenberg J.A., held that an amendment under rule 5.04(2) was not to be made unless there was an absence of non- compensable prejudice and there were "special circumstances". [page603]

[21] Laskin J.A. dissented on two points -- he rejected the requirement of "special circumstances" and disagreed with Cronk J.A.'s distinction between a "deliberate and informed decision" to mistakenly name a party and an unintentional mistake. For the Motion judge to find "special circumstances", and in the same breath, rely "particularly" on the passage of Laskin J.A.'s dissent which declared it unnecessary to find "special circumstances", persuades us he misconstrued the ratio of Mazzuca. We find no persuasive argument that sufficient special circumstances exist to support the requested amendment.

Appeal allowed.