COURT OF APPEAL FOR ONTARIO

DATE: 20001222

DOCKET:C33863

CARTHY, AUSTIN AND ROSENBERG JJ.A.

BETWEEN: )

) Matthew Wilton

EVELYN OWEN ) for the appellant

Plaintiff )

(Appellant) )

and ) Michael Birley

) for the respondent, Zosky

JACK ZOSKY and JACK M. )

FUTERMAN )

Defendants ) Michael Kestenberg

(Respondents) ) for the respondent, Futerman

and )

ALLAN HAWRYLUK ) P. John Brunner

) for the respondent, Hawryluk

Third Party )

(Respondent) )

) Heard: November 10, 2000

On appeal from the order of Justice James M. Spence dated March 3, 2000.

CARTHY J.A.:

[1] This is an appeal that does not lend itself to an opening summary except to say that it involves third party rights under a release. Beyond that, the issue and decision can only be fully understood by following the chronology of events and submissions to a conclusion. This history essentially dictates the outcome of the appeal.

[2] In the first action, the plaintiff Evelyn Owen sued her dentist, Allan Hawryluk, for damages for negligence arising from his participation in an implant procedure. Hawryluk had created a prosthesis and put it in place on implants inserted in the plaintiff’s jaw by another dental surgeon, Jack Zosky. In due course the plaintiff discharged her lawyer, Jack Futerman, who had instituted that action. She then proceeded on her own to settle her claim against Hawryluk. She signed a release protecting Hawryluk and any third party who might claim contribution or indemnity from Hawryluk under s.1 of the Negligence Act. The release stated, in part:

FULL AND FINAL RELEASE

IN CONSIDERATION of the payment or of the promise of the sum of THIRTY-FIVE THOUSAND DOLLARS ($35,000.00) to EVELYN OWEN (the “Releasor”), the Releasor hereby releases and forever discharges DR. ALLAN HAWRYLUK (the “Releasee”), his heirs, executors, adminstrators, successors and assignees, or any of them, from any and all actions, causes of action, claims, counterclaims and demands for damages, loss or injury whatsoever, howsoever arising, that the Releasor may have or may hereafter have by reason of any cause, matter or thing whatsoever arising out or in any way in respect of the subject matters as more particularly described in Ontario Court (General Division) Action No. 407975/90U commenced in Toronto.

AND FOR THE AFORESAID CONSIDERATION, the Releasor agrees not to make any claim or take any proceedings against any other person or corporation who might claim contribution or indemnity under the provisions of the Negligence Act and the amendments thereto.

[3] The plaintiff then commenced this action against Futerman and Zosky. The claim against Futerman was for negligence in the conduct of the first action, including the failure to include Zosky as a defendant. The claim against Zosky was, among other things, for damages for negligence in his advice and care in the implant placement procedure. Both Zosky and Futerman instituted third party proceedings against Hawryluk, claiming contribution or indemnity with respect to any damages they might be liable to pay Owen. This raised the issue of the effectiveness of the release that the plaintiff had signed for the damages she had recovered from Hawryluk.

[4] Futerman’s third party claim is questionable on its face, as Hawryluk is clearly not responsible for Futerman’s professional negligence. However, Zosky’s claim appears to potentially fall within what was contemplated by the release, in affording protection to those who may have third party claims against Hawryluk.

[5] The problem for Hawryluk was how to assert his rights under the release. In Van Patter v. Tillsonburg District Memorial Hospital, et al. (1999), 1999 3754 (ON CA), 45 O.R. (3d) 223 (C.A.), this court on similar facts held that because persons in the position of Zosky and Futerman were not privies to the release, they could not rely upon it. The Rules provide that a third party can only assert against the plaintiff defences available to the defendants. See rule 29.05(1). Since there was no privity of contract, Zosky and Futerman could not rely upon the release, and Hawryluk therefore could not bring summary judgment proceedings based upon it.

[6] Some months after the release of the Van Patter decision, the Supreme Court of Canada issued its judgment in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd. (1999) 1999 654 (SCC), 245 N.R. 88. This decision carved out an exception to the privity of contract doctrine and stated that in limited circumstances, a third party beneficiary of a contract may be permitted to claim benefits accorded by the terms of that contract.

[7] Looking at those two authorities, counsel for Hawryluk probably realized that in order for the defendants to assert a Fraser River defence, they would have to await a trial to establish that the facts brought them within the parameters of the exception as articulated in that case. Hawryluk’s solution was to bring an application under s.106 of the Courts of Justice Act to stay both the third party proceedings and the main action as an abuse of process.

[8] That application came on before Spence J., who in very brief reasons concluded that the plaintiff was seeking to resile from the terms of the release. Accordingly, the plaintiff’s action was not permitted to proceed, and he ordered that both the action and the third party proceedings be stayed.

[9] It is to be noted that there was no motion by the defendants to dismiss the proceedings against them based upon the release. It is difficult to discern, either from the reasons of Spence J. or from the material filed, a proper basis for effectively dismissing the action in circumstances where a motion by the defendants for summary judgment would have failed. The claim against the lawyer Futerman is entirely separate from that against the dentist Hawryluk and the claim against Zosky, if it involves joint or several liability with Hawryluk, will require a trial to determine if the criteria are met, as set out in Fraser River, for an exception to the privity doctrine.

[10] In any event, only the plaintiff appealed, and only from the stay of the action. The defendants did not appeal the dismissal of the third party proceedings and appeared as respondents in support of the third party. The third party proceedings thus stand as stayed regardless of the outcome of the appeal.

[11] In the course of the hearing before this court, appellant’s counsel stated that prior to the argument of the application, he had undertaken not to pursue any claim which could result in claims by the defendants for contribution or indemnity against Hawryluk under the Negligence Act. He stated that the appellant was prepared to abide by the terms of the release and protect those whose protection was anticipated.

[12] Counsel for Hawryluk protested that this undertaking was only made the day before the appeal. However, after some discussion it was shown that the undertaking was contained in the plaintiff’s factum filed on the application. It is not mentioned in the reasons of the motion judge.

[13] Once counsel for Hawryluk accepted the existence of the undertaking, he equally accepted that his client had no exposure to liability from a continuance of the main action. Nor was his client facing on-going legal expenses from the third party proceedings, because the stay had not been appealed. At that point, there could be no basis for the third party opposing the appeal. The two defendants then argued as respondents against the appeal but provided no reason to dismiss the plaintiff’s appeal.

[14] I conclude that the only sensible result is to set aside the stay order in the main action. The plaintiff will be held to her undertaking to abide by the release. If there be frailties in the plaintiff’s claims, these can be tested by motions for summary judgment which the defendants may choose to initiate.

[15] The costs of the appellants here and below should be paid equally and jointly by the three respondents. In setting aside the third party proceedings, the motion judge directed that the plaintiff pay the costs of the third party. That order falls within the ambit of this appeal by the plaintiff, and will be set aside along with the other costs orders. Normally, the third party would recover the costs of the application to stay the third party proceedings from the defendants but, since there was no appeal of that order, this court has no power to make such an order.

[16] An order should issue in accordance with these reasons.

Released: December 22, 2000 “JJC”

“J.J. Carthy J.A.”

“I agree Austin J.A.”

“I agree M. Rosenberg J.A.”