Third Party Action Against Plaintiff’s Expert Dismissed on Basis of No Duty of Care and “Witness Immunity”

In an interesting decision, just released, Mr. Justice De Lotbinière Panet dismissed a third party claim brought by a defendant against an engineering firm which had provided a report to the plaintiff.

Vie Holdings Inc. v. Imperial Oil Limited was an action for damages consequent upon the contamination by gasoline of the plaintiff’s property. The plaintif alleged that a hydrocarbon spill at an Esso station, owned by Imperial Oil, had migrated to the plaintiff’s adjacent premises. The plaintiff had commissioned an environmental assessment from an engineering firm, Paterson & Associates. Paterson had concluded that the plaintiff’s property had been contaminated by gasoline from the defendant’s service station.

Imperial Oil defended the action and commenced third party proceedings against Paterson and some of its individual members, alleging negligent misrepresentation, breach of contract and abuse of process.

The third parties and the plaintiff moved under Rule 21 for dismissal of the third party claim, on five separate grounds. Justice Panet allowed the motion, accepting all of the plaintiff’s five arguments. (We got the impression, reading the decision, that His Honour had taken a dim view of Imperial’s tactics.)

In this commentary though, we are going to focus on only two of the five grounds: (1) absence of duty of care and (2) “witness immunity”.

Duty of Care

In his analysis of both duty of care and “witness immunity”, Panet J. referred extensively to a decision of the Nova Scotia Court of Appeal in Elliott v. Insurance Crime Prevention Bureau. (We have linked to a PDF version of that case, which is well worth reading.) In Elliott, the plaintiffs’ home was destroyed by fire. Their insurer denied their claim, alleging arson. The plaintiffs succeeded against the insurer at trial and recovered damages, interest and costs for their loss of property. However, the trial court found that the insurer had not acted in bad faith in denying the claim and accordingly, claims for aggravated and punitive damages were dismissed.

The plaintiffs in Elliott then brought another suit against various adjusters and investigators who had been retained by the insurer (as well as a deputy fire marshall, who had investigated at the request of the local fire department). It is the decision in this second action to which Panet J. referred in Vie Holdings. The Nova Scotia Court of Appeal held that, for policy reasons, no duty of care was owed to the plaintiff homeowners by the insurer’s investigators. (The fire marshall was found to owe no duty even apart from the policy argument.) The court said that “imposing the proposed duty would distort the legal relationships among the insurer, the insured and the investigators and could potentially undermine the ability of the insured and the insurer to properly deal with insurance claims”.

The Nova Scotia Court of Appeal went on to consider, at some length, the concept of “witness immunity”. It found that the principle protected the defendant investigators against some, but not all of the plaintiffs’ allegations.

On the duty of care issue, Justice Panet applied what was referred to in Elliott as the Anns/Kamloops test (a reference to two leading cases, one from the House of Lords and the other from the Supreme Court of Canada). The test is a two-part one: first, determining whether the requirements of foreseeability and proximity have been met. The second part involves a consideration of whether a duty that might otherwise exist, should be negated for policy reasons.

His Honour concluded that it was reasonably foreseeable, that Imperial might be injured by a report, negligently prepared, by the engineers. However, he ruled that there was not a sufficient proximity between Imperial and the plaintiff’s engineers to warrant the imposition of a duty of care. In reaching the latter conclusion, he noted the absence of any contractual relationship between the two parties (Imperial and Paterson).

Justice Panet then turned to the second branch of the Anns/Kamloops test, i.e., policy considerations. He held that even if there could be said to have been a duty of care owed by Paterson to Imperial (and he did not think there could be), such a duty should not be imposed, for policy reasons:

The damages alleged can only be the legal and associated costs as a result of defending any claim asserted by the Plaintiff. However, in the event that the Defendants are successful in the claim by the Plaintiffs, they have their remedy against the Plaintiff to recover all or substantially all of those costs. Further, and of greater significance, is that the recognition of the proposed duty of care would distort the legal relationships in that it would set up an incoherent scheme of liability, where, rather than focus on the obligation or the possible liability of the Defendant with respect to damages caused to the Plaintiff, there would be a further issue, a distorting one, where the Defendant would focus any alleged liability on the party who prepared the report for the Plaintiff in the first place.

Witness Immunity

This is a concept that seems to be arising with increasing frequency. (See, for example, Lowe v. Guarantee Co. of North America (which also dealt with duty of care), Reynolds v. Kingston and Worthman v. Assessmed.) Traditionally, this privilege has protected witnesses against liability for defamation arising out of words spoken in the course of giving evidence in judiical or quasi-judicial proceedings. More recently, the privilege has sometimes been invoked on behalf of expert witnesses who have been retained by a party to assist with pending or contemplated litigation. The scope of the privilege, so far as we can determine, is still in the course of being defined by our courts.

Justice Panet found that Paterson and its employees were protected by witness immunity from suit by Imperial. He adopted the following test, taken from the Elliott case:

1. What is the conduct that forms the basis of the… cause of action – that is, what is the “gist and essence” of the…claim?

2. What is the scope of the claimed immunity and does the “gist and essence” of the…claim fall within it?

3. Is the scope of the claimed immunity settled by authority?

4. If not, does the claimed immunity meet the test of necessity?  

Here, His Honour was satisfied that the test had been met. In particular, he concluded that it was “necessary” to extend the immunity to Paterson because failing to do so would adversely affect the administration of justice. On the facts of this case, it is difficult to quarrel with his conclusion.

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