Farrell v Costco Wholesale, 2015 ONSC 7783

In this case, Costco brought a motion seeking leave from the court to issue a third party claim. Rule 29.02 of the Rules of Civil Procedure provides that the court must grant a party leave to issue a third party claim, unless doing so would “prejudice” the plaintiff. At issue in this case was whether allowing Costco to issue a third party claim at this stage of the action would prejudice Ms. Farrell to such an extent that leave should not be granted.

On November 11, 2012, Ms. Farrell was injured at a Costco department store after a display board fell off the shelf and hit her in the head. Ms. Farrell suffered a concussion, which continues to negatively impact her to this day.

On November 19, 2012, Ms. Farrell’s lawyer sent Costco a notice of her intention to sue for damages. On May 6, 2014, Ms. Farrell formally commenced an action against Costco. After Costco delivered its Statement of Defence and both parties conducted their examinations for discovery, the action was eventually set down for trial on December 5, 2014. The trial was set to begin in May 2016. It was not until August 15, 2015, that Costco gave its first indication that it wanted to begin a third party claim against Artika, the supplier of the merchandise that was displayed by the board that fell on Ms. Farrell. If Costco were to be granted leave, the trial would likely not begin until January 2017.

Price J. held that if granting leave to issue a third party claim would prejudice the plaintiff, then the court must exercise its discretion to determine whether leave ought to be granted. Having regard to all the circumstances of the case, the court must weigh the prejudice that granting leave would create against the desirability of having the third party claim determined at the same trial as the main action (as opposed to the defendant commencing a separate action against the third party).

The Court held that in this case, the issuance of a third party claim would prejudice Ms. Farrell in the following ways:

1. She would face a new examination for discovery which would be more challenging to her memory and the appearance of her credibility, given the amount of time that has passed since the injury.
2. The delay of an additional eight months before trial begins will further weaken her own and her witness’ recollection of events. It will also substantially delay the final determination of Costco’s liability and of Ms. Farrell’s entitlement to compensation.

In exercising its discretion to determine whether leave should be granted despite the prejudice to Ms. Farrell, the Court considered a number of factors including:

1. The period of two years and nine months from when the incident occurred, and fifteen months from the time the claim was served, to when Costco first decided that it wanted to pursue a third party claim.
2. At the time the incident occurred, the apparent availability to Costco of the facts underlying its third party claim.
3. The absence of any explanation from Costco for its failure to issue the third party claim earlier as well as a lack of any discernable merit to the third party claim.
4. The fact that even if Artika is found to be liable to indemnify Costco, it is unlikely that a separate action brought by Costco against Artika will result in a verdict that is inconsistent with the verdict reached in Ms. Farrell’s action against Costco.
5. The action had already been set down for trial and a pre-trial conference was scheduled for April 2016.
6. If a third party claim were issued, Ms. Farrell would likely have to undergo another examination for discovery, a year and a half after the first one. Additionally, the action will likely be delayed by at least another eight months, when the next trial sittings take place in January 2017.
7. Ms. Farrell continues to be adversely affected by her injury, including being unable to maintain full-time employment to support herself and her three children.

The Court ultimately held that the prejudice to Ms. Farrell that would result from granting Costco leave to issue a third party claim would outweigh any unfairness to Costco that is caused by requiring it to commence a separate action against Artika. The prejudice to Ms. Farrell would also outweigh any risk of inconsistent verdicts that may arise from bringing a separate claim. Costco’s motion for leave to issue a third party claim was dismissed.

What the Insurer Should Know

When considering bringing a third party action, the sooner the better.  The court will closely review the prejudice to the parties which may be suffered by an amendment to the pleadings at a late stage in the proceeding.

Mitch Kitagawa	Kentt Coburn, Articling Student