IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

TNR Gold Corp. v. MIM Argentina Exploraciones S.A.,

 

2011 BCSC 243

Date: 20110228

Docket: S084670

Registry: Vancouver

Between:

TNR Gold Corp., and
Solitario Argentina S.A.

Plaintiffs

And

MIM Argentina Exploraciones S.A., Minera Andes Inc.,
Minera Andes S.A., Los Azules Mining Inc. and
Andes Corporacion Minera S.A.

Defendants

And

Armstrong Simpson, a Partnership, Michael G. Armstrong,
S. Paul Simpson, S. Paul Simpson Law Corporation,
Shauna L. Hartman and G. Arnold Armstrong

Third Parties

Before: The Honourable Mr. Justice Greyell

Reasons for Judgment

Counsel for the Plaintiffs:

G.K. MacIntosh, Q.C.
S. Hern

Counsel for the Defendant MIM Argentina Exploraciones S.A.:

N.R. Hughes

Counsel for the Defendants Minera Andes Inc., Minera Andes S.A., Los Azules Mining Inc., and Andes Corporacion Minera S.A.:

C.A.B. Ferris
A.M. Kemshaw

Counsel for the Third Parties Armstrong Simpson, a Partnership, Michael G. Armstrong, S. Paul Simpson, S. Paul Simpson Law Corporation, Shauna L. Hartman and G. Arnold Armstrong:

B.G. Ward, Q.C.
A.L. Folino

Place and Date of Hearing:

Vancouver, B.C.

January 13, 2011

Place and Date of Judgment:

Vancouver, B.C.

February 28, 2011


 

[1]             These motions concern applications brought by the defendants Minera Andes Inc. and related companies pursuant to Rule 6-1(1)(b)(i) of the Supreme Court Civil Rules (the “Rules”) for leave to amend their Response to Civil Claim, Counterclaim and Third Party Notice and for an order pursuant to Rule 22-5 that Supreme Court action, Vancouver Registry No. S-103104 (the “Solicitors’ Action”), be tried at the same time as this action.

[2]             The third parties (“TNR’s Lawyers”) seek an order striking out the Third Party Notice on the ground it discloses no reasonable cause of action.  The plaintiffs support this application.

Introduction

[3]             This action concerns an agreement relating to properties involved in a mining exploration project located in Argentina called Los Azules Project (the “Project”).

[4]             The plaintiffs have brought this action, in part, to attempt to rectify a term in an Exploration and Option Agreement (the “Agreement”) relating to the Project.  The Agreement was originally entered into between the plaintiff Solitario Argentina S.A. (“Solitario”) and the defendant MIM Argentina Exploraciones S.A. (“MIM”).  The plaintiffs seek a declaration such rectification is enforceable against all defendants.  In the alternative they seek damages for breach of an implied term of the Agreement and further claim the time limit set out in the term is unenforceable for lack of consideration.

The Parties

[5]             Solitario is a subsidiary of the plaintiff TNR Gold Corp. (“TNR”) and is engaged in the development of mineral properties in Argentina.

[6]             MIM is a member of the Xstrata group of mining companies operating worldwide.  MIM’s interests in the Agreement have been transferred to the other defendants.

[7]             The defendant Minera Andes Inc. (“MAI”) is a mining exploration company with assets located in Argentina.

[8]             The defendants Minera Andes S.A. (“MASA”), Los Azules Mining Inc. (“LAMI”) and Andes Corporacion Minera S.A. (“Andes”) are wholly owned subsidiaries of MAI.  MASA holds MAI’s interests in the Project, LAMI was assigned MAI’s rights and obligations under the Agreement, and Andes was assigned all of MASA’s rights in and to the properties forming part of the Project.

[9]             I will refer to all defendants noted in the preceding paragraph as the Minera defendants.

[10]         TNR’s Lawyers were the plaintiffs’ legal advisors.  They provided legal services to the plaintiffs in the review and execution of the Agreement.

The Dispute between the Parties

[11]         The Agreement between Solitario and MIM allowed MIM to conduct exploration work on certain properties forming part of the Project and provided that Solitario had rights to “back-in” to an interest in specific properties on certain terms.

[12]         The term that is the focus of the action is Clause 7.1 of the Agreement (the “Impugned Term”).  That term provides:

If, within 36 months of exercising the Option, Xstrata completes a feasibility study on any part of the Property, Xstrata must notify Solitario, and Solitario will have the right to “buy back” up to a maximum 25% equity in the Property at any time within 120 days of receiving such notification (the “Back-in Right”) and giving written notice to Xstrata of the exercise of the Back-in right.

[13]         The action was commenced on September 24, 2010.  The plaintiffs allege that the Impugned Term was inserted unilaterally during the negotiations leading to the Agreement and that Solitario failed to notice the provision before signing the Agreement.

[14]         Paragraphs 9 to 16 of the Notice of Civil Claim read:

9.         Solitario and MIM agreed to terms and conditions regarding the Property in a Letter of Understanding dated May 15, 2003.

10.       In the Letter of Understanding, Solitario sold an option to MIM to acquire all of the Property and explore the Property, and retained a “back-in” right, which is a right to re-acquire an interest in the Property in specified circumstances.  Solitario’s back-in right is correctly described in clause 10 of the Letter of Understanding as follows:

10.       Back-in Right:  SA will have the right to buy back equity up to the level of 25% of the Property at any time within 120 days of the completion of a feasibility study on any part of the Property, on the following basis:

a)         By paying MIM two (2) times the corresponding percentage proportion of MIM’s actual expenditures (e.g. should MA [sic SA] seek to purchase back to 25% from 0% equity it would pay MIM 2 times 25% of MIM’s actual expenditure).

b)         Actual expenditures will refer only to work carried out within SA properties and any equity purchased will only be equity in SA properties.

c)         MIM’s expenditures will be calculated up to the time SA indicates unequivocally that it will exercise this Back-in Right.

11.       In clause 15 of the Letter of Understanding, MIM committed to preparing a full draft agreement within 90 days of the Letter of Understanding being accepted. In fact, Solitario and MIM operated under the Letter of Understanding for approximately a year, and the full agreement was not signed until approximately May 15, 2004 (the “MIM-Solitario Option Agreement”).

12.       Notwithstanding the agreement as to Solitario’s back-in right, as correctly recorded in clause 10 of the Letter of Understanding, MIM unilaterally changed the back-in provision in the final draft of the MIM-Solitario Option Agreement.  MIM inserted the words “If, within 36 months of exercising the Option...” at the beginning of the back-in clause (the “36-month restriction”) so that the re-drawn back-in provision read as follows, in the MIM-Solitario Option Agreement as signed:

7.         BACK-IN RIGHT

7.1       If, within 36 months of exercising the Option, Xstrata* completes a feasibility study on any part of the Property, Xstrata* must notify Solitario, and Solitario will have the right to elect to “buy back” up to a maximum 25% equity in the Property at any time within 120 days of receiving the said notification (the “Back-in Right”) by giving written notice to Xstrata* of the exercise of the Back-in Right. [Emphasis in original]

*”Xstrata” is synonymous with MIM for the purposes of this notice of civil claim.

13.       MIM prepared the final draft of the MIM-Solitario Option Agreement, introducing the 36-month restriction, on or about April 21, 2004, nearly a year after the Letter of Understanding and shortly before the MIM-Solitario Option Agreement was signed, in May, 2004.  The final draft contained numerous other amendments as well, none of which were substantial.  In all other respects, the drafts leading to the MIM-Solitario Option Agreement reflected what the parties had agreed to, as recorded in the Letter of Understanding.

14.       Solitario and MIM never discussed the 36-month restriction which MIM inserted unilaterally, and MIM did not notify Solitario, orally or in writing, that it was inserting the 36-month restriction.  In the result, Solitario missed noticing the change created by the 36-month restriction before it signed the full agreement.

15.       The 36-month restriction would effectively destroy the commercial purposed of the back-in right provision.  It would mean that so long as MIM chose not to complete a feasibility study within 36 months of exercising the option, Solitario would lose all back-in rights, unless it was able to waive the completion of a feasibility study within the 36 month period and exercise the back-in right.

16.       Solitario first noticed the 36-month restriction in 2008, at which time it amended the writ in this action to plead rectification.

[15]         As noted, the plaintiffs claim the Court should rectify the Agreement; alternately the Court should find there has been a breach of an implied term.  The plaintiffs further allege that the time limit in the Impugned Term is unenforceable because of a lack of consideration.

[16]         The defendants have pled in their Response to Civil Claim (the “Response”), filed October 7, 2010, that no feasibility study was completed on the project and that “at all material times [the plaintiffs] were aware of the 36 month time period and took no steps to seek an amendment or to rectify” the Agreement.

[17]         The defendants issued a Third Party Notice on October 14, 2010 joining TNR’s Lawyers to the lawsuit (the “Third Party Notice”).

[18]         Paragraphs 3 to 9 of the Third Party Notice set out the nature of the defendants’ claim against TNR’s Lawyers:

3.         The Third Parties, collectively, are Defendants in the Supreme Court of British Columbia, Vancouver Registry, Action Number S-103104, brought by the Plaintiffs for breach of contract and negligence, the facts of which are outlined below.

4.         Between 2004 and 2008, the Third Parties, collectively, contracted with the Plaintiffs to provide legal counsel regarding certain mineral tenures in which the Plaintiffs have an interest.

5.         The Third Parties were the Plaintiffs’ legal counsel when they entered into the Solitario Exploration Agreement.

6.         If the Claiming Parties are found liable to the Plaintiffs, such liability will have been a result of the Third Parties, or each of their, breach of contract by failing to provide competent legal services.

7.         At all material times, each of the Third Parties owed the Plaintiffs a duty of care to exercise reasonable care, skill, diligence and competence in relation to providing legal services.

8.         In the alternative, if the Claiming Parties are liable to the Plaintiffs, such liability will have been a result of each of the Third Parties’ or their collective negligence and breach of their respective duties owed to the Plaintiffs, particulars of which will have included but are not limited to failing to provide adequate legal services regarding entering into the Solitario Exploration Agreement.

9.         The Claiming Parties seek contribution and indemnity from the Third Parties, or any of them with respect to any amounts for which the Defendants may be liable to the Plaintiffs, which liability is not admitted, but expressly denied.  The Claiming Parties plead and rely upon the provisions of the Negligence Act, R.S.B.C., [sic] 1996, c. 333.

[19]         The Minera defendants’ third-party claim against TNR’s Lawyers is currently based on the Negligence Act, R.S.B.C. 1996, c. 333, and “the common law of contract and tort.”

[20]         The defendants have applied to amend the Third Party Notice to further particularize and clarify the claim they are making against TNR’s Lawyers.

[21]         While the success of the application to amend will depend on the result of TNR’s Lawyers’ motion to strike out the Third Party Notice, I will set out the proposed amendments:

5.         In particular, the Third Parties provided legal services regarding the Plaintiffs’ mining and exploration rights in the Los Azules project.  In May 2004, the Plaintiffs entered into the Solitario Exploration Agreement with MIM, which allowed MIM to conduct exploration work on and earn 100% interest in certain properties forming part of the Los Azules project and provided the Plaintiffs with the right to back-in to an interest in the specific properties on certain conditions.

...

7.         The Solitario Exploration Agreement has been assigned to Andes.  Clause 7.1 of the Solitario Exploration Agreement provides for the Solitario Back-In Right as follows:

If, within 36 months of exercising the Option, Xstrata completes a feasibility study on any part of the Property, Xstrata must notify Solitario, and Solitario will have the right to “buy back” up to a maximum 25% equity in the Property at any time within 120 days of receiving such notification (the “Back-in Right”) by giving written notice to Xstrata of the exercise of the Back-in right. [Emphasis Added]

8.         The Plaintiffs allege in the Notice of Civil Claim that the above noted 36 month period was inserted unilaterally and that Solitario missed noticing the provision in the Solitario Exploration Agreement before signing it.

9.         As the Third Parties were the Plaintiffs’ legal counsel when they entered into the Solitario Exploration Agreement, if the Claiming Parties are found liable to the Plaintiffs, such liability will have been a result of the Third Parties, or each of their, breach of contract by failing to provide competent legal services.

10.       The Third Parties, or each of them, were responsible for providing legal services to the Plaintiffs regarding the execution of the Solitario Exploration Agreement and for provided legal advice to the Plaintiffs’ in relation to the provisions of the Solitario Exploration Agreement.

...

12.       If the Solitario Exploration Agreement does not reflect the true intention of the parties, the loss to the Plaintiffs is a direct result of the conduct of the Third Parties, or each of them, in advising the Plaintiffs to enter into and execute the Solitario Exploration Agreement.

[22]         In the proposed amended Third Party Notice the defendants no longer claim contribution and indemnity against TNR’s Lawyers nor do they rely on the Negligence Act.  Rather, the defendants seek a declaration of fault for the plaintiffs’ loss.  As a legal basis for the claim the defendants rely on Rules 1-3 and 3-5(1)(c) and “the common law of contract and tort”.

[23]         TNR’s Lawyers take no position on the defendants’ proposed amendments to either the Response to Civil Claim or Counterclaim but oppose the amendments to the Third Party Notice.

[24]         The plaintiffs in this action commenced the Solicitors’ Action against their law firm, Armstrong Simpson, on May 3, 2010.  The claim endorsed on the Writ of Summons reads:

The Plaintiffs’ claim against the Defendants is for breach of contract and negligence in relation to legal services provided to the Plaintiffs between 2004 and 2008 regarding certain mineral tenures in which the Plaintiffs have an interest.

[25]         The writ has yet to be served.  Neither a Statement of Claim nor a Notice of Civil Claim has been filed or served.

Issues

[26]         The issues for determination are:

1.       Should the application by TNR’s Lawyers to strike out the Third Party Notice on the ground it discloses no reasonable cause of action be allowed?

2.       If the Third Party Notice is not struck out, should the application by the defendants to amend be allowed?

3.       Should this action be joined with Supreme Court Action No. S103104 and be tried at the same time?

[27]         I grant the defendants’ application to amend its Response and Counterclaim in the form it seeks.  Such amendment will assist the parties in clarifying the issues in the lawsuit.

Application to strike out the Third Party Notice

[28]         For the reasons which follow I grant the application of TNR’s Lawyers to strike out the defendants’ Third Party Notice and, as a result, I do not grant the application to amend that notice.

[29]         The application of TNR’s Lawyers is made under Rule 9-5(1):

Scandalous, frivolous or vexatious matters

9-5(1)  At any stage of a proceeding, the court may order to be struck out or amended the whole or any part of a pleading, petition or other document on the ground that

(a)        it discloses no reasonable claim or defence, as the case may be...

[30]         The determination of this application must be made on the basis that the facts as set out in the pleadings and proposed amendments to the Third Party Notice are accepted as true.  Further, it must be clear beyond doubt that the pleadings do not disclose a reasonable cause of action:  McNaughton v. Baker, 25 B.C.L.R. (2d) 17, [1988] 4 W.W.R. 742 (C.A.); CMHC v. Barclay Construction Corp., 2001 BCSC 903; Kripps v. Touche Ross & Co. (1992), 94 D.L.R. (4th) 284, 69 B.C.L.R. (2d) 62 (C.A.), leave to appeal to S.C.C. ref’d [1993] 2 S.C.R. viii.

[31]         The facts in this case are not seriously in dispute.  The plaintiffs’ claim is for rectification and alternately that a term be implied into the contract between the plaintiffs and defendants.  The contractual term at issue is a rather narrow one; that is, the validity and proper interpretation of the Impugned Term of the Agreement.

[32]         The role of TNR’s Lawyers in drafting the Agreement is that they advised and acted on behalf of the plaintiffs in the negotiations which led to the plaintiffs signing the Agreement.  There was no legal relationship between TNR’s Lawyers and the defendants.

[33]         The facts in this case are similar to those in Adams v. Thompson, Berwick Pratt and Partners (1987), 39 D.L.R. (4th) 314, 15 B.C.L.R. (2d) 51 (C.A.).  In that case the defendant engineers sought to add the plaintiffs’ solicitors as third parties to the action on the basis the solicitors were negligent and in breach of their fiduciary duty to their client, the plaintiffs.  The Court of Appeal upheld a decision of the chambers judge to strike out the third-party claim.  McLachlin J.A., as she then was, discussed the appropriateness of adding a third party to an action where that party had acted in the role of agent for the plaintiff.  In such circumstances the fault of the agent was to be attributed to the plaintiff and was to be raised by the defendant as a defence to the plaintiff’s claim, not in third-party proceedings brought against the agent.  She stated, at 317-19:

The authorities establish that where a plaintiff contracts with two separate parties, such as a contractor and an engineer, and later sues one of them, the one sued cannot claim contribution or indemnity from the other on the ground that the other failed to properly execute his duties, where the substance of the third party claim can be raised against the plaintiff by way of defence.

This result follows from the decision in Yemen Salt Mining Corp. v. Rhodes-Vaughan Steel Ltd. et al (1976), 2 C.P.C. 318 (B.C.S.C., Ruttan J.).  In that action, the defendant contractor issued a third party notice against the plaintiff’s inspector/engineer.  The court struck out the third party notice on the grounds that the fault, if any, of the inspector would be visited upon the plaintiff and reduce its recovery against the contractor.  Yemen was followed in Westcoast Transmission Co. Ltd. v. Interprovincial Steel & Pipe Corp. Ltd. et al (1985), 60 B.C.L.R. 368 (S.C.).

Where the fault alleged against the proposed third party is in fact the fault of the plaintiff, the defendant can raise the default by way of defence, making third party proceedings unnecessary.  Yemen and Westcoast were such cases.  In both cases the plaintiff had hired someone to act in its stead to ensure that the defendant was performing his contract.  Any default was attributable to the plaintiff.

The significance in these decisions of the fact that the proposed third party was acting as the agent of the owner in circumstances where his conduct became the responsibility of the owner was pointed out by McEachern C.J.S.C. in Quintette Coal Ltd. v. Bow Valley Resource Services Ltd. et al, April 2, 1986, No. C837395, Vancouver Registry at p. 20:

. . . both Yeman [sic] and Westcoast were cases where the putative third parties were inspectors employed by the plaintiff to supervise the work of the defendant.  It was not suggested that the third parties were guilty of active negligence apart from their failure to detect the negligence of the defendant, and it was assumed that any fault on the part of the third parties would be imputed to the plaintiffs.  In this case, however, the defendant seeks contribution from Kilborn for Kilborn’s own alleged independent negligence and I am not satisfied that Kilborn’s negligence must necessarily be imputed to the plaintiff.

It thus may be stated with confidence, in my view, that a third party claim will not lie against another person with respect to an obligation belonging to the plaintiff which the defendant can raise directly against the plaintiff by way of defence.  Where the only negligence alleged against the third party is attributable to the plaintiff, there is no need for third party proceedings since the defendant has his full remedy against the plaintiff.  On the other hand, where the pleadings and the alleged facts raise the possibility of a claim against the third party for which the plaintiff may not be responsible, the third party claim should be allowed to stand.

...

It remains to consider those circumstances in which a claim against a proposed third party is, in fact, a claim with respect to an obligation of the plaintiff.

Generally speaking, all acts falling within the scope of an agency between the proposed third party and the plaintiff fall into the category of acts for which the plaintiff is responsible and hence are not the proper subject to third party claims.  At the same time, it must be recognized that a person acting as agent to the plaintiff may undertake duties toward co-contractors and others outside the scope of his agency.  To put it another way, the plaintiff’s agent may, as a consequence of his relations with other contractors on the project, assume duties toward persons other than the plaintiff, for breach of which the plaintiff would not be vicariously liable.  It was the possibility of such claims which led McEachern C.J.S.C. in Quintette, supra, to allow the third party claim to stand.

[34]         In my view the facts before me establish TNR’s Lawyers acted solely as agents for the plaintiffs.  They owed no duty nor did they have any relationship with the defendants.  If TNR’s Lawyers were negligent in advising the plaintiffs or in breach of their contract with the plaintiffs, while there may be consequences to the plaintiffs in the lawsuit those are issues solely between the plaintiffs and TNR’s Lawyers.  In so far as the legal issues between the plaintiffs and defendants are concerned the actions of TNR’s Lawyers are the actions of an agent of the plaintiffs and, as discussed in Adams, are to be raised by the defendants in their statement of defence.

[35]         The defendants seek declaratory relief (“A Declaration of Fault for the Plaintiffs’ loss”) in their Amended Third Party Notice and argue on this application that the Court has a broad discretion to allow such claims notwithstanding there is not a lis or legal relationship between the parties:  British Columbia Ferry Corp. v. T&N plc, [1996] 4 W.W.R. 161, 16 B.C.L.R. (3d) 115 (C.A).

[36]         In Cheslatta Carrier Nation v. British Columbia, 2000 BCCA 539 (leave to appeal to S.C.C. ref’d 172 B.C.A.C. 320), the Court of Appeal reviewed its decision in British Columbia Ferry Corp.  Madam Justice Newbury, for the Court, stated, at paras. 11, 13 and 14:

[11]      I have little doubt that having in hand a declaration of the kind sought here would give the plaintiff a distinct tactical advantage in any discussions that may be ongoing between the Cheslatta and the government or other parties who may have conflicting interests with those of the plaintiff. But that tactical advantage does not by itself decide the question of whether a court of law would or should entertain an action for a declaration of right in the general terms sought here. Mr. Janes relies strongly on the decision of this court in British Columbia Ferry Corp. v. T & N plc [1996] 4 W.W.R. 161, where it was said that the existence of a lis between the parties was not necessary to found a declaratory action.  The facts of that case were of course unusual:  the Court was concerned with third party claims that were necessary to enable the defendants “to establish an element of proof essential to a just resolution of the action on which all parties had joined issue.” (para. 31) The real issue was whether an action brought for “purely procedural relief” should be permitted.  Although B.C. Ferry Corp. has not been universally followed on that point (see Wright (Next Friend of) v. VIA Rail Canada Inc. [2000] 4 W.W.R. 232 (Q.B.), at 245-8), Wood J.A.’s more general comment that a lis (i.e., the seeking of consequential relief apart from a declaration) is not required to found a declaratory action, is no doubt correct and has been since the enactment of the predecessor of R. 5(22): see Guaranty Trust Company of New York v. Hannay & Company [1915] 2 K.B. 536 (C.A.), at 561-3.

...

[13]      Generally, modern courts have continued to adhere to the principle that declaratory actions should not be entertained where the declaration will serve little or no practical purpose or raises a matter of only hypothetical interest. Conversely, where the pleadings disclose a “real difficulty,” present or threatened, the action will lie. The first edition of Zamir, The Declaratory Judgment (1962), summarized the law this way:

Generally, when a person puts himself to the trouble and expense of litigation, he does it to serve some practical purpose of considerable importance for him. It is true that the mere interest of the plaintiff is not sufficient to warrant a declaration of his rights. Declaratory proceedings, though useful enough in the opinion of the plaintiff, have often been dismissed as being hypothetical . . . . Thus, where a declaration may only satisfy the plaintiff’s curiosity, or give him an extra assurance against a possible challenge or infringement of his rights in the future, it will (if there is no real ground for such a doubt or anxiety) be refused as being hypothetical. But where the court holds that it has jurisdiction and that the plaintiff has established his standing, it will be slow to find that the declaration claimed may not be useful enough to justify its intervention. Accordingly, where a real doubt is cast on the plaintiff’s rights, ensuing from a dispute between the parties, the court will generally regard the mere removal of that doubt as of sufficient utility.

The requirement of utility does not mean that the plaintiff should, in consequence of the declaration, be enriched by material assets or benefited in a tangible way. Utility only means that the declaration of the court should solve a real difficulty which confronts the plaintiff in the conduct of his business affairs or his private life. [at 192-3; emphasis added.]

[14]      Canadian courts have adopted similar reasoning. The leading case is Operation Dismantle Inc. v. Canada [1985] 1 S.C.R. 441, where Dickson J. for the majority of the Supreme Court of Canada stated that “Conjectural or speculative issues, or feigned disputes or one-sided contentions are not the proper subjects for declaratory relief.” His Lordship continued:

None of this is to deny the preventative role of the declaratory judgment. As Madam Justice Wilson points out in her judgment, Borchard, Declaratory Judgments (2nd ed. 1941), at p. 27, states that,

...no “injury” or “wrong” need have been actually committed or threatened in order to enable the plaintiff to invoke the judicial process; he need merely show that some legal interest or right of his has been placed in jeopardy or grave uncertainty....

Nonetheless, the preventative function of the declaratory judgment must be based on more than mere hypothetical consequences; there must be a cognizable threat to a legal interest before the courts will entertain the use of its process as a preventive measure. As this Court stated in Solosky v. The Queen, [1980] 1 S.C.R. 821, a declaration could issue to affect future rights, but not where the dispute in issue was merely speculative. [paras. 31-3; emphasis added.]

(See also Borowski, supra, at paras. 15-42, and Lazar Sarna, The Law of Declaratory Judgments (2nd ed., 1988) at 22-5.)

[37]         As noted above, the Third Party Notice, as the defendants seek to amend it, raises no issue between the defendants and TNR’s Lawyers.  Both the proposed amendments and the Third Party Notice claim TNR’s Lawyers acted on behalf of the plaintiffs and in doing so owed a duty to the plaintiffs to exercise due care, diligence and competence.  It is a claim for a declaration that if the plaintiffs suffered loss TNR’s Lawyers are liable for that loss.  It is my view that should the plaintiffs not be successful on this lawsuit, whether they suffered a loss as a result of advice given by their lawyers is a matter between TNR and its lawyers.  The defendants do not allege TNR’s Lawyers were in a fiduciary relationship with them or that TNR’s Lawyers owed a duty to them.  The pleadings do not assert TNR’s Lawyers made representations to the defendants in connection with the negotiation of the Agreement or that the defendants placed any reliance on any act done by TNR’s Lawyers.

[38]         The pleadings establish that TNR’s Lawyers’ involvement with the Agreement was to advise the plaintiffs on the terms of the Agreement.  Presumably the defendants had their own counsel assisting them in drafting the Agreement.  There are no facts asserted showing TNR’s Lawyers had any involvement with the defendants.

[39]         It is difficult therefore to conclude there is any practical purpose to the third-party claim other than for procedural purposes.  I find the facts of this case fall squarely within the principles outlined in Adams and Cheslatta.

[40]         Quite apart from those issues, the Court has a concern over the consequences to the solicitor-client privilege existing between TNR’s Lawyers and the plaintiffs and the litigation privilege claimed by TNR over its communications with TNR’s Lawyers.  These privileges should not be lightly interfered with.  In the circumstances of this case the defendants have not demonstrated a clear right to a remedy against TNR’s Lawyers sufficient to potentially entitle it to documents which could attract such privilege:  see Wonderful Ventures Ltd. v. Maylam, 2001 BCSC 775.

[41]         The TNR’s Lawyers who advised the plaintiffs on the content of the Agreement will clearly be necessary witnesses at the trial for the plaintiffs to succeed in its claims for rectification and implication of a term into the Agreement.  TNR acknowledges its lawyers are properly witnesses in the proceedings and, to a limited extent, have waived solicitor-client privilege.

[42]         Accordingly I conclude the third-party claim must be struck out as disclosing no reasonable cause of action.  It follows that the defendants’ application to amend the Third Party Notice is dismissed.

Should Action No. S103104 be tried at the same time as this action?

[43]         Rule 22-5(8) of the Rules provides:

Consolidation

(8)        Proceedings may be consolidated at any time by order of the court or may be ordered to be tried at the same time or on the same day.

[44]         In Merritt v. Imasco Enterprises Inc. (1992), 2 C.P.C. (3d) 275, 31 A.C.W.S. (3d) 534 (S.C.), Master Kirkpatrick, as she then was, outlined a number of the factors which the court should consider on an application under Rule 22-5(8):

1.       Do common claims, disputes and relationships exist between the parties?

2.       Are they so interwoven as to make separate trials before different judges undesirable and fraught with problems and economic expense?

3.       Will the order sought create a saving in pre-trial procedures?

4.       Will there be a real reduction in the number of trial days taken up by the trials being heard at the same time?

5.       Will there be a real saving in experts’ time and witness fees?

[45]         In Shah v. Bakken (1996), 20 B.C.L.R. (3d) 393, 46 C.P.C. (3d) 205 (S.C.), Master Joyce, as he then was, reviewed the above factors and added two further factors:

1.       Is one of the actions at a more advanced stage than the other?

2.       Will the order result in the delay of the trial of one of the actions and, if so, does any prejudice arise which may outweigh the advantage of a combined trial?

[46]         In the present case the writ in the Solicitors’ Action was issued May 3, 2010.  The endorsement on the writ, which I have set out at para. 24 of this decision, is cast in the broadest of terms.  The claim reads:

The Plaintiffs’ claim against the Defendants is for breach of contract and negligence in relation to legal services provided to the Plaintiffs between 2004 and 2008 regarding certain mineral tenures in which the Plaintiffs have an interest.

While one might be tempted to speculate the subject matter relates to this action and to the negotiation of the Agreement that is far from clear from the endorsement on the writ.

[47]         Even if it could be concluded that the subject matter of the two actions did relate to the negotiation of the Agreement, the legal issues between the parties in that lawsuit are quite different from those existing between the plaintiffs and the defendants in this action.

[48]         Further, the result of joining the actions would be to force the plaintiffs to proceed with the Solicitors’ Action, a step they may not wish to pursue.  The effect of an unserved writ was described by the Court of Appeal in Commonwealth Investors Syndicate v. Laxton, 68 B.C.L.R. (2d) 145 at para. 37, 15 B.C.A.C. 282:

Other than stopping the running of time under a limitation statute, and perhaps in respect of rights of priority, an unserved writ and statement of claim has not much more effect than a letter of demand signed but not posted.  And even after service it is not a document etched in stone.  By the time the trial date has been reached it may have undergone extensive alteration as to the style of cause, as to the allegations, as to the cause of action and as to the relief claimed.  Given that amendments are sometimes made even while a trial is proceeding it is difficult to understand how it could be said with certainty, prior to judgment, and perhaps not even then, that a plaintiff has made an unequivocal choice of the right which he asserts.  In this case that point will never be reached as we are told that following execution of the settlement agreement the trustee action was discontinued.  We do not know when that occurred. [Emphasis added]

[49]         Joining these two actions would inevitably result in an adjournment of the trial in this matter which is now set to commence June 20, 2011.  I note the trial has already been adjourned once from the Fall of 2010.  It would complicate the issues and, as stated earlier, would raise significant issues of solicitor-client privilege and litigation privilege likely leading to expensive and time consuming motions and pre-trial discoveries.

[50]         I am not satisfied joining this action with the Solicitors’ Action meets any of the tests set out in the above-noted authorities and accordingly I dismiss the defendants’ application.

Summary

[51]         Accordingly the defendants’ applications to amend its Third Party Notice and to join this action with Supreme Court Action No. S103104 are dismissed.

[52]         The defendants’ application to amend its Response to Civil Claim and to amend its Counterclaim is allowed.

[53]         TNR’s Lawyers’ application to strike the Third Party Notice is allowed.

[54]         TNR’s Lawyers and the plaintiffs will recover costs for these applications.

“GREYELL J.”