New Rules of Court Update: Discontinued Lawsuits and Third Party Costs
Reasons for judgement were released today by the BC Supreme Court, Chilliwack Registry, interpreting and applying Rule 9-8(5) for what I believe is the first time. (It’s worth pointing out, however, that this rule reads almost identically to the former Rule 36(5)). This rule deals with the entitlement of a Third Party to costs when a Plaintiff discontinues a lawsuit.
In today’s case (Patterson v. Williams) the Plaintiff sued two Defendants for personal injuries sustained when a dog knocked her over. The Defendants denied fault and issued Third Party Proceedings against another dog walker seeking contribution and indemnity.
Ultimately the Plaintiff settled the claim, signed a release in favour of the Defendants and discontinued the lawsuit. The Third Party then brought a motion asking that the Defendants pay the Third Party’s costs. The Third Party relied on Rule 9-8(5) which reads as follows:
(5) If a plaintiff discontinues the whole or any part of an action in which a person has been joined as a third party, the third party, if the discontinuance disposes of the claim against the third party, is entitled to costs and may apply to the court for a direction as to who should pay them.
Mr. Justice Sigurdson dismissed the motion finding that a discontinued lawsuit does not automatically dispose of Defendant claims against a Third Party. The Court provided the following reasons:
 The third party says that the notice of discontinuance disposes of the third party claim, as it was for contribution and indemnity only and did not include an independent claim. This was so, in the third party’s submission, because the specific wording of the third party notice made the third party claim conditional both on the plaintiff not being contributorily negligent and on the defendant being found liable. According to the third party, these conditions cannot now be satisfied because of the discontinuance. Mr. Nossal also argues that there is no ongoing claim against the third party because the terms of the Release are on so-called “B.C. Ferry Agreement terms” (British Columbia Ferry Corp. et. al. v. T&N plc. et .al. (1993), 86 B.C.L.R. (2d) 353 (S.C.); (1995), 16 B.C.L.R. (3d) 115 (C.A.)) that prevent recovery from a third party.
 I think that this application for costs must fail. While the Release may limit the liability of the defendants and prevent successful third party proceedings against them, the notice of discontinuance itself does not prevent the defendants from continuing third party proceedings against Ms. Parker.
 I do not think it can be said that the filing of the notice of discontinuance by the plaintiff disposes of the claim against the third party by the defendants.
 The claim for contribution is a substantive right that continues to exist notwithstanding a settlement: see A.R. (Al) Smith Ltd. v. Turner,  B.C.J. No. 3107,  2 W.W.R. 424 (B.C. Co. Ct.), and Canada v. Foundation Co. of Canada,  1 S.C.R. 695.
 Moreover, I do not think that the precise terms of the third party notice can be determinative of this application, as the defendants are at liberty to apply to amend the terms of the third party notice.
 Even if the terms of the Release do prevent the defendant from continuing third party proceedings against the third party, which I question, that is a matter of the interpretation of the Release, not something that flows from the filing by the plaintiff of the notice of discontinuance itself.
 Accordingly, the application by the third party for costs is dismissed, with costs.