T-5154-79
85839 Canada Ltd. and 91984 Canada Ltd.
(Plaintiffs)
v.
The Queen in right of Canada (Defendant)
Trial Division, Walsh J.—Montreal, January 14;
Ottawa, January 24, 1980.
Jurisdiction — Practice — Application in action for defend
ant's non-payment of rent to add as a plaintiff the corporation
that owned premises prior to default of rent — In defendant's
cross-demand for expenses arising out of alleged breaches of
lease by owners of premises, application by cross-defendants
for leave to issue third party notices to individuals from whom
indemnification would be sought for any liability arising out of
the cross-demand — Whether or not the Court has jurisdic
tion to grant the application.
Defendant leased from Threeway Holding Corp. premises
that were later sold and resold, with an assignment of rights
under the lease, to 85839 Canada Ltd. and then to 91984
Canada Ltd. Plaintiffs' claims were a result of defendant's
failure to pay rental in 1979 for the months of March through
September, inclusive. Defendant made cross-demand against
the rental claims for expenses allegedly incurred because the
premises had not been properly heated or maintained by Three-
way Holding Corp. Plaintiffs move to add Threeway Holding
Corp. as a necessary party to ensure that all matters in dispute
in the cross-demand made by defendant may be effectually and
completely determined and adjudicated. They also seek leave to
issue a third party notice as cross-defendant to the cross-
demand claiming indemnification from Philip Wiseman,
Samuel Wiseman and Rhoda Wiseman for any liability which
may arise in respect of defendant's cross-demand. Defendant
properly raises the question of jurisdiction.
Held, the application is dismissed. Threeway Holding Corp.
could not be joined as co-plaintiff because the claims for
outstanding rent commenced after the property had been pur
chased and the lease assigned. Any dispute between plaintiffs
and Threeway Holding Corp. cannot be adjudicated upon in
this Court whether directly or by way of third party proceed
ings. Article 1610 of the Quebec Civil Code has no bearing on
the matter for defendant has raised its provisions in defence
and brought a cross-demand over which the Court has jurisdic
tion. This does not mean, however, that third parties over whom
the Court does not have jurisdiction can be joined to the
proceedings whether by plaintiff or defendant. Although there
may be an inconvenience to plaintiffs and possibly to defendant
should the parties not be able to dispose of the entire matter in
controversy in this Court, this Court neither has jurisdiction
over the proposed third party proceedings arising from defend-
ant's cross-demand nor jurisdiction to oblige defendant to add
as a cross-defendant in the cross-demand another party not
named as plaintiff in the proceedings brought. It would not be
appropriate, as plaintiffs seek in the alternative, to add Three-
way Holding Corp. as co-plaintiff by amendment to the pro
ceedings. The entire claim of plaintiffs (as distinguished from
the cross-demand) arises from rental due following March 1,
1979.
McNamara Construction (Western) Ltd. v. The Queen
[1977] 2 S.C.R. 654, applied. R. v. F. E. Cummings
Construction Co. Ltd. [1974] 2 F.C. 9, applied. R. v. The
Bank of Montreal [1933] S.C.R. 311, applied. R. v. La
Garantie, Compagnie d'assurance de l'Amérique du Nord
[1977] 1 F.C. 63, applied.
APPLICATION.
COUNSEL:
Leonard Seidman for plaintiffs.
Michel H. Duchesne for defendant.
SOLICITORS:
Tinkoff, Seal, Shaposnick & Moscowitz,
Montreal, for plaintiffs.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
WALSH J.: Plaintiffs move to add Threeway
Holding Corp. as a necessary party to ensure that
all matters in the dispute in the cross-demand
made by defendant herein may be effectually and
completely determined and adjudicated upon.
They also seek leave to issue a third party notice as
cross-defendant to the cross-demand claiming
indemnification from Philip Wiseman, Samuel
Wiseman and Rhoda Wiseman for any liability
which may arise in respect of defendant's cross-
demand. Defendant properly raises the question of
the jurisdiction of the Court over the parties
sought to be brought into the action in this way.
The situation is an extraordinary one, but difficul
ties, which may result for plaintiffs if their motion
is not granted, cannot justify giving jurisdiction to
the Court in matters with respect to which it has
no jurisdiction.
The facts as set out in the pleadings are as
follows:
Threeway Holding Corp. entered into a lease
whereby it leased to defendant certain business
premises in the City of Montreal for a five-year
period commencing on November 1, 1974 and
terminating on October 31, 1979 an option being
given for three one-year renewals. It is alleged
although denied by defendant that by letter dated
September 12, 1978, the lease was renewed for a
period following November 1, 1979. Subsequently
the property was sold to plaintiff 85839 Canada
Ltd. together with an assignment of all rights in
the lease. Defendant was duly notified and accept
ed this. As a result allegedly all rental owed by
defendant commencing from February 1, 1979 was
payable to plaintiff 85839 Canada Ltd. It is also
alleged that subsequently plaintiff 85839 Canada
Ltd. sold the property to plaintiff 91984 Canada
Ltd. together with an assignment of all rights in
the lease in question and that defendant was duly
notified of the assignment and acknowledged
receipt of the notification. As a result all rental
owed by defendant commencing in July 1979 is
payable to plaintiff 91984 Canada Ltd. Defendant
failed to pay rental for the months of March,
April, May, June, July, August and September
1979. As a result plaintiff 85839 Canada Ltd.
claims $7,047.80 and plaintiff 91984 Canada Ltd.
claims $5,285.85, with reservation of its rights to
claim future sums which become due.
Defendant contests certain of the allegations in
the statement of claim and complains that for a
long period of time the premises were not properly
maintained or heated by the lessor Threeway
Holding Corp. in conformity with the conditions of
the lease. The cross-demand claims the sum of
$3,725.46 for necessary repainting of the premises
by the Department of Public Works, $995 for
moving expenses when the Ministry of National
Health and Welfare left the premises on August
31, 1976 as a result of their condition, $1,320 as
moving expenses, when in its turn the Postal Min
istry left the premises on September 15, 1978, and
expenses of $1,108.79 and $990 when Environ
ment Canada left on May 17, 1979. The cross-
demand is made for these amounts. Compensation
is claimed of these amounts against rental claims
of plaintiffs, and at the same time cancellation of
the lease retroactive to May 17, 1979 is sought as
well as any renewal of the lease.
Plaintiffs claim, not without some justification,
that at least some of the amounts due on the
cross-demand are claims against Threeway Hold
ing Corp. their predecessor in title as they arose
prior to February 1979. It would appear that on
the merits the terms and conditions of the sale of
the property to plaintiff 85839 Canada Ltd. and of
the assignments of the lease to it and subsequently
by it to 91984 Canada Ltd. will determine whether
or not they assumed all the obligations of their
predecessor in title Threeway Holding Corp. The
latter could not possibly be joined as a co-plaintiff
as plaintiffs suggest as an alternative to granting
of their motion, since the claims for outstanding
rent commenced in February 1979 after the prop
erty had been purchased from Threeway Holding
Corp. and the lease assigned. Whether or not
defendant in her cross-demand can claim from
plaintiffs amounts due as damages by their prede
cessors in title will be a matter for decision at the
hearing on the merits after examining the sale and
assignment contract and considering the legal
issues involved. At present there is no issue be
tween the plaintiffs and Threeway Holding Corp.
although there might be eventually a recursory
action in the event that defendant is successful in
her cross-demand. In defending the cross-demand
plaintiffs as lessors by virtue of the assignment of
the lease can invoke the defences available to their
said predecessor in title. In their motion plaintiffs
confuse the situation by seeking in a third party
notice to have Philip Wiseman, Samuel Wiseman
and Rhoda Wiseman indemnify them against any
liability arising out of the cross-demand on the
grounds that they are responsible as vendors of the
immoveable property in question, and assignors of
the lease, yet at the same time they seek an order
requiring the defendant to amend her cross-
demand to add Threeway Holding Corp. as a
cross-defendant. No explanation appears as to the
relationship between Philip Wiseman, Samuel
Wiseman and Rhoda Wiseman and the Threeway
Holding Corp. Possibly it was a partnership, the
named parties being partners.
In any event it is clear that any dispute between
plaintiffs and the said parties or plaintiffs and the
Threeway Holding Corp. cannot be adjudicated
upon in this Court whether directly or by way of
third party proceedings. Plaintiffs invoked article
1610 of the Quebec Civil Code (formerly article
1641) and referred to certain authorities comment
ing on it, but I do not believe that it has any
bearing on the matter; it merely allows the lessee
in the event of inexecution of an obligation by the
lessor to demand specific performance, cancella
tion of the contract if the inexecution causes him
serious prejudice, and reduction of rent in addition
to damages. While these are issues which can be
raised in defence, defendant has done this and has
brought a cross-demand over which the Court has
jurisdiction.
This does not mean however that third parties
over whom the Court does not have jurisdiction
can be joined to the proceedings whether by plain
tiff or defendant. In the case of McNamara Con
struction (Western) Limited v. The Queen,' Chief
Justice Laskin stated at page 662:
Where it is not the Crown's liability that is involved but that of
the other party to a bilateral contract, a different situation
prevails as to the right of the Crown to compel that person to
answer process issued out of the Federal Court.
In the earlier decision of The Queen v. F. E.
Cummings Construction Co. Ltd. 2 Collier J. stated
at page 15:
A third party notice is the equivalent of a writ of summons.
' [1977] 2 S.C.R. 654.
2 [ 1974] 2 F.C. 9.
In that case the Queen as plaintiff sought dam
ages for defects in a building constructed by
defendant Cummings who issued third party
notices to subcontractors and others claiming
indemnity. It was held that the Court had no
jurisdiction to entertain or hear third party pro
ceedings. Reference was made at page 16 to the
case of The King v. The Bank of Montreal; in
which the Crown had sued the Bank of Montreal,
its banker, to recover monies paid out of its
account in respect of forged cheques or unauthor
ized endorsements. The Bank of Montreal, by
third party proceedings, relying on the Bills of
Exchange Act claimed indemnity against the
Royal Bank of Canada which had negotiated the
cheques. Duff C.J. in rendering judgment (quoted
at page 18 of Collier J.'s judgment) stated in part:
The Supreme Court of Ontario has jurisdiction, by virtue of the
statutes and rules by which it is governed, to entertain and
dispose of claims in what are known as third party proceedings.
Claims for indemnity, for example, from a third party, by a
defendant in respect of the claim in the principal action against
him, can be preferred and dealt with in the principal action.
But there can be no doubt that the proceeding against the third
party is a substantive proceeding and not a mere incident of the
principal action. These rules are in essence rules of practice, not
of law, introduced for the purposes of convenience and to
prevent circuity of proceedings.
Later on the same page Chief Justice Duff in
commenting on the jurisdiction of the Exchequer
Court over a claim based on the Bills of Exchange
Act stated:
No doubt the principal action is strictly within the words "cases
relating to the revenue." There is also, no doubt, a sense in
which the third party claim relates to the revenue since it is a
claim to have the third party indemnify the defendant in
respect of a debt which the defendant is called upon to pay to
the Crown. There is a great deal to be said also on grounds of
convenience in favour of investing the Court with jurisdiction to
entertain such claims for indemnity. On the whole, however, we
think, having regard to the context, that this claim is not within
the intendment of sub-paragraph (a).
[1933] S.C.R. 311.
This judgment was followed by Marceau J. in
the case of The Queen v. La Garantie, Compagnie
d'assurance de l'Amérique du Nord 4 in which
defendant was sued as a surety upon the failure of
the principal debtor to fulfil its commitments as a
tenderer, and then served a third party notice on
the latter. Marceau J. stated at page 64 maintain
ing plaintiff's objection to the third party notice:
I believe that plaintiffs objection is justified. The fact that
the third party could have been sued as joint and sole debtor on
the obligation alleged in the action could not confer jurisdiction
on this Court to decide which means of redress defendant may
use against the third party. Moreover, nothing requires that the
principal debtor be a party to an action, in order for its grounds
of defence to be pleaded by its surety. A third party notice is
equivalent to a writ of summons and in itself gives rise to an
action: in the case at bar, this action does not come under the
jurisdiction of this Court.
Although there may be an inconvenience to
plaintiffs therefore, and possibly also to defendant
should the parties not be able to dispose of the
entire matter in controversy in this Court, I am
obliged to conclude that this Court does not have
jurisdiction over the third party proceedings
sought to be instituted herein arising from defend
ant's cross-demand, or to oblige defendant in her
cross-demand to add as cross-defendant another
party not named as plaintiff in the proceedings
brought. Neither do I believe that it would be
appropriate, as plaintiffs seek in the alternative, to
add Threeway Holding Corp. as co-plaintiff by
amendment to the proceedings. The entire claim of
plaintiffs (as distinguished from the cross-demand)
arises for rental due following March 1, 1979.
Plaintiffs' motion is therefore dismissed with costs.
ORDER
Plaintiffs' motion is dismissed with costs.
4 [1977] 1 F.C. 63.
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