A-919-91
Thomas Fuller Construction Co., (1958) Limited
(Plaintiff) (Appellant)
v.
Her Majesty the Queen in Right of Canada
(Defendant) (Respondent)
INDEXED AS: THOMAS FULLER CONSTRUCTION Co, (1958)
LTD. V. CANADA (CA.)
Court of Appeal, Marceau J.A.—Ottawa, October 6,
1992.
Contracts — Contractor suing Crown for damages caused
by delays of two construction projects — Agreements purport
ing to authorize contractor to sue on behalf of subcontractors
— Appeal from Trial Division order finding litigation agree
ments invalid as offending laws of champerty and maintenance
— Trial Judge not properly seized of matter as Crown's
motions not supported by Court Rules — Order purposeless in
that, even if agreements declared null and void, contractor
could still contend that liable under own contract with subcon
tractors — Leave to amend also useless as no amendment now
required — Appeal allowed.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Rules, C.R.C., c. 663, RR. 341(b), 419(1),
474(1)(a).
CASES JUDICIALLY CONSIDERED
REFERRED TO:
Flexi-Coil Ltd. v. F.P. Bourgault Industries Air Seeder
Division Ltd. (1991), 35 C.P.R. (3d) 154; 123 N.R. 235
(F.C.A.); Bemeche v. Canada, [1991] 3 F.C. 383; (1991),
133 N.R. 232 (C.A.).
APPEAL from Trial Division order ([1992] 1 F.C.
512) declaring litigation agreements between contrac
tor and subcontractors invalid as offending laws of
champerty and maintenance. Appeal allowed.
COUNSEL:
P. Donald Rasmussen and Ernest S. J. Schmidt
for plaintiff (appellant).
J. Grant Sinclair, Q.C. and Robert P. Hynes for
defendant (respondent).
SOLICITORS:
Rasmussen, Starr & Ruddy, Ottawa, for plaintiff
(appellant).
J. Grant Sinclair, Q.C., Toronto, and Deputy
Attorney General of Canada for defendant
(respondent).
The following are the reasons for judgment of the
Court delivered orally in English by
MARCEAU J.A.: We are all of the view that the order
of the Trial Division [[1992] 1 F.C. 512] under attack
in this appeal cannot be allowed to stand.
Two different motions are disposed of by the order,
each one relating to a separate action. These two
actions brought by Thomas Fuller Construction
against the Crown are in respect of two distinct con
struction contracts. Fuller claims compensation under
each contract for damages suffered by it as a result of
delays caused by the Crown. In the course of the
examination for discovery, it was revealed that a por
tion of the damages claimed in each action related to
losses sustained by Fuller' s subcontractors resulting
from the same delays. It came to light that, prior to
launching its actions, Fuller signed agreements with a
number of its subcontractors. Under the agreements,
Fuller acknowledged the validity of the subcontrac
tors' claims and agreed to pursue an action against
the Crown in excess of, but including, the amount of
the subcontractors' claims set out in the agreements.
The subcontractors agreed to provide evidence and
assistance to Fuller in its prosecution and to pay a
proportionate share of the costs of the action. In addi
tion, the subcontractors agreed to accept, in full satis
faction of any claim which they might have against
Fuller, the amount recovered by Fuller in respect of
these damages in Fuller' s action against the Crown.
The agreements also provide for division of a suc
cessful judgment if the allocation is not clear from
the judgment, and for dealing with a contingency
offer for settlement which is accepted by some but
not all of the claimants.
The Crown brought a motion in action T-1416-87
for an order that the so-called litigation agreements
that Fuller had entered into with its subcontractors be
declared void and struck down as offending the laws
of maintenance and champerty. The Crown brought a
motion in action T-1036-87 for an order for judgment
dismissing the part of Fuller's claim against the
Crown relating to the losses sustained by the subcon
tractors. In both motions, there was also a request for
leave to amend the statement of defence so as to
plead nullity of the agreements if the main relief
sought were refused.
By order of the Associate Chief Justice, the two
motions were consolidated and submitted together for
adjudication. They were then disposed of by a single
order. This is, of course, the order under appeal. By
this order, the learned Trial Judge determined first
that Fuller could not assert as its own claims of its
subcontractors against the Crown, in the absence of
privity or liability between the subcontractors and the
Crown; he then addressed the litigation agreements
and found that they were tantamount to assignments
of a bare right to sue which offend the laws of cham-
perty and maintenance. The conclusion was that these
agreements were invalid.
We are of the view that the Trial Judge could not
make the order that he made first because he was not
properly seized of the question of law that he pur
ported to determine and second because his determi
nation was purposeless.
The Judge was not properly seized of the matter
because the two motions were not supported by any
rule of the Court. Rule 474(1)(a) [Federal Court
Rules, C.R.C., c. 663] which permits the Court to
determine a preliminary question of law relevant to
the decision of the matter was not applicable since
the validity of the "litigation agreements", the ques
tion of law seen by the Judge, was, in no way, raised
by the pleadings and, in any event, could not be seen
as a pure question of law based on undisputed facts
the resolution of which would eliminate the need for
a trial or a substantial part of it (see the judgment of
this Court in Berneche v. Canada, [1991] 3 F.C.
383). Rule 419(1) which permits the Court to strike
out all or part of a pleading obviously did not apply
either since there was no allegation in the statement
of claim to strike. And Rule 341(b) which allows for
judgment of any matter in respect of which the only
evidence consists of documents, was no more appli
cable, the Court having held over and over again that
it is necessary for a determination under that Rule
that no relevant facts be in controversy and the law
be so clear that there would be no need for a trial (see
Flexi-Coil Ltd. v. F.P. Bourgault Industries Air
Seeder Division Ltd. (1991), 35 C.P.R. (3d) 154
(F.C.A.)).
As for the lack of purpose in the order, suffice it to
say that even if the "litigation agreements" are
declared null and void, this will not prevent Fuller
from contending that it is liable under its own con
tract with the subcontractors and that liability entails
a certain amount of loss to Fuller. Whether or not
such contention will be successful or even receivable
in the factual circumstances of the case is not a mat
ter before this Court at this time.
We have no difficulty agreeing with counsel for
the Crown that the case is a very complex one but
that is no reason to try to deal with it piece by piece
and at a moment in the proceedings when the pieces
are not even identified and put together.
There is finally the alternative relief sought by
both motions of an order granting leave to amend.
We consider, and counsel agree, that this is also use
less, no amendment being required at this time.
The appeal will therefore be granted and the order
of the Trial Division will be set aside. The judgment
being based on a point not raised in the factums,
there shall be no order as to costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.