Third Party Claims in Class Actions: Who to Invite to the Party

Defendants in a class action, like in any other action, can bring a claim against third parties who were not sued directly by the plaintiff. In some cases, a plaintiff’s failure to include necessary third parties may result in the court refusing certification because a class proceeding is not the preferable procedure.

General Considerations

A defendant can generally commence a third party claim against a person who is not a party to the action where the person:

  • May be liable to the defendant for all or part of the plaintiff’s claim;
  • May be liable to the defendant for an independent claim for damages or other relief arising out of the same or related matters at issue in the main action; or
  • Should be bound by the determination of an issue arising between the plaintiff and the defendant (for example, the third party may have their own individual liability to the plaintiff on the facts at issue).

However, a plaintiff can ask the court to have the third party claim tried separately where it may prejudice or delay the main action. In considering whether to stay or sever a third party claim, courts will consider the objectives of third party claims:

  • to avoid a multiplicity of actions;
  • to avoid inconsistent findings in two different actions on the same facts;
  • to allow the third party to defend the plaintiff's claims; and
  • to save costs and to prevent the plaintiff from enforcing a judgment against the defendant before the third party issue is determined.

Failure to Include Necessary Parties Can be Fatal to Certification

In some cases, plaintiffs have decided not to name certain parties in an attempt to make the proceeding more appropriate for certification. This approach can backfire, since the absence of necessary defendants will often mean that the action cannot be certified. As the court emphasized in T.L. v. Alberta (Director of Child Welfare), 2006 ABQB 104 at 143, class proceedings legislation “is a tool of civil procedure, and is not intended to override other substantive and procedural rules, such as [the Rule] which requires the presence of all necessary parties.”

Differing Approaches of the Courts

The Courts have taken various approaches to the addition of third party claims where they may complicate the proceedings:

  • Courts have stayed third party claims until the conclusion of the common issues trial, either with or without the requirement that the third party be bound by the findings of fact made at the common issue trial.
  • Courts have refused to stay third party claims (even where hundreds of third parties were added) where the third parties should have the right to participate in the proceeding and defend the main action.
  • Courts have refused to certify claims where a multitude of disparate third parties would make the proceeding overly complicated and unmanageable.
  • Courts have certified class proceedings even where there are multiple and disparate third parties, since “the object of the [Class Proceedings Act] is not to provide perfect justice” and the difficulties regarding third parties could be accommodated by giving them leave to apply to participate in the trial of the common issues.

Strategic Considerations

In appropriate cases, defendants may wish to bring third party claims not only to bind the third parties as part of the class proceeding, but also to support the position that a class proceeding is not the preferable procedure for certification in a particular case.

If the defendant’s objective is early settlement, adding third parties has both pros and cons. While adding third parties may increase the pot of money available for settlement and facilitate sharing the burden of settlement, this step can also complicate and stall the resolution of a class proceeding.