Staying an Earlier-Filed Action in Favour of a More Comprehensive Proceeding

The Dispute

A contractor and its principal fell into a dispute with two companies over one contract, and the contractor sued first. The other side then sued in a different court registry over the same contract, adding the contractor’s affiliated company, its principal and two further parties. One disagreement had become two lawsuits, with two sets of legal bills, and only one of them could be tried.

The Parties’ Positions

The counterparties applied to stay the earlier action so that their own later proceeding could go forward, on the ground that it was the more comprehensive of the two. That action joined every party to the dispute, including the contractor’s affiliated company, its principal and two further parties, so it could be tried on the pleadings substantially as they stood. Allowing the earlier action to proceed instead would require those parties to be added and the pleadings substantially amended. On costs the counterparties sought the costs of the application in any event of the cause.

The contractor group resisted that application and applied to stay the later action instead, on the ground that it had commenced its own proceeding first. It maintained that the course open to the counterparties was to file a response to that proceeding and a counterclaim joining the additional parties, instead of commencing a fresh action in another registry. Its position placed the priority of commencement at the centre of the choice between the two proceedings, and treated the joinder of the further parties as something the counterparties could have achieved within the existing action. On costs, counsel for the contractor group opposed the order sought and submitted that each party should bear its own costs.

The Court’s Decision

The court held that both proceedings concerned the same dispute and the same contract, and that both could not proceed, because the duplication of costs and expenses would not serve the efficient administration of justice. It accepted that a response and counterclaim in the earlier action would have been the preferable course. The court applied the approach taken in Concord Kingsway Project Limited Partnership v Ivanhoe Cambridge II Inc., asking which process better serves the interests of justice towards allowing a proper and fair determination of the issues. On that footing the court stayed the earlier action and allowed the later one to proceed, and, observing that there had been something of a race to the courthouse steps, it ordered the costs of the applications in the cause. The contractor group lost its own proceeding and its choice of registry, and continued as a defendant in the surviving action.

Key Lessons for Claimants and Defendants in a Contract Dispute

• Do not rely on filing first to secure the forum. Where two actions cover the same contract, the choice between them can turn on which proceeding, as the pleadings stand at the hearing, can be tried without adding parties or substantial amendment.
• Join every necessary party in the first pleading. The court allowed the later action to proceed on the ground that it already included the affiliated company, the individual principal and the two further parties, so it could be tried on the pleadings substantially as filed.
• Answer a first-filed action by response and counterclaim where the additional parties can be joined that way. The court agreed that this was the preferable course, and in civil and commercial litigation it is the route that avoids a second proceeding and a contest over which one survives.
• Price the cost of a contest over which proceeding continues before commencing a second action on the same contract. The court left the costs of these applications in the cause, so both sides carried the expense of the argument until the action itself was determined.

The choice between the two proceedings turned on the state of the pleadings and the parties before the court on the day the applications were heard. A similar contest may resolve differently.

ATAC LAW acts for contractors, owners and suppliers in construction litigation and arbitration in British Columbia.

Mike C. Stewart, Partner, Lawyer, Mediator, Arbitrator, acted for the contractor group in this matter. Mike C. Stewart