All the Proper Parties, Part II

All the Proper Parties, Part II

March 16, 2021

By Brian Babcock

In a recent article, we discussed the importance of suing the right parties, and what to do if you later discover additional parties, or a misnomer.

Less frequently, we see problems where the wrong person is named as the Plaintiff or Applicant in the lawsuit. This can be just as important as suing the proper parties, and creates some of the same issues.

Some of the situations where “proper Plaintiffs” issue arise include:

  • damage to property cases where the true ownership of the property is “lost in time” – or the person sent to instruct the lawyer is unaware that HoldCo owns the real estate, even though OpCo is public facing, and is everybody’s employer. In some cases, OpCo might also have a loss due to business losses, while HoldCo sues for the physical damages
  • where individuals act and talk like they are partners or proprietors, but the property or business is legally owned by a corporation or trust
  • in personal injury cases, family members might have losses. They may join the injured person’s lawsuit, or start their own, but must be named a Plaintiff
  • in contract cases, the “third party beneficiary” rule may apply. If Jane contracts with the contractor but John owns the house, it is Jane not John who must sue for breach of contract – but she may have no losses. John might sue in negligence, but that has different rules than breach of contract. A third possibility is whether Jane was acting as agent for John, in which case John might sue in contract law. Even more unusual are situations where Jane is a trustee, and John is a beneficiary. In some situations, equity may allow John to sue
  • in insurance claims, only an insured may sue the insurer. We sometimes see fights over whether a family member or a commercial tenant, might be an additional insured
  • unincorporated associations cannot sue or be sued. As they cannot own property, they cannot suffer a legally recoverable loss. So a sports league wanting to obtain an injunction over a loss of ice time will need individuals to step forward as Plaintiffs. In many cases, we find that people are unsure whether or not the club is incorporated. Or perhaps it was incorporated, but has been dissolved or not doing required filings, yet still carries on as if it still exists.

In most situations, only the entity which has suffered the loss can recover compensation or another remedy for it. Though in most cases that is obvious, where it is unclear, making the wrong choice may be fatal. Amending the claim after the time limit to sue is difficult if the purpose is to add a fresh Plaintiff. Though on paper, the rule is the same as with adding a Defendant, the judge is always much more skeptical about how we answer the key question “How did you not know who the proper Plaintiff was in the first place?”

Where it is relatively easy to correct a misnomer where the Defendant’s name is wrong, as long as they knew they were being sued, there are not a lot of good excuses excuses for getting a Plaintiff’s name wrong.

Perhaps one of the most common errors in this area is failing to include all possible Plaintiffs. Just as we recommend suing broadly and sorting it out later, if in doubt whether a related person (or corporation) has a loss, they ought to be included. This is a bit tougher to do with Plaintiffs, because in order to include a party:

  • your lawyer needs their consent or instructions to be added
  • the retainer or agreement with your lawyer must contain extra provisions to govern such issues as who gives direction to the lawyer; what happens in the case of a disagreement; who pays court costs to the other side if necessary; how any recovery is shared, and the obligation of secondary parties to co-operate with your lawyers and participate in the law suit
  • the lawyer must obtain the necessary “know your client” information, both for regulatory purposes and to make sure that misnomer is avoided
  • all parties might be later exposed to an adverse costs award, so adding extra parties as Plaintiffs may have consequences

In limited circumstances, if you are the only client, you may instruct your lawyer to add parties on your own. In these situations, you are telling your lawyer that you have permission to do so. If there is time, your lawyer will still want to verify this. You also then become solely or primarily responsible for fees and costs, and all the other multi-party issues must be addressed in the written retainer document.

The lessons to be learned here parallel part one of this tale, but are perhaps more important:

  1. Work with your lawyer to identify all possible plaintiffs and add them in the proceeding from the start.
  2. Do not sit on your rights until the limitation is about to expire. Even if you are undecided about suing, you want to begin the process of identifying potential parties early. It may take time to obtain information.
  3. If you become aware that another person suffered a loss from the incident, seek to add them promptly.

As we said earlier, all litigation is risky business, and working with your lawyer to manage that risk is time and money well spent. It helps if you think about these issues before meting with your lawyer, which saves both time and money.