Executive Summary: Key Legal and Evidentiary Issues

• A fire at a leased commercial property triggered competing insurance claims between a landlord, tenant, and insurer.

• The landlord's sole shareholder, Mr. Dawson, sought to personally claim mental distress damages against the insurer.

• The plaintiff moved to amend the pleadings to add Mr. Dawson as a co-plaintiff under Rule 27.10 of the Rules of Court.

• Intact Insurance argued the amendment failed to disclose a valid cause of action, citing corporate law limits on shareholder claims.

• The Court applied the “plain and obvious” test and found Dawson's proposed claim was at least arguable under the Law Reform Act.

• The motion to amend was granted, with costs awarded to the plaintiff and leave to challenge the amendment later if necessary.

Background and facts of the case

This dispute originated from a fire on May 11, 2022, at a commercial property located at 546 King Street in Fredericton, New Brunswick. The property was owned by 671617 NB Ltd., and leased to 722951 NB Inc., a tenant operating a restaurant known as Brewbakers. The tenant held an insurance policy issued by Intact Insurance Company. Under the lease agreement, the landlord was designated as an additional insured on that policy.

The plaintiff alleged that Intact failed to properly indemnify it under the insurance policy and delayed handling the fire loss claim. Andrew Dawson, the sole director, officer, and shareholder of the plaintiff company, claimed that Intact’s conduct caused him personal mental distress. As a result, the plaintiff sought leave to amend its pleadings to add Mr. Dawson as a co-plaintiff, asserting a personal claim for mental distress damages.

The motion to amend and legal positions

The plaintiff brought a motion under Rule 27.10 of the Rules of Court, seeking to amend its Statement of Claim. Mr. Dawson’s claim relied on Section 4 of the Law Reform Act, which permits a non-party to a contract to enforce it if they are identified in or intended to benefit from it. He argued that as the operating mind of the plaintiff company, and a foreseeable recipient of the policy’s “peace of mind” benefit, he had a personal right to claim.

Intact opposed the motion, asserting that Dawson lacked any standing to sue. It argued the policy was between Intact and the corporate entity, and that any alleged harm to Mr. Dawson was merely derivative of harm to the company. Citing the rule from Foss v. Harbottle, Intact maintained that shareholders cannot sue for wrongs done to their corporations. It did not, however, argue that the proposed claim was statute-barred or that it would suffer procedural prejudice.

Court’s reasoning and application of legal test

Justice Morrison applied the well-established “plain and obvious” test for determining whether a proposed amendment should be allowed. He emphasized that amendments should be permitted unless they introduce a hopeless claim or cause prejudice that cannot be remedied by costs or adjournment.

Though the plaintiff did not submit a draft of the amended claim—a rare and criticized omission—the judge accepted counsel’s verbal description of the proposed amendment. He held that it was at least arguable that Mr. Dawson could qualify as an intended beneficiary under the Law Reform Act. The judge also declined to resolve the Foss v. Harbottle issue at this stage, noting that Intact had raised it late and that such substantive questions should not be adjudicated on a motion to amend.

Decision and outcome

The Court granted the motion to amend, allowing Mr. Dawson to be added as a plaintiff and to pursue a personal claim against Intact for mental distress. The Court ordered the amended Statement of Claim to be filed within 30 days. To preserve procedural fairness, it also allowed the defendants to bring the matter back if the filed amendment exceeded what was described during the hearing.

The plaintiff was awarded $1,500 in costs, to be split equally between the two defendants. The Court clarified that its ruling did not determine the merit of Mr. Dawson’s claim—only that it was not clearly doomed from the outset.

Conclusion

This case illustrates the procedural flexibility courts maintain when evaluating proposed amendments and the cautious approach taken toward foreclosing claims prematurely. It also highlights the evolving intersection of contract, corporate, and insurance law in shareholder-led litigation involving third-party beneficiary rights.