THE EFFECT OF A BC FERRY AGREEMENT ON THE JOINT LIABILITY OF NON-SETTLING TORTFEASORS

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1 THE EFFECT OF A BC FERRY AGREEMENT ON THE JOINT LIABILITY OF NON-SETTLING TORTFEASORS Introduction Given that the majority of litigation cases settle, the ability to structure an effective settlement and to understand the consequences of a settlement are of primary importance to lawyers and their clients alike. This paper will address partial settlement agreements in the form adopted in the case of British Columbia Ferry Corp. et. al. v. T&N plc. et. al. 1 ( BC Ferry ) (a BC Ferry Agreement ). It will consider whether the effect of a BC Ferry Agreement is to sever the joint liability of non-settling tortfeasors to the injured party or plaintiff. In other words, whether as a result of a BC Ferry Agreement with the settling tortfeasor, the plaintiff loses its right to collect the loss caused by the non-settling tortfeasors on a joint basis from any one of those non-settling tortfeasors. In arriving at a partial settlement of a multi-party dispute, the parties have to consider not only the amount and the timing of the settlement, but also its impact on the relationship between the plaintiff, the settling tortfeasor and the non-settling tortfeasor(s). If partial settlements are to be encouraged settling tortfeasors require certainty that they will not be dragged back into the litigation and plaintiffs require certainty that a partial settlement will not affect their common law right to pursue the non-settling tortfeasors on a joint liability basis. Until the decision in BC Ferry, the ability of the settling tortfeasor to successfully extract itself from litigation was uncertain. There were authorities supporting successful extraction 2 and authorities supporting successful third party claims by the non-settling tortfeasors against the settling tortfeasor. 3 The decision in BC Ferry brought certainty and clarity to the effect of partial settlements where the plaintiff agreed not to seek to recover any portion of the losses which were attributable to the fault of the settling tortfeasor from the non-settling tortfeasor(s), thereby making partial settlements more attractive for litigants in multi-party disputes. A settlement in the form adopted in BC Ferry is structured so as to ensure that the settling tortfeasor effectively settles and satisfies its proportionate share of liability to the injured party. The effect is to sever the liability of the settling tortfeasor from the joint liability of the non-settling tortfeasors thereby rendering a claim for contribution by the non-settling tortfeasors against the settling tortfeasor incapable of success since the injured party can no longer recover any portion of the loss attributable to the settling tortfeasor from the non-settling tortfeasors. This is based on the fundamental principle of contribution law that a tortfeasor (settled or otherwise) cannot be compelled by any other tortfeasor to pay or contribute more than its proportionate share of fault. Contribution liability is several not joint. 1 (1993), 86 BCLR (2d) 353 (SC); (1995), 16 BCLR (3d) 115 (CA) [hereinafter, BC Ferry ]. 2 Westcoast Transmission Co. v. Interprovincial Steel and Pipe Corp. [1985] BCJ No. 943 [hereinafter, Westcoast ]. 3 Tucker(Public Trustee of) v. Asleson (1991), 62 BCLR (2d) 78 (SC); (1993), 78 BCLR (2d) 172 (CA) [hereinafter Tucker ]. 1

2 A recent paper by Stacey Boothman entitled Liability After The BC Ferries Agreements, 4 calls into question the impact of a BC Ferry Agreement on the joint liability of non-settling tortfeasors creating further uncertainty in this area of the law. The crux of Ms. Boothman s argument, that a BC Ferry Agreement may and should result in the severing of the liability of the non-settling tortfeasors, is that it would be unfair to prevent a non-settling tortfeasor from seeking contribution from a settling tortfeasor where the non-settling tortfeasor has paid more than its proportionate share of the injured party s loss (for example, where one tortfeasor has settled on the terms of a BC Ferry Agreement and one of the non-settling tortfeasors turns out to be impecunious, the non-settling tortfeasor who is forced to pay for the injured party s loss would be held responsible for both its own share of fault and the share of fault of the impecunious tortfeasor). Ms. Boothman suggests that it would be unfair in such a situation to prevent the paying nonsettling tortfeasor from claiming contribution against the settling tortfeasor for a proportionate part of the share of the impecunious tortfeasor. Ms. Boothman argues, without compelling authority or reasons, that because a BC Ferry Agreement is a proportionate share settlement agreement it should necessarily result in severing the joint liability of all parties and not just the settling tortfeasor. In other words, the injured party entering into a BC Ferry Agreement gives up its right to jointly recover the remainder of its loss (which is only the loss attributable to the fault of the non-settling tortfeasors) in order to ensure that the non-settling tortfeasors do not suffer any unfairness. If this were the law the chilling effect on partial settlements would be widespread and immediate. No plaintiff would ever settle (except maybe for a very substantial premium) with one tortfeasor on this basis because by doing so it would be assuming all of the unknown insolvency risk of each of the remaining tortfeasors. This is inconsistent with the common law approach which has always been to allocate the risk of an insolvent tortfeasor on other tortfeasors rather than an innocent plaintiff. Ms. Boothman s argument misapprehends the principles underlying multiparty disputes. Most significantly, the unfairness that Ms. Boothman points to is not created by a BC Ferry Agreement. Rather this unfairness results from the interplay of two well established common law principles: the principle that the innocent injured party is entitled to recover the full amount of its loss from any one of the tortfeasors who have caused or contributed to the loss (even where this results in a tortfeasor paying more than its proportionate share), and the principle that one tortfeasor cannot compel another tortfeasor (settled or not) to pay or contribute more than that other tortfeasor s proportionate share. It has always been the law, prior to and after BC Ferry, that if a tortfeasor who pays the full amount of an injured party s loss cannot successfully recover some of the money paid in contribution from other tortfeasors, that tortfeasor is without a remedy, irrespective of any partial settlement. The practical effect of Ms. Boothman s solution to the potential unfairness for non-settling tortfeasors would be to remove the right of an injured party to pursue the non-settling tortfeasors jointly, thereby eliminating any incentive to settle by either the injured party or the non-settling tortfeasors. This would only serve to frustrate the entire purpose of BC Ferry which was to encourage partial settlements in multi-party litigation by creating finality for the settling 4 Stacey Boothman, Liability After The BC Ferries Agreements, Insurance Law Conference 2004, CLE, Vancouver. 2

3 tortfeasor. That the settling tortfeasor should benefit from this arrangement is consistent with the public policy of encouraging settlement of disputes. The risk of an improvident settlement, in relation to the share of the settling tortfeasor s fault, is borne by the plaintiff and not the nonsettling defendants. Non-settling defendants also benefit by being able to argue that the majority of the plaintiff s loss is attributable to the fault of the settling tortfeasor since the plaintiff has abandoned any claim for this loss against them. That non-settling tortfeasors should benefit from a settlement between a plaintiff and a settling tortfeasor through the severing of joint liability visà-vis the remaining defendants is completely inconsistent with the encouragement of settlements and would only serve to make non-settled tortfeasors more intransigent. Under the current law, an injured party has the ability to maximize its chances of recovery by pursuing tortfeasors who are on the hook of joint liability. If the joint liability of non-settling tortfeasors is severed by a BC Ferry Agreement, non-settling tortfeasors would have the benefit of limited liability for their proportionate share and the injured party would be on the hook for any collection risk. If this were the case such agreements would immediately cease to be used by plaintiffs to effect partial settlements. The following will attempt to demystify the BC Ferry Agreement and to explain the rational behind it in light of the basic principles underlying multi-party litigation. It will be argued that the BC Ferry Agreement does not have the effect of severing the joint liability of non-settling tortfeasors primarily because such a finding would be inconsistent with well established and settled principles of common law. Such a radical departure from these principles would undoubtedly require the action of the legislature. There are two distinct relationships underlying multi-party litigation: the injured person vis-à-vis the tortfeasors; and the tortfeasors among themselves. These relationships give rise to completely independent claims: recovery and contribution. The issue raised by the partial settlement agreement cases, including BC Ferry, relates solely to the claim for contribution. At the foundation of the BC Ferry Agreement is the well settled principle of contribution law that no tortfeasor can be compelled by another tortfeasor to pay more than that tortfeasor s proportionate share of fault. By settling for its proportionate share of fault, the settling tortfeasor makes any claim for contribution against it moot (except for purely procedural purposes) since such a claim would not have any hope of success. The BC Ferry Agreement does not introduce any novelty into the area of contribution law. It relies on established existing principles, which favour innocent plaintiffs, to produce clarity and certainty in the partial settlement of multi-party disputes. Part 1. An injured party s right to joint recovery is independent from a tortfeasor s right to claim contribution The principle that an injured party has a right to joint recovery and the principle that tortfeasors, in their turn, have the right to seek contribution among each other are separate and distinct principles and should be treated as such. The two relationships that need to be distinguished are (1) the tortfeasors to the injured party, and (2) the tortfeasors among themselves. The 3

4 development of these relationships and the legal theories underlying them are completely independent of each other. A. The relationship between tortfeasors and an injured party fairness to the injured party Fairness to the innocent injured party has been an important pillar of our legal system. In a multi-tortfeasor situation, the injured party has historically held and continues to hold the right to recover the full amount of its loss from any one of the responsible tortfeasors (the right to joint recovery). The only exception to this right to joint recovery has been where the injured person is itself contributorily responsible or at fault for its loss. The right of the injured party to joint recovery is often expressed as imposing joint and several liability on the tortfeasors. Therefore, to appreciate the concept of joint recovery, it is first necessary to understand the oft misunderstood concept of joint and several liability. The term joint and several liability has itself been the source of much of the confusion. Several adds nothing to the meaning of the extent of a tortfeasors liability and where possible I will use the term joint liability. The common law historically differentiated between three situations where more than one tortfeasors caused damage to a person: (1) tortfeasors whose joint act caused the same damage ( joint tortfeasors ), (2) tortfeasors whose separate acts caused the same damage ( several concurrent tortfeasors ) and (3) tortfeasors whose separate acts caused different damage ( several non-concurrent tortfeasors ). 5 Procedurally, the nature of a legal action against different types of tortfeasors varied depending under which category they fell. Joint tortfeasors were subject to the same cause of action against them and could only be sued together, each responsible for the whole amount of the loss. Resolution against or a release in favour of one joint tortfeasor resulted in a release of all. A covenant not sue rather than a release was traditionally used to avoid this result. Several non-concurrent tortfeasors were subject to different causes of action, could only be sued in separate actions and only for their respective share of liability to the injured party. Several concurrent tortfeasors possessed characteristics of both joint tortfeasors and several nonconcurrent tortfeasors. On the one hand, several concurrent tortfeasors had to be sued in separate actions. 6 On the other hand, several concurrent tortfeasors, like joint tortfeasors, were each liable for the entire loss suffered by the injured party. 7 According to Fleming, joint and several liability meant that... the person injured [could], at his option, sue each of [the tortfeasors] separately for the whole amount of the loss or all of them jointly in the same action, though even in the latter case judgment obtained against all [could] be executed in full against any one of them.... In contrast, several tortfeasors could not be joined at common law, so that the possibility of joining defendants in one action was for long the 5 Clerk and Lindsell, Clerk and Lindsell on Torts, 18 th ed, (London: Sweet and Maxwell, 2000) at J.G. Fleming, The Law of Torts, 8 th ed. (The Law Book Company Limited, 1992) at D. Cheifetz, Apportionment of Fault in Tort, (Ontario: Canada Law Book, 1981) at 7. 4

5 crucial test of joint liability. 8 Thus, originally, the concept of joint and several liability defined a procedural peculiarity of the common law system which allowed only joint tortfeasors to be sued together (jointly). The concept did not apply to define the nature of the liability of tortfeasors, because all tortfeasors responsible for the same damage (joint or several concurrent), whether they could or could not be sued jointly, were responsible for full amount of the loss suffered by the injured party. As a result of a number of legislative changes, 9 all tortfeasors can now be sued jointly. 10 The concept of joint and several liability survived this procedural change and was adopted by the BC Negligence Act to apply to all situations where damage or loss has been caused by the fault of 2 or more persons. 11 The familiar understanding of the concept of joint and several liability that has continued after these procedural changes could more accurately be referred to as the joint liability (also referred to as liability in solidum) of joint tortfeasors and several concurrent tortfeasors. Fridman explains the meaning of this concept as follows: Where parties were so liable, as in the case of joint tortfeasors or several tortfeasors who caused the [same] damage, they could each individually be sued for the total amount of loss incurred by the plaintiff, or if joint tortfeasors, they could be sued together. 12 The right of the injured party to joint recovery is an obvious corollary of the concept of joint and several liability, as the concept is understood today: where the tortfeasors are concurrent tortfeasors 13 (caused the same damage), the injured party can recover the full amount of its loss from any one of them. However, where the tortfeasors are non-concurrent (caused different damage) the injured party cannot jointly recover. At common law the only exception to joint recovery from concurrent tortfeasors was the injured party s contributory negligence. An injured party who was found contributorily negligent could not recover any of its loss from any tortfeasors, it was a complete defence to any claim against a tortfeasor. The BC Negligence Act now allows injured parties to recover some loss even where there is a finding of contributory negligence. However, the Negligence Act explicitly provides that in such a situation the injured party still does not have the right to joint recovery. 14 Where a plaintiff is contributorily negligent it can only recover from each tortfeasor that tortfeasor s proportionate share of liability. The Negligence Act did not introduce any exceptions to joint liability that did not already exist at common law. Thus, in a situation where more than one tortfeasor causes the same damage, contributory negligence of the injured party remains the only exception to the injured party s right to joint recovery. B. The relationship among tortfeasors themselves certainty. 8 Fleming, supra note 6 at Section 53 of the BC Law and Equity Act, RSBC 1996, c. 253 made it possible to obtain a number of successive orders against joint tortfeasors without the fear of releasing them; section 5(2)(b) of the BC Rules of Court made it possible to join several concurrent (and non-concurrent) tortfeasors in one action. 10 There have been suggestions of changing terminology to join these two groups into concurrent tortfeasors verses non-concurrent tortfeasors (See G. H. L. Fridman, The Law of Torts in Canada, 2 nd ed., (Toronto: Carswell, 2002) at ). 11 Negligence Act, RSBC 1996, c. 333, section Fridman, supra note 10 at Fridman, supra note 10 at Negligence Act, supra note 11, section 1. 5

6 The common law is not, and has never been, focused on the issue of fairness to tortfeasors in terms of recovery of a loss by an injured party. The basic notion underlying the law of contribution is that tortfeasors who pay more than their share of fault can seek contribution from other tortfeasors. However, no tortfeasor who has paid more than its proportionate share can compel another tortfeasor to pay more than that other tortfeasor s proportionate share. 15 If one of the non-paying tortfeasors happens, for example, to be insolvent, the paying tortfeasor bears this loss and cannot share it with the other tortfeasors. Of course if the insolvency of a particular tortfeasor is known to the trier of fact before a judgement is rendered this could impact on how fault is apportioned between the tortfeasors. The ability of tortfeasors to claim contribution against each other has developed and is judicially interpreted as independent and procedurally separate of the injured party s right to joint recovery. Traditionally, tortfeasors did not have the right to seek contribution against each other. 16 If the injured party decided to recover the full amount of its loss from any one of the tortfeasors, the paying tortfeasor was simply out of luck. The reasoning was that there were no rights of contribution between tortfeasors because to allow the same was seen as rewarding a wrongful act. 17 The common law rule was substantially changed by provincial legislation that recognised the right to contribution and indemnity. In addition to the argument that a right to contribution [was] essential in order to preclude the unjust enrichment of the non-paying concurrent wrongdoer, 18 it was suggested that giving the injured party the ultimate discretion as to who to pursue enabled tortfeasors to indulge in risk-creating activities knowing that they would not be likely to be the subject of action because an injured plaintiff would be more likely to sue another,... more capable of undertaking the burden of paying damages. 19 Thus, the development of the right of tortfeasors to seek contribution has its roots in pragmatic considerations of making multi-party disputes more certain for tortfeasors and of taking full discretion from the injured person. The relationship that was affected by the introduction of the right to contribution was that of tortfeasors among themselves; the injured person s right to joint recovery was not undermined or affected. Essentially, the ability to seek contribution remains a separate and distinct cause of action that does not arise until the judgment or settlement in the original action and, therefore, cannot affect the original action in any way. It is merely a procedural variation (presumably to avoid a multiplicity of actions and to allow for the cost effective, speedy and efficient administration of justice) that now allows tortfeasors to bring a third party claim for contribution in the same action as they are being sued Infra note 45. This is an important principle that forms the foundation of the BC Ferry Agreement. The controversy around this principle will be discussed in Part 3 of this article. 16 Clerk & Lindsell, supra note 5 at Cheifetz supra note 7 at See Fridman, supra note 10 at Fridman, supra note 10 at 898 quoting Gregory, Contribution Among Tortfeasors: A pragmatic Criticism, (1941) 54 HLR FBI Foods Ltd. v. Glassner, [2001] BCJ No. 193 (QL) at para

7 Furthermore, the degree of fault or negligence of any tortfeasor is irrelevant to its liability to the innocent injured party. 21 If the tortfeasor is liable, however unfair it may be, the tortfeasor is responsible to the injured party for the whole amount of the loss. The apportionment of fault becomes important only (except where the plaintiff is contributorily negligent) to determine the extent of contribution that the paying tortfeasor can seek from other tortfeasors. If a particular tortfeasor is unable to pay its share, the paying tortfeasor will be forced to absorb the insolvent tortfeasor s share. Justice Dickson in the case of Parkland (County) No. 31 v. Stetar 22 explained the relationship between the injured person s right to joint recovery and the tortfeasor s right to contribution as follows: It is fundamental... to tort law that a plaintiff can proceed against any one of a number of joint or several tort-feasors; there is no duty upon him to sue all those whom he believes contributed to his hurt. He may elect to recover the full amount of his damage from a tort-feasor only partly to blame and that tort-feasor, prior to enactment of s.4(1)(c) of The Tort-Feasors Act, had no right to contribution from any other person: Merryweather v. Nixon [91799), 8 T.R. 186, 101 ER 1337]. Section 4(1)(c) and its counterpart in other jurisdictions have ameliorated the common law in that the right to contribution has now been recognized; however, even in those cases in which for some reason the right to contribution does not exist, the victim retains the right of full recovery from the tort-feasor whom he has sued. 23 [emphasis added] In summary, the right of tortfeasors to seek contribution against each other is substantively and procedurally independent of an injured party s right to joint recovery and addresses a different relationship than the right of an injured party to joint recovery. Even a complete abolition of the right of tortfeasors to seek contribution among themselves would not affect, absent legislation, the right of an injured party to recover its full loss on a joint basis against any one of the tortfeasors. Part 2: The disputes arising out of partial settlements address the relationship among tortfeasors The leading cases in the area of partial settlement agreements do not question or deal with the right of the injured party to joint recovery. These cases mainly address the uncertainty regarding the effect of a partial settlement agreement on the ability of a non-settling tortfeasor to claim contribution from a settling tortfeasor. The issue in these cases was whether the non-settling tortfeasors remained responsible to the injured party for the full amount of the loss less the amount of the settlement, or for the full amount of the loss less the settling tortfeasor s percentage or proportionate share. This issue was 21 Cheifetz, supra note 7 at [1975] 2 SCR Ibid., at 10 (QL). 7

8 important to settling tortfeasors because it determined whether or not they could be third partied back into the action by the non-settling tortfeasors. Until the decision in BC Ferry, the effect of various partial settlement agreements on the remaining responsibility of the non-settling tortfeasors to the injured party and on their ability to claim contribution from the settling tortfeasor was unclear. The courts were fairly consistent in their rulings, but viewed together the decisions provided an incomplete picture. The BC Ferry Agreement served as the missing piece to complete the picture. The post BC Ferry situation can be summarised as follows. If a settling tortfeasor pays the full monetary amount of its proportionate share of the loss, a claim for contribution cannot succeed because no tortfeasor can be compelled by another tortfeasor to pay more than its share. Nonsettling tortfeasors, in such a situation remain responsible to the injured party for the full amount of the loss less the monetary amount of the settlement (which in this case happens to be equivalent to the percentage share of the settling tortfeasor). If a settling tortfeasor does not pay the full amount of its share and the injured party pursues the non-settling tortfeasors for the shortfall, a claim for contribution can be brought by the nonsettling tortfeasors against the settling tortfeasor. In this situation, the non-settling tortfeasors remain responsible to the injured party for the full amount of the loss less the monetary amount of the settlement (which in this case does not amount to full proportionate share of the settling tortfeasor). If an injured party agrees that whatever a settling tortfeasor pays amounts to that tortfeasor s full share (a BC Ferry Agreement not to seek to recover from anyone else, including the non-settling tortfeasors, any portion of the loss attributable to the settling tortfeasor) a claim for contribution cannot be maintained. In this situation, the non-settling tortfeasors are only being pursued for, and can only be responsible to the injured party for, the total loss attributable to the collective fault of the non-settling defendants. The monetary amount of the settlement in this case is irrelevant to the claim against the non-settling tortfeasors. The ability of the injured person to recover from the non-settling tortfeasors on a joint basis is unaffected by any of the above-noted settlement agreements. The leading cases in this area are set out below. A. Westcoast -- when a settling tortfeasor pays the full amount it owes, a claim for contribution against it cannot succeed In Westcoast Transmission Co. v. Interprovincial Steel & Pipe Corp. 24 ( Westcoast ), the injured party brought an action against a manufacturer of natural gas pipe. It was found that the injured party hired a third party to inspect the pipe. The injured party settled with the third party and the defendant manufacturer brought a third party claim against the third party for contribution and indemnity under section 4 of the Negligence Act. McLachlin J. (as she then was) struck the third party claim on the basis that there was no possibility for the contribution claim to succeed on the facts. Unfortunately, the decision did not state the amount of the 24 Westcoast, supra note 2. 8

9 settlement or the total amount of the loss, thus making it of limited narrow use for our purposes. However, McLahclin s J. comments and findings are insightful:... on an application such as this, it is not enough to look at the wording of the section in abstract. The Court must ask itself how the section might conceivably apply in the case before it. In attempting to answer that question, I arrive at the conclusion that s.4 cannot, in the circumstances, of this case, give rise to a claim for contribution or indemnity by Ipsco against Hanson. The right of Ipsco to claim indemnity against Hanson could only arise upon Westcoast recovering against Ipsco for the whole amount of the loss, including that attributable to Hanson. But this scenario is impossible. Westcoast can recover nothing on account of loss attributable to Hanson. It has settled and been paid in full for all claims on account of loss arising from the negligence or breach of contract of Hanson. Westcoast is therefore debarred from recovering any amount on account of Hanson s negligence or breach of contract. That being the case, Ipsco could not be required to pay to Westcoast any portion of a judgment recovered which may be attributable to Hanson s negligence, unless it pays moneys out on account of Hanson. Accordingly, there is no possibility of a successful claim for contribution or indemnity by Ipsco against Hanson under s.4 of the Negligence Act. 25 [emphasis added] The conclusion in Westcoast was interpreted to mean that a release of one several concurrent tortfeasor had the effect of severing the liability of the remaining tortfeasors. 26 However, the case on its facts stands for the proposition that the settling tortfeasor and the non-settling tortfeasor (or the non-settling tortfeasors as a group) each become responsible for their proportionate share, and not that the non-settling tortfeasors as among themselves are no longer jointly liable to the injured party. A different interpretation cannot be drawn given that on the facts of Westcoast there was only one non-settling tortfeasor, and there is no dicta to suggest that if there were multiple non-settling tortfeasors, the injured party s right of joint recovery against them would be severed. At most, the case stands for the proposition that where the settling tortfeasor s account is paid in full, the non-settling tortfeasor cannot succeed in a claim for contribution, simply because it cannot be held liable for any part of the loss attributable to the settling tortfeasor. Had the amount paid been insufficient to cover the portion of the loss attributable to the fault of the settling tortfeasor, the result in Westcoast would likely have been different. B. Tucker when a settling tortfeasor does not pay the full amount of its proportionate share a claim for contribution against it can be maintained where the injured party pursues the nonsettling defendants for this shortfall A situation where the settlement did not cover the entire loss attributable to the fault of the settling tortfeasor arose in Tucker (Public Trustee of) v. Asleson 27 ( Tucker ). The injured party in this case settled with the insurer of one of the three tortfeasors for the limits of the insurance 25 Ibid. at para Karen Martin and Jeff Van Hinte, Complex Multi-Party Construction Litigation, Construction Law 2003 Update (CLE), Chapter 2 at Tucker, supra note 3. 9

10 policy. At trial, each tortfeasor was found one third at fault. The court summarised the nonsettling tortfeasors argument as follows:... the effect of the plaintiff s settlement with Mrs. Tucker was to sever the parties joint liability. They say that their liability now cannot exceed two thirds of the total damages awarded, because they cannot be required to pay any portion of the loss attributable to the negligence of the released party.... They say they are jointly and severally liable for that portion of the judgment only. 28 [emphasis added] The structure of this argument is important. Essentially, the non-settling tortfeasors did not argue that as among themselves they were not jointly liable; they argued that whatever the amount of settlement was, the injured party gave up the right to claim the settling tortfeasor s share from the non-settling tortfeasors. Basing their argument on the Westcoast line of cases, the non-settling tortfeasors asserted that they could not be required to pay more than their collective share of fault. The injured party s position was that the non-settling tortfeasors were liable for the full amount of the loss, less only the amount of the settlement. The practical difference was significant. The total amount of the loss was $2 million. The limits of the insurance policy were $500,000. If the non-settling tortfeasors were right, they would be jointly liable for $1.3 million. If the injured party was right, they would be liable for $1.5 million. Justice Finch (as he then was) rejected the decision in Westcoast as uninformative, stating that... the line of cases starting with Westcoast are all decided on motions concerning pleadings. They are therefore decided upon assumed facts.... The reasons do not identify the full amount of Westcoast s claim for the defective pipe, and I cannot find the basis upon which the chambers judge concluded that Westcoast was paid in full for loss arising from Hanson s fault. It is clear in the case at bar, however, that neither the defendant Tuckers not their insurer CHAC paid the plaintiff in full for Mrs. Tucker s share of liability for the total damages. The plaintiffs agreed to accept the Tuckers policy limits of $500,000 (less a 10 per cent discount), not because that amount represented the Tuckers full share of responsibility, but rather for practical reasons which so often underlie compromise settlements. 29 Justice Finch said that the rationale for preventing the injured party from recovering from the non-settling tortfeasors part of the share of the settling tortfeasor is to prevent double compensation. It would be manifestly unfair if a rule which was designed to prevent double compensation, or overcompensation, could be used in this case to prevent the plaintiff from making a full recovery. 30 Justice Finch did not find any legal basis to suggest that the partial settlement affected the non-settling tortfeasors ability to seek contribution. On the facts of Tucker, however, there was little doubt that the claim for contribution could succeed because the 28 Ibid.at para Ibid., at paras Ibid., at paras. 130 and

11 non-settling tortfeasor was being pursued for part of the loss attributed to the fault of the settling tortfeasor. The Court of Appeal 31 upheld Justice Finch s conclusion on this issue, stating that the right of contribution and indemnity among several concurrent tortfeasors is independent of what the injured person does if, in fact, damage or loss has been caused by the fault of two or more tortfeasors. 32 The decisions in Westcoast and Tucker failed to resolve the uncertainty associated with partial settlements. Westcoast was inconclusive because of vagueness as to the facts. Tucker was inconclusive because it left open the possibility of a settling tortfeasor being brought back into the litigation. To circumvent the decision in Tucker, an injured party could either agree to indemnify a settling tortfeasor for any third party claim made against them or, considering the comments in Westcoast, could clearly express that the settlement amount received was sufficient to cover the settling tortfeasor s share. The latter was attempted in BC Ferry and previously in its American counterpart, Pierringer. C. Pierringer/ BC Ferry where an injured party agrees that whatever a settling tortfeasor pays amounts to that tortfeasor s full share (i.e agrees not to seek to recover from anyone else, including the non-settling tortfeasors, any portion of the loss attributable to the settling tortfeasor) a claim for contribution cannot be maintained because the non-settling tortfeasors are only being pursued for, and can only be responsible to the injured party for, the total loss attributable to the collective fault of the non-settling defendants and the settling tortfeasor cannot be compelled by other tortfeasors to pay more than its share The Pierringer Agreement The Pierringer Agreement takes its name from the US case of Pierringer v. Hoger. 33 In this case, all but one tortfeasor settled with the injured party before trial. Releases were executed specifying that the injured party does hereby credit and satisfy that portion of the total amount of damages of the undersigned... which has been caused by the negligence, if any, of such of the settling parties hereto as may hereafter be determined to be the case in the further trial or other disposition of this or any other action. And the injured party does hereby release and discharge, that fraction and portion and percentage of his total causes of action and claim for damages against all parties... which shall hereafter, by further trial or other disposition of this or any other action (1993) 78 BCLR (2d) Ibid., at para (1963) 21 Wis. 2d 182 [hereinafter Pierringer ]. 34 Ibid., at

12 The sole non-settling tortfeasor made claims for contribution which were all dismissed. The court acknowledged that the right to contribution theoretically continued to exist, but it was practical to reject the claim because it had no possibility of success. Discussing an earlier example of a proportionate share settlement, the court described the rationale behind refusing the claim for contribution in the following way: As a practical matter, since the non-settling tort-feasor under such a release would not have to pay to the settler more than one half of his total damages, there was no good reason to preserve for the non-settling tort-feasor a theoretical right of contribution which would never mature or ripen into recovery. Recognizing the intention of the release was controlling, this court took a shortcut and avoided a circuity of action by giving immediate effect to the release in barring the nonsettling tort-feasor s claim to a right of contribution. The same type of release involving the important factor of satisfying a definite portion of the cause of action thus releasing the nonsettling tort-feasor s primary liability, if any, to pay the full and complete damages [emphasis added] Given that there was only one non-settled defendant in the case, it cannot be argued that the case stands for the proposition that a settlement with one tortfeasor severs the liability of all remaining non-settled defendants. BC Ferry Agreement In BC Ferry, the plaintiff BC Ferry Corp. sued T&N plc., an asbestos manufacturer, alleging that the materials which the defendant produced and which were from time to time installed in the plaintiff s ferries were unsafe. The defendant T&N plc. brought a third party notice against the contractors, subcontractors and architects involved in the installation of the materials. The plaintiff made an agreement with the third parties which essentially took the same form as a Pierringer Agreement. The parties agreed that [n]either BC Ferries nor the province will seek to recover, either in the Action or by any other proceedings, any portion of the losses which it claims in the Action which a court or other tribunal may attribute to the fault of Yarrows. In particular, without limiting the generality of the foregoing, neither BC Ferries nor the Province will seek to recover such portion of its losses from the defendants in the Action. 36 The third parties then applied to have the claim against them dismissed. Justice Braidwood (as he then was) considered the rationale behind claims for contribution and the wording of section 4 of the Negligence Act, and concluded that the third party claims for contribution had to be dismissed because they could not succeed. It is not the contract itself which deprives the defendant of claiming against the third party... but the fact that the plaintiff only seeks from the defendant that part of its loss which the defendant caused. 37 [emphasis added] This reasoning is very similar to McLachlin s J. comments in Westcoast and the decision of the court in Pierringer. An implicit distinction is made between the ability of the tortfeasors to 35 Ibid., at BC Ferry, supra note 1 at para Ibid., at para

13 claim contribution and the necessity of contribution. It is impracticable to allow a claim to proceed if that claim has no hope of success. Justice Braidwood was careful to say that his decision did not affect the reasoning of Justice Finch in Tucker because in BC Ferry, unlike Tucker, the injured party only sought the part of its loss that was actually caused by the non-settling tortfeasor; there was no excess that the nonsettling tortfeasor was obliged to pay to the injured person. 38 Hence, the claim for contribution could not succeed (similar to Westcoast). The BC Court of Appeal upheld this decision without adding anything fundamentally different on the issue. 39 In summary, the above cases did not question the right of the injured party to joint recovery. The relationship of interest in these cases was solely that of the tortfeasors among themselves. The decisions in Westcoast and in Tucker did not provide sufficient finality for settling tortfeasors. The BC Ferry case achieved such finality by establishing that a settling tortfeasor could not be third partied back into the litigation where the plaintiff agrees not to seek from any non-settling tortfeasors any portion of the loss attributable to the fault of the settling tortfeasor. Effectively, the settling tortfeasor satisfies its proportionate share of fault to the injured party and the nonsettling tortfeasors can no longer be held responsible for any part of that share. D. BC Children s Hospital v. Air Products Canada Ltd. 40 where an injured party agrees not to seek to recover from the non-settling tortfeasors any portion of the loss attributable to the settling tortfeasor the monetary amount of the settlement is irrelevant The theory that the effect of a settlement based on a tortfeasors proportionate share of fault is equivalent to a settlement of the full monetary amount of such a share being received by the injured party, is supported by the recent decision in BC Children s Hospital. In this case, the court held that the amount of settlement between the injured party and the settling tortfeasor was irrelevant to the proceedings between the injured party and the non-settling tortfeasors. The Hospital commenced an action claiming that a number of parties were jointly and severally liable for damages for civil conspiracy. The Hospital entered into a settlement agreement with some tortfeasors. The agreement contained a confidentiality clause. The non-settling tortfeasors sought disclosure of the agreement, including the amount of the settlement, arguing that the agreement could have an impact on the case they had to meet and on the amount of damages sought by the Hospital. The Hospital pleaded in its Statement of Claim that the settlement agreement included a provision whereby the Hospital expressly waived its right to recover from the defendants, other than the settling defendants, any portion of the losses and damages attributed to the fault of the settling defendants. This was in essence a BC Ferry Agreement. 38 Ibid., at para (1995)16 BCLR (3d) 115. The Court of Appeal held, on a related issue, that Justice Braidwood was wrong to refuse joining the settling party into the action for procedural relief only. Refusing such joinder would jeopardise the ability of the non-settling tortfeasors to make their case. 40 British Columbia Children s Hospital v. Air Products Canada Ltd. (2001) BCSC 1083 (SC); (2003) (BCCA) 177 (CA); leave to SCC granted on January 22, 2004 [2003] SCCA No

14 Neilson J. refused disclosure of the amount of settlement as irrelevant stating that... the plaintiffs proposed amendments set out a waiver and made it clear that they do not seek to recover from the remaining defendants any portion of the losses that the court may attribute to the fault of the ALC defendants. The result is that Praxair and the other remaining defendants are only potentially jointly and severally liable for that portion of the plaintiffs loss which is related to their own degree of fault as determined by the court the pleadings reveal no basis upon which the Praxair defendants may make a claim for contribution and indemnity from the ALC defendants. Even if such a claim were made, the reasons of Mr. Justice Wood in BC Ferry (1995) make it clear it could not succeed. 41 The non-settling tortfeasors further argued that if the settling tortfeasor paid more than its share of fault, the Hospital would be unjustly enriched. Therefore, the non-settling tortfeasors should have access to the amount of settlement. Neilson J. rejected this argument as premature. She stated that the non-settling tortfeasors clearly had a tactical advantage in conducting their defence to place as much liability as possible on the settling tortfeasors. However, the amount of settlement was irrelevant because the judicial determination of apportionment of fault could be made independent of such information. 42 The non-settling tortfeasors appealed the decision of Neilson J. with respect to non-disclosure of the settlement amount. The majority of the Court of Appeal agreed with the decision of Neilson J. on the issue of the settlement amount without providing a discussion of the issue. The Court of Appeal simply stated that In the present case, Neilson J. considered that disclosure of that portion of the settlement agreement relating to the amount of the settlement between the plaintiff and the ALC defendants need not be produced because relevance had not been demonstrated. With that conclusion, I agree. 43 Huddart J. dissenting did not address this issue. Leave to appeal to the Supreme Court of Canada was granted in this case on January 22, However, the main issue likely to be addressed at that level is privilege and confidentiality of the partial settlement agreements. It is submitted that the decision on the irrelevancy of the settlement amount is sound given that in entering into such a settlement the plaintiff bears the burden of any improvident settlement with the settling tortfeasor (because a claim for any shortfall is abandoned) and as such should also receive the benefit of any settlement in excess of the settling tortfeasor s share of the loss. Nonsettling defendants can t have it both ways, assume no risk for any shortfall but share in any excess. 41 BC Children s Hospital v. Air Products Canada Ltd. (2001) BSCS 1083 at paras Ibid., at paras BC Children s Hospital v. Air Products Canada Ltd. (2003) BCCA 177 at para BC Children s Hospital v. Air Products Canada Ltd. ([2003] SCCA No

15 Part 3: The BC Ferry Agreement is rooted in the principle that no tortfeasor can be compelled by another tortfeasor to pay more than that tortfeasor s proportionate share of the loss attributable to its fault The BC Ferry Agreement did not introduce any novel legal concepts into the area of multi-party disputes. It achieves the finality of full withdrawal for the settling tortfeasor because it is rooted in the well established principle that tortfeasors sued for contribution cannot be compelled by other tortfeasors to pay more than their proportionate share of loss attributable to their fault. 45 This principle was recently called into question, albeit unsuccessfully. It was argued in the Ontario case of Renaissance Leisure Group Inc. (c.o.b. Muskoka Sands Inn) v. Frazer 46, ( Renaissance ) 47 that in a situation where one of the tortfeasors turns out to be impecunious, the other tortfeasors should equitably divide the share of the impecunious tortfeasor among themselves in addition to their proportionate shares of fault. The impact of such a decision would be to impose a type of joint liability for contribution among tortfeasors where it has always been several. This was not a decision involving the issue of partial settlements. Extending this reasoning to a BC Ferry Agreement situation would suggest that in addition to its proportionate share of liability to an injured party, a settling tortfeasor could potentially be liable to non-settling tortfeasors on a joint basis. This would again expose the settling tortfeasor to third party claims for contribution by non-settled defendants and effectively undermine the possibility of most partial settlements. Of course, as we have seen, if the liability to non-settling tortfeasors is only several a claim for contribution will be dismissed where there is a BC Ferry Agreement. As the law stands today, the argument that a settling tortfeasor is responsible for anything above its proportionate share on the basis of joint liability for contribution is unlikely to succeed. The current position with respect to the law of contribution is well stated by Cheifetz: Section 2 (equivalent to section 4 in BC) provides that a tortfeasor is liable to pay contribution to a co-tortfeasor in the degree in which the former is found to be at fault or negligent. This means that the liability to pay contribution is several, not joint.... For example, assume there are three tortfeasors, T1, T2 and T3, all equally at fault. Also, assume that P s damages are valued at $9,000. If T1 claims contribution from T2 and T3, T1 will receive judgment providing for contribution from each of T2 and T3 in the amount of $3, Neither T2 nor T3 can be required to pay more than $3,000 to T1. T1 will have to bear the risk of being unable to collect the $3,000, or any portion of the 45 Cheifetz supra note 7 at 60; see also Cheifetz, Allocating Financial Responsibility among Solvent Concurrent Wrongdoers: Problems in Apportionment of Fault in Contribution and Contributory Fault Cases Resulting from Martin v. Listowel Memorial Hospital and Renaissance Leisure Group Inc. v. Frazer, (2004) 28 Adv. Q [2001] OJ No Renaissance Leisure Group Inc. (cob Muskoka Inn) v. Frazer, [2001] OJ No. 866 (QL); [2004] OJ No (QL). 15

16 amount, from each of T2 and T3. It follows from this that any tortfeasor not sued by P does not have to claim contribution from a co-tortfeasor in respect of any contribution claim made against the former tortfeasor. No tortfeasor can be required [by another tortfeasor] to pay more than his share of the injured person s damages. 48 [emphasis added] The strongest authority on the issue of the equitable distribution of an impecunious tortfeasor s share among other tortfeasors is Glanville Williams. He writes: Suppose that P sues D1, who brings in D2 and D3 as third parties. P obtains judgment against D1, and D1 in turn claims contribution against D2 and D3. If it is known that D3 is insolvent, the share of contribution payable by D2 will be increased so as to distribute the loss resulting from D3 s insolvency equally between D1 and D2. [cites Shepheard v. Bray, [1906] 2 Ch. 235 at 256, which was decided under the then English Companies Act in reference to the joint and several liability of co-directors. This case has not been followed on this issue in Canada.] Suppose, however, that D3 s insolvency was not known at the time of D1 s judgment against his companions for contribution, but is discovered only when the judgment against D3 for contribution comes to be executed. On such facts, unless special provision is made, the loss resulting from D3 s insolvency is borne exclusively by D1, yet there is no reason why D1 should bear the whole of it and D2 none of it. D2 is as guilty as D1, and it is mere chance that P happened to sue D1 and not D2. The principle of the Tortfeasors Act [Negligence Act in Canada] is that it should not be left to the injured person to determine the incidence of loss between joint tortfeasors. On the facts here imagined this object is frustrated. The matter can, however, be set right very simply by an appropriate wording of the judgments for contribution. D1 can be given contingent judgment against D2 and D3 severally for contribution of one third of the sum that he has to pay P, and he may be given in addition a contingent judgment for one half of the sum payable by the other defendant in the event of default by him... the result of the scheme is that if D3 becomes insolvent, or is untreacable, D1 will recover against D2 (1) one third of the judgment debt under the primary judgment for contribution and (2) one sixth of the judgment debt under the secondary judgment. In this way justice can be done between the solvent defendants.... In the dearth of authority, the present conclusion must be regarded as framed merely in the optative mood.... Where the various defendants are found guilty in unequal proportions, the risk of insolvency should naturally be shared in the same proportions. 49 The court in Renaissance adopted Glanville Williams proposition of equitable distribution. The facts in Renaissance are an old story now in the N.H.L.: Frank and Frazer got involved in a fight at Renaissance. Scott Mellanby (pre NHL) interfered and got injured. Mellanby sued Frank and Renaissance, but not Frazer. Renaissance brought a contribution claim against Frazer, but not against Frank, who was found to be insolvent. 48 Cheifetz, supra note 7 at G.L. Williams, Joint Torts and Contributory Negligence, (London: Stevens & Sons Limited, 1951) at