7.1 Introduction
In cases of potential multi-party liability, a release may affect others who are not party to it. For example, based on traditional common law principles, a release given to one joint tortfeasor will affect the right of the releasor to assert or continue claims against other joint tortfeasors. And releases often contain no-claim-over clauses, pursuant to which the releasor agrees not to assert or continue a claim against any party who might claim over against the releasee. These clauses affect potential claims by the releasor against non-parties to the release who would be in position to make a claim over against the releasee should the releasor proceed with a claim against them. These and other situations of multi-party liability, where a release may affect others who are not party to it, are addressed in the following headings of this chapter.
A somewhat different situation arises when parties to a contract agree that one of them will give a release to a third party. This situation was addressed by the Ontario Court of Appeal in Metcalfe & Mansfield Alternative Investments II Corp. (Re), 2008 ONCA 587 (CanLII), leave to appeal refused, Jean Coutu Group (PJC) Inc. et al. v. Metcalfe & Mansfield Alternative Investments II Corp. and Other Trustees of Asset Backed Commercial Paper Conduits Listed in Schedule “A” to this application et al., 2008 CanLII 46997 (SCC). The Court of Appeal said that: “There is nothing to prevent a debtor and a creditor from including in a contract between them a term providing that the creditor release a third party. The term is binding as between the debtor and creditor.”
7.2 Partnership
The legal nature of a general partnership was discussed by Bastarache J. of the Supreme Court of Canada in Continental Bank Leasing Corp. v. Canada, 1998 CanLII 794 (SCC), [1998] 2 SCR 298, at paragraphs 22 and 23. The Ontario Partnerships Act that was before the court in that case defines partnership as “the relation that subsists between persons carrying on a business in common with a view to profit”. Bastarache J. said that this wording, in common with the majority of partnership statutes in the common law world, disclosed three essential ingredients of a partnership: (1) a business, (2) carried on in common, (3) with a view to profit. He went on to note that the existence of a partnership is dependent on the facts and circumstances of each particular case and by what the parties actually intended. (Although the decision of Bastarache J. was given on behalf of the minority of the court, McLachlin J., said, on behalf of the majority, that she agreed with all aspects of his reasons except for his determination that the appellant could not take advantage of a provision of the Canadian Income Tax Act because its participation in a partnership was void by virtue of the Partnerships Act.)
As stated by the author of a leading Canadian text on the law of partnerships: “Much of the legal writing on the topic takes the view that a partnership is not a separate and distinct legal entity from the partners but rather the partners are, in essence, in a principal-and-agent relationship to each other.” The author points out, though, that, while a partnership “does not have a separate and distinct legal existence from its partners, some statutory provisions, trade practice and common law have dealt with a partnership as if it was essentially a separate entity”. See A. Manzer, A Practical Guide to Canadian Partnership Law (Toronto ON: Thomson Reuters, 2020), Volume 1, at pages 1-11 and 1-19.
According to Lindley and Banks on Partnership, 20th Edition (London: Thomson Reuters, 2017), at paragraphs 12-57 and 12-81, a partner may give a valid release of a partnership debt (assuming no fraud or collusion between the partner and the debtor) and a bona fide release by one partner will not be set aside at the instance of the other partners. In general, then, this book indicates that a true release will bind the firm, although a covenant not to sue will not do so. As for a release given to a partner by a creditor, Lindley and Banks says, at paragraph 13-99, it cannot be assumed that a purported release will necessarily discharge the other partners: “if, on a true construction, it does not preclude a subsequent action against all the partners, including the partner to whom it is given, it will not in fact operate as a release and the continuing liability of the other partners will be unaffected.”
A limited partnership is, generally-speaking, a form of partnership with one or more general partners who control and manage the business and limited partners who contribute only capital, take no part in control or management of the business and have limited liability. The decisions below include discussion about the implications of a release given by one or more partners of a general or limited partnership.
Pacific NW Equip. Leasing Corp. v. Vancouver Whitecaps Partnership, 1985 (CanLII) 497 (BC SC) , affirmed on other grounds Pacific Northwest Equipment Leasing Corp. v. B.C. Bearing Engineers Ltd., 1986 CanLII 1268 (BC CA)
A release of one partner from a partnership debt discharges all the others, for where several persons are bound jointly, or jointly and severally, a release of one is a release of them all. But if a release is so drawn as to show that it was intended to enure for the benefit of the releasee personally and not to avail even him in an action against the releasee jointly with other people, persons jointly liable with him will not be discharged (quoting from Lindley on Partnership, 15th Edition).
Journey’s End Toronto Hotel Number One Partnership v. Deloitte & Touche LLP, 2006 CanLII 3479 (ON SC)
Four limited partners holding five out of 146 partnership units commenced this action in the name of the limited partnership. The defendant and the third parties sought to stay or dismiss the action on the ground that it was improperly framed as a partnership rather than a personal action. The four limited partners argued that, with the exception of one unlocated unit holder, all other holders of partnership units had executed releases, leaving them as the only parties who could sue the defendant. The court noted that the general partner had signed a release and the general partner, rather than a limited partner, ordinarily must commence litigation on behalf of the limited partnership. The court also said that the fact that the other limited partners were prevented from suing by virtue of the releases only prevented their pursuit of the cause of action: the releases did not remove their status as limited partners. They were still limited partners and the limited partnership had not authorized the action.
7.3 Joint or Joint and Several Liability of Tortfeasors or Debtors
The common law “release bar” rule developed in cases dealing with the liability of joint tortfeasors. Joint tortfeasors are, in general, those who cause a single tort together with a common purpose: Contributory Fault: The Tortfeasors and Contributory Negligence Act, Manitoba Law Reform Commission (Report #128, September 2013), 2013 CanLIIDocs 12, at pa 60. Professor John Kleefeld elaborated on the concept of joint tortfeasors in an article published in 2015 following the seventieth anniversary of the enactment of the Saskatchewan Contributory Negligence Act. Here is what Professor Kleefeld had to say about joint tortfeasors (in the context of comments about the confusing terminology used in the case law on joint and several wrongdoing):
As originally termed, a joint tort was one committed by multiple persons in concert—that is, in pursuit of a common design. The mental or intentional element was essential. This meant that “the act of one is the act of all” and that damages could not be apportioned among the joint tortfeasors … . Over time, the concept also came to include situations in which one person is vicariously responsible for another, as in principal-agent or master-servant relations, and situations in which a duty owed jointly by two or more persons is not performed. In all such cases, the defendants could be sued jointly or severally, the latter term being a synonym for “separately” or “individually.” If the plaintiff succeeded, each defendant would be liable for the whole—again, on the single-act theory. The Latin term for this idea, liability in solidum, is still used, and finds expression in civil-law systems as in Quebec’s provision that parties who “have jointly taken part in a wrongful act…are solidarily liable for reparation thereof.” In common-law systems, the expression most often used is “joint and several liability.”
See The Contributory Negligence Act at Seventy, Saskatchewan Law Review, (2015) Volume 78(1) 31 at page 45, 2015 CanLIIDocs 5312.
It is important, though, to recognize that the term joint tortfeasors is not a synonym for those tortfeasors who may be jointly and severally liable for a particular injury. This is noted in the Manitoba report, which indicates (at page 13, footnote 1) that:
‘Joint and several liability’ should not be confused with the concept of ‘joint tortfeasors’. Concurrent tortfeasors, whose actions combine to cause a single injury, may be either joint tortfeasors or several tortfeasors.
Tortfeasors who are not ‘joint’ are ‘several’. The actions of several tortfeasors may cause different damage or may combine to produce the same damage: Manitoba Law Reform Commission report, at page 13, footnote 1. As stated by Professor Kleefeld:
…“several” is … used in contradistinction to “joint” as a label for tortfeasors and comes in two varieties. Glanville Williams, in a 1951 work still considered the locus classicus in the Commonwealth, explains it best:
Where tortfeasors are not joint they are necessarily “several,” “separate,” or “independent.” Several (i.e. separate or independent) tortfeasors are of two kinds: several tortfeasors whose acts combine to produce the same damage, and several tortfeasors whose acts cause different damage.
As Williams goes on to note, the cases are preoccupied with acts that combine or concur (in Latin concurrere: run together), rather than with non-concurrent torts. The law has to a great extent assimilated the position of joint tortfeasors and several tortfeasors whose acts concur to produce the same damage. The terminology can apply to other civil wrongs, such as breaches of contract or breaches of trust, leading to the broader term concurrent wrongdoers. Wrongs are concurrent “if they cause the same damage to the injured person, whether they are contemporaneous or successive.”
See The Contributory Negligence Act at Seventy, Saskatchewan Law Review, (2015) Volume 78(1) 31 at page 46, 2015 CanLIIDocs 5312.
The report of the Manitoba Law Reform Commission referred to above points out that, at common law, because a joint tort was a single wrongful act and a single cause of action, a release by a plaintiff of a claim against one joint tortfeasor usually released all other joint tortfeasors and a judgment against one joint tortfeasor, even if unsatisfied, released all other joint tortfeasors. These rules are known as the “release bar” rule and the “judgment bar” rule. They did not apply to several tortfeasors, even if the acts of the tortfeasors combined to cause a single injury. As well, the common law rules did not apply if a potential plaintiff entered into an agreement with a joint tortfeasor promising merely not to sue that tortfeasor (a covenant not to sue), in which case the claim was not released and the cause of action was preserved. See the Manitoba Law Reform Commission September 2013 Report, at page 60. See also on this subject Chapter 1: Introduction to Releases, section 1.4, Covenant or Agreement Not to Sue.
The rule that a release to one jointly or jointly and severally liable released the other also prevailed in the law of contract; but the judges there developed the limitation upon the rule that a covenant not to sue one does not discharge the other: Glanville Williams, Joint Torts and Contributory Negligence, page 44, quoted, for example, in Tucker v. Asleson, 1997 CanLII 2782 (BC CA) at paragraph 110.
This difference between the legal consequences of a release and those of a covenant not to sue was criticized in Bryanston Finance v. De Vries, [1975] 2 All E.R. 609, where Lord Denning said:
That is an arid and technical distinction without any merits. It is a trap into which the unwary fall but which the clever avoid. It should be discarded now that we have statutory provision for contribution between joint wrongdoers. The right solution nowadays is for any sum paid by the one wrongdoer under the settlement to be taken into account when assessing damages against the other wrongdoer. If the plaintiff recovers more, he gets the extra. If he recovers less, he loses and has to pay the costs. And as between the joint wrongdoers themselves, there can be contribution according to what is just and equitable…
These words of Lord Denning have been quoted or referred to in a number of Canadian cases. See, for example, Laudon v. Roberts, 2009 ONCA 383 (CanLII), at paragraph 40, application for leave to appeal dismissed, Rick Laudon v. Will Roberts and Keith Sullivan, 2009 CanLII 61390 (SCC) and Dixon v. British Columbia, 1980 CanLII 445 (BC CA).
There has been a long history of legislative change to the common law regarding liability of joint wrongdoers in Canada (as well as England and other countries of the Commonwealth): see, for example, Professor Kleefeld’s article on The Contributory Negligence Act at Seventy and, with particular reference to the release bar and judgment bar rules, see the narrative and footnotes in Part IX.A of this article, starting at page 95. Any attempt to explain (some might say untangle) the history of these legislative changes across Canada is beyond the scope of rlaw.online. Suffice it to say that an understanding of the current state of the law on issues relating to liability of joint wrongdoers starts with the legislation of the particular province or other jurisdiction.
Castle v. Bilsky, 1921 CanLII 450 (ON SC)
The court dismissed an appeal from an order that the plaintiff might issue a writ of execution against the defendant Mackie for the balance remaining due to the plaintiff under a judgment granted in this litigation. Mackie argued that the judgment was a joint and several judgment against all the defendants, that two of his co-defendants, Black and Bilsky, had been released by the plaintiff, and that such releases effected a total discharge of the judgment, so that no claim was enforceable against Mackie. Each of the releases contained a clause in which the plaintiff reserved all rights as against defendants other than Black or Bilsky to prosecute the judgment and collect the balance thereof from the defendants other than Black or Bilsky. The court referred to the “rule” that, where several debtors are bound jointly or jointly and severally, a release given to one of them discharges the others, unless the creditor, when granting the release, reserved his rights against them, in which case the release is merely equivalent to a covenant not to sue one of the parties and does not discharge the others. The court also said that where there is a plain reservation of the right to proceed against the other defendants for the balance of the judgment, and the debtor who is being released accepts the release and pays money upon that understanding, it is plain that he is not injured and that his co-defendants will have a right of contribution against him, if otherwise so entitled, notwithstanding the release given by the plaintiff.
Avco Financial Services v. Doyle, 1979 CanLII 3850 (PE SCTD)
The defendant in this action and his wife signed a joint and several promissory note in favour of the plaintiff and a payment was made on the note. The issue was whether a document sent from the plaintiff to the defendant’s wife releasing her from all obligations to the plaintiff was effective also to release the defendant. The court noted that, in the case of joint and several covenantors, the rule is that a release of one discharges the other, unless the creditor, when granting the release, reserves its rights against the other. The plaintiff relied on a letter from it to the defendant’s wife as evidence that it was only the wife who was being released. There was no express reservation of a right to proceed against the defendant in this letter and in fact there was no mention made of the defendant in the letter. The court could not see any intention from the letter which would limit its effect from being a blanket release to being only a release of the defendant’s wife. The court observed that, had the defendant’s wife known that rights were being reserved against the defendant, she might well have refused to make any payment. Further, the money which was paid to the plaintiff belonged to both the defendant and his wife and it appeared there was a lawyer, acting for both the defendant and his wife, who made the payment of money. In these circumstances, it was very difficult for the court to infer that the payment was intended to be made only on the condition that the defendant would not be released.
Toronto Dominion Bank v. Higgott et al., 1984 CanLII 2081 (ON SC)
Where a creditor receives a part payment from a debtor who is jointly, or jointly and severally bound, and that debtor intends by that payment to secure release from liability to the creditor, the creditor may do one of two things. The creditor may give the debtor a full and unqualified release of that debtor’s liability for the debt. If the creditor does so, the release operates to discharge all the other debtors. The rationale for this principle is that the joint guarantee of the debt was part of the consideration for the contract of each debtor. There are some cases where a release of one joint debtor has not had the effect of releasing the others, but they are all cases where the release in question was of a right or obligation independent of and separate from the debt on which the creditor sued. Instead of giving the joint debtor a release, the creditor may covenant not to sue on the obligation. The covenant not to sue will not release the other joint debtors. It does not prejudice the creditor’s rights to proceed against the others for the balance.
Canadian Imperial Bank of Commerce v. Markus, 1990 CanLII 4136 (NS SC)
Referring to Higgott, above, the court said that, when a creditor receives part payment from a joint debtor, or one who is jointly and severally bound, and the debtor intends to secure a release from liability to the creditor, the creditor may give the debtor a full and unqualified release of liability to the debt, which operates to discharge all other debtors, or the creditor may agree with the debtor not to sue the debtor on the obligations. The court did not accept the defendant’s reliance on this proposition in respect of guarantees that the defendant claimed were to be joint and several. The court found that the guarantees were not joint and several, based on evidence including the separate listing of names on an application form, separate guarantee forms sent for each of two guarantors, and the failure of the guarantee forms to make any reference to joint liability.
Tucker (Guardian of) v. Asleson, 1993 CanLII 2782 (BC CA)
CRC-Evans Canada Ltd. v. Pettifer, 1997 CanLII 14943 (AB QB) , appeal on other grounds dismissed, 1998 ABCA 191 (CanLII)
It was argued in this case that a discontinuance of the action against certain defendants affected the position of the remaining defendants. The defendants relied upon the common law rule that a judgment obtained against one joint wrongdoer released all the others, even though the judgment may not be satisfied. The court said that, at common law, the release of one joint wrongdoer released all others, even though this might not have been the intention of the parties. The rationale behind this rule flowed from the notion that the cause of action is one and indivisible, and when one party is released, all other individuals otherwise liable are released as well. The court noted that the one judgment rule in relation to joint tortfeasors had been changed by section 3(1) of the Alberta Tort-Feasors Act. The court said that this section appeared to govern the situation before it. If the law was as stated by counsel for the defendants, it would complicate litigation by making plaintiffs reluctant to release parties when it would be wise to do so. An over-cautious and potentially time consuming and resource wasting approach would be followed by most litigants.
Skalicky v. Baraniski, 1997 CanLII 9778 (SK CA)
As a general rule, a release of one joint tortfeasor releases all other joint tortfeasors. Absent legislation abrogating this rule, the principle applies in Saskatchewan. The provisions of The Contributory Negligence Act, R.S.S. 1978, c. C-31 had no application to the tort of conversion. Under the common law rule, anyone who suffered damage by reason of a tort jointly committed by two or more persons was deemed to have but one cause of action which merged in the first judgment recovered in respect of it. In addition, if anyone who suffered damage at the hands of the joint tortfeasors released one of them from liability, the releasor could not sue the other joint tortfeasors, citing Wah Tat Bank Ltd. and Another v. Chan Cheng Kum (1975), 2 All E.R. 257 (P.C.).
Rafiki Properties Ltd. v. Integrated Housing Development Ltd., 2000 BCSC 833 (CanLII)
In this litigation arising from the construction of a hotel, the defendant contended, with respect to claims relating to delayed completion of the project, that a release given by the plaintiff to the contractor also released the defendant. For a number of reasons, the court was unable to conclude that the case came within the principles that apply in respect of joint tortfeasors and it held that the release of the contractor did not operate to release the defendant from liability.
M. et al v. Hardwick et al, 2000 BCSC 1362 (CanLII)
In this case, it was not contested that a release of one joint tortfeasor releases the other. The court found that a settling defendant and non-settling defendants were joint concurrent tortfeasors; thus, the release of the former also released the latter and the action was dismissed against the non-settling defendants. The court said that the fact that breach of contract was alleged as well as negligence arising from the same facts was not enough to separate out the causes of action so as to preserve the breach of contract action in the face of the release of a joint concurrent tortfeasor.
MacArthur v. S. Bransfield Ltd., 2003 NBCA 71 (CanLII)
The established and time-honored common law rule is that release of one joint tortfeasor, whether under seal or by way of accord and satisfaction, releases all other joint tortfeasors. However, it has been described as pernicious and nefarious for “discouraging settlements or ensnaring the unwary”. Not surprisingly, as soon as the rule was pronounced, lawyers set out to find legal ways to circumvent it to allow the plaintiff to settle part of the claim with a defendant without jeopardizing the plaintiff’s position vis-à-vis other joint tortfeasors. The device commonly used to escape the application of the rule is through the “covenant not to sue” (referring to Jameson v. Central Electricity Generating Board, [1998] H.C.J. No.50, [1999] 1 All E.R. 193). Some provinces have abolished the rule by specifically providing that a release of a joint tortfeasor does not operate to release the others. New Brunswick has not legislated away the rule so that, in this province, lawyers continue to draft documents whose only raison d’être is to ensure that the settlement reached with one of several joint tortfeasors for part of the claim does not operate to compromise the plaintiff’s right to pursue his or her action for the totality of the damages against any remaining joint tortfeasors. The appellant argued that the settlement agreement in this case was a release despite the fact that it contained a covenant to discontinue and not pursue the legal action. The court said that this argument, at first blush, was attractive. The settlement allowed the settling defendant to walk away from the lawsuit without ever having to face the prospect of the plaintiff pursuing him for additional damages, just as a true release would do. However, there were important features that distinguished the agreement from an unconditional release, namely, a covenant reserving to the plaintiff the right to continue its legal action against the remaining defendants and the fact that the cause of action had not been released, discharged or extinguished. The cause of action was preserved and kept alive. The distinction between a covenant not to sue and a true release, although described as “an arid and technical distinction without any merits” by Lord Denning in Bryanston Finance, above, has nevertheless continued to find favor in those jurisdictions where the rule has not been abolished by legislation.
Flynn v. Halifax Regional Municipality, 2005 NSCA 81 (CanLII)
At common law, release or discharge of a joint tortfeasor could, with certain exceptions, release or discharge the other joint tortfeasors. The principle did not apply to release “several tortfeasors” or “several concurrent tortfeasors”. A settling defendant in this case was not a joint tortfeasor with a non-settling defendant and the automatic release principle had no application. The court did not need to consider the effect of the Tortfeasors Act on the common law principle of automatic release.
Wheeler v. Rupp, 2007 ABQB 119 (CanLII)
The liability of joint tortfeasors is derived from one indivisible cause of action: a settlement and release entered into with one tortfeasor has the effect of releasing the other tortfeasors because the action is terminated. It was suggested that the legislation be changed to give a release the same meaning as a judgment in the Tort-Feasors Act. Pursuant to section 3(1) of the Tort-Feasors Act a judgment against any tortfeasor liable in respect of damage suffered as a result of a tort is not a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage. The legislation has not been changed. Releases are not covered by section 3(1). A statute should not be construed to change the common law beyond what the plain words of the statute say. In spite of the academic and some judicial criticism (referring to CRC-Evans, above), the common law rule still remains in Alberta. Section 3(1) does not apply to releases.
Village on the Park (Re), 2009 ABQB 497 (CanLII)
A Pierringer Agreement (see section 7.6 below) contained a covenant not to sue, rather than a release, and thus the common law rule that a release of one joint tortfeasor releases all joint tortfeasors was not applicable to release the defendant from liability.
Dawson v. Tolko Industries Ltd., 2010 BCSC 346 (CanLII)
On this summary trial application, certain defendants, referred to as the Towers defendants, argued that they and the defendant Tolko were joint tortfeasors in respect of the wrongs pleaded in the claim and that, on this basis, a release of the defendant Tolko resulted in the release of the Towers defendants. The court referred to five tests for determining whether defendants are joint tortfeasors and, for a number of reasons, concluded that it could not determine the issue raised by the argument of the Towers defendants on a summary trial application.
Zypherus Holdings Inc. v Dorais Estate, 2013 ABCA 287 (CanLII) , application for leave to appeal dismissed, BDO Canada Limited, in its Capacity as Trustee of the Estate of Michel Dorais, Deceased, A Bankrupt v. Zypherus Holdings Inc., 2014 CanLII 11032 (SCC)
“A release given to one of a number of persons who is jointly or jointly and severally liable discharges the others”: Halsbury’s Laws of England (4th ed., Vol. 9 at §627). “[A] release of one joint and several covenantor discharges the others, in precisely the same way as with purely joint covenants”: Glanville L. Williams, Joint Obligations, (London, Butterworth & Co, 1949). In the case of joint and several covenantors, a release of one discharges the other unless the creditor, when granting the release, reserves its rights against the other. Joint Obligations states that “the necessity for looking in the deed for an express reservation of rights against the other debtors exists only where the deed is worded as a release”. If it is worded as a covenant not to sue, the other debtors remain liable. In this case, the appellant acknowledged the release in its factum, but did not argue the release was defective in any way. Therefore, the Court of Appeal assumed it was not.
Gwininitxw v. British Columbia (Attorney General), 2013 BCSC 1972 (CanLII)
In this case, the court addressed whether a release given to the defendant Roxgold and its agents extended to the proposed defendant Raven. Raven relied on the common law doctrine that a release extinguishes claims against joint tortfeasors and argued that this doctrine extends to officers and directors acting on behalf of a corporation. The court did not accept this submission and certainly did not accept it as broadly as it was expressed. The court referred to ScotiaMcLeod v. Peoples Jewellers Ltd., 1995 CanLII 1301 (ON CA) for the proposition that an attempt to hold directors vicariously liable for the negligence of a corporation for their conduct as “directors simpliciter”, without any allegation of tortious conduct made against them personally, was founded on a theory of liability which does not exist in law. And the court referred to XY, LLC v. Zhu, 2013 BCCA 352 for the proposition that, in order for a director to be held liable for tortious conduct committed in the course of his/her employment, the tortious conduct of the director must be properly pleaded and proven as an “independent” tort committed by the director.
Mazza v Ornge Corporate Services Inc., 2015 ONSC 7785 (CanLII) , appeal dismissed, 2016 ONCA 753 (CanLII)
The defendants moved for summary judgment dismissing claims by the plaintiff, their former CEO, relating to the termination of his employment. As stated by the motion judge, the plaintiff sought to enforce the termination provisions in an employment agreement as against alleged common employers, when he had deliberately released the “main” employer with whom he negotiated that very agreement. The motion judge said that, at the core of the motion, the moving parties did no more than rely upon the principle that a creditor who releases one joint debtor will normally be held to release all. Since the result of a common employer finding is to find that each of the employers are jointly party to the self-same employment arrangement (in this case, a written contract), the corollary is that a release of the obligations thereunder in favour of one operates in favour of all. Just as partners both bind and release the partnership when dealing with partnership obligations, so one (alleged) common employer bound them all in consenting to the terms of the employment agreement and released them all in coming to a settlement of its obligations under that same agreement.
Lee v. Transamerica Life Canada, 2016 BCSC 191 (CanLII)
Employers who are found vicariously liable are considered to be joint tortfeasors with the wrongdoer. At common law, the plaintiff was deemed to have one cause of action against joint tortfeasors and the first judgment the plaintiff might recover against a joint tortfeasor extinguished any cause of action against any other joint tortfeasor; to much the same effect, a release of one joint tortfeasor also, at common law, resulted in the release of all other joint tortfeasors.
Tandalla Inc. c. Lippman Leebosh April, 2016 QCCA 1145 (CanLII)
Article 1690 of the Civil Code of Quebec says that: “Express release granted to one of the solidary debtors releases the other co-debtors only for the share of the co-debtor who has been discharged; if one or several of the other co-debtors become insolvent, the shares of the insolvents are apportioned rateably between all the other co-debtors, except the co-debtor to whom the release was granted, whose share is borne by the creditor.” A release of the primarily-liable debtor in this case was for his “share” of the debt, in the words of Article 1690 C.C.Q., and consequently, the release enured to the benefit of the co-debtor. In summary, the court said, the release of an in solidum debtor who is primarily liable will cause the release of the co-debtor who is secondarily liable. Such full release is not automatic because of the in solidum nature of the liability but rather depends on the apportionment of the debt as between co-debtors.
Quenneville v. Robert Bosch GmbH, 2017 ONSC 7422 (CanLII)
Section 139(1) of the Ontario Courts of Justice Act statutorily overruled the common law’s “judgment bar rule” and the “release bar rule.” The judgment bar rule posits that a judgment against one joint tortfeasor bars a judgment against the other joint tortfeasors, and the release bar rule posits that a release of one joint tortfeasor bars an action and a judgment against the other tortfeasors. Section 139(1) provides that where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or a separate proceeding. A plaintiff can sue a single joint tortfeasor and obtain a judgment or settle and release that single joint tortfeasor and then proceed against the other tortfeasors.
7.3.1 Effect of Release – Co-Conspirators
In the case that follows, the release of one alleged co-conspirator was found to have extinguished the cause of action such that there remained no cause of action against other alleged co-conspirators.
DataNet Information Systems, Inc. v. Belzil, 2010 ABQB 72 (CanLII)
The plaintiff companies alleged a conspiracy to petition the companies into bankruptcy improperly. The plaintiffs had given a release that released the petitioning party from the actions pleaded in their amended statement of claim. The release extinguished the associated cause(s) of action. There remained no cause of action against those who were allegedly co-conspirators with the petitioning party.
7.3.2 “Release Bar” Rule Not Applicable
The decisions below address situations in which, at common law, the release bar rule does not apply.
Ho v. Yip, 1995 CanLII 973 (BC SC)
It was argued that any release given by the plaintiffs to another party involved in the events giving rise to this litigation also discharged the defendant of any liability. However, while such a rule may apply to joint tortfeasors, it does not apply to wrongdoers against whom there are completely distinct causes of action, even where the damage caused may have been the same.
Margetts v. Timmer Estate, 1996 CanLII 10468 (AB QB) , affirmed on appeal, 1999 ABCA 268 (CanLII)
The lower court adopted and applied the decision in Tucker, above, and concluded that the general rule that a release of one joint tortfeasor releases all joint tortfeasors did not apply in this case. The Court of Appeal affirmed the decision of the lower court.
Quenneville v. Robert Bosch GmbH, 2017 ONSC 7422 (CanLII)
Section 139(1) of the Ontario Courts of Justice Act statutorily overruled the common law’s “judgment bar rule” and the “release bar rule.” The judgment bar rule and the release bar rule never applied to concurrent several tortfeasors and subject to the qualification that the plaintiff cannot make a double recovery, a plaintiff can sue several tortfeasors in successive actions.
7.3.3 Effect of Release on Claim for Contribution
The decisions below indicate that the right of contribution and indemnity among several concurrent tortfeasors is not affected by a release given to one or some of the tortfeasors.
Tucker (Guardian of) v. Asleson, 1993 CanLII 2782 (BC CA)
The Owners of Strata Plan KAS3204 v Navigator Development Corporation, 2020 BCSC 1954 (CanLII)
A plaintiff cannot compromise the contribution rights of a concurrent wrongdoer against a settling party by granting a release to the settling party. Post-tort actions by a plaintiff that extinguish its claim against one tortfeasor, such as granting a release as part of a settlement, do not compromise the right of concurrent tortfeasors to claim contribution from the released party (citing Tucker v. Asleson, above). In this case, the plaintiff reached a settlement with a number of defendants and a third party. The obvious objective of the settlement was to extricate the settling parties from the litigation in exchange for a payment of money, while permitting the plaintiff to continue the action against the remaining defendants. This was achieved by providing the settling parties with a release of liability, an indemnity, and a covenant that the plaintiff would amend its pleadings to remove the settling parties and circumscribe its claim to preclude any claim over against them. Construing the plaintiff’s obligation to limit its claim to extend to eliminating the plaintiff’s right to joint recovery from the remaining defendants for loss attributed to them as a group would be commercially absurd since it would represent a significant detriment to the plaintiff and would not confer any corresponding benefit on the settling parties.
7.4 Joint Tortfeasors and the Doctrine of Merger
As discussed in Chapter 3 above, the doctrine of merger generally prevents a claimant from relitigating a claim that has been adjudicated: see Sherwood Steel Ltd v Odyssey Construction Inc, 2014 ABCA 320 (CanLII), at paragraph 16 and Chapter 3: Effectiveness and Enforcement of Releases, section 3.3.4, Giving Effect to Finality (including section 3.3.4.1, Res Judicata). Thus, in Faulds v. O’Connor, 2010 NSSC 55 (CanLII) , at paragraph 93, the court said that merger and estoppel arising from a court decision are quite different from a private release.
While a private release certainly cannot be equated with a judgment or decision of a court, the cases set out below recognize that a judgment or decision giving rise to merger, and a settlement with or release of one joint tortfeasor, would generally produce a similar result at common law. This is consistent with the case law indicating that a release extinguishes the cause of action or rights that are within the scope of the release. See Chapter 1: Introduction to Releases, section 1.2.1, Extinguishment of Claim and Bar to Action. In Sherwood Steel, at paragraph 16, the Alberta Court of Appeal said that, although the nomenclature “merger” captures the notion of a claim having been merged into the original judgment, a more apt description of the effect of the doctrine is “exhaustion”; that is, upon adjudication, the cause of action is exhausted such that it ceases to exist and cannot support relitigation. Based on this view of merger, a cause of action that has been adjudicated ceases to exist, just as a cause of action relinquished in a valid and enforceable release is extinguished.
Copperview Haven Ltd. v. Waverley Park Estates Ltd. 1984 CanLII 782 (BC CA)
The common law principle was that, if a judgment was given against one joint tortfeasor, or settlement was reached with one joint tortfeasor, all of the other joint tortfeasors were thereby released because the cause of action had merged in the judgment and there was no existing cause of action to continue. The rule never applied to concurrent tortfeasors, against whom there were completely distinct causes of action, even in cases where they may have caused the same damage. The common law, even with respect to joint tortfeasors, was changed by legislative amendment in British Columbia in 1976, modelled on legislation enacted in the United Kingdom in 1935. On the facts of this case, the plaintiffs settled with certain defendants after a number of days of trial and the remaining defendants applied to dismiss the action against them on the basis of the doctrine of merger. The motion was dismissed by the trial judge. On appeal, the Court of Appeal said that the appellant did not put forward any basis for the application of the principle of merger to the separate and distinct torts that were committed in this case. Accordingly, the court would not accede to the appellants’ argument that the settlement extinguished the respondents’ cause of action against the appellants.
Kasperson v. Halifax (Regional Municipality), 2012 NSCA 110 (CanLII)
At common law there are fundamental differences between concurrent and joint tortfeasors. Where a plaintiff is injured by two or more defendants who act jointly to cause damage to a plaintiff, the plaintiff has but one cause of action. If the plaintiff sued one or more to judgment, the cause of action was merged. Subject to very limited exceptions, if a plaintiff settles with one joint tortfeasor he is debarred from proceeding against other joint tortfeasors. This is not so for a plaintiff who has been damaged by the acts or omissions of concurrent or several tortfeasors. Not only was there no bar from proceeding against them one after the other as the plaintiff had a separate cause of action against each, but, at common law, such tortfeasors could not be sued in the same action.
Lee v. Transamerica Life Canada, 2016 BCSC 191 (CanLII)
Employers who are found vicariously liable are considered to be joint tortfeasors with the wrongdoer. At common law, the plaintiff was deemed to have one cause of action against joint tortfeasors which merged in the first judgment the plaintiff might recover. Such judgment extinguished any cause of action against any other joint tortfeasor; to much the same effect, a release of one joint tortfeasor also, at common law, resulted in the release of all other joint tortfeasors.
7.5 No-Claim-Over and Indemnity Provisions of a Release
Many releases contain a no-claim-over clause, in which the releasor agrees not to commence or maintain an action against any person who might claim over against the releasee. As well, releases – whether with or without a no-claim-over clause – may include an indemnity provision in which the releasor agrees to indemnify and save harmless the releasee from any further claims which may be made against the releasee in respect of the matters set forth in the release. No-claim-over clauses and indemnity provisions are addressed in the decisions that follow.
Certain of the decisions below refer to the failure of the releasor to bargain for an exception from the claims covered by a no-claim-over clause of a release. As to a reservation of the releasor’s rights to make a claim, and whether specific words are needed to express limits on the scope of a release, see Chapter 2: Release Formation and Drafting, section 2.5.6, Reservation of Rights by Releasor, and Chapter 6: Scope and Application of Releases, section 6.2.3, Whether Specific Words are Needed to Express Limits on Scope.
Sceptre Resources Ltd. v. Deloitte Haskins & Sells, 1988 CanLII 3576 (AB QB), appeal dismissed and cross-appeal allowed on other grounds, Sceptre Resources Limited v. Deloitte Haskins & Sells, 1991 ABCA 320 (CanLII)
In connection with certain transactions relating to the reorganization of Francana Oil & Gas Ltd., Francana negotiated an agreement with one of the other parties involved in the reorganization transactions and gave a release with a no-claim-over clause. Following execution of the release, Francana and another plaintiff commenced legal proceedings against the defendant, a firm of accountants which had provided certain certificates for the purposes of the reorganization. The defendant argued that it was protected from any claims being advanced as it was a party entitled to claim contribution and indemnity from the parties discharged by the release. The court said that, by the release, Francana precluded itself from advancing any claim against the releasee. It also precluded itself under the no-claim-over clause from taking proceedings against any person or corporation who might claim contribution or indemnity from the parties discharged by the release. This precluded Francana from advancing a claim against the defendant. Although the defendant was not a party to the release, it was entitled to benefit from the release as a result of the words used.
Hampshire Holdings Ltd. v. Surrey (City of), 1996 CanLII 3454 (BC SC)
The plaintiff in this case and the third party South Surrey Hotel Ltd. were parties to earlier litigation that was settled. The plaintiff had given a comprehensively-worded release to South Surrey Hotel that contained a no-claim-over clause in which the plaintiff agreed not to make any further claim or to take any further proceedings in respect of any matter which was the subject of the release against any other person, corporation, or other legal entity who or which might claim contribution or indemnity from South Surrey Hotel. The court found that, inasmuch as the defendant in this action was entitled to join South Surrey Hotel as a third party “arising from the subject matter of the earlier compromised action”, the plaintiff was precluded from litigating this action. The court said it was of no avail to the plaintiff that it sought different damages in this action from those which it sought in the earlier action that was “consensually discontinued” since the factual foundation in both actions was the same.
Woodcliffe Corp. v. Rotenberg, 2005 CanLII 23675 (ON CA) , application for leave to appeal dismissed, Woodcliffe Corporation v. Rotenberg, 2006 CanLII 4766 (SCC)
Several actions between the plaintiffs and the third parties to this proceeding resulted from difficulties that arose in the course of the purchase, development and financing of a real estate project. These other actions were settled and comprehensive mutual releases were exchanged between the third parties and the plaintiffs. All the releases included, at a minimum, typical wording of a no-claim-over clause. The Court of Appeal held that the motions judge did not err in concluding that, as this action encompassed matters previously litigated and settled between the plaintiffs and the third parties, it should be stayed. By staying the main action, rather than simply staying the third party proceedings, the motions judge properly followed the decision in Sinclair-Cockburn . As the allegations in the statement of claim were inextricably linked to allegations of wrongdoing by the third parties, they fell within the category of claims precluded by the releases. Simply put, the claims could not be litigated without re-litigating the claims against the third parties. Third party proceedings were virtually inevitable. The object and purpose of the release was not only to prevent the plaintiffs from suing the third parties, but also to ensure that the third parties would not be further disturbed by the plaintiffs. Given the history of this litigation and the nature of the claims the plaintiffs sought to assert, the motions judge properly distinguished Owen v. Zosky and Holthaus v. Bank of Montreal . The plaintiffs could have refused to settle unless defendants in this action were excepted from the “no claims over” provisions of the releases. Having proceeded with settlements without such an exception, and having obtained the benefits of the settlements, the plaintiffs should also have to assume the burden the settlements imposed in terms of precluding claims over.
Lee v. Back Information Services, Ltd., 2005 CanLII 38101 (ON SC) , appeal dismissed on consent, 2006 CanLII 22108 (ON CA)
The plaintiff was involved in a motor vehicle accident as a result of which she submitted a claim to Canada Life for monthly benefits under her group long-term disability policy with her employer, the defendant. The plaintiff sued Canada Life under the policy and, upon the settlement of that action, she signed a release with a no-claim-over clause. The plaintiff commenced this action against the defendant for wrongful dismissal and, in addition, she alleged that the defendant failed to report an increase in her annual salary to Canada Life, thus reducing her benefits. The defendant made a third party claim against Canada Life for contribution and indemnity, alleging that it had reported the plaintiff’s increased salary to Canada Life. Canada Life claimed that, had the defendant reported the increase, then Canada Life would have increased the premium. The court concluded that the situations in Sinclair-Cockburn and Woodcliffe, above, were very similar to the situation in this case. The plaintiff signed the release and, consequently, Canada Life was entitled to all of the benefits that flowed from it. As in Sinclair-Cockburn , what the plaintiff was seeking would have amounted to a unilateral amendment to the release. At the time when the release was being negotiated and signed, the plaintiff should have tried to procure a concession regarding her right to pursue the defendant, but she did not do so.
Radvar v. Canada (Attorney General), 2005 CanLII 45412 (ON SC) , appeal dismissed, Radvar v. Canada (Attorney General), 2007 ONCA 137 (CanLII)
The plaintiff made a claim under a policy of insurance issued to him by the defendant Chubb. Chubb retained an investigation firm to carry out background enquiries about the plaintiff. The action against Chubb was settled and the plaintiff signed a full and final release with a no-claim-over clause. Subsequently the plaintiff commenced this action for breach of privacy rights, fiduciary obligations and regulatory negligence. The plaintiff’s claim against the Attorney General of Canada was based on the release of his personal information to the investigators by Human Resources Development Canada. The court said that all of the claims against Canada found their factual underpinnings in the matters to which the release applied. There were no claims against Canada that were not “subject to a cross-claim against the co-defendants” (one of which was Chubb). Whether the action against Canada could proceed was determined by the decisions in Sinclair-Cockburn and Woodcliffe, above. It would be unjust to permit the action against Canada to proceed while preventing Canada from advancing its crossclaims against its co-defendants. Adopting the reasoning of the Court of Appeal in Woodcliffe, the court held there was no injustice in preventing the plaintiff’s action from proceeding, in that to do so was simply holding him to his bargain. The court said it was not necessary to consider whether Canada was directly entitled to the benefit of the release as a non-party falling within the ambit of the release nor whether to permit the action to proceed would constitute an abuse of process, as argued by Canada.
Drapeau v. Heald, 2006 CanLII 9147 (ON SC)
The plaintiff was involved in four motor vehicle accidents. An action arising out of one of the actions was settled and the plaintiff and her spouse gave a release which included a no-claim-over clause: they agreed not to take any proceedings against any other person or corporation who might claim contribution or indemnity from the releasees. When a defendant in an action arising out of one of the other accidents initiated third party proceedings against one of the releasees, the releasee moved for a stay of proceedings. The court said that a stay of the third party claim by the defendant against the third party would be inappropriate because the defendant had nothing to do with the settlement agreement in the other action. The action by the plaintiffs against the defendant fell squarely within the language of the no-claim-over clause, but the defendant had no obligation to abide by the plaintiffs’ undertaking in the release. The defendant was not a party to the agreement which included the release provisions and neither party to the release was entitled to require a stay of the third party claim.
Misko v. Doe, 2007 ONCA 660 (CanLII)
The plaintiff was involved in two motor vehicle accidents eleven months apart. He settled with the first tortfeasor and gave a standard release with a no-claim-over clause. The identity of the second tortfeasor was unknown and, accordingly, the plaintiff sued, among others, the insurer of his own vehicle pursuant to the unidentified motorist coverage provided in his policy. The insurer made a third party claim against the first tortfeasor. The Court of Appeal said that the cases in this area were not entirely consistent and that, “lurking behind the issues” was a formidable policy question. In giving the release, the plaintiff agreed that he would not make any claim or take proceedings against any person who might claim contribution or indemnity from the first tortfeasor. If the insurer was able to bring a third party claim against the first tortfeasor, the plaintiff would be in breach of that agreement. Thus, if the insurer was successful in adding the first tortfeasor as a third party, it would seem to follow that the plaintiff’s claim against the insurer should be struck out in view of the release (citing Sinclair-Cockburn ). Such a result would seriously undermine the public interest in settling actions. Few plaintiffs would risk providing a release in the standard form used in this case, for fear that, if injured later in a separate incident, the release would prevent recourse against the second tortfeasor. Defendants might be reluctant to settle if they continued to be exposed to liability from claims brought by subsequent tortfeasors. The Court of Appeal concluded, though, that, at the trial of this action, the insurer would not be at risk of having to compensate the plaintiff for damages from the first accident. The insurer would have no occasion to seek contribution or indemnity from the first tortfeasor because, if it should be found to be liable to the plaintiff, judgment would go against it only for its degree of responsibility for the plaintiff’s injuries. Since it could have no claim against the first tortfeasor, it was not entitled to commence a third party claim
Ieradi v. Gordin, 2007 CanLII 48637 (ON SC)
The plaintiff commenced an action arising from a failed purchase of the shares of a company which owned certain properties. The action – against the parties who were to be the vendors of the shares – was settled. The minutes of settlement contained a release given by the plaintiff with a no-claim-over clause. Subsequently, the plaintiff commenced this action against the defendant lawyers alleging negligence in the provision of legal services in respect of the failed transaction. The defendants issued third party claims against the vendors claiming contribution and indemnity. The parties acknowledged that, in the face of the minutes of settlement, there could be no action taken or sustained against the third parties. The court concluded that the fact that the third party proceedings were being stayed did not mean that the main action must also be stayed. If a third party proceeding without merit can still be stayed based on a “no action clause” in a prior release and, on that basis, the main action stayed, then any defendant can get that advantage simply by issuing a third party proceeding even though it has no chance of success. In this case, if the lawyers were negligent, it was their actions or failure to act which created the liability. The third parties could not be liable for the professional negligence of the lawyers. The lawyers’ defence that their inability to tender was a result of the failure of the third parties to provide clear title did not give rise to a third party action and did not attract the protection offered by the release. Where a third party has no exposure in contribution and indemnity to any successful claim by a plaintiff, the court need not dismiss or stay the main action pursuant to a “covenant not to sue”.
Warner v. Balsdon, 2008 CanLII 23713 (ON SCDC)
The plaintiff was injured in a motor vehicle accident and, with the participation of paralegals retained by her, she settled her claim against the owner and driver of the other vehicle, the Balsdons, without commencing an action. She signed a release that included a no-claim-over clause. The plaintiff subsequently commenced this action against the Balsdons for damages arising out of the accident, and she also claimed against the paralegals for negligence in failing to properly advise her. The paralegals cross-claimed against the Balsdons, who moved to strike out the cross-claim. On an appeal from the dismissal of the motion, the court said that, should the release be upheld, then by its very terms the plaintiff was barred from bringing an action against anyone who might claim contribution and indemnity from the Balsdons or their insurer. Thus, if the release was upheld, the plaintiff’s entire claim against the paralegals would be dismissed and any cross-claim would fall, being moot. Similarly, should the release be set aside, then there would be no liability on the part of the paralegals and once again the crossclaim would be moot, because a careful reading of the statement of claim revealed that the only claim made by the plaintiff against the paralegals was for the damages she would have recovered against the Balsdons had the release not been executed. This, the court said, was sufficient to allow the appeal.
Grace Canada, Inc. (Re), 2008 CanLII 54779 (ON SC)
In a proceeding under the Companies’ Creditors Arrangement Act, the Crown supported approval of a settlement provided that the approval order expressly recognized that the Crown’s “claim over” for contribution and indemnity was unimpaired. However, the purpose of the release in the minutes of settlement was to protect the debtor from indirect claims through the Crown: since any claim for which the debtor was ultimately liable could not be pursued, the Crown had no need nor any ability to “claim over” against the debtor.
Metcalfe et al. v. Thompson Dorfman Sweatman, 2008 MBQB 292 (CanLII)
A family dispute over the use, valuation and ownership of a family farm was finally settled in 2003 by way of a consent order that precluded further litigation between the parties. Pursuant to that settlement, the parties executed releases with no-claim-over clauses. The position of the defendant in this action was that, if this claim were to be allowed to proceed, a party from the earlier settlement, Winston Metcalfe, would have to be added as a third party, which was expressly barred by the releases. However, the court said that a determination that the defendant breached its duty to the plaintiffs would validate the actions of the plaintiffs in settling the earlier claim. The administration of justice would be adversely affected if a court determined that the defendant had failed in its duty to the plaintiffs but was able to use that very failure to insulate itself from the loss. Further, the court concluded that the former claim that was settled and the claim in this action did not concern the same issues. If the defendants were to be found liable, the assessment of damages against the defendants would involve evidence being led that related to the settled claim. But that did not mean that the defendants would consequentially have any remedy against Winston Metcalfe.
B.P.B. v. M.M.B., 2009 BCCA 365 (CanLII)
A release given by the respondent in settlement of an action against her uncle was raised as a complete bar to this action against her father. The judges of the Court of Appeal took different views about whether the release was relevant or appropriately considered on the appeal. Because neither the specific terms of the release nor the basis for the settlement were before the court, Chiasson J. said it would be inappropriate to consider the release in the disposition of the appeal. Smith J. said he would also dismiss the father’s release submission on its merits. In the release, the respondent had agreed not to make any claim or take any proceedings against any other person who might claim contribution or indemnity from the releasee, her uncle. Smith J. said it would appear that the respondent was in breach of her covenant in the release when she commenced the action against her father. However, any right of action for breach of her covenant would lie with the uncle. The father was not a party to the agreement between the respondent and her uncle and he therefore could not assert any rights under it.
Thompson v. O’Sullivan, 2009 CanLII 15455 (ON SC)
The plaintiff asserted claims in this action by reason of injuries she suffered in a motor vehicle accident and the defendants issued a third party claim in which they alleged that the third party’s negligence in relation to an earlier accident caused or contributed to the injuries for which the plaintiff was claiming damages in the main action. The court said that, together, Misko, above, and Willoughby v. Weber, 2008 CanLII 8255 (ON SC) stand for the proposition that, where the plaintiff has no claim against third parties (either because of an express release, as in Misko, or because of the expiration of a limitation period, as in Willoughby), then the defendants are not entitled to issue a third party claim. Instead, they are immune to liability for any injuries proceeding from the previous accident, i.e., any injuries caused by the third parties. The defendants are only liable for the injuries that they caused in the second accident.
Thompson v. Musliyan, 2010 ONSC 5351 (CanLII)
The plaintiff Terri-Jo Thompson was involved in a motor vehicle accident and she retained paralegals to negotiate her claim with the insurer of the driver of the other vehicle. Her claim was settled and she signed a release. Subsequently, the plaintiffs commenced this action against the other driver, the insurer, the paralegals and others, in which they challenged the settlement of the claim by the paralegals. The other driver and the insurer brought a motion to dismiss the action, as against them, on the basis of the release. After negotiations, the plaintiffs gave a second release to the other driver and the insurer. The second release contained a no-claim-over clause. Still later, the paralegals filed a statement of defence and made a crossclaim against the other driver and the insurer. The paralegals brought a motion for summary judgment on the basis that the second release applied to them and they relied on the no-claim-over clause in the second release. The court decided that there were genuine issues for trial and it dismissed the motion for summary judgment. The court said it would make little sense to interpret the second release as applicable to the paralegals who had not been party to the negotiations that gave rise to the second release in the first place. At the time when the second release was executed, the paralegals had failed to respond at all to the action. On the clear wording of the release, the plaintiffs specifically released only two parties in an ongoing action.
1562860 Ontario Ltd. (Shoeless Joe’s) v. Insurance Portfolio Inc., 2011 ONCA 180 (CanLII)
The respondents arranged business loss insurance for the appellant. When the appellant called on the insurance – which was provided by the third party insurer – it was told that there was insufficient coverage. The appellant settled with the insurer for less than the value of its loss, and signed a release in favour of the insurer with a no-claim-over clause. The appellant then sued the respondents, who claimed indemnification against the insurer. The motion judge stayed both the main action and the third party claim, finding that the action and the third party claim were clearly linked, and that the appellant must live with the consequences of its release. The Court of Appeal said that, should the appellant succeed in the main action and prove that it was underinsured, the respondents’ third party claim could not succeed because it could not be established that the appellant was properly insured. On the other hand, should the appellant be unable to prove that it suffered loss due to under-insurance, there would be nothing for which the respondent could claim contribution or indemnity. In either case, the third party claim arising from the underinsured claim in the main action could not succeed. A stay of the third party proceedings arising from the underinsured claim was therefore appropriate and, in those circumstances, permitting the main action to proceed based on this claim no longer engaged the appellant’s release of the third party. To that extent, the stay of the main action ordered at first instance must be lifted. The appellant also claimed that the respondents were negligent and in breach of their fiduciary duty in failing to assist the appellant in settling its insurance claim with the third party. The respondents denied this claim and claimed indemnity from the third party for breaching the duty of care requiring it to settle the appellant’s insurance claim on a reasonable basis. The Court of Appeal saw no reason to interfere with the stay of the main action and the third party proceeding arising from this claim. In respect of this claim in the main action, the Court of Appeal said that the appellant must live with the consequences of its release of the third party.
Dalton v. Jim’s Carpentry and Upholstery Limited, 2013 CanLII 9575 (NL SCTD)
The plaintiffs settled a claim against the Follets, vendors of a property purchased by the plaintiffs, arising from certain issues with the property. The plaintiffs signed a release in which they agreed to indemnify and save harmless the Follets from any further claims which might be brought against the Follets in respect of the matters set forth in the release. After discontinuing their action against the Follets, the plaintiffs commenced this action against defendants including Jim’s Carpentry and Upholstery Limited. Jim’s Carpentry issued a third party notice claiming indemnity from the Follets should the plaintiffs be successful in their claim against the defendants. The Folletts made an application to have the third party notice set aside. The court said that to allow the third party claims to be struck on the application would be an injustice to Jim’s Carpentry in defending the claim. According to the court, it was not the rights of the third party which had to be protected at this stage of the proceeding; it was the interest of Jim’s Carpentry which had to be protected. Jim’s Carpentry did not know about the release until the Follets were joined as third parties and was not aware of or party to any of the settlement negotiations. The court went on to say that surely Jim’s Carpentry had the right to make a third party claim against the Follets so as to determine what impact the release might have on the plaintiff’s action against Jim’s Carpentry. The issues raised by the application were all trial issues and not issues for chambers, because the only way to get at the intent of the parties was through a robust review of the facts. The application was dismissed.
1369521 Ontario Inc. v. Pension Fund Realty Limited, 2014 ONSC 6490 (CanLII)
The plaintiffs sued the defendants in respect of losses arising out of a failed investment in a restaurant. The plaintiffs reached two separate settlements with certain of the defendants and provided releases to these defendants which included no-claim-over clauses. The other defendants, referred to by the court as the Liao defendants, cross-claimed against the settling defendants claiming contribution or indemnity for any amounts for which the Liao defendants might be found responsible to the plaintiffs. In respect of a motion by the settling defendants seeking enforcement of the settlement, the court said the plaintiffs proposed to require the settling defendants to spend time and money participating in a legal proceeding to apportion liability for the plaintiffs’ damages. While the plaintiffs indicated that they would indemnify the settling defendants for their expenses in respect of such litigation, the plaintiffs offered only an unsecured covenant and the assurance that they would be successful in the action against the Liao defendants. Further, the court said that, even if it had the authority to “re-write the agreements between the parties”, the equities did not favour the plaintiffs in this case. In respect of a motion by the Liao defendants for an order striking the action as an abuse of process, the court found that the Liao defendants had no standing to bring the motion. The standing of the Liao defendants depended on their entitlement to assert the benefit of the releases, but the language of the releases contained no language that assisted the Liao defendants in their argument that the parties to the releases intended that the Liao defendants would also be beneficiaries of the releases. The court concluded that the settling defendants were entitled to an order discontinuing the plaintiffs’ action and it dismissed the motion of the Liao defendants.
Sazant v Mattinson, 2015 ONSC 3709 (CanLII)
The plaintiff brought a motion for a determination that the defendant was in breach of a mutual release which stated that the defendant was barred from making a claim against “any other person or corporation” who might claim “contribution and indemnity” from the plaintiff. The defendant brought a motion for a determination that he was not in breach of the release and for an order dismissing the action. After signing the release, the defendant made an application to the Criminal Injuries Compensation Board. By statute, the Board was authorized to pursue subrogated claims. The court said that the Board could not, however, claim for “contribution and indemnity”. Put another way, under its directing legislation, the Board could only pursue subrogated claims and not claims for contribution and indemnity, but the plain language of the release precluded contribution and indemnity. In any event, the Board’s right to subrogate would crystallize when funds were paid out to the applicant and that point had yet to be reached. The Board had expressly indicated that it would not be pursuing a subrogated claim. The release barred the defendant from making any claim against any other person or corporation. A claim for criminal injuries compensation was not a claim against the Board, but was rather a claim against a fund managed by the Board. The plaintiff’s motion was dismissed and the defendant’s motion was allowed.
Toronto Hydro v. Gonte and City of Toronto, 2018 ONSC 4315 (CanLII)
In this case, the defendant Toronto Hydro made third party claims against the City of Toronto and Gonte Construction. Toronto Hydro settled with the City and gave a release with a no-claim-over clause whereby it agreed not to make any claim against any person or corporation who might claim over against the releasee. The release included an explicit exception to the no-claim-over clause in respect of Toronto Hydro’s claims against Gonte. The court concluded that a finding that Toronto Hydro could only pursue its claim in tort against Gonte in the amount of Gonte’s several share of liability was not contrary to the exception to the no-claim-over clause. The issue was not about Toronto Hydro being barred from making its claim against Gonte but about the legal scope of the claim and the claim was limited to Gonte’s several share of liability as a matter of law under the Negligence Act.
Daum v Borsuk, 2020 BCSC 2013 (CanLII)
The core issue in this case was precisely the same issue as that which was the subject of a settlement in prior litigation. In a release given in connection with the settlement, the plaintiff agreed not to bring claims against anyone who might make a claim against the releasee. The plaintiff was, therefore, precluded from bringing this action (citing Taberner v. World Wide Treasure Adventures and Browne v. McNeilly ). This action resulted in the releasee being third partied into the proceedings and required him to defend himself. It was a breach of the release.
Parks v. McAvoy, 2022 ABQB 489 (CanLII)
This litigation arising from the construction of the plaintiff’s home was brought against defendants including the general contractor and its principal (the Woodparke defendants). Shortly after the statement of claim was filed, the plaintiff settled directly with one of the subcontractors, Alberta Marble. When the Woodparke defendants issued a third party notice against Alberta Marble, Alberta Marble applied for summary dismissal of the notice on the basis of the settlement with the plaintiff. The court said that, while this would legally follow in an appropriate case, the release in this case was not adequate to allow Alberta Marble to be released from the action. For that reason, Alberta Marble’s application was dismissed. Alberta Marble’s argument was that, according to the release, it was entitled to be indemnified by the plaintiff and so, as provided for in section 3(1)(c) of the Alberta Tort-Feasors Act, no claim for contribution could be made against it. But the court said that the question arising from the wording of section 3(1)(c) was whether or not Alberta Marble’s release from the plaintiff covered the “same damage” as claimed against Alberta Marble by the Woodparke defendants. Unfortunately, the court said, given the wording of the release, it was impossible to know exactly what was covered and what was not. The court said the release must cover the same damage as that for which the defendant might be liable and the release given to Alberta Marble simply did not do that.
McInyre v. Potter, 2022 MBQB 103 (CanLII)
The plaintiffs sued two sets of defendants in contract and tort. The first set of defendants was referred to by the court as “the Potters”. The plaintiffs discontinued the action against the second set of defendants and released the second set of defendants from all liability. After one of the plaintiffs revealed some apparently new information on examination for discovery, the Potters brought motions to add the (former) second set of defendants as third parties. The court referred to the decision in Terranata Winston Churchill Inc. v. Teti Transport Ltd., et al., 2020 ONSC 7577 (see Chapter 4: Releases and Settlement, section 4.6.3.3) and compared the provisions of the release in this case with the release discussed in Terranata. The plaintiffs and one group of defendants in Terranata negotiated a settlement and it was agreed that the plaintiffs would sign a “full release”, but the parties could not agree on the wording of the full release. In Terranata, the court concluded that a full release included a no-claim-over clause and a contribution and indemnity clause. In this case, there was no evidence regarding whether the plaintiffs and the second set of defendants ever signed a settlement agreement, let alone a settlement agreement using the term “full release”. The court in Terranata “wrote” an extremely comprehensive release, which differed substantially from the release signed in this case. The release in this case said that the releasors (the plaintiffs) agreed not to make or continue any claims; the Terranata release said that the releasor agreed not to make or continue any claims. On its face, the release in this case (which was never referred to as a “full” release) did not act as a bar to the Potters filing third party claims against the second set of defendants.
Fehr v. Gribilas, 2022 ONSC 275 (CanLII)
It is the court’s abuse of process jurisdiction and not contract law that enforces releases that include a no-claim-over provision. That said, it is the policy of holding contracting parties to their bargains that explains the exercise of the court’s jurisdiction to stay or dismiss the proceedings that breach the contractual obligations. In Sinclair-Cockburn , the stay of the main action and of the third party claim was based on the court’s procedural jurisdiction to stay actions that are an abuse of process and not on the law of contract, although contractual principles including the concept of privity of contract were mentioned. A party can carve out exceptions to the scope of the no-claim-over provision in a release but that was not done in Sinclair-Cockburn, nor was an exception to the no-claim-over provision bargained for in this case. According to the analysis of the court in Ieradi, above, in order to have the protection of a no-claim-over provision in a release for which the litigant was not a signatory, the litigant must satisfy two pre-conditions: (1) he or she must have been sued with respect to the subject matter of the release; and (2) he or she must have a viable claim over to trigger the protection of the no-claim-over provision. The explanation for the first pre-condition is that a stay on the grounds of abuse of process will be granted only to preclude claims that are connected to the claims that are being released; claims against the litigant seeking a stay that are independent of the subject matter of the release will not be stayed. As to the second pre-condition, if the triggering claim is not legally viable, then the extraordinary order of a stay cannot be justified.
Mulchan v. Evans, 2022 ONSC 5354 (CanLII)
Indera Persaud commenced an action for damages arising from a motor vehicle accident and, upon reaching a settlement of the action, she signed a release that contained a provision indemnifying the releasees against any future claims asserted by any person entitled to claim under the Family Law Act. Later, another action was commenced claiming damages, pursuant to the Family Law Act, for loss of care, guidance, and companionship suffered by Persaud’s disabled, adult son, Basant Mulchan. Mulchan sought damages from the releasees or, in the alternative, from his mother’s lawyers who he alleged had negligently failed to add him as a plaintiff in the earlier litigation to assert his Family Law Act claims and had failed to advise his mother that she should do so. If his claim against the releasees was statute barred, Mulchan looked to recover his damages from the lawyers. But the releasees did not plead that the claim was statute barred and Mulchan brought a motion for leave to serve and file a notice of discontinuance against the lawyers. In response to Mulchan’s claim against them, the releasees took several steps: among other things, they delivered a crossclaim seeking contribution and indemnity from the lawyers for any amounts they had to pay to Mulchan and they issued a third party claim against Persaud seeking contribution or full indemnification pursuant to the terms of the release. The lawyers moved to strike out the crossclaim on the ground that it disclosed no reasonable cause of action. The court noted that the releasees had not pleaded a limitations defence and it said that Mulchan’s claim against the lawyers was no longer “viable or necessary”. The court granted leave to Mulchan to serve and file a notice of discontinuance. As to the crossclaim, the releasees argued that their claim for contribution and indemnity in respect of Mulchan’s losses should be allowed to proceed because the lawyers failed to advise Persaud about the terms of the release she signed. The court did not accept this argument. The court said that, if the lawyers breached any duties owed to Persaud related to the terms of the release, that fault was entirely unrelated to Mulchan’s claim for loss of care, guidance, and companionship caused by the accident that harmed Persaud. No claim for contribution and indemnity for Mulchan’s claim for loss of care, guidance, and companionship could arise against the lawyers in respect of what advice they did or did not provide to Persaud before she signed the release containing the indemnification provision in favour of the releasees. There was no connection between the damage claimed by Mulchan and the releasees’ pleadings about the release.
Wiener v Strickland et al, 2023 ONSC 3452 (CanLII)
The plaintiff brought this action alleging negligence by a lawyer who acted for him in litigation relating to an estate. The litigation was settled at a mediation and one of the terms of the settlement was that standard releases were to be signed, releasing the estate and estate trustees. The plaintiff’s position was that he agreed to the terms of the settlement so long as he could sue the lawyer for the estate, Gunn (who was not one of the parties to this litigation). The plaintiff refused to sign minutes of settlement because the minutes did not expressly provide that he could sue Gunn. A motion to enforce the settlement was resolved by way of a consent order which provided that releases were to be signed. The plaintiff signed a release that was referred to by the court in this case as “a standard estate release”. It was common ground that nothing in the release prevented the plaintiff from bringing a claim against Gunn. However, the plaintiff argued that the release that was a term of the settlement reached at the mediation must be interpreted to include a no-claim-over clause, which the plaintiff would not accept, because, should the plaintiff sue Gunn, then Gunn would make a claim over that would be prohibited by the release. The court rejected this argument. The court said that nothing in the settlement document prevented the plaintiff from suing Gunn. A standard estate release “like in a distribution” does not generally include a no-claim-over clause. This was the type of release that was signed following the consent order – the parties signed a standard estate release, without a no-claim-over clause, even though the consent order provided for “full and final” releases. The form of release that was eventually signed supported the conclusion that, at the time of the mediation, the parties expected standard estate releases without a no-claim-over clause.
7.5.1 No Foundation for a Viable Claim Over
A plaintiff can prevent a defendant from advancing a claim for contribution against another party by limiting its claim to loss that is not ultimately attributed to the fault of the other party. By doing so, the plaintiff eliminates the foundation for any claim for contribution against the other party: Blue Mountain Linen Inc. v. Enercare Homes and Commercial Services Limited Partnership, 2022 ONSC 5635 (CanLII) , at paragraph 31, citing The Owners of Strata Plan KAS3204 v. Navigator Development Corporation, 2020 BCSC 1954 (CanLII) , at paragraph 19. A leading case on this point is Taylor v. Canada (Minister of Health), 2009 ONCA 487 (CanLII).
The plaintiff in Taylor brought a class action against Health Canada for damages she allegedly suffered as a result of the insertion of a surgical implant in her jaw. She claimed that Health Canada’s negligent regulation of such devices caused her injury. As stated by the Ontario Court of Appeal in a later decision:
Taylor concerned an attempt, by a defendant to a class action, to add third parties from whom the defendant wished to claim contribution and indemnity on the basis that their fault had contributed to each class member’s injury. In other words, due to the risk it could be made to pay 100 percent of the damages it wished to seek indemnity from the third parties for their proportion of fault. The plaintiff, however, made it clear by an amendment to the claim that the exposure of the defendant was limited to damages for which it could have no right of contribution, because all that was claimed were the damages that would be apportioned to the defendant given its relative degree of fault …. This was done specifically “to preclude the defendant’s attempt to assert a third party claim” and with the intention that “[t]he possibility of third party claims will be obviated”…. Thus in Taylor the plaintiff amended her statement of claim to specifically state that she was not suing the defendant for anything other than the defendant’s proportionate share of fault, in circumstances that made it clear she was prepared to reduce the claim by the proportion of fault that would be attributed to the proposed third parties.
See Endean v. St. Joseph’s General Hospital, 2019 ONCA 181 (CanLII), at paragraph 66.
The Court of Appeal said in Taylor (paragraph 20) that contribution rights arise only where a defendant is required to pay more than its proportionate share of the plaintiff’s damages. The plaintiff had limited her claim and those of the class members to losses attributable to Health Canada’s negligence. She was not seeking all of her damages from Health Canada; she was seeking only the portion of her damages attributable to Health Canada’s neglect and not the portion of her damages that might be attributable to the neglect of the dental surgeon or the hospital that were named in the defendant’s third party claim. Because the plaintiff had limited her claim and the claim of other class members to those damages attributable to the fault of Health Canada, the third party claim against the doctor and the hospital for contribution and indemnity disclosed no reasonable cause of action: Taylor, paragraph 33. The Court of Appeal did not accept the defendant’s argument that the court had no jurisdiction to apportion fault against the doctor and the hospital unless they were parties to the proceeding: paragraphs 23-28.
In J.K. v. Ontario, 2017 ONCA 902 (CanLII), the Ontario Court of Appeal considered an appeal from an order striking out a third party claim in a proposed class proceeding against the Crown alleging negligence, breach of fiduciary duty, and breach of Charter rights in the use of solitary confinement in youth detention centres across Ontario. The court allowed the appeal, concluding that it was not plain and obvious that the Crown could not succeed in its third party claim against non-government, non-profit organizations which operated some of the youth detention centres under contract with the Crown.
The court further concluded in J.K., however, that it was possible for the plaintiff’s claim to be amended in such a manner that the Crown’s third party claim would have no reasonable prospect of success, at which point the Crown’s third party claim could be properly struck without leave to amend. The court went on to provide guidance on “the kind of amendment that would enable the third party claim to be struck”. (The court was urged to do so by counsel for the plaintiff, who sought guidance on how to “Taylorize” the claim: see paragraph 31 of the Court of Appeal decision.) The court said that, in its view, if the claim were to be amended in accordance with specific wording set out by the court, then the principle in Taylor would apply and preclude third party claims for contribution and indemnity. The court also said that, if these amendments were to be made, the motion judge could then strike the Crown’s third party claim in negligence, without leave to amend to plead a right of contribution and indemnity.
Note that, in the earlier Sinclair-Cockburn case, a third party claim was stayed as an abuse of process even though, in its reply and counterclaim, the plaintiff undertook not to claim from the defendant any amount that it could recover from the third party. (And the plaintiff’s counsel gave a similar undertaking directly to the third party’s counsel.) The plaintiff in this case had given a release to the third party which included a no-claim-over clause. The no-claim-over clause provided that the plaintiff would not make any claim or take any proceedings against any other person, corporation, or other entity who might claim contribution or indemnity from the third party with respect to any matter to which the release related, and would indemnify the third party against any such claim. The plaintiff argued, though, that it should be allowed to continue its action against the defendant because it had undertaken not to claim from her any money that she could recover from the third party. The plaintiff argued that its claim against the defendant did not expose the third party to any financial liability.
The Court of Appeal did not accept the plaintiff’s arguments. The Court of Appeal’s reasoning was as follows:
As [the third party’s counsel] said during oral argument, his client paid a substantial sum of money to buy peace, not just peace from potential liability for a judgment, but peace from even having to respond to a claim from [the defendant]. [The plaintiff] signed an unqualified release. [The third party] is entitled to all the benefits that flow from that release, which include its reputational interest and its interest in not being dragged into a lawsuit. [The third party] was entitled to expect the party who signed the release to live up to its bargain. It is not obliged to accept something almost as good. The undertaking proffered by [the plaintiff] amounts to a unilateral amendment to the release. Nothing in the settlement agreement authorizes such an amendment.
Moreover, each party had counsel when the release was negotiated. … Had [the plaintiff] wanted to preserve its right to pursue [the defendant] …, it should have tried to procure that concession in the settlement negotiations. Apparently, it did not do so.
See Sinclair-Cockburn Insurance Brokers Ltd. V. Richards, 2002 CanLII 45031 (ON CA), at paragraphs 14-15, application for leave to appeal to the Supreme Court of Canada dismissed with costs, S.C.C. File No. 29431. S.C.C. Bulletin, 2003, p. 457.
Ieradi v. Gordin, 2007 CanLII 48637 (ON SC)
The plaintiff commenced an action arising from a failed purchase of the shares of a company which owned certain properties. The action – against the parties who were to be the vendors of the shares – was settled. The minutes of settlement contained a release given by the plaintiff with a no-claim-over clause. Subsequently, the plaintiff commenced this action against the defendant lawyers alleging negligence in the provision of legal services in respect of the failed transaction. The defendants issued third party claims against the vendors claiming contribution and indemnity. The parties acknowledged that, in the face of the minutes of settlement, there could be no action taken or sustained against the third parties. The court concluded that the fact that the third party proceedings were being stayed did not mean that the main action must also be stayed. The court noted that, in Sinclair-Cockburn, the decision of the motion judge with respect to a stay of the main action was restricted to only three paragraphs in the statement of claim. Thus, the court said it would appear that the parties in Sinclair-Cockburn recognized that it was possible to maintain parts of the main action in the face of the third party proceedings being stayed. Although the reason for this was not stated, it was consistent with the proposition that claims against the defendants which are independent of any claims to be made against the third parties cannot obtain the protection offered by the release and the “no action clause” it contains. If a third party proceeding is not sustainable, it does not require the protection offered by the release. If a third party proceeding without merit can still be stayed based on a “no action clause” in a prior release and, on that basis, the main action stayed, then any defendant can get that advantage simply by issuing a third party proceeding even though it has no chance of success. The court feared that was what was being hoped for in this case. If the lawyers were negligent, it was their actions or failure to act which created the liability. The third parties could not be liable for the professional negligence of the lawyers. The lawyers’ defence that their inability to tender was a result of the failure of the third parties to provide clear title did not give rise to a third party action and did not attract the protection offered by the release. Where a third party has no exposure in contribution and indemnity to any successful claim by a plaintiff, the court need not dismiss or stay the main action pursuant to a “covenant not to sue”.
Searle v. McCabe, 2011 ONSC 6344 (CanLII)
The plaintiff retained the defendant lawyers to advance a claim against her husband for his failure to comply with the terms of a separation agreement. She grew dissatisfied with the services of the defendants, changed lawyers, settled with her husband and signed a release with a no-claim-over clause. When the plaintiff brought an action against the defendants for negligence, the defendants issued a third party claim against the husband claiming contribution and indemnity from him and they moved for a stay of the plaintiff’s action because of the release she had signed in favour of her husband. The motion judge refused the stay on the ground that the solicitors were not signatories to the release and could not therefore derive any benefit from it. On a motion for leave to appeal from this decision, all parties agreed that the decision could not be sustained on the ground stated by the motion judge. However, the dismissal of the motion for a stay was upheld on another ground, namely, the absence of any legal basis for the third party claim against the husband. The judge who heard the leave to appeal motion said that no basis was advanced upon which it could be argued that the husband owed any duty to his wife’s lawyers. There being no viable legal basis for the third party claim against the husband, the promise by the wife not to make a claim against anyone who might claim indemnity from her husband did not justify a stay of proceedings against the defendants.
The Owners of Strata Plan KAS3204 v Navigator Development Corporation, 2020 BCSC 1954 (CanLII)
It is clear that a plaintiff cannot compromise the contribution rights of a concurrent wrongdoer against a settling party by granting a release to the settling party. However, a plaintiff can prevent a defendant from advancing a claim for contribution against a settling party by limiting its claim to loss that is not ultimately attributed to the fault of the settling party. Thus, a plaintiff can prevent a defendant from seeking contribution from another party by circumscribing the pleadings to only seek damages attributable to the defendant’s fault (referring here to Taylor as an example). Similarly, a plaintiff can prevent a defendant from seeking contribution or indemnity from a particular party by expressly waiving any right to recover any portion of the loss ultimately attributed to that party’s fault. This is what happened in British Columbia Ferry Corp. v. T & N, 1995 CanLII 1810 (BC CA). BC Ferry is authority for the proposition that a third party claim will be summarily dismissed as bound to fail where the plaintiff has expressly waived, in its pleadings, any right to recover from the defendants any portion of the loss which the court may attribute to the fault of the settling third party.
Blue Mountain Linen Inc. v. Enercare Homes and Commercial Services Limited Partnership, 2022 ONSC 5635 (CanLII)
In this decision, the court said the jurisprudence supports the conclusion that a plaintiff can tailor (or “Taylorize”) its claim so as to preclude any possibility of a claim for contribution and indemnity against a third party if the plaintiff restricts its claim against the defendant to a claim that excludes those damages caused by the third party. The court agreed with the analysis in Strata Plan KAS3204, above, which applied Taylor to a situation involving a no-claim-over clause. Sinclair-Cockburn did not involve a pleading that waived the plaintiffs’ claim against the third party; rather, the plaintiff in that case undertook in its reply pleading not to claim money from the defendant that the defendant could recover from the third party. In any event, Sinclair-Cockburn pre-dated Taylor, and to the extent there is any inconsistency between the approaches, the court applied the most recent jurisprudence, referring specifically to Taylor and J.K., above. Because the plaintiff in this case had expressly waived its right to recover from the defendant Enercare any portion of its loss that might be attributable to the wrongdoing of the third party Onward, and for which the defendants, or any third party to this action, might be entitled to claim against Onward for contribution, indemnity or an apportionment, there was no viable claim over to be made against Onward by Enercare. The main action was thus not a “Prohibited Proceeding” under the no-claim-over clause of a release given by the plaintiff to Onward, because it was not a proceeding against a party which might claim contribution from, or be indemnified by, Onward. The fact that Enercare had made a claim for contribution and indemnity against Onward did not bring the main action within the definition of “Prohibited Proceeding”, because it was apparent that the third-party claim was not viable. If the court were to stay the main action in the face of this fatal flaw in the third party claim, the concern identified in Ieradi would arise —any defendant could get the advantage of having the main action stayed, free, simply by issuing a third party proceeding even if it had no chance of success. The court recognized that if the third party proceeding was stayed or dismissed, but the main action allowed to continue, there would need to be an apportionment of liability at trial to ensure that Enercare was not responsible for the portion of the plaintiff’s losses related to Onward’s faults, if any. However, the jurisprudence was clear that such an apportionment could be made without Onward remaining as a party to the action, and that non-party production and discovery was an available means of ensuring the relevant evidence was before the court. While Onward had bargained to be free from being a party in a proceeding relating to the plaintiff’s claims, it had not bargained for freedom from the rules regarding non-party discovery, nor had it bargained for the right to bring to a close any proceeding that might seek an apportionment of liability where there was no claim over against it for contribution and indemnity. This analysis led to the conclusion that the main action should not be stayed. The analysis also led to the conclusion that the third party claim ought to be stayed or dismissed. However, the notice of motion sought only a stay of the main action, from which counsel indicated that a stay of the third-party action would automatically flow. No separate request was made to stay or dismiss the third party action. The court was not prepared to grant relief that had not been sought.
7.6 Litigation Agreements and Releases
When a plaintiff reaches a settlement with some, but not all, defendants in multi-party litigation, the settling defendants will understandably expect a full release of claims against them by the plaintiff. But a full release of the non-settling defendants may be problematic because the plaintiff will proceed with its claims against the non-settling defendants and the non-settling defendants are likely to assert that the settling defendants are responsible, in whole or in part, for any award ultimately made by the court in favour of the plaintiff.
These issues were discussed by the Supreme Court of Canada in a case involving a litigation agreement referred to as a “Pierringer Agreement”, Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 (CanLII) , [2013] 2 SCR 623, at paragraphs 21 and 22. (Pierringer Agreements take their name from the American case of Pierringer v. Hoger, 124 N.W. 2d 106, 21 Wis. 2d 182 (U.S. Wis. S.C. 1963).)
As stated by the Supreme Court, Pierringer Agreements were developed in the United States to address the obstacles to settlement that arose in multi-party litigation. The court quoted the following statement from an article by Professor Peter B. Knapp (“Keeping the Pierringer Promise: Fair Settlements and Fair Trials” (1994), 20 Wm. Mitchell L. Rev. 1, at p. 5) about why, prior to Pierringer Agreements, settlements of complicated multi-defendant litigation had been difficult to encourage:
On one hand, a plaintiff contemplating settlement with one of several defendants faced the possibility that release of the one defendant would also extinguish all claims against the nonsettling defendants. On the other hand, in jurisdictions which permitted contribution among joint tortfeasors, a settling defendant faced the possibility of post-settlement contribution claims made by the nonsettling defendants.
The Supreme Court went on in the Sable Offshore case to note that, in the United States, Pierringer Agreements “were found to significantly attenuate the obstacles in the way of negotiating settlements in multi-party litigation”. The court said:
Under a Pierringer Agreement, the plaintiff’s claim was only “extinguished” against those defendants with whom it settled; the claims against the non-settling defendants continued. The settling defendants, meanwhile, were assured that they could not be subject to a contribution claim from the non-settling defendants, who would be accountable only for their own share of liability at trial.
Earlier, the Alberta Court of Appeal had made similar comments about a “proportionate share settlement agreement”. In Amoco Canada Petroleum Co. Ltd. v Propak Systems Ltd., 2001 ABCA 110 (CanLII), at paragraphs 15-16 the court said:
There is …[a] … complication that a proportionate share settlement agreement must address. As a result of third party proceedings, settling defendants are almost always subject to claims for contribution and indemnity from non-settling defendants for the amount of the plaintiff’s loss alleged to be attributable to the fault of the settling defendants. Before the settling defendants can be released from the suit, some provision must be made to satisfy these claims.
This obstacle is overcome by including an indemnity clause in which the plaintiff covenants to indemnify the settling defendants for any portion of the damages that a court may determine to be attributable to their fault and for which the non-settling defendants would otherwise be liable due to the principle of joint and several liability. Alternatively, the plaintiff may covenant not to pursue the non-settling defendants for that portion of the liability that a court may determine to be attributable to the fault of the settling defendants.
According to the Ontario Court of Appeal, “the essence of a Pierringer Agreement is that one or more defendants in a multi-party proceeding settle with the plaintiff(s) and withdraw from the litigation”. As stated by that court, the features of a typical Pierringer Agreement are as follows:
(i)the settling defendant settles with the plaintiff;
(ii)the plaintiff discontinues its claim against the settling defendant;
(iii)the plaintiff continues its action against the non-settling defendant but limits its claim to the non-settling defendant’s several liability;
(iv)the settling defendant agrees to co-operate with the plaintiff by making documents and witnesses available for the action against the non-settling defendant;
(v)the settling defendant agrees not to seek contribution and indemnity from the non-settling defendant; and
(vi)the plaintiff agrees to indemnify the settling defendant against any claims over by the non-settling defendants.
(See Handley Estate v. DTE Industries Limited, 2018 ONCA 324 (CanLII) , at footnote 2, quoting from Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd Edition (Toronto: LexisNexis Canada, 2017), at page 762 and Moore v. Bertuzzi, 2012 ONSC 3248 (CanLII) , at paragraph 84.)
Another type of litigation agreement that also originated from the United States is a “Mary Carter Agreement”. (Mary Carter Agreements take their name from the American case of J.D. Booth v. Mary Carter Paint Company, 202 So. 2d 8 (Fla. 2d DCA 1967).) The features of a typical Mary Carter Agreement are as follows:
(i)the contracting defendant guarantees the plaintiff a certain monetary recovery and the exposure of that defendant is “capped” at such amount;
(ii)the contracting defendant remains in the lawsuit; and
(iii)the contracting defendant’s liability is decreased in direct proportion to the increase in the non-contracting defendant’s liability.
(See Handley Estate v. DTE Industries Limited, 2018 ONCA 324 (CanLII) , at footnote 1, Moore v. Bertuzzi, 2012 ONSC 3248 (CanLII) , at paragraph 67 and Pettey v. Avis Car Inc., 1993 CanLII 8669 (ON SC), at page 732.)
There are many decisions dealing with litigation agreements, notably Pierringer Agreements and Mary Carter Agreements, that do not shed light on the Canadian law of releases. The intent of the case summaries that follow below is to highlight decisions regarding litigation agreements in which releases emerged as a point of consideration. In particular, as can be seen from section 7.6.1 below, early British Columbia case law on disclosure requirements with respect to litigation agreements indicated that anything that could be construed as a release, covenant not to sue, or reservation of rights must be disclosed.
Hollinger Inc. (Re), 2012 ONSC 5107 (CanLII)
One of two motions before the court in this proceeding under the Companies’ Creditors Arrangement Act was for approval of settlements entered into between the applicants, referred to collectively as Hollinger, and Hollinger’s former auditors and lawyers. Each of the settlement agreements contained third party releases in favour of the settling parties and was conditional upon the issuance of satisfactory bar orders giving effect to the releases, which, in each case released the settling parties from claims advanced against them for contribution by any party in respect of Hollinger’s settled claims. One ground for the opposition of the non-settling defendants to the settlements was that that the third party release and bar orders that formed an integral part of the settlements, if approved, would deprive the remaining defendants of rights they would have had for documentary production and oral discovery if the settling parties were to remain as defendants, or be third parties, in any action. In order to lessen the objection of the non-settling defendants to the third party releases in the settlement agreements, Hollinger agreed to limit recovery from a non-settling defendant to his/her or its several liability only, provided that such non-settling defendant’s liability was demonstrably shared with a settling party against whom the non-settling defendant successfully proved a claim for contribution and indemnity. The court said that the applicants in this case sought what they urged were very limited third party releases and bar orders of the kind commonly ordered in connection with Pierringer Agreements in standard, multi-party litigation. The court recognized the potential detriment to defendants from Pierringer Agreements and accepted that settlement with some but not all defendants interferes with what might otherwise be the procedural rights of remaining defendants. The court said, though, that any detriment should be balanced, on a case by case basis, against the benefit to settling defendants and to plaintiffs, as well as the administration of justice as a whole. The court was satisfied that, through management, the interests of the defendants could be balanced with the entitlement of those parties who wished by settlement to be extricated from the process. The court expressed its doubt that such balance could have been achieved if Hollinger had not agreed to limit its claims against the non-settling defendants to each of their several liabilities.
Pchelnyk et al v. Carson et al, 2017 SKQB 181 (CanLII)
In this case, the plaintiffs entered into a proportionate share settlement agreement with one defendant. Certain of the remaining defendants argued that the risk of insolvency of a remaining defendant, to the extent that the insolvent defendant’s share of liability would have been paid by the defendant being released, must stay with the plaintiffs before the settlement agreement could be approved. The Court said that the remaining defendants were entitled to the comfort of an undertaking from the plaintiffs that, in the event one of the remaining defendants were to go bankrupt, the plaintiffs would not pursue the other remaining defendants for an amount that was more than they would have had to pay if the defendant being released had remained in the action.
7.6.1 Disclosure of Litigation Agreements – Release Implications
When some but not all parties to multi-party litigation have reached a settlement of issues between them, general principles of settlement privilege and common interest privilege may appear to apply so as to protect information about their settlement from disclosure. Canadian case law, however, addresses the extent to which privilege must give way in favour of disclosure of litigation agreements in multi-party litigation. A number of these decisions, particularly from British Columbia, explicitly indicate that, among other things, the existence of a release is relevant to the disclosure obligation. The development of Canadian case law in this area, and the comments made about releases as courts have considered the disclosure obligation, can be seen from the decisions summarized below. But note that there are many other Canadian decisions not set out below in which the courts have discussed the disclosure of litigation agreements without touching on the subject of releases. These include: Middelkamp v. Fraser Valley Real Estate Board, 1992 CanLII 4039 (BC CA), Laudon v. Roberts, 2009 ONCA 383 (CanLII), application for leave to appeal dismissed, Rick Laudon v. Will Roberts and Keith Sullivan, 2009 CanLII 61390 (SCC) and Stamatopoulos v. Regional Municipality of Durham, 2014 ONSC 6313 (CanLII).
As is apparent from the decisions summarized below, the law regarding disclosure of litigation agreements has evolved somewhat differently in British Columbia than in Ontario. In this regard, it is important to bear in mind that the B.C. Rules of Professional Conduct did not contain language similar to the commentary relied on in an early Ontario decision, Pettey v. Avis Car Inc., 1993 CanLII 8669 (ON SC), until the introduction of a new B.C. Code of Professional Conduct on January 1, 2013: see Northwest Waste Solutions Inc. v. Super Save Disposal Inc., 2017 BCCA 312 (CanLII) , at paragraph 55, (summarized below).
British Columbia Ferry Corp. v. T & N, 1994 CanLII 1453 (BC SC)
The defendant made an application for production of documents relating to a settlement between the plaintiffs and other parties. The court referred to the distinction between a release and a covenant not to sue and said that the settlement document did not disclose any cooperation between the parties to assist the plaintiffs in the prosecution of the action. The court concluded that the documents were privileged and did not require their production.
Martin v. Listowel Memorial Hospital, 2000 CanLII 16947 (ON CA)
In this case, the plaintiffs reached a settlement with certain defendants and counsel for the plaintiffs felt constrained by the agreement not to disclose the terms of the settlement. No issue was raised on appeal challenging the settlement or “its secret nature”, but, because it was an infant settlement, court approval was required. The Court of Appeal agreed with a proposal made in an article that courts should be involved in reviewing the fairness of partial settlements, particularly in cases involving infants: this would allow the issue of “who is released and who remains a party” to be resolved with a full understanding of consequences for settling and non-settling parties.
Aviaco International Leasing Inc. v. Boeing Canada Inc., 2000 CanLII 22777 (ON SC)
There are obviously situations where agreements or arrangements, which otherwise would be protected by common interest privilege, must still be disclosed and produced. Mary Carter Agreements are the principal example of such situations. The issue is really to what extent or in what circumstances should the common interest privilege yield to a more important principle and that is the need for full disclosure to promote the objective of a fair trial. The court said it would put the issue as follows: Do the terms of the agreement alter the apparent relationships between any parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation? The reason why Mary Carter Agreements have to be produced is because such agreements fundamentally alter what otherwise would be the expected relationship between two parties to the litigation—normally the plaintiff and one of the defendants. It changes that relationship from an adversarial one to a co-operative one and it is consequently important that both the court and the other parties know of that change. Otherwise, the court and the other parties might be misled.
British Columbia Children’s Hospital v. Air Products Canada Ltd., 2003 BCCA 177 (CanLII) , leave to appeal granted and appeal abandoned, [2003] S.C.C.A. No. 240
The majority of the Court of Appeal over-ruled certain directions given by a chambers judge regarding disclosure of provisions of a settlement agreement, but agreed that disclosure should be made of any provision of the settlement agreement that could be construed as a release, covenant not to sue, or reservation of rights. The majority said that, although disclosure of this class of material was not required in the British Columbia Ferry case, above, its potential relevance appears to have been acknowledged in that case. Further, the majority said that, while the vitality in this jurisdiction of the ancient rule about release of one joint tortfeasor effecting a release of all may be doubted, the information should be disclosed to allow other defendants to make such use of the information as they may be advised.
Dos Santos v. Sun Life Assurance Co. of Canada, 2005 BCCA 4 (CanLII)
Where a settlement agreement may have a direct effect on the rights and responsibilities of third parties, the parties to the agreement must be mindful that the confidential nature of the agreement will not be upheld so far as it affects the other parties. For example, in the B.C. Children’s Hospital case (above) where non-settling defendants may have been affected by the settlement agreement between other defendants and the plaintiffs due to rules around the release of joint tortfeasors, the court upheld an order that anything in the settlement communications construed as a release, covenant not to sue, or reservation of rights be produced.
Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898 (CanLII) , application for leave to appeal to SCC dismissed, 2011 CanLII 38818 (SCC)
The obligation upon entering into a litigation agreement is immediately to inform all other parties to the litigation as well as the court because such agreements change entirely the landscape of the litigation. The absence of prejudice does not excuse late disclosure. Any failure of compliance amounts to abuse of process and the only remedy to redress the wrong is to stay the claim asserted by the defaulting, non-disclosing party.
Moore v. Bertuzzi, 2012 ONSC 3248 (CanLII)
The case law establishes that settlement privilege is not absolute and that it admits of exceptions where a settlement agreement must be disclosed to non-settling parties. An important exception, not confined to Mary Carter Agreements or Pierringer Agreements, is that an otherwise privileged settlement agreement must be immediately disclosed when the agreement changes the adversarial orientation of the lawsuit and the court needs knowledge of the settlement in order to maintain the fairness and integrity of its process.
Zwaniga v. JohnVince Foods Distribution L.P., 2012 ONSC 3848 (CanLII)
In this case, a cooperation agreement was promptly disclosed. The court said this is mandatory: the cooperation agreement is similar to a Mary Carter Agreement or a Pierringer Agreement that affects the adversarial orientation of the lawsuit and such agreements are not privileged and must immediately be disclosed to the opponents and the court. In this regard, the court referred to Moore v. Bertuzzi, above.
Bilfinger Berger (Canada) Inc. v. Greater Vancouver Water District, 2014 BCSC 1560 (CanLII)
Where there would be common interest privilege over an agreement between parties in litigation, that privilege should give way to some extent when necessary for the just disposition of pending litigation, or, to put it another way, to ensure a fair trial. More specifically, this means the common interest privilege between litigants who have a cooperation agreement must give way to some extent in particular circumstances, including where the agreement contains a release, covenant not to sue, or reservation of rights. The reasoning in the BC Children’s Hospital decision (above) is an acknowledgement by the Court of Appeal that there may be reasons, aside from the joint tortfeasor release rule, for other parties to have an interest in knowing about an agreement to release, not sue, or to reserve rights to sue one another, which are important enough to override settlement privilege in the information. A reason for requiring disclosure of arrangements involving a reservation of rights is that knowledge of these arrangements is relevant to understanding where the parties stand in relation to each other in the litigation process, which itself is relevant in weighing their testimony and submissions. It is important information that can impact the approach to cross-examination and the assessment of the evidence
Nadeau Poultry Farm Limited v. Desjardins & Desjardins Consultants Inc., 2014 NBQB 81 (CanLII)
In this case, the court considered the timeliness of disclosure of a Pierringer Agreement and release. The non-settling parties relied on the decision in Aecon Buildings in support of their argument that immediate disclosure of the Pierringer Agreement was required. The court said that, although a Pierringer Agreement should be disclosed in a timely fashion, the application of what constitutes timely disclosure or how a party goes about disclosing the fact of the existence of such an agreement in a particular case will be fact dependent. Aecon Buildings dealt with a Mary Carter-type agreement and a Mary Carter Agreement changes the landscape of litigation more substantially than a Pierringer Agreement. In a typical Mary Carter Agreement, the settling defendant is no longer adverse to the plaintiff but Instead has an incentive to establish the liability of the non-settling defendant. In a Pierringer Agreement, the settling defendant is extricated from the lawsuit and no longer has any stake in the outcome of the trial. On the facts of this case, the non-settling defendant was advised that the settling defendants were working on a Pierringer Agreement. When the settling parties came to an agreement on the form and wording of the terms of the Pierringer Agreement and release, the non-settling parties were informed of this the next day. Upon a request by the non-settling defendant for a copy of the agreement, the settling parties executed the Pierringer Agreement that day and then provided the non-settling parties with a copy of the agreement five days later. The court found that the agreement was disclosed in a timely fashion.
Northwest Waste Solutions Inc. v. Super Save Disposal Inc., 2017 BCCA 312 (CanLII)
There is a long history of a duty to disclose Mary Carter-type agreements in Ontario, something that should be well-known to the Bar of that province. The same duty to disclose was not clearly articulated in B.C. until recently. The first case in which a B.C. court required immediate disclosure appears to be Bilfinger #1 (above). When the agreement in this case was made, the law on the duty to disclose in B.C. was not as clear as that in Ontario; as a result, the judge at first instance did not err by failing to stay the proceeding or strike the claim as a remedy for breach of the duty to disclose. The remedy for the abuse of process is that the party which sought disclosure should receive full indemnity for the costs it incurred in obtaining disclosure of the agreement.
Bergen v Guliker, 2017 BCSC 1373 (CanLII)
The plaintiffs claimed damages arising from a motor vehicle collision involving a vehicle driven by Gerald Guliker. The plaintiffs alleged that the RCMP, immediately prior to the collision, had negligently engaged in a pursuit of Guliker’s vehicle. The plaintiffs sued Gulliker (who was killed in the collision), the Crown in right of British Columbia and the Crown in right of Canada. The Insurance Corporation of British Columbia took the position that Guliker had breached his insurance policy, filed third party notices and contested Guliker’s liability. The Crown sought to strike the plaintiffs’ pleadings as an abuse of process on the ground that ICBC failed to disclose in a timely way a Partial Release and Agreement signed by the plaintiffs and ICBC. The agreement obliged the plaintiffs to cooperate with ICBC in bringing or prosecuting any action, but at the risk, cost and expense and for the benefit of ICBC. The Crown argued that the agreement changed the landscape of the litigation because the plaintiffs and ICBC thereafter had identical interests. The court referred to the majority decision of the Supreme Court of Canada on abuse of process in Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, and went on to say it did not agree that the claims, with ICBC and the plaintiffs cooperating in their prosecution, risked unfairness to the Crown, nor that they were they contrary to the interests of justice, nor that they would proceed in a manner which could bring the administration of justice into disrepute. The Crown had long been aware of the common interest of the plaintiffs and ICBC to attach fault to the RCMP members who pursued Guliker’s vehicle. The court did not accept that the plaintiffs and ICBC had an obligation to disclose the Partial Release and Agreement. It did not alter the landscape of the litigation
Rekowski v. Renfrew (County), 2019 ONSC 2852 (CanLII)
In this action arising out of a motor vehicle accident, certain of the defendants sought to explore a number of questions with respect to the resolution of earlier litigation relating to the same accident. Among other things, these defendants wished to know if releases signed by parties in the earlier actions barred rights of recovery or indemnity in this proceeding. The court said that the defendants were entitled to know if releases were signed which restricted the rights of any of the litigants in this case. The court went on to say that settlement documents are presumptively privileged including the ultimate minutes of settlement. But releases are another matter. Releases signed to implement a settlement are intended to be a bar to subsequent litigation. Releases are not subject to settlement privilege and they are relevant particularly if they affect the right of parties to advance claims. Releases were to be produced, although it was not necessary to disclose the amount of the settlements if that was set out in the release documents.
Handley Estate v. DTE Industries Limited, 2018 ONCA 324 (CanLII)
The obligation of immediate disclosure of litigation agreements is not limited to pure Mary Carter or Pierringer Agreements (both discussed below). The disclosure obligation extends to any agreement between or amongst parties to a lawsuit that has the effect of changing the adversarial position of the parties set out in their pleadings into a co-operative one. In this case, the parties did not dispute a motion judge’s finding that litigation agreements should have been disclosed immediately and the issues on appeal centred on the appropriate remedy for such non-disclosure: the remedy granted by the Court of Appeal was an order staying the action (a third party claim having already been settled).
Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2021 ONSC 984 (CanLII) , appeal dismissed, 2022 ONCA 66 (CanLII) , application for leave to appeal dismissed, 2022 CanLII 96460 (SCC)
The plaintiff in this action entered into a settlement agreement with one of the two defendants. According to the terms of settlement, the plaintiff agreed to discontinue the litigation against the settling defendant on a “with prejudice and without costs basis”. The plaintiff also agreed to execute a release in favour of the settling defendant that would be held in escrow and provided on completion of the litigation with the non-settling defendant, if the settling defendant fulfilled its continuing obligation to provide cooperation to the plaintiff throughout the litigation. As stated by the court, from the time of the settling defendant’s acceptance of these terms of settlement, it was no longer adverse in interest to the plaintiff; rather, to obtain its bargained-for release, the quality of its continuing support of the plaintiff was subject to the plaintiff’s approval. The plaintiff refused to disclose a copy of the release held in escrow to the non-settling defendant and only disclosed the release upon being ordered to do so by a Master, after contesting the motion to require it to do so. The court followed the decision of the Ontario Court of Appeal in Handley Estate, above, and ordered that the action be permanently stayed. The plaintiff argued that, when it served a notice of discontinuance “without costs and with prejudice”, this was disclosure of the settlement to the non-settling defendant. But the court said a settlement can have any number of terms. A typical settlement would see the settling defendant pay an amount of money to the plaintiff in return for an immediate release from the litigation. The settlement in this case was of a very different kind.
Mann Engineering Ltd. et al. v. Desai et al., 2021 ONSC 2245 (CanLII)
The court said that a settlement reached by the plaintiff and certain defendants in this case was “a typical settlement in which a release is exchanged for consideration”. There was no contractual requirement of cooperation, or any other aspect of the settlement agreement that altered the adversarial landscape. Accordingly, the moving party defendants’ motion for disclosure of the settlement agreement was dismissed.
Chu de Québec-Université Laval v. Tree of Knowledge International Corp., 2021 ONSC 5946 (CanLII)
Certain of the defendants sought an order staying or dismissing this action on the ground that the plaintiff did not disclose immediately the terms of a Pierringer agreement between the plaintiff and the other two defendants in the action. It was common ground that the fact that the plaintiff and the settling defendants had entered into a Pierringer agreement was disclosed immediately. The plaintiff sent an email to the non-settling defendants which disclosed the key features of the settlement agreement and the fact that the settlement agreement would be disclosed to the court as soon as possible. Once the entire redacted settlement agreement had been disclosed to the non-settling defendants, they became aware of a release provided for in the agreement which was to be held in escrow, pending the plaintiff’s assessment of the quality of the evidence provided by the settling defendants. The non-settling defendants asserted that the release – and terms respecting the details of the cooperation by the settling defendants – were essential terms of the settlement agreement that altered the litigation landscape and ought to have been disclosed immediately following the execution of the settlement agreement. The court said that additional details regarding the type of cooperation that would be provided and the existence of the release would be of assistance to the non-settling defendants in determining their litigation strategy going forward. However, in light of the disclosure that had already been made with respect to the change in the adversarial relationship, these terms were not essential terms that further altered the adversarial relationship. It was the settlement itself that changed the relationship from an adversarial one to a non-adversarial one. The jurisprudence is clear that where disclosure of some of the terms of a settlement agreement is required, the disclosure must be “immediate”; however, the application of the term “immediate” in a particular case is “fact-dependent” (citing Aecon above). A purposive interpretation of the concept of immediate disclosure was required and appropriate in this case. The court was satisfied that the plaintiff’s disclosure of the essential terms of the settlement agreement was immediate when considered in the context of the factual dynamics of the case.
Crestwood Preparatory College Inc. v. Smith, 2022 ONCA 743 (CanLII)
The defendant David Smith moved for an order staying or dismissing this action as against him. The circumstances giving rise to the action led to litigation in both Florida and Ontario, but the defendants in this action had not yet pleaded, and thus had not taken positions against one another, when the motion was heard. Smith argued that the plaintiffs’ failure to disclose immediately litigation agreements they reached with certain of the other defendants was an abuse of process. These litigation agreements provided for cooperation by the defendants that were party to them and for a release of these defendants. The action against Smith was permanently stayed by the motion judge and the decision of the motion judge was upheld by the Court of Appeal. The appellate court referred to two seminal cases that identified and described the “parameters” of the disclosure obligation, Aecon and Handley Estate, above, as well as a number of further decisions that reinforced those principles, including Tallman and CHU de Québec-Université Laval, above. The court said that, for the purposes of this appeal, the applicable principles were as follows: (1) the “clear and unequivocal” obligation of immediate disclosure is triggered where partial settlement agreements “change entirely the landscape of the litigation”; (2) the disclosure obligation applies to Mary Carter, Pierringer and any other settlement agreement that has the effect of changing the pleaded or expected adversarial position of the parties into a co-operative one; (3) identifying a change in the parties’ pleaded positions is not an essential part of the disclosure test; (4) parties may bring a motion for directions where the extent of the duty to disclose may be unclear; (4) the absence of prejudice does not justify late disclosure of such an agreement; and (5) the failure to provide immediate disclosure in these circumstances amounts to an abuse of process where the sole remedy is an automatic stay of proceedings. The Court of Appeal concluded that the motion judge made no error in applying the law as consistently articulated by it, that where a settlement agreement has the effect of changing entirely the landscape of the litigation in a way that significantly alters the dynamics of the litigation, it must be immediately disclosed to the non-settling defendant(s). Failure to do so amounts to abuse of process, the remedy for which is an automatic stay of the proceeding. In this case, while the respondent had not yet delivered a statement of defence when he learned of the settlements, the fact that no prejudice is suffered by the non-settling defendant as a result of the failure to disclose is of no import in the analysis.
K.J. v. The Regional Municipality of Halton, 2022 ONSC 2199 (CanLII)
The defendant Tad Nelson moved for an order permanently staying or dismissing this action as against him for failure to immediately disclose to him a settlement agreement entered into by the plaintiff and the defendant Regional Municipality of Halton No formal minutes of settlement were signed to reflect the settlement between the plaintiff and Halton, but the plaintiff signed a document entitled Final Release, Confidentiality and Assignment. The plaintiff agreed, among other things, to release Halton and its agents, employees, successors, assigns, and so on, save and except Nelson, who was explicitly not released. The plaintiff also assigned her rights in the action as against Nelson to Halton. The court said that Halton had an obligation to disclose immediately the settlement agreement that it concluded with the plaintiff and that Halton had failed to do so. As a result, the action and a crossclaim by Halton against Nelson were stayed. The court noted that this case was slightly different from the main authorities on the issue of the obligation of immediate disclosure because it was the plaintiff, not a defendant, who “exited” the action after the settlement, and it was a defendant (Halton) that was pursuing the litigation. Nevertheless, the court said that the same principles applied, mutatis mutandis. The court found that the settlement agreement between the plaintiff and Halton altered the apparent relationships between the parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation. Based on the pleadings, the plaintiff and Halton were adverse in interest. However, after the settlement, not only were the plaintiff and Halton no longer adverse in interest, but the plaintiff was out of the action, having assigned its interest in the action to Halton. Halton having stepped into the plaintiff’s shoes, the plaintiff and Halton were one and the same and, consequently, not adverse. Halton was then wearing two litigation hats – plaintiff and crossclaiming defendant. This changed the litigation landscape. A reader of Halton’s statement of defence and crossclaim would not have an accurate understanding of the relationship between the plaintiff and Halton in the litigation and would not know of the plaintiff’s assignment to Halton. The court said that Halton’s statement of defence and crossclaim was a sham. In addition to the fact that the settlement agreement altered the relationship between the plaintiff and Halton from that which was set out in the pleadings, the settlement agreement affected the adversarial orientation and the dynamics of the litigation between Halton and Nelson. Prior to the settlement, Halton and Nelson were not adverse with respect to the issue of the plaintiff’s damages: it was in both their interests to have the plaintiff’s damages assessed as low as possible. By reaching an agreement with the plaintiff on the quantum of damages and seeking to recover the settlement amount from Nelson, Halton was no longer adverse to the plaintiff on the issue of damages (in fact, it became the plaintiff by assignment) and it became adverse to Nelson on that issue.
Peoples Trust Company c. Berger, 2022 QCCS 2958 (CanLII)
Various parties in this litigation sought adjudication of objections to questions posed during pre-trial examinations involving seven witnesses. One of the objections was made when a witness was asked whether he had an agreement in place with another party, Alex Lazarus, whereby the witness agreed not to collect on any judgments, should such be granted, against Lazarus. While the objection to this question was based on several categories of privilege, the court said that the objection invoking settlement privilege was relevant, in contrast with the other privileges invoked. As for settlement privilege, the court said an exception to settlement privilege applied to the question in respect of which the objection was made. There is a public interest in ensuring that defendants not be deprived of their right of subrogation against co-debtors and that the plaintiff not be overcompensated. Where settlement privilege shields the fact that a plaintiff has released one of the defendants and that the plaintiff has received sums or other consideration from one of the co-defendants in settlement of the claim against that one defendant, then an unfairness can result. The plaintiff can end up depriving the other defendants of their right to claim reimbursement from the released defendant based on their respective shares for the liability and the plaintiff can end up being overcompensated if the other co-defendants are required by a judgment to pay the original claimed amount. The law calls for a reduction of the claim that can be made against solidary debtors where one or more of them benefit from a release of the obligation by the creditor. This area of the law applies regardless of whether the liability is in solidum rather than perfect solidarity. Given the law on solidarity and the reduction of the claim where there is a release of the obligation or renunciation of solidarity, the court said the witness must disclose whether there was a settlement agreement with Lazarus to the effect that the former would not execute against the latter any favourable judgment in the present proceedings. If such a settlement agreement existed, the witness must disclose it, either through a redacted version of the agreement or by way of stipulated answers if the agreement was verbal, the nature and extent of any release of obligation or renunciation of solidarity. He was not required to disclose any amount paid as part of the settlement. In a footnote to its decision, the court said that the Sable case (section 7.6 above) contains a discussion of the principles governing solidarity among debtors and settlements in multi-party litigation in a common law context, but the analysis is no different in the context of Quebec civil law.