THE EFFECT OF A BC FERRY AGREEMENT ON THE JOINT LIABILITY OF
NON-SETTLING TORTFEASORS
Introduction
Given that the majority of litigation cases settle, the ability to structure an effective settlement
and to understand the consequences of a settlement are of primary importance to lawyers and
their clients alike. This paper will address partial settlement agreements in the form adopted in
the case of British Columbia Ferry Corp. et. al. v. T&N plc. et. al.1(“BC Ferry”) (a “BC Ferry
Agreement”). It will consider whether the effect of a BC Ferry Agreement is to sever the joint
liability of non-settling tortfeasors to the injured party or plaintiff. In other words, whether as a
result of a BC Ferry Agreement with the settling tortfeasor, the plaintiff loses its right to collect
the loss caused by the non-settling tortfeasors on a joint basis from any one of those non-settling
tortfeasors.
In arriving at a partial settlement of a multi-party dispute, the parties have to consider not only
the amount and the timing of the settlement, but also its impact on the relationship between the
plaintiff, the settling tortfeasor and the non-settling tortfeasor(s). If partial settlements are to be
encouraged settling tortfeasors require certainty that they will not be dragged back into the
litigation and plaintiffs require certainty that a partial settlement will not affect their common law
right to pursue the non-settling tortfeasors on a joint liability basis.
Until the decision in BC Ferry, the ability of the settling tortfeasor to successfully extract itself
from litigation was uncertain. There were authorities supporting successful extraction2 and
authorities supporting successful third party claims by the non-settling tortfeasors against the
settling tortfeasor.3 The decision in BC Ferry brought certainty and clarity to the effect of partial
settlements where the plaintiff agreed not to seek to recover any portion of the losses which were
attributable to the fault of the settling tortfeasor from the non-settling tortfeasor(s), thereby
making partial settlements more attractive for litigants in multi-party disputes. A settlement in
the form adopted in BC Ferry is structured so as to ensure that the settling tortfeasor effectively
settles and satisfies its proportionate share of liability to the injured party. The effect is to sever
the liability of the settling tortfeasor from the joint liability of the non-settling tortfeasors thereby
rendering a claim for contribution by the non-settling tortfeasors against the settling tortfeasor
incapable of success since the injured party can no longer recover any portion of the loss
attributable to the settling tortfeasor from the non-settling tortfeasors. This is based on the
fundamental principle of contribution law that a tortfeasor (settled or otherwise) cannot be
compelled by any other tortfeasor to pay or contribute more than its proportionate share of fault.
Contribution liability is several not joint.
1
(1993), 86 BCLR (2d) 353 (SC); (1995), 16 BCLR (3d) 115 (CA) [hereinafter, “BC Ferry”].
Westcoast Transmission Co. v. Interprovincial Steel and Pipe Corp. [1985] BCJ No. 943 [hereinafter,
“Westcoast”].
3
Tucker(Public Trustee of) v. Asleson (1991), 62 BCLR (2d) 78 (SC); (1993), 78 BCLR (2d) 172 (CA) [hereinafter
“Tucker”].
2
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A recent paper by Stacey Boothman entitled “Liability After The BC Ferries Agreements,”4 calls
into question the impact of a BC Ferry Agreement on the joint liability of non-settling tortfeasors
creating further uncertainty in this area of the law. The crux of Ms. Boothman’s argument, that a
BC Ferry Agreement may and should result in the severing of the liability of the non-settling
tortfeasors, is that it would be unfair to prevent a non-settling tortfeasor from seeking
contribution from a settling tortfeasor where the non-settling tortfeasor has paid more than its
proportionate share of the injured party’s loss (for example, where one tortfeasor has settled on
the terms of a BC Ferry Agreement and one of the non-settling tortfeasors turns out to be
impecunious, the non-settling tortfeasor who is forced to pay for the injured party’s loss would
be held responsible for both its own share of fault and the share of fault of the impecunious
tortfeasor).
Ms. Boothman suggests that it would be unfair in such a situation to prevent the paying nonsettling tortfeasor from claiming contribution against the settling tortfeasor for a proportionate
part of the share of the impecunious tortfeasor. Ms. Boothman argues, without compelling
authority or reasons, that because a BC Ferry Agreement is a “proportionate share settlement
agreement” it should necessarily result in severing the joint liability of all parties and not just the
settling tortfeasor. In other words, the injured party entering into a BC Ferry Agreement gives
up its right to jointly recover the remainder of its loss (which is only the loss attributable to the
fault of the non-settling tortfeasors) in order to ensure that the non-settling tortfeasors do not
suffer any unfairness.
If this were the law the chilling effect on partial settlements would be widespread and immediate.
No plaintiff would ever settle (except maybe for a very substantial premium) with one tortfeasor
on this basis because by doing so it would be assuming all of the unknown insolvency risk of
each of the remaining tortfeasors. This is inconsistent with the common law approach which has
always been to allocate the risk of an insolvent tortfeasor on other tortfeasors rather than an
innocent plaintiff. Ms. Boothman’s argument misapprehends the principles underlying multiparty disputes. Most significantly, the unfairness that Ms. Boothman points to is not created by a
BC Ferry Agreement. Rather this unfairness results from the interplay of two well established
common law principles: the principle that the innocent injured party is entitled to recover the full
amount of its loss from any one of the tortfeasors who have caused or contributed to the loss
(even where this results in a tortfeasor paying more than its proportionate share), and the
principle that one tortfeasor cannot compel another tortfeasor (settled or not) to pay or contribute
more than that other tortfeasor’s proportionate share. It has always been the law, prior to and
after BC Ferry, that if a tortfeasor who pays the full amount of an injured party’s loss cannot
successfully recover some of the money paid in contribution from other tortfeasors, that
tortfeasor is without a remedy, irrespective of any partial settlement.
The practical effect of Ms. Boothman’s solution to the potential unfairness for non-settling
tortfeasors would be to remove the right of an injured party to pursue the non-settling tortfeasors
jointly, thereby eliminating any incentive to settle by either the injured party or the non-settling
tortfeasors. This would only serve to frustrate the entire purpose of BC Ferry which was to
encourage partial settlements in multi-party litigation by creating finality for the settling
4
Stacey Boothman, “Liability After The BC Ferries Agreements,” Insurance Law Conference – 2004, CLE,
Vancouver.
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tortfeasor. That the settling tortfeasor should benefit from this arrangement is consistent with the
public policy of encouraging settlement of disputes. The risk of an improvident settlement, in
relation to the share of the settling tortfeasor’s fault, is borne by the plaintiff and not the nonsettling defendants. Non-settling defendants also benefit by being able to argue that the majority
of the plaintiff’s loss is attributable to the fault of the settling tortfeasor since the plaintiff has
abandoned any claim for this loss against them. That non-settling tortfeasors should benefit from
a settlement between a plaintiff and a settling tortfeasor through the severing of joint liability visà-vis the remaining defendants is completely inconsistent with the encouragement of settlements
and would only serve to make non-settled tortfeasors more intransigent. Under the current law,
an injured party has the ability to maximize its chances of recovery by pursuing tortfeasors who
are “on the hook” of joint liability. If the joint liability of non-settling tortfeasors is severed by a
BC Ferry Agreement, non-settling tortfeasors would have the benefit of limited liability for their
proportionate share and the injured party would be “on the hook” for any collection risk. If this
were the case such agreements would immediately cease to be used by plaintiffs to effect partial
settlements.
The following will attempt to demystify the BC Ferry Agreement and to explain the rational
behind it in light of the basic principles underlying multi-party litigation. It will be argued that
the BC Ferry Agreement does not have the effect of severing the joint liability of non-settling
tortfeasors primarily because such a finding would be inconsistent with well established and
settled principles of common law. Such a radical departure from these principles would
undoubtedly require the action of the legislature.
There are two distinct relationships underlying multi-party litigation: the injured person vis-à-vis
the tortfeasors; and the tortfeasors among themselves. These relationships give rise to
completely independent claims: recovery and contribution. The issue raised by the partial
settlement agreement cases, including BC Ferry, relates solely to the claim for contribution.
At the foundation of the BC Ferry Agreement is the well settled principle of contribution law that
no tortfeasor can be compelled by another tortfeasor to pay more than that tortfeasor’s
proportionate share of fault. By settling for its proportionate share of fault, the settling tortfeasor
makes any claim for contribution against it moot (except for purely procedural purposes) since
such a claim would not have any hope of success. The BC Ferry Agreement does not introduce
any novelty into the area of contribution law. It relies on established existing principles, which
favour innocent plaintiffs, to produce clarity and certainty in the partial settlement of multi-party
disputes.
Part 1. An injured party’s right to joint recovery is independent from a tortfeasor’s right to
claim contribution
The principle that an injured party has a right to joint recovery and the principle that tortfeasors,
in their turn, have the right to seek contribution among each other are separate and distinct
principles and should be treated as such. The two relationships that need to be distinguished are
(1) the tortfeasors to the injured party, and (2) the tortfeasors among themselves. The
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development of these relationships and the legal theories underlying them are completely
independent of each other.
A. The relationship between tortfeasors and an injured party – fairness to the injured party
Fairness to the innocent injured party has been an important pillar of our legal system. In a
multi-tortfeasor situation, the injured party has historically held and continues to hold the right to
recover the full amount of its loss from any one of the responsible tortfeasors (the right to joint
recovery). The only exception to this right to joint recovery has been where the injured person is
itself contributorily responsible or at fault for its loss.
The right of the injured party to joint recovery is often expressed as imposing “joint and several
liability” on the tortfeasors. Therefore, to appreciate the concept of joint recovery, it is first
necessary to understand the oft misunderstood concept of “joint and several liability”. The term
“joint and several liability” has itself been the source of much of the confusion. “Several” adds
nothing to the meaning of the extent of a tortfeasors liability and where possible I will use the
term “joint liability”.
The common law historically differentiated between three situations where more than one
tortfeasors caused damage to a person: (1) tortfeasors whose joint act caused the same damage
(“joint tortfeasors”), (2) tortfeasors whose separate acts caused the same damage (“several
concurrent tortfeasors”) and (3) tortfeasors whose separate acts caused different damage
(“several non-concurrent tortfeasors”).5
Procedurally, the nature of a legal action against different types of tortfeasors varied depending
under which category they fell. Joint tortfeasors were subject to the same cause of action against
them and could only be sued together, each responsible for the whole amount of the loss.
Resolution against or a release in favour of one joint tortfeasor resulted in a release of all. A
covenant not sue rather than a release was traditionally used to avoid this result.
Several non-concurrent tortfeasors were subject to different causes of action, could only be sued
in separate actions and only for their respective share of liability to the injured party.
Several concurrent tortfeasors possessed characteristics of both joint tortfeasors and several nonconcurrent tortfeasors. On the one hand, several concurrent tortfeasors had to be sued in separate
actions.6 On the other hand, several concurrent tortfeasors, like joint tortfeasors, were each liable
for the entire loss suffered by the injured party.7
According to Fleming, “joint and several liability” meant that “ . . . the person injured [could], at
his option, sue each of [the tortfeasors] separately for the whole amount of the loss or all of them
jointly in the same action, though even in the latter case judgment obtained against all [could] be
executed in full against any one of them. . . . In contrast, “several” tortfeasors could not be joined
at common law, so that the possibility of joining defendants in one action was for long the
5
Clerk and Lindsell, Clerk and Lindsell on Torts, 18th ed, (London: Sweet and Maxwell, 2000) at 4-102.
J.G. Fleming, The Law of Torts, 8th ed. (The Law Book Company Limited, 1992) at 257.
7
D. Cheifetz, Apportionment of Fault in Tort, (Ontario: Canada Law Book, 1981) at 7.
6
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crucial test of joint liability.”8 Thus, originally, the concept of “joint and several liability”
defined a procedural peculiarity of the common law system which allowed only joint tortfeasors
to be sued together (jointly). The concept did not apply to define the nature of the liability of
tortfeasors, because all tortfeasors responsible for the same damage (joint or several concurrent),
whether they could or could not be sued jointly, were responsible for full amount of the loss
suffered by the injured party.
As a result of a number of legislative changes,9 all tortfeasors can now be sued jointly.10 The
concept of “joint and several liability” survived this procedural change and was adopted by the
BC Negligence Act to apply to all situations where “damage or loss has been caused by the fault
of 2 or more persons.”11 The familiar understanding of the concept of “joint and several
liability” that has continued after these procedural changes could more accurately be referred to
as the joint liability (also referred to as liability in solidum) of joint tortfeasors and several
concurrent tortfeasors. Fridman explains the meaning of this concept as follows:
Where parties were so liable, as in the case of joint tortfeasors or several tortfeasors who
caused the [same] damage, they could each individually be sued for the total amount of
loss incurred by the plaintiff, or if joint tortfeasors, they could be sued together.12
The right of the injured party to joint recovery is an obvious corollary of the concept of “joint
and several liability,” as the concept is understood today: where the tortfeasors are concurrent
tortfeasors13 (caused the same damage), the injured party can recover the full amount of its loss
from any one of them. However, where the tortfeasors are non-concurrent (caused different
damage) the injured party cannot jointly recover.
At common law the only exception to joint recovery from concurrent tortfeasors was the injured
party’s contributory negligence. An injured party who was found contributorily negligent could
not recover any of its loss from any tortfeasors, it was a complete defence to any claim against a
tortfeasor. The BC Negligence Act now allows injured parties to recover some loss even where
there is a finding of contributory negligence. However, the Negligence Act explicitly provides
that in such a situation the injured party still does not have the right to joint recovery.14 Where a
plaintiff is contributorily negligent it can only recover from each tortfeasor that tortfeasor’s
proportionate share of liability. The Negligence Act did not introduce any exceptions to joint
liability that did not already exist at common law. Thus, in a situation where more than one
tortfeasor causes the same damage, contributory negligence of the injured party remains the only
exception to the injured party’s right to joint recovery.
B. The relationship among tortfeasors themselves – certainty.
8
Fleming, supra note 6 at 257.
Section 53 of the BC Law and Equity Act, RSBC 1996, c. 253 made it possible to obtain a number of successive
orders against joint tortfeasors without the fear of releasing them; section 5(2)(b) of the BC Rules of Court made it
possible to join several concurrent (and non-concurrent) tortfeasors in one action.
10
There have been suggestions of changing terminology to join these two groups into “concurrent” tortfeasors
verses “non-concurrent” tortfeasors (See G. H. L. Fridman, The Law of Torts in Canada, 2nd ed., (Toronto: Carswell,
2002) at 585-586).
11
Negligence Act, RSBC 1996, c. 333, section 4.
12
Fridman, supra note 10 at 892.
13
Fridman, supra note 10 at 885-886.
14
Negligence Act, supra note 11, section 1.
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The common law is not, and has never been, focused on the issue of fairness to tortfeasors in
terms of recovery of a loss by an injured party. The basic notion underlying the law of
contribution is that tortfeasors who pay more than their share of fault can seek contribution from
other tortfeasors. However, no tortfeasor who has paid more than its proportionate share can
compel another tortfeasor to pay more than that other tortfeasor’s proportionate share.15 If one of
the non-paying tortfeasors happens, for example, to be insolvent, the paying tortfeasor bears this
loss and cannot share it with the other tortfeasors. Of course if the insolvency of a particular
tortfeasor is known to the trier of fact before a judgement is rendered this could impact on how
fault is apportioned between the tortfeasors.
The ability of tortfeasors to claim contribution against each other has developed and is judicially
interpreted as independent and procedurally separate of the injured party’s right to joint recovery.
Traditionally, tortfeasors did not have the right to seek contribution against each other.16 If the
injured party decided to recover the full amount of its loss from any one of the tortfeasors, the
paying tortfeasor was simply “out of luck.” The reasoning was that there were no rights of
contribution between tortfeasors because to allow the same was seen as rewarding a wrongful
act.17
The common law rule was substantially changed by provincial legislation that recognised the
right to contribution and indemnity. In addition to the argument that a right to contribution
“[was] essential in order to preclude the unjust enrichment of the non-paying concurrent
wrongdoer,”18 it was suggested that giving the injured party the ultimate discretion as to who to
pursue enabled tortfeasors to “indulge in risk-creating activities knowing that they would not be
likely to be the subject of action because an injured plaintiff would be more likely to sue another,
. . . more capable of undertaking the burden of paying damages.”19
Thus, the development of the right of tortfeasors to seek contribution has its roots in pragmatic
considerations of making multi-party disputes more certain for tortfeasors and of taking full
discretion from the injured person. The relationship that was affected by the introduction of the
right to contribution was that of tortfeasors among themselves; the injured person’s right to joint
recovery was not undermined or affected.
Essentially, the ability to seek contribution remains a separate and distinct cause of action that
does not arise until the judgment or settlement in the original action and, therefore, cannot affect
the original action in any way. It is merely a procedural variation (presumably to avoid a
multiplicity of actions and to allow for the cost effective, speedy and efficient administration of
justice) that now allows tortfeasors to bring a third party claim for contribution in the same
action as they are being sued.20
15
Infra note 45. This is an important principle that forms the foundation of the BC Ferry Agreement. The
controversy around this principle will be discussed in Part 3 of this article.
16
Clerk & Lindsell, supra note 5 at 4-113.
17
Cheifetz supra note 7 at 9.
18
See Fridman, supra note 10 at 898.
19
Fridman, supra note 10 at 898 quoting Gregory, “Contribution Among Tortfeasors: A pragmatic Criticism,”
(1941) 54 HLR 1156.
20
FBI Foods Ltd. v. Glassner, [2001] BCJ No. 193 (QL) at para. 23.
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Furthermore, the degree of fault or negligence of any tortfeasor is irrelevant to its liability to the
innocent injured party.21 If the tortfeasor is liable, however unfair it may be, the tortfeasor is
responsible to the injured party for the whole amount of the loss. The apportionment of fault
becomes important only (except where the plaintiff is contributorily negligent) to determine the
extent of contribution that the paying tortfeasor can seek from other tortfeasors. If a particular
tortfeasor is unable to pay its share, the paying tortfeasor will be forced to absorb the insolvent
tortfeasor’s share.
Justice Dickson in the case of Parkland (County) No. 31 v. Stetar22 explained the relationship
between the injured person’s right to joint recovery and the tortfeasor’s right to contribution as
follows:
It is fundamental . . . to tort law that a plaintiff can proceed against any one of a number
of joint or several tort-feasors; there is no duty upon him to sue all those whom he
believes contributed to his hurt. He may elect to recover the full amount of his damage
from a tort-feasor only partly to blame and that tort-feasor, prior to enactment of s.4(1)(c)
of The Tort-Feasors Act, had no right to contribution from any other person:
Merryweather v. Nixon [91799), 8 T.R. 186, 101 ER 1337]. Section 4(1)(c) and its
counterpart in other jurisdictions have ameliorated the common law in that the right to
contribution has now been recognized; however, even in those cases in which for some
reason the right to contribution does not exist, the victim retains the right of full recovery
from the tort-feasor whom he has sued.23 [emphasis added]
In summary, the right of tortfeasors to seek contribution against each other is substantively and
procedurally independent of an injured party’s right to joint recovery and addresses a different
relationship than the right of an injured party to joint recovery. Even a complete abolition of the
right of tortfeasors to seek contribution among themselves would not affect, absent legislation,
the right of an injured party to recover its full loss on a joint basis against any one of the
tortfeasors.
Part 2: The disputes arising out of partial settlements address the relationship among
tortfeasors
The leading cases in the area of partial settlement agreements do not question or deal with the
right of the injured party to joint recovery. These cases mainly address the uncertainty regarding
the effect of a partial settlement agreement on the ability of a non-settling tortfeasor to claim
contribution from a settling tortfeasor.
The issue in these cases was whether the non-settling tortfeasors remained responsible to the
injured party for the full amount of the loss less the amount of the settlement, or for the full
amount of the loss less the settling tortfeasor’s percentage or proportionate share. This issue was
21
Cheifetz, supra note 7 at 97.
[1975] 2 SCR 884.
23
Ibid., at 10 (QL).
22
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important to settling tortfeasors because it determined whether or not they could be third partied
back into the action by the non-settling tortfeasors.
Until the decision in BC Ferry, the effect of various partial settlement agreements on the
remaining responsibility of the non-settling tortfeasors to the injured party and on their ability to
claim contribution from the settling tortfeasor was unclear. The courts were fairly consistent in
their rulings, but viewed together the decisions provided an incomplete picture. The BC Ferry
Agreement served as the missing piece to complete the picture.
The post BC Ferry situation can be summarised as follows. If a settling tortfeasor pays the full
monetary amount of its proportionate share of the loss, a claim for contribution cannot succeed
because no tortfeasor can be compelled by another tortfeasor to pay more than its share. Nonsettling tortfeasors, in such a situation remain responsible to the injured party for the full amount
of the loss less the monetary amount of the settlement (which in this case happens to be
equivalent to the percentage share of the settling tortfeasor).
If a settling tortfeasor does not pay the full amount of its share and the injured party pursues the
non-settling tortfeasors for the shortfall, a claim for contribution can be brought by the nonsettling tortfeasors against the settling tortfeasor. In this situation, the non-settling tortfeasors
remain responsible to the injured party for the full amount of the loss less the monetary amount
of the settlement (which in this case does not amount to full proportionate share of the settling
tortfeasor).
If an injured party agrees that whatever a settling tortfeasor pays amounts to that tortfeasor’s full
share (a BC Ferry Agreement not to seek to recover from anyone else, including the non-settling
tortfeasors, any portion of the loss attributable to the settling tortfeasor) a claim for contribution
cannot be maintained. In this situation, the non-settling tortfeasors are only being pursued for,
and can only be responsible to the injured party for, the total loss attributable to the collective
fault of the non-settling defendants. The monetary amount of the settlement in this case is
irrelevant to the claim against the non-settling tortfeasors.
The ability of the injured person to recover from the non-settling tortfeasors on a joint basis is
unaffected by any of the above-noted settlement agreements.
The leading cases in this area are set out below.
A. Westcoast -- when a settling tortfeasor pays the full amount it owes, a claim for
contribution against it cannot succeed
In Westcoast Transmission Co. v. Interprovincial Steel & Pipe Corp.24 (“Westcoast”), the
injured party brought an action against a manufacturer of natural gas pipe. It was found that the
injured party hired a third party to inspect the pipe. The injured party settled with the third party
and the defendant manufacturer brought a third party claim against the third party for
contribution and indemnity under section 4 of the Negligence Act. McLachlin J. (as she then
was) struck the third party claim on the basis that there was no possibility for the contribution
claim to succeed on the facts. Unfortunately, the decision did not state the amount of the
24
Westcoast, supra note 2.
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settlement or the total amount of the loss, thus making it of limited narrow use for our purposes.
However, McLahclin’s J. comments and findings are insightful:
. . . on an application such as this, it is not enough to look at the wording of the section in
abstract. The Court must ask itself how the section might conceivably apply in the case
before it. In attempting to answer that question, I arrive at the conclusion that s.4 cannot,
in the circumstances, of this case, give rise to a claim for contribution or indemnity by
Ipsco against Hanson. The right of Ipsco to claim indemnity against Hanson could only
arise upon Westcoast recovering against Ipsco for the whole amount of the loss, including
that attributable to Hanson. But this scenario is impossible. Westcoast can recover
nothing on account of loss attributable to Hanson. It has settled and been paid in full for
all claims on account of loss arising from the negligence or breach of contract of Hanson.
Westcoast is therefore debarred from recovering any amount on account of Hanson’s
negligence or breach of contract. That being the case, Ipsco could not be required to pay
to Westcoast any portion of a judgment recovered which may be attributable to Hanson’s
negligence, unless it pays moneys out on account of Hanson. Accordingly, there is no
possibility of a successful claim for contribution or indemnity by Ipsco against Hanson
under s.4 of the Negligence Act.25 [emphasis added]
The conclusion in Westcoast was interpreted to mean that a release of one several concurrent
tortfeasor had the effect of “severing the liability of the remaining tortfeasors.”26 However, the
case on its facts stands for the proposition that the settling tortfeasor and the non-settling
tortfeasor (or the non-settling tortfeasors as a group) each become responsible for their
proportionate share, and not that the non-settling tortfeasors as among themselves are no longer
jointly liable to the injured party. A different interpretation cannot be drawn given that on the
facts of Westcoast there was only one non-settling tortfeasor, and there is no dicta to suggest that
if there were multiple non-settling tortfeasors, the injured party’s right of joint recovery against
them would be severed.
At most, the case stands for the proposition that where the settling tortfeasor’s account is paid in
full, the non-settling tortfeasor cannot succeed in a claim for contribution, simply because it
cannot be held liable for any part of the loss attributable to the settling tortfeasor. Had the
amount paid been insufficient to cover the portion of the loss attributable to the fault of the
settling tortfeasor, the result in Westcoast would likely have been different.
B. Tucker – when a settling tortfeasor does not pay the full amount of its proportionate share
a claim for contribution against it can be maintained where the injured party pursues the nonsettling defendants for this shortfall
A situation where the settlement did not cover the entire loss attributable to the fault of the
settling tortfeasor arose in Tucker (Public Trustee of) v. Asleson27(“Tucker”). The injured party
in this case settled with the insurer of one of the three tortfeasors for the limits of the insurance
25
Ibid. at para 14.
Karen Martin and Jeff Van Hinte, “Complex Multi-Party Construction Litigation,” Construction Law 2003
Update (CLE), Chapter 2 at 2.1.06.
27
Tucker, supra note 3.
26
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policy. At trial, each tortfeasor was found one third at fault. The court summarised the nonsettling tortfeasors’ argument as follows:
. . . the effect of the plaintiff’s settlement with Mrs. Tucker was to “sever” the parties’
joint liability. They say that their liability now cannot exceed two thirds of the total
damages awarded, because they cannot be required to pay any portion of the loss
attributable to the negligence of the released party. . . . They say they are jointly and
severally liable for that portion of the judgment only.28 [emphasis added]
The structure of this argument is important. Essentially, the non-settling tortfeasors did not
argue that as among themselves they were not jointly liable; they argued that whatever the
amount of settlement was, the injured party gave up the right to claim the settling tortfeasor’s
share from the non-settling tortfeasors. Basing their argument on the Westcoast line of cases, the
non-settling tortfeasors asserted that they could not be required to pay more than their collective
share of fault.
The injured party’s position was that the non-settling tortfeasors were liable for the full amount
of the loss, less only the amount of the settlement. The practical difference was significant. The
total amount of the loss was $2 million. The limits of the insurance policy were $500,000. If the
non-settling tortfeasors were right, they would be jointly liable for $1.3 million. If the injured
party was right, they would be liable for $1.5 million.
Justice Finch (as he then was) rejected the decision in Westcoast as uninformative, stating that
. . . the line of cases starting with Westcoast are all decided on motions concerning
pleadings. They are therefore decided upon assumed facts. . . . The reasons do not
identify the full amount of Westcoast’s claim for the defective pipe, and I cannot find the
basis upon which the chambers judge concluded that Westcoast was “paid in full” for loss
arising from Hanson’s fault.
It is clear in the case at bar, however, that neither the defendant Tuckers not their insurer
CHAC paid the plaintiff “in full” for Mrs. Tucker’s share of liability for the total
damages. The plaintiffs agreed to accept the Tuckers’ policy limits of $500,000 (less a 10
per cent discount), not because that amount represented the Tuckers’ full share of
responsibility, but rather for practical reasons which so often underlie compromise
settlements.29
Justice Finch said that the rationale for preventing the injured party from recovering from the
non-settling tortfeasors part of the share of the settling tortfeasor is to prevent double
compensation. “It would be manifestly unfair if a rule which was designed to prevent double
compensation, or overcompensation, could be used in this case to prevent the plaintiff from
making a full recovery.”30 Justice Finch did not find any legal basis to suggest that the partial
settlement affected the non-settling tortfeasors’ ability to seek contribution. On the facts of
Tucker, however, there was little doubt that the claim for contribution could succeed because the
28
Ibid.at para. 94.
Ibid., at paras. 128-129.
30
Ibid., at paras. 130 and 133.
29
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non-settling tortfeasor was being pursued for part of the loss attributed to the fault of the settling
tortfeasor.
The Court of Appeal31 upheld Justice Finch’s conclusion on this issue, stating that “the right of
contribution and indemnity among several concurrent tortfeasors is independent of what the
injured person does if, in fact, damage or loss has been caused by the fault of two or more
tortfeasors.”32
The decisions in Westcoast and Tucker failed to resolve the uncertainty associated with partial
settlements. Westcoast was inconclusive because of vagueness as to the facts. Tucker was
inconclusive because it left open the possibility of a settling tortfeasor being brought back into
the litigation. To circumvent the decision in Tucker, an injured party could either agree to
indemnify a settling tortfeasor for any third party claim made against them or, considering the
comments in Westcoast, could clearly express that the settlement amount received was sufficient
to cover the settling tortfeasor’s share. The latter was attempted in BC Ferry and previously in
its American counterpart, Pierringer.
C. Pierringer/ BC Ferry – where an injured party agrees that whatever a settling tortfeasor
pays amounts to that tortfeasor’s full share (i.e agrees not to seek to recover from anyone else,
including the non-settling tortfeasors, any portion of the loss attributable to the settling
tortfeasor) a claim for contribution cannot be maintained because the non-settling tortfeasors
are only being pursued for, and can only be responsible to the injured party for, the total loss
attributable to the collective fault of the non-settling defendants and the settling tortfeasor
cannot be compelled by other tortfeasors to pay more than its share
The Pierringer Agreement
The Pierringer Agreement takes its name from the US case of Pierringer v. Hoger.33 In this
case, all but one tortfeasor settled with the injured party before trial. Releases were executed
specifying that the injured party
does hereby credit and satisfy that portion of the total amount of damages of the
undersigned . . . which has been caused by the negligence, if any, of such of the settling
parties hereto as may hereafter be determined to be the case in the further trial or other
disposition of this or any other action.
And the injured party
does hereby release and discharge, that fraction and portion and percentage of his total
causes of action and claim for damages against all parties . . . which shall hereafter, by
further trial or other disposition of this or any other action . . . .34
31
(1993) 78 BCLR (2d) 173.
Ibid., at para. 116.
33
(1963) 21 Wis. 2d 182 [hereinafter “Pierringer”].
34
Ibid., at 184-185.
32
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The sole non-settling tortfeasor made claims for contribution which were all dismissed. The
court acknowledged that the right to contribution theoretically continued to exist, but it was
practical to reject the claim because it had no possibility of success. Discussing an earlier
example of a proportionate share settlement, the court described the rationale behind refusing the
claim for contribution in the following way:
As a practical matter, since the non-settling tort-feasor under such a release would not
have to pay to the settler more than one half of his total damages, there was no good
reason to preserve for the non-settling tort-feasor a theoretical right of contribution which
would never mature or ripen into recovery. Recognizing the intention of the release was
controlling, this court took a shortcut and avoided a circuity of action by giving
immediate effect to the release in barring the nonsettling tort-feasor’s claim to a right of
contribution. The same type of release involving the important factor of satisfying a
definite portion of the cause of action thus releasing the nonsettling tort-feasor’s primary
liability, if any, to pay the full and complete damages . . . .35[emphasis added]
Given that there was only one non-settled defendant in the case, it cannot be argued that the case
stands for the proposition that a settlement with one tortfeasor severs the liability of all
remaining non-settled defendants.
BC Ferry Agreement
In BC Ferry, the plaintiff BC Ferry Corp. sued T&N plc., an asbestos manufacturer, alleging that
the materials which the defendant produced and which were from time to time installed in the
plaintiff’s ferries were unsafe. The defendant T&N plc. brought a third party notice against the
contractors, subcontractors and architects involved in the installation of the materials. The
plaintiff made an agreement with the third parties which essentially took the same form as a
Pierringer Agreement. The parties agreed that
[n]either BC Ferries nor the province will seek to recover, either in the Action or by any
other proceedings, any portion of the losses which it claims in the Action which a court
or other tribunal may attribute to the fault of Yarrows. In particular, without limiting the
generality of the foregoing, neither BC Ferries nor the Province will seek to recover such
portion of its losses from the defendants in the Action.36
The third parties then applied to have the claim against them dismissed. Justice Braidwood (as
he then was) considered the rationale behind claims for contribution and the wording of section 4
of the Negligence Act, and concluded that the third party claims for contribution had to be
dismissed because they could not succeed. “It is not the contract itself which deprives the
defendant of claiming against the third party . . . but the fact that the plaintiff only seeks from the
defendant that part of its loss which the defendant caused.”37 [emphasis added]
This reasoning is very similar to McLachlin’s J. comments in Westcoast and the decision of the
court in Pierringer. An implicit distinction is made between the ability of the tortfeasors to
35
Ibid., at 188.
BC Ferry, supra note 1 at para. 5.
37
Ibid., at para. 12.
36
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claim contribution and the necessity of contribution. It is impracticable to allow a claim to
proceed if that claim has no hope of success.
Justice Braidwood was careful to say that his decision did not affect the reasoning of Justice
Finch in Tucker because in BC Ferry, unlike Tucker, the injured party only sought the part of its
loss that was actually caused by the non-settling tortfeasor; there was no excess that the nonsettling tortfeasor was obliged to pay to the injured person.38 Hence, the claim for contribution
could not succeed (similar to Westcoast). The BC Court of Appeal upheld this decision without
adding anything fundamentally different on the issue.39
In summary, the above cases did not question the right of the injured party to joint recovery. The
relationship of interest in these cases was solely that of the tortfeasors among themselves. The
decisions in Westcoast and in Tucker did not provide sufficient finality for settling tortfeasors.
The BC Ferry case achieved such finality by establishing that a settling tortfeasor could not be
third partied back into the litigation where the plaintiff agrees not to seek from any non-settling
tortfeasors any portion of the loss attributable to the fault of the settling tortfeasor. Effectively,
the settling tortfeasor satisfies its proportionate share of fault to the injured party and the nonsettling tortfeasors can no longer be held responsible for any part of that share.
D. BC Children’s Hospital v. Air Products Canada Ltd.40 –where an injured party agrees not
to seek to recover from the non-settling tortfeasors any portion of the loss attributable to the
settling tortfeasor the monetary amount of the settlement is irrelevant
The theory that the effect of a settlement based on a tortfeasors proportionate share of fault is
equivalent to a settlement of the full monetary amount of such a share being received by the
injured party, is supported by the recent decision in BC Children’s Hospital. In this case, the
court held that the amount of settlement between the injured party and the settling tortfeasor was
irrelevant to the proceedings between the injured party and the non-settling tortfeasors.
The Hospital commenced an action claiming that a number of parties were jointly and severally
liable for damages for civil conspiracy. The Hospital entered into a settlement agreement with
some tortfeasors. The agreement contained a confidentiality clause. The non-settling tortfeasors
sought disclosure of the agreement, including the amount of the settlement, arguing that the
agreement could have an impact on the case they had to meet and on the amount of damages
sought by the Hospital.
The Hospital pleaded in its Statement of Claim that the settlement agreement included a
provision whereby the Hospital expressly waived its right to recover from the defendants, other
than the settling defendants, any portion of the losses and damages attributed to the fault of the
settling defendants. This was in essence a BC Ferry Agreement.
38
Ibid., at para. 11.
(1995)16 BCLR (3d) 115. The Court of Appeal held, on a related issue, that Justice Braidwood was wrong to
refuse joining the settling party into the action for procedural relief only. Refusing such joinder would jeopardise the
ability of the non-settling tortfeasors to make their case.
40
British Columbia Children’s Hospital v. Air Products Canada Ltd. (2001) BCSC 1083 (SC); (2003) (BCCA) 177
(CA); leave to SCC granted on January 22, 2004 [2003] SCCA No. 240.
39
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Neilson J. refused disclosure of the amount of settlement as irrelevant stating that
. . . the plaintiffs proposed amendments set out a waiver and made it clear that they do
not seek to recover from the remaining defendants any portion of the losses that the court
may attribute to the fault of the ALC defendants. The result is that Praxair and the other
remaining defendants are only potentially jointly and severally liable for that portion of
the plaintiffs’ loss which is related to their own degree of fault as determined by the
court. . . .
. . . the pleadings reveal no basis upon which the Praxair defendants may make a claim
for contribution and indemnity from the ALC defendants. Even if such a claim were
made, the reasons of Mr. Justice Wood in BC Ferry (1995) make it clear it could not
succeed.41
The non-settling tortfeasors further argued that if the settling tortfeasor paid more than its share
of fault, the Hospital would be unjustly enriched. Therefore, the non-settling tortfeasors should
have access to the amount of settlement. Neilson J. rejected this argument as premature. She
stated that the non-settling tortfeasors clearly had a tactical advantage in conducting their
defence to place as much liability as possible on the settling tortfeasors. However, the amount of
settlement was irrelevant because the judicial determination of apportionment of fault could be
made independent of such information.42
The non-settling tortfeasors appealed the decision of Neilson J. with respect to non-disclosure of
the settlement amount. The majority of the Court of Appeal agreed with the decision of Neilson
J. on the issue of the settlement amount without providing a discussion of the issue. The Court
of Appeal simply stated that
In the present case, Neilson J. considered that disclosure of that portion of the settlement
agreement relating to the amount of the settlement between the plaintiff and the ALC
defendants need not be produced because relevance had not been demonstrated. With that
conclusion, I agree.43
Huddart J. dissenting did not address this issue. Leave to appeal to the Supreme Court of Canada
was granted in this case on January 22,2004.44 However, the main issue likely to be addressed at
that level is privilege and confidentiality of the partial settlement agreements.
It is submitted that the decision on the irrelevancy of the settlement amount is sound given that in
entering into such a settlement the plaintiff bears the burden of any improvident settlement with
the settling tortfeasor (because a claim for any shortfall is abandoned) and as such should also
receive the benefit of any settlement in excess of the settling tortfeasor’s share of the loss. Nonsettling defendants can’t have it both ways, assume no risk for any shortfall but share in any
excess.
41
BC Children’s Hospital v. Air Products Canada Ltd. (2001) BSCS 1083 at paras 34-36.
Ibid., at paras. 37-38.
43
BC Children’s Hospital v. Air Products Canada Ltd. (2003) BCCA 177 at para. 34.
44
BC Children’s Hospital v. Air Products Canada Ltd. ([2003] SCCA No. 240.
42
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Part 3: The BC Ferry Agreement is rooted in the principle that no tortfeasor can be
compelled by another tortfeasor to pay more than that tortfeasor’s proportionate share of
the loss attributable to its fault
The BC Ferry Agreement did not introduce any novel legal concepts into the area of multi-party
disputes. It achieves the finality of full withdrawal for the settling tortfeasor because it is rooted
in the well established principle that tortfeasors sued for contribution cannot be compelled by
other tortfeasors to pay more than their proportionate share of loss attributable to their fault. 45
This principle was recently called into question, albeit unsuccessfully.
It was argued in the Ontario case of Renaissance Leisure Group Inc. (c.o.b. Muskoka Sands Inn)
v. Frazer46, (“Renaissance”)47that in a situation where one of the tortfeasors turns out to be
impecunious, the other tortfeasors should equitably divide the share of the impecunious
tortfeasor among themselves in addition to their proportionate shares of fault. The impact of
such a decision would be to impose a type of joint liability for contribution among tortfeasors
where it has always been several. This was not a decision involving the issue of partial
settlements.
Extending this reasoning to a BC Ferry Agreement situation would suggest that in addition to its
proportionate share of liability to an injured party, a settling tortfeasor could potentially be liable
to non-settling tortfeasors on a joint basis. This would again expose the settling tortfeasor to
third party claims for contribution by non-settled defendants and effectively undermine the
possibility of most partial settlements. Of course, as we have seen, if the liability to non-settling
tortfeasors is only several a claim for contribution will be dismissed where there is a BC Ferry
Agreement.
As the law stands today, the argument that a settling tortfeasor is responsible for anything above
its proportionate share on the basis of joint liability for contribution is unlikely to succeed. The
current position with respect to the law of contribution is well stated by Cheifetz:
Section 2 (equivalent to section 4 in BC) provides that a tortfeasor is liable to pay
contribution to a co-tortfeasor in the degree in which the former is found to be at fault or
negligent. This means that the liability to pay contribution is several, not joint. . . . For
example, assume there are three tortfeasors, T1, T2 and T3, all equally at fault. Also,
assume that P’s damages are valued at $9,000. If T1 claims contribution from T2 and T3,
T1 will receive judgment providing for contribution from each of T2 and T3 in the
amount of $3,000. . . . Neither T2 nor T3 can be required to pay more than $3,000 to T1.
T1 will have to bear the risk of being unable to collect the $3,000, or any portion of the
45
Cheifetz supra note 7 at 60; see also Cheifetz, “Allocating Financial Responsibility among Solvent Concurrent
Wrongdoers: Problems in Apportionment of Fault in Contribution and Contributory Fault Cases Resulting from
Martin v. Listowel Memorial Hospital and Renaissance Leisure Group Inc. v. Frazer,” (2004) 28 Adv. Q. 137.
46
[2001] OJ No. 866.
47
Renaissance Leisure Group Inc. (cob Muskoka Inn) v. Frazer, [2001] OJ No. 866 (QL); [2004] OJ No. 3486 (QL).
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amount, from each of T2 and T3. It follows from this that any tortfeasor not sued by P
does not have to claim contribution from a co-tortfeasor in respect of any contribution
claim made against the former tortfeasor. No tortfeasor can be required [by another
tortfeasor] to pay more than his share of the injured person’s damages.48 [emphasis
added]
The strongest authority on the issue of the equitable distribution of an impecunious tortfeasor’s
share among other tortfeasors is Glanville Williams. He writes:
Suppose that P sues D1, who brings in D2 and D3 as third parties. P obtains judgment
against D1, and D1 in turn claims contribution against D2 and D3. If it is known that D3
is insolvent, the share of contribution payable by D2 will be increased so as to distribute
the loss resulting from D3’s insolvency equally between D1 and D2. [cites Shepheard v.
Bray, [1906] 2 Ch. 235 at 256, which was decided under the then English Companies
Act in reference to the joint and several liability of co-directors. This case has not been
followed on this issue in Canada.] Suppose, however, that D3’s insolvency was not
known at the time of D1’s judgment against his companions for contribution, but is
discovered only when the judgment against D3 for contribution comes to be executed.
On such facts, unless special provision is made, the loss resulting from D3’s insolvency is
borne exclusively by D1, yet there is no reason why D1 should bear the whole of it and
D2 none of it. D2 is as guilty as D1, and it is mere chance that P happened to sue D1 and
not D2. The principle of the Tortfeasors Act [Negligence Act in Canada] is that it should
not be left to the injured person to determine the incidence of loss between joint
tortfeasors. On the facts here imagined this object is frustrated. The matter can, however,
be set right very simply by an appropriate wording of the judgments for contribution. D1
can be given contingent judgment against D2 and D3 severally for contribution of one
third of the sum that he has to pay P, and he may be given in addition a contingent
judgment for one half of the sum payable by the other defendant in the event of default
by him . . . the result of the scheme is that if D3 becomes insolvent, or is untreacable, D1
will recover against D2 (1) one third of the judgment debt under the primary judgment
for contribution and (2) one sixth of the judgment debt under the secondary judgment. In
this way justice can be done between the solvent defendants. . . .
In the dearth of authority, the present conclusion must be regarded as framed merely in
the optative mood. . . . Where the various defendants are found guilty in unequal
proportions, the risk of insolvency should naturally be shared in the same proportions.49
The court in Renaissance adopted Glanville Williams’ proposition of equitable distribution. The
facts in Renaissance are an old story now in the N.H.L.: Frank and Frazer got involved in a fight
at Renaissance. Scott Mellanby (pre NHL) interfered and got injured. Mellanby sued Frank and
Renaissance, but not Frazer. Renaissance brought a contribution claim against Frazer, but not
against Frank, who was found to be insolvent.
48
49
Cheifetz, supra note 7 at 60.
G.L. Williams, Joint Torts and Contributory Negligence, (London: Stevens & Sons Limited, 1951) at 171-172.
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Justice Cullity held that Frank’s portion of liability (a non-party) should be apportioned between
Renaissance and Frazer. He reasoned that
[i]f the recommended approach is not adopted, an injured party in such a case will be able
to affect the manner in which the burden of the satisfied judgment is shared between the
solvent wrongdoers by selecting the one against whom judgment is to be executed.
Liability to contribute as between wrongdoers should not be affected by such a decision. .
. . I do not believe that either the language or the policy of the Act [Contributory
Negligence Act] would be disregarded, or distorted, by a finding that it is the relative
degrees of fault or negligence of the parties to the contribution action that must be
determined in a case such as this.50
The Court of Appeal rejected the decision of Justice Cullity. 51 Justice Sharpe writing for the
court stated that even though the Ontario Law Reform Commission in its exhaustive study on the
subject of contribution in Report of Contribution Among Wrongdoers and Contributory
Negligence, (Toronto: Ministry of Attorney General, 1988), suggested equitable distribution,
“the legislature has not yet acted on that recommendation.”52
There have been no BC cases adopting Glanville Williams’ proposition for equitable distribution
in a case of impecuniosity. Aside from his text there appears to be no basis to suggest that
tortfeasors are responsible for more than their share of fault even if, after apportionment of fault,
one of the tortfeasors turns out to be impecunious. 53 The imposition of joint liability for
contribution on tortfeasors among each other, as opposed to joint liability vis-à-vis an injured
party, will undoubtedly require action by the legislature. Until such a development, the BC Ferry
Agreement is firmly rooted in the current law of contribution and can continue to be used by
parties who wish to enter into partial settlement agreements to bring finality to their disputes.
Conclusion
The basic principles underlying multi-party disputes (with or without a partial settlement) can be
summarized as follows:
1. the injured party should recover as close to full amount of its loss as possible;
2. to facilitate this objective the injured party has a common law right to joint recovery;
3. among themselves, legislation permitting, the tortfeasors can claim contribution;
4. tortfeasors sued for contribution cannot be compelled to pay more then their
proportionate share of liability.
A BC Ferry Agreement does not undermine any of these principles. It uses them to achieve
finality of settlement for both the injured party and the settling tortfeasor. It also achieves
50
Ibid., at paras 37-42.
[2004] OJ No. 3486.
52
Ibid., at para. 52.
53
Cheifetz, supra notes 7 and 45.
51
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finality for non-settling tortfeasors with respect to that portion of the loss attributable to the fault
of the settling tortfeasor. It allows non-settling tortfeasors to effectively argue in any settlement
discussion or trial of the matter that the settling tortfeasor bears the largest proportion of fault for
the loss of the injured party. The non-settling tortfeasors, however, remain jointly liable among
themselves to the injured party for all of the loss collectively attributable to their fault.
As a matter of law, there is no reason to suggest that a BC Ferry Agreement affects the joint
liability of the non-settling tortfeasors. The right of tortfeasors to seek contribution on a several
basis against each other is independent of the right of the injured party to recover the full amount
of its loss from any one of the tortfeasors. It is merely procedural that the two rights are
exercised in the same action, rather than in two separate actions: one action involving the injured
party and the tortfeasors, and a subsequent action among only the tortfeasors for contribution.
Throughout the development of partial settlement agreements leading up to the BC Ferry
Agreement, the right of the injured party to jointly recover has never been questioned. The issue
in all the leading partial settlement cases has been that of a tortfeasor’s ability to seek
contribution from other tortfeasors. Until BC Ferry, it was uncertain under what circumstances a
third party claim for contribution would succeed in a situation where a partial settlement
agreement was concluded. Some certainty and finality was brought to this area of the law by BC
Ferry which relies on a well established principle of contribution law that no tortfeasor can be
compelled by another tortfeasor to pay more than its proportionate share of the loss attributable
to its fault.
A BC Ferry Agreement does not introduce any novel concepts. The injured party merely agrees
that it will not seek to recover any portion of the loss attributable to the fault of the settling
tortfeasor from other tortfeasors, effectively agreeing that the settling tortfeasor’s share is paid in
full. This agreement makes a contribution claim against the settling tortfeasor unnecessary since
the non-settling tortfeasors cannot compel the settling tortfeasor to pay any more than that
tortfeasor’s proportionate share and the non-settling tortfeasors are no longer exposed to a claim
for the settling tortfeasor’s portion of the loss by the injured party.
In conclusion and as mentioned at the beginning of this paper, from a practical perspective any
perception among lawyers that a real risk exists that a BC Ferry Agreement has the effect of
severing joint liability of non-settling tortfeasors would have the immediate effect of eliminating
partial settlements on this basis and would have a detrimental impact on the settlement of multiparty disputes in general because: (1) the injured party would have no incentive to settle since it
would assume all of the unknown risk of uncollectibility from any non-settling tortfeasors; (2)
the non-settling tortfeasors would have less incentive to settle because they would no longer be
“on the hook” for joint liability to the injured party; and (3) the basic principles underlying the
area of multi-party disputes would be undermined making practical advice in this area of the law
very difficult.
In my view, absent intervention by the legislature, there is no real risk that a court will find a BC
Ferry Agreement has the effect of severing the joint liability of non-settling tortfeasors. Such a
finding would be completely inconsistent with the legal principles which have guided the courts
in this area for many years and with the public and judicial policy of encouraging the settlement
of disputes between litigants.
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