In a previous post we discussed the concept of Mary Carter Agreements as one means of effecting a partial settlement in a multi-party civil action. There we observed:
Settlements of civil actions, including commercial claims, are both judicially encouraged and desirable. They serve the public interest by unburdening the courts of cases to be tried thereby saving public money. They benefit the litigants who are spared the costs, both direct and indirect, of participating in a trial. They also provide a certainty of result and the closure of a stressful distraction.
Further, lawyers in Ontario are ethically bound by their Rules of Professional Conduct to promote settlement with their clients whenever it is possible to do so on a reasonable basis.
Settlements are more easily accomplished where there are only one or two defendants and the cause of action is the same. They become more difficult when there are multiple defendants, causes of actions and complex issues of fact and law. In these cases plaintiffs carry a great burden and risk. Any opportunity to lessen that load is welcome. If one defendant will not settle, others might. It is not surprising then that the concept and use of “partial settlements” have become more prevalent.
An alternative means is a Pierringer Agreement or Pierringer Settlement. This settlement mechanism also has an American origin in 1963 but has been accepted many times as acceptable for use in Canada beginning in 1995 with the British Columbia Court of Appeal (BCCA) decision in British Columbia Ferry Corp v. T&N.
Here, a plaintiff in a multi-party civil suit, agrees with one or more of the defendants to accept a sum in settlement of all their claims against the paying defendant(s) in the action. The plaintiff would then also agree to discontinue their claims against those paying defendants.
These defendants would therefore no longer participate in the proceeding.This latter step is what distinguishes a Pierringer Agreement from a Mary Carter Agreement.
- The settling defendant(s) pay an agreed sum to the plaintiff to be released from the action and any further liability;
- The settlement amount is available as a credit for all parties towards the satisfaction of the plaintiff’s damages;
- The plaintiff is allowed to continue with the action for damages against the remaining defendant(s);
- The plaintiff agrees not to persue the remaining defendant(s) for any damages awarded beyond those defendant(s) percentage share so as to prevent their claiming any contribution or indemnity over against the settling defendant(s).
Pierringer settlements are less fraught with policy concerns then was the case with Mary Carter settlements. The main reason for this is the withdrawal of the settling defendant such that the plaintiff will no longer have their co-operation at trial. procedurial or substantive issues
One concern that began with the BCCA decision above was the conditional release of the settling defendants from the action where it would deprive the remaining defendant(s) of their right to establish an essential element of their case in defence.
This approach has been used by the Ontario Superior Court of Justice in Ontario New Home Warranty Program v. Chervron Chemical Co. This tactic appears to be used sparingly, which is likely the result of the policy desire to encourage settlement which might not occur if one of the essential elements of the Pierrringer Agreement is negated. After all, the goal of the settling defendant(s) is to pay and be done with the action both in terms of liability and further litigation costs. The non-settling defendants on the other hand do not want to lose any of their rights to contribution or indemnity through their cross or third party claims.
As with Mary Carter agreements, Pierringer agreements must be disclosed to both the non-settling parties and the court forthwith after being reached.
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