The Owners of Strata Plan KAS3204 v Navigator Development Corporation, 2020 BCSC 1954 is a recent decision that sets out a strong view on joint and several liability and the doctrine of privity within the context of partial settlement agreements. In summary, Madam Justice Warren confirmed that BC Ferry agreements preserve joint and several liability among non-settling parties and do not confer a benefit on non-settling parties for the purpose of relying on an exception to the doctrine of privity.
The Basics: Multiple Tortfeasors and Settlement Agreements
In negligence claims, a plaintiff’s loss is apportioned among wrongdoers based on their degree of fault. However, s. 4(2) of the Negligence Act entitles plaintiffs who are not contributorily negligent to recover their entire loss from a single wrongdoer. If a plaintiff collects judgment against a wrongdoer, for more than their apportioned fault, that wrongdoer is left with a right of contribution against the other wrongdoers for the latter’s apportioned fault. Section 4(2) thus places the risk of recovering from individual parties on wrongdoers instead of innocent plaintiffs.
As a statutory right, partial settlement agreements do not alone prevent a wrongdoer from claiming contribution against settling wrongdoers under s. 4(2) and dragging them back into the litigation (Tucker (Public Trustee of) v. Asleson, (1993) 78 B.C.L.R. (2d) 173). To avoid a situation where the settling wrongdoer is liable to the non-settling wrongdoers, the court in British Columbia Ferry Corp. v. T&N plc, (1995) 16 B.C.L.R. (3d) 115 held that a plaintiff may amend its pleadings to limit its claim to the loss attributable to non-settling parties or waive its right of recovery against settling parties. When such amendments are made to the claim, the non-settling wrongdoer has no ability to seek contribution from a settling wrongdoer. Such agreements have since been coined “BC Ferry agreements.”
The Facts of the Case at Hand
Navigator Development is a case where a third party, Greyback Construction Ltd. (“Greyback”), brought a summary trial application to dismiss claims made against it in an underlying construction defects action. The plaintiff had settled with some parties through two BC Ferry agreements which provided a waiver of the plaintiff’s right to recover for amounts attributable to settling parties, 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” (the “Settlement Agreements”). Despite the plaintiff amending its pleadings, Greyback brought an application on the basis that:
- BC Ferry agreements generally severed joint and several liability among non-settling parties;
- the Settlement Agreements specifically severed joint and several liability among non-settling parties, thereby benefiting Greyback and entitling it to rely on the “principled exception” to privity to enforce the Settlement Agreements; and
- policy reasons deemed it unfair for the court to hold otherwise as non-settling parties may be “left holding the bag” for insolvent non-settling parties despite their right of contribution.
The Effect of BC Ferry Agreements Generally
After thoroughly reviewing relevant case law, the Court definitively confirmed that BC Ferry agreements do not sever joint and several liability amongst non-settling parties, but only “between settling parties, as a group, and non-settling parties, as a group.”[1] Madam Justice Warren elaborated that such agreements do not remove a plaintiff’s “right to recover for loss attributed to…non-settling wrongdoers…on a joint basis”[2] and that the effective restriction of non-settling parties’ contribution rights against settling parties resulted from amendments to pleadings and not from BC Ferry agreements directly.
The Contractual Terms, Privity of Contract, and the “Principled Exception”
As regards the Settlement Agreements themselves, Greyback relied on a clause limiting the plaintiff’s claim “to the several extent of liability of the Remaining Defendants.” Following principles of contractual interpretation, the court found that it was “obvious that the parties did not intend” to sever joint liability among non-settling parties as this “would be commercially absurd”; the non-settling parties had provided nothing in exchange for this “benefit.”[3] Applying these principles, the Court confirmed that wording that severed “joint and several liability among the settling and non-settling [parties]” would similarly preserve joint liability as between the non-settling parties.[4]
Further, the Court held that even if BC Ferry agreements did extinguish joint and several liability among non-settling parties, this would not confer a benefit as required to rely on the “principled exception” to privity. As neither privy to nor beneficiary of the Settlement Agreements, Greyback could not enforce them.
Policy Arguments
In relation to Greyback’s policy argument, the Court held that this was a “fundamental misunderstanding” of contribution rights. Her Ladyship explained that parties cannot simply share the burden of an insolvent party’s apportionment, as contribution rights exist only to the extent of one’s attributed fault. However, as BC Ferry agreements indirectly reduce a claim’s value, they actually protect non-settling parties by limiting the potential shortfall they may bear if unable to pursue contribution against an insolvent co-defendant.
Conclusion and Takeaways
This decision is crucial to multiparty litigation where partial settlement agreements are an essential tool to focus issues and achieve early settlement. By preserving the joint liability of non-settling parties, BC Ferry agreements can continue to incentivize parties to resolve matters outside of court by shielding settling wrongdoers from contribution claims and reinforcing a plaintiff’s right to full recovery under s. 4(2). However, as contribution claims are limited only by a plaintiff’s claim and not a BC Ferry agreement, parties must ensure that their settlement agreement is reflected in amended pleadings to ensure that their intentions in settlement will be enforced by the courts.
Written by Jeremy Ellergodt with contribution from articling student Karen McLean.
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[1] The Owners or Strata Plan KAS3204 v. Navigator Development Corporation, 2020 BCSC 1954, at para. 8.
[2] Ibid, at para 7.
[3] Ibid, at paras. 59 and 61.
[4] Ibid, at para. 41.
