A BC Ferries Agreement gives one or more defendants an opportunity to settle out of a multi-party proceeding on the plaintiff’s agreement to forego recovery of any portion of the loss ultimately attributable to the settling parties from the non-settling defendants.
How does this affect the parties that remain in the action? Are they jointly, severally, or jointly and severally liable as between them?
In The Owners of Strata Plan KAS3204 v Navigator Development Corporation, 2020 BCSC 1954, Madam Justice Warren decided that a BC Ferries agreement extinguishes joint liability between settling parties, as a group, and non-settling parties, as a group, but joint and several liability remains as between the non-settling parties.
This was a summary trial application brought by a third party, Greyback Construction Ltd. (“Greyback”). The underlying action is a multi-party construction dispute. New Home Warranty Providers (the “Plaintiff”) brought a subrogated claim in the name of the Owners of Strata Plan KAS3204 (the “Strata”) for damages arising from alleged deficiencies in the construction and design of the Strata’s buildings.
The Plaintiff entered into two BC Ferries settlement agreements with some of the defendants and a third party (the “Settlement Agreements”). As contemplated in the Settlement Agreements, the Plaintiff amended its Notice of Civil Claim to expressly waive its right to recover any portion of the loss ultimately attributable to the fault of any of the settling parties for which any non-settling party might advance a claim for contribution or indemnity.
The Considerations of the Court
The main consideration before the court was whether a settlement between a plaintiff and some, but not all, alleged wrongdoers has the effect of extinguishing non-settling wrongdoers claims’ for contribution and indemnity against each other.
The court considered this through the lens of British Columbia Ferry Corp. v. T & N, (1995), 16 B.C.L.R. (3d) 115 (C.A.) (“BC Ferry”). The court referred to the BC Ferry case as the authority that a third party claim is bound to fail where a plaintiff has expressly waived in its pleadings any right to recover from the defendant any portion of loss which a court may ultimately attribute to the fault of a settling third party. Per BC Ferry, it is not the contract which deprives a defendant from claiming against the third party, but the fact that the plaintiff only seeks from the defendant the part of its loss which the defendant caused.
The court further decided that contribution rights of non-settling defendants are not prejudiced by a BC Ferry settlement. Settling parties are taken out of the equation, but their apportionment of liability is not. For example, if a defendant settles through a BC Ferries agreement and is ultimately found liable for 20% of the harm, the non-settling parties may seek contribution of the remaining 80% from each other. In no situation will they be responsible for the 20% that was attributable to the settling party.
Madam Justice Warren then went on to briefly consider the two Settlement Agreements themselves to see whether Greyback could rely on them to sever liability as between the remaining defendants when Greyback was not a party to the Settlement Agreements.
The court held that no principled exception to privity of contract applied in this case.
The Settlement Agreements did not extend any benefit to Greyback. The Plaintiff did not intend to insulate the non-settling wrongdoers from claims for contribution or indemnity. The Settlement Agreements provided 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 limit its claim to preclude any claim over against the settling parties. The Plaintiff did not intend to limit its claim against each of the remaining non-settling defendants to the portion of loss ultimately attributed to the fault of that remaining defendant.
In dismissing Greyback’s application, at para 61, Madam Justice Warren said this:
 Finally, the obvious objective of the Settlement Agreements 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.
This decision seems to shut the door on arguing that liability is severed between the remaining non-settling defendants when settling parties enter into a BC Ferries agreement unless there are unusual circumstances giving the non-settling parties the benefit of that agreement. This should give parties pause when they know that other parties are considering BC Ferries agreements-especially if there are impecunious parties who are left in the action. While a non-settling party will not be responsible for paying the portion of loss ultimately attributable to the settling parties, they may be on the hook for paying the lion’s share of any award where the other non-settling parties are unable to pay.
For more information about the topics discussed in this article, please contact Jennifer O’Leary and Melody Cheung.
With thanks to articling student Melody Cheung for her assistance in drafting this article.