J.M. et al. v. W.B. et al., 2004 ONCA 8541

J.M. et al. v. W.B. et al. [Indexed as: M. (J.) v. B. (W.)]

71 O.R. (3d) 171

[2004] O.J. No. 2312

Docket Nos. C39867, C39881 and C39899

Court of Appeal for Ontario

Rosenberg, Goudge and Cronk JJ.A.

June 3, 2004

Negligence -- Apportionment of fault -- Pierringer agreement -- Superior Court has jurisdiction under s. 1 of Negligence Act to apportion fault or neglect in multi-party tort claim against persons who were originally named as party defendants but who, as result of pre-trial settlement, will not be parties to action at time of trial -- Negligence Act, R.S.O. 1990, c. N.1, s. 1.

In 1997, the plaintiffs claimed damages for sexual assaults alleged to have been perpetrated by the defendants WB and EM. They sued the defendant Dr. Kerr, who was allegedly the physician for several of the plaintiffs and for WB, for negligence and breach of fiduciary duty. The plaintiffs sued other defendants for negligence and breach of fiduciary duty, and they sued the defendants the Salvation Army and the Orange Lodge as being vicariously liable. After the action was commenced, the claims of several plaintiffs were discontinued or dismissed on consent.

In September 2002, the remaining plaintiffs entered into a partial settlement agreement with all the defendants save for WB, EM and Dr. Kerr (the "Non-Settling Defendants"). Under the settlement agreements, modelled on a type of settlement known as a "Pierringer agreement", the plaintiffs settled their claims against the Settling Defendants and agreed to limit their claims against the Non-Settling Defendants. The settlement included the plaintiffs' agreement to restrict their claims against the Non-Settling Defendants to only their several, rather than joint and several, liability. The agreements contained an indemnity clause. The indemnity clause stated that:

The [plaintiffs] restrict their claim to whatever the non- settling defendants may be directly liable for and as such non-settling defendants cannot be jointly liable with the settling defendants. The clause means non-settling defendants have no basis to seek contribution, indemnity, relief over by way of equitable subrogation, declaratory relief or otherwise against the [Settling Defendants].

On September 26, 2002, Métivier R.S.J. granted an order approving the agreements, to the extent that they affected the interests of minors, and dismissed the plaintiffs' action as against the Settling Defendants, without costs.

With the death of WB and EM and the default of several other defendants, the only remaining Non-Settling Defendant was Dr. Kerr. Given the terms of [page172] the agreements and the granting of the dismissal order, Dr. Kerr was concerned that the trial judge might lack jurisdiction to determine the degree, if any, in which the fault or neglect of the Settling Defendants caused or contributed to the plaintiffs' injuries and damages. Kerr was concerned that he could be deprived of his right to obtain an apportionment of liability against the Settling Defendants. He moved to have the dismissal order set aside and for leave to amend his pleading to assert cross- claims against the Settling Defendants. To address the jurisdictional issue raised by Dr. Kerr, the parties agreed to submit a special case for the opinion of the court under Rule 22 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The parties agreed that the terms of the agreements required that Dr. Kerr should have the opportunity and right, if so advised, to obtain an adjudication at trial as to whether the neglect of one or more of the Settling Defendants caused or contributed to the damages alleged.

On the special case, concluding that he was bound by the Court of Appeal's judgment in Martin v. Listowel Memorial Hospital, Forget J. held that the Superior Court of Justice did not have jurisdiction to apportion fault or neglect against the Settling Parties because, at the time of the trial, they would not be parties to the action. The plaintiffs and some of the Settling Defendants appealed.

Held, the appeal should be allowed.

In the circumstances of this case, the Superior Court has the jurisdiction to determine whether and to what extent any fault or neglect of the Settling Defendants caused or contributed to the damages alleged by the plaintiffs, although the Settling Defendants will not be parties to the action at the trial. The Martin judgment was not dispositive of the jurisdictional question and the case was distinguishable.

Neither the reasoning in Martin nor the language of s. 1 of the Negligence Act, which provides for the apportionment of liability where damages are caused or contributed to by the fault or neglect of two or more persons, precluded the apportionment of fault or neglect at trial to one or more of the Settling Defendants. First, there was no indication in s. 1 of the Negligence Act of a legislative intention to limit the jurisdiction of the Superior Court in the apportionment of liability in negligence cases. Second, the facts in Martin were different because unlike the case at bar, the person against whom negligence was to be alleged had no opportunity to respond directly to the plaintiffs' allegations of negligence against her, or to their claims for relief. In contrast, in this case, the Settling Defendants were sued and had an opportunity to resist any potential findings of fault or negligence against them. Third, Martin was also distinguishable from the immediate case in that the settlement agreement was secret and not disclosed to the other defendants or to the court.

Fourth, the reasoning in Martin concerning the apportionment of liability was premised on the view that the word "persons" in s. 1 of the Act is intended to refer to persons sued in the litigation. There is no "absent" tortfeasor in the immediate case. Rather, the Settling Defendants are "sued persons" in the appellants' action. Accordingly, although the Settling Defendants will not be participants at trial, a trial apportionment of liability against them is consistent with the reasoning in Martin. Fifth, the decision in Martin was distinguishable on another, critical ground. The interpretive result in Martin was driven by important policy considerations that do not apply here. The court was concerned that a finding of a degree of fault in respect of a non-party could have significant consequences for other defendants under s. 1 of the Act. If a portion of the fault were attributed to a [page173] non-party, or to a party at fault but with a legal defence such as a limitation defence, the defendants who are liable to the plaintiff would be left with no one from whom they could recover that portion of the claim. This concern was met by the type of Pierringer settlement agreement employed by the appellants and Settling Defendants.

By the terms of the Agreements and their amended pleading, the appellants have acknowledged and agreed that they will hold the Non-Settling Defendants accountable for their several liability only. As well, the Settling Defendants have agreed that the trial judge may apportion fault or negligence against them, although they will not take part in the trial. Finally, Dr. Kerr should be free to take the position at trial that his exposure to any shortfall in the appellants' recovery of damages occasioned by the insolvency of another Non-Settling Defendant should be reduced by a proportion related to the fault of the Settling Defendants. On the basis of all these factors, the purpose of s. 1 of the Act was not undermined by the agreements and no question of potential unfairness or prejudice to any of the parties will arise from the implementation of the part of the settlements that contemplate the apportionment of fault or neglect at trial to the Settling Defendants.

APPEAL from an order of Forget J. of the Superior Court of Justice, dated March 17, 2003, on a motion for determination of a special case under Rule 22 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. [page174]

Cases referred to 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 535 (ON CA), [1972] 2 O.R. 280, 25 D.L.R. (3d) 386 (C.A.); Amoco Canada Petroleum Co. v. Propak Systems Ltd., [2001] A.J. No. 600, 2001 ABCA 110, 200 D.L.R. (4th) 667, [2001] 6 W.W.R. 628, 91 Alta. L.R. (3d) 13, 281 A.R. 185, 4 C.P.C. (5th) 20 (C.A.); British Columbia Ferry Corp. v. T & N plc, 1995 1810 (BC CA), [1995] B.C.J. No. 2116, [1996] 4 W.W.R. 161, 65 B.C.A.C. 118, 16 B.C.L.R. (3d) 115, 27 C.C.L.T. (2d) 287 (C.A.); Cook v. Ip (1985), 1985 163 (ON CA), 52 O.R. (2d) 289, 22 D.L.R. (4th) 1, 5 C.P.C. (2d) 81 (C.A.) [Leave to appeal to S.C.C. dismissed (1986), 55 O.R. (2d) 288]; Kelvin Energy Ltd. v. Lee, 1992 38 (SCC), [1992] 3 S.C.R. 235, 97 D.L.R. (4th) 616, 143 N.R. 191 (sub nom. Loewen Ondaatje McCutcheon & Co. v. Sparling); Martin v. Listowel Memorial Hospital (2000), 2000 16947 (ON CA), 51 O.R. (3d) 384, 192 D.L.R. (4th) 250, 48 C.P.C. (4th) 195 (C.A.); Maxfield v. Llewellyn, [1961] 3 All E.R. 95, 1 W.L.R. 1119, 105 Sol. Jo. 550 (C.A.); Ontario New Home Warranty Program v. Chevron Chemical Co. (1999), 1999 15098 (ON SC), 46 O.R. (3d) 130, 37 C.P.C. (4th) 175 (S.C.J.); Pierringer v. Hoger, 124 N.W.2d 106 (Wis. S.C. 1963); Sparling v. Southam Inc. (1988), 1988 4694 (ON SC), 66 O.R. (2d) 225, 41 B.L.R. 22 (H.C.J.); Wells v. McBrine (1988), 1988 3087 (BC CA), 33 B.C.L.R. (2d) 86, 54 D.L.R. (4th) 708, [1989] 2 W.W.R. 695, 47 C.C.L.T. 94 (C.A.) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 11 Negligence Act, R.S.O. 1990, c. N.1, ss. 1, 4 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 22 Authorities referred to Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (Toronto: Ministry of the Attorney General, 1988)

Peter J. Cronyn, for J.M. et al. M. Philip Tunley, for the Governing Council of the Salvation Army, Victor Greenwood, Lillian Greenwood, the Estate of Cyril Fisher, Doug Hiltz and Harold Peckford, and as Agent for respondent, Vera Burrows. P. David McCutcheon and Kate Broer, for The Grand Orange Lodge of British America. Paul A. Millican, for Dr. Archibald Kerr.

The judgment of the court was delivered by

CRONK J.A.: --

I. INTRODUCTION

[1] The sole issue in these proceedings is whether the Superior Court of Justice has jurisdiction under s. 1 of the Negligence Act, R.S.O. 1990, c. N.1 (the "Act") to apportion fault or neglect in a multi-party tort action against persons who were originally named as party defendants but who, as a result of pre-trial settlements, will not be parties to the action at the time of trial.

[2] Twenty individual plaintiffs commenced this action in January 1997, claiming damages for historical sexual abuses and assaults that they allege were perpetrated upon 14 of them, when they were children, by the defendants [W.B.] and [E.M.]. They also allege that there may be other victims of similar tortious conduct by these defendants, apart from any of the plaintiffs. As well, they claim that the remaining defendants breached duties owed to the plaintiffs by failing to take steps that would have prevented the alleged abusive and assaultive activities of [W.B.] and [E.M.], or by permitting such activities to occur.

[3] The incidents in question are alleged to have occurred between 1960 and 1991, thus spanning a period of about 31 years. As a result, several of the defendants are now elderly or in poor health.

[4] After the commencement of the action, the following events transpired:

(i) [W.B], [E.M], and one other defendant died;

(ii) the claims of several plaintiffs were discontinued or dismissed on consent;

(iii) some of the defendants defaulted in defending the action; [page175]

(iv) the defendant, Dr. Archibald Kerr, defended the action and cross-claimed against some of his co-defendants, seeking contribution and indemnity from them and reserving his right to cross-claim against other co-defendants following discoveries; and

(v) third party claims were initiated by the defendant, The Governing Council of the Salvation Army, and Kerr against two individuals: the mother of some of the plaintiffs, who was married first to [W.B.] and subsequently to [E.M.], and a second individual who the plaintiffs assert was a witness to some of the abuse involving children other than the plaintiffs.

[5] By September 2002, those plaintiffs who remained involved in the litigation had each entered into partial settlement agreements (the "Agreements") with all the defendants (the "Settling Defendants") save for [W.B], [E.M.] and Kerr (the "Non-Settling Defendants"). Under the Agreements, the plaintiffs settled their claims against the Settling Defendants and agreed to limit their claims against the Non-Settling Defendants.

[6] On September 26, 2002, Métivier R.S.J. of the Superior Court of Justice granted an order approving the Agreements, to the extent that they affected the interests of minors, and dismissing the plaintiffs' action as against the Settling Defendants, without costs.

[7] As a result of all these events, Kerr became the only remaining Non-Settling Defendant active in the action.

[8] Prior to the dismissal order, Kerr and the Settling Defendants reserved their respective rights to bring cross- claims against each other at any time during the action. Although Kerr was aware that the plaintiffs were negotiating the Agreements, and was provided with copies of two of the Agreements after they were executed, he did not receive notice of the plaintiffs' dismissal motion before Métivier R.S.J.

[9] Given the terms of the Agreements and the granting of the dismissal order, Kerr was concerned that the judge who presided over the trial might lack jurisdiction to determine the degree, if any, in which the fault or neglect of the Settling Defendants caused or contributed to the plaintiffs' alleged injuries and damages. Kerr feared that, by virtue of the dismissal order, he could be deprived of his right to obtain such an apportionment of liability, if any, against the Settling Defendants.

[10] Accordingly, Kerr moved to set aside the dismissal order and for leave to amend his pleading to assert cross-claims against the Settling Defendants. [page176]

[11] In response to Kerr's motion, the Settling Defendants amended their statement of claim, on consent, to refer to the Agreements and some of their essential terms. They also agreed that, if requested by Kerr or the plaintiffs, they would consent to being examined for discovery.

[12] To address the jurisdictional issue raised by Kerr and the ability of the court to give full effect to the terms of the Agreements at trial, the parties also agreed to adjourn parts of Kerr's motion and to submit a special case for the opinion of the court under Rule 22 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. With the concurrence of all parties, the following question was posed for the opinion of the court:

Does the Court have the jurisdiction to determine whether any fault or neglect of the Settling Defendants or any of them caused or contributed to the damages alleged by the plaintiffs, and the degree of any such contribution, if the Settling Defendants are not parties to the action at the time of trial, in circumstances where the Settling Defendants have entered into Partial Settlement Agreements with the plaintiffs, and consent to the Court so determining the fault or neglect of the Settling Defendants?

[13] The special case was heard by Forget J. of the Superior Court of Justice on February 18, 2003. By order dated March 17, 2003, he held that the Superior Court of Justice did not have jurisdiction to apportion fault or neglect at trial against the Settling Defendants who, by then, would not be parties to the action.

[14] The plaintiffs and some of the Settling Defendants now jointly appeal from that decision. Although three separate appeals were initiated, the appeals were consolidated and heard together by this court. For ease of reference, I refer throughout the balance of these reasons to the plaintiffs as the appellants.

[15] For the reasons that follow, I conclude that the Superior Court of Justice has jurisdiction, in the circumstances of this case, to determine whether and to what extent any fault or neglect of the Settling Defendants caused or contributed to the damages alleged by the appellants, although the Settling Defendants will not be parties to the action at trial. Accordingly, I would allow the appeals.

II. ADDITIONAL FACTS

[16] The appellants allege in their statement of claim, among other matters, that [W.B.] was a senior soldier, employee and agent of the Salvation Army and a member of The Grand Orange Lodge of British America at the time of his alleged tortious conduct. Similarly, they assert that [E.M.] was a member, employee [page177] and officer of the Orange Lodge at the time of the alleged sexual abuses and assaults. The appellants claim that, while active as supervisors or participants in a variety of Salvation Army or Orange Lodge youth activities, [W.B.] and [E.M.] sexually, emotionally and physically abused numerous children, including 14 of the appellants, at several locations, some of which were controlled or owned by the Salvation Army or the Orange Lodge.

[17] The appellants seek damages against [W.B.] and [E.M.] for assault and battery and intentional infliction of nervous shock rising from their alleged paedophiliac activities. As against the Settling Defendants and Kerr, the latter of whom was allegedly the physician to several of the appellants and [W.B.], the appellants claim damages for negligence and breach of fiduciary duty. They also assert that either or both of the Salvation Army and the Orange Lodge are vicariously liable for the damages claimed in respect of the individual conduct of [W.B.], [E.M.] and various of the Settling Defendants.

[18] By September 2002, all the appellants who continued as participants in the action had entered into Agreements with the Settling Defendants. The terms of the Agreements are identical and modelled on a type of settlement agreement known as a Pierringer agreement, as described in the Wisconsin case of Pierringer v. Hoger, 124 N.W.2d 106 (Wis. S.C. 1963).

[19] The parties indicated in the special case that the Agreements are intended, in part, "to permit the Settling Defendants to exit the action by settling their claims with the plaintiffs, and by attempting to eliminate any joint liability the Settling Defendants might be found to have with the remaining defendants".

[20] The Agreements each provide:

(i) that the settlement and payment contemplated thereunder are not to be taken as an admission of liability on the part of the Settling Defendants;

(ii) that the action will be dismissed as against the Settling Defendants, on consent and without costs;

(iii) that the appellants will use their best efforts to cause any cross-claims against the Settling Defendants to be similarly dismissed, without costs, "in order to fully and finally conclude all litigation arising from the matters pleaded" in the action against the Settling Defendants;

(iv) a full and final release by the appellants in favour of the Settling Defendants; [page178]

(v) that the appellants will indemnify and hold harmless the Settling Defendants from any cross-claim or third party claim, and any other proceeding or claim arising from the issues and allegations in the action; and

(vi) for the disclosure of the Agreement, including the settlement amount provided thereunder, to the trial court, on certain conditions.

[21] The indemnity provision contained in each of the Agreements states:

The [appellants] restrict their claim to whatever the non- settling defendants may be directly liable for and as such non-settling defendants cannot be jointly liable with the settling defendants. This clause means non-settling defendants have no basis to seek contribution, indemnity, relief over by way of equitable subrogation, declaratory relief or otherwise against the [Settling Defendants].

[22] In February 2003, after the dismissal of the appellants' claims against the Settling Defendants, the appellants amended their statement of claim, on consent, to reflect the compromises of their claims detailed in the Agreements. The amended version of their pleading states:

89. The Plaintiffs have agreed with the Settling Defendants that they shall limit their claims against the Non- settling Defendants to claims for damages, costs and interest attributable only to the Non-settling Defendants' several share of liability to the Plaintiffs and joint liability to one another, if any, such that the Plaintiffs' recovery shall be limited to recovering the damages, costs and interest attributable to the Non-settling Defendants' several share of liability, or joint share of liability among them, proven against them at trial.

90. For greater certainty, the Plaintiffs shall have no claim directly or indirectly against the Settling Defendants and the Plaintiffs shall limit their claims against the Non-settling Defendants so as to exclude any cross-claim or third party claim made against or which could be made against the Settling Defendants arising from the issues in this action.

91. The Plaintiffs admit that the Court at any trial of this matter has and shall have full authority to adjudicate upon the apportionment of liability, if any, between all Defendants named in this Statement of Claim, including the Settling Defendants, whether or not the Settling Defendants remain as parties by cross-claim or third party claim in this action.

(Emphasis added)

The Non-Settling Defendants are defined in the appellants' amended pleading to mean [W.B.], [E.M.] and Kerr. [page179]

[23] All parties agree that the terms of the Agreements require that Kerr should have the opportunity and right, if so advised, to obtain an adjudication at trial as to whether the neglect or fault of one or more of the Settling Defendants caused or contributed to the damages alleged by the appellants. Indeed, it is common ground that the trial judge who presides over the trial of the action will be required to determine the degree to which the Settling Defendants are at fault or negligent in order to give effect to the Agreements.

[24] The parties, including Kerr, also agree that if the appeals are allowed, the factual and legal issues in dispute will be reduced, costs savings for all parties will be realized, and no prejudice will be caused to any party.

[25] Kerr, therefore, does not oppose the dismissal of the appellants' claims against the Settling Defendants so long as he is not deprived of his right to seek to limit his potential liability, if any, by having the Settling Defendants' share of liability adjudicated at trial. Kerr's proposed cross-claims against the Settling Defendants are intended to preserve his access to such an apportionment. However, if the Settling Defendants are required to remain in the action as defendants to cross-claims brought by Kerr, the substance of their settlement bargain with the appellants will be threatened and, potentially, lost entirely.

III. MOTIONS JUDGE'S DECISION

[26] In his reasons dated March 17, 2003, the motions judge implicitly acknowledged that the active parties to this action either agreed to, or did not oppose, the terms of settlement contained in the Agreements. He also recognized that the parties consented to the jurisdiction of the Superior Court of Justice to apportion liability at trial as against the Settling Defendants.

[27] The motions judge held that the proposed apportionment of liability to the Settling Defendants, "[did] not pose a risk of prejudice to any of the persons involved in the present proceedings . . .".

[28] However, the motions judge also reviewed the decision in Martin v. Listowel Memorial Hospital (2000), 2000 16947 (ON CA), 51 O.R. (3d) 384, 192 D.L.R. (4th) 250 (C.A.), in which this court stated in obiter that a court could only apportion degrees of fault under s. 1 of the Act to a defendant who was a party to the applicable proceedings. Primarily on the basis of that case, the motions judge concluded that the Superior Court of Justice lacked the asserted jurisdiction to apportion fault or neglect to the Settling Defendants at trial. [page180]

IV. ANALYSIS

(1) Pierringer Settlement Agreements

[29] In recent years, Pierringer settlement agreements have been increasingly utilized in Canada in a variety of litigation settings. In Amoco Canada Petroleum Co. v. Propak Systems Ltd. (2001), 2001 ABCA 110, 200 D.L.R. (4th) 667, [2001] A.J. No. 600 (C.A.), at pp. 673-74 D.L.R., the Alberta Court of Appeal outlined the factors leading to their emergent use:

Now past is the day when "settlement agreement" can be understood to refer solely to the final resolution of all outstanding issues between all parties to a lawsuit, effectively bringing the suit to an end. In the last several years, in response to increasingly complex and commensurately dilatory and costly litigation, a new generation of settlement agreements has been cautiously adopted by the litigation bar.

The new settlement agreements, which include such exotically named species as the Mary Carter agreement and the Pierringer agreement, endeavour to attain a more limited objective: rather than trying to resolve all outstanding issues among all parties, a difficult task in complicated suits, they aim to manage proactively the risk associated with litigation. In short, contracting litigants prefer the certainty of settlement to the uncertainty and expense of a trial and the possibility of an undesirable outcome. This "risk-management" objective is accomplished by settling issues of liability between some but not all of the parties, thereby reducing the number of issues in dispute, simplifying the action, and expediting the suit. Ancillary benefits include a reduction in the financial and opportunity costs associated with complex, protracted litigation, as well as savings of court time and resources.

[30] The court in Amoco described a Pierringer settlement agreement in this way (at p. 671 D.L.R.):

Such agreements permit some parties to withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused, with no joint liability. As the non-settling defendants are responsible only for their proportionate share of the loss, a Pierringer agreement can properly be characterized as a "proportionate share settlement agreement".

[31] Pierringer agreements, however, are not free from settlement complications. As observed by the court in Amoco (at pp. 674-75 D.L.R.):

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 [page181] 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. . . . [I]n either case the goal of the proportionate share settlement agreement is to limit the liability of the non-settling party to its several liability.

[32] The Agreements in this case, as I have said, contain both an indemnity clause in favour of the Settling Defendants and an agreement by the appellants to restrict their claims against the Non-Settling Defendants to only those defendants' several, rather than joint and several, shares of liability. In respect of the Non-Settling Defendants, therefore, the Agreements effectively represent a contractual "opting-out" by the appellants of the joint liability provision set out in s. 1 of the Act, save for joint liability, if any, among the Non- Settling Defendants.

(2) Implementation of the Agreements in this Case

[33] The parties who appeal from the motions judge's decision challenge it on three main grounds. First, they argue that there is nothing in the reasoning of this court in Martin, supra, or under the Act, that operates in the circumstances of this case to preclude the requested liability apportionment at trial against the Settling Defendants. Second, they maintain that the motions judge's decision is contrary to the decisions of other courts in Canada, which have endorsed the implementation of Pierringer settlement agreements. Finally, they assert that the motions judge's decision is also contrary to the settled policy of Canadian courts to encourage settlement. I will address each of these submissions in turn.

(i) Lack of legal impediment to the asserted jurisdiction of the Superior Court

[34] In Ontario, the implications of a Pierringer settlement agreement for the apportionment of liability at trial must be assessed in light of s. 1 of the Act. That section reads:

1. Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.

[35] The terms of s. 1 of the Act are mandatory. They require the court, in a negligence action involving two or more tortfeasors, to [page182] "determine the degree in which each of such persons is at fault or negligent" (emphasis added). In contrast to other sections of the Act, in which express reference is made to the "parties" to an action, s. 1 refers to the apportionment of fault or neglect among "persons" found to have caused or contributed to the damages established at a trial. Thus, Ontario courts have been required to determine whether the word "persons", as used in s. 1, includes persons who are not parties to the negligence action in which damages are proven.

[36] In Martin, this court considered the scope of s. 1 of the Act. In that case, the infant plaintiff suffered serious brain damage at birth due to the negligence of two doctors and a nurse and the lack of adequate training of ambulance attendants by the hospital where the infant plaintiff was born. The infant plaintiff and his family members sued the doctors, the ambulance attendants and the hospital in negligence. They did not sue the nurse, who was added as a third party by the doctors. A pre-trial settlement was reached between the plaintiffs and the doctors, with the result that the doctors did not participate at trial. The terms of the settlement agreement were not disclosed to the other defendants, or to the court.

[37] The trial judge in Martin held that the doctors, the nurse and the hospital were negligent and that the hospital was also vicariously liable for the nurse's negligence. He made no finding of negligence against the ambulance attendants. In addition, although he made express findings of negligence against the nurse, he did not determine the degree of her fault. He ultimately concluded that he was unable to determine the respective degrees of fault of those defendants whom he found to be negligent. In his view, the nurse, who was not a named defendant in the main action, was not a "party" to the litigation and the nurse and the hospital could not be held separately negligent.

[38] Section 4 of the Act provides: "If it is not practicable to determine the respective degree of fault or negligence as between any parties to an action, such parties shall be deemed to be equally at fault or negligent." In reliance on s. 4 of the Act, the trial judge in Martin apportioned negligence in equal shares among the hospital and the two doctors, thereby essentially treating the doctors as if they were still parties to the action. He then granted judgment in favour of the plaintiffs against the hospital for one-third of the plaintiffs' total damages but, in recognition of the pre-trial settlement with the doctors, directed that no judgment should issue in favour of the hospital against the doctors. [page183]

[39] On appeal to this court, it was argued that the trial judge's apportionment of liability based on s. 4 of the Act was in error. In the alternative, the plaintiffs submitted that s. 1 of the Act required the trial judge to determine the degree of fault of the nurse.

[40] The plaintiffs' appeal was successful on the grounds that the trial judge erred by applying s. 4 of the Act in circumstances where the degrees of fault of the hospital and the two doctors could be determined, and by failing to correctly apportion liability between the hospital and the nurse. In the latter respect, this court held that the degree of fault of vicariously responsible defendants should be apportioned in order to reflect the contributions of each of the persons for whom the responsible defendants are vicariously liable. Accordingly, contrary to the holding of the trial judge, the apportionment of fault to the hospital should have reflected both its direct negligence and its vicarious liability for the nurse's negligence. To arrive at that apportionment, it was necessary that the nurse's degree of fault be determined to establish the degree of fault for which the hospital was vicariously liable.

[41] In commenting on the plaintiffs' alternative argument regarding s. 1 of the Act, the court considered the import of the word "persons" as used in that section (at para. 31):

The trial judge fully considered [the nurse's] involvement in the birth of the plaintiff Steven Martin, and made several findings of negligence against her, concluding that her negligence materially contributed to the damage he suffered. However, he did not go on to determine her degree of fault because he did not consider her to be a party to the action. The plaintiffs submit that because s. 1 refers to persons and not parties, he should have done so, even if she was not a party.

We would not give effect to that submission. There is no basis in s. 1 or anywhere in the Act for a judge to attribute a portion of fault to a non-party. Furthermore, although s. 1 refers to "persons", in any particular action its effect is to impose joint and several liability to the plaintiff only on defendants found at fault or negligent, and not on any other person.

The use of the word "persons" in the section, where "parties" is used elsewhere in the Act, has led to the suggestion that the section is intended to apply to anyone at fault. However, the authorities which have considered the issue have consistently held that the section does not allow the court to apportion any degree of fault to a non-party. Furthermore, this interpretation is consistent with the proper operation of the Act.

(Emphasis added)

[42] The motions judge appears to have regarded Martin as dispositive of the jurisdictional question posed by the parties on the special case. I disagree. With respect, I am of the view that neither the reasoning in Martin nor the language of s. 1 of the [page184] Act precludes the apportionment of fault or neglect at trial to one or more of the Settling Defendants. I reach that conclusion for the following reasons.

[43] First, the Superior Court of Justice enjoys a wide jurisdiction under s. 11 of the Courts of Justice Act, R.S.O. 1990, c. C.43 that encompasses, "all the jurisdiction, power and authority historically exercised by courts of common law and equity in England and Ontario". This jurisdiction cannot be displaced absent clear and unequivocal statutory language: see 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 535 (ON CA), [1972] 2 O.R. 280, 25 D.L.R. (3d) 386 (C.A.) at p. 282 O.R.; and Cook v. Ip (1985), 1985 163 (ON CA), 52 O.R. (2d) 289, 22 D.L.R. (4th) 1 (C.A.) at p. 296 O.R., leave to appeal to S.C.C. refused (1986), 55 O.R. (2d) 288.

[44] There is no express indication in s. 1 of the Act of a legislative intention to limit the jurisdiction of the Superior Court of Justice in the apportionment of liability in negligence cases. To the contrary, s. 1 of the Act is a substantive law provision that confirms the jurisdiction of the Superior Court to apportion liability among concurrent tortfeasors: see Martin at para. 48.

[45] Second, the facts in Martin are markedly different from the facts in this case. In Martin, the nurse was never sued by the plaintiffs and, thus, had never been a party to the main action. Accordingly, she had no opportunity to respond directly to the plaintiffs' allegations of negligence against her, or to their claims for relief. As between the plaintiffs and the nurse, the nurse was a stranger to the action.

[46] In contrast, in this case, the Settling Defendants were sued by the appellants and defended the action. They are aware of the allegations made by the appellants and had an opportunity to resist any potential findings of fault or negligence against them. Similarly, from the outset of the litigation, the appellants were aware of the involvement of the Settling Defendants and, knowing this, chose to voluntarily compromise their claims against them under the Agreements. In those important respects, the Settling Defendants are in a position analogous to that of the doctors, rather than to that of the nurse, in Martin.

[47] It is significant that findings of negligence and an apportionment of fault were made against the doctors in Martin, although they took no part in the trial. It is unclear from the reported decision in Martin whether the doctors consented to such an apportionment, notwithstanding the settlement entered into by them with the plaintiffs. The trial judge indicated in Martin that, had the nurse been a named defendant, he would have assigned equal fault to each of the two doctors, the nurse and the hospital. That apportionment of degrees of fault was ultimately [page185] accepted by this court, without any suggestion that the trial judge erred by apportioning liability to the doctors.

[48] Third, Martin is also distinguishable from this case on another fundamental factual basis. In Martin, the settlement agreements entered into by the defendant doctors were secret, and were not disclosed to the other defendants or to the courts. In contrast, the parties to the Agreements here have agreed to the disclosure of the Agreements to the trial court and copies of two of the Agreements have been provided to Kerr, the single remaining active defendant. Thus, consideration of the fairness of the settlement with the Settling Defendants, insofar as it relates to minors, was possible by the court prior to the approval of the settlement by Métivier R.S.J. and it is open to the judge at trial to assess the impact of the settlement on the Non-Settling Defendants and Settling Defendants alike.

[49] Fourth, the court emphasized in Martin at para. 34 that the purpose of the joint and several liability provision contained in s. 1 of the Act is, "to facilitate full recovery of the loss for the plaintiff, while at the same time providing a mechanism for each of those who contributed to the loss to share the financial responsibility in the proportions of their respective degrees of fault". In the same paragraph of its reasons, the court also said that, to accomplish this primary objective: "The effect of s. 1 of the Negligence Act is to make all persons sued who caused or contributed to the damage suffered by the plaintiff jointly and severally liable to the plaintiff for the damage" (emphasis added). See also the court's comments in Martin at para. 41 concerning Maxfield v. Llewellyn, [1961] 3 All E.R. 95, 1 W.L.R. 1119 (C.A.).

[50] Thus, the reasoning in Martin concerning the apportionment of liability against the nurse and the doctors was premised on the view that the word "persons" in s. 1 of the Act is intended to refer to persons sued in the litigation. For that reason, the determination of the degree of fault or neglect of the doctors, who had been sued by the plaintiffs, was permissible, whereas such a determination regarding the nurse, who had not been sued by the plaintiffs, was not.

[51] It is noteworthy, in this regard, that the court in Martin expressly agreed at para. 47 with the recommendation of the Ontario Law Reform Commission in its 1988 Report on Contribution Among Wrongdoers and Contributory Negligence (Toronto: Ministry of the Attorney General, 1988) at p. 187, that no degree of fault should be apportioned under s. 1 of the Act to an "absent concurrent wrongdoer". As well, the court in Martin stated at para. 48 with reference to s. 1 of the Act: [page186]

It is the only section of the Act which imposes liability, as opposed to apportioning fault. The section is substantive, not procedural. Therefore, when applying the section to any specific action, it is understood that joint and several liability to the plaintiff can and will attach only to a party defendant, although others who may also have been at fault could potentially have been found jointly and severally liable had they been sued by the plaintiff. Because procedurally the section only affects defendants, under this section the court is to apportion degrees of fault only to defendants.

(Emphasis added)

[52] There is no "absent" tortfeasor in this case. Rather, the Settling Defendants are "sued persons" in the appellants' action. Accordingly, although the Settling Defendants will not be participants at trial, a trial apportionment of liability against them is consistent with the reasoning in Martin.

[53] Fifth, the decision in Martin is distinguishable on another, critical ground. The interpretive result in Martin was driven by important policy considerations that do not apply here. The court was concerned in Martin that a finding of a degree of fault in respect of a non-party could have significant consequences for other defendants under s. 1 of the Act. The court stated (at para. 36):

If the fault is apportioned only among the parties, then if there is a non-party who may also have been at fault and contributed to the damage, a larger percentage of the whole loss may be attributed to each party, so that the entire loss is divided for indemnity purposes, and no gap is left. But if a portion of the fault were attributed to a non-party, or to a party at fault but with a legal defence such as a limitation defence, the defendants who are liable to the plaintiff would be left with no one from whom they could recover that portion of the claim.

(Emphasis added)

[54] This concern is met by the type of Pierringer settlement agreement employed by the appellants and Settling Defendants. By the terms of the Agreements and their amended pleading, the appellants have acknowledged and agreed that they will hold the Non-Settling Defendants accountable for their several liability only. As well, the Settling Defendants have agreed that the trial judge may apportion fault or negligence against them, although they will not take part in the trial.

[55] By reason of these concessions, no risk of a "gap" in liability arises, in the sense described in Martin, from the potential apportionment of liability at trial to the Settling Defendants. As I have said, there is no absent or unknown tortfeasor in the case at bar, and the appellants have contractually limited their claims as against both the Settling Defendants and the Non-Settling Defendants. As a result, if the Agreements are given effect at trial, any Non-Settling Defendant against whom fault or neglect [page187] is found will not be exposed to the risk of an apportionment to them of a larger percentage of the appellants' total loss, based on joint liability with the Settling Defendants, than would otherwise occur, based on their own direct fault.

[56] Finally, Kerr advances an additional compelling reason to support a liability apportionment at trial against the Settling Defendants. He asserts that there is a real risk that none of the Non-Settling Defendants, except himself, will have the financial means to satisfy any judgment granted against them. He therefore submits that he may be exposed under the operation of s. 1 of the Act to the risk of paying damages in excess of any several shares of damages that might be apportioned against him, because he will be jointly liable under s. 1 for the several liability of any impecunious Non- Settling Defendant. As a result, Kerr wishes to be free to take the position at trial that his exposure to any shortfall in the appellants' recovery of damages occasioned by the insolvency of another Non-Settling Defendant should be reduced by a proportion related to the fault of the Settling Defendants.

[57] Assuming, without deciding, that this argument is available under Ontario law, Kerr will be unable to advance this submission at trial if the trial judge lacks the authority to determine the degree in which the Settling Defendants are at fault or negligent, if at all.

[58] On the basis of all these factors, it is my view that the purpose of s. 1 of the Act is not undermined by the Agreements and no question of potential unfairness or prejudice to any of the parties will arise from the implementation of the part of the settlements that contemplates the apportionment of fault or neglect at trial to the Settling Defendants.

[59] In my view, the reasoning in Martin does not mean that persons who have been sued by a plaintiff and who, therefore, are not strangers to the action, invariably cannot be subject to an apportionment of liability at trial under s. 1 of the Act if they become non-parties to the plaintiff's action by reason of a pre-trial settlement. To the contrary, in my opinion, when a named party defendant invokes the jurisdiction of the court by defending claims of negligence brought against it, and thereafter relinquishes its right to pursue its defence of those claims by voluntarily entering into a pre-trial settlement, that party is a "person" against whom an apportionment of liability may properly be made where, as here, no question of unfairness or prejudice will arise. Such an apportionment, in my opinion, comports with the interpretation of the substance of s. 1 of the Act that was articulated by this court in Martin. In this case, the [page188] absence of unfairness or prejudice is indicated by the fact that the parties active in the litigation consent to, or do not oppose, an apportionment at trial of fault or neglect, if any, to the Settling Defendants.

(ii) Experience in other provinces with Pierringer agreements

[60] The parties also argue that the motions judge's decision is contrary to the developed experience in other provinces concerning the implementation of Pierringer settlement agreements. They point out that the implementation of settlement agreements of the Pierringer type has been approved by the appellate courts of Alberta and British Columbia, even in the absence of the consent, or the non-opposition, of all parties: see Amoco, supra, and British Columbia Ferry Corp. v. T & N plc, 1995 1810 (BC CA), [1995] B.C.J. No. 2116, 27 C.C.L.T. (2d) 287 (C.A.). See also, concerning the assessment of fault against non- parties, Wells v. McBrine (1988), 1988 3087 (BC CA), 33 B.C.L.R. (2d) 86, 54 D.L.R. (4th) 708 (C.A.) and the discussion regarding that case by this court in Martin at para. 43.

[61] The motions judge correctly concluded that such decisions should be approached with caution by Ontario courts because the statutory regimes governing the apportionment of negligence vary from province to province. Simply stated, the impact in another province of a Pierringer settlement agreement on the rights of non-settling parties to a lawsuit may have no relevance in Ontario because the applicable statutory regime and the procedural rules of court that govern the forum in which the lawsuit was commenced may be fundamentally different from those that apply in Ontario.

[62] In my view, however, the Amoco decision and similar cases are instructive in this respect: they essentially emphasize that the interests of the administration of justice are not facilitated by requiring the involvement at trial of a litigant for purely procedural purposes where this can be avoided without unfairness or prejudice to the parties. I endorse this proposition.

[63] As observed by this court in Martin at para. 27:

With litigation becoming more and more expensive and numerous initiatives being taken to reduce the cost of litigation, it would be counterproductive to interpret the Negligence Act as requiring the addition of unnecessary parties, purely for form, in order to obtain a fair and proper apportionment of fault.

This statement in Martin was concerned with the suggestion by the trial judge in that case, a suggestion rejected by this court, that persons for whom a defendant may be found to be vicariously liable must be added as third parties in order to support a [page189] finding of vicarious liability against the named defendant. Nonetheless, it underscores the desirability of avoiding the joinder or involvement in litigation, for purely procedural or technical purposes, of persons who are not otherwise necessary parties.

[64] The conclusion that I have reached regarding the proper interpretation of s. 1 of the Act and the decision in Martin avoids this result. I again underscore, as argued by some of the Settling Defendants in these proceedings, that the "persons" against whom a finding of contributory fault or neglect is sought in this case (the Settling Defendants), are persons who had proper notice of the appellants' allegations and a full opportunity to respond to them. They voluntarily elected to terminate their involvement in the litigation on terms that contemplate that the Non-Settling Defendants will continue to have the right to seek a trial apportionment of the Settling Defendants' degree of contributory responsibility, if any, despite the absence of the Settling Defendants at trial. Moreover, they have agreed to be discovered, should discovery of them be sought by the appellants or Kerr. Thus, there is no suggestion in this case of potential procedural unfairness to the Non-Settling Defendants. Finally, all active parties to this litigation either consent, or do not object, to the apportionment of liability at trial as against the Settling Defendants. These factors obviate any need for the Settling Defendants to remain involved in the litigation as passive or active litigants.

(iii) Public interest in promoting settlement

[65] Finally, there is an additional, and powerful, reason to support the implementation of the Agreements in this case: the overriding public interest in encouraging the pre-trial settlement of civil cases. This laudatory objective has long been recognized by Canadian courts as fundamental to the proper administration of civil justice: see for example, Sparling v. Southam Inc. (1988), 1988 4694 (ON SC), 66 O.R. (2d) 225, 41 B.L.R. 22 (H.C.J.) at p. 230 O.R., referred to with approval by the Supreme Court of Canada in Kelvin Energy Ltd. v. Lee, 1992 38 (SCC), [1992] 3 S.C.R. 235, 97 D.L.R. (4th) 616 at para. 48; and Ontario New Home Warranty Program v. Chevron Chemical Co. (1989), 1999 15098 (ON SC), 46 O.R. (3d) 130, 37 C.P.C. (4th) 175 (S.C.J.) at p. 147 O.R. Furthermore, the promotion of settlement is especially salutary in complex, costly, multi-party litigation. As observed in Amoco at p. 677 D.L.R.:

In these days of spiralling litigation costs, increasingly complex cases and scarce judicial resources, settlement is critical to the administration of justice.

[66] The negotiated settlement between the appellants and the Settling Defendants, as recorded in the Agreements and reflected [page190] in the appellants' amended pleading, is in the public interest and the interests of all active parties to the litigation. The implementation of the Agreements, which necessitates an apportionment of liability at trial against the Settling Defendants, will result in the participation of fewer parties at trial and will shorten the duration of the trial. This, in turn, will reduce the legal costs of the parties and permit the efficient use of judicial and court resources. As well, and importantly, the implementation of the Agreements is in the interests of all the defendants to the action. The interests of the Settling Defendants are furthered by the release contained in the Agreements and the potential liability of the Non-Settling Defendants is significantly limited under the bargain made by the appellants.

[67] I conclude that Pierringer settlement agreements, of the type employed in this case, should be supported in circumstances where, as here, the fairness of the settlement is unchallenged and prejudice arising from the full implementation of the settlement has not been alleged or shown. Cases of this kind cannot be rendered "unsettleable", for all practical purposes, without just and substantive cause. Such cause does not arise in the case at bar.

(iv) Other relevant factors

[68] I wish to comment upon two additional and related considerations arising in these proceedings. Kerr argued before this court that the trial judge in this action would be faced with a most difficult, if not impossible, task if required to determine the Non-Settling Defendants' several share of liability without being in a position to make the same determination concerning the responsibility, if any, of the Settling Defendants for the appellants' losses. Correspondingly, he asserted that the determination of his share of liability without regard to the Settling Defendants' contributory responsibility would be manifestly unfair.

[69] I agree with both of these submissions. The appellants' allegations, if proven, will make Kerr, the other Non-Settling Defendants and the Settling Defendants concurrent tortfeasors. The liability of the Non-Settling Defendants, however, will be limited to their several liability, and their joint liability with each other, in accordance with the contractual concessions made by the appellants in the Agreements. In these circumstances, it is difficult to conceive how the several liability of the Non-Settling Defendants could properly and justly be determined by the trial judge without regard to the proportionate fault or neglect of the Settling Defendants. [page191]

[70] In some ways, this is analogous to the apportionment of vicarious liability addressed in Martin. In that case, as I have said, this court held that the hospital's total liability, including its vicarious liability, could not be justly determined without a determination of the degree of fault of the negligent nurse. Similarly, fairness requires that Kerr's several share of fault or neglect not be determined in a vacuum, without consideration of the several liability of all other proven tortfeasors. Were it otherwise, Kerr could be exposed at trial to the potential risk of being required to pay damages to the appellants for part of the Settling Defendants' several shares of liability, claims to which, as Kerr properly points out, have been compromised and released by the appellants under the Agreements.

V. DISPOSITION

[71] For the reasons given, I would allow the appeals, set aside the order of the motions judge, and answer the question posed on the special case as follows: the Superior Court has jurisdiction, in the circumstances of this case, to determine whether and to what extent any fault or neglect of the Settling Defendants caused or contributed to the damages alleged by the appellants, although the Settling Defendants will not be parties to the action at trial. As acknowledged by the parties, this is not an appropriate case for an award of costs.

Appeal allowed.