Miller Group Inc. et al. v. James et al.

[Indexed as: Miller Group Inc. v. James]

Ontario Reports

Court of Appeal for Ontario,

Sharpe, Epstein and Pepall JJ.A.

April 29, 2014

120 O.R. (3d) 155 | 2014 ONCA 335

Case Summary

Civil procedure — Settlement — Plaintiffs suing M and S for damages allegedly caused by fly rock incident following blasting at quarry owned by M and operated by S — M cross-claiming against S for indemnity — Plaintiffs and S entering into settlement agreement — Plaintiffs agreeing to dismissal of their action against S and agreeing to restrict their claims against M to sums for which M might be severally liable — [page156] Motion judge dismissing M's cross-claim and dismissing M's motion for summary judgment dismissing plaintiffs' claim — M's appeal allowed — Motion judge failing to deal with threshold issue of whether M could establish implied oral agreement with S for indemnification.

The plaintiffs sued M and S jointly for damages allegedly caused by a fly rock incident following blasting at a quarry owned by M and operated by S. M cross-claimed against S for indemnity, alleging that S had agreed to indemnify M for claims such as those asserted by the plaintiffs. The plaintiffs and S entered into a "Pierringer" or proportionate share settlement agreement which provided that S would pay the plaintiffs $35,000 for damages and costs in return for a dismissal of the plaintiffs' action against S and a full release. The agreement provided that the plaintiffs would surrender any right to pursue M for damages for which M had a right against S for indemnity. The plaintiffs moved to amend their statement of claim to remove S and to restrict their claim against M to one for several damages. S moved for summary judgment dismissing M's cross-claim. M moved for summary judgment against the plaintiffs on the ground that the plaintiffs were estopped from proceeding against M under the terms of the settlement agreement and in the light of S's oral or implied agreement to indemnify M. The motion judge granted the plaintiffs' and S's motions and dismissed M's motions, but held that M was entitled to amend its statement of defence to seek a declaration for contribution and indemnity. M appealed.

Held, the appeal should be allowed.

The trial judge correctly found that M's substantive right to seek a reduction of its own liability, if any, to the plaintiffs by virtue of an assessment of contribution or indemnity by S, if any, was preserved and that M's right to a reduction of its exposure to the plaintiffs by any amount it could assert against S by way of contribution or indemnity remained. However, the motion judge erred by failing to address the threshold issue of whether M could establish an implied oral agreement with S for indemnification. That issue could be determined, if necessary, pursuant to rule 20.04(2.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

Cases referred to

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, 105 A.C.W.S. (3d) 56 [Leave to appeal to S.C.C. refused [2001] S.C.C.A. No. 383]; Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764, 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167, 93 B.L.R. (4th) 1, 10 C.L.R. (4th) 17, 211 A.C.W.S. (3d) 845; Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7, 366 D.L.R. (4th) 641, 453 N.R. 51, J.E. 2014-162, 314 O.A.C. 1, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 46 C.P.C. (7th) 217, 95 E.T.R. (3d) 1, 37 R.P.R. (5th) 1; M. (J.) v. B. (W.) (2004), 2004 8541 (ON CA), 71 O.R. (3d) 171, [2004] O.J. No. 2312, 240 D.L.R. (4th) 435, 187 O.A.C. 201, 47 C.P.C. (5th) 234, 131 A.C.W.S. (3d) 557 (C.A.); Pierringer v. Hoger, 124 N.W.2d 106, 21 Wis. 2d 182 (S.C. 1963)

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(2) [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 20.04(2.2) [page157]

APPEAL from the order of Ray J., [2013] O.J. No. 5820, 2013 ONSC 3266 (S.C.J.) dismissing the defendant's cross-claim and dismissing its motion for summary judgment dismissing the plaintiffs' claim.

Ryan D. Garrett, for appellants.

Robert E. Houston, Q.C., and Jaime Wilson, for respondents Jimmie Raymond James and Brenda Lee James.

Craig O'Brien, for respondents Sernoskie Bros. Limited et al.

The judgment of the court was delivered by

[1] SHARPE J.A.: — This appeal involves the interpretation and application of a "Pierringer" or proportionate share settlement agreement.

[2] The plaintiffs, Jimmy and Brenda James (the "Jameses"), commenced this action in negligence and nuisance for property and personal injury damages. They allege that the damages were caused by a fly rock incident following blasting at a quarry owned by the appellant Miller Group Inc. and Smith Construction ("Miller Group") and operated by the respondents Sernoskie Bros. Limited and Alan Sernoskie (the "Sernoskies"). The Miller Group cross-claimed against the Sernoskies for indemnity, alleging that the Sernoskies had agreed to indemnify them for claims such as those asserted by the Jameses and to add them as named insureds on their liability insurance.

[3] After the completion of discoveries, the Jameses and the Sernoskies entered into a settlement agreement modeled on that used in Pierringer v. Hoger, 124 N.W.2d 106, 21 Wis. 2d 182 (S.C. 1963) and considered in M. (J.) v. B. (W.) (2004), 2004 8541 (ON CA), 71 O.R. (3d) 171, [2004] O.J. No. 2312 (C.A.) and Amoco Canada Petroleum Co. v. Propak Systems Ltd., 2001 ABCA 110, [2001] A.J. No. 600, 200 D.L.R. (4th) 667 (C.A.), leave to appeal to S.C.C. refused [2001] S.C.C.A. No. 383. The settlement agreement provided that the Sernoskies would pay the Jameses $30,000 for damages and $5,000 for costs in return for a dismissal of the Jameses' action against the Sernoskies and a full release. The agreement further provided that the Jameses were entitled to pursue their claims against the Miller Group only with respect to the several liability of those defendants and that the Jameses would amend their statement of claim accordingly. The Jameses were required to restrict their claims to sums for which the Miller Group may be severally liable. Significantly, the Jameses specifically agreed only to pursue the Miller Group for claims for which the Miller Group "shall have no basis to seek contribution, indemnity, relief over or relief by way of equitable subrogation, declaratory relief or otherwise against the [page158] [Sernoskies]". The Jameses further agreed to indemnify the Sernoskies for any cross-claims or claims for indemnity that were, are or could be raised in the action.

The Motions and Order under Appeal

[4] This appeal arises from an order made on three motions brought and heard together:

(1) the Jameses moved for leave to amend their statement of claim to remove the Sernoskies and to restrict their claim to one for several damages against the Miller Group based in nuisance;

(2) the Sernoskies moved for summary judgment against the Miller Group asking for dismissal of the Miller Group's cross-claim against them;

(3) the Miller Group moved for summary judgment against the Jameses on the ground that the Jameses were estopped from proceeding against the Miller Group under the terms of the settlement agreement and in the light of the Sernoskies' oral or implied agreement to indemnify the Miller Group.

[5] The motion judge

(1) granted the Jameses' motion to remove the Sernoskies from the action and to amend the statement of claim;

(2) granted the Sernoskies' motion for summary judgment dismissing the Miller Group cross-claim; and

(3) dismissed the Miller Group's motion for summary judgment to dismiss the Jameses' claim. The order further provided, however, that the Miller Group is entitled to amend its statement of defence to seek a declaration for contribution and indemnity and that it shall be entitled to seek that declaration notwithstanding the removal of the Sernoskies from the proceedings. The motion judge said that this declaration was to replace the Miller Group's cross-claim against the Sernoskies.

Issues

[6] The Miller Group appeals the dismissal of its cross-claim against the Sernoskies and dismissal of its motion for summary judgment to dismiss the Jameses' claim. As the provision in the order dismissing the Miller Group cross-claim is final in nature, [page159] we proceeded to entertain both aspects of this appeal pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(2).

Analysis

[7] It is common ground that under the terms of the settlement agreement, the Jameses have surrendered any right to pursue the Miller Group for damages for which the Miller Group has a claim against the Sernoskies for indemnity. In support of its position before the motion judge resisting the Sernoskies' motion for summary judgment to dismiss the cross-claim and advancing its claim for summary judgment to dismiss the Jameses' claim, the Miller Group provided an affidavit from its property manager, Thomas Jones. In that affidavit, Jones deposed that while there was no written agreement setting out the terms of service by the Sernoskies to the Miller Group, the Sernoskies were responsible for the design and execution of all blasting operations at the Miller Group quarry and the Miller Group relied entirely on their expertise. Jones further deposed that it was the Miller Group's expectation that if the blasting operations conducted by the Sernoskies caused any damage, the Sernoskies would indemnify the Miller Group for such damages. Jones was not cross-examined on that affidavit and neither the Jameses nor the Sernoskies provided any evidence to challenge the allegation of an implied indemnity agreement.

[8] The motion judge found, in my view correctly, that the Miller Group's "substantive right to seek a reduction of its own liability if any to the plaintiff by virtue of an assessment of contribution or indemnity by Sernoskie, if any, is preserved" and that the Miller Group's "right to a reduction of its exposure to the plaintiffs by any amount it can assert against Sernoskie by way of contribution or indemnity remains". However, the motion judge made no comment or finding as to whether the Jones affidavit was sufficient to establish an indemnity agreement and a consequent right to reduction or elimination of the Jameses' claim in its entirety. His order that the Miller Group should be allowed to advance a claim for a declaration for contribution and indemnity notwithstanding the removal of the Sernoskies indicates that he thought there was an arguable basis for such a claim.

[9] In my view, the motion judge erred by failing to address the factual and substantive basis for the Miller Group's claim for summary judgment dismissing the Jameses' claim. The combination of the terms of the settlement agreement and the assertion of an indemnity agreement between the Miller Group and the Sernoskies gives rise to a threshold question as to the Miller Group's liability for the damages claimed by the James. The [page160] Miller Group brought a motion for summary judgment to have that threshold issue determined, but the motion judge failed to deal with it.

[10] In oral argument before us, counsel for the Miller Group submitted that we should grant summary judgment dismissing the claim on the basis that the Jones affidavit asserting an implied indemnity agreement was uncontradicted. In my view, it would not be appropriate in the circumstances of this case to give that relief. First, I agree with counsel for the Jameses that the Jones affidavit is at least to some extent equivocal. Second, my review of the entire record, especially the factums filed on appeal and the reasons of the motion judge, as well as the oral submissions of counsel on this appeal, suggests to me that this matter was not presented to the motion judge with the same clarity that emerged during the oral argument of this appeal.

[11] On the other hand, the Miller Group has raised a significant threshold issue as to its liability and, in my view, the Miller Group is entitled to have that threshold issue determined by way of summary judgment. The issue of whether the Miller Group can establish an implied oral agreement with the Sernoskies for indemnification is one that can and should be determined, if necessary pursuant to the procedure contemplated by rule 20.04(2.2) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. This is a narrow and discrete issue involving oral evidence from a small number of witnesses that can be gathered in a manageable period of time and in which evidence is likely to have a significant impact on whether summary judgment is warranted: see Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7, 366 D.L.R. (4th) 641, paras. 61-65; Combined Air Mechanical Services Inc. v. Flesch (2011), 2011 ONCA 764, 108 O.R. (3d) 1, [2011] O.J. No. 5431 (C.A.), at para. 103.

[12] In these circumstances, the appropriate order is to allow the appeal from the order dismissing the Miller Group's cross-claim and dismissing the Miller Group's motion for summary judgment to dismiss the Jameses' claim and to remit the matter to the Superior Court for determination of the issue whether the Miller Group has a contractual right of indemnity against the Sernoskies. We were advised that the action is ready for trial and we leave the details of how best to schedule this motion in relation to the trial entirely in the discretion of the Superior Court of Justice.

[13] The Miller Group is entitled to its costs of the appeal fixed at $10,000, inclusive of disbursements and applicable taxes.

Appeal allowed.

End of Document