ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-385355
DATE: 20120830
BETWEEN:
MALCOLM RAINS Applicant/Plaintiff – and – LUCIAN BOGDAN MOLEA Respondent/Defendant and THE LOCH GALLERY INC. Defendant
David Quayat, for the Applicant/Plaintiff
Robert Rueter, for the Respondent/Defendant Lucian Bogdan Molea
Douglas B.B. Stewart, for the Defendant The Loch Gallery Inc.
HEARD: June 22, 2012
J. macdonald j.
reasons for decision
[ 1 ] The plaintiff has settled with one of two defendants. The Settlement Agreement states that the plaintiff will limit his claims against the non-settling defendant to that defendant’s several share of liability or his proportionate share of joint liability, and states also that the settling defendant will not sell certain of the non-settling defendant’s works of art until trial.
[ 2 ] The non-settling defendant states that he is prejudiced by the settlement term which prevents him from selling his works of art through the settling defendant, and he opposes the plaintiff’s motion to dismiss the action against the settling defendant to the extent of seeking a term in his favour.
the facts
a) The Litigation
[ 3 ] The plaintiff Rains, a Canadian artist, has sued the non-settling defendant, Molea, another Canadian artist, for infringement of copyright contrary to the Copyright Act, R.S.C. 1985, c. C-42. In addition, the plaintiff has sued both the non-settling defendant and the settling defendant, Loch Gallery Inc. which exhibited, offered for sale and sold the non-settling defendant’s works of art, for passing off these works of art as the plaintiff’s, contrary to the Trade-Marks Act, R.S.C. 1985, c. T-13 , and also for conspiring together to injure the plaintiff.
[ 4 ] The plaintiff’s action was instituted in August, 2009. The non-settling defendant’s Statement of Defence was delivered in September, 2009, denying all liability. The non-settling defendant did not cross-claim against the settling defendant. The settling defendant has defended the action but its Statement of Defence is not in the motion materials. The settling defendant was examined for discovery in April, 2010. The action was set down for trial in May, 2012.
b) The Settlement Agreement
[ 5 ] In March, 2012, the plaintiff and the settling defendant entered into a written Settlement Agreement which was promptly disclosed to the non-settling defendant, with the settlement sum redacted. The relevant portions of the Settlement Agreement are as follows:
Pending the trial of this Action and any appeals therefrom, Loch Gallery agrees not to sell or display, including on its website, the crumpled paper works of the defendant, Lucian Bogdan Molea (“Molea”), at issue in the Action.
Loch Gallery shall be permitted forthwith to sell and display crumpled fabric and unfurling roll works of Molea.
Rains shall limit his claims in the Action against Molea to claims and recovery for damages, costs and interest solely attributable to Molea’s several share of liability or proportionate share of joint liability to Rains proven against him at trial of the Action or by other final disposition by the Court. For greater certainty, Rains agrees that he shall have no claim directly or indirectly against Loch Gallery, and shall limit his claims against Molea so as to exclude any cross claim or third party claim made against or which could be made against Loch Gallery arising from the issues in the Action.
The Parties agree that the Court at any trial of the Action has and shall have full authority to adjudicate upon apportionment of liability, if any, between Molea and Loch Gallery, whether or not Loch Gallery remains as a party in the Action, including by cross claim or third party claim.
In the event that Molea claims against Loch Gallery, or notifies of his intention to claim against Loch Gallery, by way of cross claim or third party claim in the Action, Rains shall amend the Statement of Claim in the Action in accordance with the language at paragraphs 7 and 8 of these Minutes.
The Parties shall execute a Full and Final Mutual Release … .
Rains shall take out an Order dismissing the Action as against Loch Gallery on consent on a without costs basis, within 30 days of receipt of the Settlement Amount.
the issues
[ 6 ] The plaintiff has moved to dismiss the action against the settling defendant. Both these parties take the position that the Settlement Agreement does not require court approval. The Notice of Motion does not seek approval of the settlement.
[ 7 ] The non-settling defendant asserts that the settlement is subject to court approval, which has not been properly sought. He does not oppose dismissal of the action against the settling defendant provided that a term is imposed on the plaintiff. His position is that the provision of the Settlement Agreement which prevents him from selling certain of his works of art through the settling defendant until trial is an interference with his contractual relations with the settling defendant which is like an interlocutory injunction. Consequently, he seeks an undertaking from the plaintiff to pay all damages which he will sustain by reason of this interference if he is successful at trial, as a term of court approval of the settlement.
[ 8 ] The plaintiff and the settling defendant dispute that the non-settling defendant is prejudiced by the Settlement Agreement. The plaintiff submits that the term sought is neither necessary nor appropriate.
[ 9 ] The issues, therefore, are as follows:
Does the settlement require court approval?
Does the Settlement Agreement result in prejudice to the non-settling defendant?
If the settlement requires court approval and if the Settlement Agreement causes prejudice to the non-settling defendant, should the settlement be approved and if so, on what terms?
analysis
a) Does the settlement require court approval?
[ 10 ] There was argument about whether the Settlement Agreement is a “Pierringer agreement”, of the type first considered in Pierringer v. Hoger , 124 N.W. 2d 106 (Wis. 1963) . In Amoco Canada Petroleum Company v. Propak Systems Ltd. (2001) 2001 ABCA 110 , 200 D.L.R. (4 th ) 667, the Alberta Court of Appeal described Pierringer agreements as follows, at p. 671:
“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”.”
[ 11 ] A Pierringer agreement may also contain variations on this basic theme, with additional terms to address either the exigencies of a multi-party lawsuit or complications arising from partial settlement thereof. These additional terms often address interference with the ability of non-settling defendants to obtain productions from and to have discovery of settling defendants, and claims for contribution or indemnity by non-settling defendants against settling defendants.
[ 12 ] In this case, the Settlement Agreement at least resembles a Pierringer agreement because it states that the non-settling defendant will be responsible only for his several liability, or proportionate share of joint liability. Nonetheless, the plaintiff submits that this is not a Pierringer agreement. It is the plaintiff’s position that the non-settling defendant has not claimed contribution or indemnity from the settling defendant and therefore can only be held liable for his several liability or his proportionate share of joint liability. Thus, the plaintiff contends, the “proportionate share” language in the Settlement Agreement has no effect on the non-settling defendant, unlike in a Pierringer agreement.
[ 13 ] In my opinion, the issue is not whether this Settlement Agreement is properly described as a Pierringer agreement or whether the clause therein, which limits the plaintiff’s claims against the non-settling defendant to his several liability or his proportionate share of joint liability actually affects the non-settling defendant’s rights. In Martin et al. v. Listowel Memorial Hospital (2000), 51 O.R. (3d) 384, the Court of Appeal referred at para. 53 to an article entitled “Settlement of Complex Liability Lawsuits: Opportunities and Perspectives” (2000) 22 Advocates Quarterly 265, in which the authors, Paul Bates and James Cameron, suggest that the court should be involved in “reviewing the fairness of all partial settlements and their consequences for all parties”. At para. 54, the Court of Appeal stated that “this proposal is one which ought to be implemented.”
[ 14 ] Consequently, the fact that this is a partial settlement of the lawsuit and the non-settling defendant impugns the fairness of the Settlement Agreement makes it necessary for the court to consider the fairness of the settlement.
[ 15 ] It is not necessary that a party to a partial settlement seek formal court approval of the settlement, although that may be done if it is thought to be appropriate. Here, the motion for dismissal of the action against the settling defendant affords the court a full opportunity to consider the fairness of what has been agreed between the plaintiff and the settling defendant. The Settlement Agreement was disclosed promptly to the non-settling defendant and has been placed before the court. All parties have been able to address the issues which arise from the Settlement Agreement, for the court’s consideration. That is what is required.
[ 16 ] The parties to a civil lawsuit have broad discretion in choosing whether to settle some or all claims and in deciding on the terms of settlement. Settling civil cases is in the public interest: Kelvin Energy Ltd. v. Lee , (1992) 3 S.C.R. 235, 97 D.L.R. (4 th ) 616 at para. 48 , M.(J.) v. B.(W.) (2004), 71 O.R. (3d) 171 (C.A.) at para. 65 . Settlements are also an integral part of the administration of justice. As stated in the Amoco case ( supra ) 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.”
[ 17 ] The requirement that the court shall consider the fairness of all partial settlements of lawsuits does not derogate from these principles. This requirement also arises from the public interest, namely the public interest in the proper administration of justice in the courts, as public institutions. Experience with partial settlement agreements in multi-party lawsuits has shown that non-settling defendants may be seriously affected, both procedurally and substantively. See, for example, the Amoco case ( supra ) at pp. 674-75 D.L.R., Ontario New Home Warranty Program et al. v. Chevron Chemical Company (1999), 46 O.R. (3d) 130 (O.S.C.J.) and Lau v. Bayview Landmark Inc. [2006] 34 C.P.C. (6 th ) 138 (O.S.C.J.) . The risk of a partial settlement causing unfairness or prejudice to non-settling defendants in a lawsuit touches on the inherent jurisdiction of the court to control its process. The overarching need to ensure public confidence in the administration of justice is the reason why the court must review the fairness of a partial settlement of a lawsuit and its consequences. Public confidence in the administration of justice is enhanced when there is partial settlement of a lawsuit by ensuring the integrity of the court’s process.
[ 18 ] The applicable principle is that settlement agreements of the type under consideration should be supported where 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 type cannot be rendered unsettleable unless there is just and substantive cause: M.(J.) ( supra ) at para. 67.
b) Does the Settlement Agreement result in prejudice to the non-settling defendant?
[ 19 ] The non-settling defendant asserts that the term of the Settlement Agreement which prevents him from selling certain of his works of art through the settling defendant until trial causes prejudice to him by interfering with his contractual rights. He does not assert that the Settlement Agreement interferes with him or his litigation position in any other way.
[ 20 ] The motion materials establish that the settling defendant and the non-settling defendant entered into a letter agreement in 2005 pursuant to which the settling defendant would exhibit, offer for sale and sell the non-settling defendant’s works of art. I find that this arrangement resulted in the settling defendants selling the non-settling defendant’s works of art from 2005 until 2008. This arrangement ended in November, 2008, I find, because the settling defendant decided that it should stop selling the non-settling defendant’s works of art, given the plaintiff’s allegations. The non-settling defendant did not file any evidence which contradicts the aforesaid evidence of the settling defendant.
[ 21 ] I therefore find that it was the plaintiff’s allegations, now contained in the lawsuit and not the Settlement Agreement which disrupted any contractual relations between the defendants. On all of the evidence, the Settlement Agreement therefore does not cause prejudice to the non-settling defendant.
c) Should the settlement be approved and if so, on what terms?
[ 22 ] Approval of the settlement has not been sought and is not formally required. The court has been given the opportunity to consider the fairness of the settlement and its effect on the non-settling defendant. That is all that is required. The term which the non-settling defendant seeks to impose on the plaintiff is excessive and unnecessary because the settlement agreement does not cause prejudice to the non-settling defendant. There is no just or substantive cause for refusing to take the steps necessary to implement the settlement.
order
[ 23 ] The action is dismissed against the settling defendant. As requested by both the plaintiff and the settling defendant, this is on a with prejudice, without costs basis.
[ 24 ] I award the costs of the motion to the plaintiff against the non-settling defendant. If these parties cannot agree on costs, the plaintiff’s written submissions not exceeding three double-spaced pages, plus all necessary docket and disbursement information, shall be delivered within 14 days, and the non-settling defendant’s written submissions, similarly limited, shall be delivered within 25 days of the release of these reasons.
Mr. Justice John Macdonald
Released: August 30, 2012
COURT FILE NO.: CV-09-385355
DATE: 20120830
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MALCOLM RAINS Applicant/Plaintiff – and – LUCIAN BOGDAN MOLEA Respondent/Defendant and THE LOCH GALLERY INC. Defendant
REASONS FOR DECISION
J. Macdonald J.
Released: August 30, 2012