Gendron v. Doug C. Thompson Ltd. (Thompson Fuels), 2019 ONCA 293 (CanLII)

Full Decision

Material Facts:
The following case discusses the right of set-off in Pierringer agreements.

This case is about a 2008 oil leak, wherein a home furnace oil tank leaked through the basement and into surrounding soil, through a drainage system under the house and into the city’s culvert, which carried it into nearby Sturgeon Lake. The leak instigated a massive remediation project to remediate the millions of dollars of damage to the environment.

The plaintiff in this case (“Mr. Gendron”) sued in negligence against the following three parties: Thompson Fuels, his fuel supplier and service technician; the Technical Standards and Safety Authority (the “TSSA”), as the administrative authority responsible for regulation and enforcement of fuels in Ontario; and Les Reservoirs D’Acier de Granby Inc. (“Granby”), the manufacturer of the oil tanks.

History of Proceedings:
Granby settled with Mr. Gendron shortly after the trial began, signing a Pierringer agreement. In return for Granby’s settlement, Mr. Gendron released Granby from the action and removed the risk that co-defendants might have to pay Granby’s share of damages if Granby could not do so. At the conclusion of trial, the trial judge granted judgement in favour of Mr. Gendron against Thompson Fuels. The court appropriated 60% liability to Mr. Gendron and 40% to Thompson Fuels, and found that the two remaining defendants (the TSSA and Granby) were not liable.

Following trial, the parties appeared before the trial judge to address whether Thompson Fuels has a right of set-off so that its liability for damages would be reduced by the amount paid by Granby to Mr. Gendron pursuant to their partial settlement agreement. The trial judge held that Thompson Fuels did not have a right of set-off against the amount paid by Granby to Mr. Gendron under the Pierringer agreement, because Mr. Gendron would not receive double recovery.

Thompson Fuels and Mr. Gendron initiated separate appeals, which were heard together. The Court of Appeal unanimously dismissed both appeals, including the ground of appeal regarding the right of set-off.

There were 9 issues raised at appeal, including the issue of the right of set-off in Pierringer agreements. The court was asked to consider whether the trial judge erred in failing to reduce the amount awarded against Thompson Fuels by the amount of the Granby settlement, or, alternatively, in failing to reduce the total damages by the settlement amount before applying the allocation of fault.

The Court of Appeal decided that the trial judge correctly concluded that there was no double recovery until Mr. Gendron had been fully compensated for his loss. The trial judge found that the result was dictated by the Court of Appeal’s decision in Laudon v. Roberts, 2009 ONCA 383, 249 O.A.C. 72, and held there was no right of set off, because Mr. Gendron would not receive double recovery. This decision is consistent with the policy objectives underlying Pierringer agreements.

In its decision, the Court of Appeal defined Pierringer agreements as follows:

[97] A Pierringer agreement is used in multi-party litigation when one or more defendants, but not all of them, wish to settle with the plaintiff. These agreements permit a settling defendant to be released from a lawsuit under certain specific terms, leaving the remaining non-settling defendants to continue in the proceeding. Under the terms of a Pierringer agreement, a plaintiff may only seek recovery from the non-settling defendants on a several liability basis instead of a joint and several liability basis. The practical result is that settling defendants are no longer involved in the litigation and the remaining non-settling defendants are responsible only for the loss they actually caused.

In the present case, Mr. Gendron settled with Granby shortly after the start of trial and the parties entered into a Pierringer agreement. The trial judge dismissed the claim against Granby. That ruling has not been appealed; however, Thompson Fuels submits that Mr. Gendron will receive unfair compensation if he receives more than the damages awarded to him based upon the negligence of the defendants. According to Thompson Fuels, Mr. Gendron can only recover damages and interest in the total amount 40% of total assessed damages, and any compensation above that amount is unfair. Mr. Gendron takes the position that double recovery does not occur until he receives compensation in excess of his total loss.

In determining if the settling plaintiff has been overcompensated, the Court considered the question of whether one measures the plaintiff’s recovery against its total loss, or only against that portion of the loss that was not caused by its contributory negligence. In this regard, the Court adopted the analytical framework set out in a decision released subsequent to the present case’s trial judge’s decision, by the Alberta Court of Appeal (“ABCA”) in Canadian Natural Resources Ltd. v. Wood Group Mustang (Canada) Inc., 2018 ABCA 305, which stated that:

[151]…plaintiffs should be encouraged to settle multiparty claims, even if they are contributorily negligent. The settling but contributorily negligent plaintiff in a Pierringer arrangement should not have to give credit to the non-settling defendant until it is fully indemnified for its losses.

The Court in the present case added that it is not always a simple matter to determine whether the plaintiff has been overcompensated by reason of a partial settlement. In any event, courts should encourage settlements, and responsible plaintiffs who reach a settlement agreement should not be punished by reason of the fact that they appear to have reached a settlement for an amount greater than what the court ultimately awards.

The Court also reviewed American case law, which indicates that although the liability of a non-settling defendant is limited to its proportionate share of fault, the non-settling defendant generally does not enjoy a further right of set-off against the amount of the settlement. The Court stated that although the rule in Canada is different, Canadian courts have not been indifferent to considerations of encouraging settlements and fairness to the non-settling defendant as seen in cases such as Ratych v. Bloomer, [1990] 1 SCR 940.

The Court concluded that absent double compensation, a non-settling defendant should not be able to rely on the benefits of a Pierringer agreement to which it is a stranger, beyond the guarantee that it will not be required to pay more than its share of the liability. By taking this approach, a plaintiff who may have been contributorily negligent will be encouraged to attempt to settle.

For the foregoing reasons, the court unanimously dismissed the appeals, and confirmed the trial decision that the defendant found liable at trial (Thompson Fuels) was not entitled to set off for amount paid by the defendant who settled under a Pierringer agreement (Granby).

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