In Maio v. Kapp Contracting Ltd., the Ontario Court of Appeal once again tackled the difficult concept of Pierringer Agreements.
Briefly, the facts are as follows. The plaintiffs brought an action against three defendants because of flood damage losses. The defendants crossclaimed against one another and also issued third-party claims. The third parties then issued a fourth-party claim.
The plaintiffs subsequently settled with one of the defendants the City of Vaughan (the “City”). As part of the settlement, the plaintiffs and the City entered into a Pierringer Agreement. The agreement included the following term:
THE PLAINTIFFS AND THE SETTLING DEFENDANT AGREE AND CONSENT to the dismissal of the action commenced in the Superior Court of Justice at Toronto under Court File No.: CV-10-410508 (the “Action”) on a without costs basis as against the Settling Defendant. It is understood and agreed that, should the Plaintiffs so choose, the Plaintiffs may continue to pursue their claims against the Remaining Defendants, but that such claim will only be pursued solely with respect to the several liability of the Remaining Defendants. [Emphasis added.]
After entering into the agreement, the plaintiffs dismissed their claim against the City. The remaining defendants also dismissed their crossclaims against the City. The dismissal Order included a term that the plaintiffs were to amend their statement of claim to restrict their claims against the remaining defendants to each defendant’s several liability.
Later, the plaintiffs dismissed their claim against one of the two remaining defendants, Kapp Contracting Ltd. (“Kapp”), leaving only one defendant, Mer Mechanical Inc. (“Mer”) – as well as the third parties and fourth party.
The issue on appeal was whether the Pierringer Agreement and dismissal Order precluded the defendant, Mer, from pursuing its third-party claims because the action was restricted to Mer’s several liability only.
The Court of Appeal found that Mer is not prevented from pursuing its third-party claims. The Court found that the agreement and Order merely prevents the plaintiffs from recovering damages against Mer that may be attributable to the City and to Kapp – the other named defendants who were out of the action. But that in no way affected Mer’s ability to seek contribution from the third parties.
Paragraph 9 of the Court’s decision is particularly important. In that paragraph, the ONCA stated that a Pierringer Agreement which limits a plaintiff’s claim to the several liability of the remaining defendants does not limit a plaintiff’s recovery to ONLY those damages directly attributed to those remaining defendants. Rather, the agreement merely ensures that the plaintiff does not recover any damages attributable to the defendant or defendants released in the agreement – unless the agreement is specifically worded otherwise.
In Maio v. Kapp Contracting Ltd., there was no specific wording otherwise. There was no basis for finding that the parties to the Pierringer intended to reduce the plaintiffs damages to ONLY those that could be specifically attributed to the remaining defendant, thereby releasing all third and fourth parties from any potential liability.
If you are like me, these principals can be difficult to conceptualize in the abstract – so I will do my best to give a practical illustration of what the ONCA outlined. Assume a plaintiff’s losses were caused by parties A, B, C, D, E and F. Further assume parties A and B are collectively 30% responsible for the losses; C is 50% responsible; and D, E and F are collectively 20% responsible, but the plaintiff only sued A, B, and C. If A and B are let out pursuant to a typical Pierringer Agreement, the plaintiff can still pursue C for the remaining 70% of the losses and any third party claims C has against D, E and F for contribution and indemnity will also remain with respect to C’s liability.
The moral of this story is that a typical Pierringer Agreement merely prevents plaintiffs from recovering damages caused by the released defendants. It does not prevent a plaintiff from recovering damages caused by other persons.
Stated more simply, but not as comprehensively, a typical Pierringer Agreement does not release third, fourth or subsequent parties, from legal responsibility.
