A Practical Guide to Joint and Several Liability

September 1, 2022

A Practical Guide to Joint and Several Liability

A PRACTICAL GUIDE TO JOINT AND SEVERAL LIABILITY

Eric A. Dolden and Tiffany M. Sillanpää

September 2022

CONTACT LAWYER

ERIC A. DOLDEN
604.891.0350
edolden@dolden.com
TIFFANY M. SILLANPÄÄ
647.494.8840
tsillanpaa@dolden.com

A PRACTICAL GUIDE TO JOINT AND SEVERAL LIABILITY

I.       INTRODUCTION

Insurers are often confronted with either the reality or the prospect of multi-party litigation. The ensuing issues of joint and several liability, third party proceedings and costs apportionment can be daunting to insurers vested with the responsibility of instructing litigation counsel. This is so not only because the issues are complex, but because the law is constantly evolving and the decisions to be made are rife with strategic considerations.

The purpose of this paper is to provide insurers with a practical guide to joint and several liability focussing on some of the important issues which need to be considered by insurers faced with the threat of liability in multi-party proceedings. The paper specifically considers the consequences of adding a third party to an action and also discusses arguments that can and should be made in respect of the apportionment of costs.

II.      JOINT AND SEVERAL LIABILITY: CONTRIBUTION AND INDEMNITY

Before we dive into joint and several liability and how it operates across Canada, it is important to define some common terms found in the caselaw:

  • Joint concurrent tortfeasors – tortfeasors whose acts concur (run together) to produce the same damage or injury.
  • Several concurrent tortfeasors – independent tortfeasors, whose separate actions combine to cause the same damage or injury.
  • Several tortfeasors – independent tortfeasors, each of whose actions cause different damage or injuries.
  • Contribution – is a claim by a tortfeasor who has been found liable to a plaintiff to recover a share of the damages from another individual.
  • Indemnity – is a claim by a tortfeasor who has been found liable to a plaintiff to recover the entire amount from another individual.

a)   Liable Co-defendants

Modern provincial and territorial legislation in Canada provides for indemnity or contribution among joint tortfeasors. For example, section 4 of the British Columbia Negligence Act provides:

Liability and right of contribution

4(1)     If damage or loss has been caused by the fault of 2 or more persons, the Court must determine the degree             to which each person was at fault.

(2)       Except as provided in section 5 if 2 or more persons are found at fault

(a)     they are jointly and severally liable to the person suffering the damage or loss, and
(b)     as between themselves, in the absence of a contract express or implied, they are liable to contribute           to and indemnify each other in the degree in which they are respectively found to be at fault.

The practical effect of such legislation is to make people who were merely severally liable at common law jointly liable. In practice, where two or more persons have caused a plaintiff’s injury and/or loss, the court will find the defendants jointly and severally liable for the plaintiff’s damages. While there are some exceptions, as noted below, in a practical sense, this means that the plaintiff is entitled to collect the entire judgment from any defendant, and that the defendant who pays the plaintiff can then seek reimbursement from the other defendant(s) for their proportionate share of the loss. The plaintiff’s ability to recover the full amount from any defendant is of obvious importance when one defendant has no funds from which to pay a judgment. It is also the reason why plaintiff counsels try to ensure that even just 1% liability rests on an insured defendant.

By way of example of joint and several liability, in Strata Plan NW 3341 v. Canlan Ice Sports Corp., the plaintiff strata corporation claimed damages for leak-related repairs to three buildings and sued the developer, contractor, structural engineer, and a building design company as defendants. Various defendants then commenced third party proceedings against the contractor, structural engineer and the building design company. Prior to trial, the plaintiffs had settled with the developer. The court found 20% liability against the Corporation of Delta. In subsequent reasons, the court determined that, the developer Canlan was 30% at fault and that the general contractor Van Maren and designer Elbe Lock Walls, were each 25% at fault. Although the defendants argued that the plaintiffs were contributorily negligent in causing the damage, the court rejected their argument.

The effect of Strata Plan NW 3341 is that a plaintiff is entitled to collect the entire judgment from any of the defendants at fault. If one defendant pays the entire judgment, that defendant can then issue third party proceedings against the other defendants who were found at fault and claim contribution from them defendant in the proportion that each was found liable to the plaintiff.

b)   Plaintiff Partially Liable

Where the plaintiff is found to be partly at fault for his/her loss (contributorily negligent), the law in British Columbia differs from the law in Ontario and many other Canadian jurisdictions. In British Columbia, when a plaintiff is contributorily negligent, the defendants are only severally liable and not jointly liable. This means that a defendant plaintiff is only liable to pay damages in proportion to its own liability; it is not liable to pay for any other party’s share of liability. Therefore, it is very important for plaintiffs who risk being found partly liable to ensure that all potential tortfeasors are named as defendants so that maximum recovery can be made. This is not the case in many other Canadian jurisdictions. In the remaining provinces, under the same circumstances, the defendants would remain jointly and severally liable to the plaintiff.

c)   Cross-Canada Examples

The ability of a plaintiff to recover under joint and several liability is generally consistent across Canada with the exception of Saskatchewan, British Columbia, and Nova Scotia.

In most provinces, including Alberta and Ontario, if one of multiple defendants is not found liable or does not have funds to pay its portion of liability, the other defendants will still be jointly and severally liable to pay the plaintiff for their own and the delinquent co-defendant’s portion of the damages.

In British Columbia, contributorily-negligent plaintiffs do not have recourse against co-defendants for the delinquent defendant’s share of liability; they can only collect damages from each defendant in accordance with that defendant’s liability, regardless of whether any defendant is unable to satisfy its liability exposure. Nova Scotia also follows this approach.

Saskatchewan is an outlier province. Here, the delinquent defendant’s liability is apportioned pro rata among the other parties based on their own respective shares of liability.

To further illustrate how each Canadian province would deal with joint and several liability, as well as the allocation of damages, consider the following scenario and chart demonstrating how the likely outcomes:

  • Two patrons fight in a bar.
  • Patron #1 sustains a broken jaw.
  • Patron #2 runs out of the bar immediately and is never identified.
  • Patron #1 sues the bar and Patron #2 (as an unidentified “John Doe”), and is awarded $100,000.
  • Liability is apportioned at trial as follows:
    • Patron #1 – 35%
    • Patron #2 – 50%
    • Bar – 15%
ProvinceJoint & Several LiabilityAllocation as per example
British ColumbiaNegligence Act, [RSBC 1996] c. 333, ss. 1, 2, and 4

The Negligence Act in British Columbia apportions fault between all of the wrongdoers who caused the plaintiff’s loss. A plaintiff can recover the whole of its loss from any one of two or more wrongdoers on the basis of joint and several liability. However, while the liability of multiple tortfeasors is joint and several if a plaintiff is not contributorily negligent, it is several if a plaintiff is contributorily negligent.

The Bar’s liability would be several only.
Patron #1 is contributorily negligent. Liability is several.

The Bar is liable for $15,000.

Since Patron #2 is never identified, Patron #1 can only recover the $15,000 from the Bar.
AlbertaContributory Negligence Act, RSA 2000, c. C-27, ss. 1 and 2

Alberta apportions liability between the two or more persons causing the damage or loss.

When two or more persons are found at fault, they are jointly and severally liable to the person suffering the damage or loss.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.
SaskatchewanThe Contributory Negligence Act, RSS 1978, c. C-31, ss. 2, 3, and 3.1

The Contributory Negligence Act in Saskatchewan apportions damages where two or more persons are at fault for the damage caused to one or more persons. If two or more persons are found at fault, they are jointly and severally liable to those suffering the damage.

Saskatchewan is unique in Canada, in that section 3.1 of The Contributory Negligence Act explicitly deals with a situation where a contribution cannot be collected. If the court is satisfied that the contribution of a person at fault cannot be collected, the court shall apportion the uncollectable amount among the others at fault, proportionate to their respective degrees of fault. As a result, a contributorily negligent plaintiff will be required to share in the shortfall in this scenario.
Patron #2 is never identified, and their 50% liability must be apportioned between Patron #1 and the Bar.

Patron #1’s pro rata share is now 70%, and the Bar’s pro rata share is 30%.

Patron #1 will recover $30,000 from the Bar.
ManitobaThe Tortfeasors and Contributory Negligence Act, CCSM, c. T90, ss. 4 and 5

The Tortfeasors and Contributory Negligence Act in Manitoba states that if two or more defendants are found negligent, they are held jointly and severally liable to the plaintiff for the whole of the damages apportioned against them. A plaintiff’s contributory negligence will be accounted for when apportioning the damages.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.
OntarioNegligence Act, RSO 1990, c. N.1, ss. 1 and 3

Ontario’s Negligence Act states that if two or more persons caused on contributed to the damages or loss experienced, they are jointly and severally liable to the person suffering the damage or loss. A plaintiff’s contributory negligence will be accounted for when apportioning damages.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.
QuebecCivil Code of Quebec, CQLR, c. CCQ-1991, articles 1478 and 1480.

Quebec’s Civil Code of Quebec states that if an injury is caused by several persons, liability is shared between them in proportion to the seriousness of the fault of each person. A plaintiff’s contributory negligence will be accounted for when apportioning damages.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.
New BrunswickContributory Negligence Act, RSNB 2011, c. 131, ss. 1 and 3

Joint & Several Liability In New Brunswick, when two or more persons are at fault for causing the damages or loss, liability is apportioned based on the degree in which each person is at fault. When two or more persons are found at fault, they are jointly and severally liable to the person suffering the damage or loss.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.
Nova ScotiaContributory Negligence Act, RSNS 1989, c. 95, s. 3

In Nova Scotia, where two or more persons are at fault for causing the damage or loss, liability is apportioned based on the degree in which each person is at fault.

Nova Scotia’s courts have taken section 3 to limit the responsibility of a defendant to their proportionate allocation when the plaintiff is contributorily negligent. Additionally, the courts have held that the Contributory Negligence Act limits the contributorily negligent plaintiff’s ability to call on a joint or concurrent tortfeasor for the totality of damages.
Patron #1 is contributorily negligent. Liability is several.

The Bar is liable for $15,000.

Since Patron #2 is never identified, Patron #1 can only recover the $15,000 from the Bar.
Prince Edward IslandContributory Negligence Act, RSPEI 1988, c. C-21, ss 1 and 2

In Prince Edward Island, when two or more persons are at fault for causing the damages or loss, liability is apportioned based on the degree in which each person is at fault. When two or more persons are found at fault, they are jointly and severally liable to the person suffering the damage or loss.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.
Newfoundland and LabradorContributory Negligence Act, RSNL 1990, c. C-33, ss.2 and 3

In Newfoundland and Labrador, when two or more persons are at fault for causing the damages or loss, liability is apportioned based on the degree in which each person is at fault. When two or more persons are found at fault, they are jointly and severally liable to the person suffering the damage or loss.
Since Patron #2 is never identified, Patron #1 will recover the full $65,000 amount from the Bar.

III.     STATUTORY MODIFICATIONS

However, the liability apportionment under the statutes discussed above does not apply to all litigation. In many provinces, other legislation modifies common law joint and several liability in particular contexts.

For example, British Columbia’s Health Care Costs Recovery Act permits the government to recover from a wrongdoer health care costs incurred to treat people injured by that person’s wrongdoing. Section 17 of the Act states that where a plaintiff is contributorily negligent, the plaintiff’s proportionate share of the health care costs cannot be collected from the defendants – but the defendants remain jointly and severally liable for their collective share of liability.

Federally, the Canada Business Corporations Act has modified joint and several liability in situations of pure economic loss and states that joint and several liability does not apply when the plaintiff brings the action as a member of a partnership or other association or as a trustee in bankruptcy, liquidator, receiver or sequestrator of a corporate body.

In maritime law, joint and several liability does not apply for the recovery of lost cargo or property on board, or loss of earnings, when such losses are caused by the fault or neglect of two or more ships. If an incident involving two or more ships causes pollution damage, the owners of all the ships involved are only jointly and severally liable for damages that are not reasonably separable.

Many other legislative modifications to joint and several liability have been enacted across Canada. When dealing with claims involving regulated industries, in particular, consider that specific legislation might alter the joint and several liability that would normally apply.

IV.     CONTRIBUTION FROM PARTIES OUT OF THE PLAINTIFF’S REACH

Sometimes plaintiffs will choose not or fail to sue all of the parties who were potentially liable for their injuries. In other cases, a court might rule that one of the defendants wrongfully contributed to the injuries, but has a complete legal defence that precludes any liability. This can happen in a number of different scenarios:

a)       the plaintiff’s action against that defendant may be time-barred;

b)       the plaintiff may have released the defendant from liability;

c)       the plaintiff may have agreed not to claim against that defendant; or

d)       the plaintiff may be subject to a statutory or contractual bar that precludes any claim against that            defendant.

Each scenario leads to a different result, and creates important consequences for the defendant. These are discussed in turn.

a)  When the plaintiff’s action against the third party is time-barred

If a plaintiff’s action against a tortfeasor is time-barred, a defendant is precluded from claiming contribution and indemnity from the tortfeasor. This principle was established by the Supreme Court of Canada in County of Parkland v. Stetar. In Parkland, the plaintiff failed to give timely notice to the County of his personal injury claim arising from a motor vehicle accident, thereby losing his right to recover directly from the County, even though the court had determined that the County was 25% at fault for the plaintiff’s loss.

Because the defendants were jointly and severally liable for the plaintiff’s loss, the plaintiff was able to recover the judgment in full from the other defendants. However, the court ruled that the defendants who paid the judgment could not then seek contribution from the County. The limitation period that protected the County from the plaintiff also protected the County from the other defendants seeking contribution.

In coming to its decision, the Supreme Court quoted from a decision of Lord Denning of the English House of Lords, in which, referring to the following paragraph from the English Law Reform (Married Women and Tortfeasors Act),

Where damage is suffered by any person as a result of a tort…(c) any tortfeasor liable in respect of the damage may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage…

Lord Denning stated,

That is all I need read. These words as construed by the House of Lords cover two situations: (i) where a tortfeasor has been sued and has been found liable; and (ii) where a tortfeasor has not been sued, but, if he had been sued, he would have been held liable. The words do not cover a third situation; (iii) where a person who is alleged to be a tortfeasor has been sued and has been held not liable. If he has been held not liable on the merits of the case, clearly he cannot be sued for contribution. If he has been saved from liability by reason of the Statute of Limitations, again he cannot be sued for contribution…” [emphasis added]

Thus, in situations where different limitation requirements apply to the parties, defendants should be aware that the usual principles of joint and several liability might not apply. In British Columbia, defendants would be well advised in such cases to seek to prove the plaintiff partly at fault, so that the liability of the tortfeasors would be several and not joint.

Parkland has been considered in subsequent cases in many provinces with the opposite result to that reached by the Supreme Court of Canada. This is because other courts considering this issue were either interpreting legislation that is different that considered in Parkland or were interpreting legislation that allows a third party action to be initiated despite the expiration of the limitation period. For instance, in Ontario, the case of Mega International Commercial Bank (Canada) v. Yung established that the two-year limitation period for third party claims for contribution and indemnity under the Ontario Limitations Act is subject to discoverability, giving defendants extra time to add third parties to an action if they can prove they were not aware of the third party’s existence before the limitation period expired.

ii)       When Can a defendant Seek Contribution?

If a plaintiff obtains judgment jointly and severally, a defendant who has paid more than his or her proportionate share of liability can seek contribution from a co-defendant. However, a defendant’s right to contribution does not arise until a plaintiff has successfully obtained a judgment against the defendants. This issue was addressed by the British Columbia Court in Gagner v. Mission (District). In Gagner, the District of Mission unsuccessfully applied to strike out a third party notice on the basis that the third party notice had been filed after the expiration of a two month notice limitation period with respect to notifying the District of a potential claim. The Court held that section 4 of the Limitation Act eliminated any limitation defence in any third party proceeding and stated further, at page 4, that:

The individual defendants have no legal right to recompense against Mission unless and until there first be a judgment in favour of the plaintiff rendered against those defendants. It is only then that it can be said that any right in law to indemnity or contribution arises. In short, the statutory obligation to give notice to Mission called for by s. 755 would arise only when judgment is obtained against the defendants Goncalves, and it is only on such date that the 60 days commences to run.

A similar result was reached in Mueck v. Overhill, where Mr. Justice McKenzie held that the expiration of any limitation period between the plaintiff and the third party did not relieve the third party from liability for contribution. However, in Pybus v. Palm Springs & European Health Spa Ltd., The Court held that if judgment has been obtained against a party and entered, that party is barred from issuing a third party notice. In order to avoid the result in Pybus, a defendant must ensure that she or he has issued third party proceedings before judgment is entered.

b)       When the plaintiff has released the third party

When the plaintiff has obtained a judgment against or has settled with one of two defendants, or by agreement has released a third party brought into the proceedings by a co-defendant, the issue arises whether the remaining defendant is released and, if not, whether it can still claim indemnity or contribution from the released party.

i)        Judgment against one Joint Tortfeasor

At common law, if judgment was recovered against one joint tortfeasor, or if a joint tortfeasor was released in a settlement, that released the other joint tortfeasors. In British Columbia, the Law and Equity Act, s. 53, has modified the common law position only with respect to the obtaining of an order against one joint tortfeasor and provides as follows:

Proceedings and order against one of several persons jointly liable

53(2)   The obtaining of an order against any one person jointly liable does not release any others jointly liable             who have been sued in the proceeding, whether the others have been served with process or not.

The above provision was interpreted in Scarmar Construction Ltd. v. Geddes Contracting Co. Ltd., in which the British Columbia Court of Appeal held that the section extinguished the common law bar when the joint and several tortfeasors have been sued in the same action.

ii)       Settlement with a Joint Tortfeasor

Until 1991, a court in British Columbia would set aside a third party proceeding where the plaintiff had settled with the defendant against whom the third party notice had been issued. This result was based on the reasoning in WestCoast Transmission Co. v. Interprovincial Steel & Pipe Corp. The court in that case held that where the plaintiff released one defendant, no claim for contribution and indemnity could arise when the plaintiff had settled with that party and had already been compensated for that party’s share of the plaintiff’s damages.

As a result of the reasoning in WestCoast, plaintiffs who released a defendant severed the joint and several liability of the remaining tortfeasors. The practical effect was that if the plaintiff settled with the defendant for less than the portion of liability assessed against this defendant at trial, the plaintiff could not then seek the shortfall from the remaining defendants.

The reasoning in WestCoast was subsequently rejected in 1993 by the British Columbia Court of Appeal in Tucker v. Asleson. The court held that the right to contribution and indemnity among defendants remained unaffected by any agreement that the plaintiff might make with a defendant. The court reasoned that the plaintiff’s act of releasing one party could not sever the joint liability of all of the tortfeasors to indemnify the plaintiff in full, and therefore the remaining tortfeasors retained their right to seek indemnity or contribution from the released party.

The practical effect of Tucker and similar decisions is that if a plaintiff settles with a defendant for an amount less than that defendant’s portion of liability assessed at trial, the plaintiff can recover the shortfall from the remaining tortfeasors, who in turn can still claim contribution from the settling defendant. If a party wishes to settle directly with the plaintiff and wishes to sever joint liability, then the party must obtain an indemnity agreement from the plaintiff in the settlement agreement (i.e., known historically as a “covenant not to sue”, and in more recent times, as a “Pierringer agreement” in most provinces, or a “B.C. Ferries” agreement in British Columbia, as discussed below) stating that the plaintiff will indemnify the released party from any further liability it may suffer as a result of contribution claims from the other tortfeasors. The indemnity agreement should be broad enough to cover indemnity for both legal fees and judgments or settlement amounts.

Cases in other Canadian jurisdictions have applied the same reasoning as in Tucker. For example, in Amello v. Bluewave Energy Limited Partnership, the Ontario Superior Court of Justice found that a Pierringer agreement between the plaintiffs and one defendant did not render cross claims between the co-defendants for contractually-based indemnity and contribution meaningless; the court refused to strike out the crossclaims as a result. In Alberta, courts have held that fairness must prevail whenever a court is dealing with a Pierringer Agreement and judges have a wide discretion when dealing with such agreements to ensure the trial process is fair. The general approach for ensuring fairness is set out in Murphy Canada Exploration Co. v Novagas Canada Ltd.:

Where a party will suffer procedural prejudice through none of its own doing, the Courts should generally consider steps to remedy the prejudice. The objectives of the Rules of Court are to ensure that matters proceed to be determined on their merits, in a timely, efficient, cost-effective and fair manner. These objectives often conflict, and the Courts are often faced with balancing these objectives. Of those objectives, however, the most important is fairness.

[T]he Court must consider if there is substantial prejudice to the non-settling defendant, whether the prejudice can or should be mitigated, and whether the settlement agreement should be approved but on terms or conditions. Otherwise, the Court becomes merely the affixer of a rubber stamp.

Thus, on an application to approve and implement a Pierringer settlement agreement, the Court may:

1. Approve and implement the agreement on its terms;

2. Refuse to approve the agreement on its terms if there is significant prejudice to the non-settling parties that cannot be reasonably mitigated; or

3. Approve and implement the agreement, but on terms or conditions aimed at mitigating the prejudice to the non-settling parties.

c)       When the plaintiff has agreed not to claim against the third party

The second method for avoiding a third party action against a settling defendant is to obtain the plaintiff’s agreement that the plaintiff will not advance a claim either against the released party or against the remaining defendants for the portion of the loss attributable to the released party. These types of agreements are, as mentioned above, most frequently referred to as Pierringer agreements, or “B.C. Ferries” agreements in British Columbia,

In Sable Offshore Energy Inc. v Ameron International Corp., the Supreme Court of Canada concisely outlined the basic principles of these types of agreements:

[A]   Pierringer Agreement allows one or more defendants in a multi-party proceeding to settle with the plaintiff and withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused. There is no joint liability with the settling defendants, but non-settling defendants may be jointly liable with each other.

This is what occurred in B.C. Ferry Corporation v. T & N plc.—the case from which such agreements get their name in British Columbia. The plaintiff sued several defendants for losses relating to materials containing asbestos, which the defendants had installed in the plaintiff’s ferries. The defendants third-partied the contractors, subcontractors, and architects involved in the installation. The plaintiff then agreed with the third parties that it would not seek to recover from the remaining defendants any portion of its losses attributable to the fault of the third parties. With the waiver agreement in hand, the third parties then sought to have the third party action dismissed.

The British Columbia Court of Appeal held that the third parties were entitled to have the defendants’ contribution claim dismissed. The Court upheld the chamber judge’s finding that since the plaintiff had waived all rights to recover from the remaining defendants any of the damages attributable to the third parties, there was no need for the remaining defendants to exercise any right pursuant to s. 4 of the Negligence Act and indeed, under such circumstances, no right would arise pursuant to that section. The plaintiff’s agreement to indemnify the settling defendant from any contribution claims essentially “short-circuited” such claims; the non-settling defendants no longer needed to claim contribution, since the plaintiff had effectively waived that portion of liability. In making its finding, the court indicated that the waiver agreement should form part of the pleadings in the action, both to ensure that there would be no doubt as to the limits of the plaintiff’s claim, and to reinforce the obligation upon the trial judge to apportion liability amongst all parties, even non-defendants.

However, the Court of Appeal allowed part of the third party claim to proceed. The defendants were allowed to continue seeking a declaration as to the degree of fault, if any, attributable to each third party. The Court held that if the defendants were not allowed to do this, the defendants would be denied specific procedural rights to an examination for discovery, obtaining documents, etc. Thus, while the third parties got the defendants’ contribution claim dismissed, they had to remain in the action to protect the non-settling defendants’ procedural rights.

Insurers in British Columbia, and other provinces using a Perringer agreements, should note the following:

a)         When negotiating the terms of a settlement agreement, ensure that the released defendants obtain an             indemnity that covers declaratory relief.

b)         Insurers might not have to continue defending the settling defendant, because liability policies are             generally limited to claims for “compensatory damage” or “damages”, and declaratory relief is not a claim             for damages.

d)       When the plaintiff is under a contractual disability

The consequences for a defendant differ yet again where a plaintiff is barred from suing a party as a result of the terms of a contract entered before any loss has occurred. Such a contractual bar can arise where a plaintiff has agreed to limit of the other parties’ liability, or pre-emptively waived any claims that might arise in the course of the contract (including a “waiver of subrogation”). Where the plaintiff is barred from suing another party, other defendants in an action by the plaintiff will also be barred from suing that party for indemnity and contribution.

This principle was established by the Supreme Court of Canada in Giffels Associates Ltd. v. Eastern Construction Co. Ltd. In that case, the plaintiff Dominion was barred from claiming against a contractor due to the expiry of a contractually limited guarantee period. Instead, the plaintiff sued the engineer, Giffels, who in turn third-partied the contractor for indemnity and contribution. The court ruled that since the contractor was completely protected in contract and tort by its agreement with the plaintiff, the third party claim against it for indemnity and contribution, whether based on a Negligence Act or otherwise, could not succeed. As stated by Chief Justice Laskin:

I am of the view that it is a precondition of the right to resort to contribution that there be liability to the plaintiff. I am unable to appreciate how a claim for contribution can be made under s. 2(1) by one person against another in respect of loss resulting to a third person unless each of the former two came under a liability to the third person to answer for his loss.

However, in Weinbaum v Weidberg, Justice Dow held that the Ontario legislature meant to override the holding in Giffels with Limitation Act, s. 18, which reads:

For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

As such, there is no way to contract out of the two-year limitation period set by the Limitations Act in Ontario when it comes to claims for contribution and indemnity. Alberta’s Limitation Act has similarly direct language setting out limitation periods specific to contribution claims and it is foreseeable that a court in that jurisdiction could come to the same conclusion as Weinbaum. By contract, British Columbia’s Limitation Act is far less direct on the matter and the potential for a Weinbaum-type finding is not as obvious.

i)        Waiver of Subrogation

The same principle was applied in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., in which the plaintiff was barred from pursuing a subrogated claim against a charter company whose negligence damaged its barge. The plaintiff had previously agreed to waive any right of subrogation it might have against the charterer.

Although the charterer was not a party to the contract between the plaintiff and its insurer and normally could not rely upon the insurance policy’s terms, the court applied an exception dependent upon two factors:

(a)        the parties to the contract must have intended to extend the benefit to the third party seeking to rely on              the contractual provision; and

(b)        the activities performed by the third party seeking to rely on the contractual provision must have been              the activities that were contemplated as coming within the scope of the contract.

In Fraser River, the court found that both factors were met. As a result, the plaintiff’s insurers could not subrogate against the charterer.

ii)       Antecedent Contractual Limitation Period

The principle in Giffels was applied in British Columbia Cancer Agency v. Keen Engineering Ltd. The plaintiff was barred from suing a general contractor because the plaintiff previously agreed to cap any claims it might assert against the contractor, at an amount equal to the available proceeds of the contractor’s liability insurance, in exchange for a waiver of subrogation clause given by the general contractor’s insurer. Pursuant to its contract with the general contractor, the plaintiff had obtained property and liability insurance for the general contractor. After the plaintiff suffered a loss, it sued the project architect/designer, who in turn third partied the general contractor. The general contractor moved to have the third party action against it dismissed.

The relevant portion of the waiver of subrogation clause contained in the insurance contract read as follows:

It also is agreed that all right of subrogation is hereby waived under this policy against any corporation, firm, individual or other entity, to which or to whom coverage is afforded under this policy, except Insurers shall retain the right of subrogation against any architects and engineers employed by the Insured, for loss or damage caused by error in design or faulty workmanship.

Following Giffels, the court ruled that since the plaintiff’s claim against the general contractor was barred, the architect’s third party claim against the general contractor was also barred, since by its nature (i.e., a claim for indemnity and contribution), the claim was subrogated to the plaintiff. However, the court did not strike the architect’s third party action insofar as it alleged an independent cause of action against the third party general contractor. That portion of the third party claim was left for determination at trial.

iii)     Covenant to Insure

Giffels was considered by the British Columbia Court of Appeal in Orange Julius Canada Ltd. v. the City of Surrey. The Court considered an appeal arising from the interpretation of lease covenants requiring a shopping mall’s tenants to insure in the joint names of the tenant and the landlord against loss by fire, and to waive rights of subrogation against the landlord. In this case the tenants’ lease with the landlord stipulated that the tenants hold insurance policies in the joint names of the landlord and the tenant stipulating that the insurance policies so obtained would waive recourse and any subrogation rights against the landlord. The defendants, who were allegedly responsible for the cause and spread of the fire causing damage in this case, attempted to make claims for contribution and indemnity from the landlord.

The landlord argued that because the tenants didn’t have a cause of action against it, then the defendants who were did not either. In response the defendants, argued that they had a statutory right to contribution and indemnity from the landlord by virtue of the Negligence Act, s. 4 and that this independent legal right could not be negated by any bargain between the landlord and its other tenants. Their argument distinguished Giffels on the basis that in Giffels both defendants were in contractual relationships with the plaintiff and both could have protected themselves from liability by contractual arrangements. The defendants said that this was different from the facts in the case at bar, where only the landlord could protect itself from suit by the tenants.

In rejecting the defendants’ argument, the court reiterated the principle in Giffels that “it is a precondition of the right to resort to contribution that there be liability to the plaintiff”. The court agreed with the summary trial judge who held that the principle in Giffels could not be interpreted so narrowly. At page 10, the court approved paragraph 33 of the trial judgment which stated:

[33]   I am unable to accept that the principle stated in Giffels can be so restricted. The precondition was not said to arise because both the engineer and the contractor were party to contracts with the plaintiff, but only because, having protected itself, one of them had no liability to the plaintiff and could not be said to have contributed to any actionable loss it suffered. In my view, the precondition can exist regardless of whether there was a contractual relationship between the plaintiff and the defendant who seeks to make a claim for contribution and indemnity.

The Court of Appeal upheld the summary trial judge’s decision to strike out the third party notices against the landlord.

V.       OTHER CONSIDERATIONS REGARDING ADDING UNNAMED TORTFEASORS AS PARTIES

In 1988, in Wells v. McBrine, the British Columbia Court of Appeal attributed a portion the fault for a plaintiff’s injuries to parties who were not parties to the action. The court agreed with a jury verdict finding 40% liability for a motor-vehicle accident against a group of “troublemakers” who were not parties to the action, 40% against the defendant, and 20% against the plaintiff. The “troublemakers” had blocked the defendant’s path and thrown objects on his windshield, obscuring his vision. The defendant’s vehicle struck the plaintiff who was walking on the side of the road. The court accepted the defendant’s submission that others – even non-parties – were responsible for the plaintiff’s loss.

From a practical perspective, in British Columbia cases where the plaintiff is not contributorily negligent, the Wells decision is of little use to defendants who are even 1% liable, because all defendants are jointly and severally liable and the plaintiff can therefore still collect the entire judgment from them (or any of them). The paying defendant(s) would then be left to seek contribution from the other defendants. To recover contribution from the non-party, a separate action would have to be commenced since the non-party would not be bound by the judgment.

On the other hand, if a plaintiff is found contributorily negligent, the practical benefit of the Wells decision to a defendant is significant. The effect of a finding of contributory negligence is to make the defendants severally and not jointly liable (Leischner). The defendant(s) would be liable to the plaintiff only for its (their) own share of liability.

While “Jon Doe” and “Jane Doe” defendants are often named in Ontario and Alberta proceedings as placeholders until the proper tortfeasors can be found (if ever), the joint and several liability models used in these provinces, as outlined earlier in this paper, means that any liability and damages apportioned to these unnamed tortfeasors will ultimately be held by the active co-defendants.

VI.      APPORTIONMENT OF COSTS

Canadian courts have a wide discretion to award costs as they see fit. Generally, successful parties are awarded their costs. However, courts will consider other factors, such as whether formal offers to settle were made prior to trial and how liability was apportioned between the parties.

Many jurisdictions in Canada have provisions in their procedural rules dealing with the consequences of a party not accepting a formal offer made prior to trial. For example, in Ontario, Rule 49.10 provides as follows:

(2) Where an offer to settle,

(a) is made by a defendant at least seven days before the commencement of the hearing;

(b) is not withdrawn and does not expire before the commencement of the hearing; and

(c) is not accepted by the plaintiff,

and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.

When the court divides liability amongst the parties, the starting point in determining costs is the legislation. In British Columbia, the Negligence Act, s. 3, provides as follows:

3.          Unless the court otherwise directs, the liability for costs of the parties to every action shall be in the              same proportion as their respective liability to make good the damage or loss.

The leading case in British Columbia on the apportionment of costs is Flatley v. Denike. The plaintiff and defendant were both found 50% liable for a motor vehicle accident in which only the plaintiff was injured. At trial, each party was awarded 50% of their costs incurred to the date of a settlement offer made by the defendant.

On appeal, the British Columbia Court of Appeal considered whether the uninjured defendant ought to recover 50% of his costs from the plaintiff and then be permitted to set those costs off against the plaintiff’s costs. The court referred to the Negligence Act, s. 2(c), which provides that the person sustaining damage or loss is entitled to recover from a person at fault the percentage of his or her damage or loss corresponding to the defendant’s degree of fault. As a result, a defendant who has not suffered any damage or loss, cannot recover anything from the plaintiff. The court then considered section 3 of the Negligence Act and stated:

In cases where the defendant has not suffered damage, the plaintiff is under no liability for costs because the plaintiff’s liability, if any, would only be in the same proportion as his or her liability to make good the defendant’s damage or loss, of which there is none.

In the result, the plaintiff was entitled to 50% of her costs up to the date of the settlement offer and the defendant was not entitled to any costs, given that he suffered no damage or loss.

VII.     CONCLUSION

The potential for joint and several liability to impose significant liability exposure on “deep pocket” defendants, municipalities, and those with large insurance policies, has been a topic of discussion for several years in many provinces. Most recently, in 2019, the Ontario government opened a consultation into joint and several liability and specifically petitioned insurers for their opinions on the principle.

Many municipalities in particular support initiatives to change joint and several liability. In 2022, Ottawa city council moved to recommend reforms to the Attorney General, pleading for a full proportionate liability model similar to that of British Columbia. Similar reform efforts in Alberta around 2010 failed to achieve legislative changes.

While no major reforms have been made of late, insurers should likely monitor the growing discontent with the joint and several liability model in provinces like Ontario and Alberta.

This paper provides practical insights into the current state of the law in Canada respecting joint and several liability, how that law may impact third party proceedings, and the apportionment of costs at trial. Every case will differ on its facts and, results may vary depending on the jurisdiction in which it is brought. Similarly, the existence of legislative modifications that apply to the industry or type of case being tried may also alter the outcome of the joint and several liability apportionment. However, if consideration is given to the issues discussed in this paper, parties, as well as their insurers, will be better equipped to understand and meet the challenges of multi-party litigation.

We're here to Help

Work With Us

Canadian Lawyer Magazine 2021-2022 Top 10 Insurance Defence Boutique

Named One of Canada's Top Insurance Defence Litigation Boutiques by Canadian Lawyer magazine