Supreme Court to rule on disclosure of amounts paid under Pierringer agreements

On June 28 th 2012, the Supreme Court of Canada granted leave to appeal in the case of Sable Offshore Energy Inc. v. Ameron International Corp, a decision of the Nova Scotia Court of Appeal surrounding disclosure obligations under Pierringer agreements.[1]  A Pierringer agreement is a type of settlement agreement whereby the Plaintiff settles a claim with one or more co-defendant in an action (often called the settling defendants) while reserving the right to proceed against other co-defendants (the non-settling defendants).[2]  The agreement derives its name from the Wisconsin case of Pierringer v. Hoger,[3] and is also referred to as a proportionate share settlement agreement.[4]  Pierringer agreements can be used in actions involving third (fourth, and fifth) party claims, either by way of indemnity from settling parties, or through an agreement by the Plaintiff not to pursue damages against non-settling defendants which are attributable to the actions of settling defendants.[5]

The leading case on disclosure obligations of Pierringer agreements is Amoco Canada Petroleum Co. v. Propak Systems Limited, an Alberta Court of Appeal decision dealing with, among other things, the timing of disclosure of the Pierringer agreement to both non-settling defendants and the Court.[6]  In Amoco, the Court determined that Pierringer agreements had to be disclosed to non-settling defendants prior to trial, and that the terms of the agreement, if not the amounts paid under them, should also be disclosed to the Court.[7]

In Sable Offshore Energy Inc. v. Ameron International Corp.,[8] a group of non-settling defendants applied to the Nova Scotia Supreme Court for an order requiring the Plaintiff to disclose amounts paid under the Pierringer agreements prior to trial.[9]  The trial judge articulated the competing policy reasons at play in making its decision, including the privilege historically attached to settlement agreements, and the intention of the Court to encourage settlement between parties.[10]  The parties agreed that Pierringer agreements represented a deviation from the general principle of settlement privilege, but did not agree on how the exception should apply with respect to amounts paid.[11]  The Plaintiff argued the non-settling defendants would be at an advantage if the amounts were disclosed, where the non-settling defendants argued that knowing the amounts being paid was tantamount to having details of mitigation, and that the amounts should be disclosed to prevent the Plaintiff from being overcompensated.[12]

The Nova Scotia Supreme Court denied the non-settling defendants application, ruling that amounts paid under the Pierringer agreements did not have to be disclosed prior to trial.[13]  In its reasoning, the Court stated that while the amounts were relevant to pre-trial preparation, relevance did not overcome the importance of encouraging parties to settle claims and that ordering disclosure could discourage parties from negotiating settlement.[14]

Two of the non-settling defendants appealed the decision of the Supreme Court to the Nova Scotia Court of Appeal.[15]  The Court of Appeal reversed the finding of the trial judge and ordered disclosure of the amounts paid under the Pierringer agreements in place prior to trial.[16]  The Court of Appeal's reasoning provides an interesting review of Pierringer agreements and which policies and principles take precedence.

In its decision, the Court of Appeal emphasised the fundamental principle of a fair trial and that defendants are entitled to know the case they must answer, including the potential value of the claim.[17]  In the Court of Appeal's view, the value of the claim ‘forms an important part of pre-trial preparation, settlement positions and trial preparation.[18]’

Of seemingly equal importance to the Court of Appeal was a nexus between the amounts paid by settling defendants and the damages sought against non-settling defendants.  In this case, the Plaintiff acknowledged that the amounts paid under the Pierringer agreements could impact  the damages sought from non-settling defendants.[19]  On this basis, the Court of Appeal distinguished the Sable decision from others in which there was no relationship between the damages sought by the Plaintiff against the non-settling defendants and the amounts paid by settling parties.[20]

The Court ruled that the Plaintiff was to disclose the amounts paid under the Pierringer agreements to non-settling parties only, finding that whether or the amounts paid were admissible at trial was an issue for the trial judge.[21] Thus setting the case for appeal; as the impact of this decision could have wide implications for those strategising their approach to settlement.  Anyone involved in multi-party litigation should watch the out come closely.