In two recent decisions, the Ontario Court of Appeal considered questions of several liability, allocation of responsibility between tortfeasors and partial settlement agreements. These decisions will have significant effects in insurance litigation where multiple tortfeasors are involved.

Taylor v. Her Majesty the Queen in Right of Canada (June 17, 2009)

In this decision, the Court of Appeal considered the question of whether fault could be apportioned against non-parties in a negligence action, where the plaintiff had chosen to limit the claim to the damages attributable to the actions of one defendant.

This is a class action which was certified against the federal government, alleging negligence on the part of Health Canada in the regulation of medical devices. The representative plaintiff Kathryn Taylor alleged that she suffered injuries as a result of the surgical insertion of a TMJ implant into her jaw. She alleged that Health Canada was negligent in allowing the device to be sold in Canada.

After several amendments to the Statement of Claim, the plaintiff limited the claim against Health Canada to “those damages that would be apportioned to the Defendant [Health Canada] in accordance with the relative degree of fault that is attributable to the Defendant’s negligence”. The Claim went on to specifically state that the Plaintiff “does not seek, on her own behalf or on behalf of the Class, any damages that are found to be attributable to the fault or negligence of any other person, or for which the Defendant could claim contribution or indemnity”.

Notwithstanding the Statement of Claim was limited in this manner, the defendant brought a Third Party Claim for contribution and indemnity against the surgeon who performed the surgery to implant the device and the hospital where the surgery took place, alleging that the surgeon and hospital had contributed to the plaintiff’s injuries. The defendant argued that the plaintiff’s injuries were indivisible and therefore, even with the limitation in the claim, the defendant may unfairly be held liable for the negligent acts of the surgeon and hospital. Further, the defendant argued that the court could not apportion fault to a non-party under the Ontario Negligence Act based on a previous Court of Appeal decision in Martin v. Listowel Memorial Hospital (2000).

The third parties brought a motion to strike the Third Party Claim on the basis that there was no cause of action against the third parties given how the claim was structured. As well, in this case, the limitation period for the plaintiff to have sued the third parties had expired so that there was no possibility of subsequent litigation involving them. The motion to strike was granted. On appeal, the Ontario Court of Appeal confirmed that decision.

The Court of Appeal noted that “contribution rights [under s.1 of the Negligence Act] only arise where a defendant is required to pay more than its proportionate share of a plaintiff’s damages” but that the plaintiff in this case was “not seeking all of her damages from Health Canada; she seeks only the portion of her damages attributable to Health Canada’s neglect and not the portion of her damages that may be attributable to the neglect of the doctor or hospital”. Therefore, “because Ms. Taylor has limited her claim to those damages attributable to Health Canada’s fault, Health Canada can have no claim over against the doctor or the hospital for the damages claimed by Ms. Taylor and the other class members”.

The Court of Appeal then considered Martin v. Listowel Memorial Hospital, where the court had suggested in obiter that there could be no apportionment of fault made against a nonparty in a negligence action. In Taylor, the court noted that “the statement in Martin v. Listowel that a court has no jurisdiction to apportion fault against a non-party has been overtaken by later decisions of this court” and referenced various cases where this had been allowed. The court concluded:

Interpreting s.1 of the Negligence Act to permit a court to apportion fault against a non-party makes good sense. Interpreting s.1 in this way promotes the streamlining of litigation, as in the present case, and, as in other cases, the settlement of parts of litigation.

In my view, this is an appropriate case for the court to determine whether to apportion fault against the doctor or the hospital, though neither is a party to the action. Permitting apportionment without insisting that they be parties will mean fewer parties at trial, a shorter trial and reduced costs.

In the final part of its decision, the Court of Appeal considered the defendant’s request for procedural relief in the form of production of documents and discovery from the third parties, if the Third Party Claim was dismissed. The court stated that the requested relief “seems to have merit” but that it was more properly to be considered by the judge managing the class action.

Laudon v. Roberts (May 7, 2009)

In this decision, the Court of Appeal considered the effects of a partial settlement in a negligence action and specifically the credit to which the non-settling defendants were entitled based on the partial settlement.

This case involved a boating accident. The plaintiff Rick Laudon was injured when the boat he was riding in, operated by Keith Sullivan, collided with a boat operated by Will Roberts. Laudon and Roberts entered in to a settlement agreement for $365,000 for damages and interest plus costs and the case proceeded to trial against Sullivan alone. The jury assessed Laudon’s total damages at $312,000 and apportioned liability 50% to Roberts, 39% to Sullivan and 11% to Laudon for contributory negligence. Sullivan resisted the plaintiff’s motion for judgment in accordance with the jury verdict, on the basis that the plaintiff had already been fully compensated for the loss by the settlement with Roberts. The trial judge rejected this submission and ordered Sullivan to pay 39% of the assessed damages.

Sullivan appealed. The Court of Appeal allowed the appeal and dismissed the action against him. In its reasons, the court noted “It is a fundamental principle of tort law in this country that an injured plaintiff should be neither over nor under, but fully compensated by way of damages for injury sustained by the negligence of others” and concluded that “to permit the plaintiff to recover any amount from Sullivan would result in double- recovery to the plaintiff”. The court quoted extensively from the 2008 decision of the British Columbia Court of Appeal in Ashcroft v. Dhaliwal which involved a similar partial settlement before trial by one defendant and consideration of whether that amount should be deducted from the amount payable by the non-settling defendant after damages were assessed at trial. The B.C.C.A. held:

For the following reasons I find that the trial judge was correct to deduct the settlement amounts from the damage award against the respondents. The fundamental principle of damage awards is that the plaintiff should be ‘compensated for the full amount of his loss, but not more’. The proper focus of a damage award is on the plaintiff’s loss. The court should not encourage settlement with the promise that plaintiffs may have the opportunity for double recovery. There is no valid policy reason for treating concurrent and consecutive torts differently when both are necessary causes of an indivisible injury and its consequential losses.