Recently, in The Owners of Strata Plan KAS3204 v. Navigator Development Corporation, 2020 BCSC 1954 [Navigator], the B.C. Supreme Court clarified the effect of a BC Ferry Agreement, on the joint and several liability of remaining non-settling parties. A BC Ferry Agreement is where, in a multi-party proceeding, the plaintiff and one or more defendants agree to settle and the plaintiff agrees not to recover from the non-settling defendant(s) any portion of the loss ultimately attributable to the settling defendant(s). The Court in Navigator confirmed that when a BC Ferry Agreement is made, the liability of the remaining defendants remains joint and several as between each other.

The B.C. Negligence Act provides that a plaintiff has a right to recover the whole of its loss from any one, or combination of, multiple wrongdoers on the basis of joint and several liability. It also provides that the wrongdoers have the right to claim for contribution and indemnity against each other “in the degree to which they are respectively found at fault” (s. 4(2)(b)). In a BC Ferry Agreement (named after British Columbia Ferry Corp. v. T & N, (1995), 16 B.C.L.R. (3d) 115 (C.A.)), the settling defendants are protected from claims for contribution and indemnity from the non-settling defendants because the plaintiff is prohibited from recovering from the non-settling defendants any portion of the loss ultimately attributable to the settling defendants. To give effect to a BC Ferry Agreement, the plaintiff must amend its Notice of Civil Claim to expressly waive its right to recover any portion of the loss attributable to the settling parties. The plaintiff’s new claim will seek damages only attributable to the remaining defendant(s). Therefore, the liability of the settling parties is no longer joint and several with the non-settling parties. The issue in Navigator was whether or not the liability of the non-settling defendants for the portion of the loss that is attributable to them as a group remains joint and several between them.

In Navigator, the plaintiff entered into two BC Ferry Agreements with some of the defendants and a third party (the “Settling Agreements”). A third party (who was not party to the Settling Agreements), Greyback, sought a declaration that, as a result of the Settling Agreements, the plaintiff limited its claim to the several liability of the non-settling defendants that remained. If the liability of the non-settling defendants was several, the third party claims against Greyback would have to be dismissed.

Greyback argued that it would be unfair for a BC Ferry Agreement not to extinguish joint liability between the remaining defendants, because the remaining defendants would be left liable for the portion of the loss attributed to an insolvent party in the action. It asserted that the liability for the insolvent party’s portion of the loss would, theoretically, be shared between a smaller number of parties. Additionally, Greyback argued that the Settling Agreements provide that the plaintiff will limit its claim “to the several extent of liability of the Remaining Defendants” and this extinguishes the joint liability of the non-settling parties for the portion of the loss ultimately attributed to them as a group. Although Greyback was not a party to the Settling Agreements, it argued that it could rely on the principled exception to the doctrine of privity of contract, which allows a party to rely on a contract despite being a stranger to it. The plaintiff argued that the law is clear that a BC Ferry Agreement does not eliminate the joint liability of the remaining defendants for the portion of the loss attributed to them as a group and that Greyback, as a stranger to the Settling Agreements, could not rely on them.

The Court addressed Greyback’s fairness argument, stating the Greyback had misinterpreted the fundamentals of contribution and indemnity. The Court explained that regardless of any settlement, the wrongdoer who pays the plaintiff for more than its proportionate share of the loss (the “Paying Defendant”) will not be able to spread responsibility for the insolvent party’s portion of the loss among the other wrongdoers. This is because a Paying Defendant cannot compel another defendant to contribute more than its proportionate share. The Paying Defendant is on the hook for the insolvent party’s portion of the loss, whether or not there is a BC Ferry Agreement.

The Court determined that none of the case law cited by Greyback and its supporters could support Greyback’s assertion that BC Ferry Agreements extinguish joint liability between non-settling defendants. In Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, Madam Justice Abella wrote that inherent in BC Ferry Agreements (referred to as Pierringer Agreements in other jurisdictions) is the principle that “non-settling defendants can only be held liable for their share of the damages and are severally, and not jointly, liable with the settling defendants.” Here, the Court concluded that Madam Justice Abella must have been referring to the extinguishment of joint liability of the non-settling defendants as a group, especially given her earlier comment that “non-settling defendants may be jointly liable with each other.”

The Court stated that the plaintiff may recover from any one of the non-settling defendants on a joint and several basis and they may make claims of contribution and indemnity between each other. A BC Ferry Agreement extinguishes the joint liability between the settling parties, as a group, and non-settling defendants, as a group. The Court determined that this is what was referred to in the sentence in question in the Settling Agreements, which provides that the Plaintiff will limit its claim “to the several extent of liability of the Remaining Defendants.” Furthermore, irrespective of the proper interpretation of that sentence, Greyback did not establish that it could rely on the Settlement Agreements. The principled exception to privity allows a person who is not a party to a contract to rely on a benefit conferred to it if the parties to the contract intended to extend a benefit to that person and activities performed by the person come within the scope of the contract. The Court found no indication that the Plaintiff and settling defendants had intended to extend any benefit to Greyback or the non-settling defendants.

This case ends any debate on whether or not a BC Ferry Agreement will sever the joint liability of non-settling parties as a group. Non-settling parties are reminded that, after a BC Ferry Agreement is made, the plaintiff may recover the entire amount attributable to the non-settling parties as a group, from any one of them on a joint and several basis.