The Supreme Court of Canada released its decision in Sable
Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 on
June 21, 2013, concluding that financial terms of settlements need
not be disclosed in multi-party cases. The unanimous decision
written by Justice Abella provides guidance on the impact of
"Pierringer Agreements" and confirms the importance of
settlement privilege in encouraging out-of-court settlements.
THE FACTS AND JUDICIAL HISTORY
Sable sued a number of parties including suppliers and
applicators of paint for its equipment, alleging that the paint had
failed to prevent corrosion. Sable settled with all defendants
except for two, Ameron and Amercoat. It entered into Pierringer
Agreements with the settling defendants. Pierringer Agreements
allow one or more defendants to settle with a plaintiff and
withdraw from the litigation, leaving the remaining non-settling
defendants (in this case Ameron and Amercoat) responsible only for
their proportionate share of loss.
All of the terms of the Pierringer Agreements were disclosed to
the non-settling defendants, with the exception of the amounts paid
by the settling defendants. Sable agreed to disclose the settlement
amounts to the trial judge once the liability of the non-settling
defendants had been determined. The non-settling defendants applied
for disclosure of the amounts paid by the settling defendants.
The application for disclosure of the settlement amounts was
initially dismissed by the lower court. The Nova Scotia Court of
Appeal reversed this decision, and held that awareness of the
settlement amounts was fundamental for the non-settling defendants
to know the case they had to meet.
THE DECISION OF THE SUPREME COURT OF
The Supreme Court allowed Sable's appeal and held that the
amounts paid by the settling defendants were subject to settlement
privilege and could not be disclosed.
The Supreme Court's decision stresses the importance of
settlement privilege in promoting and achieving settlements.
Settlement privilege protects communications made during the course
of negotiations, regardless of whether or not a settlement is
achieved. Parties to a lawsuit are more likely to settle if they
know from the outset that their communications cannot be disclosed.
The Supreme Court held that settlement privilege also applies to
the amount negotiated in a settlement as this reflects the
"admissions, offers and compromises made in the course of
The Supreme Court acknowledged that there are exceptions to
settlement privilege. In some circumstances, it would be
appropriate to disclose settlement amounts in Pierringer Agreements
to non-settling defendants. A non-settling defendant seeking
disclosure of settlement amounts must establish that there is a
public interest in disclosing settlement amounts which overrides
the public interest in promoting settlement, for instance in cases
of fraud, misrepresentation, undue influence and where there is a
risk of the plaintiff being overcompensated. In this last respect,
the Supreme Court approves the notion that at the end of a trial
against non-settling defendants, the settlement amount received
should be disclosed to avoid any overpayment of the plaintiff's
damages. In this case, the Supreme Court was satisfied that there
was no such overriding public interest. The non-settling defendants
were aware of all the terms of the Pierringer Agreements, except
the settlement amounts paid, had access to all the relevant
documents and evidence in the possession of the settling
defendants, and had assurance that they would only be held liable
for their portion of the damages.
The Supreme Court accepted that knowing settlement amounts where
there is a partial settlement could provide a tactical advantage to
non-settling defendants as this knowledge would permit non-settling
defendants to consider how much they want to invest in a case.
However, this tactical advantage did not outweigh the public
interest in encouraging settlement. As the Supreme Court stated,
"Someone has to go first," and, with this decision, the
Supreme Court is encouraging that first settlement in multi-party
litigations. The decision also shows the Supreme Court's
preference for mechanisms designed to foster settlement.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
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