On March 20, 2023, the Supreme Court of British Columbia (Court) issued a decision in Ridley Terminals Inc. v. Sandvik Canada Inc. (Ridley), affirming the importance of promoting settlement in multiparty litigation and facilitating the efficient resolution of complex claims. In Ridley, the Court dismissed an application by non-settling defendants to add a settling defendant back into the litigation as a third party to get discovery, after the settling defendant had entered into a “Pierringer” settlement agreement (known in British Columbia as a “B.C. Ferry” agreement).
The Court held that the non-settling defendants failed to adduce sufficient evidence showing that existing discovery procedures, including steps to obtain discovery from non-parties, would be inadequate. The “balance of the prejudice,” the Court concluded, “in having to take such steps does not outweigh the prejudice in having to continue to participate in litigation post settlement.”
Ridley Terminals Inc. (Plaintiff), which operates a bulk marine terminal in northern British Columbia, retained an engineering firm (Engineering Firm) to advise on and implement upgrades to its facility, which subcontracted construction to a mechanical contractor (Upgrade Subcontractor). The Plaintiff also retained an engineering consultant (Inspection Consultant) to carry out annual inspections of the terminal, including the upgraded facilities, which in turn subcontracted those services to a testing and inspection company (Inspection Subcontractor).
When the upgraded facilities experienced catastrophic failure, the Plaintiff commenced an action against the Engineering Firm, the Upgrade Subcontractor, the Inspection Consultant and the Inspection Subcontractor, alleging that Sandvik Canada Inc. et al. (Defendants) breached various duties owed to the Plaintiff.
The Inspection Consultant entered into a “Pierringer” or “B.C. Ferry” settlement agreement. Under that agreement, the Inspection Consultant was removed as a defendant from the case, and the Plaintiff waived the portion of any claims attributable to the Inspection Consultant’s fault. Subsequently, the Engineering Firm and the Inspection Subcontractor (Applicants) applied to add the Inspection Consultant back into the litigation as a third party defendant for the purpose of obtaining discovery from it. The Plaintiff and the Inspection Consultant argued that granting the applications would partially defeat the purpose of settlement and deter early settlement in other cases.
B.C. SUPREME COURT DECISION
The Court dismissed the applications to add the Inspection Consultant as a third party. It stated that the question was whether the proposed third party would suffer prejudice by being added to the action and whether greater injustice would be caused by not adding the Inspection Consultant to give the non-settling defendants discovery.
After noting the Plaintiff and Inspection Consultant’s arguments about deterring settlement, the Court held that the Applicants failed to show they would suffer greater injustice if the applications were denied. The Court found the Applicants had not adduced evidence establishing they would be unable to obtain the necessary discovery through the ordinary steps available to them under the Supreme Court Civil Rules, including steps for obtaining discovery against non-parties.
The Court concluded that the prejudice in being required to take additional discovery steps would not outweigh the prejudice to the Inspection Consultant if it were required to participate in the litigation after settlement. This decision facilitates the early resolution of complex claims by settlement.
The authors of this bulletin acted for the successful defendant in opposing the application.
For more information, please contact them:
Joshua Hutchinson +1-604-631-4178
Michael O’Brien +1-403-260-9753
Dalton W. McGrath, K.C. +1-403-260-9654
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