Cormack v. Chalmers

In Personal Injury and Maritime Law on (Updated )

Précis: The court held a "Mary Carter" type settlement agreement with one defendant, who was entitled to limit his liability, did not change the liability of the other defendant to several from joint.

Facts:The plaintiff was badly injured when she was struck by a motor vessel while swimming. The plaintiff commenced proceedings in the Ontario Superior Court against the first defendant, the owner/operator of the vessel that struck her and also against the second defendant, the owner of the residence where she was staying at the time as a guest. The plaintiff alleged the second defendant had failed to warn her of the dangers of swimming off his dock. The plaintiff also alleged that the defendants were jointly liable for her injuries pursuant to the provisions of the Negligence Act of Ontario. Subsequently, the first defendant commenced limitation proceedings in the Federal Court pursuant to the provisions of the Marine Liability Act. The plaintiff and second defendant were parties to the limitation proceeding and consented to a judgement declaring that the first defendant’s liability was limited to $1 million. The plaintiff and first defendant also entered into a settlement agreement to the effect that the first defendant’s liability to the plaintiff was limited to $1 million and that the plaintiff would indemnify and hold the first defendant harmless in the event he was called upon to pay more than this amount. The second defendant was not a party to the settlement agreement and later brought this application to strike those parts of the Statement of Claim pleading that the liability of the defendants was “joint”.

Decision: Motion Dismissed.

Held: The second defendant argues that the hold harmless provision in the settlement agreement has the legal effect of nullifying the joint liability of the defendants under the Negligence Act and renders him severally liable only. This is not the effect of the agreement as the liability of the first defendant is capped at $1 million with or without the settlement agreement. Whether a settlement agreement has the effect of changing a defendant’s liability to one of several from joint and several depends on the language of the agreement in question. This case is analogous to a situation where one of several defendants enjoys legal immunity or limitation of liability and, in such circumstances, the remaining defendants are not protected from joint liability.