Today’s decision of the Court of Appeal in Laudon v. Roberts was bad news for two of the three parties (the plaintiff and one defendant) but very good news for the other defendant.
The action arose out of a boating accident in which the plaintiff Laudon had been injured. Sullivan was operating one of two boats that had collided and Roberts was operating the other. The plaintiff had received a total of $438,000 from one defendant (Roberts) prior to trial, pursuant to a Mary Carter agreement (“MCA”). (Under a “Mary Carter agreement”, the settling defendant agrees to pay a certain amount to the plaintiff, in exchange for an agreement by the plaintiff, not to pursue recovery of any more money from that defendant at trial. Usually, there is also a provision whereby the settling defendant is protected against crossclaims or other subsidiary claims that it might otherwise face from other parties, seeking contribution or indemnity. So, the settling defendant “caps” its liability by entering into the MCA.)
The jury assessed damages at $312,021 and found the non-settling defendant (Sullivan) 39% at fault. The trial judge, Mr. Justice Guy P. DiTomaso, awarded judgment against the defendant Sullivan in the sum of $121,688.19 (39% of $312,021), exclusive of interest.
Sullivan appealed, arguing that money paid under the MCA should be deducted from the award, reducing Sullivan’s payment to zero. The trial judge had rejected this argument. His ruling would have permitted the plaintiff to retain both the MCA payment and the trial award. However, the Court of Appeal allowed Sullivan’s appeal and set aside the judgment given at trial. It dismissed the plaintiff’s claim against Sullivan and awarded costs to Sullivan, to be paid by the plaintiff.
There were some unusual features of the arrangement that was entered into in this case. The parties had asked the trial judge to rule, at the beginning of the trial, on whether or not the amount paid by Roberts under the MCA was deductible from any sums that Sullivan might be found liable to pay to the plaintiff. Justice DiTomaso ruled that the MCA payment was not deductible. The Court of Appeal held that he should not have made this ruling at the beginning of the trial, when the issue was only a hypothetical one. Instead, a ruling should have been rendered after the jury’s verdict. (And, of course, the Court held that the ruling should have been to the opposite effect, that the MCA payment was deducible.)
The Court of Appeal observed that usually, MCA’s give to the settling defendant the opportunity to recoup some of its payment, in the event that the plaintiff recovers judgment for more than the amount of the payment. However, there was no such provision in the agreement entered into in this case.
On the appeal, counsel for Roberts argued for reimbursement out of the amount found by the jury to be payable by Sullivan. However, the Court rejected this request, noting that Roberts had failed to cross-appeal from the decision of DiTomaso J. In addition, at the opening of trial, both Sullivan and Roberts had consented to the dismissal of the crossclaims between them, so even if Roberts had cross-appealed, the Court of Appeal was satisfied that he had given up any right of recovery that he might otherwise have had against Sullivan.
So, the decision was a small windfall for the plaintiff, who received from Roberts $365,000 for damages and interest on a claim judged by a jury to be worth $312,021 (before interest). Sullivan received a large windfall, by not having to pay any of the $121,688 for which the jury had found it liable and (to add insult to injury), by receiving an award of costs, payable by the plaintiff.
Roberts’ insurer, on the other hand, will probably think twice before entering into another Mary Carter agreement…