Sable Offshore Energy Inc. et al. v. Ameron International Corp. et al., (2013) 446 N.R. 35 (SCC)

• Judge: McLachlin, C.J.C., LeBel, Abella, Cromwell, Moldaver, Karakatsanis and Wagner, JJ.
• Court: Supreme Court of Canada
• Case Date: Friday June 21, 2013
• Jurisdiction: Canada (Federal)
• Citations: (2013), 446 N.R. 35 (SCC);2013 SCC 37;AZ-50978920;[2013] ACS no 37;[2013] SCJ No 37 (QL);JE 2013-1134;[2013] 2 SCR 623;[2013] CarswellNS 429;[2013] EXP 2138

Sable Offshore Energy v. Ameron Intl. (2013), 446 N.R. 35 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2013] N.R. TBEd. JN.016

Sable Offshore Energy Inc., as agent for and on behalf of the Working Interest Owners of the Sable Offshore Energy Project, ExxonMobil Canada Properties, Shell Canada Limited, Imperial Oil Resources, Mosbacher Operating Ltd., Pengrowth Corporation, ExxonMobil Canada Properties, as operator of the Sable Offshore Energy Project (appellants) v. Ameron International Corporation, Ameron B.V., Allcolour Paint Limited, Amercoat Canada, Rubyco Ltd., Danroh Inc. and Serious Business Inc. (respondents)

(34678; 2013 SCC 37; 2013 CSC 37)

Indexed As: Sable Offshore Energy Inc. et al. v. Ameron International Corp. et al.

Supreme Court of Canada

McLachlin, C.J.C., LeBel, Abella, Cromwell, Moldaver, Karakatsanis and Wagner, JJ.

June 21, 2013.

Summary:

The plaintiffs' oil rig was painted using paint manufactured by the Ameron defendants. The paint failed, leading to corrosion of the steel the paint was intended to protect. As there was no privity of contract between the plaintiffs and the Ameron defendants, the plaintiffs' claim against the Ameron defendants was based in negligence, alleging, inter alia, that the paint was unsuitable for the project. The plaintiffs also claimed against the defendants who prepared surfaces for painting, applied paint or contracted with others to do the foregoing. The Ameron defendants applied under rule 14.25(1)(a) to strike the claim against them as failing to disclose a reasonable cause of action. The Ameron defendants submitted that the law did not recognize tort liability for pure economic loss resulting from "non-dangerous" defects in products.

The Nova Scotia Supreme Court, in a judgment reported (2006), 249 N.S.R.(2d) 122; 792 A.P.R. 122, dismissed the application. Assuming that the defect was "non-dangerous", it was not plain and obvious that tort liability for pure economic loss recognized by the Supreme Court of Canada for "dangerous defects" (Winnipeg Condominium case) would not be extended to "non- dangerous" defects. Alternatively, it was not plain and obvious that the defective paint failed to meet the level of dangerousness required by the Winnipeg Condominium case. Finally, it was not plain and obvious that the plaintiffs' claim was not for pure economic loss, as opposed to a property damage claim. The Ameron defendants appealed.

The Nova Scotia Court of Appeal, in a judgment reported (2007), 255 N.S.R.(2d) 164; 814 A.P.R. 164, dismissed the appeal. The plaintiffs and a number of defendants negotiated Pierringer agreements and applied to the court for an order approving the settlement agreements. The non-settling defendants, although not opposing court approval, tendered a number of conditions that they wished included in the court order to protect their rights.

The Nova Scotia Supreme Court, in a judgment reported (2009), 287 N.S.R.(2d) 113; 912 A.P.R. 113, approved the Pierringer agreements subject to conditions. The court considered which conditions and amendments to the pleadings proposed by the non-settling defendants were appropriate and which ones were unnecessary.

The Nova Scotia Supreme Court, in a judgment reported (2010), 291 N.S.R.(2d) 1; 922 A.P.R. 1, subsequently issued supplementary reasons reflecting three changes respecting (1) the amendment of the style of cause (deleting names of settling defendants), (2) respecting amendments to the statement of claim (re plaintiffs no longer pursuing claims against the settling defendants), and (3) respecting admissions in the pleadings (now concluding that full argument on this issue should be left to a later time). The non-settling defendants sought disclosure of the settlement amount.

The Nova Scotia Supreme Court, in a judgment reported (2010), 299 N.S.R.(2d) 216; 947 A.P.R. 216, held that the settlement amount was not to be disclosed. The non-settling defendants appealed.

The Nova Scotia Court of Appeal, in a judgment reported (2011), 310 N.S.R.(2d) 382; 983 A.P.R. 382, allowed the appeal and ordered disclosure of the settlement amounts in the Pierringer Agreement. The plaintiffs appealed.

The Supreme Court of Canada allowed the appeal. Settlement privilege protected disclosure of the settlement amounts.

Practice - Topic 4590

Discovery - What documents must be produced - Settlement documents and other agreements - The plaintiffs' oil rig was painted using paint manufactured by the Ameron defendants - The paint failed, leading to corrosion of the steel that the paint was intended to protect - The plaintiffs sued the Ameron defendants and the defendants who prepared surfaces for painting, applied paint or contracted with others to do the foregoing - The plaintiffs and some defendants settled by way of a court-approved Pierringer agreement - All non-financial terms of the settlement were disclosed, but not the settlement amounts - The non-settling defendants would be liable only for the proportion of damages attributable to their fault - The plaintiffs agreed to disclose the settlement amounts once liability was determined - The non-settling defendants sought disclosure of the settlement amount - The trial judge refused to order disclosure, stating that "the public interest in settlements is better furthered by protecting the settlement made by the settling defendants with the plaintiffs. ... To decide otherwise would ... undermine, if not extinguish, the possibility of settlement negotiations." - The Nova Scotia Court of Appeal ordered disclosure of the settlement amounts to the parties - The Supreme Court of Canada restored the trial judge's decision - Disclosure of the settlement amounts was protected by settlement privilege - The court stated that "I see no tangible prejudice created by withholding the amounts of the settlements which can be said to outweigh the public interest in promoting settlements. ... The non-settling defendants have in fact received all the non-financial terms of the Pierringer Agreements. They have access to all the relevant documents and other evidence that was in the settling defendants' possession. They also have the assurance that they will not be held liable for more than their share of damages. Moreover, Sable agreed that at the end of the trial, once liability had been determined, it would disclose to the trial judge the amounts it settled for. As a result, should the non-settling defendants establish a right to set-off in this case, their liability for damages will be adjusted downwards if necessary to avoid overcompensating the plaintiff. ... It is therefore not clear to me how knowledge of the settlement amounts materially affects the ability of the non-settling defendants to know and present their case. ... A proper analysis of a claim for an exception to settlement privilege does not simply ask whether the non-settling defendants derive some tactical advantage from disclosure, but whether the reason for disclosure outweighs the policy in favour of promoting settlement. While protecting disclosure of settlement negotiations and their fruits has the demonstrable benefit of promoting settlement, there is little corresponding harm in denying disclosure of the settlement amounts in this case." - See paragraphs 20, 25, 27, 30.

Practice - Topic 9851.1

Settlements - Mary Carter or Pierringer agreements - [See Practice - Topic 4590].

Practice - Topic 9851.1

Settlements - Mary Carter or Pierringer agreements - The Supreme Court of Canada stated that "a Pierringer Agreement allows one or more defendants in a multi-party proceeding to settle with the plaintiff and withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused. There is no joint liability with the settling defendants, but non-settling defendants may be jointly liable with each other." - See paragraph 6.

Practice - Topic 9867

Settlements - Disclosure - [See Practice - Topic 4590].

Cases Noticed:

Pierringer v. Hoger (1964), 124 N.W.2d 106 (Wis.), refd to. [para. 6].

Sparling v. Southam Inc. (1988), 66 O.R.(2d) 225 (H.C.J.), refd to. [para. 11].

Loewen, Ondaatje, McCutcheon & Co. v. Sparling et al., [1992] 3 S.C.R. 235; 143 N.R. 191, refd to. [para. 11].

Kelvin Energy Ltd. v. Lee - see Loewen, Ondaatje, McCutcheon & Co. v. Sparling et al.

Rush & Tompkins Ltd. v. Greater London Council, [1988] 3 All E.R. 737; 104 N.R. 392 (H.L.), refd to. [para. 12].

Cutts v. Head, [1984] 1 All E.R. 597 (Eng. C.A.), refd to. [para. 13].

Middelkamp et al. v. Fraser Valley Real Estate Board et al. (1992), 17 B.C.A.C. 134; 29 W.A.C. 134; 71 B.C.L.R.(2d) 276 (C.A.), refd to. [para. 16].

Brown v. Cape Breton (Regional Municipality) (2011), 302 N.S.R.(2d) 84; 955 A.P.R. 84; 2011 NSCA 32, refd to. [para. 17].

Amoco Canada Petroleum Co. et al. v. Propak Systems Ltd. et al., [2001] 6 W.W.R. 628; 281 A.R. 185; 248 W.A.C. 185; 2001 ABCA 110, refd to. [para. 18].

Hudson Bay Mining and Smelting Co. v. Wright et al. (1997), 120 Man.R.(2d) 214 (Q.B.), refd to. [para. 18].

Dos Santos Estate v. Sun Life Assurance Co. of Canada (2005), 207 B.C.A.C. 54; 341 W.A.C. 54; 2005 BCCA 4, refd to. [para. 19].

Unilever PLC v. Procter & Gamble Co., [2001] 1 All E.R. 783 (C.A.), refd to. [para. 19].

Underwood v. Cox (1912), 26 O.L.R. 303, refd to. [para. 19].

Bioriginal Food & Science Corp. et al. v. Gerspacher et al. (2012), 410 Sask.R. 158; 2012 SKQB 469, refd to. [para. 29].

Authors and Works Noticed:

Bryant, Alan W., Lederman, Sydney N., and Fuerst, Michelle K., The Law of Evidence in Canada (3rd Ed. 2009), para. 14.341 [para. 17].

Knapp, Peter B., Keeping the Pierringer Promise: Fair Settlements and Fair Trials (1994), 20 Wm. Mitchell L.R. 1, pp. 5 [para. 21]; 6, 7 [para. 22].

Vaver, David, "Without Prejudice" Communications - Their Admissibility and Effect (1974), 9 U.B.C.L. Rev. 85, p. 88 [para. 13].

Counsel:

Robert Belliveau, Q.C., and Kevin Gibson, for the appellants;

John P. Merrick, Q.C., and Darlene Jamieson, Q.C., for the respondents, Ameron International Corp. and Ameron B.V.;

Terrence L. S. Teed, Q.C., and Ronald J. Savoy, for the respondents, Allcolour Paint Ltd., Amercoat Canada, Rubyco Ltd., Danroh Inc. and Serious Business Inc.

Solicitors of Record:

McInnes Cooper, Halifax, Nova Scotia, for the appellants;

Merrick Jamieson Sterns Washington & Mahody, Halifax, N.S., for the respondents, Ameron International Corp. and Ameron B.V.;

Bingham Law, Moncton, N.B., for the respondents, Allcolour Paint Ltd., Amercoat Canada, Rubyco Ltd., Danroh Inc. and Serious Business Inc.

This appeal was heard on March 25, 2013, before McLachlin, C.J.C., LeBel, Abella, Cromwell, Moldaver, Karakatsanis and Wagner, JJ., of the Supreme Court of Canada.

On June 21, 2013, Abella, J., delivered the following judgment in both official languages for the Court.