Creative Costs Arrangements
In estates litigation, we’ve grown used to the new regime after McDougald Estate v. Gooderham, 2005 CanLII 21091 (Ont. C.A.), and its gloss – “blended costs”; Sawdon Estate v. Watch Tower Bible and Tract Society of Canada, 2014 ONCA 101 (Ont. C.A.) (Ont. C.A.), and Heston-Cook v. Schneider, 2015 ONCA 10 (Ont. C.A.)
In many cases, one can also take a creative approach to settlement and the risks associated with costs through the same sorts of arrangements that are common in commercial disputes – agreements between contesting parties but whom have different exposure to liability and different interests in the litigation. I have in mind here such tools as a “Mary Carter Agreement” or a “Pierringer Agreement”.
A “Mary Carter Agreement” takes its name from an American case – Booth v. Mary Carter Paint Co., 202 So. 2d 8 (1967, Fla. Dist. Ct). Under this arrangement, a ‘settling defendant’ may enter into a partial settlement with the plaintiff featuring a transfer of money by the settling defendant to the plaintiff pending final judgment, remain in the litigation as a defendant, and make common cause with the plaintiff against another defendant. In essence this allows the defendant to cap its exposure and the plaintiff to fund its litigation against other defendants. If the ultimate liability of the defendant is less than agreed, the excess may be subject to return to the defendant depending on the nature of the details; Laudon v. Roberts, 2009 ONCA 383 (Ont. C.A.).
A “Pierringer Agreement” is another American development imported into Canadian jurisprudence; see Pierringer v. Hoger, 124 N.W.2d 106 (Wisc. S.C., 1963).
In this sort of agreement, there is a partial settlement whereby the plaintiff and a defendant settle the claim and the defendant withdraws from participation in the litigation. The defendant’s payment is put towards the damages award. In exchange, the plaintiff agrees to indemnify the settling defendant for any contribution sought from it by the non-settling defendant(s). See generally Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 (S.C.C.)
Both of these sorts of agreement must be disclosed to the Court which will then have a discretion as to which details must be disclosed to the parties adverse in interest so that the adversarial nature of the litigation is preserved.
To my mind these are very useful tools that can be employed where litigation in respect of an estate may give rise to a multiplicity of claims that arise from complex estate plans. Parties with common interests may align and the proceedings may be contoured to reflect such agreements. Ultimately the benefit is simpler proceedings with lessened exposure for the parties in agreement.
Have a very nice weekend everyone.