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PROCEEDINGS - Settlements

Friday, November 09, 2018 @ 8:26 AM  

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Appeal by the plaintiff from the apportionment of negligence between the parties and from the trial judge’s determination of interest and the impact of the Pierringer agreements. The plaintiff built an underground Emulsion Pipeline. It retained IMV Projects to provide it with engineering advice on the design and construction of the pipeline. Shaw Pipe supplied the pipe system. Flint Field Services was retained to install the pipe. The Emulsion Pipeline failed after three months of operations due to flawed design and operational error. The plaintiff, IMV Projects, Shaw Pipe and Flint Field Services were all found negligent. The entire pipeline system as recommended by Shaw Pipe was unfit for its intended purpose as it was very vulnerable to water penetrating the waterproof outer jacket. In dealing with a well blowout, the plaintiff negligently decided to flow hot emulsion down the pipeline which, unbeknownst to the plaintiff’s operators, pushed the Emulsion Pipeline beyond its design limits. On the eve of trial, the plaintiff entered into Pierringer settlement agreements with Shaw Pipe and Flint Field Services, and the action proceeded against IMV Projects only. The trial judge attributed 50 per cent responsibility to the plaintiff, 20 per cent to IMV Projects, 25 per cent to Shaw Pipe and five per cent to Flint Field Services. The Memorandum of Agreement that formed the background of the relationship between the plaintiff and IMV Projects contained an indemnity clause providing that the plaintiff would be responsible for any damage arising from a well blowout and a covenant in a clause provided for the payment of solicitor and own client costs in some circumstances.

HELD: Appeal allowed in part. The apportionment of liability was varied to 25 per cent to the plaintiff, 35 per cent to IMV Projects, 35 per cent to Shaw Pipe and five per cent to Flint Field Services. There was evidence that could support a finding of negligence on the part of Shaw Pipe in telling Flint Field Services that some cracks in the waterproof outer jacket could be tolerated. There was also sufficient evidence to support the finding that Shaw Pipe knew that the plaintiff and IMV Projects were relying on it to recommend a suitable product. There was palpable and overriding error in the trial judge’s conclusion that the Emulsion Pipeline was not a crumbling skull which affected the apportionment of fault to Shaw Pipe and IMV Projects. All parties were jointly responsible for the damage based on their respective fault. The plaintiff’s operators, in dealing with the blow out, were faced with a difficult choice in the face of an emergency. They had no viable alternatives open to them. The trial judge’s apportionment of responsibility at trial reflected palpable and overriding error given the respective roles of the four responsible parties. The trial judge’s conclusion that the damage to the Emulsion Pipeline was not sufficiently connected to the well blowout to fall within the indemnity clause was available on the record. The trial judge did not err in rejecting the plaintiff’s claim for solicitor and client costs as there was no applicable solicitor and client costs clause in this case. The trial judge’s selection of the date the damage was first observed as the date on which interest commenced was reasonable. The settling plaintiff under the Pierringer agreement must give credit to the non-settling defendant for any surplus arising from the payments by the settling defendants. The principle against overcompensation, however, did not require the settling plaintiff to recognize a surplus until it was completely indemnified for its damage and it had recovered its solicitor and client costs of pursuing the settling defendants.

Canadian Natural Resources Ltd. v. Wood Group Mustang (Canada) Inc., [2018] A.J. No. 1123, Alberta Court of Appeal, R.L. Berger, F.F. Slatter and M.B. Bielby JJ.A., September 21, 2018. Digest No. TLD-November52018010