Supreme Court Denies Leave in Oil Leak Case

November 25, 2019

The Supreme Court of Canada recently denied leave to appeal in the case of Gendron v. Doug C. Thompson Ltd. (Thompson Fuels).  This brings an end to a lawsuit that determined several important issues.

Facts

The case arose out of an oil leak. Approximately one week into trial, the plaintiff and an oil tank manufacturer entered into a Pierringer Agreement.

The trial judge determined liability as follows: 60% on the plaintiff, 40% on the company that inspected and filled the tank, and zero on the tank manufacturer and the TSSA. The Court of Appeal upheld the trial judge’s findings on liability.

The trial judge found that the tank manufacturer complied with its duty to warn. It provided warnings to oil tank professionals. There was no need to warn end users.

The decision shows that homeowners must retain professionals to install, maintain, and fill tanks. They also must report oil leaks in a timely manner.

Further, technicians must comply with regulatory requirements. They must also keep up to date with best practices. Even though the TSSA did not require indoor oil tanks to be checked for water at the pertinent time, the court found that the water test should have been conducted by the technician.

The total damages were over $2.1 million. After applying contributory negligence, the plaintiff was awarded $864,000.

Pierringer Agreement

The Court of Appeal stated that the damages should not be reduced by the amount the plaintiff received through the Pierringer Agreement with the tank manufacturer. There would be no double recovery unless the plaintiff received more than $2.1 million.

The Court of Appeal indicated that settlement should be encouraged. Absent double compensation, a non-settling defendant cannot rely on the benefits of a Pierringer Agreement beyond the guarantee that it will not be required to pay more than its share of liability.

This decision will likely encourage plaintiffs to enter into Pierringer Agreements, particularly in cases where they are faced with a finding of contributory negligence

This is an example of how the decision works:

  • Court assesses damages at $1 million
  • Liability split 50/50 between plaintiff and non-settling defendant.  No liability on settling defendant
  • Settling defendant paid plaintiff $500,000
  • Non-settling defendant not entitled to any deduction
  • Plaintiff recovers total of $1 million ($500,000 from settling defendant and $500,000 from non-settling defendant)

This is another example:

  • Court assesses damages at $1 million
  • Liability split 50/50 between plaintiff and non-settling defendant.  No liability on settling defendant
  • Settling defendant paid plaintiff $750,000
  • Non-settling defendant entitled to deduction of $250,000
  • Plaintiff recovers total of $1 million ($750,000 from settling defendant and $250,000 from non-settling defendant)

Intuitively, the plaintiff would be overcompensated in both examples. If there had been no Pierringer Agreement, the plaintiff would recover $500,000 in both scenarios. However, with the Pierringer Agreement, the plaintiff receives $1 million, based on the Court of Appeal’s decision.

Brian Sunohara and Meryl Rodrigues were counsel for the tank manufacturer.