Mary Carter Agreement Pitfalls > Principles Reviewed

In a lawsuit where the plaintiff is suing two or more defendants, there exists the possibility that the plaintiff may choose to enter into a partial settlement prior to the completion of Trial.  A Mary Carter agreement is one type of partial settlement whereby the plaintiff settles against some (but not all) of the defendants and then continues the lawsuit against the remaining defendants.

In Laudon v. Roberts (2009 Ontario Court of Appeal), the plaintiff suffered personal injuries in a boating accident and sued two defendants.  He claimed $2 million in a lawsuit against two defendants.  Prior to Trial, he entered into a Mary Carter agreement and settled his claim against one defendant for $438,000 (being $365,000 in damages and interest, plus $35,000 in costs and $38,000 in disbursements).  He proceeded to Trial against the remaining defendant, Sullivan.

At Trial, the defendant Sullivan (with whom no agreement was reached) was found 39% responsible for the accident.  But the plaintiff’s overall award at Trial ($331,000 in damages and interest) was less than what he received from the Mary Carter agreement ($365,000 in damages and interest), which was paid in full prior to Trial.

Does the plaintiff still recover against the defendant Sullivan (39% of $331,000 means that Sullivan was to pay $144,000)?  Or is the plaintiff’s claim against the defendant Sullivan dismissed (with the plaintiff having to pay costs to Sullivan)?

Sullivan argued that the plaintiff could not obtain a double recovery and collect against Sullivan when the plaintiff had already collected $365,000 in damages and interest prior to Trial.

The plaintiff won at Trial and recovery against Sullivan was awarded.  Sullivan was ordered to pay the plaintiff: (1) $144,000 in damages and interest; (2) $400,000 in legal costs; and (3) $90,000 in disbursements.  This was awarded in addition to the Mary Carter agreement payment.

At the Court of Appeal, the plaintiff lost and Sullivan’s argument against a ‘double recovery’ prevailed.  Sullivan is not required to pay damages to the plaintiff.  Significantly, the plaintiff is required to pay Sullivan’s costs and disbursements.  Sullivan’s costs are likely significant.

In an earlier ruling, Laudon v. Roberts (2008 Ontario Superior Court), before the Court of Appeal’s decision, the issue of costs of the Trial was decided by the Trial Judge.  The plaintiff sought $819,000 in legal costs for the lawsuit plus $157,000 in disbursements.  In contrast, at that same hearing, the defendant Sullivan sought his legal costs of $530,000 for the lawsuit (because his position was that the lawsuit should be dismissed against him).

Given that the plaintiff was awarded $400,000 in costs at Trial, it is likely that the defendant Sullivan will recover significant costs.  The various offers made by the defendant Sullivan, before Trial, were found to be valid offers to settle (pursuant to Rule 49) by the Trial Judge.

After the Court of Appeal’s decision, the plaintiff’s position is as follows:

• The plaintiff recovered $38,000 in disbursements from the Mary Carter agreement but will be responsible for paying for the disbursements of the defendant Sullivan;
• The plaintiff recovered $35,000 in costs from the Mary Carter agreement and will likely face a demand of at least $530,000 in costs from the defendant Sullivan;
• The plaintiff is to pay $10,000, all inclusive, to the defendant Sullivan for the appeal; and
• The plaintiff had already been ordered in a 2007 decision to pay the defendant Sullivan $20,000 for costs thrown away for an adjournment of the Trial initially set to proceed in the Spring, 2006 (due to an error by plaintiff’s counsel at that Trial in revealing the particulars of the Mary Carter agreement leading to the recusal of that Trial Judge from the case).  Importantly, that decision left open the possibility of the defendant Sullivan claiming additional wasted costs over and above the $20,000 awarded.

Gregory Chang
Toronto Insurance Litigation Lawyer