Court File and Parties

Court File No.: CV-16-2192-00 Date: 2023-01-18 Superior Court of Justice – Ontario

Re: JEFF VEENSTRA and BONNIE VEENSTRA and MUNICIPALITY OF NORTH MIDDLESEX, VIC STELLINGWERFF, and YVONNE MARIE DESJARDINE et. al.

Before: Justice H.A. Rady

Counsel: Sean Dewart and Brett Hughes, agents for the lawyers for the Plaintiffs Jonathan DeVries for the Defendants North Middlesex and Vic Stellingwerff

Heard: January 4, 2023

Endorsement

Introduction

[1] The moving parties seek an order staying this action as an abuse of process resulting from the plaintiffs’ failure to disclose a Pierringer agreement they entered into with former defendants. The responding parties bring a cross-motion seeking to amend the Statement of Claim to explicitly restrict the plaintiffs’ claim against the moving parties to their several liability.

The Underlying Litigation

[2] In 2014, the plaintiffs purchased a home in Parkhill, Ontario from Yvonne Desjardine. They allege that the house contained numerous defects that were not disclosed, arising from renovations undertaken by the vendor. This action was commenced on September 9, 2016. The plaintiffs seek damages for negligence, negligent misrepresentation, and breach of contract. They named the vendor, the listing agent, the buyers’ agent, the purchasers’ home inspector, the title insurer and the moving parties (also described here collectively as North Middlesex) as defendants. As against North Middlesex, they allege that Mr. Stellingwerff, the chief building inspector, closed Ms. Desjardine’s prior building permit application for renovations notwithstanding certain deficiencies.

[3] The defendants delivered Statements of Defence. Examinations for discovery were completed in February 2018. The action was set down three years later. In June 2021, the defendant Desjardine filed an assignment in bankruptcy and the action has been stayed against her. The case was scheduled for trial to commence October 17, 2022. The trial was adjourned in light of this motion.

Settlement Agreement

[4] The case proceeded to a judicial pre-trial on January 25, 2022 before Justice McArthur. It was attended by all counsel. Counsel for the plaintiffs and certain of the defendants had resolution discussions and a settlement was reached. There is no question that a Pierringer agreement was discussed during the conference. On January 26, 2022, the court sent counsel a copy of Justice McArthur’s pre-trial report. It confirmed that:

Tentative settlement was arranged between some defendants and plaintiffs. Terms and formalities to be put in place as well as a Pierringer agreement involving the municipality. This will narrow the case down to between the plaintiff and municipality and Stewart Title with further discussions to follow.

[5] Mr. Camman, counsel for the plaintiffs has deposed that all defendants were aware of the Pierringer agreement and that the plaintiffs’ claim would be restricted to the non-settling defendants’ several liability. See para. 22 of the Camman affidavit sworn November 25, 2022. His evidence on this point is uncontroverted. The lawyer for North Middlesex who attended the first pre-trial has not filed an affidavit.

[6] I pause here to note that Mr. DeVries raised an issue respecting the application of Rule 50.09 of the Rules of Civil Procedure and whether evidence about what occurred at the pre-trial should be admitted. In fact, both parties have filed affidavits that touch on pre-trial discussions. In my view, the mischief R. 50.09 is intended to prevent is the disclosure of privileged information, such as settlement positions on liability and quantum, or discussions on those topics. Here, the affidavits are very general in nature and do not disclose a “statement” made during the pre-trial or the parties’ settlement positions.

[7] In their motion record, the moving parties acknowledge that after the pre-trial, they were advised that the tort defendants were in the process of entering into a Pierringer agreement with the plaintiffs. See the affidavit of Kellie Gibson, sworn September 7, 2022, para. 6.

[8] On January 27, 2022, the plaintiffs settled with the title insurer. Plaintiffs’ counsel wrote to counsel for the title insurer inquiring if it would be part of the Pierringer agreement. All counsel were copied on the correspondence including counsel for North Middlesex. Ultimately, the insurer decided it unnecessary to be part of the Pierringer agreement.

[9] On January 31, 2022, a draft Pierringer agreement was circulated among the settling defendants in the form that was eventually executed between February and April 7, 2022.

[10] The agreement provided as follows:

• The settling defendants would pay an amount to the plaintiffs;
• The settling defendants would consent to a without costs dismissal order of the claims between them, and the plaintiffs would limit their claims against the non-settling defendants (i.e. North Middlesex and Mr. Stellingwerff) to their several liability;
• The settling defendants would “cooperate with and avail themselves to” both the plaintiffs and the non-settling defendants “for the purpose of giving evidence at trial;”
• The plaintiffs would release their claims against the settling defendants;
• The plaintiffs would amend their statement of claim to reflect the Pierringer agreement;
• All parties would receive complete details and copies of the Pierringer agreement “following its execution”, except for the dollar amount; and
• The plaintiffs would disclose details of the agreement to the court “forthwith upon execution.”

Chronology Post Pierringer

[11] A second pre-trial was scheduled for March 9, 2022 before Justice McArthur, which was attended only by the plaintiff and the moving parties. Plaintiffs’ counsel deposes that “discussions were premised on the plaintiffs seeking a settlement that reflected their damages attributable to North Middlesex and Mr. Stellingwerff, considering the settlements with the settling defendants”: Camman affidavit at para. 26. Counsel who was acting for North Middlesex deposes that she has “no recollection” of “discussions premised on the plaintiffs limiting their recovery to the non-settling defendants’ several share of liability” and that the plaintiffs’ settlement position appeared to her to be the full value of their damages. See the affidavit of Tara Pollitt, sworn December 2, 202, at para. 6.

[12] In the meantime, a draft fresh as amended Statement of Claim, which removed the settling defendants from the litigation, was circulated among all counsel. All parties consented to the amendment, including counsel for the moving parties. The amended claim did not expressly limit the claim to the non-settling defendants’ several liability as contemplated by the Pierringer agreement. Mr. Camman has deposed that they did not realize that additional language was necessary in the Statement of Claim to do so but they always understood the claim was so limited: Camman affidavit, at para. 23.

[13] On March 9, 2022, counsel for the purchasers’ building inspector sent an unredacted copy of the Pierringer agreement to all counsel, including counsel for North Middlesex.

[14] On March 10, 2022, plaintiffs’ counsel asked the moving parties’ counsel to delete the copy that had been provided to her because it contained financial details protected by settlement privilege. She quite properly obliged. Counsel for the plaintiffs asked counsel for the settling defendants not to include North Middlesex in any further communication respecting the Pierringer agreement.

[15] On March 2, 2022, Justice McArthur signed an order amending the Statement of Claim on consent dismissing the action against the settling defendants and the settling defendants’ crossclaims. It was circulated among all parties on May 5, 2022.

The Stay Motion

[16] On August 16, 2022, Mr. DeVries assumed carriage of the file. He asked for a copy of the Pierringer agreement. On August 25, 2022, a copy was forwarded with the quantum of settlement redacted.

[17] On September 7, 2022, this motion for a stay was served.

The Parties’ Positions

[18] The moving parties assert that:

• the Pierringer agreement was withheld from them;
• the plaintiffs prevented its disclosure;
• the amendment to the claim did not conform with the agreement because it failed to limit the claim to the moving parties’ several liability;
• the Pierringer agreement changed the litigation landscape because it required the settling defendants to assist the remaining parties;
• the plaintiffs’ actions constitute an abuse of process and a stay is required.

[19] The plaintiffs respond that:

• the fact of the Pierringer agreement was disclosed promptly;
• it did not significantly alter the litigation landscape;
• plaintiffs’ counsel amended the claim to remove the settling defendants as parties but did not appreciate that additional language was necessary to limit damages to North Middlesex’s several liability, which can now be accomplished by amendment to the Statement of Claim.

The Law

[20] There is now a substantial body of recent caselaw respecting litigation agreements. The parties agree on the basic principles, which are helpfully set out in CHU de Québec-Université Laval v. The Tree of Knowledge International Corp., 2022 ONCA 467, at para. 55. They agree that there is a duty of immediate disclosure when the agreement changes the litigation landscape. Where they part company is about what must be disclosed and whether the litigation landscape has changed in this case.

[21] The moving parties rely in particular on Tallman Truck Centre Limited v. K.P.S. Holdings Inc., 2022 ONCA 66 in support of the proposition that disclosure requires not just the existence of an agreement but also its relevant terms. There is no obligation on a non-settling party to seek disclosure. The obligation is that of the settling parties and the failure of compliance amounts to an abuse of process requiring a stay. See also Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898.

[22] The responding parties submit that a more nuanced analysis is required. They acknowledge that a stay is now the only remedy for failure to disclose by virtue of Handley Estate v. DTE Industries Limited, 2018 ONCA 324; and Crestwood Preparatory College Inc. v. Smith, 2022 ONCA 734. Consequently, they submit that the moving parties bear the onus to demonstrate that “the proceedings under scrutiny are unfair to the point that they are contrary to the interests of justice”: R. v. Nixon, 2011 SCC 34. The court should take a cautious approach given the draconian nature of the remedy: Poirier v. Logan, 2021 ONSC 1633, at para. 57, appeal dismissed 2022 ONCA 350; CHU de Québec-Université Laval v. Tree of Knowledge International Corp., supra.

[23] They submit that North Middlesex was not entitled to a copy of the agreement itself, but rather the fact of the agreement and any terms that altered the litigation landscape: Aecon Buildings, supra, paras. 13-14; CHU de Québec-Université-Laval, supra, at paras. 59-60.

[24] The responding parties note that the rationale underlying the disclosure requirement is that the “apparent relationships between any parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation” is altered. In other words, the settling defendants may no longer be in an adversarial position but rather a co-operative one to the plaintiffs: Handley Estate, supra, at paras. 39 and 40 quoting Aviaco International Leasing Inc. v. Boeing Canada Inc., at para. 23.

[25] However, the litigation landscape is not always altered in a significant way even when a partial settlement requires some element of cooperation from the settling defendants. As a result, the court is required to assess the entire landscape, considering the pleadings and the conduct of the litigation: Handley Estate, supra, at para. 40.

Analysis and Disposition

[26] I have concluded that the motion for a stay should be dismissed and the cross-motion to amend the pleadings should be granted.

[27] I would observe at the outset that it is beyond dispute that the moving parties were aware of the fact that there was a Pierringer agreement in the works no later than January 25, 2022, when the first pre-trial was conducted. The agreement was not fully executed until April 7, 2022.

[28] Counsel for the moving parties received an unredacted copy of the agreement on March 9, 2022, which she properly deleted at the plaintiffs’ request because it contained financial information that was subject to settlement privilege. I recognize that the duty to disclose is that of the plaintiffs, but it strikes me as unusual that the moving parties’ counsel did not request a copy of the unredacted agreement until August 25, 2022, when North Middlesex knew no later than January 26, 2022 that such an agreement was being circulated.

[29] Counsel also knew as of the second pre-trial on March 9, 2022 that an agreement had been concluded and that the Statement of Claim was being amended to reflect that development.

[30] It is the case that Pierringer agreements contain fairly standard terms. In Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3d ed. (Toronto: LexisNexis Canada, 2017), at p. 762, the authors describe the features of a Pierringer agreement as:

(1) the settling defendant settles with the plaintiff; (2) the plaintiff discontinues its claim against the settling defendant; (3) the plaintiff continues its action against the non-settling defendant but limits its claim to the non-settling defendant’s several liability; (4) the settling defendant agrees to co-operate with the plaintiff by making documents and witnesses available for the action against the non-settling defendant; (5) the settling defendant agrees not to seek contribution and indemnity from the non-settling defendant; and (6) the plaintiff agrees to indemnify the settling defendant against any claims over the by non-settling defendants.

[31] CHU de Québec-Université-Laval, supra, is instructive on this issue. The settling plaintiff advised the non-settling parties that it had entered into a “Pierringer agreement” within a few days of doing so and that it would seek court approval, but it did not identify specific terms of settlement at that time. The motion judge found that “[b]ased on this disclosure, a reasonably experienced civil litigation lawyer would have known that the adversarial orientation of the litigation had changed, that parties that had been co-defendants were no longer co-defendants, and were no longer aligned with the other defendants”, and that “the critical disclosure – the fact that the adversarial relationship among the parties had changed – was made the day after the Settlement Agreement was signed.” See paras. 55-56 and 72-73.

[32] That is almost exactly what happened here. North Middlesex was aware at an early point that a Pierringer agreement was being finalized. Counsel who was acting at the time is an experienced litigator and would have been aware that the parties’ adversarial relationship had been changed, a subject to which I will return below. Steps were taken to remove the settling defendants from the litigation, consistent with the customary terms of a Pierringer agreement.

[33] I do not agree with Mr. DeVries that the plaintiffs actively prevented North Middlesex from having a copy of the agreement. He points to plaintiffs’ counsel’s letter of March 10, 2022 to support his contention, in which she asked the settling defendants to refrain from including North Middlesex on emails regarding the Pierringer agreement. This attributes a far more sinister connotation than the correspondence reasonably bears. Given that North Middlesex had been given an unredacted copy of the agreement to which it was not entitled, it is reasonable to conclude that plaintiffs’ counsel was merely ensuring that it did not happen again.

[34] Unfortunately, plaintiffs’ counsel did not forward a redacted copy of the agreement as they had agreed to do. Nor did counsel for North Middlesex request a copy. The only reasonable explanation is inadvertence on both sides. There is no evidence that the plaintiffs were attempting to conceal the agreement. Indeed, the evidence points to the opposite conclusion.

[35] The other point that bears comment is the issue of the damage claim. Counsel for North Middlesex emphasized that the claim was not amended to limit the prayer for relief to North Middlesex’s several liability as the Pierringer agreement contemplated. The decision in Endean v. St. Joseph’s General Hospital, 2019 ONCA 181, is instructive. Justice Zarnett began his discussion of the interaction between concurrent liability and Pierringer orders at para. 47. He said:

[47] At law, where more than one wrongdoer has caused or contributed to the plaintiff’s injury, they are each liable to compensate the plaintiff in full, subject only to the rule that the plaintiff cannot recover more than 100% of their damages: see Athey v. Leonati, [1996] 3 S.C.R. 458, at para. 25. In practical terms, this means the plaintiff can recover 100% of their losses from any defendant who caused or contributed to the particular injury regardless of the degree of fault of that defendant, and regardless of whether others, parties or non-parties, were also at fault.

[36] He then set out the essential features of a Pierringer order at para. 52 (also referred to at para. 30 of this decision) and discussed their impact on the non-settling defendants’ liability. He continued the analysis at paras. 53-55:

[53] These essential provisions of a Pierringer Order are informed by the discussion of liability above. The non-settling defendant will have cross-claimed against a settling defendant because it wants to recover the settling defendant’s share of fault from it as indemnity, should the non-settling defendant have to pay more than its proportionate share of the plaintiff’s damages. The non-settling defendant’s need to do so disappears under a Pierringer Order, because it requires the plaintiff to effectively put the non-settling defendant in the same economic position as if it paid the plaintiff in full and recovered any indemnity from the settling defendant. It does this by requiring the plaintiff to reduce its recovery from the non-settling defendant by the percentage of fault to be attributed to the settling defendant, and thus by the amount the non-settling defendant would have been able to recover from the settling defendant as indemnity: see M.(J.) v. Bradley (2004), 71 O.R. (3d) 171, 187 O.A.C. 201 (C.A.), at paras. 30-31.

[54] To use an example, suppose defendants A and B were each creditworthy and cross-claimed against each other for indemnity. Suppose each is found liable at trial and fault was apportioned 50% to each. The plaintiff makes A pay 100% of the damages. But A recovers from B, on a cross-claim, for B’s 50% proportionate liability as indemnity. At the end of the day, A’s net payment is only 50%, commensurate with A’s liability.

[55] Now suppose the plaintiff settled with B before trial. In the Pierringer Order situation, the plaintiff reduces their recovery from A (who did not settle) by the amount it is determined that B is at fault. At trial, A and B are each found to be 50% at fault. The plaintiff reduces their claim against A by the amount of fault attributed to B. A’s net payment is the same 50%.

[37] The Endean decision is responsive to the moving parties’ concern.

[38] The other question is whether the litigation landscape was significantly changed by the agreement. I have concluded that it was not, for the following reasons.

[39] The cooperation clause in the Pierringer agreement only provided that the settling defendants would “cooperate with and avail themselves to the Plaintiffs and Remaining Defendants, or any of them, for the purposes of giving evidence at the trial of the Action” if asked.

[40] Contrary to North Middlesex’s contention, the agreement did not oblige the settling defendants to provide “enhanced” or “favourable” evidence to the plaintiffs. The obligation to cooperate enured to the benefit of both the plaintiffs and North Middlesex. The settling defendants were no longer part of the litigation and their crossclaims had been dismissed. Consequently, they had no axe to grind with either side. Put another way, there was no reason for the settling defendants to assist the plaintiffs any more than North Middlesex. There is also no evidence that North Middlesex has approached the non-settling defendants or that they have refused to cooperate.

[41] The cooperation clause in this case is factually different from others discussed in the case law. So, for example, in Caroti v. Vuletic, 2021 ONSC 2778, the court considered more expansive cooperation clauses than that in this case and found that they did not entirely change the litigation landscape. The settlement agreement required the settling defendant to attend at trial as a witness if summonsed, participate in witness interviews with plaintiffs’ counsel before testifying at trial, meet with plaintiffs’ counsel in advance of examinations for discovery of the non-settling defendants, provide a will-say statement prior to trial, and serve an affidavit of documents. Even with the breadth of those provisions, the immediate disclosure obligation did not apply in that case.

[42] In contrast, in Tallman, supra, the court considered the undisclosed cooperation obligation that misled the court and the non-settling parties. The plaintiff, Tallman Truck Centre, settled with a defendant, Secure Capital Advisors. Secure agreed to serve an affidavit approved by Tallman to support Tallman’s motion for summary judgment against the non-settling defendant. Secure served the affidavit in a “responding” record, though it was intended to support Tallman’s motion, not respond to it. The witness deposed to facts contrary to Secure’s statement of defence. The motion judge found that this was a “sham” presentation of evidence. That is simply not the case here.

[43] Given the early disclosure of the existence of the Pierringer agreement and the fact that the litigation landscape was not significantly altered, the motion for a stay of proceedings is dismissed.

The Cross-Motion

[44] The plaintiffs seek to amend the Statement of Claim to clarify that their claim for damages is restricted to North Middlesex’s several liability. Mr. DeVries conceded that the amendment addresses to some extent the concerns about the precise nature of the relief sought by the plaintiffs. However, he emphasized that North Middlesex’s preparation for the October trial was predicated on the understanding that the claim was based on joint and several liability. I am not persuaded that the concern was realistic given the Endean decision.

[45] Rule 26 is mandatory. Mr. DeVries conceded that there is no basis to deny the amendment if the stay is refused. The motion is granted.

Conclusion

[46] The motion is dismissed and the cross-motion granted. If the parties cannot agree I will receive brief written submissions (no more than three pages) on costs by February 17, 2023.

Justice H.A. Rady Date: January 18, 2023