COURT OF APPEAL FOR ONTARIO

DATE: 20220504 DOCKET: C69289

Pardu, Paciocco and Thorburn JJ.A.

BETWEEN

Roger Poirier Plaintiff (Appellant)

and

Jeremy Logan, Hilary Goldstein, Jerry Friedberg, Morey Chaplick, M.C. Capital Corp., and Buchli Goldstein LLP Defendants (Respondents)

Counsel: R. Paul Steep and Leah Ostler, for the appellant Shantona Chaudhury and Mitchell McGowan, for the respondents Hilary Goldstein and Buchli Goldstein LLP Jeffrey Larry, for the respondent Jeremy Logan [1] Maureen Whelton, for the respondent Jerry Friedberg [2] Morey Chaplick, acting in person [3]

Heard: March 24, 2022 by video conference

On appeal from the order of Justice Paul M. Perell of the Superior Court of Justice, dated March 4, 2021, with reasons reported at 2021 ONSC 1633.

Paciocco J.A.:

OVERVIEW

[1] The respondents Morey Chaplick and Jeremy Logan owned the respondent M.C. Capital Corp. (“M.C. Capital”), which carried on a wholesale and retail clothing business through an operating company, Standard Apparel Inc. (“Standard Apparel”). In 2015, Mr. Logan asked the appellant, Roger Poirier, to invest in the clothing business by buying out Mr. Chaplick’s shares. Mr. Poirier acquired Mr. Chaplick’s interest in the clothing business and personally guaranteed the debts of the business. The clothing business soon failed, resulting in significant losses to Mr. Poirier.

[2] Mr. Poirier alleges that in purchasing the shares he relied upon what proved to be fraudulent or negligently misleading corporate financial statements. He alleges that those financial statements were prepared by Jerry Friedberg, the business accountant, and were provided to him by Mr. Chaplick, Mr. Logan and Mr. Friedberg.

[3] Lawyer Hilary Goldstein of Buchli Goldstein LLP assisted Mr. Poirier in the share acquisition. Ms. Goldstein is Mr. Logan’s wife, and Mr. Poirier alleges that she breached their contract of retainer and acted in conflict of interest by failing to disclose relevant information known to her relating to the business risk he was undertaking.

[4] Based on these allegations, Mr. Poirier instituted an action against the respondents Mr. Chaplick, M.C. Capital, Mr. Logan, Ms. Goldstein and her law firm, Buchli Goldstein LLP. He also sued Mr. Friedberg. [4]

[5] While discoveries were underway, Mr. Poirier settled his claim against Mr. Friedberg, but his lawyers did not disclose the settlement to the respondents for six months. As the result of this period of non-disclosure, the motion judge stayed the action against the respondents, finding that the failure to disclose the settlement immediately was an abuse of process requiring the dismissal of the proceedings. The motion judge referred to the legal test he applied as the “dismissal principle”, and he relied on multiple authorities, including Handley Estate v. DTE Industries Limited, 2018 ONCA 324, 421 D.L.R. (4th) 636.

[6] Mr. Poirier appeals that decision, arguing that the motion judge erred in law by applying an incorrect test and that he committed palpable and overriding errors of fact. He seeks to have the stay set aside and the action reinstated. For the reasons that follow, I would dismiss the appeal.

MATERIAL FACTS

[7] Mr. Poirier launched the action on December 20, 2017. He sued Mr. Logan, Mr. Chaplick, Mr. Friedberg and M.C. Capital for $3.7 million in damages for fraud, deceit, fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, breach of contract and breach of the duty of good faith. He sued Ms. Goldstein and Buchli Goldstein LLP for $3.7 million in damages for breach of contract, negligence, negligent misrepresentation and breach of the duty of good faith.

[8] Between February 13, 2018 and May 11, 2018, the pleadings in the action were completed. The defendants delivered their statements of defence, and on May 11, 2018, Mr. Poirier delivered his reply.

[9] Along with their statements of defence, each of the defendants issued crossclaims. Mr. Logan crossclaimed against Mr. Chaplick and M.C. Capital. Mr. Chaplick and M.C. Capital crossclaimed against all other defendants. Ms. Goldstein and Buchli Goldstein LLP crossclaimed against M.C. Capital, Mr. Chaplick and Mr. Friedberg. Mr. Friedberg issued crossclaims against M.C. Capital, Mr. Chaplick and Mr. Logan. All of the crossclaims were for contribution and indemnity.

[10] Despite having issued crossclaims against other defendants, all of the defendants cooperated in their defence strategy. In January 2019, their lawyers agreed that during discoveries they would defer examining one another on their crossclaims to avoid indirectly assisting Mr. Poirier in obtaining admissions that could assist in his action (the “stand still agreement”). The strategy was obvious. If Mr. Poirier could not prove his claims, there would be no need for contribution or indemnity. In February 2019, the defendants, including Mr. Friedberg, collaborated in preparing a plan for the examination of Mr. Poirier.

[11] The examinations for each of the respondents were completed by March 5, 2019. Mr. Friedberg’s examination was yet to take place, and Mr. Poirier’s examination was not completed because Mr. Friedberg’s lawyers had not finished questioning Mr. Poirier. Counsel for Ms. Goldstein and Buchli Goldstein LLP met with Mr. Friedberg’s lawyers to strategize about the examination, and lawyers for the other respondents were involved in subsequent correspondence about the examination.

[12] The continuation of Mr. Poirier’s examination and the examination of Mr. Friedberg were initially scheduled for July 2019, but had to be rescheduled for October 28 and 29, 2019. However, in October 2019, lawyers for Mr. Poirier and Mr. Friedberg began settlement discussions. On October 24, 2019, without explanation, Mr. Friedberg’s lawyers advised the respondents that they and Mr. Poirier’s lawyers had agreed to adjourn the examination of Mr. Poirier. On October 28, 2019, Mr. Poirier’s lawyers sent Mr. Friedberg’s counsel an email that read:

As discussed, in order to conclude this agreement the following will happen:

1. I will notify counsel that we will not be proceeding tomorrow;
2. We will provide a revised affidavit for your approval;
3. If the affidavit is agreeable, Mr. Friedberg will provide a sworn statement of assets;
4. If the above is acceptable, we will confirm an agreement to not continue against Mr. Friedberg and that the action will be dismissed or discontinued, without costs;
5. Poirier will provide a Full and Final Release to Mr. Friedberg.

Please confirm.

[13] That same day, October 28, 2019, Mr. Poirier’s lawyers advised the respondents’ lawyers that the examination of Mr. Friedberg, scheduled for the next day, was also cancelled. Ms. Goldstein’s lawyers sought an explanation, but none was forthcoming.

[14] On October 30, 2019, the settlement between Mr. Poirier and Mr. Friedberg was finalized and Mr. Friedberg furnished a sworn affidavit dated October 29, 2019 (the “settlement affidavit”).

[15] In the settlement affidavit, Mr. Friedberg attested that he did not know of Mr. Poirier’s share acquisition before it was completed, and at the time he was unaware that business accounts had been falsified. However, he attested to information that would assist Mr. Poirier in implicating Mr. Chaplick and Mr. Logan in falsifying accounts receivable prior to the share acquisition.

[16] This information included Mr. Friedberg’s description of ongoing cash flow challenges that Standard Apparel had experienced prior to the share acquisition; allegations about Mr. Chaplick using Standard Apparel funds to pay his personal expenses; claims that as Standard Apparel’s president, Mr. Logan had access to all of the business’s financial accounts and increasing autonomy over the business commencing in the fall of 2014; and the assertion that in September 2015, Mr. Friedberg discovered that accounts receivable had been falsified in the corporate accounts. In the settlement affidavit, Mr. Friedberg also averred that Mr. Logan directed him to do a partial write-off of falsified accounts as bad debts and that on Mr. Logan’s direction he had prepared separate monthly financial reports. He said that the accurate versions of the financial reports were provided to Mr. Logan but not to Mr. Poirier.

[17] Mr. Friedberg also attested in the settlement affidavit that Mr. Logan had access to a corporate credit card belonging to Standard Apparel as well as exclusive access to the credit card statements, and that approximately $750,000 had been spent on the credit card in the two years it was active.

[18] Mr. Poirier’s lawyers and Mr. Friedberg’s lawyers had discussions about disclosing their settlement, but the decision was made not to write to the respondents’ counsel “just yet”. Periodically, over the next six months, emails were exchanged about when and how disclosure would be made.

[19] In the meantime, preparation for the litigation continued. On November 13, 2019, Mr. Poirier’s lawyers asked Mr. Logan’s lawyers for information about the Standard Apparel credit card that had been used for $750,000 in purchases. That same day, Mr. Poirier’s lawyers presented Mr. Logan’s and Ms. Goldstein’s lawyers with a chart of undertakings under advisement, asking that they be answered by January 13, 2020.

[20] On February 11, 2020, Mr. Poirier’s lawyers followed up with Ms. Goldstein’s counsel for responses to the undertakings. Ms. Goldstein’s lawyer noted in response that he had not received a reply to his email inquiring into the reason for the cancellation of the examinations and reiterated that request. Mr. Poirier’s lawyers did not respond.

[21] On April 30, 2020, six months after the settlement agreement was finalized, Mr. Poirier’s lawyers advised the respondents’ lawyers for the first time that Mr. Poirier had settled with Mr. Friedberg. Ms. Goldstein’s counsel responded by asking for the immediate production of the settlement agreement. Instead, Mr. Poirier’s lawyers provided an email, copied to all respondents and attaching Mr. Friedberg’s affidavit, which said, in material part:

The terms of an agreement with Mr. Friedberg were arrived at on October 30, 2019. The terms are:

1. Mr. Friedberg would provide a statement under oath setting out his knowledge of the facts relevant to the action;
2. Mr. Poirier would consent to dismiss the claim against Mr. Friedberg without costs and without payment of any damages by him;
3. The settlement was not conditional on the dismissal of the crossclaims against Mr. Friedberg; and
4. Mr. Friedberg was responsible for preparing materials for a motion to have the claim dismissed, with consent of the parties or Order of the Court.

[22] I pause to note that in setting out the terms of the settlement agreement, Mr. Poirier’s lawyers did not mention the role they had played in preparing the settlement affidavit or that the settlement was contingent on the settlement affidavit being agreeable to them. Since this omission from the notification was not addressed by the motion judge, I will say no more about it. [5]

THE MOTION AND THE REASONS FOR DECISION

[23] Upon learning that the settlement had not been disclosed for six months, the respondents brought motions to have Mr. Poirier’s action dismissed as an abuse of process. In responding affidavits, counsel for Mr. Poirier and Mr. Friedberg attested that they did not believe that disclosure was urgent and had always intended to disclose the settlement once the motion materials for the dismissal of the action against Mr. Friedberg were completed. Those motion materials were unexpectedly delayed, in part because Mr. Friedberg’s lead lawyer, who was charged with preparing the motion materials, became seriously ill.

[24] On March 4, 2021, the respondents’ stay motions were granted and the action against them was dismissed.

[25] In his Reasons for Decision, the motion judge described the circumstances of the case in detail, including a comprehensive recitation of the facts I have just recounted.

[26] When he described the law to be applied, the motion judge said, in material part:

When there are co-defendants […], and the plaintiff […] settles with one or more of them but not all of them, and the settlement changes the adversarial orientation of the proceeding, […] the plaintiff […] must immediately disclose to the non-settling defendants […] that (a) there is a settlement and (b) the terms of the settlement that change the adversarial orientation of the proceeding.

[27] In his analysis, the motion judge did not speak of the changes in the adversarial orientation of the proceeding but spoke instead about “settlement agreements that fundamentally alter the relationship among the parties to the litigation such that there has been an entire change in the landscape of the litigation”. [6]

[28] The motion judge also described the consequences of breaching this rule: “The failure to disclose immediately or the failure to disclose the terms of a settlement that changes [the] adversarial orientation of the action is an abuse of process for which the only remedy is the dismissal of the proceeding”. He continued: “It is no answer that the non-settling defendant […] was not prejudiced by the time that it learned of the settlement.”

[29] The motion judge then set out the arguments of the parties. After doing so he recognized that whether a settlement agreement requires disclosure depends on the facts of the particular case. He then found that the settlement agreement in this case fundamentally changed the litigation landscape. In explaining that finding, he noted that Mr. Friedberg was “not a fringe player either as a party or as a potential witness” but played a “fundamental” role in the litigation. He went on:

Whether [Mr. Friedberg] was going to stand common cause with his co-defendants or to turn to them to divert or diffuse blame or escape blame in the crossclaims was not a small matter in the litigation landscape and the earth moved when he settled with the plaintiff while not settling with the crossclaiming defendants.

[The] adversarial orientation of a lawsuit is complex because parties may be adverse about some issues and not others. […] In the immediate case, the settlement agreement between Mr. Poirier and Mr. Friedberg would impact on the tactics and strategy, the line of questioning for examinations for discovery and how to assess the steps being taken from that point forward.

While sometimes an undertaking to co-operate or assist may not change the litigation landscape, this was not one of those cases. The defendants had crossclaims, and they had manifestly agreed to hold their crossfire until later in the litigation. By delivering an affidavit that was vetted by plaintiff’s counsel as part of the settlement, Mr. Friedberg was charging into the fray of the crossclaims and assisting Mr. Poirier. That was a fundamental change in the litigation landscape.

[30] The motion judge also found that although immediate disclosure of the settlement agreement was required, immediate disclosure did not occur. He did not accept evidence from Mr. Poirier’s lawyers that disclosure of the settlement had been unintentionally delayed. He found that “while an explanation was provided for why drafting the incidental documentation was delayed, no explanation was provided [for] why the settlement agreement […] and its essential terms were not disclosed immediately after October 30, 2019.”

[31] Mr. Poirier appeals the decision to stay the action, asks that it be reversed, and requests that the action be reinstated.

ISSUES

[32] The grounds of appeal before us can be stated generally, as follows:

A. Did the motion judge err by applying an incorrect test? B. Did the motion judge commit palpable and overriding errors?

[33] Rather than stating each sub-issue as a separate ground of appeal, the errors alleged to have contributed to each of these grounds of appeal will be identified and addressed below.

[34] As I will explain below, I would not allow this appeal. This is not a case of first impression where it is open to us to determine what the relevant law should be. The material rules are settled by decisions of this court that are binding on us, and they impel the dismissal of the claimed errors of law. Those decisions include Handley Estate; Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, 328 D.L.R. (4th) 488, leave to appeal refused, [2011] S.C.C.A. No. 84; Laudon v. Roberts, 2009 ONCA 383, 308 D.L.R. (4th) 422, leave to appeal refused, [2009] S.C.C.A. No. 304; Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66, 466 D.L.R. (4th) 324; and Waxman v. Waxman, 2022 ONCA 311.

[35] Nor am I satisfied that any palpable and overriding errors occurred. The appellant has identified none and is effectively seeking to persuade us to disagree with the motion judge’s conclusion that this settlement agreement changed the landscape of the litigation, and to substitute our decision for the one made by the motion judge. In my view, the motion judge was entitled on the evidence before him to come to the decision that he did. It would not be appropriate for us to interfere.

A. Did the Motion judge err in applying an incorrect test?

[36] Mr. Poirier offers several submissions in support of his contention that the motion judge applied the wrong test. I would reject each of those submissions and find that the motion judge correctly identified and applied the law.

Did the motion judge err by failing to apply a two-part test?

[37] In his factum Mr. Poirier argued that this court’s decision in Aecon “set out a two-part test”:

(a) Has the agreement in question changed the position of the parties from that reflected in the pleadings such that it can be described as a “change in the litigation landscape”?

(b) If so, does the failure to immediately disclose the agreement amount to an abuse of process meriting a stay of the action?

[38] He appears to have backed away during oral submissions from the argument that a two-part test applies. This was well-advised. Aecon does not set out a two-part test. Instead, MacFarland J.A. made clear that if it is determined that a party failed in its obligation to disclose a settlement agreement, an abuse of process will be found. She stated, at para. 16: “The obligation of immediate disclosure is clear and unequivocal. It is not optional. Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party” (emphasis added).

[39] MacFarland J.A. then went on to find that the failure to make immediate disclosure requires a stay of the action: “Where, as here, the failure amounts to abuse of process, the only remedy to redress the wrong is to stay the […] proceedings”: at para. 16.

[40] I do not accept Mr. Poirier’s argument that by inserting the clause “as here”, MacFarland J.A. was holding that a stay is only required if the abuse of process is similar in kind or in seriousness to the abuse of process in Aecon. As subsequent decisions of this court make clear, when she said, “as here”, MacFarland J.A. was not imposing limits on the kinds of abuse of process that will warrant a stay. She was saying that when, as in the case before her, an abuse of process occurs because of a failure to comply with the obligation to disclose a settlement agreement, the only remedy to redress the wrong is to stay the proceedings: Handley Estate, at para. 45; Tallman, at para. 28; Waxman, at para. 47.

[41] It follows that the usual principles that apply in granting a stay, an otherwise discretionary remedy that is to be used only in the clearest of cases, do not apply. Essentially, any breach of the obligation to disclose falls among the clearest of cases that require a stay. There is a one-part test, not a two-part test. Put simply, if it is found that immediate disclosure of a settlement was required but not made, it follows automatically that an abuse of process has occurred and that the action must be stayed.

[42] In Aecon, MacFarland J.A. explained why a stay is required for any breach of the obligation to disclose a settlement agreement: “Only by imposing consequences of the most serious nature on the defaulting party is the court able to enforce and control its own process and ensure that justice is done between and among the parties”: at para. 16. As Ferrier J. elaborated in Pettey v. Avis Car Inc. (1993), , 13 O.R. (3d) 725 (Gen. Div.), at para. 32, justice between and among the parties requires immediate disclosure:

The [non-settling] defendants must be advised immediately because the agreement may well have an impact on the strategy and line of cross-examination to be pursued and the evidence to be led by them. The [non-settling] parties must also be aware of the agreement so that they can properly assess the steps being taken from that point forward […].

Did the motion judge err by failing to consider whether the settlement agreement made the pleadings a sham?

[43] Mr. Poirier argued that only settlement agreements that result in changes to the position that the parties have taken in their pleadings require immediate disclosure, since without disclosure in such cases, “the pleadings would disguise the real adversaries and mislead the Court and the non-settling parties as to who is really at risk and in what amount”. Hence, in his factum, when describing the test for whether an obligation to disclose will arise, Mr. Poirier included a change in position from the pleadings as a required component: “Has the agreement in question changed the position of the parties from that reflected in the pleadings such that it can be described as a ‘change in the litigation landscape’?” It is clear from his submissions that in articulating the test in this way, Mr. Poirier is calling for a close examination of the pleadings to determine whether the settlement has altered the legal and/or factual positions that the settling party had taken in those pleadings.

[44] Mr. Poirier added an additional component to the test in his submissions. He argued that before disclosure is required, an undisclosed settlement agreement would have to cause the litigation process to become a “sham”.

[45] He buttressed these arguments by submitting that unless these standards for staying proceedings are maintained, a stay will be a disproportionate remedy, as it would be in this case. He added that applying a more aggressive standard is bad policy, as it would discourage settlements.

[46] Based on these submissions, Mr. Poirier argued that the motion judge erred in this case by failing to determine whether the settlement agreement created a sham and by not considering the relationship between Mr. Friedberg’s pleadings and the adversarial relationship that existed after the settlement agreement.

[47] I would reject these arguments. Neither a change in the position of the parties reflected in the pleadings, nor a “sham” inquiry, are essential parts of the disclosure test. As I have indicated, it is settled in this court’s jurisprudence that the obligation to disclose arises where the settlement agreement changes entirely the landscape of the litigation in a way that significantly alters the adversarial relationship among the parties to the litigation or the “dynamics of the litigation”: Aecon, at para. 13; Tallman, at para. 12; Handley Estate, at paras. 12, 29 and 37; Laudon, at para. 39. This is the inquiry that the motion judge identified and applied, and he was correct to do so.

[48] To be sure, it may almost invariably be the case that if this inquiry is satisfied the settling party’s pleadings will no longer fully reflect the post-settlement state of the litigation, but the authorities do not support the proposition that a finding that a settlement agreement has altered the adversarial relationship disclosed in the pleadings is a condition precedent to a determination that an obligation to disclose has arisen. In Laudon, at para. 39, when describing agreements that significantly alter the relationship among the parties to the litigation, MacFarland J.A. said, “Usually the position of the parties will have changed from those set out in their pleadings” (emphasis added). She did not say this must always be so. Similarly, when Nordheimer J. (as he then was) expressed the test in Aviaco International Leasing Inc. v. Boeing Canada Inc. (2000), , 48 C.P.C. (4th) 44, at para. 23, in a passage approved by Brown J.A. in Handley Estates, at para. 40, he asked: “Do the terms of the agreement alter the apparent relationships between the parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation?” (emphasis added).

[49] To be clear, I am not suggesting that a motion judge may choose to disregard the pleadings when determining whether there is an obligation to disclose a settlement agreement. The status that the parties assume in their pleadings as either cooperative with or adversarial to the plaintiff’s claim is clearly an essential starting point in determining whether there has been a significant alteration in the adversarial relationship. The pleadings should therefore be consulted, but a motion judge need not and should not supplant the established inquiries I have just described with a comparison between the litigation positions reflected in the pleadings and the litigation relationship after the settlement agreement. Certainly, the motion judge is not required to identify specific changes arising from the settlement that have been made to the pleaded factual and/or legal positions of the settling party.

[50] In any event, I am not persuaded that the motion judge failed to consider Mr. Friedberg’s pleaded position. In describing the arguments of the parties, he referred explicitly to Mr. Poirier’s submission that “as soon as the settlement was implemented the action would be congruent with the pleadings”. It is clear from his conclusions that the motion judge rejected this submission. There is no basis for assuming that he stayed the actions without having regard to the pleadings.

[51] Mr. Poirier argues to the contrary that had the motion judge considered Mr. Friedberg’s pleadings, he would have seen that Mr. Friedberg did not change his adversarial position. I do not agree. Although Mr. Friedberg denied knowledge and involvement in the share acquisition in both his pleadings and his settlement affidavit, his pleadings offer no hint of the extensive, helpful information he provided to Mr. Poirier in his settlement affidavit. Indeed, his statement of defence begins with the assertion that he has no knowledge of the allegations contained in the statement of claim, an assertion that is impossible to reconcile with the detailed account of events he provided in the settlement affidavit. Mr. Friedberg’s position clearly shifted between the pleadings and his settlement affidavit. More importantly, as I will develop below, the motion judge found that he moved from being a party adverse to Mr. Poirier based on the pleadings, to cooperating with him. It therefore cannot be inferred that the motion judge must have disregarded Mr. Friedberg’s pleadings in coming to the decision he did.

[52] Nor do I agree with Mr. Poirier that a settlement agreement will only trigger an obligation to disclose if “the delayed disclosure of the agreement results in a sham or other egregious process which misleads the Court or non-settling parties as to the true position of the parties”. I have described the legal test that is to be applied in identifying whether disclosure is required, and it does not require a “sham” finding. Nor do I understand MacFarland J.A. to have been saying otherwise when she commented in Aecon that without disclosure the settlement agreement before her “renders the process a sham”: at para. 16. When her decision is read as a whole, it is evident that she was not building this feature into the test, but simply commenting on the effect that non-disclosure would have had in that case.

[53] Frankly, the concept of a “sham” is not apt to add anything to the inquiry. A “sham” is not a term of art. Based on the motion judge’s findings it is arguable that the non-disclosure in this case could be said to have rendered the litigation a sham. During the six months that the settlement agreement was undisclosed, the respondents were unaware that their co-defendant Mr. Friedberg, with whom they had established a cooperative relationship, was in fact assisting Mr. Poirier and could no longer be counted on by them as an ally in defeating Mr. Poirier’s claim. In my view, adding a “sham” criterion would not be helpful.

[54] Finally, it strikes me that this argument is a slightly more sophisticated version of the submission that this court rejected in Handley Estate, at para. 39, that the obligation to disclose is confined to Mary Carter and Pierringer agreements. Mr. Poirier used Mary Carter and Pierringer-like agreements to attempt to illustrate when, in his view, non-disclosure of a settlement agreement renders the litigation process a sham. In my view, the obligation to disclose is not contingent on a finding that the settlement has rendered the litigation process a sham.

[55] Before leaving this issue, I will, for the sake of completeness, respond to Mr. Poirier’s policy argument that if the operation of the legal test is not confined to “sham” cases, this will discourage settlements. In my view, there is no air of reality to this concern. The rule now under consideration does not prohibit settlements that change entirely the landscape of the litigation and significantly alter the adversarial relationship among the parties to the litigation or the dynamics of the litigation. It simply requires that if such settlements are made, they are immediately disclosed.

Did the motion judge err by considering the stand still agreement?

[56] Mr. Poirier argued that the motion judge erred by considering the stand still agreement, which he contends was irrelevant to the analysis. I would not find the stand still agreement, or the cooperation between defendants – including Mr. Friedberg – in preparing for the examination of Mr. Poirier, to be irrelevant. Unbeknownst to the respondents, as a result of the settlement agreement, Mr. Friedberg would no longer be cooperating with his co-defendants in the litigation, and he had furnished Mr. Poirier with information, contrary to the stand still agreement he had made. The motion judge was entitled to use this as illustrative of the change in the adversarial relationship between the parties after the undisclosed settlement agreement.

[57] Nor do I accept Mr. Poirier’s argument that it is perverse for the motion judge to have considered a stand still agreement that Mr. Poirier’s lawyers were unaware of. I will note in passing that the motion judge made no finding that Mr. Poirier’s lawyers were unaware of the stand still agreement, and it is unclear on the record before us whether there was any evidence or information to this effect before the motion judge. Indeed, it is hard to imagine the motion judge making such a finding given that Mr. Poirier’s lawyers could not have missed the fact that none of the defendants were examining each other in spite of their crossclaims. In any event, the obligation to disclose is not contingent on the settling parties appreciating that the landscape of the litigation has changed. It arises if the landscape of the litigation has been changed by the settlement agreement that they have made.

[58] I would not find that the motion judge erred by considering the stand still agreement.

Conclusion on whether the motion judge erred in applying an incorrect test

[59] I would not find that the motion judge committed any legal errors. In my view, he correctly identified and applied the legal test.

B. DID THE MOTION JUDGE COMMIT PALPABLE AND OVERRIDING ERRORS?

[60] Mr. Poirier argues that the motion judge committed palpable and overriding errors in finding that the settlement agreement changed the adversarial orientation of the proceeding and that Mr. Poirier failed to give immediate notice. Specifically, Mr. Poirier argues that the motion judge misapprehended the evidence relating to each of the following findings:

(1) In finding that the settlement agreement reduced Mr. Friedberg’s potential culpability, in the face of the crossclaims against Mr. Friedberg that left him fully exposed to liability after the settlement agreement; (2) In finding that without the settlement agreement, Mr. Friedberg may have stood “common cause” with the co-defendants, when in fact the crossclaims made the co-defendants adversaries; (3) In finding that after the settlement agreement Mr. Friedberg stood “common cause” with Mr. Poirier, despite the fact that Mr. Poirier had not agreed to indemnify or protect Mr. Friedberg on the crossclaims and that Mr. Friedberg would derive no benefit from Mr. Poirier’s recovery; (4) In finding that the provision of affidavit evidence was not comparable to a party giving a witness statement, despite affidavit evidence from Mr. Friedberg’s lead lawyer confirming that the settlement affidavit merely contained relevant evidence that Mr. Friedberg would have given on examination; and (5) In finding that the failure to disclose immediately was a strategic decision (which in any event was irrelevant), contrary to unchallenged affidavit evidence from one of Mr. Poirier’s lawyers and one of Mr. Friedberg’s lawyers.

[61] I am not persuaded that the motion judge misapprehended evidence in making any of these findings. I will begin by addressing the first four alleged misapprehensions.

[62] In substance, Mr. Poirier’s arguments relating to the first four alleged misapprehension of evidence claims represent an invitation to have us reconsider the motion on its merits and to come to and substitute a different decision from the one the motion judge made. I say this because the motion judge clearly understood the arguments now being made, and rejected them, as he was entitled to do.

[63] Specifically, when summarizing Mr. Poirier’s arguments, the motion judge described Mr. Poirier’s reliance on the crossclaims to support his contention that the litigation landscape had not changed given Mr. Friedberg’s continued exposure to damages. He also described Mr. Poirier’s reliance on the absence of an indemnity or protection agreement relating to the crossclaims, and he re-stated Mr. Poirier’s submission that Mr. Friedberg’s affidavit was equivalent to a witness statement.

[64] The motion judge then went on to reject Mr. Poirier’s attempt to rely on the crossclaims to undermine a finding that the settlement agreement had changed the landscape of the litigation. The motion judge rejected that submission because he found that the settlement agreement had a significant impact on whether Mr. Friedberg would attempt to escape crossclaim liability by standing “common cause with his co-defendants” as all of the co-defendants had been doing prior to the settlement agreement. I see no error in that conclusion.

[65] Contrary to Mr. Poirier’s submissions, the motion judge did not use the phrase “common cause” to describe the post-settlement-agreement relationship between Mr. Poirier and Mr. Friedberg. What he found was that as a result of the settlement agreement, Mr. Friedberg began assisting Mr. Poirier by “charging into the fray”, removing himself from the stand still agreement, and furnishing evidence to Mr. Poirier that would assist in establishing his case against the other defendants. It is clear that the motion judge did not misunderstand or ignore the fact that Mr. Poirier was not indemnifying or protecting Mr. Friedberg from potential liability on the crossclaims. Instead, he offered other bases for his finding that Mr. Friedberg was no longer an adversary of Mr. Poirier but was in fact assisting him.

[66] The motion judge also expressly rejected Mr. Poirier’s claim that the settlement affidavit was the same as a witness statement. He made this finding because unlike the answers provided in an examination, the settlement affidavit was “vetted by plaintiff’s counsel”. In coming to this conclusion, the motion judge was not obliged to accept what was, in truth, the speculative opinion of Mr. Friedberg’s attesting counsel that the examination would have produced the same answers as contained in the settlement affidavit.

[67] In any event, as Sossin J.A. said in Waxman, a settlement agreement that would only be operative if one of the plaintiffs is satisfied with the evidence of the settling defendant “[puts] in place financial incentives for the settling defendants to align themselves with the [plaintiff] by providing evidence that the [plaintiff] would judge to be helpful in continuing to prosecute the action against [other defendants], and in doing so, [changes] the adversarial landscape”: at para. 33.

[68] Once again, nothing prevents parties from entering into such settlement agreements. But if such agreements are reached, they are apt to trigger the obligation to disclose.

[69] I am therefore not persuaded that the motion judge committed palpable or overriding errors in coming to any of these determinations. His decisions were supported on the record and are entitled to deference.

[70] Nor did the trial judge commit palpable and overriding errors in finding that counsel to the parties to the settlement agreement knew that the settlement needed to be disclosed, and that Mr. Poirier’s delay in doing so was unexplained, tactical and strategic. In coming to these conclusions, the motion judge was plainly aware of the affidavit evidence he is said to have misapprehended. He described that affidavit evidence in his Reasons for Decision. Although another judge may have come to a different decision, the motion judge was entitled to interpret that affidavit evidence as he did, and to draw the inferences that he did from the contemporaneous email chain.

[71] Mr. Poirier also argues that whether the delay in disclosure was unexplained, tactical and strategic is irrelevant to whether the obligation to disclose arose and was breached. However, the motion judge’s finding in this regard was responsive to a factual contest engaged by the parties relating to whether there was a reasonable explanation for the delay in disclosure. Whether or not the law permits such explanations to be considered, the motion judge cannot be blamed for resolving a factual issue that was placed before him. In any event, this finding was not material to the outcome. When the motion judge’s decision is read as a whole, it is clear that he based his decision to stay the proceedings on the legal test he was obliged to apply.

CONCLUSION

[72] There is no question that the decision of the motion judge to stay the actions against the respondents is a serious, arguably even harsh consequence. In Aecon, at para. 16, MacFarland J.A. described the policy reasons supporting the automatic remedy of a stay, and in Handley Estate, at paras. 45-47, Brown J.A. expressed the view that no unfairness is likely to arise because of the ease of compliance with the obligation to disclose, including, if necessary, by seeking directions from a court in cases of uncertainty. [7]

[73] I would find that the motion judge identified and applied the law correctly and committed no palpable or overriding errors in doing so.

[74] I would dismiss the appeal, and order costs payable in the agreed upon amount to the respondents collectively, in the amount of $25,000 inclusive of HST and disbursements.

Released: May 4, 2022 “G.P.” “David M. Paciocco J.A.” “I agree. G. Pardu J.A.” “I agree. J.A. Thorburn J.A.”

Footnotes

[1] Mr. Larry appeared but made no written or oral submissions on behalf of the respondent. [2] Ms. Whelton appeared but made no written or oral submissions on behalf of the respondent. [3] Mr. Chaplick appeared but made no written or oral submissions on his behalf. [4] For convenience, when I refer to the respondents and Mr. Friedberg collectively, I will describe them as “the defendants”. [5] See Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66, 466 D.L.R. (4th) 324, at paras. 18-19, describing the obligation to make “functional disclosure”. [6] Mr. Poirier did not take issue with the varied language the motion judge used in describing the test for identifying an obligation to disclose, nor could he have effectively done so. The motion judge’s first articulation – whether “the terms of the settlement […] change the adversarial orientation of the proceeding” – tracks the language used by Brown J.A. in Handley Estate, at para. 39. The motion judge’s alternative phrasing, asking whether the settlement agreement “fundamentally alter[s] the relationship among the parties to the litigation such that there has been an entire change in the landscape of the litigation”, reflects the language used by MacFarland J.A. in Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, 328 D.L.R. (4th) 488, at para. 13, leave to appeal refused, [2011] S.C.C.A. No. 84, and in Handley Estate, at para. 42. In Waxman v. Waxman, 2022 ONCA 311, at para. 37, Sossin J.A. included both of these inquiries in his articulation of the test: “[The] key question for the court in applying Handley Estate is whether the agreement, at the time it was entered into, changed the litigation landscape and, and in so doing, altered the adversarial position of the parties to one of cooperation” (emphasis omitted). [7] The motion judge encouraged parties to err on the side of caution by disclosing when unsure, which may well be wise counsel.