SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-450944

DATE: 2015/02/19

RE: BILL ROBERTS, Plaintiff/Responding Party

AND:

ZOOMERMEDIA LIMITED, Defendant/Moving Party

BEFORE: MASTER RONNA M. BROTT

COUNSEL: Joseph Morrison, for the Plaintiff

Julie A. O’Donnell, for the Defendant

HEARD: May 9, 2014 and October 21, 2014

ENDORSEMENT

The Facts

[1] This action is brought by the plaintiff, Bill Roberts (“Roberts”), the former President and Chief Executive Officer of the television division of the defendant. Prior to commencing employment with the defendant the plaintiff was employed with S-Vox Foundation pursuant to a contract of employment dated November 1, 2007, amended June 11, 2009 and which terminated October 31, 2011. On June 30, 2010 the defendant purchased certain assets of S-Vox Foundation, including Vision TV, where the plaintiff held the position of Chief Executive Officer. As part of the purchase, the defendant agreed to an assignment of the plaintiff’s employment agreement and the plaintiff commenced employment with the defendant as President and Chief Executive Officer of the television division. The assignment was confirmed in writing by the defendant on June 26, 2010 and includes three (3) documents:

(a) Plaintiff’s employment agreement (“employment agreement”) which had commenced on November 1, 2007 and was scheduled to expire on October 31, 2011;

(b) Offer letter (“offer letter”) dated March 4, 2010 from the defendant to the plaintiff confirming the acceptance of the assignment of the employment agreement and that it would enter into a new employment agreement for a minimum of one year following the expiration of the employment agreement; and

(c) The Memorandum of Agreement regarding Amendment to the Employment Agreement dated June 11, 2009 (“amendment”).

[2] The amendment provides, inter alia, that severance provisions of the employment agreement were to be replaced by a provision entitling Roberts to a lump sum payment equivalent to two years salary.

[3] The employment agreement provides that Roberts is entitled to a paid sabbatical leave provided he remain employed on October 31, 2011 when the employment agreement terminated.

[4] The employment agreement provides that any waiver or amendment to the employment agreement must be in writing and signed by both parties. Roberts agreed to the assignment of his employment by signing the correspondence dated June 27, 2010.

[5] Following the defendant’s purchase on or about June 30, 2010, Roberts commenced employment with the defendant and continued to be employed for the remainder of 2010 and during the course of 2011.

[6] In or about July 2011 Roberts contacted the defendant’s Chief Executive Officer, Moses Znaimer (“Znaimer”) to discuss the terms of a new employment agreement as his contract would terminate in October 2011. At the meeting Znaimer asked Roberts to have his legal advisor prepare a letter setting out the terms of a new/extended employment agreement. By correspondence dated September 16, 2011 Roberts’ counsel set out proposed terms of an extension (“Extension letter”) which included entitlements under the existing contract of employment and a proposal for the continuation of his employment.

[7] In response to the extension letter, Gord Poland, the defendant’s Chief Operating Officer (“Poland”), requested a clarification regarding the lump sum payment, and alleged that Roberts had agreed to forgo the sabbatical payment.

[8] Roberts’ counsel sent a revised extension letter dated October 25, 2011 and thereafter, discussions continued on the sabbatical issue. By correspondence dated October 28, 2011 Roberts’ counsel asked Poland to sign-off on the extension letter on the understanding that there continued to be disagreement on the sabbatical issue. The defendant did not execute the extension letter and at the end of October 2011, the employment agreement expired but he continued to work.

[9] Between November 2011 and January 2012 the plaintiff and the defendant, through their legal counsel, sought to reach a resolution on the sabbatical issue. The plaintiff had not by then, received a lump sum severance payment. In January 2012 the plaintiff advised the defendant that it would commence an action to enforce the severance payment and the sabbatical entitlement if the parties could not reach an agreement by January 20, 2012. The defendant asked the plaintiff to delay litigation at least until March 2012 when Znaimer and/or Poland would be back in the office. On or about March 1, 2012 Roberts was advised that his employment was being terminated. The notice of termination did not provide for any lump sum severance payment or sabbatical entitlement. It provided the plaintiff would be provided with “four (4) weeks salary and benefits continuation at the end of the working notice period” – which was until the remainder of the one-year extension.

[10] This action was commenced on April 12, 2012. The plaintiff filed an Amended Statement of Claim on May 25, 2012.

The Motion

[11] The defendant brings this motion for an Order striking paragraphs 22, 26-28, 30 – 33, 36 and 37 of the Amended Statement of Claim on the basis that the paragraphs plead privileged settlement negotiations.

[12] Rule 25.11 of the Rules of Civil Procedure provides as follows:

The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or is an abuse of process of the court.

[13] The law is clear that pleadings which evidence privileged communications may be struck on the basis that they are scandalous, frivolous or vexatious. There is an overriding public interest in the settlement of lawsuits. The purpose of privilege is to promote settlement by ensuring that communications made in the course of settlement negotiations are inadmissible. As stated by Master MacLeod in Belsat Video Marketing Inc. v Zellers Inc., [2003] OJ No 3168 at para. 21

It is the policy of the Court to promote voluntary settlement and the Court should jealously protect bona fide settlement discussions.

[14] In Inter-Leasing Inc. v Ontario (Minister of Finance), 2009 ON SCDC 63595, [2009] OJ. No 4714 the Divisional Court held that for settlement privilege to apply, each of three conditions must be met:

(1) Litigation must be in existence or within contemplation;

(2) The communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and

(3) The purpose of the communication must be to attempt to effect a settlement.

1. Litigation must be in existence or within contemplation

[15] It is the defendant’s position that litigation was contemplated in July 2011 when the plaintiff first consulted his counsel regarding the terms of his employment or, as of September 16, 2011 when plaintiff’s counsel first set out the terms of the extension of the plaintiff’s contract or, at the latest, as of October 28, 2011 when plaintiff’s counsel sent a revised version of acceptable terms of the contract. The defendant states that the intent of plaintiff’s counsel’s correspondence of October 28, 2011 was clearly one of contemplated litigation.

[16] The plaintiff submits that there was no contemplation of litigation until November 11 or 12, 2011, when the defendant retained counsel.

[17] In July 2011 Znaimer had asked the plaintiff to have his lawyer prepare a letter confirming the terms of the plaintiff’s employment. This was not litigious or adversarial. From then until November 2011 communications flowed between Roberts, his lawyer and Poland. The negotiations were conducted in a civil manner between employee and employer. During that time, while the issue of the sabbatical appeared to be in issue, his entitlement to the lump sum severance does not appear to have been in dispute.

[18] In Ross River Dena Council v Canada (Attorney General), [2009] 2 C.N.L.R. (Yuk S.C.) the court stated:

However, the more meaningful question is whether the mere possibility of litigation, at that time, is sufficient to satisfy the first of the three criteria for establishing settlement privilege. In Blue Line Hockey Acquisition Co. v Orca Bay Hockey Ltd., 207 BCSC 143, Wedge J., at para. 103, held that, in order to successfully invoke settlement privilege, the party seeking the privilege must establish that a litigious dispute is in existence or within contemplation, and that the communications in question were for the purpose of attempting to effect a settlement of that dispute. She continued at para. 104:

The mere existence of a dispute or potential dispute does not give rise to the privilege. Only where the dispute has become “litigious” does the privilege arise. A dispute is “litigious” where litigation is commenced or contemplated. The person who claims the privilege bears the onus of establishing it:..

Also, as already noted, Gray J. In Keefer Laundry, said this at para 97:

…Litigation can be said to be reasonably contemplated when a reasonable person, with the same knowledge of the situation as one or both of the parties, would find it unlikely that the dispute will be resolved without it.

[19] In my view, a reasonable person would not find that the only way that the remaining dispute would be resolved would be to proceed to litigation. The parties were simply discussing the plaintiff’s contract extension. Therefore, I find that litigation was contemplated as of November 11, 2011 when defence counsel became involved.

2. The communications were made with the intent that they would not be disclosed if negotiations failed

[20] The defendant submits that the communications between the parties’ counsel and between Poland and plaintiff’s counsel were made with the intent that they would not be disclosed “if negotiations failed”.

[21] Additionally or alternatively, the defendant asks the court to imply an intention of non-disclosure as stated by Salhany, J. at para. 21 in Welch v Welch, [1994] OJ No. 956

A review of these authorities clearly indicates that where litigants attempt to negotiate settlement of their differences without the intervention of their solicitors, the court will imply an intention that any communication not be disclosed to the court in the event the negotiations fail.

[22] It does not appear that the communications were intended to remain ‘private’. Roberts and/or his counsel, set out terms regarding the extension of his contract of employment. I do not believe that Roberts ever understood or intended that, in the absence of that extension, that his wishes would not be capable of being produced. At the time he made his desires for contract renewal known to the defendant, he was not contemplating litigation. Hence, it was not in his mind that his communications would or would not be producible.

3. The purpose of the communications was to effect a settlement

[23] The defendant submits that the negotiations between the parties were bona fide settlement negotiations. The plaintiff submits that throughout the negotiations for the extension of the employment agreement, the defendant accepted that the plaintiff was entitled to the lump sum severance payment. It is the plaintiff’s submission that when, on March 1, 2012, the defendant terminated the plaintiff from his employment, they advised him that the sabbatical payment would not be honoured. As well, it was at that time that the issue of the defendant’s objection to the lump sum severance entitlement, was first raised. Therefore, it was as of March 2012 that the documents and/or communications in relation to the lump sum severance payment first became protected by settlement privilege.

“Bad Faith Negotiations”

[24] The plaintiff is seeking bad faith damages in this action, relying on the conduct of the defendant during the negotiations and the ultimate denial of the plaintiff’s entitlement to a lump sum severance payment and sabbatical. The plaintiff asserts that in order to attract settlement privilege, the negotiations and/or communications must be made in a bona fide attempt to settle. Because the defendant was negotiating in bad faith, those communications cannot be protected by settlement privilege. The plaintiff submits that during their discussions in August, September and October 2011, the defendant conceded that the lump sum severance was owing. In support thereof, the plaintiff relies on the defendant’s corporate circular distributed in December 2011 wherein Roberts’ lump sum severance payment was referenced. In March, the defendant terminated the plaintiff and advised him that it was not going to honour the sabbatical nor the lump sum severance payment.

[25] Prior v Sunnybrook and Women’s College Health Sciences Centre, [2006] OJ No. 2070 held that communications which are not bona fide or honest attempts to reflect compromise, do not attract the protection of privilege. Improper threats to obtain an advantage in the litigation and simply marking communication ‘without prejudice’ in an effort to attract privilege should not be permitted.

[26] The defendant asserts that the negotiations between the parties regarding the terms of the plaintiff’s employment were bona fide settlement negotiations and there are no facts to support any allegations of bad faith. To the extent that the defendant made any concessions with respect to the payment of a lump sum severance, the defendant asserts that those concessions were made as part of a genuine effort to effect a compromise and not bad faith. It is the defendant’s view that the plaintiff should not be permitted to use any admission against interest made by the defendant. In its view, because the plaintiff believed, in November 2011 that he was an ‘employee without a contract and for an indefinite term’, the defendant had no option but to terminate the employee, which it did on March 1, 2012.

The Pleadings in Question

[27] Paragraph 22 of the Amended Statement of Claim states:

22. The Defendant conceded that Mr. Roberts was entitled to the lump sum severance payment and all of the other entitlements set out in the Extension Letter with the sole exception of the sabbatical entitlement.

[28] This paragraph is properly pleaded. The defendant conceded in the cross-examination on his Affidavit, that as of October 2011, the issue of Roberts’ entitlement to a lump sum severance payment was not in issue. This fact is corroborated by the Management Circular dated December 11, 2011. As there was no litigious dispute or contemplated litigation in October 2011, the paragraph is not subject to settlement privilege and shall not be struck.

[28] Paragraph 26 states:

26. Given the Defendant’s refusal to agree to the Extension Letter, immediately prior to the expiry of the Employment Agreement on October 30, 2011, Mr. Roberts, through his legal counsel, confirmed that if his Employment Agreement expired, he would be entitled to the lump sum severance payment as well as all the sabbatical entitlements, although he would continue to report to work for the Defendant while the parties continued to attempt to resolve the dispute over the sabbatical issue. Mr. Roberts’ legal counsel also clearly advised the Defendant that his continued employment should not be construed as a waiver or forfeiture of any of his entitlements pursuant to his Employment Agreement.

There is no reference to any settlement discussions in this pleading. In my view, the plaintiff is simply outlining his unconditional assertion of rights, “without any hint of compromise”. In Bellatrix Exploration Ltd. v Penn West Petroleum Ltd. (2013) 358 D.L.R. (4^th) relied on in East Guardian v Mazur 2014 ONSC 6403, the court held that if there is no potential for compromise – if they simply make a demand – they cannot be considered to be negotiations. Further, the facts set out in this paragraph concern the plaintiff’s position prior to November 2011, at the time prior to any contemplation of litigation. Accordingly, this paragraph shall not be struck.

[29] Paragraph 27 states:

27. During the period of November 2011 until January 2012, Mr. Roberts, through his legal counsel, attempted to reach some resolution of the sabbatical issue. Mr. Roberts, through his legal counsel confirmed that they were doing so without prejudice to Mr. Roberts’ right to pursue payment of the lump sum severance payment which by now, was due and owed to Mr. Roberts.

This paragraph shall be struck. It speaks of the plaintiff’s attempt to ‘resolve’ the sabbatical issue, and notes the plaintiff’s “without prejudice” position.

[30] Paragraph 28 states.

28. At no time during these discussions did the Defendant ever assert that Mr. Roberts would not be entitled to the lump sum severance payment. The only entitlement that the Defendant indicated it was not prepared to honour was the sabbatical entitlement.

By the time in question (November 2011 to January 2012), the defendant had involved its counsel and litigation was contemplated. Although the first sentence pleads what was not discussed as part of the settlement discussions, and the plaintiff asserts that what was not discussed cannot be considered to have formed part of settlement communications, and hence, cannot be found to be subject to settlement privilege, in my view, this paragraph should be read together with paragraph 27, both of which address the settlement discussions. This paragraph shall be struck.

[31] Paragraph 31 states:

31. Following Mr. Znaimer’s meeting with Mr. Roberts, the Defendant’s legal counsel responded to the letter from Mr. Roberts’ legal counsel. Therein, he advised that as the parties had now agreed to meet at the beginning of March, he would not be responding to Mr. Roberts most recent proposal, which incidentally, had been provided on December 1, 2011. He further commented, in keeping with Mr. Znaimer’s comments to Mr. Roberts, that, “…we agree that a meeting at the beginning of March, shortly after Bill’s return, would be fruitful in finally resolving this matter”.

The paragraph does not contain any contents, terms or proposals of settlement. Simply because it refers to the fact that there were communications between counsel, does not amount to communications subject to settlement privilege.

[32] Paragraph 32 states:

32. Based on Mr. Znaimer’s personal assurances that ZoomerMedia Limited would honour the payment of the lump sum severance payment and would negotiate some resolution of the sabbatical issue in good faith upon his return at the end of February 2012, and the further correspondence from the Defendant’s legal counsel, Mr. Roberts agreed not to commence an action at that time.

The plaintiff asserts that the defendant may not rely on settlement privilege to exclude this paragraph because the defendant, and specifically Mr. Znaimer, have failed to file any evidence to demonstrate why he ultimately did not honour the lump sum severance entitlement. As Znaimer failed to show good faith, the plaintiff submits that the paragraph may remain. These facts as pleaded are mere inferences and are nothing more than allegations until they are admitted or proven. Whether or not this is bad faith is not to be determined at the pleadings stage. Rather, it will be up to the trial judge to make a determination on the admissibility of evidence and its weight. This paragraph is not subject to settlement privilege.

[33] Paragraph 33 states:

33. During the course of February, Mr. Roberts, through his legal counsel, attempted to schedule a meeting of the parties for early March. The Defendant’s legal counsel refused to schedule a meeting.

This simply references a factual occurrence and does not outline the contents of any discussions. It is therefore not subject to settlement privilege.

[34] Paragraph 36 states:

36. Also on March 1, 2012, concurrent with Mr. Roberts receiving the aforementioned notice of termination, the Defendant, through new legal counsel, namely, Shields O’Donnell MacKillop LLP, sent correspondence to Mr. Roberts’ legal counsel.

This pleading simply sets out a chronological history that as of March 1, 2012, Mr. Roberts is terminated, new defence counsel is retained, and counsel set out the defendant’s legal position. This is not settlement privileged communication.

[35] Paragraph 37 states:

37. In its correspondence, the Defendant’s new legal counsel expressly advised that the Defendant was not going to honour the payment of the lump severance payment, nor the sabbatical entitlements, as provided in Mr. Roberts’ Employment Agreement. It also confirmed that Mr. Roberts would receive working notice of termination until October 31, 2012, although it indicated that Mr. Roberts would only receive “four (4) weeks salary and benefits continuation” following the working notice period. In closing, the letter indicated that as counsel they had advised their client that this treatment of Mr. Roberts was “fair and reasonable”.

This paragraph outlines the actual legal position of the defendant and offers to meet with the plaintiff on a without prejudice basis. It is the meeting which is to take place that defence counsel intimates will be on a without prejudice basis. I find this paragraph to contain allegations in support of the plaintiff’s claim for bad faith conduct in failing to honour the plaintiff’s lump sum severance payment. The defendant’s attempt to classify these allegations as settlement privilege is not accepted.

[36] Accordingly only paragraphs 27 and 28 shall be struck. The plaintiff is at liberty to redraft the paragraphs in accordance with the Rules. The defendant’s motion with respect to the remaining paragraphs is dismissed.

[37] The parties exchanged costs outlines at the end of the hearing and they agreed to attempt to agree on the issue of costs within 30 days. In the event that they are unable to reach an agreement, the plaintiffs shall within 45 days serve and file brief (1 – 2 pages) costs submissions. The defendants shall respond with brief (1 – 2 pages) submissions within 15 days following receipt of the plaintiffs’ submissions. Any Reply requires leave of the Court.

MASTER RONNA M. BROTT

Date: February 19, 2015