Elder v. Rizzardo Bros. Holdings Inc.

CITATION: Elder v. Rizzardo Bros. Holdings Inc., 2016 ONSC 7235

COURT FILE NO.: CV-11-102525

DATE: 20161123

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HELEN ELDER

Plaintiff

– and –

RIZZARDO BROS. HOLDINGS INC, HANK WILLIAMS and HANK WILLIAMS o/a H.C.S.W. PROPERTY MANAGEMENT

Defendant

COUNSEL:

T. Boland and D. Romaine for the Plaintiff

B. Jones for Rizzardo Bros. Holdings Inc.

F. DelGiudice and D. Elmaleh for Hank Williams and H.C.S.W. Property Managememt

HEARD: November 17, 2016

ruling on disclosure of settlement agreement

Boswell j.

Overview

[1] Helen Elder slipped on ice in the parking lot of a grocery store. She fell and broke her elbow. She sued the owner of the parking lot as well as the contractor hired by the owner to perform winter maintenance on the lot, relying on the provisions of the Occupiers’ Liability Act, R.S.O. 1990, c. O.2. The owner crossclaimed against the contractor for contribution and indemnity and breach of contract.

[2] Damages were settled prior to trial. The issue of liability went before a jury in Newmarket.

[3] Several days into the trial defence counsel notified the court that the crossclaim had been conditionally settled. Details of the settlement were not provided. The plaintiff’s counsel sought an order that the details of the settlement be disclosed to them and to the court. Defence counsel demurred.

[4] After hearing argument, the court ruled that the details of the settlement must be disclosed to the court for review. They were. After reviewing those details, the court ruled that they were to be disclosed to the plaintiff. They were. After further argument, the court ruled that the defendants were no longer adverse in interest save on very narrow issues and directed that defence counsel could not ask leading questions during the cross-examination of each other’s witnesses, save on those narrow issues.

[5] Counsel were promised written reasons to follow the summary rulings. These are those reasons.

The Legal Framework

Settlement Privilege

[6] Defence counsel, to their credit, recognized that their settlement agreement arguably altered the litigation landscape and, out of an abundance of caution, they advised the court of it. They remained of the view, however, that the agreement in fact did not change the dynamics of the litigation and need not be disclosed. They argued that it was protected against disclosure by the doctrine of settlement privilege.

[7] Settlement privilege is an evidentiary privilege that applies to settlement communications where three preconditions are met:

(i) Litigation has commenced or is within contemplation;

(ii) The communication was made with the express or implied intention that it would not be disclosed in the event that negotiations failed; and,

(iii) The purpose of the communication was to bring about settlement.

See Inter-Leasing Inc. v. Ontario (Minister of Finance), [2009] O.J. No. 4717 (Div. Ct.); Moore v. Bertuzzi, 2012 ONSC 3248.

[8] The philosophical rationale for recognizing a privilege over settlement discussions is a public policy one. The administration of justice is, in some respects, fragile. It is understaffed and underfunded. It already robs from Peter to pay Paul in an effort to keep on top of its heavy caseload. It depends heavily on the pre-trial resolution of the overwhelming majority of cases in order to meet the needs of those cases that do not settle. Protecting settlement discussions with an evidentiary privilege is seen as one way to encourage settlements. One can readily imagine the chilling effect on settlement discussions should parties be permitted to reveal what their opponents were prepared to do to resolve a case.

[9] It appears well-settled that settlement privilege is a class privilege, as opposed to a case-by-case privilege, though there is at least one Ontario authority to the contrary: see Ontario (Liquor Control Board) v. Magnotta Winery Ltd. (2009), 97 O.R. (3d) 664 (Div. Ct.). Were it not a class privilege, a markedly different test would be applied on a case-by-case basis. I am proceeding on the basis that it is a class privilege and that the three preconditions have been made out in this case.

The Disclosure of Settlement Agreements

[10] Litigation involving multiple parties creates opportunities for a variety of different types of settlements. Sometimes one defendant will settle up with a plaintiff, leaving the fight to go on with the remaining defendant(s). Other times, like here, defendants settle up between themselves and form a united front against the plaintiff. Certain commonly seen varieties of settlement agreement have been given labels: Mary Carter Agreements[^1] and Pierringer Agreements[^2] for instance. To date, there is no customary name attached to settlements reached between crossclaiming defendants.

[11] A crossclaim settlement was the subject of attention in Moore v. Bertuzzi, as above, a case well familiar to Canadian hockey fans. In a March 2004 game between the Vancouver Canucks and the Colorado Avalanche, Mr. Bertuzzi sucker punched Mr. Moore from behind and drove his head into the ice, causing career-ending injuries to Mr. Moore. Mr. Moore sued Mr. Bertuzzi as well as the owner of the Canucks hockey club, Orca Bay Hockey Inc. Mr. Bertuzzi and Orca Bay crossclaimed against one another. Mr. Bertuzzi also commenced a third party claim against his then coach, Marc Crawford, alleging that he had essentially been acting on Mr. Crawford’s instructions when he attacked Mr. Moore.

[12] At some point prior to trial, Mr. Bertuzzi and Orca Bay settled their crossclaims. Moreover, Mr. Bertuzzi settled his claim against Mr. Crawford. Mr. Moore moved before a Toronto master to obtain an order that the terms of the settlement be disclosed to him and to the court. The defendants asserted settlement privilege but were unsuccessful before the master who ordered disclosure of their agreement. The defendants appealed to a judge of this court. The appeal was heard by Perell J. who dismissed it.

[13] Justice Perell thoroughly reviewed the law as it pertains to the exception of settlement privilege in the context of partial settlements. He found, consistent with prior authorities such as Pettey v. Avis Car Inc. (1993), 1993 CanLII 8669 (ON SC), 13 O.R. (3d) 725 (Gen. Div.), that there is a litigation basis for piercing settlement privilege in circumstances of partial settlements like Mary Carter and Pierringer agreements. He held specifically, at paras. 76-77 as follows:

The court needs to understand the precise nature of the adversarial orientation of the litigation in order to maintain the integrity of its process, which is based on a genuine not a sham adversarial system and which maintenance of integrity may require the court to have an issue-by-issue understanding of the positions of the parties. The adversarial orientation of a lawsuit is complex because parties may be adverse about some issues and not others. In these regards, it is worth noting from the above passage from Pettey v. Avis Car Inc. that Justice Ferrier explained the need for disclosure of the settlement agreement because of its "impact on the strategy" but he said: "most importantly, the court must be informed immediately so that it can properly fulfil its role in controlling its process in the interests of fairness and justice to all parties."

As a matter of ensuring procedural fairness, as an element of its assessment of evidence, as a factor in determining the truth of the facts, and as a factor in administering justice, the court needs to know the reality of the adversity between the parties.

[14] Justice Perell went on to find that the exception to settlement privilege is not restricted to Mary Carter and Pierringer agreements, but applies whenever the agreement changes the adversarial landscape.

[15] The Divisional Court came to a similar conclusion in the subsequent case of Stamatopoulos v. Harris, 2014 ONSC 6313. There, Nordheimer J., for a unanimous panel, concluded that once a Mary Carter or similar agreement is entered into, both the existence of the agreement and its terms must be disclosed to the court and to the other parties to the litigation. (Para. 20). He went on to add:

If there is any issue that one or more clauses in the [Mary Carter Agreement] should not have to be disclosed, because the disclosure of those specific clauses are not relevant to the principles that require the MCA to be disclosed, (recognizing that the MCA is prima facie privileged), the disclosing party is entitled to edit the MCA for disclosure purposes subject to any order of the court.

Application of the Legal Framework

[16] In this instance the defendants argued that there was nothing relevant in their agreement because it did not change the litigation landscape at all. In effect, they took the position that they should be entitled to edit the entire agreement in accordance with the rule established by Justice Nordheimer in Stamatopoulos. The plaintiff’s counsel disagreed, largely based on the theory that any resolution of a crossclaim must impact on the litigation landscape as it must inevitably reduce or eliminate any adversity between the parties. The court must be the final arbiter, of course, as Justice Nordheimer recognized. For that reason I ordered that the agreement be disclosed to the court for review.

[17] The defendants had not actually reduced their agreement to writing, so they made a short note of the substance of the agreement and provided it to the court.

[18] The substance of the agreement is reflective of the provisions of the Occupiers’ Liability Act. Section 6 of that Act provides, in effect, that an occupier can avoid liability if it is found that damage was caused by the negligent work of an independent contractor, provided the occupier acted reasonably in entrusting the work to the contractor and provided further that the occupier took such steps as it reasonably ought to have in order to satisfy itself that the contractor was competent and that the work had been properly done.

[19] The defendants’ agreement provides essentially that if the jury concludes that the owner was negligent on the basis of hiring an incompetent contractor or failing to monitor the contractor, then the contractor will assume liability for that part of the crossclaim. This agreement was conditional on a finding of some liability against the owner. It left open the prospect that there could be some independent negligence found against the owner, but the circumstances in which such liability could be found in this case are extremely narrow.

[20] Having reviewed the agreement, it struck me that there was much to be said for the defendants’ assertion that the litigation landscape probably had not changed all that much. Obviously their interests were largely aligned as a result of the terms of the agreement. But even without the agreement, the defendants were largely aligned in their position that the contractor had done an adequate job of winter maintenance and that is the central issue in the litigation. Moreover, the contractor was not asserting that the owner had hired an incompetent contractor, for obvious reasons.

[21] That said, it was, in my view, arguable that the landscape had changed and that the plaintiffs should have an opportunity to make that argument and to make submissions about what, if any, restrictions should be placed on cross-examination between defendants. The plaintiffs could not make those submissions in a vacuum. Accordingly, for the reasons expressed by Perell J. in Moore v. Bertuzzi, I ordered disclosure of the agreement to the plaintiff’s counsel.

Cross-Examination

[22] It is axiomatic that trials are, at their core, an exercise in finding the truth. For better or worse, our system of justice has settled upon the adversarial system as the method by which evidence is tendered and tested in an effort to arrive at the truth of a matter. Cross-examination is integral to the process. Indeed, at least one noted jurist has famously referred to it as “the greatest legal engine ever invented for the discovery of the truth”: 5 Wigmore, Evidence § 1367, p. 32 (J. Chadbourn rev. 1974).

[23] The adversarial system is dependent, of course, on its adversarial nature being legitimate and not divorced from reality. As Perell J. observed in Moore v. Bertuzzi, at para. 89, “a reason for disclosure was that the court immediately needed to know the extent to which, if at all, the settlement agreement influenced the adversary system.”

[24] Cross-examination is designed to challenge, undermine, test, weaken and/or discredit evidence given in-chief. Cross-examination of opposing witnesses permits leading questions, at least in part, because the absence of presumptive bias removes concerns about ready acquiescence.

[25] Cross-examination in non-adversarial circumstances may well have a tendency to distort, rather than enhance, the truth-finding function of the trial process. It would be both unfair and unhelpful to have a non-adverse counsel spoon-feeding answers to a willing witness.

[26] When the rationale for asking leading questions in cross-examination is absent, the rule permitting such questioning is brought into question. In other words, where the witness is, in fact, favourable or biased towards the cross-examiner, the general rule permitting leading questions ceases to have rational support.

[27] The court has an obligation to ensure that trials are conducted in a fair and efficient manner for all parties and, more generally, in the broader interests of the community. It has an inherent jurisdiction to control the trial process. Part of that jurisdiction includes the discretion to put limits on cross-examination: See R. v Clancey, [1992] O.J. No. 3968.[^3]

[28] In my view, the resolution of the crossclaim between the defendants all but put an end to their adversity. Frankly, even before the crossclaim was resolved, any adversity may have been more apparent than real. Both had an interest in establishing that Hank Williams was a competent winter maintenance contractor; that he had in place a reasonable regime of inspection and maintenance; and that he complied with the system on the date in question. Rizzardo Bros. had nothing to gain by suggesting that Hank Williams was negligent in any way. Moreover, Mr. Williams had nothing to gain by the suggestion that Rizzardo Bros. had hired an incompetent contractor, or that Rizzardo Bros. had somehow failed to sufficiently monitor his work.

[29] In my view, the defendants had everything to gain by supporting one another’s positions in the trial. The landscape was very much non-adversarial between them.

[30] In the result, I prohibited each defence counsel from asking leading questions of witnesses called by the other defence counsel. The rationale for permitting leading questions was absent and, in my view, permitting leading questions would be unfair and would risk distorting the evidentiary record.

[31] I allowed for two exceptions to the general prohibition against leading questions. The first was in relation to the scope of the contract between the defendants. There were some differences in their positions about the precise scope of the work to be done. The second was in relation to one particular aspect of the design of the parking lot – an evidentiary issue that had the potential to shift some portion of the liability towards Rizzardo Bros. and away from Hank Williams.

Boswell J.

Released: November 23, 2016

[^1]: In a Mary Carter Agreement, the settling defendant settles with the plaintiff but remains in the lawsuit to pursue a cross-claim against one or more other defendants. The settling defendant guarantees a minimum payment to the plaintiff and that defendant’s liability is capped at the guaranteed sum. Should the plaintiff recover more than the guaranteed amount, the settling defendant’s liability is reduced on a dollar-for-dollar basis for the amount the plaintiff recovers in excess of the guarantee.

[^2]: In a Pierringer Agreement, the settling defendant settles with the plaintiff and the action against the settler is discontinued. The plaintiff agrees to indemnify the settling defendant should there be any successful cross-claims advanced by non-settling defendant(s). The plaintiff continues its action against the non-settling defendant(s) but limits its claim to the several liability of the non-settling defendant(s). The settling defendant agrees to aid the plaintiff in making out its claim against the non-settling defendant(s).

[^3]: This discretion is subject to the absolute right of a one accused to cross-examine a co-accused in a joint criminal trial: R. v. Gignac (1976), 1976 CanLII 1426 (ON CA), 30 C.C.C. (2d) 40.