ACCEL ELECTRICAL CONTRACTORS LIMITED v. THE CORPORATION OF THE CITY OF BRAMPTON et al.

CITATION: 2017 ONSC 6708

COURT FILE NO.: CV-16-548425

MOTION HEARD: 20170616

REASONS RELEASED: 20171116

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

ACCEL ELECTRICAL CONTRACTORS LIMITED

Plaintiff

and

THE CORPORATION OF THE CITY OF BRAMPTON, THE CITY OF BRAMPTON, ELITE CONSTRUCTION INC., ENRICO LISI, and INTACT INSURANCE COMPANY

Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: H. Tariq, Fax: 905-695-5201 -for the plaintiff

R. Sohi, Fax: 905-738-0528 -for the defendants Elite, Lisi and Intact

REASONS RELEASED: November 16, 2017

Reasons for Decision

Contribution is a concept which is deeply rooted in our legal history. It provides a mechanism for the achievement of the fundamental policy which Aristotle termed corrective justice.

... contribution is a simple concept but it has not been simple in implementation.

I. Overview

[1] The above observations by Professor Elizabeth Adjin-Tettey, Associate Dean, of the Faculty of Law, University of Victoria are contained her review entitled Multi-Party Disputes: Equities between Concurrent Tortfeasors found at (2016) 53:4 Alta L Rev 863.

[2] In the present case, this court needs to seek the just balancing of the interests of various parties to an action where a settlement is reached, prior to trial, between some of those parties.

[3] In particular I am dealing with a motion by the Plaintiff, Accel Electrical Contractors Limited ("Accel"), for inter alia an order compelling the Defendants, Elite Construction lnc. ("Elite") and Enrico Lisi ("Lisi"), to deliver a further and better Affidavit of Documents. Additional relief was originally sought against the City of Brampton when the motion was argued however that became moot, at least to an extent, while this matter was under reserve.

[4] At the time of the arguing of this motion, Brampton had a motion pending seeking summary judgment dismissing this action as against it. Within the past month, on October 18th Justice McEwen granted that relief on terms. His order dismissed this action as against the Defendants, the Corporation of the City of Brampton and the City of Brampton, with costs. However an additional term of his order provided that the Order did not preclude the Plaintiff, Accel, from pursuing its third party claim against Brampton, in a related action brought by Elite bearing Court File No. 16-CV-553705.

[5] As well a variety of procedural orders were made on consent at the time this motion was heard, so that the sole issue of substance now outstanding related to the alleged entitlement of the moving subcontractor to documents relating both to the settlement of the claims between Brampton and Elite with respect to the subject project and also seeking the specific terms of the settlement.

[6] It seems a simple concept, but it turns out not to be particularly simple in implementation.

II. Background

[7] Elite, a general contractor, entered into a contract with the City with respect to the construction of the Williams Parkway Works and Operations Centre in Brampton, Ontario (the "Project"). The City is the owner of the Project.

[8] In turn, Accel, an electrical subcontractor, entered into a subcontract with Elite to provide electrical installation for the Project.

[9] Intact Insurance Company ("Intact") provided a Labour and Material Payment Bond with respect to the payment obligations of Elite incurred on the Project.

[10] The Project was significantly delayed. The plaintiff asserts Elite failed to pay Accel for the balance owed under its contract and for extras including those arising as a result of the delay.

III. Proceedings

[11] Accel commenced this action on March 10, 2016 as action CV-16-548425, on the basis of a claim under the performance bond, and other contractual and restitutionary claims. As well claims were asserted for breach of trust under the Construction Lien Act.

[12] On or about April 5, 2016, Elite defended the within action by serving a Statement of Defence and Counterclaim. Elite asserts there were various deficiencies and delays, and is counterclaimingagainst Accel for $1,500,000.00.

[13] As well Elite commenced a separate claim (16-CV-553705) on May 31, 2016 against its subtrade Accel and the provider of that company’s Performance Bond. Brampton was not a named as a defendant to that litigation; but was then made the subject of a third party claim initiated by Accel and Trisura against Brampton.

[14] The general contractor Elite asserts that Accel breached the terms of its contract with Elite in that it failed to complete its scope of work as required by the contract, failed to provide adequate workforce, failed to install the required equipment and in particular delayed the work of Elite, causing damages and additional costs for which Accel and its insurer are said to be responsible.

[15] It is also asserted that the work had to be done out of sequence a result of Accel’s performance, which caused additional costs to Elite for which Accel and Trisura are claimed to be responsible.

[16] In turn Accel and its insurer asserted their third party, asserting that Brampton or its sub consultants, inspectors and agents, played a role inter alia in:

(a) certifying amounts owed to Accel on its claims;

(b) inspecting Accel’s work;

(c) providing specifications and directions where necessary for the work to be conducted properly and on time; providing specifications and directions were necessary for the work to be conducted properly and on time; and

(d) coordinating the sequence of the work on the construction project,.

[17] Accel asserts that Brampton is responsible for any delay or deficiencies. “As it engaged in the various acts, omissions, or breaches of legal duties which include, but are not limited to the following”:

• failing to ensure the site was ready in order for Accel to proceed

• failing to ensure permits were in place for the axle to proceed on schedule

• failing to ensure that the work of other trades was sequenced, coordinated schedules that they would not interfere and delay Accel’s work

• failing to provide proper design drawings, specifications,

• failing to ensure proper design to enable axle to proceed with its work in a more timely and manner and with fewer costs.

[18] Ultimately Accel and Trisura state that, to the extent that any part of Elite’s claim as against them arises out of acts, omissions or breaches of Brampton as alleged above, they are entitled “to be fully indemnified and compensated by Brampton in connection therewith.”

[19] So, as often the case, the subtrade asserts that if any failures to perform its contractual duties are found, such defaults are either the responsibility of the General Contractor or the Owner or both.

[20] Now, to a degree that formula was altered by an agreed resolution of contractual claims as between Elite and Brampton.

IV. Interim Resolution with City:

[21] An affidavit from a law clerk with the lawyers for the Plaintiff, Accel, filed in support of this motion asserted that the Affidavit of Documents of Elite was deficient, as it did not disclose the following documents:

(a) Documentation between the City of Brampton, Elite, the subcontractors, the project managers, and/or consultants, dealing with any issues of delay on the Project, including emails and/or correspondence, reports, and minutes of meeting, in particular, minutes of meeting between the City of Brampton and/or its consultants and Elite; and

(b) Compensation to Elite by the City of Brampton in relation to the delay to the Project.

[22] The affidavit further asserted:

“5. I have been advised by Emilio Bisceglia, the Plaintiff's lawyer, and verily believe, the City of Brampton and Elite have reached a settlement, whereby the City of Brampton has compensated Elite for the delays to the Project, in the amount of approximately $750,000.00.

6. Accel seeks documentation in relation to the settlement, and why the City of Brampton changed its position.”

[23] This later point identifies the central issue remaining on the motion before me. Where two parties settle claims involved in an action, what is the entitlement of the remaining litigants to details of such a settlement.

V. Pierringer Agreements and Their Consequences.

[24] In recent years one of the best tools in a litigator's toolbox was a Pierringer Agreement,

which is named after the American case of Pierringer v. Hoger, 124 N.W.2d 106 (Wis. 1963).

[25] Such arrangements, sometimes called a "Proportionate Share Settlement Agreement", is often used in multi-party litigation when one or more Defendants (the "Settling Defendants") resolve their dispute with the Plaintiff or Plaintiffs.

[26] In theory a Pierringer Agreement allows the Settling Defendants to be released from the lawsuit leaving the remaining Defendants (the "Non-Settling Defendants") to continue to defend the Plaintiff's claim. Normally under the terms of the agreement, the Non-Settling Defendants are precluded from issuing cross claims against the Settling Defendants. Further, the Pierringer Agreement stipulates that the Plaintiff must amend its Statement of Claim to only seek recovery for the Non-Settling Defendants' "several liability" as opposed to the more encompassing joint and several liability that the Non-Settling Defendants would typically be liable for.

[27] Courts have generally held that they are willing to favour the benefits of settlement (not only to the parties but on the judicial system and the administration of justice generally) through a Pierringer Agreement over the disadvantage or sometimes even the prejudice suffered by the remaining, Non- Settling Defendants. Courts have often approved Pierringer Agreements and the withdrawal of the Settling Defendants from the action prior to document discovery and oral discovery notwithstanding that to do so would seemingly put the Non-Settling Defendants at a disadvantage.

[28] In Hollinger Inc., 4322525 Canada Inc. and Sugra Limited. 2012 ONSC 5107, 96 CBR (5th) 1; [2012] OJ No 4346, Justice Colin Campbell observed in considering an application to approve of a settlement entered into between the Applicants (collectively "Hollinger) and his former auditors, and lawyers. Approval of the settlement was objected to by the Non-Settling Defendants.

[29] Justice Campbell also addressed the consequences flowing from the approval of such an agreement. The Court went on to find that while Pierringer Agreements have been increasingly utilized in Canada in a variety of litigation settings, including class actions, there was no question that settlement with some Defendants as opposed to all Defendants interferes with what might otherwise be the procedural rights of the remaining Defendants.

[30] While the Court did recognize that any detriment should be balanced against the benefit to the Settling Defendants and to the Plaintiffs, as well as to the administration of justice as a whole on a case by case basis, in this case, it took, what at that time was an unusual step, of approving the settlement on certain conditions allowing for discovery of the Settling Defendants.

[31] In particular, just over 5 years ago Justice Campbell observed:

[95] The management of the discovery process in civil litigation, particularly complex civil litigation, has been of increasing concern to all who are involved in the administration of justice.

[96] If one were to go back 40 years, the parties to litigation and their counsel were largely responsible for managing production and discovery. In that bygone age there were often only 5 to 10 documents for production and less than a half a day for oral discovery.

[97] Parenthetically, most judges and many counsel report that at trial today there are rarely more than 5 to 10 documents that are truly determinative. However, in the last decade the world of documentary discovery has changed significantly.

[98] Typically there are thousands if not hundreds of thousands and sometimes millions of documents that have become part of the discovery process.

[99] This has given rise to the need for the court to participate in the process….”

[32] Ultimately the Court held that both Settling Defendants would continue to have a role in the litigation. In particular, the Court approved the settlement but on conditions that:

1. At a minimum, each of Torys and KPMG agree to be bound by the respective procedural protocols which would form part of the appendices to the Orders;

2. That a term in each Order provided that each of Torys and KPMG recognize and accept that they will have ongoing obligations in the litigation as non-parties, subject to management by the Court.

[33] In a contemporary commentary on the decision, Don McGarvey, Q.C. observed:

“The expense to which these Settling Parties are necessarily put by the obligations on them as non-parties for document production and discovery may well give other Defendants in multi-party litigation pause before they consider settling (and presumably being extricated from) litigation if they are going to continue to be effectively subject to expensive document and oral discovery processes and the Court's order and direction.

When one resolves a case and believes that they are extricated from it, it is my view that a Court should do everything to uphold that. While there may be some procedural rights that are lost by the Non-Settling Defendants, they are just that, procedural rights. They do not appear to be substantive.

Of course, it is open for any party as a Defendant to engage in settlement discussions with a Plaintiff and hopefully extricate themselves (without the obligations of document and oral discovery, one would hope), at any time. The prudence of entering into these discussions and achieving a resolution of the case on terms typically found in a Pierringer Agreement should be a triumph and should be upheld by the Court….”

[34] Over the past 5 years a number of decisions of Canadian Courts have sought to clarify the correct approach to such “partial settlements”.

[35] At the outset of these reasons I referred to the article by Professor Elizabeth Adjin-Tettey. There she specifically focused on the question of the recent Supreme Court guidance in this area:

14 A tortfeasor may want to settle with the plaintiff for a myriad of reasons including to simplify trials, minimize costs, resolve claims in a timely manner, avoid the possibility of an unfavourable outcome in court, increase the plaintiff's access to compensation, give the settling party closure, or avoid negative publicity. In fact, courts have upheld "the overriding public interest in encouraging the pre-trial settlement" as essential for the effective administration of justice. In Sable Offshore Energy Inc v. Ameron International Corp. [2013 SCC 37], [2013] 2 SCR 623 at para 1 ] Justice Abella reiterated support for encouraging settlements to minimize resorting to litigation, stating: "[t]he justice system is on a constant quest for ameliorative strategies that reduce litigation's stubbornly endemic delays, expense and stress." The Supreme Court of Canada's desire to encourage settlement was echoed by Justice Karakatsanis in Hryniak v. Mauldin, [2014 SCC 7] noting that in addition to delays, the litigation process has become cost prohibitive for ordinary Canadians, no longer reflects the modern reality, and should be reconsidered.

[36] In Sable Offshore Energy, Justice Abella wrote:

[A] Pierringer Agreement allows one or more defendants in a multi-party proceeding to settle with the plaintiff and withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused. There is no joint liability with the settling defendants, but non-settling defendants may be jointly liable with each other.

[37] With regard to issues such as are before me in this case, Professor Adjin-Tettey observes:

18 Releases under Pierringer Settlement Agreements do not guarantee that third party claims against the settling tortfeasor will be dismissed. Courts have discretion to allow a third party claim to proceed where attributing fault is still in issue and dismissing the third party action would significantly prejudice the non-settling party's defence against the plaintiff's claim. As well, a court may allow a settling tortfeasor to be joined as a third party where it is necessary to establish the degree of fault of the third party. In such cases, the purpose of the third party proceeding, and for including the settling party in the litigation is simply to grant declaratory relief and not to expose that party to any liability. …

19 Including a settling party in the litigation to give the non-settling party procedural remedies does not expose the former to contribution and indemnity claims or further liability. However, it forces such persons to be part of the proceedings and potentially incur costs for legal representation that should have been avoided with the settlement. This undermines part of the rationale for pre-trial settlements, including minimizing cost, timely resolution of claims, and the general public interest in promoting settlement.

21 Courts have generally taken the position that the discretion to grant declaratory relief for purely procedural purposes will be exercised sparingly and certainly not to allow defendants to circumvent settlement agreements insulating non-parties from further liability. Such an approach assures settling parties they will rarely be drawn into litigation after concluding proportionate share agreements and is consistent with the public policy in favour of encouraging settlements. [footnotes omitted throughout]

[38] However the approach is not without difficulty. Prior to the decision in Sable Offshore Energy Ontario Courts considered the extent of disclosure required in a nationally known case.

VI. Moore v. Bertuzzi

[39] Canadian hockey fans are well aware of the facts giving rise to an action brought by a seriously injured player which was partially settled before trial. The treatment of a partial settlement gave rise to an interlocutory decision of Justice Perell in Moore v. Bertuzzi, 2012 ONSC 3248; 219 A.C.W.S. (3d) 298; 32 C.P.C. (7th) 376; 110 O.R. (3d) 611; 2012 CarswellOnt 6962.

[40] This was an appeal from Master Dash by the defendants, Bertuzzi and Orca Bay Hockey Limited Partnership, Orca Bay Hockey, Inc., Vancouver Canucks Limited Partnership and Vancouver Hockey General Partners Inc. from an order requiring them to disclose their settlement agreement to the plaintiff, Moore.

[41] The settlement agreement was entered into by the defendants and a third party, the coach Crawford, which resulted in a consensual dismissal of crossclaims between the defendants and of the third party claimAn examination for discovery was conducted in August 2007 of Bertuzzi and of Nonis, the senior vice-president and general manager of the Canucks, on behalf of the Orca Bay defendants.

[42] During the examination of Bertuzzi, evidence was given that in the dressing room between the second and third periods the Canucks' coach, told the Canucks players that Moore had to "pay the price." Moore alleged that by this statement the coach was encouraging the Canucks players to engage Moore in a fight as retaliation for the previous incident. Bertuzzi issued a third party claim against Crawford. Bertuzzi pleaded that Crawford urged his players to make Moore "pay the price" knowing it would likely result in injury to Moore and that Crawford failed to caution his players against physical aggression towards Moore. After the main action and third party action were set down for trial, Bertuzzi, Orca Bay, and Crawford signed a settlement agreement.

[43] The Master reviewed the written agreement in confidence. Without disclosing the agree-ment to Moore, he described the nature of the settlement agreement as a "proportional sharing agreement" and he concluded that the settlement agreement was akin to a Mary Carter agreement, which had to be promptly disclosed to the court. The Master ordered the defendants' settlement agreement be produced.

[44] The appeal from that decision was dismissed. The headnote reads in part:

A strategic alliance had ended and the dynamics of the litigation had been changed by the settlement agreement. The settlement of the crossclaims ended the common cause and informal alliance that Moore and Bertuzzi had to show that Orca Bay was the instigator and substituted a mutual non-aggression pact between Bertuzzi and Orca Bay. It was beside the point that Moore was not entitled to rely on Bertuzzi pointing an adversarial sword at Orca Bay. The point was that the court administering and overseeing the adversary system needed to know that the adversarial orientation had changed. The court needed information about a change in the adversarial orientation from the moment the change occurred and that need was not limited to the circumstances of a Mary Carter agreement or to the circumstances that the trial had not yet begun.

[45] The Courts at both levels held the defendants were disqualified from asserting privilege for their settlement agreement, the existence of which should therefore be disclosed to Plaintiff.

[46] Justice Perell’s reasons for arriving at this conclusion are helpful in defining a correct approach to such cases:

• 1. Exceptions to Settlement Privilege

64 I will begin the discussion by assuming that the settlement agreement between Bertuzzi and Orca Bay is a privileged communication for settlement purposes. …

65 A leading case that takes a similar approach to the one I am employing is Pettey v. Avis Car Inc. (1993), 1993 CanLII 8669 (ON SC), 13 O.R. (3d) 725 (Gen. Div.). In that case, there was a Mary Carter settlement agreement, and the issues for the court were: (1) when must the agreement be disclosed; (2) how much of the agreement must be disclosed; and (3) are Mary Carter agreements an abuse of process. There is no mention in Justice Ferrier's judgment that the agreement was a privileged communication, which seems rather to have been a given or assumed factor in the case.

67 The settlement in Pettey had the features of a Mary Carter agreement, which originated in the Florida case of Booth v. Mary Carter Paint Co., 202 So. 2d 8 (Fla. 1967). The features are: (1) the settling defendant settles with the plaintiff but remains in the lawsuit and may pursue crossclaims against the non-settling defendant(s); (2) the settling defendant guarantees the plaintiff a specified monetary recovery; (3) the exposure of the settling defendant is "capped" at the specified amount; (4) the settling defendant's liability is decreased in direct proportion to any monetary recovery above the specified amount; and (5) the non-settling defendant is exposed only to several liability and is no longer exposed to joint and several liability.

68 The structure of a Mary Carter agreement provides an incentive for the plaintiff and the settling defendant to co-operate to maximize the quantum of the plaintiff's recovery because the defendant's liability is capped but the amount of payment will be reduced in direct proportion to the amount above the capped amount determined at the trial to be owed to the plaintiff. This structure, which practically speaking, means that the settling defendant shares in the plaintiff's recovery, explains why Mary Carter agreements have been challenged as champertous. The structure also explains why if the agreement is not disclosed, a Mary Carter agreement may be challenged as an abuse of process. The undisclosed settlement agreement distorts the adversarial orientation of the litigation. The abuse is that if the agreement is not disclosed, then the trier of fact will have a misleading basis for understanding the evidence since apparent adversaries are in truth allies.

69 In Pettey the three non-settling defendants took the position that the settlement agreement between the plaintiff and two defendants was an abuse of process and void as against public policy. Justice Ferrier, however, reasoned that if the Mary Carter agreement was disclosed, then it was not an abuse of process, because with disclosure, the court would have control of its process and could direct procedural safeguards to counter the skewering of the adversarial orientation of the lawsuit. Thus, in Pettey v. Avis Car Inc., Justice Ferrier ruled that the settling defendants could not cross-examine on issues related to the quantum of damages, except with leave of the court.

71 After reviewing the Canadian jurisprudence, Justice Ferrier concluded that Mary Carter agreements could be legal and enforceable, but they had to be disclosed. He concluded that it was a matter of judicial discretion about whether the financial details must be disclosed, and in the case before him, he was satisfied that he had enough disclosure without knowing the financial details to enable him to control the court's process. [my emphasis]

72 In answer to the question of when must a Mary Carter agreement be disclosed, Justice Ferrier stated:

The answer is obvious. The agreement must be disclosed to the parties and to the court as soon as the agreement is made. The non-contracting [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 evidence to be led by them. The non-contracting parties must also be aware of the agreement so that they can properly assess the steps being taken from that point forward by the plaintiff and the contracting [settling] defendants. In short, procedural fairness requires immediate disclosure. 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.

73 This passage from Pettey v. Avis Car Inc. is authority that a Mary Carter agreement must be disclosed to the court and to the non-settling defendant as soon as it is made and disclosure cannot be postponed to the commencement of the trial. ….

[47] Justice Perell goes on to further set out the rationale for timely disclosure:

76 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."

[48] Later in his reasons his Honour recognized that the same logic applied in other partial resolution situations:

93 The necessity of disclosing the reality of the adversarial orientation of the parties is not confined to the circumstances of Mary Carter agreements or Pierringer agreements. Other cases have held that the non-settling defendants have a right to review the settlement agreements to the extent that the agreements have an impact on litigation strategy, the design of the cross-examinations, and the evidence to be led at trial; see: Leadbetter v. Penncorp Life Insurance Co., [1999] O.J. No. 496 (Gen. Div.); SNC-Lavalin Profac Inc. v. Sankar, [2007] O.J. No. 1966 (Master). The agreements in these cases involve arrangements between a plaintiff and a settling defendant; however, the case law reveals that settlement agreements that involve different permutations of parties to the litigation must be disclosed.

[49] Counsel for Elite referred me to an earlier decision by Master Birnbaum which I found helpful. In City of Toronto Economic Development Corp.v. Olco Petroleum Group Inc. [2008] O.J. No. 2413;168 A.C.W.S. (3d) 60; the city brought a motion for production of certain documents in an action against a former tenant of city lands in order to obtain costs for the remediaton of the lands. That tenant filed a suit against the defendant, a sub-tenant. The defendant prepared documents and reports related to that litigation and negotiations with that company. The plaintiff then sought the production of those documents in its own action against the defendant. The defendant argued that the documents were protected by settlement privilege. The Master held that requested information was protected by settlement privilege. The purpose of the reports and discussions were for the purpose of effecting a settlement. In part she held:

“….In the 21st century, we encourage people to resolve their disputes without litigation and even if there is litigation, we encourage litigants to use the rules to prepare for effective negotiation, particularly with our emphasis on mediation and pre-trials. Only a small percentage of cases actually go to trial. Thus we must protect the confidentiality of settlement negotiations at all stages of negotiations so that participants will engage in useful discussions without the fear that their statements will be used against them if negotiations fail.”

[50] In her reasons she also cited, then Master, Beaudoin’s decision in Canadian Gateway Development Corp. v. National Capital Corporation, [2002] O.J. No. 3167; 115 A.C.W.S. (3d) 964 discussing the appropriate privilege analysis:

“Privilege arises if a communication is made to effect a compromise. There is a strong public interest in encouraging settlement and for that reason, all bona fide settlement discussions should be protected by privilege. As Sopinka and Lederman add at p. 813 para. 14.215:

“Hence letters designed to open such negotiations, or letters or discussions which attempt to convince the opponent of the strengths of the other's position, but which also recognizes weaknesses, in the hope of some settlement can be effected once each other's positions are on the table, should be subject to the privilege, whether or not they contain an actual offer of settlement.”

Having considered the foregoing case law, it is my view that law is trending towards limiting the extent of production of otherwise privileged documentation, while nevertheless seeking not to unduly prejudice, the remaining, non-settling litigants. This is focused upon in a most helpful recent decision.

VII. Allianz Global Risks US Insurance Co. v. Canada (Attorney General)

[51] While this matter was under reserve my former colleague, Justice C.U.C. MacLeod was addressing similar issues in his decision in Allianz Global Risks US Insurance Co. v. Canada (Attorney General), [2017] O.J. No. 3829; 2017 ONSC 4484. I find his analysis confirms what I believe to be the correct approach in this case.

[52] In Allianz Motion by the plaintiffs sought approval to implement a Pierringer agreement. The actions arose out of incidents involving damage to an aircraft sustained when the aircraft could not be kept on the paved portion of the runway while landing in the rain. The plaintiffs were the owners of the aircraft and a consortium of insurers. A settlement was reached between the plaintiffs and two of the defendants. The plaintiffs now sought to amend their claim to remove Transport Canada and the airport as defendants. They proposed to continue with a much more focused claim against the non-settling defendant NAV Canada, responsible for air traffic control, limited to its proportionate share of fault, if any.

[53] Unlike the present situation, the relevant agreement required the plaintiffs to ensure that none of the settling defendants were exposed to claims for contribution by a non-settling defendant.

[54] Justice MacLeod found that there was an overriding public interest in favour of settlement. The non-settling defendant did not oppose dismissal of the cross-claims provided the terms were fair. In particular, he concluded that there was jurisdiction to dismiss the crossclaims and third party claims in order to implement the Pierringer agreement “but it is appropriate to do so on terms which minimize prejudice to the non-settling defendant.”

[55] In particular, the court set out essentials the issue before it on this basis:

“8 The issue then is whether the court can force the non-settling defendant to abandon claims against the settling defendants without its consent. Assuming the court has that authority is it reasonable to impose the order on terms other than those agreed to by the remaining defendant? And is it appropriate to impose terms over the objection of the settling parties at the risk of imperilling the settlement?

[56] Justice MacLeod’s usual comprehensive and incisive analysis led him to conclude that “public policy supports Pierringer Agreements in Multi-party Litigation”. He Summarizes his thorough analysis and consideration for reaching this conclusion in these terms:

9. There is no doubt that there is an overriding public interest in favour of settlement. It is sound judicial policy which contributes to the administration of justice. Pierringer agreements have been recognized as an important tool in settling multi-party litigation. As described by the Supreme Court it is an important tool without which it is very difficult to conclude a settlement with only some of the defendants and with which it is possible to substantially streamline the litigation.

In the United States, Pierringer Agreements were found to significantly attenuate the obstacles in the way of negotiating settlements in multi-party litigation. Under a Pierringer Agreement, the plaintiff's claim was only "extinguished" against those defendants with whom it settled; the claims against the non-settling defendants continued. The settling defendants, meanwhile, were assured that they could not be subject to a contribution claim from the non-settling defendants, who would be accountable only for their own share of liability at trial.

10 This is a motion to implement a Pierringer agreement. This is not a case in which the agreement itself requires court approval but approval is required to amend the statement of claim, to allow the settling defendants out of the action and to stay or dismiss the crossclaims. The controversial aspect of this is the request for a "bar order" which would prevent the non-settling defendant from making any claim against any other party if it is found liable.

11 There is a public policy in favour of supporting settlements. Pierringer agreements should be approved and supported if possible because there are benefits to the parties involved in the litigation but also systemic benefits to the justice system as a whole. Of course the implementation of the agreement must also be fair to the non-settling defendant which is left to face the litigation alone. …. [footnotes omitted]

[57] Counsel contemplating a settlement that involves arrangements such as these would be well advised to carefully consider the guidance contained in the Allianz decision. For my purposes in these reasons, I simply extract his Honour’s conclusion on procedural questions:

19 I conclude that given the public policy grounds for encouraging settlement and the clear authority from the Court of Appeal that indemnity cannot be claimed by the defendant if the plaintiffs limit their claim in the manner proposed, the court would have the jurisdiction to dismiss the crossclaims for contribution and indemnity. As pleaded they will become untenable when the plaintiffs' claim is narrowed and it would be unjust to permit them to continue only to claim costs. [See Packard v. Fitzgibbon, 2017 ONSC 566, a recent decision of Justice Mew] In any event at this point it is highly unlikely given the manner in which this action has proceeded that there are any costs attributable solely to the crossclaims.

[58] Having satisfied himself that he could make the orders, he further observed citing Rule 37.13(1) that “I can of course do so on terms.”

[59] He further observed in this regard:

20…..I recognize that the settling parties have not agreed to any terms and if I grant the relief only on terms that are unacceptable to them, it may imperil the settlement. That concern does not justify granting the orders unconditionally if doing so prejudices the rights of the non-settling defendant.

21 If I conclude that justice requires the orders only be granted on terms then it will be up to the settling defendants to determine if they are prepared to live with the terms. Having regard to the public policy identified above, the court should not impose terms unnecessarily and should attempt not to undermine the settlement by imposing terms which eliminate the benefit of settling.

22 What the settling parties achieve through the Pierringer agreement is a limit on their exposure to liability and certainty regarding their contribution to the damages but they also hope to end the need to incur further costs as a party to the litigation. Of course they cannot extract themselves entirely from the litigation because they are in possession and control of relevant documents and they have personnel who will be necessary witnesses at the trial but it would undermine one of the benefits of settling if they continue to have the same obligations as a party.”

[60] For my present purposes I am left with the direction from Justice MacLeod that “Each agreement must be evaluated in context.”To date Canadian courts have had relatively little experience wrestling with these issues, especially following the release of the Supreme Court’s decision in Sable Offshore Energy , supra . For the purpose of this motion, I note his observation that the court must still weigh the impact of these agreements on the trial, on discovery and on preservation of evidence.

VIII. What Terms are Required?

[61] In this case, as in Allianz, I agree that all of the documents produced in both actions arising from the Project and all of the discovery transcripts should continue to be available to Accel. It will be for the trial judge to determine precisely how these may be used by whom considering that they were produced or examined at a time when there were other parties in the litigation. I too, do not see how I can rule in advance on the manner in which the trial will be conducted. At this point it is unclear who if anyone may seek to call the witness so it would not be appropriate to rule in advance on whether or not transcripts may be read in.

[62] As well, I acknowledge the very real possibility that Accel may have to seek discovery of the parties to the companion litigation, if they have information that has not already been elicited during their discovery by the plaintiff or cannot be obtained voluntarily. I do not agree it is appropriate to give leave in advance of the need being identified. It is not necessary at this stage to provide Accel with an open ended authority.

[63] With respect to what needs to be disclosed with respect to settlement. Master MacLeod refers to his earlier decision in Noonan v. Alpha-Vico, 2010 ONSC 2720, which was decided in 2010 and contains a useful analysis of proportionate share settlements and their impact on the litigation.

[64] That case was partly concerned with disclosure of the terms of the Pierringer agreement and at the time there were two schools of thought about whether the executed agreement was privileged and the amount of the settlement had to be disclosed to the non-settling party.

[65] The Supreme Court has since resolved both of those questions in Sable Offshore, supra at paras 18-25and the answer now is that the agreement is covered by settlement privilege. The fact of the agreement and certain features of the agreement must be disclosed to the court and to the non-settling defendant but the amount of the settlement need not be at this stage.

[66] However that does not complete the entitlements as ultimately the amount must be disclosed to the court after judgment, in order to ensure the plaintiff is not over compensated. (See Laudon v. Roberts 2009 ONCA 383)

[67] Justice MacLeod also points out the desirability of using “amended” pleadings in such cases, rather than “fresh as amended”:

“Since it is an amended pleading and not a fresh pleading, it is readily apparent that there were originally co-defendants and what the allegations were against those defendants. I also think that is appropriate as it will show the trier of fact that the litigation has changed since it was begun.”

[68] Other practical issues addressed in Allianz relate the effective and efficient manner to deal with ongoing document production and preservation:

36 The plaintiffs as well as NAV Canada are now in possession of copies of all documents produced by the settling defendants. There should be a mechanism to avoid the need for each party to include those documents in new affidavits of documents. More importantly there should be a mechanism for identifying which party intends to make use of those documents and to avoid a chaotic situation and effective trial planning there should be a mechanism to determine which witnesses from the settling defendants will be called at trial and by which party. This mechanism however is likely to be found in discovery planning, case management and trial management rather than trying to anticipate all possible scenarios in an order.

[69] Similarly, in this case I am deferring to those dealing with case and trial management of these disputes in the future. However, if the parties are not able to establish a discovery plan or have specific issues relating to such a plan. I am prepared to convene a case conference to address those issues.

IX. Disposition

[70] Having regard to the issues identified in his reasons in Allianz and having reviewed the various orders proposed by the parties Justice MacLeod made 15 specific orders with respect to the manner of proceeding addressing a wide variety of issues.

[71] In the present case the relevenant portion of the motion brought by Accel sought “documentation in relation to the settlement, and why the City of Brampton changed its position.” .

[72] Based on the forgoing analysis I am satisfied that both the quantum of the settlement amount and the documentation generated with respect to valuating and negotiating the settlement agreement entered between Brampton and Elite need not be produced at this stage of the litigation.

[73] I am also prepared to make an order providing that immediately after the completion of, and the exchange of, any amended pleadings, counsel are to meet and confer with a view to updating a discovery and production plan including agreement if possible concerning the admissibility and use of any discoveries or other examinations previously conducted and documents previously produced.

[74] Accel was in my view ultimately unsuccessful on the central issue concerning productions. Nevertheless other relief sought was obtained ultimately on consent. This is a developing area of the law and in the circumstances I feel this is an appropriate situation to make the costs of this motion, fixed at $5000, payable in the cause of the action as between Accel and Elite.

Released: November 16, 2017

DS/ R205 ______________________

Master D. E. Short