COURT FILE NOS.: CV-18-608051-00CL CV-19-614180-00CL

DATE: 20210526

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CV-18-608051-00CL

ANDREW STRONACH, Plaintiff

AND:

BELINDA STRONACH IN HER PERSONAL CAPACITY and AS TRUSTEE OF THE ANDREW STRONACH 445 FAMILY TRUST, NICOLE WALKER, and FRANK WALKER IN THEIR CAPACITY AS TRUSTEES OF THE ANDREW STRONACH 445 FAMILY TRUST, ALON OSSIP IN HIS PERSONAL CAPACITY and AS TRUSTEE OF THE ANDREW STRONACH 445 FAMILY TRUST, and STRONACH CONSULTING CORP., Defendants

AND RE: CV-19-614180-00CL

SELENA STRONACH, Plaintiff

AND:

BELINDA STRONACH, NICOLE WALKER, FRANK WALKER, ELFRIED STRONACH and ALON OSSIP, in their capacities as Trustees of the Andrew Stronach 445 Family Trust, BELINDA STRONACH, ELFRIEDE STRONACH and ALON OSSIP, in their capacities as Trustees of the 445327 Trust; BELINDA STRONACH, FRANK WALKER, and NICOLE WALKER, in their capacities as Trustees of the Strosel 2011 Trust; BELINDA STRONACH, FRANK WALKER and NICOLE WALKER, in their capacities as Trustees of the Stroand 2011 Trust; BELINDA STRONACH in her capacity as Trustee of the BSFIN Investment Trust; 2305218 ONTARIO INC. in its capacity as Trustee for the Woodington Trust; BELINDA STRONACH in her capacity as Trustee of the Adena North Trust; FRANK WALKER and NICOLE WALKER, in their capacity as Trustees for the Andrew Stronach Family Trust; BELINDA STRONACH in her capacity as Trustee for the Andrew Stronach 2011 Trust; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER, in their capacities as Trustees of the ST Trust, Defendants

BEFORE: Justice Cavanagh

COUNSEL: Marie Henein and Alex Smith for Andrew Stronach

Matthew P. Gotlieb and Shaun Laubman for Selena Stronach

Michael Barrack and Iris Fischer for Belinda Stronach

Melanie Ouanounou for Nicole Walker and Frank Walker

Mark Gelowitz for Alon Ossip

Linda Plumpton and Gillian Dingle for Stronach Consulting Corp.

HEARD: April 1, 2021

ENDORSEMENT

Introduction

[1] Andrew Stronach and his daughter, Selena Stronach, are plaintiffs in two separate actions. Each plaintiff seeks leave to amend the statement of claim in each of their respective actions.

[2] The defendants, including Belinda Stronach, oppose this motion. At the hearing of this motion, Belinda Stronach’s counsel made submissions in opposition to the plaintiffs’ motions which were adopted by counsel for the other defendants.

[3] For the following reasons, I grant the motions brought by Andrew and Selena and grant them leave to amend their respective pleadings in the forms in Schedules “A” and “B” to the Notice of Motion.

Background Facts

[4] The plaintiffs’ actions are two of three related lawsuits that were commenced in 2018 and 2019 regarding the management of the Stronach family business and trusts. These three actions have proceeded together on the Commercial List and have been case managed.

[5] Frank Stronach is the founder of the Stronach family business empire. The Stronach Group (“TSG”) is the name for the network of mostly trust-owned corporations that constitute the Stronach family assets. Frank Stronach created the network of companies and trusts that hold or control most of the Stronach family assets for the benefit of his wife, Elfriede; his children, Andrew and Belinda; and his grandchildren, Selena and Belinda’s children, Frank Walker and Nicole Walker. Frank Stronach is not the beneficiary of any trust.

[6] I refer to the members of the Stronach family, for ease of reference, by their first names (I refer to Frank Walker as Frank W.).

[7] These trusts indirectly own 100 per cent of 445327 Ontario Limited (“445”) which, in turn, directly or indirectly owns a significant portion of TSG’s assets, including Stronach Consulting Corp. (“SCC”). SCC is the largest and most prominent corporate entity within TSG, which owns and operates the assets and companies that comprise the bulk of the Stronach family’s wealth.

[8] The primary trusts are:

a. The Andrew Stronach 445 Family Trust – 23.1% ownership interest – Andrew and Selena are beneficiaries. Belinda, Frank W., and Nicole are the current trustees.

b. The Belinda Stronach 445 Family Trust – 67.4 % ownership interest – Belinda, Frank W., and Nicole are the beneficiaries. Belinda, Frank W., Nicole, and Glen A. Huber are currently the trustees.

c. The 445327 Trust – 9.5% ownership interest – Andrew, Selena, Belinda, Frank W., Nicole, and Elfriede are the beneficiaries. Belinda is currently the only trustee.

[9] Belinda is the President and Chair of TSG’s main operating entity. Belinda is a trustee of most of the trusts that ultimately own the Stronach family assets, including trusts where Andrew and Selena are the only beneficiaries. Belinda’s children are also trustees of the trusts, including the trust where Andrew and Selena are the beneficiaries.

[10] Frank and Elfriede commenced the first action (the “FS/ES Action”) on October 1, 2018 in which they made allegations against Belinda, Alon Ossip (the former CEO of TSG and former trustee of certain of the family trusts), Belinda’s two children, as well as SCC. The FS/ES Action revolved around alleged wrongdoing by Belinda and other defendants concerning the management of TGS as well as the responsibilities of the trustees of various family trusts through which TSG is ultimately owned.

[11] In their respective actions, Andrew and Selena claim against Belinda, Frank W., Nicole, Alon, and, in Selena’s case only, Elfriede for breach of their fiduciary duties as trustees, oppression, and other causes of action.

[12] In her statements of defence, Belinda denies the allegations against her. Belinda pleads that as trustee of the 445 Trusts, she has worked to safeguard and advance the interests of the beneficiaries, including Andrew and Selena. Belinda pleads that as Chair and President of TSG, she has always acted in the best interests of TSG’s stakeholders, which include the beneficiaries of the 445 Trusts.

[13] On May 13, 2020, Belinda and Frank signed a document entitled “Agreement between Frank Stronach and Belinda Stronach Regarding Division of Stronach Family Assets to Resolve all Litigation”. Belinda describes this document as a confidential, without prejudice agreement in principle to negotiate towards a proposed settlement of the litigation. I will refer to this document as the “May 2020 Agreement”, although it is not a binding settlement agreement. Andrew and Selena are not parties, and the document was provided to them after it was signed. Belinda and the other defendants assert that this document is covered by settlement privilege.

[14] A judicial mediation began in late May 2020 and proceeded over the course of seven months. The mediation resulted in a settlement of Frank and Elfriede’s action in August 2020. The mediation did not result in a settlement of Andrew and Selena’s claims.

[15] The FS/ES Action was settled in August 2020 on terms which involved Frank and Elfriede receiving certain assets. Andrew and Selena objected to the settlement, alleging that the settlement involved a transfer of assets in which they have an interest. The terms of this settlement became public. Belinda does not object to the plaintiffs’ proposed amendments referencing this transaction.

[16] In December 2020, 445 and Alon Ossip executed a term sheet in a separate transaction. Belinda does not assert that this transaction is subject to settlement privilege.

Analysis

[17] Belinda opposes certain of the proposed amendments because they (a) contain impermissible references to settlement privileged communications in the context of a confidential mediation process; (b) attempt to withdraw material admissions; (c) include irrelevant personal attacks; and (d) make requests for unnecessary interim / interlocutory relief.

Legal principles with respect to pleading amendments

[18] Under rule 26.01 of the Rules of Civil Procedure, on a motion for leave to amend a pleading, “the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment”.

[19] Rule 26.01 requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court’s process; or the pleading discloses no reasonable cause of action. Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial. The onus to prove actual prejudice lies with the responding party. See 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, at para. 25.

[20] Proposed amendments that seek to rely on matters covered by settlement privilege are prejudicial and the court will refuse to grant leave to amend in these circumstances: Al Mabrook and Amina Reda v. The Corporation of the City of Toronto, 2013 ONSC 6515 (SCJ) at para 14.

Should proposed amendments with respect to the May 2020 Agreement be denied because it is subject to settlement privilege?

[21] The defendants oppose proposed amendments that include statements with respect to the May 2020 Agreement on the ground that it is covered by settlement privilege.

[22] The basic tenet of settlement privilege is that it “enables parties to engage in settlement negotiations without fear that information they disclose will be used against them in litigation.” R. v. Nestle Canada Inc., 2015 ONSC 810, at para. 39. The privilege is based “on the understanding that parties will be more likely to settle if they have confidence from the outset that their negotiations will not be disclosed”: Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, at para. 16. Settlement privilege is a class privilege. As with other class privileges, while there is a prima facie presumption of inadmissibility, exceptions will be found when the justice of the case requires it: Sable, at para. 12.

Is the May 2020 Agreement prima facie subject to settlement privilege?

[23] Settlement privilege will attach to a document or communication where (a) there is a litigious dispute; (b) the communication was made with the express or implied intention that it would not be disclosed; and (c) the purpose of the communication is to attempt to effect a settlement: Hollinger Inc., Re, 2011 ONCA 579, at para. 16.

[24] The plaintiffs submit that the May 2020 Agreement is not subject to settlement privilege because Belinda has failed to discharge her burden of showing that it was made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed. The plaintiffs accept that the first and third requirements have been satisfied.

[25] The evidence upon which Belinda and the other defendants rely in response to the plaintiffs’ motions is an affidavit from a legal assistant at the law firm of her counsel. In this affidavit, the deponent attaches a number of documents, including the May 2020 Agreement. In respect of this document, the deponent states: “[o]n this motion, Belinda takes the position this document is privileged and cannot be described or referred to in the proposed amended statement of claim of the Plaintiffs”. Belinda did not swear or affirm an affidavit in response to the plaintiffs’ motions.

[26] Belinda relies on the circumstances in which the May 2020 Agreement was made and the content of the May 2020 Agreement itself to support her submission that it was made with the intention that it would not be disclosed in the event that settlement negotiations failed. Belinda submits that these circumstances and the content of the document strongly support an inference that the May 2020 Agreement was made for the purpose of settlement negotiations and with the intention that it would remain confidential if no settlement was achieved.

[27] Belinda submits that she has provided ample evidence to support this inference, and an affidavit from her is not required. Belinda relies on Temex Resources Corp. v. Walker, 2014 ONSC 3170 in which the motion judge held, at paras. 52 and 67, that where the purpose of the communication is to attempt to effect a settlement and the parties are clearly involved in negotiating a settlement, the intention that the communication would be kept confidential if settlement was not achieved should be inferred unless something suggests otherwise.

[28] Belinda relies on the following circumstances to support the inference she asks me to draw that the May 2020 Agreement was made with the intention that it would not be disclosed if no settlement was achieved:

a. The May 2020 Agreement was signed on May 13, 2020, days after the case management judge directed the parties to mediate and make serious efforts to resolve their dispute.

b. By May 12, 2020, an in-person judicial mediation had been booked by plaintiffs’ counsel to commence shortly.

c. The May 2020 Agreement was, on its face, an effort to lay the groundwork for the mediation and potential resolution among the parties.

d. The mediation discussions took place over a seven-month long period overseen by the case management judge, and it was subject to a confidentiality order.[^1]

e. An email was sent by her counsel in August 2020 in which her counsel stated that “[i]n the event these negotiations are unsuccessful, no party will acquire any greater rights than they would otherwise have by virtue of these negotiations.”

[29] Belinda submits that in these circumstances and given the content of the May 2020 Agreement as a framework for continued negotiations, I should infer that the May 2020 Agreement was intended to be kept confidential if no settlement was achieved.

[30] The plaintiffs submit that the evidence before the court does not allow an inference to be drawn that the May 2020 Agreement was made with the intention that it would be kept confidential if settlement was not achieved. They argue that the second requirement for settlement privilege is separate from the third requirement (that the purpose of the communication is to attempt to effect a settlement), and that satisfaction of the third requirement does not, in these circumstances, lead to a presumption that the second requirement is also satisfied. The plaintiffs submit that on the evidence before me, Belinda has failed to show that an inference should be drawn that the May 2020 Agreement was intended to be kept confidential. They submit that Belinda was required to tender evidence, through her own affidavit, that the May 2020 Agreement was made with the requisite intention, and she did not do so.

[31] It is not always necessary that a party who asserts settlement privilege over a communication must swear or affirm an affidavit to prove the requisite intent. For example, in Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund (Trustee of) v. SNC Group Inc., 2013 ONSC 6297, Perell J. held, at para. 78, that the circumstances were strongly indicative that the parties intended that their settlement discussions not be disclosed and be treated as confidential. Where a party asserts settlement privilege over a communication, that party has the onus of showing that the three requirements for settlement privilege have been satisfied. In any given case, this is a contextual, fact-specific analysis: Emery Silfurtun Inc. (Re), 2018 ONCA 485, at para. 22.

[32] The plaintiffs rely on the fact that the May 2020 Agreement is not marked “without prejudice” and does not contain a term that states that its contents are confidential. The plaintiffs also point to an email sent by counsel for Frank to counsel for Andrew and counsel for Selena which transmitted the May 2020 Agreement without any comment. The mail was not marked “without prejudice” and there was no indication that the May 2020 Agreement was to be kept confidential. The plaintiffs submit that the absence of these words in the May 2020 Agreement and in the email from Frank’s counsel sending it to Andrew’s and Selena’s counsel weighs heavily against a finding that Belinda had the necessary intent to give rise to the privilege.

[33] A statement that a communication is “without prejudice” is not conclusive in establishing privilege, and the absence of these words is not conclusive in establishing that the communication is not privileged: Bellatrix Exploration Ltd. v. Penn West Petroleum Ltd., 2013 ABCA 10, [2013] A.J. No. 10 (Alta C.A.), at paras. 24-25, as cited in Singh v. Progressive Conservative Party of Ontario, 2017 ONSC 4168 (SCJ), at para. 73. The absence of the words “without prejudice” is a factor to be considered in the appreciation of all of the circumstances: Bercovitch v. Resnick et al., 2011 ONSC 5082, at para. 28; leave to appeal denied 2011 ONSC 6410 (Div. Ct.). The absence of the words “without prejudice” is a less significant factor where the parties are not represented by lawyers in the negotiations: Bercovitch, at para. 28.

[34] The May 2020 Agreement was negotiated by Frank and Belinda and, after it was signed, it was provided by Frank’s counsel to counsel for Andrew and for Selena. I do not regard the fact that the May 2020 Agreement is not, itself, marked “without prejudice” to be a significant factor that supports a conclusion that the document was not intended to be privileged. As between Frank and Belinda, who were parties to the May 2020 Agreement, the words were not needed. However, the words “without prejudice” would have more meaning when the document was given to other parties as a framework for settlement.

[35] The email from Frank’s counsel sending the May 2020 Agreement to counsel for other plaintiffs does not include the words “without prejudice”, although counsel for all parties are experienced and capable. Belinda relies on an email from Frank’s counsel dated May 6, 2020 in which she makes a statement concerning the proposed judicial mediation as “the collective recollection of plaintiffs’ counsel” as indicative of the fact that Frank, Elfriede, Andrew, and Selena often took the same or similar positions in the litigation and communicated to the defendants as a group. Belinda submits that, viewed in this context, the absence of the words “without prejudice” is insignificant.

[36] I do not agree that this email allows me to draw any inference about the relationship among the three plaintiffs or their counsel. In my view, absent evidence explaining these relationships and why, in the circumstances, the “without prejudice” notation was not included when the May 2020 Agreement was sent, the absence of this notation is a factor that weighs against the inference that I am asked to draw that the document was made with the intention that it not be disclosed if the negotiations failed.

[37] The plaintiffs place particular reliance on the fact that the defendants’ productions in the three actions have included as relevant and non-privileged documents numerous proposals, including from Belinda, aimed at resolving the family disputes with which the litigation is concerned. These documents are appended as exhibits to the affidavit filed in support of these motions. A number of these documents are marked “without prejudice” and, nevertheless, no settlement privilege was asserted.

[38] One of these proposals made in August 2018 was expressly referenced in Belinda’s defence to Frank’s and Elfriede’s claim as a document upon which she relies. At the time the August 2018 proposal was made, the litigation had not yet commenced, although the parties had retained legal counsel. Belinda does not assert that litigation was not contemplated. These proposals were also made and sent for use in discussions with a view to resolving the family dispute. Belinda, in her defence to Frank and Elfriede’s claim, relies on the response to this proposal, pleading that it was not constructive.

[39] The plaintiffs submit that, on their face, these proposals were made and communicated in circumstances which are similar to those surrounding the May 2020 Agreement and the fact that no privilege was claimed in respect of these proposals refutes any inference that might otherwise be available that the parties intended the May 2020 Agreement to remain confidential if settlement was not achieved.

[40] Belinda submits that each of these prior proposals was made at different times and in different circumstances than the May 2020 Agreement, and that one would need to examine the circumstances surrounding the making and communication of each proposal before concluding that the circumstances are similar to those in relation to the May 2020 Agreement. Belinda submits that in the absence of this evidence, the production of and reliance on prior proposals does not detract from the inference I am asked to draw that the May 2020 Agreement was intended to be kept confidential.

[41] I agree that there may be additional factual context that may be relevant if one were to analyze whether settlement privilege could have been asserted over any of the prior proposals or settlement communications. However, on the facts in evidence before me, including the prior proposals themselves and Belinda’s pleadings, it appears that the grounds upon which Belinda relies to assert settlement privilege over the May 2020 Agreement would have applied to the prior proposals, including the August 2018 proposal. I am required to take the circumstances surrounding the prior proposals into account as part of my analysis of the overall circumstances in relation to the May 2020 Agreement. If there are additional factual circumstances that are relevant to my analysis, it was up to Belinda to provide evidence of these circumstances in order for her to discharge the onus to satisfy the requirements for settlement privilege.

[42] Belinda also submits that it was open to her to assert privilege over prior settlement proposals or other settlement communications made in the context of this family dispute or choose not to do so. She submits that a party is able to choose whether to assert privilege over a settlement proposal by, for example, making it on an expressly “with prejudice” basis. Belinda submits that the fact that she did not assert privilege over some prior proposals or communications does not affect whether she is entitled to assert privilege over the May 2020 Agreement.

[43] I accept that a party is entitled to make a settlement proposal to another party and communicate that the proposal is not subject to settlement privilege by making it expressly “with prejudice”. But there is no evidence before me that Belinda expressly made earlier proposals about division of family assets on a “with prejudice” basis. A number of pages in the August 2018 proposal are marked “without prejudice”, yet this proposal was produced as a relevant document which is not privileged. None of the other proposals or communications is marked “with prejudice”. There is no evidence that Andrew or Selena who, if the August 2018 proposal was properly subject to settlement privilege, shared the privilege, was asked to waive the privilege when Belinda pleaded the August 2018 proposal. The evidence indicates that Belinda relied on the August 2018 proposal in her pleading in the litigation and produced the August 2018 proposal and other proposals and related communications as non-privileged and relevant documents.

[44] The circumstances of the prior proposals which Belinda produced as non-privileged documents upon which she relies in the litigation, and the fact that no privilege was asserted over these documents, call into question the inference that Belinda asks me to draw that the May 2020 Agreement was made with the intention that it not be disclosed and be kept confidential. This evidence suggests that the May 2020 Agreement, which appears similar to other proposals which Belinda made without the intention that they not be disclosed, was also made without this intention. In these circumstances, the fact that the May 2020 Agreement was signed soon after the case management judge directed a mediation, and that this document was used as a framework for discussions in the mediation does not, without more, support an inference that the document was made with the intention that it be kept confidential. In reaching this conclusion, I take into consideration that there is no evidence about when the negotiations which led to the May 2020 Agreement began. I am unable to determine on the record before me whether this document would have been prepared and circulated even if a judicial mediation was not directed. On this evidentiary record, I am unable to draw the inference that the May 2020 Agreement was prepared for the purpose of using it at the judicial mediation.

[45] I do not agree that the email sent by Belinda’s counsel in August 2020 that, if the negotiations are unsuccessful, “no party will acquire any greater rights than they would otherwise have by virtue of these negotiations” is sufficient for Belinda to discharge her onus. This email does not refer to the May 2020 Agreement and it does not show that when the May 2020 Agreement was sent to the plaintiffs it was intended to be kept confidential.

[46] In these circumstances, it was incumbent on Belinda to provide additional evidence to show that the May 2020 Agreement was made in materially different circumstances from the earlier proposals, and to explain that she intended that the May 2020 Agreement be kept confidential and why her intention with respect to the May 2020 Agreement differed from her intention with respect to the prior proposals.

[47] In the absence of such evidence, Belinda has not discharged her onus of showing that the May 2020 Agreement was made with the intention that it be kept confidential if there was no settlement.

[48] My conclusion that Belinda has failed to discharge her onus of showing that the May 2020 Agreement was made with the intention that it be kept confidential is dispositive of the issue of whether the plaintiffs should be given leave to amend their pleadings to refer to the May 2020 Agreement. The plaintiffs also argue, in the alternative, that (i) any privilege was waived, and (ii) the interests of justice warrant not giving effect to the privilege. I also address these issues.

If the May 2020 Agreement is prima facie covered by settlement privilege, did Belinda waive the privilege?

[49] The plaintiffs submit that if the May 2020 Agreement is prima facie covered by settlement privilege, the privilege should not be applied here because Belinda has waived it, both explicitly and implicitly.

[50] In S. & K. Processors Ltd. v. Campbell Ave. Herring Producers Ltd., 1983 CanLII 407 (BC SC), at para. 6, McLachlin J., as she then was, held that waiver of privilege is ordinarily established where it is shown that the possessor of the privilege: (1) knows of the existence of the privilege; and (2) voluntarily evinces an intention to waive that privilege.

[51] The onus of proving that settlement privilege has been waived rests with Andrew and Selena: York Region Condominium Corp. No. 890 v. Market Village Markham Inc., 2019 ONSC 4835, at para. 33.

[52] The plaintiffs rely upon the fact that Belinda, as President of SCC, has produced other settlement proposals of varying similarity to the May 2020 Agreement that were exchanged over time. The plaintiffs also rely upon Belinda’s pleading of the August 2018 proposal. They submit that having done so, Belinda may not now pick and choose which proposals to disclose to the court and which not to disclose.

[53] In Bentley v. Stone, 1998 CarswellOnt 4467, Hockin J. quoted with approval, at para. 8, the following passage from Wigmore as set out in The Law of Evidence, Butterworth’s, Sopinka, Lederman and Bryant, at p. 666 as to what constitutes waiver of privilege by implication:

Judicial decision gives no clear answer to this question. In deciding it, regard must be had to the double elements that are predicated in every waiver, i.e., not only the element of implied intention, but also the element of fairness and consistency. A privileged person would seldom be found to waive, if his intention not to abandon could also control the situation. There is always also the objective consideration that when his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder. He may elect to withhold or to disclose, but after a certain point his election must remain final.

[54] Hockin J. added that “[w]hether intended or not, waiver may occur when fairness requires it, for example, if a party has taken positions which would make it inconsistent to maintain the privilege”.

[55] Belinda submits that the plaintiffs have failed to meet their burden of showing that any privilege attaching to the May 2020 Agreement was waived.

[56] Belinda submits that several of the proposals, including the August 2018 proposal, are not similar to the May 2020 Agreement because, among other things, they were communicated before the litigation commenced.

[57] The fact that the August 2018 proposal, and other proposals, were sent before the litigation commenced is not, in my view, a material distinction. Belinda does not assert that litigation was not contemplated when these proposals were sent. The August 2018 proposal, like the May 2020 Agreement, was made in an attempt to resolve the dispute. Both the August 2018 proposal and the May 2020 Agreement proposed a division of family assets. The two documents appear similar on their face.

[58] Belinda submits that production of prior proposals to other parties does not lead to automatic waiver of privilege attaching to future settlement communications and that waiver cannot be waived unilaterally. By pleading the August 2018 proposal, and by producing other proposals as relevant and non-privileged documents, Belinda disclosed her intention to waive any privilege over these documents. Andrew and Selena do not assert privilege over these documents. Any privilege that may have attached to the August 2018 proposal or the other proposals produced by Belinda in the litigation has been waived.

[59] The plaintiffs submit that Belinda has implicitly waived privilege over the May 2020 Agreement by pleading that she acted in the best interests of TSG’s stakeholders, including Andrew, and that she has always exercised her discretion appropriately in accordance with her fiduciary duties. The plaintiffs point out that the terms of the settlement with Frank are public, and that Belinda does not object to the plaintiffs testing Belinda’s position that she discharged her fiduciary duties properly by reference to the terms of the settlement with Frank. The plaintiffs submit that by taking this position, Belinda has opened the door to having her position tested through use of the May 2020 Agreement.

[60] Belinda responds that a party is not entitled to ignore settlement privilege and use unsuccessful settlement negotiations to test the position of the opposite party in litigation. Belinda submits that if a party is treated as having waived privilege in these circumstances, this would undermine the rationale for settlement privilege and discourage parties from engaging in settlement discussions to resolve disputes. Belinda submits that Andrew and Selena are free to plead that the settlement terms of the FS/ES Action are prejudicial to their interests and that it is a basis for claims against her and the other defendants, but they cannot refer to the May 2020 Agreement, a communication covered by settlement privilege, to attempt to create rights arising therefrom.

[61] The claims of Andrew and Selena against Belinda are founded on allegations that she breached fiduciary duties owed to them in her capacity as trustee. They rely on proposals made by Belinda in relation to division of the family assets, including the terms of settlement of the FS/ES Action. As I have noted, Belinda relies on the August 2018 proposal and she has produced as relevant and non-privileged documents a number of other proposals. The only one of these proposals over which Belinda claims privilege is the May 2020 Agreement. To the extent that the August 2018 proposal or the other proposals were, prima facie, subject to settlement privilege, Belinda has waived the privilege. Having done so, it would be unfair to allow Belinda to select which of several proposals for division of family assets she wishes to rely on and, at the same time, maintain privilege over only one of the proposals, the May 2020 Agreement.

[62] If I had held that the May 2020 Agreement is prima facie subject to settlement privilege, I would hold that Belinda has implicitly waived this privilege.

If the May 2020 Agreement is prima facie covered by settlement privilege, do the interests of justice require that any privilege be set aside?

[63] In Sable, the Supreme Court of Canada held, at para. 12, that settlement privilege is not inviolate, and exceptions will be found when the interests of justice require it. The Court held, at para. 19:

There are, inevitably, exceptions to the privilege. To come within those exceptions, a defendant must show that, on balance, “a competing public interest outweighs the public interest in encouraging settlement” [citations omitted]. These countervailing interests have been found to include allegations of misrepresentation, fraud or undue influence [citations omitted], and preventing a plaintiff from being overcompensated [citation omitted]”.

[64] In Sable, the Court held, at para. 30, that “[a] proper analysis of a claim for an exception to settlement privilege does not simply ask whether the non-settling defendants derive some tactical advantage from disclosure, but whether the reason for disclosure outweighs the policy in favour of promoting settlement”. [emphasis in original]

[65] The plaintiffs submit that they seek to plead the May 2020 Agreement to demonstrate that Belinda’s conduct in connection with the May 2020 Agreement was itself improper. They seek to plead the existence of this agreement as evidence of an independent wrong, and not as an admission.

[66] In Mueller Canada Inc. v. State Contractors Inc. et al., 1989 CarswellOnt 469, the plaintiff alleged breach of contract and breach of fiduciary duty against a defendant for entering into a settlement agreement with other parties that did not account for the plaintiff’s interests. The plaintiff sought production of the settlement agreement, which was resisted on the basis of settlement privilege. Doherty J., as he then was, ordered that the settlement agreement be produced.

[67] In his reasons, at para. 7, Doherty J. identified the two competing interests at play: first, that full production of all potentially relevant documents prior to trial is recognized as essential to effective and efficient litigation; and, second, that to foster the goal of encouraging parties to resolve their dispute short of trial, communications made in furtherance of efforts to settle are, subject to certain exceptions, not admissible or producible against the parties to those communications.

[68] In his consideration of the rationale for settlement privilege, Doherty J. held that “[w]here documents referable to the settlement negotiations or the settlement document itself have relevance apart from establishing one party’s liability for the conduct which is the subject of the negotiations, and apart from showing the weakness of one party’s claim in respect of those matters, the privilege does not bar production.” Doherty J. explained how this principle applied in the case before him:

By its pleadings, Mueller has put the contractual relationship of State and the Kellogg companies, as established by the settlement letter, in issue. Mueller says that the settlement agreement constitutes a breach of its contract with State and a breach of fiduciary duty by State. State’s admission in its pleadings that the agreement existed cannot deny Mueller access to the document. The settlement letter has potential relevance apart entirely from any force it may have as an admission against interest by either State or the Kellogg Companies in connection with the events relating to the initial dispute between State and the Kellogg Companies.

On my reading of Waxman (I.) and Sons, supra, the settlement agreement come squarely within one of the exceptions to the rule against disclosure of settlement-related documents. It is producible. Its ultimate admissibility is a matter for the trial judge.

[69] Belinda responds that the Mueller decision is of no assistance because it concerned whether a settlement document should be produced, and the issue of admissibility was not decided. Belinda submits that there is no issue on the motions before me of whether the May 2020 Agreement should be produced because it is already in the plaintiffs’ possession. I disagree that the Mueller decision does not apply for this reason. Doherty J. held, at para. 17, that an exception to settlement privilege applied and the settlement agreement was not within the privilege. For this reason, the settlement document was required to be produced. On the motions before me, if an exception to settlement privilege applies such that the May 2020 Agreement is not within the privilege, the plaintiffs will be entitled to plead references to the May 2020 Agreement.

[70] Belinda also submits that the Mueller decision is distinguishable because in Mueller the settlement agreement was a final agreement made in a different proceeding to which the plaintiff was not a party, whereas the May 2020 Agreement is not a final agreement but a framework for settlement discussions with other parties, including Andrew and Selena, which became part of the mediation process. I agree that a settlement agreement between parties in another action is different than a proposal for settlement made to another party in the same action. In either situation, however, a key question when the court considers whether an exception to the privilege is needed in the interests of justice is whether the settlement documents have relevance apart from establishing one party’s liability for the conduct which is the subject of the negotiations or the weakness of one party’s claim in respect of those matters.

[71] Here, the plaintiffs allege that by entering into the May 2020 Agreement with Frank, Belinda breached her fiduciary duty as a trustee. They rely on the May 2020 Agreement as an independent basis in and of itself for a breach of fiduciary duty claim and as a material fact for the allegation of breach of fiduciary duty in relation to the 2020 settlement between Belinda and Frank. A simple pleading of a breach of fiduciary duty may not, alone, be sufficient to show that an exception to the settlement privilege is warranted in the interests of justice for any documents otherwise subject to privilege. I am satisfied, however, that the proposed pleadings make allegations that connect the May 2020 Agreement with the allegation of breach of fiduciary duty, such that the May 2020 Agreement has relevance to these allegations apart from its use it as evidence of an admission of liability or as showing a weak case.

[72] Belinda submits that the plaintiffs, through the proposed pleading amendments, have shown that they will be using the May 2020 Agreement as admissions of facts by relying in their proposed amended pleadings on the proportions for division of assets as expressed in that document. The plaintiffs respond that these proportions were always in the pleadings before the proposed amendments, and they do not intend to rely on the May 2020 Agreement as an admission in this respect. If I had held that the May 2020 Settlement Agreement was prima facie subject to settlement privilege, and that privilege was not waived, I would not have allowed amendments to the plaintiffs’ pleadings that rely on admissions from the May 2020 Agreement with respect to the proportions of a division of assets.

[73] In these circumstances, an exception to settlement privilege with respect to the May 2020 Agreement would do little to detract from the public interest in encouraging settlement. I am satisfied that applying an exception to allow the plaintiffs to plead the May 2020 Agreement in support of their cause of action based on alleged breach of fiduciary duty would be in the interest of justice. If I had held that the May 2020 Agreement was prima facie subject to settlement privilege and that this privilege was not waived, I would hold that an exception to settlement privilege applies in these circumstances.

Do the proposed amendments withdraw admissions? If so, should leave be granted to do so?

[74] Belinda objects to certain of the proposed pleading amendments on the ground that they seek to withdraw admissions or that they are added statements that contradict admissions in the pleading (before the proposed amendments).

[75] The proposed amendments in Andrew’s pleading to which Belinda objects are:

a. Deletion of a pleaded statement that Elfriede is the principal beneficiary of the 445 Trust;

b. Addition of the words “knowing that Frank had no legal or beneficial entitlement to these assets;

c. Addition of the italicized words in the following pleaded statement:

In January 2017, Frank, then 84, purported to cause himself to be formally reappointed as the “super trustee” of the Belinda 445 Trust and the Andrew 445 Trust. He was unable to regain effective control of TSG in this manner and, the following year, attempted to do so by bringing an action [...]

d. Deletion of a pleaded statement that “Frank and Elfriede seek Frank’s appointment as a trustee of the Family Trusts on the basis of the aforementioned reappointment document, and Andrew supports that result”. [

[76] The proposed amendments in Selena’s pleading to which Belinda objects are:

a. the deletion of the words “his sole discretion and in” and the words “he determined” in a paragraph that, before the proposed amendments, reads:

35. The unequal distribution of ownership of TSG that was implemented in 2013 was never intended to be permanent or unalterable. Frank intended to and did retain flexibility to move assets in his sole discretion and in the manner that he determined would be in the best interests of the Stronach family and consistent with the stated intention of equalizing the interests of his grandchildren [...].

b. The addition of italicized words a statement in new paragraph 95(c) that reads “Hundreds of millions of dollars were transferred by the Trustees from the assets of the Trusts to Frank despite the fact that he had no legal or beneficial entitlement to these assets.”

[77] Belinda relies on rule 51.05 of the Rules of Civil Procedure which provides that “[a]n admission made in response to a request to admit, a deemed admission under rule 51.03 or an admission in a pleading may be withdrawn on consent or with leave of the court.”

[78] Belinda submits that granting leave to withdraw an admission under rule 51.05 is a discretionary remedy, but the court may exercise its discretion to permit an amendment withdrawing an admission only where the moving party has satisfied the court that: (a) there is a triable issue with respect to the amendment; (b) the original admission was inadvertent or resulted from wrong instructions; and (c) withdrawal of the admission will not result in any non-compensable prejudice. Belinda submits that these requirements have not been satisfied.

[79] The first question to be addressed is whether the pleaded statements qualify as admissions.

[80] With respect to the proposed amendments in respect of the plaintiffs’ support of Frank as the head of TSG and super-trustee of the 445 Trusts, Belinda submits that the plaintiffs’ pleaded statements in this respect are an inflection point in these proceedings which amount to a central organizing admission by the plaintiffs. Belinda submits that these statements are also relevant to the content of the May 2020 Agreement.

[81] In Petrasovic v. 1496348 Ontario Limited, 2012 ONSC 4897, the motion judge held that allegations in a statement of claim generally should not and will not be construed as admissions. An admission must be deliberately made by the party pleading it as a concession to its opponent. The admission must be unambiguous. If a statement of defence does not admit the allegations in the statement of claim, and instead denies them, then the allegations cannot be an admission within the meaning of rule 51. See Petrasovic, at paras. 25-30.

[82] Belinda submits that the following statements in Andrew’s pleading, before the proposed amendments, are admissions: (a) Elfriede is the principal beneficiary of the 445 Trust; and (b) Andrew supports Frank’s appointment as a trustee of the Family Trusts.

[83] I disagree that these pleaded statements are admissions. The statements are made in a statement of claim and do not admit a statement in another pleading. Belinda has not shown that in her statement of defence she accepted these statements as admissions.

[84] A plaintiff is not precluded by rule 51 from amending a statement of claim to plead a new or different facts from those pleaded in an existing statement of claim, or from withdrawing statements of fact pleaded in a statement of claim, unless the statements qualify as admissions that were deliberately made as a concession to the opposing party. If they so qualify, leave to withdraw the admissions is required. The statements in Andrew’s pleading which he proposes to delete are not admissions.

[85] Belinda submits that the statement in Selena’s pleading, before the proposed amendments, that Frank intended to and did retain flexibility to move assets in his sole discretion and in the manner that he determined would be in the best interests of the Stronach family qualifies as an admission.

[86] Belinda submits that this statement is a clear and unambiguous statement of fact in a statement of claim and, therefore, qualifies as an admission which cannot be withdrawn without leave of the court. Belinda uses the example of a pleaded statement in a statement of claim that “the light was red at the time of the accident”. Belinda contends that such a statement cannot be changed to one that “the light was green” by way of an amendment, without leave of the court, because this would be withdrawal of an admission.

[87] I disagree. The authorities are clear that rule 51 applies to admissions in a pleading, and that an admission is a statement deliberately made in a pleading as a concession to the party’s opponent. Rule 51 does not prevent a plaintiff from amending a statement of claim to plead facts which conflict with facts already pleaded, if those facts are not admissions. In Belinda’s amended statement of defence to Selena’s amended statement of claim, she pleads that “[s]ince November 29, 2013, Frank has not had a legal or beneficial interest in 445 Limited”. Belinda has not shown the Selena’s pleaded statement that Frank retained flexibility to move assets in his sole discretion was deliberately made as a concession to Belinda or another opposing party.

[88] Andrew and Selena do not require leave under rule 51 to amend their respective pleadings.

Should leave to amend be denied because proposed amendments are scandalous, vexatious and an abuse of process?

[89] Belinda opposes certain of the proposed pleading amendments on the ground that they are inflammatory attacks that are scandalous, vexatious and an abuse of process.

[90] With respect to Andrew’s proposed amendments, his counsel has advised that Andrew no longer seeks to include one of the allegations in question.

[91] The other allegations in Andrew’s proposed amended pleading to which Belinda objects on this ground are the italicized words in the following paragraph:

Corporate nepotism at TSG has also included hiring Frankie and Nikki in high-paying, executive-level positions. It is not apparent that Frankie or Nikki perform any real work for TSG, however. Nikki, for instance, was not hired for any value proposition-but instead so that Belinda would not have to pay for grown daughter’s shopping, travel, entertainment and dining expenses.

[92] The proposed pleadings in Selena’s proposed amended pleading to which Belinda objects on this ground are:

16. Whereas her cousins own multiple properties in Canada and the US, Selena has been living in the last three years in an unfinished house that is in such a condition that, for a time, she and her mother have been forced to share a single room over their garage.

17. Belinda’s hold on the life of her young niece goes beyond financial control. Belinda has placed restrictions on Selena’s movement around the family farm - where Selena has lived all of her life.

18. Since the start of Selena’s lawsuit, funding for the renovations at Selena’s residents have been cut off.

[93] In Brunn v. Halton Children’s Aid Society, 2016 ONSC 6195, Master Pope, at para. 29, set out the principles that apply on a motion to strike out portions of a pleading under rule 25.11. A motion under rule 25.11 is analogous to the motions before me. These principles include:

a. In considering whether a pleading ought to be struck out, the court must read it in context with a generous eye and only strike it out if it is “plain and obvious” that it must fail at trial. The party moving to strike has a heavy burden. The burden is at least as great, or even greater, where the pleading is said to be scandalous, frivolous, vexatious or an abuse of process than where the claim is said to disclose no reasonable cause of action.

b. Motions under rule 25.11 should only be granted in the “clearest of cases”.

c. While pleadings must not offend the Rules, it is well-established that counsel may frame their pleadings as they deem advisable and this right should not be lightly infringed by the court. The inclusion of unnecessary detail or excessive verbosity in a pleading is not of itself the reason for striking out a pleading. It is incumbent upon the party seeking to strike out the pleadings to show that he or she is prejudiced or embarrassed by the pleading or that a fair trial will be delayed by the irregularity.

d. Nothing which is relevant to the issues between the parties can be scandalous, frivolous, or vexatious.

e. A pleading is frivolous when it is clearly insufficient on its face and is presumably interposed for mere purposes of delay or to embarrass the opponent. A claim is frivolous if the proponent can present no rational argument based upon the evidence or law in support of that claim.

[94] Belinda submits that the pleadings to which she objects constitute personal attacks on Belinda and, although she categorically denies the allegations, it is the language of control – intended to inflame and paint Belinda as a malefactor and villain - that is vexatious and improper.

[95] Selena submits that the pleaded allegations are relevant to an issue raised in Selena’s claim that she has been mistreated and disparately treated by Belinda, including at the family farm, in part as retaliation for bringing this action. Selena submits that in her own pleading, Belinda has cast herself in a favourable light and others less favourably.

[96] In Selena’s proposed amended pleading, there are a number of paragraphs which include allegations that relate to issues of Belinda’s conduct towards Selena. These are not the subject of objections. Belinda did not submit that the subject matter of the pleaded allegations to which she objects is not relevant, but that the language used is improper.

[97] I am not satisfied that Belinda has met the high onus of showing that the paragraphs to which she objects should be struck out as scandalous, frivolous, or an abuse of process. Counsel is given considerable latitude to choose the language to make relevant allegations of fact. I am not satisfied that the language used in the paragraphs in question reaches the level that it should be struck out as impermissibly inflammatory.

Should Selena’s proposed amendments seeking interlocutory relief be disallowed?

[98] In her proposed amendments, Selena include several request for interlocutory relief, including an order appointing a corporate inspector and an injunction preventing sale of trust assets. Andrew’s proposed amendments would remove similar requests for relief.

[99] Belinda objects to the requests in Selena’s proposed amended pleading that seek interim and interlocutory relief on the ground that these claims are contrary to the direction of the case management judge who has directed that there be no further requests for interim or interlocutory relief.

[100] I do not agree that the proposed pleadings should be struck out for this reason. If a motion is brought for interim or interlocutory relief, the direction of the case management judge may be raised at that time and the effect of such a motion on the scheduled trial date may be raised.

Disposition

[101] For the following reasons, the motions by Andrew and Selena for leave to amend their respective pleadings are granted.

[102] If the parties are unable to resolve costs, written submissions may be made in accordance with a schedule agreed upon by counsel and approved by me.

Cavanagh J.

Date: May 26, 2021

[^1]: The Confidentiality Order applies to information that is proprietary or confidential to The Stronach Group. The proposed pleadings do not disclose any such information.