COURT FILE NO.: CV-18-00608051-00CL and CV-19-614180-00CL DATE: 2023-10-03 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: ANDREW STRONACH, Plaintiff

AND: BELINDA STRONACH, NICOLE WALKER, FRANK WALKER and ALON OSSIP in their capacities as Trustees of the Andrew Stronach 445 Family Trust; BELINDA STRONACH and ALON OSSIP in their capacities as Trustees of the 445327 Trust; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER in their capacities as Trustees of the Stroand 2011 Trust; BELINDA STRONACH in her capacity as Trustee of the Belinda Stronach 2011 Family Trust; BELINDA STRONACH in her capacity as Trustee of the BSFIN Investments Trust - 2011; BELINDA STRONACH in her capacity as Trustee of the Adena North Trust; NICOLE WALKER and FRANK WALKER in their capacities as Trustees for the Andrew Stronach Family Trust; NICOLE WALKER and FRANK WALKER in their capacities as Trustees for the Andrew Stronach Special Trust; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER in their capacities as Trustees for the Andrew Stronach 2011 Trust; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER in their capacities as Trustees for the Belinda Stronach 2011 Trust; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER in their capacities as Trustees for the Elfriede Stronach 2011 Trust; BELINDA STRONACH in her capacity as Trustee of the Andrew Stronach Family Trust –2015; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER in their capacities as Trustees of the Belinda Stronach 445 Family Trust; 2305218 ONTARIO INC. in its capacity as Trustee for the Woodington Trust - 2011; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER in their capacities as Trustees of the ST Trust; BELINDA STRONACH, ALON OSSIP, FRANK WALKER and NICOLE WALKER in their personal capacities and STRONACH CONSULTING CORP., Defendants

AND BETWEEN:

SELENA STRONACH, Plaintiff

AND:

BELINDA STRONACH, NICOLE WALKER, FRANK WALKER, ELFRIEDE 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, ELFRIEDE STRONACH and NICOLE WALKER, in their capacities as Trustees of the Strosel 2011 Trust; BELINDA STRONACH, FRANK WALKER, ELFRIEDE STRONACH 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, ELFRIEDE STRONACH, FRANK WALKER and NICOLE WALKER in her capacity their capacities as Trustee Trustees for the Andrew Stronach 2011 Trust; BELINDA STRONACH, NICOLE WALKER and FRANK WALKER, in their capacities as Trustees of the ST Trust; BELINDA STRONACH, ELFRIEDE STRONACH, FRANK WALKER and NICOLE WALKER, in their personal capacities, Defendants

BEFORE: Penny J.

COUNSEL: Shaun Laubman and Cole Pizzo, for the Plaintiff, Selena Stronach Marie Henein, Alex Smith and Eleni Loutas, for Plaintiff, Andrew Stronach Melanie Ouanounou, for the Defendants, Nicole Walker and Frank Walker Michael Barrack, Iris Fischer, Anna Christiansen and Peter Howard, for the Defendant, Belinda Stronach Mark Gelowitz and Craig Lockwood, for the Defendant, Alon Ossip Tom Curry and Nina Bombier, for the Defendant, Elfriede Stronach Linda Plumpton, Gillian Dingle, Danida Shiff and Stacey Reisman, for the Defendant, Stronach Consulting Corp. Christine Windsor and Sarit Batner, for Frank Stronach

HEARD: July 19, 2022

reasons for decision

Introductory Note

Some explanation is required for why these reasons in respect of two pretrial motions brought before me on July 19, 2022, are being released now, over 14 months later. Although the background is described in a case conference endorsement I issued on September 28, 2023, I will briefly repeat that explanation in this introductory note to provide context for these reasons.

I heard these motions in my capacity as the assigned trial judge on a six week trial scheduled to proceed in the fall of 2022. Shortly after these motions were argued, but while my decision was still under reserve, Justice McEwen conducted a lengthy judicial settlement conference in this matter. The parties reached an agreement in principle during the settlement conference. I was asked to “down tools” on the motion reasons and not to release the decision. As a result of subsequent events, the settlement became contentious. Notwithstanding the further efforts of Justice McEwen, the settlement came apart. The plaintiffs brought a motion to enforce the settlement which was ultimately denied. It is now the intention of the plaintiffs to proceed with the trial. The parties therefore ask that my decision on the July 19 motions be released.

Counsel for the plaintiffs provided me with several recent (post-July 19, 2022) authorities related to the disclosure issue discussed below in these reasons. Plaintiffs’ counsel did not propose to make any additional submissions. Counsel for the defendants take the position that these recent cases do not change the law as it relates to their argument on the motion. They also do not intend to make additional submissions. It was agreed that I would read the cases and let counsel know if further submissions were required. After reading the cases, I determined that further submissions were not required.

These reasons contain my decision on the two July 19, 2022 motions, which all counsel agree should be released in light on the developments described above. As many of the parties have the same last name, I have adopted the protocol, followed by the parties in their material, of using first names.

Overview

[1] There are two motions before the court in these two actions. In the Andrew Stronach action, Andrew seeks an order to stay the counterclaim of Stronach Consulting Corporation on the basis of abuse of process, i.e., the alleged failure of Stronach Consulting Corporation to disclose immediately a cooperation agreement that is alleged to have entirely changed the landscape of the litigation.

[2] In the Selena Stronach action, Selena seeks an order (which Andrew also seeks in addition to his motion for a stay) granting leave to examine Frank Stronach for discovery in advance of trial under rule 31.10 of the Rules of Civil Procedure.

[3] The trial of this matter was scheduled to begin in November 2022 for 6 weeks. I was designated as the trial judge. Although this matter was being case managed by Justice McEwen, by common agreement among the parties I heard these two pretrial motions in my capacity as the assigned trial judge.

[4] As I will explain in the reasons below, Andrew’s motion to stay the Stronach Consulting Corporation counterclaim is dismissed. Andrew and Selena’s motions to examine Frank for discovery in advance of trial are granted, on terms.

Background

[5] Most of the relevant background to these proceedings was canvassed in an earlier, May 26, 2021 decision of Cavanagh J. (2021 ONSC 3801). I have largely taken the initial part of this recitation of the background directly from Justice Cavanagh’s reasons.

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

[7] Frank Stronach is the founder of the Stronach family business. The Stronach Group (“TSG”) is the name for the network of mostly trust-owned corporations that constitute the Stronach family assets. Frank 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: Andrew’s child, Selena, and Belinda’s children, Frank Walker (“Frank W.”) and Nicole Walker. Frank is not the beneficiary of any trust.

[8] 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.

[9] 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.

[10] Belinda is the President and Chair of TSG’s main operating entity, SCC. 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.

[11] Frank and Elfriede commenced the first action (the “FE Action”) in October 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 FE Action revolved around Frank seeking to regain control of TSG, 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.

[12] In their actions, commenced in 2018 and 2019 respectively, Andrew and Selena claim against Belinda, Frank W., Nicole, Alon, SCC and, in Selena’s case only, Elfriede, for breach of their fiduciary duties as trustees, oppression, and other causes of action.

[13] In their statements of defence, Belinda and the other defendants deny the allegations of wrongdoing, breach of duty etc. Belinda, for example, 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.

[14] On May 13, 2020, Belinda and Frank signed a without prejudice agreement in principle to negotiate a resolution of the various family lawsuits. This framework document was entitled “Agreement between Frank Stronach and Belinda Stronach Regarding Division of Stronach Family Assets to Resolve all Litigation”. Although it is referred to as the “May 2020 Agreement”, it was not a binding settlement agreement. Andrew and Selena were not parties to the FE Action and were not parties to the May 2020 Agreement. The May 2020 Agreement was provided to them after it was signed.

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

[16] The August 2020 settlement involved Frank and Elfriede receiving certain assets and the dismissal of all claims and counterclaims by and against them. The terms of the settlement contemplated a highly complex series of transactions, including the transfer or lease of various lands, assets and businesses from TSG to Frank. The parties agreed to the immediate dismissal of the FE Action on a without costs basis. The main terms of the FE Deal were summarized in an eight-page term sheet dated August 10, 2020. The term sheet was sent to Andrew and Selena that same day. On August 13, 2020, Justice Hainey signed an order dismissing the FE Action and any related counterclaims and actions. Given its complexity, the FE Deal took several months to close. The closing agenda, for example lists over 700 documents and over 50 steps required for the transaction to close. The FE Deal closed on November 27, 2020.

[17] Under the FE Deal, Frank agreed to try to obtain Andrew and Selena’s agreement to the settlement. Andrew now pleads that Frank exerted a “pressure campaign” on Andrew and Selena which included “threats and abuse” in an effort to obtain their consent to the settlement.

[18] Andrew and Selena did not consent to the settlement. Rather, they allege that the settlement involved a transfer of assets in which they have an interest and which was detrimental to their interests. They sought to amend their claims to raise these issues. Justice Cavanagh granted Andrew’s and Selena’s motions to amend their claims to attack the settlement and to make claims about adverse consequences (to them) arising from it.

[19] At the heart of both of the present motions is one agreement called the “cooperation agreement” executed by Frank and the defendants in the FE Action as part of closing the FE Deal. Paragraph 4 of the cooperation agreement deals with third party litigation including, specifically, Andrew’s and Selena’s Actions. Paragraph 4 prohibits Frank and Elfriede from voluntarily assisting Andrew and Selena in their actions and requires Frank and Elfriede to refuse any request from Andrew or Selena to do so. The sole exception to this prohibition is a circumstance where Frank and Elfriede are compelled by court process. Paragraph 4 provides, in relevant part:

Neither the FE Group or any member of the FE Group nor the BOW Group or any member of the BOW Group…will voluntarily become involved with, offer assistance to, or seek to advance the position of, any third party (a “Third Party Claimant”) against the other Group, including but not limited to the AS Action or SS Action. If and to the extent such assistance is sought by a Third Party Claimant from either Group, the applicable Group will advise the other Group, including as to its refusal to assist such Third Party Claimant.

ES and FS shall not voluntarily assist the plaintiffs in the AS Action or the SS Action or any litigation that Andrew Stronach or Selena Stronach may hereafter commence […] or give effect to any of the relief sought in the AS Action or the SS Action […] except and solely to the extent that they are compelled by the Court process.

For the avoidance of doubt, nothing in this Agreement shall restrict a member of either group from testifying truthfully if compelled to do so by law in any proceeding.

[20] It is not in dispute that, although the cooperation agreement was executed on November 27, 2020, it was not produced to Andrew and Selena until June 2021. As a result of the new allegations in Andrew’s 2021 amendments, approved by Justice Cavanagh, and the amended defences, the parties agreed to exchange supplementary affidavits of documents by June 30, 2021. As part of its additional production obligations, SCC produced the closing documents for the FE Deal, including the cooperation agreement.

Analysis

The Motion for a Stay

The Law

[21] It is well established that agreements which “change entirely the landscape of the litigation” as between the parties to a lawsuit must be immediately disclosed to the non-settling parties and to the court. The obligation to immediately disclose such agreements is “clear and unequivocal”. Although elaborated extensively by D.M. Brown J.A. in Handley Estate v. DTE Industries Limited, 2018 ONCA 324, the basic rule dates back to at least 1993. The immediate disclosure requirement extends not only to Mary Carter or Pierringer agreements, but to “any agreement between or amongst parties to a lawsuit that has the effect of changing the adversarial position of the parties set out in their pleadings into a cooperative one”.

[22] The immediate disclosure obligation was recently affirmed by the Court in CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467. Writing for the Court, Sossin J.A. reiterated the following governing principles:

• There is a “clear and unequivocal” obligation of immediate disclosure of agreements that “change entirely the landscape of the litigation.”
• The obligation is to immediately disclose information about the agreement, not simply to provide notice of the agreement, or “functional disclosure.”
• Both the existence of the settlement and the terms of the settlement that change the adversarial orientation of the proceeding must be disclosed.
• Confidentiality clauses in the agreements in no way derogate from the requirement of immediate disclosure.
• The standard is “immediate” disclosure, not “eventually” or “when it is convenient.”
• The absence of prejudice does not excuse a breach of the obligation of immediate disclosure.
• Any failure to comply with the obligation of immediate disclosure amounts to an abuse of process and must result in serious consequences.
• The only remedy to redress the abuse of process is to stay the claim brought by the defaulting, non-disclosing party. This remedy is necessary to ensure the court is able to enforce and control its own processes and ensure justice is done between the parties.

Andrew’s Submission

[23] Andrew submits that the specific terms of the cooperation agreement fundamentally altered the litigation landscape by changing the adversarial position of the parties in the litigation into a cooperative one: by entering into the cooperation agreement, Frank and Elfriede agreed, in exchange for money and other property, to settle their litigation against the defendants and cooperate with them to impede Andrew and Selena’s ability to litigate their claims. Further, SCC’s unexplained and unjustified delay of seven months in disclosing the cooperation agreement constituted an abuse of process.

[24] The cooperation agreement contractually restrains Frank and Elfriede from providing Andrew and Selena with documentation or information that would assist them with their ongoing litigation against the defendants. For Andrew specifically, the cooperation agreement expressly permits SCC to continue to pursue its counterclaim against him for fraudulent horse breeding, while simultaneously depriving him of evidence that he claims is essential to his defence.

[25] Frank is a central figure in SCC’s counterclaim and his evidence is integral to Andrew’s defence to the counterclaim. Andrew pleads that he collaborated with Frank and Elfriede on the breeding of horses throughout his lifetime and denies having ever intentionally engaged in any breeding activities with Adena Springs stallions that were not approved by Frank.

[26] Frank’s unique knowledge of the matters at issue in the counterclaim has been affirmed by the defendants throughout the family litigation. Belinda pleads that Frank was the main decision maker with respect to the breeding, buying and selling horses for Adena Springs and that the majority of TSG’s breeding, training and racing businesses, including Adena Springs, were under Frank’s guidance.

[27] SCC has similarly emphasized the importance of Frank to the thoroughbred business. In its defence to Frank’s action, SCC pleaded that Frank was involved in all aspects of the thoroughbred business, including the selection of horses to purchase, choosing stallions to stand at stud and breed and choosing horses to buy and sell.

[28] By virtue of the cooperation agreement, Belinda and SCC have put Andrew in the untenable position of having to defend SCC’s counterclaim while depriving him of evidence that is imperative to his defence.

[29] Consistent with his “non-cooperation obligations” under the so-called cooperation agreement, Frank has denied Andrew’s request for an interview to obtain his evidence before trial, which has necessitated the present motion seeking a third-party examination of Frank.

[30] In short, Andrew argues that SCC’s conduct, in failing immediately to disclose the cooperation agreement, was an abuse of process for which the only appropriate remedy is a stay of SCC’s counterclaim.

Analysis

[31] Notwithstanding Ms. Heinen’s able and forceful argument, I am unable to agree with Andrew’s analysis of this issue. There are several problems with the applicability of the immediate disclosure rule to the circumstances of this case.

[32] First and foremost, I am not satisfied that the rule has any application in the context of a non-party to the litigation.

[33] The immediate disclosure rule affirmed in Handley Estate and other cases is concerned with abuse of process. The rule requires immediate disclosure of an agreement that “changes entirely the landscape of the litigation in a way that significantly alters the adversarial relationship among the parties to the litigation ” (emphasis added). The goal of the rule is to maintain the fairness of the litigation process. To do so, courts must know the “reality of the adversity between the parties” and whether an agreement changes the “dynamics of the litigation” or the “adversarial orientation” among the parties. Failure to comply with this requirement constitutes a “specific kind of abuse of process.” The only remedy for that abuse is a stay of proceedings.

[34] The theory of Andrew’s motion would extend this rationale to, and require immediate disclosure of, cooperation and other like arrangements with non-parties. There is no authority for this proposition. Further, there is no principled basis for expanding the scope of the rule in this way. An expansion of the rule of the kind Andrew suggests would result in a rule that is no longer rationally connected to its purpose.

[35] The immediate disclosure rule was first developed in the context of Mary Carter and Pierringer agreements because those agreements significantly change the relationship among the parties to litigation. In those cases, immediate disclosure is required to “maintain the fairness of the litigation process” and to ensure that both the court and the non-settling parties understand “the reality of the adversity between the parties.”

[36] It is certainly true that, as it developed, the immediate disclosure rule has not been limited just to Mary Carter or Pierringer agreements. Other types of settlement agreements must also be immediately disclosed, provided that they materially alter the apparent relationships among the parties to the litigation from that which would otherwise be assumed from the pleadings or expected in the conduct of the litigation.

[37] The Court of Appeal has repeatedly confirmed this objective. In 2022, it issued four decisions that address the immediate disclosure rule. In each case, the Court has confirmed that the critical question is whether the agreement changed the adversarial relationships between parties to the litigation into a cooperative one:

(a) Tallman Truck Centre Limited v K.S.P. Holdings Inc., 2022 ONCA 468: “The disclosure obligation extends to any agreement between or amongst parties to a lawsuit that has the effect of changing the adversarial position of the parties set out in their pleadings into a cooperative one”.

(b) Waxman v Waxman, 2022 ONCA 469: “What must be disclosed are agreements that alter the relationship among the parties from those set out in the pleadings”.

(c) Poirier v Logan, 2022 ONCA 470: “[I]t is settled in this court’s jurisprudence that the obligation to disclose arises where the settlement agreement changes entirely the landscape of the litigation in a way that significantly alters the adversarial relationship among the parties to the litigation or the ‘dynamics of the litigation’”.

(d) CHU de Québec-Université Laval v Tree of Knowledge International Corp., 2022 ONCA 467: “The obligation extends to any agreement between or amongst the parties ‘that has the effect of changing the adversarial position of the parties into a cooperative one’ and thus changes the litigation landscape”. [1]

[38] There is no principled basis for expanding the rule to include non-parties because there is no adversarial relationship that could be changed as between parties and non-parties. The scope of the rule as it is sought to be applied by Andrew in this case would far exceed its intended objective: there is no nexus between failing to immediately disclose an agreement between parties to litigation to a non-party and the “specific kind of abuse of process” that “consists of misleading the court and other parties about the adversarial relationship between the parties ” (emphasis added).

[39] Here, Andrew was not a party to the FE Action. Frank and Elfriede were not parties in the Andrew Action. Frank was at liberty to pursue whatever strategy he saw fit in advancing his case against, or settling with, the defendants to the FE Action. That action, and related counterclaims, has now been dismissed. Once that happened, at most Frank could have been a witness in the trial of the Andrew Action.

[40] It would be illogical to conclude that an agreement changed the adversarial relationship between the parties when the individual complaining about the agreement is not a party to the proceeding that has been changed. It would be equally illogical to apply the rule and require disclosure of an agreement with a non-party witness who has no lis with the parties to an action.

[41] I am also not convinced that non-disclosure of the cooperation agreement, standing alone, would have “entirely changed the landscape of the litigation” in a way that “significantly altered the relationship among the parties.”

[42] This is not a case where the settling party’s pleadings “no longer fully reflect the post-settlement state of the litigation.” SCC’s pleaded position in its counterclaim against Andrew remains the same as it was prior to the cooperation agreement being executed. Its position in the Andrew Action has not changed, nor has its relationship to any of the other parties in the Andrew Action: Andrew continues to be adverse in interest to SCC, and SCC continues to be aligned with the other defendants in his action. Andrew points to a change to Elfriede’s pleaded position in her defence to the Selena Action. However, Elfriede is not a party to the Andrew Action or to SCC’s counterclaim. Andrew is not a party to the Selena Action.

[43] Further, it was the FE Deal, not the cooperation agreement standing alone, which truly changed the nature of the relationship between Frank and the defendants to the FE Action, including SCC. The FE Deal resulted in the settlement of the Frank Action and its dismissal. Under the Term Sheet, the parties agreed to cooperate to achieve that result. All this was disclosed to Andrew at the time. This is unlike the facts in Handley Estate or Tallman, where parties continued to conduct themselves as though they were adverse, even though some of them had entered into an agreement that aligned their interests. Andrew was made aware of the changed nature of Frank’s relationship with SCC and the other defendants to the FE Action when it happened. This is clear from Andrew’s 2021 motion to amend his claim, in which, in light of the disclosed knowledge of Frank’s settlement with the defendants in the FE Action, Andrew formally withdrew his support for Frank (both in the litigation and as a potential trustee) and alleged that Frank threatened and verbally abused him and Selena in an effort to have them consent to the settlement too.

[44] The cooperation agreement does not require Frank’s cooperation with the defendants in the Andrew action to defeat Andrew’s claims. Nor does it preclude Frank from giving evidence under subpoena or create any financial incentive for Frank to speak anything less than the truth if he compelled to do so.

[45] Finally, the timing of this motion somewhat undermines Andrew’s claim of abuse of process based on alleged non-disclosure of an agreement which fundamentally changed the litigation landscape. Andrew waited almost a year after the cooperation agreement was produced to bring this motion. Following receipt of the cooperation agreement, he took numerous important steps in the litigation, including engaging in several weeks of examinations for discovery and demanding hundreds of documentary records from SCC by way of undertaking. The court in Caroti v Vuletic, 2021 ONSC 2778, while recognizing that the moving parties were not required to demonstrate prejudice, nevertheless observed that the moving parties’ decision to continue advancing their case was “strongly suggestive” that they did not view the previously undisclosed details of a settlement agreement to be significant: Caroti v Vuletic, 2021 ONSC 2778, paras. 25-26.

Conclusion

[46] For these reasons, Andrew’s motion for a stay of SCC’s counterclaim based on abuse of process is dismissed.

[47] Andrew advanced another argument relating to recovery from SCC of his costs during the seven months which preceded disclosure of the cooperation agreement. Based on my disposition of Andrew’s stay motion on the merits, it strikes me as unnecessary to deal with this alternative argument. However, the question of the costs of this action will be a live issue following the trial. If Andrew has substantive reasons why costs during this seven month period ought to be dealt with on a standalone basis, he is free to advance those arguments at the end of the case.

Third Party Discovery of Frank

[48] Both Andrew and Selena move for an order granting leave to conduct an examination for discovery of Frank, who is no longer a party to any of the Stronach litigation. There are two basic reasons why they say Frank’s evidence is critical to the fairness of their upcoming trial.

[49] First, Andrew and Selena’s claims involve their beneficial interests in TSG, including the Andrew 445 Trust (of which Andrew and Selena are beneficiaries) and SCC. One of their fundamental allegations is that the originating intention of the Stronach family trust structure was to allocate effective beneficial interests in TSG to each of the grandchildren in the proportion of one third (Frank W), one third (Nicole), and one third (Selena).

[50] In 2010, Frank wanted to step back from his central role at TSG to pursue other interests. Various steps were taken between 2010 to 2013 to reflect changes in Frank’s role. The Andrew 445 Trust and the Belinda 445 Trust, for example, were the result of a trust reorganization in 2013. Whether that reorganization, and Belinda’s actions following that reorganization, were in keeping with Frank’s intentions was a central issue in Frank’s now settled claim against Belinda and the other defendants in that action. It is also a live issue in Andrew’s and Selena’s Actions.

[51] Andrew and Selena submit that Frank’s evidence about the 2013 reorganization, its intent and its consequences, is critical to their claims.

[52] Second, Andrew is a defendant to SCC’s counterclaim for damages for conversion and fraud. This counterclaim alleges that Andrew made improper use of TSG thoroughbred breeding and other assets without authorization and without paying for them. SCC seeks damages for Andrew’s alleged misconduct in the amount of $8 million.

[53] Andrew’s defence is, among other things, that Frank was intimately involved in all of Andrew’s interactions with TSG thoroughbred assets and authorized essentially everything Andrew was doing.

[54] Andrew therefore submits that Frank’s evidence is critical to his defence of the SCC counterclaim as well.

The Law

[55] Rule 31.10(1) provides that the Court may grant leave to examine for discovery any person who there is reason to believe has information that is relevant to a material issue in the action. Under Rule 31.10(2), an order granting leave to discover a nonparty shall not be made unless the Court is satisfied that:

(a) the moving party has been unable to obtain the information from other persons whom the moving party is entitled to examine for discovery, or from the person the party seeks to examine;

(b) it would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person; and

(c) the examination will not,

(i) unduly delay the commence of the trial of the action,

(ii) entail unreasonable expense for the other parties, or

(iii) result in unfairness to the person the moving party seeks to examine.

[56] In order to satisfy the test under Rule 31.10(2)(a), there must be a refusal, actual or constructive, by the opposing party to obtain the information from the non-party. After the initial onus has been met under subpara. (a) of the rule, the court may then look to broader considerations, under subparas. (b) and (c) and Rule 1.04, to decide whether the court’s discretion, as set out in Rule 31.10(1), should be exercised.

The Defendant’s Submissions

[57] The defendants’ response to this motion is simple and straightforward. Frank was never a party to Andrew’s or Selena’s actions. Frank is no longer a party to any family litigation. Andrew and Selena conducted lengthy examinations of the defendants and, for the most part, did not ask those persons for any undertakings to make inquiries of Frank. Elfriede, Frank’s wife, was the only person who was asked to make inquiries of Frank. Those inquiries were answered and no complaint has been made about the sufficiency of those answers. Thus, the defendants say, Andrew and Selena simply have not met the threshold in 31.10(2)(a) which is a precondition for satisfying the test for third-party discovery. The test, they say, is “inability” to obtain the information, not whether it is convenient or unfair not to be able to take the evidence from a third party witness directly. They go further. Even if they had refused to give those undertakings, Andrew and Selena’s remedy was to move on refusals, not to seek to examine Frank themselves. Similarly, even if undertakings were given and responses made, if Andrew and Selena found the responses inadequate, their remedy was to move for further and better answers, not to seek to examine the Frank directly.

Analysis

[58] I would agree with the defendants’ argument in the context of the typical situations which arise where a party seeks information from a nonparty witness who has a connection or relationship with the opposing party. However, the circumstances of this case are highly unusual in at least two respects. First, to describe Frank as “just another witness” is like saying Everest is “just another mountain.” Frank is the creator of TSG, its assets and wealth. The trusts were created by him. He ran these businesses for decades. Frank established the basis upon which Belinda and Alon were to manage these businesses. Frank’s presence, Frank’s involvement, Frank’s decisions, whether strictly in accordance with the documents or not, permeates almost everything. This was effectively admitted by Belinda and the other defendants in Frank’s now settled action. Indeed, the defendants in that action were at pains to point out the many problems associated with Frank’s pervasive and overarching presence in the TSG businesses.

[59] Second, most of the Rule 31.10 authorities do not grapple with the implications of a document like the cooperation agreement. As noted earlier, the agreement is actually a noncooperation agreement. Frank and Elfriede are prohibited from voluntarily assisting, offering assistance to, becoming involved with or advancing the position of Andrew and Selena in their Actions.

[60] On its face, therefore, the cooperation agreement prohibits Frank from providing answers to undertakings given to Andrew and Selena by other defendants in Andrew and Selena’s Actions. This is because Frank would be, of course, under no legal compulsion to answer anything. If he did provide information in response, therefore, he would be in breach of the cooperation agreement unless all the counterparties specifically waived their rights.

[61] The defendants say none of this matters because they were never asked. Because they were never asked, they say, we simply do not know what might have happened. Maybe they would have given the undertakings. Maybe they would have asked Frank. Maybe Frank would have answered the questions. Maybe they would have been prepared to waive their rights under the cooperation agreement and provided those answers to Andrew and Selena. The threshold problem, they say, remains the same -- Andrew and Selena’s failure to ask.

[62] I am not prepared to accept these arguments. They are formalistic and respond to a problem of the defendants’ own making. What the defendants are really saying, in effect, is that they are the gatekeepers of what information may flow from Frank to Andrew and Selena. If they were prepared to allow Frank to answer a particular undertaking, it would be answered. If they were not prepared to allow Frank to answer another, it would be refused.

[63] This is not how the rule is intended to operate.

[64] In the view I take of these circumstances, the cooperation agreement itself constitutes a form of constructive refusal in the unique circumstances of this case. Andrew’s counsel argued that the cooperation agreement bordered on, if not crossed the line into, the “improper”. I do not agree that there is any “impropriety” in the cooperation agreement per se. However, the cooperation agreement, while not improper, does give rise to consequences for Frank’s children and the other family members on either side of this dispute which go beyond the four corners of the agreement itself. If this creates a problem for the defendants under Rule 31.10, it is a problem of their own making.

[65] The cooperation agreement prohibits Frank from voluntarily assisting Andrew and Selena in any way. Andrew and Selena asked Frank to give them an interview. Frank refused. In the unique circumstances of this case, Andrew and Selena were entitled to take Frank’s obligations under the cooperation agreement and refusal to grant an interview at face value. To paraphrase what Justice D.M. Brown said (when a motion judge) in Manga, Andrew and Selena were entitled to conclude there would have been no point in going through the formal exercise of posing numerous questions to the defendants’ representatives on their examination for discovery to make inquiries of Frank: Manga Hotels (Toronto) Inc. v. GE Canada Equipment Financing G.P., 2014 ONSC 2699 at para. 11.

[66] I also find it would be unfair to require Andrew and Selena to proceed to trial without having the opportunity of examining Frank. Given Frank’s unique position in this litigation, his evidence is critical to understanding the circumstances giving rise to the 2013 reorganization, Belinda and Alon’s role thereafter, and to putting Andrew’s conduct in relation to breeding TSG thoroughbreds, which is alleged to give rise to SCC’s counterclaim, in context. Without a pretrial examination focussed on Frank’s material evidence, Andrew and Selena would have to conduct an examination for discovery of Frank within the confines of the trial. The trial is no place to conduct examinations for discovery; trial time should not be wasted in that way. This is precisely why the rules provide mechanisms, such as Rule 31.10, to conduct a detailed examination prior to trial, ensuring that the actual questioning conducted at the trial will be much more focused: Manga, para. 13.

[67] The approach to be taken to the discovery of non-parties is directed at the efficient use of resources, not at increasing expense and delay or needlessly forcing parties to jump through technical hoops: Kissoon v. Aviva Insurance Company of Canada, 2018 ONSC 2167 at para. 18.

[68] In the unique circumstances of this case, the approach which is most likely to favour exposition of the truth and an efficient trial is to have Frank’s evidence taken under oath in the clear light of a formal, transcribed pretrial setting.

[69] There is no evidence that granting leave to Andrew and Selena to conduct a focussed examination of Frank will delay the trial or entail unreasonable expense.

[70] Frank maintains, however, that it would be unfair to compel him to be examined in advance of trial. Frank argues that trial fairness does not require granting leave to examine him because: a) he is “just” a witness; b) Andrew and Selena have his statement of claim which sets out his former position; and, c) Andrew and Selena have full document production via SCC, which effectively has all the documents.

[71] As noted earlier, however, Frank is not “just” a witness. He created the business and the trusts and organized TSG’s affairs. He is the author of the circumstances which gave rise to these proceedings. Until recently, he was himself a litigant in relation to those circumstances.

[72] Frank’s statement of claim is a pleading, not evidence. It contains allegations of material fact drafted by Frank’s counsel. It is no substitute for in person testimony under oath.

[73] The fact that document production is effectively complete already, assuming it to be true, merely means Frank’s examination will be all the shorter and more focussed. It does not mean his version of material events is not necessary to complete the picture.

[74] Finally, there is the question of fairness to Frank. Frank argues that he chose to settle with the defendants in his action to extricate himself from this acrimonious family dispute and avoid the further stress and disruption of being involved in the litigation. He does not want to be “used” by some family members against the others.

[75] There is no doubt that the potential for unfairness to Frank is a material consideration under Rule 31.10(2)(c)(iii). The assessment of this factor requires a balance between Frank’s personal desire to be “out of the fight” and the potential for unfairness to parties who remain embroiled in the litigation. I find, based on the evidence and circumstances of this case, that this balance weighs in favour of granting leave for a focussed examination of Frank. I come to this conclusion for essentially two reasons.

[76] First, as noted, Frank is at the heart of almost every aspect of TSG and its business. He is alleged to have had specific involvement in the very issues in dispute in the remaining litigation: the 2013 reorganization and the nature and extent of Belinda’s control of the trusts and TSG; and, the events giving rise to SCC’s counterclaim against Andrew.

[77] Second, Frank could not reasonably have understood that, by settling with the defendants in his own action, he could happily sail away and be completely insulated from the rest. Indeed, the cooperation agreement specifically contemplates ongoing litigation and specifically contemplates Frank being a competent and compellable witness in the ongoing litigation.

[78] Thus, while I respect and sympathize with Frank’s desire to have nothing further to do with this family litigation, the reality is that he is still an important piece of the puzzle whose continued participation as a witness may well be necessary. It is for this reason that the limited unfairness to Frank must yield to the greater necessity of the fairness of the trial process in the remaining litigation which has yet to unfold.

Examinations by The Defendants

[79] In what appears to be a throwaway gambit, some of the defendants have asked, in their factums, that if leave is granted to Andrew and Selena to examine Frank for discovery, they too should be permitted to examine Frank. None of these defendants delivered motions to this effect. None of these defendants have set out how they meet the test under Rule 31.10. Frank may consent to be interviewed by these defendants, or even to be examined under oath. That is up to him. But I am making no order in this respect given the lack of any motion or supporting material sufficient to meet the Rule 31.10 test.

Terms

[80] The examination for discovery of Frank by Andrew and Selena shall proceed on a date or dates mutually convenient to Frank and the necessary parties for up to a combined total of seven hours (or as otherwise agreed between Frank and the plaintiffs).

Conclusion

[81] For these reasons, Andrew and Selena’s motions for leave to examine Frank under Rule 31.10 are granted on the terms outlined above.

Costs

[82] Following conclusion of oral argument of the motions, the parties advised that they had agreed among themselves as to the disposition of costs of these motions. Costs, therefore, are ordered as agreed between the parties.

Penny J.

Date: October 3, 2023

[1] The body of these reasons reflects the cases cited to me at the time of oral argument. As noted in the Introductory Note, Andrew’s counsel recently sent me four additional, post-July 2022 decisions of the Court of Appeal, all affirming the same principles. I have read all four decisions: Skymark Finance Corporation v Ontario, 2023 ONCA 234; Crestwood Preparatory College Inc. v Smith, 2022 ONCA 743; Performance Analytics v McNeely, 2022 ONCA 731; and, Hamilton-Wentworth District School Board v Zizek, 2022 ONCA 638. In my view, none of these cases purports to expand the immediate disclosure rule to non-parties to the litigation and none of the analysis in these decisions provides any principled basis upon which to do so. They do not change the law from what was cited in July 2022 and do not address the basis upon which I have distinguished the immediate disclosure cases from the facts of this case. The defendants in the FE action did not have a duty to disclose the co-operation agreement to Andrew because Andrew was not a party to the FE action.