COURT FILE NOS.: 10898/16 and 10962/16
DATE: 20231101
SUPERIOR COURT OF JUSTICE – ONTARIO
10898/16
RE: 1086289 Ontario Inc. operating as Urban Electrical Contractors, Plaintiff (Defendant by Counterclaim)
AND:
The Corporation of the City of Welland, Defendant (Plaintiff by Counterclaim)
AND:
Rounthwaite Dick & Hadley Architects Inc. and Toronto Organization Committee for the 2015 Pan Am and Parapan Am Games (Third Parties)
AND:
Exp. Services Inc. and Elite Construction Inc. (Fourth Parties)
10962/16
Elite Construction Inc. (Plaintiff)
AND:
The Corporation of the City of Welland and Toronto Organization Committee for the 2015 Pan Am and Parapan Am Games (Defendants)
AND:
Rounthwaite Dick & Hadley Architects Inc. (Third Party)
AND:
Exp. Services and 1086289 Ontario Inc. operating as Urban Electrical Contractors (Fourth Parties)
BEFORE: The Honourable Justice M.J. Donohue
COUNSEL: Counsel, for the Moving Parties: Mr. Eric Baum and Mr. Alex Michel for the Third Party Routhwaite Dick & Hadley Architects; Ms. Samantha Gordon for the Fourth Party EXP Services Inc.
Counsel, for the Responding Party: Mr. Brett Hughes for the Counsel of the Defendant City of Welland
HEARD: September 28, 2023
ENDORSEMENT
Overview
[1] This was a long motion for satisfaction of undertakings and refusals in a complex construction litigation, which I am case managing. There are two companion actions involved.
[2] The Corporation of the City of Welland (the “City”) and the settling parties executed minutes of settlement on December 7, 2021.
[3] The third and fourth parties brought stay motions as against the City for failure to immediately disclose the settlement agreement the City reached with other parties in the litigation, specifically with the plaintiffs 1086289 Ontario Inc. (“Urban”) and Elite Construction Inc. (“Elite”).
[4] The City’s counsel, Ms. McNulty, provided a responding affidavit in those motions on September 26, 2022.
[5] Cross-examination on her affidavit resulted in a number of refusals on the basis of relevance, settlement privilege, litigation privilege, solicitor/client privilege and proportionality.
[6] The moving parties seek documents prior to December 7, 2021 to establish that the agreement was concluded earlier than that date. This would support their motion that the agreement was not “immediately” disclosed.
Disclosure Obligation
[7] Agreements that “change entirely the landscape of the litigation” such as Mary Carter agreements and Pierringer agreements must be disclosed to the court and to the other parties to the lawsuit as soon as the agreement is made.
[8] The Ontario Court of Appeal in Handley Estate v DTE Industries Limited 2018 ONCA 324, stated at para. 36:
In the 2009 decision in Laudon v. Roberts, 2009 ONCA 383, 249 O.A.C. 72, at para. 39, leave to appeal refused, [2009] S.C.C.A. No. 304, this court repeated the obligation to disclose such an agreement to the court and to the other parties to the lawsuit “as soon as it is concluded”. That disclosure obligation, and its rationale, were explained by this court at para. 39 of its reasons:
The existence of a [Mary Carter agreement] significantly alters the relationship among the parties to the litigation. Usually the position of the parties will have changed from those set out in their pleadings. It is for this reason that the existence of such an agreement is to be disclosed, as soon as it is concluded, to the court and to the other parties to the litigation. The reason for this is well stated in [Pettey, at pp. 737-738]:
The answer is obvious. The agreement must be disclosed to the parties and to the court as soon as the agreement is made. The non-contracting defendants must be advised immediately because the agreement may well have an impact on the strategy and line of cross-examination to be pursued and evidence to be led by them. The non-contracting parties must also be aware of the agreement so that they can properly assess the steps being taken from that point forward by the plaintiff and the contracting defendants. In short, procedural fairness requires immediate disclosure. Most importantly, the court must be informed immediately so that it can properly fulfil its role in controlling its process in the interests of fairness and justice to all parties. [Emphasis added.]
Position of the Moving Parties
[9] The moving parties submit that before December 7, 2021 there was one or more partial settlements “in principle” and they seek documentary disclosure of all documents to that effect. They submit that there were settlement agreements in early October 2021 and the documents are required to shed light on the timing of negotiations between the settling parties. This would show when their adversarial position as set out in their pleadings changed to a cooperative one.
[10] In part, they point to a mediation between the City and the plaintiff Elite which occurred on September 27, 2021. Further, they point to a letter on November 15, 2021 wherein counsel for the plaintiff Urban inquired whether the moving parties would consent to a dismissal of all claims as against Urban.
[11] They seek the disclosure to test the evidence of the City’s counsel that the date the agreement was concluded was December 7, 2021.
Details of the Questions Refused
[12] There were dozens of questions refused but the counsel grouped them into four categories:
(i) all correspondence regarding the timing of any “agreement in principle” between the City, Elite and Urban [including all versions of the draft minutes of settlement];
(ii) minutes of in camera meetings of city council with their litigation counsel August 10, September 14, September 21, and October 5, 2021;
(iii) documents relating to the mediation September 27, 2021 between the City and Elite;
(iv) all correspondence between counsel which addressed in any manner the settlement of the claims involving Toronto 2015.
Documents Produced
[13] For the purposes of this undertakings motion the City has produced some documents prior to December 7, 2021. The documents date from October 29, 2021 and have been produced subject to rule 34.12(2) without waiving privilege. The City agrees as well that these documents, subject to privilege, may be used at the stay motions although under seal as they maintain their position that they are not producible.
Law Regarding Settlements
[14] The Supreme Court of Canada noted that “settlement of complicated multi-defendant civil litigation is particularly valuable because complicated civil trials can consume enormous amounts of a judge’s time and can be expensive for the parties. However, settling multi-defendant civil litigation can be especially difficult….” Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, 2 S.C.R. 623, para. 21.
[15] The content of successful negotiations reflecting admissions, offers, and compromises made in the course of negotiations is protected by settlement privilege. See Sable Offshore Energy, para. 18.
[16] The exception to settlement privilege is the disclosure obligation of the terms of a concluded settlement agreement which completely changes the landscape of the litigation. See CHU de Quebec-Universite Laval v. Tree of Knowledge International Corp., 2022 ONCA 467, para. 55.
[17] As stated in Olivieri v. Sherman, 2007 ONCA 491, para. 41,
A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement [citations omitted].
(i) Documents Pre-Dating December 7, 2021 of an “Agreement in Principle”
[18] The tri-partite agreement of the City, Elite and Urban was executed on December 7, 2021. The moving parties seek production of documents before that date to establish that there had actually been an “agreement in principle” before that date. They want to determine the date when the parties were ad idem.
[19] In Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2018 ONSC 5897, Master Jolley, on motion, held that the moving parties were entitled to test the affidavit evidence regarding the date that the agreement had actually been concluded. In that case there was a factual basis that the signed agreement of June 6, 2018 was concluded earlier because the affidavit in support of it was dated before that date on May 22, 2018.
[20] The moving parties submit that there is a factual basis suggesting an earlier settlement.
[21] In particular they rely on an email dated November 15, 2021 from counsel for the plaintiff Urban inquiring if all parties will consent to dismissing Urban’s action against the City and dismissing all claims against Urban in Elite’s action. I find that such an inquiry provides evidence that the parties were working on draft settlements agreements which is supported by the rule 34.12(2) documents produced during the same time frame.
[22] The position of the moving parties was that the settling parties were privately discussing strategies to target the moving parties in the litigation. This is not improper nor does it raise a disclosure obligation. As stated in Poirier v. Logan 2021 ONSC 1633 at para. 57 (aff’d 2022 ONCA 350) an agreement to cooperate between litigants “does not necessarily fundamentally alter that litigation landscape or the adversarial orientation of litigation.”
[23] The moving parties did not provide authority that there was a disclosure obligation on an “agreement in principle” that was dependent or conditional on getting a client’s instructions or cooperation from other parties to reach a concluded agreement.
[24] Factually, in this case, the evidence in the rule 34.12(2) documents supports that the essential terms were still being negotiated throughout the month of November 2021 and that all the settling parties were still seeking instructions to agree to the final draft of the minutes of settlement until the day before they were executed.
[25] Substantive changes to the agreement were being discussed and reviewed. The example given by counsel for the City was that one draft of the minutes was 16 articles on 7 pages whereas the final draft was 19 articles on 11 pages. Through the month of November the negotiations were only between the City and the plaintiff Elite after which they then sought agreement from the plaintiff Urban. As of December 6, 2021, the City was asked if the final minutes were acceptable and counsel wrote that she was “waiting for her client to review”.
[26] The moving parties accordingly have not established a basis to relevantly probe behind the date of the executed settlement agreement of December 7, 2021.
(ii) City Council Litigation Meetings
[27] The moving parties sought disclosure of the City’s instructions to counsel of a mandate to settle. They asked for the production of all reports, memorandums or minutes of meetings prepared by the City of Welland or its departments, Welland City Council and/or Special Council related to the in camera sessions held August 10, September 14, September 21 and October 5, 2021 that addressed in any manner the issues related to the motions to stay.
[28] They also sought information regarding the City’s internal process of how settlement authority was navigated through the City before instructing counsel.
[29] They submit that this would provide relevance to the date that the parties became ad idem on an “agreement in principle”.
[30] It is evident that this litigation has been complex and the resulting agreement of December 7, 2021 was complex. Correspondence among seven counsel makes that clear. This was not a simple settlement to pay a sum of money for a full and final release.
[31] I was not provided any authority that would support lifting solicitor client privilege to produce instructions by a client to counsel to settle.
[32] I find that this was properly refused as such communications are covered by solicitor client privilege.
[33] Furthermore, the moving party would have to seek the privileged solicitor client communications of Elite and their counsel, as well as Urban and their counsel, to actually determine that the parties had an ad idem “agreement in principle” before December 7, 2021.
[34] The factual record before the court supports that the three settling parties were still negotiating after October 5, 2021 and the parties had not concluded a settlement. Such in camera discussions are accordingly not even relevant to the motion to stay.
(iii) September 27, 2021 Mediation
[35] In ordering production of documents in the Tallman case, the court noted that in the affidavit there was repeated reference to the evolution of emails regarding settlement.
[36] The moving parties submitted that this mediation was repeatedly referred to in the City’s affidavit such that privilege was waived.
[37] The affidavit merely stated that counsel for the City wished to attempt to narrow the issues and reduce the number of parties in the litigation and proposed “mediation”; that there was a “mediation” on September 27, 2021 with the plaintiff Elite; and that it was not successful.
[38] I am not satisfied that those references to the word “mediation” conclude that all documents relating to the mediation become relevant or have privilege waived in that regard.
[39] This is particularly so when the City has provided emails showing that the plaintiff Elite was still negotiating essential terms of the minutes of settlement in November of 2021.
[40] A number of refusals related to being asked “why” the mediation failed. The case law is clear that the obligation to disclose relates to concluded agreements and not to failed discussions to settle.
[41] The Supreme Court has made this crystal clear in Sable Offshore Energy Inc. at para. 13:
Settlement negotiations have long been protected by the common law rule that "without prejudice" communications made in the course of such negotiations are inadmissible (see David Vaver, "'Without Prejudice' Communications — Their Admissibility and Effect" (1974), 9 U.B.C. L. Rev. 85, at p. 88). The settlement privilege created by the "without prejudice" rule was 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. As Oliver L.J. of the English Court of Appeal explained in Cutts v. Head, [1984] 1 All E.R. 597 (Eng. C.A.), at p. 605:
[P]arties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations ... may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J in Scott Paper Co v. Drayton Paper Works Ltd (1927) 44 RPC 151 at 157, be encouraged freely and frankly to put their cards on the table.
What is said during negotiations, in other words, will be more open, and therefore more fruitful, if the parties know that it cannot be subsequently disclosed.
(iv) Toronto 2015 Settlement
[42] The request for all documents relating to the Toronto 2015 settlement was refused on the grounds of relevancy.
[43] Neither of the moving parties grounded their stay motions on a failure to disclose this settlement. This was pointed out in the City’s factum of April 12, 2023 when this motion was originally to proceed in the spring.
[44] There was no amendment to either motion record since that time to seek a stay for failure to disclose that settlement.
[45] Accordingly, I find these requests relating to the Toronto 2015 settlement were properly refused and decline to order such production.
Conclusion
[46] The refusals were proper refusals on the basis of relevancy, settlement privilege, litigation privilege, and solicitor client privilege.
[47] The motion is dismissed.
Costs
[48] The parties are urged to resolve the issue of costs between themselves. If unable to do so the parties may serve and file written submissions on costs. Such submissions are not to exceed two pages double spaced but may attach applicable offers and bills of costs.
[49] Submissions are to be emailed to St.Catharines.SCJJA@ontario.ca.
[50] The City may serve and file submissions by November 8, 2023.
[51] The third and fourth moving parties may serve and file submissions by November 15, 2023.
[52] If required, the City may serve and file a one page reply submission by November 23, 2023.
[53] Failing receipt of submissions by November 24, 2023 the court will consider costs to be resolved.
M.J. Donohue, J.
Date: November 1, 2023