Court File and Parties

COURT FILE NO.: CV-18-00597979-0000 DATE: 20241025 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

EVERTZ TECHNOLOGIES LIMITED and EVERTZ MICROSYSTEMS LIMITED Plaintiffs (Responding Parties) – and – LAWO AG, LAWO HOLDING AG, LAWO INC., LAWO GROUP USA, INC., LAWO CORP., PROVIDIUS CORP., TONY ZARE, (a/k/a ANTONY ZAREZADEQAN), AYMAN AL KHATIB, JACKSON WIEGMAN and ALBERT FAUST Defendants (Moving Parties)

Counsel: Alexander T. Mulligan, James C. Orr and Jonathan H. W. Careen, for the Plaintiffs (Responding Parties) Anu Koshal, Rachel Chan and Almut MacDonald, for the Defendants, Providius Corp., Tony Zare, Ayman Al Khatib, and Jackson Wiegman (Moving Parties) No one appeared for the Lawo Defendants

HEARD: August 29, 2024

C. STEVENSON J.

REASONS FOR DECISION

Introduction

[1] This is a motion by non-settling defendants to stay an action for abuse of process because of the allegedly late disclosure of all the non-financial terms of a Pierringer-type settlement between the plaintiffs and the other, settling defendants.

[2] The plaintiffs’ claim was issued on March 16, 2018. The plaintiffs sued two groups of defendants alleging that the members of one group, the Providius defendants (defined below), conspired with the members of the second group, the Lawo defendants (also defined below), to steal the plaintiffs’ confidential information and technology to develop competing products.

[3] The Providius defendants bring this motion to stay the claim against them because, so they argue, the plaintiffs (“Evertz”) engaged in an abuse of process when they failed to disclose on a timely basis all the non-financial terms of the settlement reached with the Lawo defendants on June 4, 2022.

[4] The plaintiffs say that they promptly provided the Providius defendants with all the material terms of the settlement with the Lawo defendants. The Providius defendants were told within days that pursuant to a partial settlement, the claim against the Lawo defendants was to be dismissed and the Lawo defendants were to receive a full and final release. The plaintiffs argue that the terms which were not initially disclosed were business terms which did not change the “litigation landscape” and did not need to be produced. Those additional terms have now been produced only to show that this is the case.

[5] The Providius defendants acknowledge that they have now received the full settlement agreement but argue it has been provided too late for the plaintiffs to be allowed to continue their claim. They say that the initial partial disclosure was inadequate, and the subsequent full disclosure should not save the plaintiffs’ claim. They argue that a stay is automatic where there is a failure to properly disclose the non-financial terms of a Pierringer-type agreement.

Background

[6] The plaintiffs are Canadian broadcast technology companies with more than 1700 employees in North America, Europe, Asia, the Middle East, and Australia.

[7] The defendant Providius Corp. is a Canadian company incorporated in 2012 which competes with Evertz. The individual Providius defendants are current or former directors and shareholders of Providius Corp. They also used to work for Evertz. Any reference to the Providius defendants means Providius Corp., Tony Zare (a/k/a Antony Zarezadeqan), Ayman Al Khatib, and Jackson Wiegman.

[8] The Lawo defendants are based in Germany and also compete with Evertz, although they are much larger than Providius Corp. Any reference to the Lawo defendants means Lawo AG, Lawo Holding, Lawo Inc., Lawo Group USA, Lawo Corp., and Albert Faust.

[9] In August 2018, Lawo became a 49 percent shareholder in Providius Corp. Lawo was granted an exclusive licence to sell Providius products.

[10] Soon after this partnership was established, the plaintiffs commenced this action alleging that the Providius defendants and the Lawo defendants had conspired to steal the plaintiffs’ confidential information and technology to develop competing products.

[11] In their amended statement of claim dated March 26, 2019, they pleaded that the defendants collectively engaged in a “single, overarching conspiracy to develop, produce, market, and sell their own IP-based network product line using stolen confidential information from Evertz”. Paragraphs 124 and 128 of the amended statement of claim refer to both a conspiracy to injure Evertz and a conspiracy by unlawful means which caused Evertz damages.

[12] Both groups of defendants, in two separate statements of defence, denied these allegations of conspiracy and alleged that the claim was an improper attempt to stifle legitimate competition.

[13] After they were sued, the Lawo defendants and the Providius defendants entered into a joint defence and common interest privilege agreement. They did not crossclaim against each other, nor did they make any third-party claims.

[14] The Providius defendants say that they and the Lawo defendants shared privileged and confidential information about their joint defence strategy.

[15] The action did not proceed expeditiously in Ontario, although each side blames the other for the delays.

[16] The plaintiffs did not move for an injunction, although one is requested in their statement of claim, to restrain the alleged misappropriation of their confidential information.

[17] The plaintiffs opposed the defendants’ proposal to move the claim to the Commercial List.

[18] Until the 2022 partial settlement, both groups of defendants were aligned and coordinated in their tactical response to the claim. Both groups brought motions to challenge the adequacy of the particulars in the statement of claim. These motions resulted in the claim being amended to correct deficiencies. Both groups of defendants then brought further motions to challenge the amended pleading. This time the motions were unsuccessful.

[19] In 2019, shortly after commencing this action, the plaintiffs’ related corporation, Evertz Microsystems Ltd., commenced an action in the U.S. federal court in Delaware for patent infringement against some of the Lawo defendants and a related U.S. corporation (the actual defendants were Lawo Inc., Lawo North America Corp., and Lawo AG).

[20] The Delaware action relates to the same underlying facts as this action, although it was based on a claim for patent infringement. The amended complaint in Delaware referred to allegations made in this action. A press release issued by one of the plaintiffs said that this action and the Delaware action would proceed in parallel, and it referred to the claims in this action for “breach of contract, breach of confidence and other torts”.

[21] Although this action and the parallel Delaware action were commenced in 2018 and 2019 respectively, this action was effectively stalled in procedural wrangling while the Delaware action proceeded towards a June 6, 2022 trial date.

[22] On the eve of the Delaware trial, on June 4, 2022, the Evertz parties (i.e., the Evertz plaintiffs in the Delaware action and this action) settled both actions with the Lawo parties.

[23] The same day, June 4, 2022, Canadian counsel for the Lawo defendants informed counsel for the Providius defendants that they were no longer in “common interest”, as had previously been formalized in the parties’ Common Interest and Confidentiality Agreement (CICA).

[24] Concurrently, the Lawo defendants’ nominees on the Providius Corp. board of directors resigned as both officers and directors.

[25] On June 7, 2022, counsel for the Lawo defendants notified the lawyers for the Providius defendants that the Lawo defendants had settled Evertz’ claim against them in this Ontario action. In reference to the termination of the CICA, they noted that they did not believe they possessed any “non-publicly available materials obtained pursuant to the [CICA]”.

[26] On June 8, 2022, the relevant Lawo defendant gave notice of termination of the licence agreement it had with Providius Corp. and ceased providing support under the licence agreement.

[27] On June 27, 2022, the Lawo defendants provided a four-page excerpt from the settlement agreement. This only contained paragraphs numbered 8 and 9 (b)-(h).

[28] Paragraph 8 provided for the prompt dismissal of this claim against the Lawo defendants and that the plaintiffs would limit their claims against the Providius defendants to their several share of liability.

[29] Paragraphs 8(c) and 9 of the excerpt require the plaintiffs to indemnify the Lawo defendants for potential claims, including any future crossclaim or similar proceeding.

[30] The Providius defendants were not satisfied with only receiving this excerpt. They repeatedly demanded a copy of the entire settlement agreement. This can be seen in emails dated August 4, 9, and 12, 2022 and a letter dated October 5, 2023.

[31] Evertz opposed this request on the basis that the rest of the settlement agreement related to the settlement of the Delaware action, to which the Providius defendants were not parties.

[32] The plaintiffs moved to dismiss their claim against the Lawo defendants and to amend their claim to remove references to them. This motion was opposed by the Providius defendants on the basis that they needed to see the full settlement agreement. Evertz maintained that it had produced all the relevant terms.

[33] Evertz wrote in its factum on the dismissal motion that the Providius defendants now “have knowledge of all the terms of the Delaware Litigation settlement agreement that relate to the Ontario action, and have in fact seen those terms in their entirety.”

[34] In the course of the dismissal motion, on February 24, 2023, some 8 months after it had been signed, the plaintiffs produced a 22-page settlement agreement called “The Ontario Litigation Settlement Agreement Between Evertz and Lawo”. This contained the terms summarized below.

[35] In section 6, Lawo agreed to terminate its licence agreement with Providius, terminate any ongoing purchase orders, not enter into other agreements with Providius, and not use any Providius technology in any Lawo products.

[36] In paragraph 7(b), Lawo agreed to dispose of its shares in Providius within 14 days after the claim against the Lawo defendants was dismissed.

[37] In paragraph 7(c), Lawo gave Evertz an option to purchase Lawo’s shares in Providius.

[38] In paragraph 9(a), Evertz agreed to indemnify the Lawo defendants if Providius sued them in respect of any aspect of the Ontario or Delaware settlement agreements.

[39] It is the late disclosure of these terms that is at the heart of this motion. Did they need to be produced at all, and if so, was the February 2023 production sufficiently prompt disclosure?

[40] Before answering this question, I should note that production of the Ontario Litigation Settlement Agreement did not end the disclosure issues. The Providius defendants still opposed the dismissal motion demanding production of the related Delaware settlement agreement.

[41] The latter document was eventually produced on October 13, 2023.

[42] Both settlement agreements had been produced by Evertz on a confidential basis.

[43] On October 17, 2023 the Providius defendants consented to the dismissal Order but insisted that the agreements should not remain confidential.

[44] Associate Justice Rappos on March 18, 2024 decided that the agreements did not contain “garden variety” Pierringer terms and that they should not remain subject to a confidentiality order.

[45] The action was finally dismissed against the Lawo defendants on May 8, 2024.

[46] Paragraph 4 of the dismissal Order provides that the liability of the Providius defendants to the plaintiffs is limited to their several share of the damages. Paragraph 5 requires the Lawo defendants to preserve all relevant documents. Paragraph 6 requires the corporate Lawo defendants to disclose names and addresses of potential witnesses who are or were their employees. Paragraph 7 preserves any rights to bring motions under rr. 30.10 and 31.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[47] To this extent, the Order provides the usual procedural protections to the non-settling defendants contemplated in Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, [2013] 2 S.C.R. 623, at para. 24 [Sable Offshore Energy].

The positions of the parties

[48] The Providius defendants say that all of the contents of the settlement agreements, other than financial terms, should have been provided right away. They argue that a permanent stay is required because material terms were only disclosed some eight months later. They say the settlement agreements with the Lawo defendants entirely changed the litigation landscape. They rely on a panoply of recent cases in the Court of Appeal including: Handley Estate v. DTE Industries Limited, 2018 ONCA 324, 421 D.L.R. (4th) 636, at paras. 45-47 [Handley Estate]; Crestwood Preparatory College Inc. v. Smith, 2022 ONCA 743, 164 O.R. (3d) 291, at paras. 39-43, 46-48 [Crestwood Preparatory College]; Hamilton-Wentworth District School Board v. Zizek, 2022 ONCA 638, 2022 CarswellOnt 12675, at paras. 10-11; and Skymark Finance Corporation v. Ontario, 2023 ONCA 234, 166 O.R. (3d) 131, at paras. 47, 53-55 [Skymark].

[49] The Providius defendants argue that this settlement is a variety of a Pierringer agreement even though it does not require the Lawo defendants to cooperate with the plaintiffs.

[50] The Providius defendants argue that while they do not have to show that actual prejudice resulted from the late disclosure, the excerpts that were provided on June 27, 2022 misrepresented the actual agreement in an attempt to obtain the dismissal order which the settling parties required.

[51] The Providius defendants say the full agreements should have been disclosed to them, and to the court, while Evertz was pursuing dismissal of its claim against the Lawo defendants over a period of almost 18 months from the June 4, 2022 settlement until the full information (including the Delaware settlement agreement) was finally disclosed on October 13, 2023.

[52] Evertz argues that the settlement agreements are not true Pierringer agreements because the Lawo defendants have been let out of this action and do not have to cooperate with Evertz. The latter have not, it is argued, “switched sides”. They have left the litigation altogether. They say the litigation landscape has not changed. This is not like some of the leading cases where a party is ostensibly on one side but has a secret deal to help the other side. They rely on other Court of Appeal cases including: Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2021 ONSC 984, 60 C.P.C. (8th) 258, at paras. 53, 61, aff’d 2022 ONCA 66, 466 D.L.R. (4th) 324 [Tallman Truck]; Poirier v. Logan, 2022 ONCA 350, 2022 CarswellOnt 5996 [Poirier]; CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467, 162 O.R. (3d) 514, at paras. 34, 59-61 [CHU de Québec]; and Kingdom Construction Limited v. Perma Pipe Inc., 2024 ONCA 593, 2024 CarswellOnt 11325, at paras. 50-53.

[53] Evertz says that the settlement with the Lawo defendants did not change what the Providius defendants were facing, in terms of Evertz’ legal claims against them.

[54] In any event, Evertz says that any disclosure obligations were met when the material aspects of the settlement were disclosed on June 27, 2022. There is no obligation to provide the entire settlement agreement to the non-settling parties. That is because the rest of the settlement agreements related to settling the patent infringement lawsuit in Delaware or were “business” terms which did not have to be disclosed because they did not relate to a change in the litigation landscape. The business deal could have been made at any time, irrespective of the litigation. The Lawo defendants made a business deal to leave a “business relationship” and this should not be conflated with changing the litigation landscape. They say that the provision of what they call a “standard” indemnity does not change that fact.

The legal framework

[55] The law is clear that the settling parties had to immediately disclose they had settled Evertz’ Ontario claim against the Lawo defendants if the settlement agreement entirely changed the litigation landscape: CHU de Québec, at para. 55. The question is fact specific, based on the configuration of the litigation and the various claims amongst the parties: Skymark, at paras. 47, 51.

[56] In Crestwood Preparatory College, at para. 57 Feldman J.A. referred to agreements that have “the effect of changing entirely the landscape of the litigation in a way that significantly alters the dynamics of the litigation”. This language was adopted by Trotter J.A. in Skymark, at para. 53. This is the standard which I apply below.

[57] The obligation to disclose is not limited to pure Mary Carter or Pierringer agreements. The fact that the Lawo defendants did not agree to cooperate with Evertz in the litigation does not mean there is no disclosure obligation, nor are the limited procedural protections in the May 8, 2024 dismissal Order (see para. 46 above) sufficient by themselves: Handley Estate, at para. 39; CHU de Québec, at para. 55; and Crestwood Preparatory College, at para. 43(b).

[58] The analysis of whether the settlement has entirely changed the litigation landscape is not dependent on the resulting changes to the pleadings, although that should be considered where applicable. An agreement which involves a party switching sides from its pleaded position must be disclosed promptly: Tallman Truck, at para. 26. Nonetheless, what matters is the change in the “apparent relationships” between any parties “that would otherwise be assumed from the pleadings or expected in the conduct of the litigation” (emphasis added): Handley Estate, at para. 40; Crestwood Preparatory College, at para. 46; and Poirier, at para. 48.

[59] The disclosure obligation extends to any agreement which changes the adversarial position of the parties into a cooperative one. The Court of Appeal stated in Handley Estate, at para. 39:

To maintain the fairness of the litigation process, the court needs to “know the reality of the adversity between the parties” and whether an agreement changes “the dynamics of the litigation” or the “adversarial orientation”: Moore v. Bertuzzi, 2012 ONSC 3248, 110 O.R. (3d) 611, at paras. 75-79.

[60] Failure to make prompt disclosure warrants a permanent stay of claims against non-settling defendants: Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, 328 D.L.R. (4th) 488, at paras. 13, 15-16, leave to appeal refused, [2011] S.C.C.A. No. 84 [Aecon Buildings]; Skymark, at paras. 46-47, 53; and Kingdom Construction Limited v. Perma Pipe Inc., 2024 ONCA 593, 42 C.C.L.I. (6th) 14, at para. 1.

[61] The Court of Appeal in Handley Estate, at para. 45 summarized the principles with respect to the remedy, citing from its seminal decision in Aecon Buildings:

(i) The obligation of immediate disclosure of agreements that “change entirely the landscape of the litigation” is “clear and unequivocal” – they must be produced immediately upon their completion: at paras. 13 and 16;

(ii) The absence of prejudice does not excuse the late disclosure of such an agreement: at para. 16;

(iii) “Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party”: at para. 16; and

(iv) The only remedy to redress the wrong of the abuse of process is to stay the claim asserted by the defaulting, non-disclosing party. Why? Because sound policy reasons support such an approach:

Only by imposing consequences of the most serious nature on the defaulting party is the court able to enforce and control its own process and ensure that justice is done between and among the parties. To permit the litigation to proceed without disclosure of agreements such as the one in issue renders the process a sham and amounts to a failure of justice: at para. 16.

[62] The fact that there is no need to establish prejudice has been reiterated regularly by the Court of Appeal: Crestwood Preparatory College, at para. 57; Waxman v. Waxman, 2022 ONCA 311, 471 D.L.R. (4th) 52, at para. 24 [Waxman (ONCA)].

[63] If a party to a partial settlement is unclear whether the agreement has to be produced, it is always open to that party to move before the court for directions: Handley Estate, at para. 47; Skymark, at para. 69.

Analysis

[64] The court must consider the substantive terms and effect of the settlement, having regard to the parties’ positions in the litigation. In my opinion the litigation landscape was entirely changed by, at least, the following terms of the June 4, 2022 settlement:

a. The Lawo defendants agreed to cease cooperating with the Providius defendants in defending the action; the joint defence strategy was done. b. The common interest privilege had terminated. c. The Lawo defendants and Evertz would be working cooperatively to have the action dismissed against the Lawo defendants. d. The Providius defendants’ liability in the continuing action would be several only, rather than joint and several with their alleged co-conspirators.

[65] All of that was disclosed in the June 4, 2022 email when the joint defence and common interest privilege agreement was terminated, when taken in conjunction with the four-page excerpt from the Ontario litigation settlement agreement which was provided on June 27, 2022.

[66] That combined disclosure within about three weeks would have been sufficiently prompt in the circumstances of this case. The motion to stay cannot succeed on that delay alone.

[67] The four-page excerpt which was provided on June 27, 2022 did not disclose, however, that the settlement agreement required the Lawo representatives to resign from Providius Corp.’s board of directors and required Lawo to terminate the licence agreement between the parties.

[68] Nonetheless, the Providius defendants knew right away that there were business consequences arising from the settlement because the Lawo director on the Providius Corp. board immediately resigned and notice of termination of the licence agreement was given on June 8, 2022.

[69] Although the Providius defendants did not see those terms in writing, for practical purposes, these details cannot be said to have been hidden from the non-settling defendants. It was clear within a few days after the June 4, 2022 settlement agreement that the settling Lawo defendants would no longer be doing business with their former partner, at least pursuant to the licence. It will be seen below, however, that this “functional disclosure” is not sufficient to meet a disclosure obligation, if one exists. The plaintiffs argue that these were business terms which did not need to be disclosed.

[70] At this stage of the analysis, I have concluded that:

a. The terms of the settlement agreement which were disclosed by June 27, 2022 had entirely changed the litigation landscape. b. The delay between June 4 and June 27, 2022 was immaterial and constituted prompt disclosure in the circumstances of this case.

[71] This still leaves the issue of whether the principle of prompt disclosure applies to the express terms about the director’s resignation and the licence termination. These terms should not be considered in isolation from the other details that were not disclosed. These are set out below.

[72] What was not disclosed until some eight months later was that the Lawo defendants would not only be divesting themselves of their shares in Providius Corp. but had also given Evertz an option to purchase Lawo’s shares. Nor were the non-settling parties told that these terms were buttressed by the indemnity Evertz gave the Lawo defendants in respect of the potential claim that might be brought by the Providius defendants arising from what the latter see as the actionable perfidy of the Lawo defendants.

[73] These additional terms on top of the licence termination and the directors’ resignation created a dramatic change in the business dynamics between the parties. But did they also have to be disclosed?

[74] In my view, the answer is yes.

[75] The Lawo defendants had been perfectly aligned with the Providius defendants both in business terms and in defence of the claim until the partial settlement was concluded.

[76] Until the partial settlement was concluded, the Providius defendants and the Lawo defendants had not crossclaimed against each other and they had worked tactically together to challenge the pleadings.

[77] After the partial settlement, the two defendants’ groups did not become protagonists in the action, as it is currently constituted, in that the Lawo defendants did not agree to cooperate with Evertz in defence of the litigation. Furthermore, notwithstanding the suspicions of the Providius defendants, there is no evidence of direct cooperation by the Lawo defendants with Evertz in its prosecution of the continuing action and there is no evidence of improper sharing of confidential information.

[78] After the partial settlement, the tactical co-operation between the two defendants’ groups ended. The Lawo defendants ceased cooperating with the Providius defendants in defence of the claim. But that part of the settlement was promptly disclosed.

[79] That is only the tip of the litigation iceberg. Apart from the Lawo defendants’ decision to cease cooperating with their alleged co-conspirators, the scope of the litigation is going to change dramatically. That is because Providius Corp. intends to sue based on the so-called business terms, which the Providius defendants say are tortious and involve alleged breaches of fiduciary duty. With respect to the latter claim, Providius notes that the individual who signed the settlement agreement on behalf of Lawo, Claudia Nowak, the CFO of Lawo, was at the time a director of Providius Corp. and had a fiduciary duty to act in the best interests of Providius Corp. It is suggested that she breached this duty when she signed the agreement.

[80] The Lawo defendants may not have agreed to cooperate with Evertz in the current litigation, as one finds in a common or garden variety Pierringer agreement, but they did agree to provide Evertz with considerable business leverage to use against the Providius defendants. They did so in a way that changes the litigation landscape entirely, which is why all these terms should have been disclosed.

[81] The Providius defendants will now have to decide whether to sue Evertz by counterclaim and the Lawo defendants by crossclaim in this action, or to commence separate proceedings, or indeed whether a lawsuit is warranted at all. The notice of motion here does ask for leave to amend the Providius’ counterclaim to include additional claims against the plaintiffs, in the alternative to seeking a stay. This is exactly the sort of potential scenario that underlies the policy requiring full and prompt disclosure of all terms that entirely change the litigation landscape.

[82] The relevant litigation landscape in my view encompasses potential new claims arising from the settlement agreement such as were created here, as well as the more common, pre-existing, inchoate claims (e.g., crossclaims which are sometimes put on hold by previously cooperating defendants).

[83] Thus, the Providius defendants for about eight months did not appreciate:

a. The existence of a new cause of action against Evertz and Lawo, or at least the full extent of the claim they now say they want to advance. This is a claim based on the allegedly tortious way Evertz orchestrated the partial settlement, causing Lawo to terminate its licence, requiring Lawo to sell its shares in Providius, and giving Evertz an option over the Lawo shares in Providius (notwithstanding that s. 6.1.1 of the Shareholders’ Agreement restricts such a transfer); or perhaps, ironically, a claim that they conspired together to this end; or b. That Evertz had indemnified the Lawo defendants for any liability arising from these undisclosed terms.

[84] In short, this part of the settlement agreement does not just raise business issues. These terms provide the basis for the proposed claim by Providius Corp. and perhaps by other members of the Providius defendants for tortious interference and possibly breach of fiduciary duty.

[85] This is not a case like Caroti v. Vuletic, 2021 ONSC 2778, 2021 CarswellOnt 20723 in which the settlement terms did nothing more than permit the settling party to do what he was entitled to do anyway, and the two groups of defendants had no common interest apart from being defendants in the action. Here the two groups of defendants were akin to partners who until settlement were accused of conspiring together to harm the plaintiff. After settlement, the “partnership” was gone and the non-settling defendants were left in the original lawsuit but now with an added counterclaim against the plaintiff and a potential crossclaim against its old “partner”, which in turn was fully indemnified by the plaintiff.

[86] As noted above, the undisclosed terms of the settlement agreement raise legal issues affecting the current action: will the claim be brought in separate proceedings, or will it be brought as a counterclaim against the Plaintiffs? Will there be a crossclaim against the Lawo defendants? Furthermore, the question of the impact of the 8 to 18-month delay on these procedural matters will have to be considered. Should a counterclaim or crossclaim be permitted at this stage of the proceeding? These issues would be for the court to decide, quite apart from the strategic considerations of the Providius defendants.

[87] All the non-financial terms of a Pierringer agreement must generally be promptly disclosed: Sable Offshore Energy, at paras. 24-25; Allianz v. Canada (Attorney General), 2017 ONSC 4484, 139 O.R. (3d) 424, at para. 31; Singh v. Mann, 2021 ONSC 8249, 76 C.P.C. (8th) 43, at paras. 35-36.

[88] Both the existence of the settlement and the terms that change the adversarial orientation of the proceeding must be disclosed: Poirier, at paras. 26-28, 63-65 and 73.

[89] It is true that the business terms of a partial settlement do not always need to be disclosed: CHU de Québec, at paras. 59-60, relying on Sable Offshore Energy, although in the latter case all terms were disclosed.

[90] But business terms which also change the litigation landscape “entirely” do need to be disclosed promptly. This is not a case like CHU de Québec where the balance of the terms was going to be put before the court for its consideration in due course: CHU de Québec, at para. 67. That was never Evertz’ intention. Evertz only produced all the terms under pressure of this motion and its own pending motion to dismiss against the Lawo defendants, and subject to a contractual obligation to the Lawo defendants to move promptly to obtain the dismissal order.

[91] The obligation to disclose is said to be immediate: Crestwood Preparatory College, at paras. 43(f), 57; Waxman (ONCA), at para. 39; and Tallman Truck, at para. 26, where three weeks was found to be unacceptable. While the degree of immediacy is open to some discussion and I was prepared to accept full disclosure if it had happened on June 27, 2022 (about three weeks late), the eight months’ delay is unacceptable. Piecemeal disclosure of some but not all the material terms is unacceptable: Handley Estate, at para. 3.

[92] Furthermore, “functional” disclosure in the form of the practical reality of the licence termination and the director’s resignation, rather than production of the written agreement, would still have been unacceptable, even without the other undisclosed terms: Tallman Truck, at paras. 18-21; Poirier, at para. 22.

[93] The policy objectives of procedural fairness, transparency, and a level playing field militate towards disclosure. The incomplete disclosure by the settling parties created a misleading picture of the parties’ relationship after the settlement and was an abuse of process: K.J. v. The Regional Municipality of Halton, 2022 ONSC 2199, at paras. 62 (d)-(g), 72-73 [K.J.].

[94] As Vermette J. said in K.J., at para. 72 and Koehnen J. said in Waxman v. Waxman, 2021 ONSC 2180, 69 C.P.C. (8th) 411, at para. 52, aff’d 2022 ONCA 311, 471 D.L.R. (4th) 52, parties should be careful about picking and choosing which terms of a settlement agreement will be disclosed. At the very least this editing process invites motions such as this one. In every such case the settling parties take their chances if they parse the agreement and do not disclose all the non-financial terms.

[95] Parties in such circumstances would be better advised to seek the direction of the court rather that taking those chances; and perhaps, as so often happens, ending up with the action stayed as an abuse of process.

[96] A stay is automatic. There is no need to show that confidential information was improperly shared or that the material non-disclosure was done for some nefarious purpose. It does not matter if there is no prejudice to the non-settling parties: Handley Estate, at para. 45; Poirier, at para. 28.

[97] The motion is granted. The action is stayed against the Providius defendants.

[98] The Providius defendants shall make their costs submissions in writing within ten days. The plaintiffs shall have ten days after receipt of those submissions to make their own written submissions. Both groups are restricted to three pages plus any offer to settle and the costs outlines already filed. No right of reply.

Released: October 25, 2024 Justice C. Stevenson