Reasons for Decision
Court File No.: CV-17-129580
Date: 2025-01-09
Ontario Superior Court of Justice
Between:
Blackstone Paving and Construction Limited (Plaintiff)
– and –
The Corporation of the Town of Newmarket (Defendant)
Appearances:
Jonathan L. Frustaglio, for the Plaintiff
Charles A. Painter and Andrea Trozzo, for the Defendant
Heard: September 27 and October 1, 2024
Justice C.F. de Sa
Introduction
[1] The Plaintiff has brought a motion seeking an order staying the Defendant’s Counterclaim on the basis that the Town of Newmarket failed to immediately disclose a settlement agreement entered into between the Town and the third party, R.V. Anderson (“RVA”), which the Plaintiff maintains amounts to an abuse of process.
[2] This matter was heard in October. Having reviewed the materials filed, and having heard the submissions of the parties, I was not satisfied that the settlement agreement materially changed the litigation landscape such that the Defendant’s failure to disclose it amounted to an abuse of process. Accordingly, I dismissed the application with reasons to follow.
[3] The reasons for my decision are outlined below.
Facts
Background
[4] On January 25, 2017, the Plaintiff, Blackstone Paving and Construction Limited (“Blackstone”), commenced an action as against the Defendant, The Corporation of the Town of Newmarket (the “Town”), for failure to pay amounts allegedly outstanding pursuant to a contract for the 2014 Srigley Street Road Reconstruction Project (the “Project”).
[5] On March 3, 2017, the Town defended the Statement of Claim and commenced a Counterclaim as against Blackstone for:
a. Liquidated damages in the sum of $282,000.00 plus applicable H.S.T.;
b. Damages for negligent misrepresentation, breach of contract, and breach of the duty of good faith in the sum of $200,000.00;
c. A declaration that Blackstone is not entitled to the sum of $15,172.47 associated with Change Order Nos. 1 to 16;
d. A declaration that Blackstone is not entitled to the sum of $34,957.06 in respect of change order requests rejected;
e. A declaration that Blackstone is not entitled to the sum of $178,000.00 with respect to Payment Certificate No. 9;
f. A declaration that Blackstone is not entitled to the sum of $131,000.00 with respect to Payment Certificate No. 9;
g. A declaration that the total sum of $137,385.53 is the proper quantum of any and all “extra work” performed on the Project;
h. A declaration that Blackstone is not entitled to payment of the 2% holdback;
i. A declaration that Blackstone is not entitled to payment of the 10% holdback;
j. A declaration that the Town is entitled to contractual set-off;
k. Costs of the Counterclaim; and
l. Pre- and post-judgment interest.
[6] On March 16, 2017, the Town commenced a Third-Party Claim as against R.V. Anderson Associates Limited (“R.V. Anderson” or “RVA”), pursuant to Court File No. CV-17-129580-A1, for contribution and indemnity for any amount which the Town pays or is held liable to the Plaintiff in addition to costs of the main action and Third-Party Claim.
[7] On July 10, 2017, Blackstone replied to the Statement of Defence and Counterclaim of the Town.
Settlement of the Third-Party Claim
[8] On May 1, 2023, the Town and R.V. Anderson entered into Minutes of Settlement pursuant to which R.V. Anderson paid the Town an identified sum in exchange for a Full and Final Release of the Third-Party Claim (the “Minutes of Settlement” or the “Settlement”).
[9] Paragraph 4 of the Minutes of Settlement includes a cooperation provision pursuant to which R.V. Anderson agrees to cooperate reasonably with the Town to enable the attendance and availability of Mr. Ken Collicott (“Mr. Collicott”), the representative of R.V. Anderson throughout the litigation, at trial (the “Cooperation Provision”).
Disclosure of Settlement and Plaintiff’s Disclosure Inquiries
[10] On November 7, 2023, in the course of telephone correspondence between counsel, the Town advised Blackstone of the settlement of the Third-Party Claim.
[11] On November 7, 2023, in e-mail correspondence to the Town, Blackstone confirmed it had been advised of the fact of settlement of the Third-Party Claim and requested the following (the “Blackstone Request”):
i) The date the Settlement was entered into; and
ii) A copy of the terms of the Settlement and any other ancillary documents with respect of the Settlement, including but not limited to witness statements, will say statements, and/or affidavits or other documents of similar effect.
[12] On November 9, 2023, in responding e-mail correspondence, the Town advanced its position that the terms of settlement were subject to a confidentiality clause and no disclosure of the terms of settlement would be made to “anyone not a party to same, which includes your client, absent a Court Order”.
[13] On November 12, 2023, Blackstone replied to the Town’s correspondence noting its disagreement with the Town’s disclosure position. Blackstone cited “a plethora of case law requiring the disclosure of these types of settlements immediately upon them being entered into”. No further details of such case law was provided.
[14] On November 13, 2023, the Town replied to Blackstone’s request and maintained its position on disclosure of the Minutes of Settlement. However, the Town reiterated throughout its willingness and preparedness to consider Blackstone’s referenced case law. In particular, the Town stated:
(a) “… if you can send me one of the cases you say exist that would require my client to disclose to yours the terms of its settlement in this matter, I am more than willing to review same and reconsider my position”;
(b) “I have disclosed the date of settlement as well, so absent a case which says I must disclose all terms of the settlement, you have our position”; and
(c) “Like I said, I am more than willing to consider any reported decision(s) you have handy that say I am wrong, and more than willing to reconsider, subject to Ms. Sydney weighing in of course as her client is party to the agreement and confidentiality clause in the minutes too”.
[15] On August 30, 2024, the Town received e-mail correspondence from Blackstone seeking to “renew our request in respect of documents relating to the settlement between the Town and RVA”, and once again referenced the existence of “applicable case law”.
[16] On September 5, 2024, the Town once again requested the citations for the “applicable case law” and reiterated it was “happy to consider your request in light of same”.
[17] On September 5, 2024, Blackstone provided the case law citations to the Town for its review and consideration.
[18] Between September 5, 2024 and September 12, 2024, the Town considered the case law provided by Blackstone and consulted with the former Third-Party, R.V. Anderson, regarding its position on disclosure of the Minutes of Settlement to which it was a party.
[19] On September 12, 2024, the Town replied to Blackstone advising it was not in agreement that the cited case law applied to require disclosure. Nonetheless, out of an abundance of caution, the Town disclosed the Minutes of Settlement, and the executed Full and Final Release with redaction of the settlement amounts paid between the Town and R.V. Anderson.
Analysis
The Test for the Obligation to Disclose
[20] The Court of Appeal in the 2022 decision of Poirier v. Logan, 2022 ONCA 350, affirmed the current governing test and principles as set out in Aecon Buildings v. Brampton (City), 2010 ONCA 898:
It 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”. [Emphasis added.]
[21] Where this obligation to disclose is, in fact, triggered, the immediate disclosure must include the fact of settlement and the terms of the settlement that change the adversarial orientation of the proceeding.
[22] As the Court made clear in Aecon:
(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.
[23] In Laudon v. Roberts, 2009 ONCA 383, 249 O.A.C. 72, para 39, leave to appeal refused, [2009] S.C.C.A. No. 304, the disclosure obligation, and its rationale, were explained by the Court of Appeal 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.]
[24] 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, paras 75-79.
[25] If a party to a litigation agreement is unclear whether the agreement has the effect of changing the adversarial position of the contracting parties, thereby attracting the mandatory disclosure obligation, it is always open to the party to move before the court for directions. In that way, the court can enforce and control its own process and ensure that justice is done between and among the parties.
[26] Again, the key question for the court is whether the agreement, at the time it was entered into, significantly changed the litigation landscape and, in so doing, altered the adversarial position of the parties to one of cooperation.
Application to the Facts of the Case
[27] The status that the parties assume in their pleadings as either cooperative with or adversarial to the Plaintiff’s claim is clearly an essential starting point in determining whether there has been a significant alteration in the adversarial relationship.
[28] In the circumstances here, I am satisfied on the evidence before me that the settlement agreement has not changed the landscape of the litigation.
[29] Although R.V. Anderson is not named as a Defendant in the main action, Blackstone has always taken an adverse position in relation to both the Defendant (the Town of Newmarket) and the third party (R.V. Anderson). And while the Town’s Third-Party Claim had sought contribution from R.V. Anderson, both the Town and R.V. Anderson’s relative positions in the main action have not changed as a result of the settlement agreement or any cooperation contemplated therein.
[30] The jurisprudence has expressly affirmed that settlement agreements involving cooperation provisions do not necessarily result in a change in the litigation landscape altering the adversarial relationship between the parties. As stated by Perrell J. in Poirier, 2021 ONSC 1633 at para. 57:
… Further, I agree that a settlement agreement by one litigant to co-operate with another litigant, be that other a friend or a foe, does not necessarily fundamentally alter the litigation landscape or the adversarial orientation of the litigation. [Emphasis added.]
[31] I agree with the Town that the Cooperation Provision here represents a mere procedural facilitation of the attendance of a witness at trial, including proviso for the necessary steps to be taken in advance of same. No paragraphs of the Cooperation Provision contribute to a finding of a change in the adversarial litigation landscape.
[32] The Cooperation Provision does not require or encourage Mr. Collicott to change R.V. Anderson’s position or provide evidence favourable to the Town regarding the outstanding disputed quantities or amounts owed. Paragraph 4(b.) of the Cooperation Provision clearly indicates Mr. Collicott will be summonsed as a witness at trial, requiring him to testify under oath and be bound by said evidence.
[33] The Cooperation Provision does not provide for or require that the Town be satisfied with the evidence of Mr. Collicott for the Minutes of Settlement to be operative, as in Waxman v. Waxman, 2022 ONCA 31124. Similarly, Paragraph 4(e.) of the Cooperation Provision requires R.V. Anderson to make available copies of solely producible documentation, which would (and has been) duly disclosed to Blackstone on receipt.
[34] Mr. Collicott participated in Examinations for Discovery as the representative of R.V. Anderson, and was examined in the presence of former counsel for Blackstone. The transcript of this Examination for Discovery is available to all counsel and forms part of the Case Center trial bundle, rendering Mr. Collicott’s testimony transparent on the record.
[35] As a summonsed witness, Blackstone retains the opportunity to cross-examine Mr. Collicott at trial regarding both his Examination for Discovery evidence as well as the balance of the pleadings and documentation in this matter.
[36] Having regard to the above, I am satisfied that the Minutes of Settlement do not rise to the level of changing entirely the landscape of the litigation in a way that significantly alters the adversarial relationship among the parties to the litigation nor the dynamics of the litigation.
[37] Accordingly, the application is dismissed.
[38] Costs of the motion will be reserved to the outcome of the trial.
Justice C.F. de Sa
Released: January 9, 2025