Of the heels of cases like Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66 and Poirier v. Logan, 2022 ONCA 350 (see my prior posts commenting on these decisions here and here), there seems to be a reflex reaction on the part of non-settling parties to bring motions whenever there is an undisclosed settlement reached during the litigation.
This recently released decision reminds litigants that the non-settling parties still have the burden of establishing that the impugned settlement actually changed the litigation landscape. Indeed, this remains the critical component behind the disclosure requirement because a settlement that changes the litigation landscape results in a Statement of Claim and perhaps the Statement of Defence of the settling defendant(s) no longer fairly representing the case before the parties and before the court, and this cannot be countenanced.
In this recent case, the non-settling parties failed to convince the court that the undisclosed settlement between the Plaintiff and one of the defendants changed the litigation landscape: as such, the claim would continue, unfettered.
The settlement under consideration arose from a real estate deal where the Purchasers were seeking redress against both the Vendor and the real estate broker-of-record for, amongst other things, misrepresentation made during the negotiations. There were cross claims between the Vendor and the broker. Ultimately the Plaintiff purchasers were satisfied that the broker had no culpability, and agreed to release the broker from the action, without costs (the “Settlement”). The Settlement was not disclosed to the remaining parties. The parties eventually proceeded through with discoveries, but the broker was never examined due to the settlement, and the Vendors never pressed for the discovery of the broker despite having a crossclaim against them. The motion to dismiss the claim was brought after the Plaintiff Purchasers set the action down for trial.
Despite the efforts on the part of the Vendors to convince the court that the litigation landscape was changed by the Settlement, the court was not convinced. The Vendors asserted that implicit in the Settlement (even if there was no written agreement) would be some manner of obligation on the part of the Broker’s to give favourable evidence to the Purchasers. The court disagreed based on the evidence from the Purchaser’s lawyer describing how he negotiated the release of the broker based on his view that they had no exposure, and that it was a simple offer to release that was accepted by the broker: no terms for cooperation were discussed or agreed upon.
Against this backdrop, the court concluded that this was:
“a case of a simple settlement agreement. This type of simple settlement agreement has been found by this court to fall outside the immediate disclosure requirement since its terms do not typically entirely change the litigation landscape in a way that significantly changes the adversarial relationship amongst the parties or the “dynamics of the litigation”; see Caroti v. Vuletic, 2021 ONSC 2778; Mann Engineering Ltd. v. Desai, 2021 ONSC 2245, 77 C.P.C. (8th) 430, and Performance Analytics Corp. v. McNeely, 2021 ONSC 8297.
But it is also important to note that caveat presented by the court (at para 46):
“In the event that it ends up that there was some form of cooperation or assistance acquired by the Purchasers from the Brokers as a result of this settlement, then that may lead to grounds for a reconsideration under r. 59.06(2).”
Dussault et al. v. Tong et al., 2022 ONSC 3866
https://www.canlii.org/en/on/onsc/doc/2022/2022onsc3866/2022onsc3866.html