Justice Perell’s reasons in Poirier v. Logan outline the importance of prompt disclosure of settlement agreements that change the landscape of the litigation.
In this action, the Plaintiff had made a Settlement Agreement with one of the Defendants, but not all of them. Neither Plaintiff’s counsel nor the Defendant in question immediately disclosed the settlement to the remaining co-Defendants.
Relying on the Court of Appeal’s decisions in Laudon v. Roberts, Handley Estate v. DTA Insutries Limites and Aecon Buildings v. Stephenson Engineering Limited, the co-Defendants/Cross claimants, brought a motion to have the Plaintiff’s action dismissed as an abuse of process.
Justice Perell agreed, granting the motion, and dismissing the Plaintiff’s action.
In October of 2019, counsel for the Defendant, Mr. Friedberg, and counsel for the Plaintiff, Mr. Poirier, had settlement discussions. On October 24, 2019, without explanation to the co-Defendants and without disclosing the settlement discussions, counsel for Mr. Friedberg advised counsel for the co-Defendants that she and Mr. Poirier’s counsel had agreed to adjourn the examinations.
On October 28, 2019, counsel for Mr. Poirier sent counsel for Mr. Friedberg an email outlining what was discussed and stating that they will confirm an agreement to not continue against Mr. Friedberg and that the action will be dismissed or discontinued, without costs. Mr. Poirier was to provide a Full and Final Release to Mr. Friedberg.
Later that day, counsel for Mr. Poirier advised the co-Defendants’ counsel that the examination of Mr. Friedberg, scheduled for the next day, would not be proceeding. No explanation was provided.
On October 30, 2019, counsel for Mr. Poirier and counsel for Mr. Friedberg finalized the settlement.
On November 5, 2019, counsel for Mr. Poirier asked counsel for Mr. Friedberg not to write to the co-Defendants and to wait for further instruction.
On April 30, 2020, in an email message to the co-Defendants, counsel for Mr. Poirier disclosed that Mr. Poirier had settled with Mr. Friedberg. The terms of the settlement were not disclosed. That evening, counsel for the Goldstein co-Defendants wrote to counsel for Mr. Poirier and asked when the Settlement Agreement had been reached. They requested that documentation evidencing the Settlement Agreement be produced immediately.
On May 4, 2020, counsel for Mr. Poirier sent an email to counsel for the co-Defendants advising that Mr. Poirier and Mr. Friedberg had reached a settlement on October 30, 2019.
The law on Disclosure of Settlement Agreements
The law with respect to disclosure of settlement agreements states that when a Plaintiff settles with one or more of the Defendants but not all of them, and the settlement changes the adversarial orientation of the proceeding, the Plaintiff must immediately disclose to the non-settling Defendants that (a) there is a settlement and (b) the terms of the settlement that change the adversarial orientation of the proceeding.
In Pettey v. Avis Car Inc., Justice Ferrier explained why the settlement terms must be disclosed and how the adversarial orientation of a lawsuit can be changed by a settlement. He stated:
“The agreement must be disclosed to the parties and to the court as soon as the agreement is made. The non-contracting [non-settling] 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 [settling] 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
Justice Perell stated that both the existence of the Settlement Agreement and the terms of it, other than the terms that do not affect the adversarial orientation of the lawsuit, must be disclosed. The failure to disclose immediately or the failure to disclose the terms of a settlement that changes the proceeding’s adversarial orientation is an abuse of process for which the only remedy is the dismissal of the proceeding.
Justice Perell’s Reasons
Justice Perell stated that he agrees with the Plaintiff’s argument that not all settlement agreements require immediate disclosure. Justice Perell agrees 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. A settlement agreement may and most often will change the litigation landscape but whether that change actually occurs will ultimately depend on the circumstances of each particular case. Justice Perall believes that the agreement in this case, between Mr. Poirier and Mr. Friedberg did fundamentally change the litigation landscape. He states that there is little reason not to disclose a settlement agreement immediately. The risks of intentionally or unintentionally keeping a settlement agreement a secret are far too risky.
In this case, Plaintiff’s counsel was wrong to write to counsel for Mr. Friedberg and state that they did not want the co-Defendants to become aware of the Settlement Agreement yet. The responsibility for disclosure was on Mr. Poirier’s counsel, and there was no justification for letting the matter slip through the cracks. The Settlement Agreement was disclosed six months later.
The circumstances of each case will reveal whether the litigation landscape has actually changed as a result of a settlement agreement. In this case, Mr. Friedberg’s role was fundamental to the litigation. Mr. Friedberg was a potentially culpable party who was being let out of the main action, and the decision to settle was consequential to the litigation landscape.
Mr. Friedberg had agreed to deliver an affidavit that was vetted by Plaintiff’s counsel as part of the settlement. This affidavit would alter the strategy and potential outcome of the cross claims and would have assisted the Plaintiff. This is without a doubt a fundamental change in the litigation landscape.
Justice Perell stated that it was the responsibility of the Plaintiff in this case to disclose the Settlement Agreement, and as a result, he granted the motion and dismissed the action.