Over the past several years, much has been made in
As a reminder to readers, as reaffirmed in
Understanding the breadth of these requirements and how the Court interprets this duty is therefore also of significant importance. In that regard, recently in Bennington
Background
Bennington
Bennington's claim related to equipment leases and monetary advances made to
For its part, Heffner alleged that it also leased equipment and advanced loans to
Mortgages and Property Involvement
A focal point of the disputes was a property located in
Settlement Efforts
Over the course of litigation, as is often the case, the parties engaged in settlement discussions, with a pivotal issue being an alleged undocumented agreement among the plaintiffs (Bennington, Heffner, and others) not to settle with
Given the nature of this particular "settlement" agreement,
The Superior Court's Decision
The issues before the motions judge at the
- Was there a settlement agreement;
- If so, did it change the litigation landscape significantly; and
- Was the agreement immediately disclosed.
Did a settlement agreement exist?
Heffner contended there was no formal settlement agreement, maintaining that while creditors could negotiate independently with
Further, the Court found that this agreement, while not formally documented, was sufficiently evidenced by the parties' actions and statements so as to constitute a "settlement agreement" for the purpose of the test.8
Did the agreement change the litigation landscape?
The critical portion of the
Given the generality of the language in the phrase "significantly altered the litigation landscape", the Court considered both the values that the rule is meant to advance, as well as the fact-specific nature of the inquiry. In this regard, the Court concluded that the factors which assist in determining whether a settlement agreement needs to be disclosed immediately include the following:
- the configuration of the litigation;
- the claims between the parties;
- the relationship between the parties and their orientation in the litigation;
- the terms of the agreement;
- whether the agreement is inconsistent with the pleadings or with the position(s) taken during litigation;
- whether the terms of the agreement alter the apparent relationships between the parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation;
- whether the agreement changes the adversarial position of the parties into a cooperative one whereby the party is incentivized to cooperate with a former adversary;
- whether the agreement impacts the litigation strategy of the non-settling party; and
- the values the rule is meant to advance:
- preserving fairness to the parties;
- preserving the integrity of the court process; and
- allowing the court to know the reality of the adversity between the parties.9
Ultimately, the Court concluded that the agreement among the plaintiffs did not fundamentally alter the adversarial relationship among the parties in a way that would significantly change the dynamics of the litigation. On this basis, it did not meet the threshold that would require immediate disclosure.
To the contrary, the plaintiffs' actions - while coordinated - did not convert their relationship with
Was the agreement disclosed immediately?
Notwithstanding that the Court considered disclosure was not necessary, it nevertheless considered (presumably in the interest of providing fulsome reasons on appeal) the allegations made that the agreement was not disclosed immediately.
With respect to
The Court stressed that the agreement did not mislead the court or disadvantage
The Court of Appeal's Decision
On appeal,
The Court did not provide precise definitions for these terms as advanced by
In rendering its decision, the Court considered the purpose of the disclosure rule, emphasizing that it is premised on ensuring the litigation process remains fair and transparent, particularly when agreements may potentially alter the strategic behaviour of parties from being opponents to collaborators.12
The core of the Court's analysis centered on the motions judge's application of these principles to the facts at hand, particularly among the respondents (Heffner and Bennington) and a third-party creditor.
The Court reviewed the motion judge's conclusion that the settlement agreement did not require immediate disclosure, observing that his conclusion was based on the finding that the agreement did not compel the respondents to support each other beyond the cooperation typically expected in litigation, nor did it modify their adversarial relationship with
Further, the Court found no palpable and overriding error in the motion judge's finding that the respondents were not adverse to one another and that their collective strategy did not significantly alter the litigation landscape against
In the result, the Court's agreement with the motions judge demonstrated that not all agreements among litigating parties necessitate disclosure, let alone immediate disclosure. Rather, the agreements that require such disclosure remain strictly those that transform the litigation landscape in such a way that significantly alters the dynamics of litigation do.
This distinction is vital for maintaining the balance between the strategic freedom of parties to negotiate and settle disputes and the overarching need to ensure fairness and transparency in the judicial process. It also furthers the Court's general position that the rule, which strictly applied with no discretion, is only to be applied in narrow circumstances.
Commentary
As noted above, the
Both the Superior Court and
Autonomy in litigation is essential for allowing parties to effectively manage their strategies within the confines of the Rules of Civil Procedure and established jurisprudence. A lack of autonomy could complicate litigation and settlement processes, potentially hindering cooperation and collaboration among parties and affecting the overall possibility of reaching settlements.
As well, in the construction context, particularly as it relates to lien proceedings that involve multiple claimants and are intended to be conducted as a form of class proceeding, Bennington offers important guidance on the management of settlement agreements and collective bargaining strategies - which is an issue that comes up regularly in such proceedings.
Construction projects often involve a web of contractual relationships, with numerous parties across several levels of the construction pyramid, each potentially holding lien rights in the event of disputes. Given the complexity of these relationships, the principles outlined in this decision reiterate the importance of transparency and the potentially harsh consequences of undisclosed settlement agreements.
That said, this decision also clarifies that such agreements require disclosure only when they transform the litigation landscape in a manner that might disadvantage other parties or mislead the court. This creates a nuanced threshold for determining when the strategic cooperation among lien claimants crosses into territory that could potentially affect the fairness and integrity of the judicial process.
Construction stakeholders often enter into various forms of agreements during the course of litigation, including those aimed at coordinating their approach to settlement negotiations or litigation strategies, as well as agreements by mid-level claimants to settle with their subtrades and take an assignment of the subtrades' claims. Ironically, rather than potentially "fetter, clog, or frustrate" settlement, such a scenario would arguably facilitate settlement among the remaining parties (insofar as there are fewer of them) and would therefore seem to be on-side of the appellant's proposed expansion of the immediate disclosure rule.
On the other hand, the
Ultimately, because the test for disclosure remains somewhat vaguely worded and heavily fact-dependent, parties will need to remain mindful of whether their settlements meet the threshold for disclosure. While the Court has refrained from expanding the rule to include agreements that merely complicate settlement efforts, parties are still required to disclose any agreements that significantly alter the adversarial dynamics of a case in a way that could disadvantage other parties or mislead the court. It also remains open that the Court may modify the test in future cases, if the fact scenario withstands scrutiny and provides sufficient policy reasons to justify such an expansion.
On this basis, construction industry participants must remain vigilant in settlement processes and continue to carefully consider how their agreements affect the overall litigation landscape, and whether they could be seen as transforming adversarial relationships in a manner that necessitates disclosure. In this regard, we recommend reaching out to qualified counsel to work through settlement agreements and negotiations - particularly when engaged in settlement based processes such as negotiation or mediation.
Footnotes
1 2024
2 2023 ONSC 2742 at paras 8-11 [Bennington].
3 Ibid at para 12.
4
5 Bennington, supra note 2 at para 32.
6 Ibid at para 33.
7 Ibid at para 35.
8 Bennington, supra note 2 at paras 32-38.
9 Ibid at paras 39-69.
10 Ibid at para 74.
11 Bennington
12 Ibid at para 14.
13 Ibid at para 16.
14 Ibid at para 17.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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