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Disclosing Agreements that “Change the Litigation Landscape”

In a series of recent decisions by the ONCA, the principle as set out in Handley Estate v. DTE Industries Limited, concerning abuse of process, occuring where parties to litigation fail to immediately disclose an agreement which changes the litigation landscape, has been endorsed and further clarified.

These disclosure requirements do not apply to any agreement that effects the relationship between the litigation parties or changes the litigation landscape, but rather necessitates a higher threshold that requires that the settlement “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.”[1]

In their analysis, courts must also consider the “reality of the adversity between the parties” and whether an agreement changes either “the dynamics of the litigation” or the “adversarial orientation”, such as changing the relationship between two parties from an adversarial one into a co-operative one.[2]

To this end, the recent decision by the ONCA in CHU de Québec-Université Laval v. Tree of Knowledge International Corp. sets out 8 principles relating to the abuse of process that arises from a failure to immediately disclose an agreement which changes the litigation landscape:

  1. There is a “clear and unequivocal” obligation of immediate disclosure of agreements that “change entirely the landscape of the litigation”. They must be produced immediately upon their completion;
  2. The disclosure obligation is not limited to pure Mary Carter or Pierringer agreements. The obligation extends to any agreement between or amongst the parties “that has the effect of changing the adversarial position of the parties into a co-operative one” and thus changes the litigation landscape;
  3. The obligation is to immediately disclose information about the agreement, not simply to provide notice of the agreement, or “functional disclosure”;
  4. Both the existence of the settlement and the terms of the settlement that change the adversarial orientation of the proceeding must be disclosed;
  5. Confidentiality clauses in the agreements in no way derogate from the requirement of immediate disclosure;
  6. The standard is “immediate”, not “eventually” or “when it is convenient”;
  7. The absence of prejudice does not excuse a breach of the obligation of immediate disclosure; and
  8. Any failure to comply with the obligation of immediate disclosure amounts to an abuse of process and must result in serious consequences… The only remedy to redress the abuse of process is to stay the claim brought by the defaulting, non-disclosing party. This remedy is necessary to ensure the court is able to enforce and control its own processes and ensure justice is done between the parties.

In the face of these recent decisions setting out the need to immediately disclose an agreement that changes the litigation landscape and the substantial consequence of having a matter permanently stayed where such immediate disclosure is not provided, parties must proceed extremely cautiously when entering into any form of agreement that can effect the landscape of litigation.

[1] Poirier v. Logan, 2022 ONCA 350 (CanLII) at para 47.

[2] Handley Estate v. DTE Industries Limited, 2018 ONCA 324 at paras. 39-41.


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