) ) STAMATIS (STEVE) STAMATOPOULOS, NIKOLAOS STAMATOPOULOS, CHRISTOTHEA STAMATOPOULOS, KYRIAKOS STAMATOPOULOS v. STEPHANIE CLARKE, 2013 ONSC 7844

CITATION : Stamatopoulos v. Harris, 2013 ONSC 7844 DIVISIONAL COURT FILE NO.: 444/13 DATE: 20131218 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT BETWEEN: ) ) STAMATIS (STEVE) STAMATOPOULOS, NIKOLAOS STAMATOPOULOS, CHRISTOTHEA STAMATOPOULOS, KYRIAKOS STAMATOPOULOS and STEPHANIE CLARKE Plaintiffs (Moving Parties) – and – RICHARD J. HARRIS and THE REGIONAL MUNICIPALITY OF DURHAM and HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ONTARIO represented by THE MINISTER OF TRANSPORTATION FOR THE PROVINCE OF ONTARIO and STATE FARM INSURANCE Defendants ) ) ) ) ) ) ) ) ))))))))))))) George A.

Bougadis for the Plaintiffs (Moving Parties) Sachin Persaud, for the Defendant Regional Municipality of Durham (Respondent) ) ) ) HEARD: December 9, 2013 at Toronto REASONS FOR DECISION DiTOMASO J. THE MOTION [ 1 ] The Plaintiffs (Moving Parties) seek leave to appeal the decision of The Honourable Justice C. Brown dated July 18, 2013, upholding the decision of Master Dash dated September 14, 2012.

The decisions compelled production of a partially redacted copy of the Mary Carter Agreement entered into by the Moving Parties and the Defendant Richard Harris, (“Harris”) to the Respondent/Defendant, the Regional Municipality of Durham (“Durham”) prior to trial. OVERVIEW [ 2 ] This action arises out of a single motor vehicle accident which occurred on November 5, 2004 at approximately 8:45 p.m. on Regional Road No. 39, in the Regional Municipality of Durham, in the Province of Ontario. The Plaintiff Steve Stamatopoulos was a front seat passenger in a motor vehicle owned and operated by Mr. Harris. Mr.

Stamatopoulos suffered catastrophic personal injury as a result of this accident. [ 3 ] Mr. Stamatopoulos and his family members commenced this action for 11 million dollars in damages plus prejudgment interest and costs against the driver, Mr. Harris and Durham (as the entity with jurisdiction over the road) and Mr. Stamatopoulos’ accident benefit provider, State Farm Insurance. [ 4 ] On or about May 7, 2010, the Plaintiffs and Mr. Harris entered into a Mary Carter Agreement with respect to this action. [ 5 ] On or about May 18, 2010 this action partially settled as against Mr. Harris and State Farm Insurance.

By way of Partial Judgment dated May 18, 2010, judgment was obtained for the Plaintiffs against Mr. Harris, for payments having a funding value of $1,378,000, all inclusive and judgment for the Plaintiffs against State Farm Insurance for the sum of $1,100,000 all inclusive. The Partial Judgment delivered by Wilkins J. also set out numerous other terms and conditions, including but not limited to the non-

disclosure of both the executed Minutes of Settlement and the Agreement. The Partial Judgment also ordered that the cross-claim of Mr.Harris was continued against his Co-Defendant Durham, subject to the executed and sealed Mary Carter Agreement between them datedMay 7, 2010. Durham was fully aware of these settlement amounts. [6] However, Durham brought a motion for production of a redacted copy of the Mary Carter Agreement, which motion washeard before Master Dash. [7] On September 14, 2012, Master Dash released his decision in which he ordered the Plaintiffs and/or Mr.

Harris to produce apartially redacted copy of the Mary Carter Agreement. Durham did not seek a copy of the redacted or un-redacted executed and litigationprivileged Minutes of Settlement, referenced in the Partial Judgment of Wilkins J. dated May 18, 2010. [8] In his Reasons for Decision, Master Dash held that a Settlement Agreement between some but not all parties to a law suitchanges the adversarial orientation or the landscape of the action. Settlement Agreements such as Mary Carter Agreements are anexception to settlement privilege.

Upon review of the Partial Judgment, Master Dash determined that the Partial Judgment did notadequately disclose the true adversarial orientation of the Plaintiffs and Mr. Harris and ordered the production of a partially redactedcopy of the Mary Carter Agreement to Durham. [9] The Moving Parties appealed the decision of Master Dash to a judge of the Superior Court of Justice which Appeal washeard before The Honourable Madam Justice C. Brown. The appeal was heard by Justice Brown on March 28, 2013.

She released herdecision regarding the Appeal on July 18, 2013 where she upheld the decision of Master Dash and ordered the production of a partiallyredacted copy of the Mary Carter Agreement after reviewing that Agreement. She dismissed the Plaintiffs’ appeal. In arriving at herdecision, Justice Brown concluded: (

a) Master Dash properly recognized the balance between settlement agreement privilege and the need to ensure the fairness,integrity, and justice of the court process in the interests of all parties concerned. Master Dash properly recognized that productions ofall or part of the actual Agreement is a matter of Court discretion and that, if production is ordered, non-relevant or otherwise privilegedportions may be redacted. In balancing privilege against the interest of justice, Master Dash was circumspect in ordering disclosure ofonly those limited portions of the Agreement that could have an effect on the litigation process in both the Pre-Trial and Trial stages; (

b) Master Dash did not misapprehend the law or facts. He correctly considered, analyzed, and applied the relevant law to thefacts of this action, as it relates to Mary Carter like Agreements, confidentiality and disclosure; (

c) Master Dash properly analyzed the effects of the settlement and Partial Judgment in changing the adversarial orientation andproperly ordered partial disclosure of the Agreement to permit Durham to fairly understand the changed adversarial alliances andchanged litigation landscape. The paragraphs in the Agreement that Master Dash ordered to be disclosed to Durham are relevant to a fullunderstanding of the changed adversarial landscape and an understanding of the new issues, interests, and alliances to be met; (

d) Master Dash’s decision is consistent with the caselaw in Ontario; and (

e) Master Dash did not improperly exercise his jurisdiction. [10] On July 12, 2013, well before Justice Brown released her Reasons for Decision, dated July 18, 2013, the Plaintiffs’ counselprovided to Justice Brown, in order to assist the court’s deliberations, a copy of the Supreme Court of Canada’s decision in SableOffshore, 2013 SCC 37 , [2013] S.C.J. No. 37, dated June 21, 2013, dealing with the relevant issue of disclosure of thesettlement amounts in Pierringer Agreements.

This decision was under reserve at the Supreme Court of Canada when the Plaintiffs’Appeal was heard on March 28, 2013 before Justice Brown. [11] On July 19, 2013, Justice Brown’s Judicial Assistant acknowledged that Plaintiffs’ counsel correspondence dated July 12,2013 along with a copy of the Sable Offshore decision had been received by Justice Brown prior to her rendering her decision. However,Justice Brown made no reference to the Sable Offshore decision in her Reasons for Decision dated July 18, 2013.

THE ISSUE [12] The issue requiring determination is whether leave to appeal should be granted to the Moving Parties. POSITIONS OF THE PARTIES Position of the Moving Parties [13] The Plaintiffs submit that they have satisfied the test for leave to appeal as set out in rule 62.02(4)(

a) and (

b) of the Rules ofCivil Procedure. Having satisfied the test for leave to appeal, leave to appeal should be granted. State Farm Insurance has settled andtakes no position. Mr. Harris supports the position taken by the Plaintiffs. Position of Durham [14] Durham submits that both Master Dash and Justice Brown were correct in arriving at their respective decisions. In short, theMoving Parties have not satisfied the applicable tests for leave to appeal as set out in rule 62.02(4)(

a) and (b). Accordingly, Durhamsubmits that leave to appeal should not be granted.

ANALYSIS Leave to Appeal Required [15] An Appeal lies with the Divisional Court from an interlocutory Order of a Judge of a Superior Court of Justice with leave.[1] Test on Motions for Leave to Appeal [16] The test for leave to appeal is governed by rule 62.02(4) of the Rules of Civil Procedure, which sets out two independentgrounds upon which leave to appeal an interlocutory Order may be granted: (

a) there is a conflicting decision by another Judge or Court in Ontario or elsewhere on the matter involved in the proposedappeal and it is, in the opinion of the Judge hearing the motion, desirable that leave to appeal be granted; or (

b) there appears to the Judge hearing the motion good reason to doubt the correctness of the order in question and the proposedappeal involves matters of such importance that, in his or her opinion, leave to appeal should to be granted.[2] [17] Leave to appeal may be granted if either of the above grounds is satisfied.

The test on motions for leave to appeal under rule62.02(4) of the Rules of Civil Procedure consists of two disjunctive branches and, in turn, each branch has two conjunctiverequirements.[3] [18] In terms of the first requirement of the first branch of the test on motions for Leave to Appeal under Rule 62.02(4)(a), adecision will be a “conflicting decision” within the meaning of Rule 62.02(4)(

a) of the Rules of Civil Procedure if a party candemonstrate a difference in the principles chosen by a Judge to guide the exercise of his or her discretion.[4] [19] In terms of the second requirement of the first branch of the test on motions for Leave to Appeal under rule 62.02(4)(a), wherethese conflicting decisions on the

interpretation of a matter of law are of general importance, the matter should be referred to theDivisional Court to resolve any apparent conflict.[5] [20] In terms of the first requirement of the second branch of the test on motions for Leave to Appeal under Rule 62.02(4)(b), amoving party does not have to convince the Court that the decision it seeks to appeal from is wrong or even probably wrong. It issufficient for the moving party to show the Court that there is good reason to doubt the correctness of the decision.

Thus, the Courtshould ask itself whether the correctness of the decision in question is open to very serious debate and, if so, is it a decision that warrantsresolution by a higher level of judicial authority.[6] [21] In terms of the second requirement of the second branch of the test on motions for leave to appeal under rule 62.02(4)(b),“matters of such importance” are not matters of particular importance relevant only to the litigants.

General importance relates to mattersof public importance and matters relevant to the development of the law and the administration of justice.[7] [22] Again, the issue on this motion is whether the Moving Parties have fulfilled the requirements for leave to appeal to theDivisional Court of the decision of Justice Brown requiring production of a redacted copy of the Mary Carter Agreement prior to trial.

The First Test – rule 62.02(4)(a) – conflictingdecisions/desirability that leave to appeal be granted. [23] The Plaintiffs’ submit that there are conflicting decisions by other courts in Ontario on the issue of disclosure of Mary CarterAgreements to non-settling parties prior to trial which is the subject matter of the proposed appeal in this action. Conversely, Durham isnot aware of any decision where production of the terms of a Mary Carter Agreement was refused when sought. Durham takes theposition that there are no conflicting decisions.

Further, it is argued that the Moving Parties have not shown any difference in principlesapplied by Justice Brown and Master Dash and those used in other decisions on the issue of production. [24] In Pettey v. Avis Car Inc., (ON SC), [1993] O.J. No. 1454 (Gen.Div.), (“Pettey”), the Court stated that theexistence of a Mary Carter-like Agreement must be disclosed to the parties and the court as soon as such an agreement is made.

Inparticular, the Court stated: The non-contracting Defendants must be advised immediately because the agreement may well have an impact on the strategy and lineof cross-examination to be pursued and evidence to be led by them. The non-contracting parties must also be aware of the agreement, sothat they can properly assess the steps being taken from that point forward by the Plaintiff and the contacting Defendants.

Mostimportantly, the Court must be informed immediately, so that it can properly fulfil its role in controlling its process in interests of fairnessand justice to all parties”.[8] [25] At para. 34, Ferrier J. held: Excepting the dollar amounts, it is rather obvious that all of the terms of the Agreement must be disclosed, especially for the purpose of

enabling the court to control its own process. [26] At para. 35, he went on to state: The disclosure of the dollar amounts is patently in the discretion of the court. In the case at bar, as above noted, a copy of the full text ofthe Agreement, including the dollar amounts, was sealed and made an exhibit in the trial, so that full disclosure was entirely within thecourt’s control. [27] The decision of the Ontario Court of Appeal in Laudon v. Roberts, 2009 ONCA 383 , [2009] O.J.

No. 1824 cited thedecision in Pettey and confirmed that the existence of a Mary Carter Agreement is to be disclosed to the Court and to the other parties tothe litigation as soon as it is concluded because the existence of such an Agreement significantly alters the relationship among the partiesto the litigation.[9] [28] Laudon is cited in the Ontario Court of Appeal decision of Aecon Buildings, a Division of Aecon Construction Group Inc. v.Brampton (City), 2010 ONCA 898 , [2010] O.J. No. 5630 at paras. 13 and 14. The disclosure of the existence of suchagreements is necessary and obvious.

Such agreements change entirely the landscape of the litigation.

The obligation is that of theparties who enter into such agreements to immediately disclose the fact. [29] The Moving Parties submit that these cases stand for the proposition that while it is open to parties to enter into Mary Carter-type Settlement Agreements, the obligation upon entering into such Agreements is to immediately inform all other parties to thelitigation and the court of the existence of such an Agreement, but not its content or actual terms. (emphasis added) [30] A line of cases running contrary to Pettey, Laudon and Aecon was cited by counsel for the Moving Parties. [31] In Noonan v.

Alpha-Vico, 2010 ONSC 2720 , [2010] O.J. No. 2807 (SCJ), (“Noonan”), Master MacLeod ruled,contrary to Laudon, supra, that the settlement amounts received in partial settlement must be disclosed to non-settling Defendants assoon as they can be ascertained. Master MacLeod further ruled that the actual terms of the Mary Carter-like Agreements may need to beimmediately disclosed to the non-settling Defendants as settlement privilege does not extend, in Master MacLeod’s view, to the executedsettlement agreements.

Master MacLeod stated in his decision that he would not rule out the possibility that in certain circumstancesthere may be aspects of a settlement agreement that must remain privileged. In Noonan v. Alpha-Vico, Master MacLeod ordered that thePlaintiffs produce the actual Minutes of Settlement, in their entirety, along with the approval Order, resolving the companion action, tothe non-settling parties.[10] [32] In Moore v. Bertuzzi,2012 ONSC 597 , [2012] O.J.

No. 665 (SCJ), Master Dash, again, contrary to Laudon, supra,ordered immediate production of the partially redacted Mary Carter-like settlement Agreement to the non-settling party on the groundsthat the agreement had changed the litigation landscape, altered the relationships among the parties from that set out in the pleadings,and changed the adversarial alignments, which could have a significant impact on the conduct of litigation and the pre-trial process.[11] [33] In Moore v.

Bertuzzi 2012 ONSC 3248 (SCJ) (“Bertuzzi”), Justice Perell upheld Master Dash’s decision on the issue of theimmediate disclosure of the terms of Mary Carter-like Agreements. Justice Perell, contrary to Laudon, supra, assumed that theagreement in question was a privileged communication, but also found that an exception applied to settlement privilege in thecircumstances.

In terms of what specifically needed to be disclosed, Justice Perell indicated that he saw “no reason not to disclose thecomplete details of the proportional sharing between the settling defendants”.[12] [34] Accordingly, the Plaintiffs submit that there are several conflicting Court decisions, including decisions of the Court ofAppeal for Ontario, in which the Court chose and applied different principles than did the motion judge when deciding the issue ofdisclosure of the Mary Carter-like Settlement Agreements.

In Pettey, supra, Laudon, supra, and Aecon, supra, the Court decided that themere existence of a Mary Carter agreement, but not its content or actual terms, was to be disclosed as soon as it was concluded to boththe Court and to the other parties to the litigation. [35] The Plaintiffs further rely on Sable Offshore Energy Inc. v.

Ameron International Corp. 2013 SCC 37 , [2013] SCJNo. 37, (“Sable Offshore”), in which the Supreme Court of Canada allowed the appeal by the Plaintiff and overturned the decision of theNova Scotia Court of Appeal, which ordered that the settlement amounts in a Pierringer Agreement be disclosed to the non-settlingDefendants prior to trial. [36] In Sable Offshore, the Supreme Court of Canada applied and/or adopted the following legal principles when deciding on theissue of disclosure of the settlement amounts in the Pierringer Agreement to the non-settling Defendants: (

a) the settlement privilege extends to concluded settlement agreements, such as Pierringer agreements, and their content; (

b) to come within exceptions to the settlement privilege, a non-settling Defendant must show that, on balance, a competingpublic interest outweighs the public interest in encouraging settlement; (

c) knowing the settlement amounts might allow the Defendants to revise their estimate of how much they want to invest in thecase, but this along does not rise to a sufficient level of importance to displace the public interest in promoting settlements; (

d) encouraging the initial settlement is palpably worthy of more protection than the speculative assumption that the non-settlingDefendants will only follow if they know the amounts of the initial settlement; (

e) if the settling parties enjoy an advantage over non-settling parties, it is one for which they have bargained. The court should

hesitate to expropriate that advantage by ordering disclosure at the instance of non-settling parties, intransigent or otherwise; and (

f) a proper analysis of a claim for an exception to settlement privilege does not simply ask whether the non-settling Defendants derive some tactical advantage from disclosure, but whether the reason for disclosure outweighs the policy in favour of promoting settlement. [13] [ 37 ] The Plaintiffs submit that a Mary Carter-like Agreement allows one or more Defendants, but not all, in a multi-party proceeding, to settle with the Plaintiff.

However, the settling Defendants remain in the action and have an interest in the outcome of the litigation due to the fact that the settling Defendants could be subject to a contribution claim from the non-settling Defendants on the basis of joint and several liability under the Negligence Act .

Accordingly, unlike in Pierringer Agreements, a non-disclosure of the actual terms of a Mary Carter Agreement to which the settlement privilege extends (but not the settlement amounts), until the commencement of Trial provides the settling parties with a tactical advantage, which encourages settlement and is consistent with the Supreme Court of Canada’s

interpretation of the public policy in favour of promoting settlement. [ 38 ] The Plaintiffs further submit that applying the principles in Sable Offshore , (not considered or not properly considered by the motion judge), the actual terms of Mary Carter Agreements (but not the settlement amounts), giving tactical advantage to the settling parties and, therefore, promoting settlement, should not be disclosed to the non-settling Defendants.

This approach would be particularly appropriate in cases where sufficient information is disclosed for the non-settling Defendants to be aware of the claims they must defend and of the overall amount that the Plaintiff is seeking for Rule 49 trial purposes and, in general, to know and present the Defendant’s case.

The possible reasons for disclosure do not outweigh the policy in favour of promoting settlement. [ 39 ] The Plaintiffs further submit that, in light of the importance and frequent use of the Mary Carter Agreements as a useful and practical “tool” to encourage settlement, the above-noted conflicting decisions from various levels of the courts on the

interpretation of a matter of law in relation to the issue of the extent of the immediate disclosure of Mary Carter Agreements to non-settling parties are of general importance. Consequently, it is desirable that this matter should be referred to the Divisional Court to resolve the apparent conflict. [ 40 ] Durham submits that there is no difference in the principles applied by Justice Brown and Master Dash and those used in other decisions. Durham asserts that the caselaw cited by the Moving Parties does not demonstrate a differing result where production of the terms of Mary Carter Agreements is sought.

Durham submits that in order to grant leave under rule 62.02(4) (a), it is not enough for a Moving Party to demonstrate that courts have exercised their discretion to produce different results.

It is necessary to demonstrate a difference in the principles chosen as a guide to the exercise of such discretion. [14] It is submitted that the Moving Parties have not shown any difference in principles applied by Justice Brown and Master Dash and those used in other decisions on the issue of production. [ 41 ] I find that there are conflicting decisions with one line of authority obligating a contracting party to disclose the existence of a Mary Carter Agreement as soon as such an Agreement is made.

Those cases do not extend to imposing an obligation to disclose settlement figures or other terms and conditions of the Agreement to the non-contracting party or parties prior to trial. [ 42 ] In contrast with this line of authority is a more recent line of authority which not only addresses the immediate disclosure prior to trial to the non-settling party or parties of the existence of the Mary Carter Agreement but also the production of the underlying actual Minutes of Settlement to non-settling parties (in Noonan ) or (in Moore ) the immediate production of the partially redacted Mary Carter Agreement to the non-settling party on the grounds that the agreement had changed the litigation landscape, alter the relationships among the parties from that set out in the pleadings, and change the adversarial alignments, which could have a significant impact on the conduct of litigation and the pre-trial process. [ 43 ] Justice Perell upheld Master Dash’s decision in Moore on the issue of the immediate disclosure of the terms of a Mary Carter Agreement.

He assumed that the Agreement in question was a privileged communication but found that an exception applied to settlement privilege in the circumstances.

Justice Perell saw “no reason not to disclose the complete details of the proportional sharing between the settling Defendants” in that case. [ 44 ] I find that there are conflicting decisions that deal with the issue of whether not only the mere existence of a Mary Carter Agreement ought to be immediately disclosed but also whether terms contained in that Agreement, the settlement figures, a partially redacted copy of the Agreement, and/or the underlying Minutes of Settlement to be produced to the non-settling party prior to trial.

Counsel for the Moving Parties query what would be the use of Mary Agreements as a litigation “tool” to promote settlements if such complete disclosure prior to trial became the practice. The question is an entirely valid one. [ 45 ] I am satisfied that the Moving Parties have satisfied the first distinct branch of the test on motion for leave to appeal under rule 62.02(4) (a).

Further, I am also satisfied that it is desirable that leave to appeal be granted as the issue of production and the extent of the immediate disclosure of the contents of Mary Carter Agreements to non-settling parties prior to trial is of general importance and that the matter ought to be referred to the Divisional Court to resolve the apparent conflict. The Second Test – rule 62.02(4)(b) – reason to doubt correctness/general importance [ 46 ] The position of Durham is that the Moving Parties cannot meet the burden on this motion for leave to appeal.

The motion judge’s decision is correct and the matter of importance relates only to the parties. There is no basis upon which to grant leave. [ 47 ] With respect, I do not agree. I find that the correctness of the decision is open to “very serious debate”. There is good reason to doubt the correctness of the order of the motion judge which required not only the immediate disclosure of the existence of the Mary Carter Agreement to non-settling parties but also the immediate disclosure or limited disclosure of the terms of the Agreement prior to

trial. Open to serious debate is whether the motion judge failed to consider or properly consider the legal principles which were applied and/or approved by the Court (General Division) in Pettey and the Court of Appeal in Laudon and Aecon with respect to the issue of disclosure of Mary Carter Settlement Agreements in advance of trial and at the complete discretion of the trial judge. [ 48 ] Further, the motion judge did not consider or properly consider the Supreme Court of Canada decision in Sable Offshore .

The Court in that case allowed the appeal by the Plaintiff and overturned the decision of the Nova Scotia Court of Appeal which had ordered that the settlement amounts in a Pierringer Agreement, which is akin to a Mary Carter Agreement, be disclosed to the non-settling Defendants prior to trial.

It is submitted that the motion judge failed to undertake a proper analysis of a claim for an exception to settlement privilege in this matter and, therefore, failed to recognize that the reasons for disclosure of the terms of the Mary Carter Agreement in the case at bar do not outweigh the policy in favour of promoting settlement. [ 49 ] It has long been recognized in Ontario that there are both legal, ethical and sound public policy reasons associated with the use of Mary Carter Agreements.

Specifically, there are tactical advantages that the settling parties obtained and have bargained for and with due exchange of consideration. As a result of such Agreements, public policy of promoting the settlement of disputes especially in complex cases is furthered.

Giving rise to serious debate is whether the immediate disclosure of the partially redacted Mary Carter Agreement prior to trial will, ultimately, result in prejudice to the settling Defendants and, as asserted by the Moving Parties, “in the improper expropriation of the advantage that the settling parties enjoy over non-settling parties as a direct result of their bargain”. [ 50 ] I am satisfied that the Moving Parties have satisfied the first part of the test under rule 62.02(4)(b).

There is reason to doubt the correctness of the motion judge’s decision. [ 51 ] In respect of the second branch of the test, I am also satisfied that the immediate disclosure of the terms of a Mary Carter Agreement to a non-settling Defendant prior to trial involves a matter of general public importance and not just a matter relevant as between the parties. The issue is relevant to the development of the law and the administration of justice.

The issue impacts directly and significantly upon the use of Mary Carter Agreements as an effective litigation tool and as such, is of general importance to counsel and litigants at large. Therefore, the Moving Parties have satisfied the greater importance branch of the test. I conclude that the Plaintiffs have satisfied both requirements of the test as set out on motions for leave to appeal under rule 62.02(4) (b). DISPOSITION [ 52 ] There shall be an Order granting the Moving Parties (Plaintiffs) leave to appeal the Order of Justice Brown dated July 18, 2013. The parties have agreed on costs. DiTOMASO J.

Released: December 18, 2013