Today’s blog is authored by Chigozie Enwereuzo, student-at-law with Hull & Hull LLP

A defendant involved in multi-party litigation may choose to settle the plaintiff’s claim where the other parties are not so disposed. The defendant can do so by entering into what is known as a Pierringer Agreement (“the Agreement”).

The Agreement makes it possible for the settling defendant to withdraw from the litigation while the plaintiff’s action continues against the non-settling defendant(s). The Agreement is useful as it encourages the partial settlement of claims and may limit a party’s risk at trial. The Agreement was originally developed in the United States to deal with some of the obstacles to settlement that were commonly seen in multi-party litigation.

Despite its usefulness, the Agreement changes the adversarial landscape of litigation for the non-settling defendant(s). Accordingly, the party entering into the Agreement is obliged to disclose it immediately to the court and other parties to the litigation. This legal requirement is usually referred to as the “Rule from Handley Estate” (“the Rule”) (see: Handley Estate v. DTE Industries Limited, 2018 ONCA 324).

The Ontario Court of Appeal recently applied the Rule in CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467 CanLII. This was an appeal that raised the issue of the scope and application of the Rule.

The appeal was from the order of the motion judge dismissing the motion of the appellant M.C and the motion of Blu Stella Consulting Group Inc. (“Blu Stella”) and F.G to stay or dismiss the action of the respondent, CHU de Québec-Université Laval, based on the respondent’s failure to immediately disclose the terms of a Pierringer agreement between it and two other defendants in this action, Tree of Knowledge International Corp. (“TOKI”), and Tree of Knowledge Inc. (“TOK US”).

The Court of Appeal concluded that, in the context of the factual dynamics of the case leading up to the plaintiff’s motion to approve the Agreement, the respondent had immediately disclosed the “essential terms” of the Agreement that changed the litigation landscape; and the motions judge correctly concluded that not all terms of the Agreement had to be disclosed. Although the Court found that the term relating to cooperation was not immediately disclosed in plaintiff’s counsel’s initial email advising of the partial settlement, it was disclosed soon after; and, in any event, cooperation between settling parties is generally an inherent feature of Pierringer agreements.

It is important to note that the Court of Appeal’s holding that “not all terms of the Pierringer Agreement had to be disclosed” was affirmed by the Supreme Court of Canada in Sable Offshore Energy Inc. vs. Ameron International Corp., 2013 SCC 37. In that case, the highest court of the land decided that a settling defendant is not required to disclose the quantum of the settlement to a non-settling defendant.

Thank you for reading!

Chigozie Enwereuzo, Student-at-Law