Executive Summary: Key Legal and Evidentiary Issues

• Pierringer settlement agreements between the plaintiffs and each third party defendant were approved, subject to conditions.

• Citibank Defendants’ consent to settlement was contingent on retaining discovery rights, including examining Michael Yurkovich as a party.

• Third party defendants are required to maintain obligations for documentary production and examination as if they remained parties.

• No issue of late disclosure or prejudice to the litigation position of the defendants was found or alleged.

• Fairness considerations were heightened due to the non-arm’s-length relationship between plaintiffs and third parties, particularly involving Michael Yurkovich.

• Citibank Defendants were granted the right to examine third parties for discovery and cross-examine them at trial if necessary.

Facts of the case

Robert Yurkovich and Laurene Yurkovich, residents of Alberta and described as investors of advanced years, commenced this action in August 2020. They sought damages resulting from the sale by the Citibank Defendants of shares pledged as collateral for a $35 million loan, after the facility went into margin. The third party, Michael Yurkovich, is their adult son and CEO of Refraction Asset Management Ltd., the family’s investment holding company. Vladimir Lizunov is the Chief Financial Officer of Refraction. The plaintiffs were examined for discovery in June 2022 and gave numerous undertakings to make inquiries of Michael Yurkovich and Refraction.

Procedural background and settlement agreements

Following the examinations, several procedural steps occurred: the defendants moved for summary judgment; the plaintiffs amended their statement of claim; the defendants opposed the amendments on the basis of the alleged expiry of a limitation period; leave was granted to amend; the appeal of that decision was quashed as it should have been brought to the Divisional Court; the defendants delivered a Fresh as Amended Statement of Defence; and a Third Party Claim was issued against each third party defendant for contribution and indemnity. The plaintiffs and each third party defendant then entered into Pierringer settlement agreements.

Discussion of policy and terms

The court recognized Pierringer agreements as an important tool for settling multi-party litigation, supporting the policy goal of encouraging settlement. However, the court also noted that approval may be declined if an opposing defendant can establish “just and substantive cause” demonstrating prejudice outweighing policy goals. In this case, no issue of late disclosure or prejudice was found or alleged. The court found that fairness required, as a condition of approval, that the Citibank Defendants retain the right to conduct examinations for discovery of the third parties as if they were parties, and to have their evidence received at trial as if called by the plaintiffs, including the right to cross-examine. The court emphasized the non-arm’s-length relationship between the plaintiffs and the third parties, and the role of Michael Yurkovich in the relevant transactions.

Ruling and outcome

Justice Osborne approved the Pierringer settlement agreements, subject to the condition that the Citibank Defendants have the right to conduct examinations for discovery of the third parties and to cross-examine them at trial if necessary, as if they were parties. The court was not satisfied that these conditions would prejudice the plaintiffs or delay the action, noting that documentary production had already been completed and that proceeding with examinations would minimize delay. The order was made to give effect to these reasons. No specific monetary amount was awarded or ordered in this decision and no party was declared the overall successful party in terms of the underlying dispute or liability, as it addressed only the approval and terms of the settlement agreements. No successful party determined