DATE: 20031229

DOCKET: C39370

COURT OF APPEAL FOR ONTARIO

LABROSSE, DOHERTY and WEILER JJ.A.

B E T W E E N:

ROYAL BANK OF CANADA

Plaintiff (Respondent)

• and -

CENTRAL CANADIAN INDUSTRIAL INC., VLADEN MATUTSCHOVSKY a.k.a. VLADEN MTUT CHOYSKY, a.k.a. VLADEN MATUTSCHOUSKY, a.k.a. VLADENMATUSOVSKY, and KATHERINE MATUTSCHOVSKY, a.k.a. EKATRINA MATUTSCHOYSKY, a.k.a. EKATERINA WEIS MATUTSCHOVSKY, a.k.a. KATHRYN MATISHOVSKY, a.k.a. KATHERINE MATUTSCHOUSKY

Defendant (Appellant)

Counsel:

Natalie Marconi for the respondent

Katherine Matutschovsky the appellant in person

Harvey S. Margel amicus curiae

Heard: September 18, 2003

On appeal from the final order of Justice Donald R. Cameron of the Superior Court of Justice dated December 12, 2002.

LABROSSE J.A.:

[1] The appellant, Katherine Matutschovsky, appeals the order of Cameron J., granting the Royal Bank of Canada (“the Bank”) judgment, in accordance with the terms of Minutes of Settlement, pursuant to rule 49.09(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] The Bank commenced an action against the other named defendants for money owing under a loan and against the appellant on her guarantee. The appellant filed a statement of defence claiming that she did not understand the documents that she signed, non est factum and lack of independent legal advice. Default judgment was obtained against all defendants except the appellant.

[3] On March 8, 2002, the appellant, acting in person, attended to be cross-examined on her affidavit filed on a pending motion for summary judgment. The cross-examination did not proceed and, instead, after lengthy settlement discussions, counsel for the Bank and the appellant signed Minutes of Settlement reducing an offer from the Bank of $58,000.00, all inclusive, to $52,000.00. In its statement of claim, the Bank had claimed $51,282.32 plus interest from August 29, 2001.

[4] Within hours of the execution of the Minutes of Settlement, the appellant resiled from the settlement claiming that it failed to acknowledge that she had been the victim of a fraud and claiming further, the next day, that she had signed under duress.

[5] In his reasons on the motion to enforce the Minutes of Settlement, the trial judge referred to certain evidence:

• The appellant had no independent legal advice before signing the guarantee;
• Her signature had been forged on a statement of affairs forming part of the documents, but there was no evidence that the signature on her guarantee was not genuine;
• Although moderately fluent in English, the appellant had the benefit of an interpreter(s) in the Russian language. In addition, with her were a paralegal and her former husband, who were present at all times during the negotiations and the signing of the Minutes of Settlement;
• The Bank’s lawyer proposed a settlement of $58,000.00. The paralegal, who was retained by her former husband but who the appellant denies was her agent, counter-offered $52,000.00;
• The Minutes of Settlement were handwritten by the Bank’s lawyer;
• The Bank’s lawyer left the room, leaving the appellant alone with her former husband, the paralegal and the interpreter(s). The interpreter(s) translated the document for the appellant; and
• After the Minutes of Settlement were signed, the paralegal informed the Bank’s counsel that he and the interpreter(s) were being accused of fraud. The appellant was claiming that they had improperly translated the Minutes of Settlement. She wanted the settlement to be amended to include that she had been a victim of fraud. The next day, she wrote to counsel claiming, amongst other things, that she had signed under duress, was a victim of fraud and had no independent legal advice.

[6] The motions judge then made two statements contained in paras. 16 and 20 of his reasons:

[16] It is reasonable to assume that many matters were discussed in the course of the settlement discussions, including the [Bank’s] intent to pursue its claim, the merits of [the appellant’s] defences, the cost of defending the claim, the cost to her if her defences were unsuccessful following a trial and the manner in which the [Bank] could enforce a judgment. She was clearly aware of most of these issues before these discussions, based on her prior correspondence with [the Bank] and its lawyer.

[20] If this case had proceeded, it would have turned on the [Bank’s] obligation in the circumstances to provide independent legal advice and the credibility of [the appellant]. In my view of the drastic consequences to the [appellant] if this case proceeded to trial and she lost, the settlement could clearly be for her benefit. The settlement also reduced the [Bank’s] entitlement and delayed enforcement of the writ for a sufficient time to allow her to arrange financing of the payment of the liability or arrange a sale of her house and other housing accommodation.

[7] There was no proper basis to support the assumption of the motions judge in the first paragraph. Clearly, the matters enumerated by the motions judge are matters that would be discussed with an independent lawyer, but they are not matters that would necessarily be discussed with two translators, a paralegal and a former husband. The Bank took the position that the appellant had the benefit of these discussions, and the motions judge seemed to accept the Bank’s position. In any event, these discussions cannot equate to independent legal advice.

[8] The conduct of the appellant in this action is suspect. She appears to have alleged misconduct against all those involved in this action. However, there is a conflict in the evidence as to what happened at the relevant time surrounding the execution of the Minutes of Settlement. The question is not, as stated by the motions judge in the first paragraph quoted above, whether the appellant was aware of the issues, or whether she knew what she was doing, but what transpired to produce her signature. The allegation of undue influence or, more accurately, economic duress does have some substance. The conflict in the evidence cannot be resolved on paper and economic duress remains an issue.

[9] The appellant had always claimed that she was the victim of a fraud. Her signature on the Personal Financial Information had been forged. She also raised, as a defence, the lack of independent legal advice. At a minimum, in these circumstances, it would have been prudent to direct her to get independent legal advice before the execution of the Minutes of Settlement.

[10] The motions judge recognized that the case would turn on the issue of independent legal advice and the credibility of the appellant. He did not address either of these issues. He also seemed to be of the view that the settlement could “clearly be for her benefit”. This conclusion is questionable. The settlement reduced the amount of the debt and delayed the enforcement of writs of execution, but the amount was still substantial and the appellant’s fear that she would lose her house remained very real.

[11] Under rule 49.09, the court has a discretion to grant judgment in the terms of the accepted offer or direct that the proceedings continue as if there had been no accepted offer to settle: see Milios v. Zagas (1998), 38 O.R. (3d) 218 (C.A.). The appellant did not request the motions judge to direct that the proceedings continue. However, the rule does not seem to require that a party request the court to send the matter to trial. It was an alternative that was open and not considered by the motions judge. It should also be noted that the appellant was self-represented.

[12] There are troubling aspects to the evidence in this case and, in the words of this court in Fox Estate v. Stelmaszyk (2003), 173 O.A.C. 378, it does not satisfy our sense of justice to enforce the settlement in those circumstances. We conclude that we should exercise the discretion under rule 49.09 and direct that the proceeding continue as if there had been no accepted offer to settle.

[13] Accordingly, the appeal is allowed. The parties have not had an opportunity to make submissions on the costs of the appeal and the costs below do not appear to have been dealt with. In the absence of submissions, we would be disposed to order costs, for both the appeal and the motion below, in the amount of $2,500.00 to follow the event of the action. If the parties wish a different disposition of the costs, they may make submissions, in writing, within fourteen days.

“J. Labrosse J.A.”

“I agree K. M. Weiler J.A.”

DOHERTY J.A. (dissenting)

[14] I would dismiss the appeal.

[15] This court does not address the matter de novo. It can interfere only if it is established Cameron J. felt into reversible error. If this court finds reversible error, then it may exercise the discretion implicit in rule 49.09 in determining the appropriate order: Fox Estates v. Stelmaszyk (2003), 173 O.A.C. 378 (C.A.).

[16] This court cannot substitute its own “sense of justice” for that of the motion judge. The limitation on appellate review is no mere formalism or rule of expediency to be applied when and if the court deems it appropriate. The limitations on appellate review recognize that this court’s “sense of justice” is no keener than that of the court from which the appeal is taken. While a second analysis, free from any restraint, may yield a different result from that reached at the first instance, there is no reason to think that it will achieve a more just result.

[17] Nor is the scope of appellate review altered by the appellant’s decision to represent herself. It is noteworthy that the appellant has had and fired at least three lawyers in the course of these proceedings, including one whom she fired on the morning of the appeal.

[18] My colleagues identified one error said to have been made by Cameron J. They conclude that there was no evidence to support his statements in paragraph 16 of his reasons.

[16] It is reasonable to assume that many matters were discussed in the course of the settlement discussions, including the [Bank’s] intent to pursue its claim, the merits of [the appellant’s] defences, the cost of defending the claim, the cost to her if her defences were unsuccessful following a trial and the manner in which the [Bank] could enforce a judgment. She was clearly aware of most of these issues before these discussions, based on her prior correspondence with [the Bank] and its lawyer.

[19] I read this passage differently than my colleagues. I think Cameron J. was simply acknowledging that he was prepared to accept that many of the matters that the appellant said were discussed, were in fact discussed. For example, she claimed that the Bank insisted that it would pursue its claim, that her defence had no merit, and that she would lose her house. These are the matters referred to by Cameron J. in paragraph 16.

[20] Cameron J.’s decision must be assessed in the context of the material put before him and the arguments made to him. The appellant contended that she had not entered into a settlement agreement. She relied on duress, and more specifically, economic duress, to negate the apparent agreement. The appellant did not take the position that although she had entered into a settlement agreement, Cameron J. should exercise his discretion under s. 49.09 and decline to enforce the settlement by way of a judgment. Given the arguments that were put before Cameron J. (and renewed in written materials before this court), he properly identified the approach to be taken to r. 49.09 in para. 17:

This court should exercise its discretion under rule 49.09 to uphold settlement agreements unless the resiling party can establish duress or non est factum or other factors which do not apply in this case such as fraud or mistaken instruction.

[21] Cameron J. reviewed the background to the motion and then identified the approach to claims of economic duress taken by this court’s judgment in Stott v. Merit Investment Corp. (1988), 48 D.L.R. (4th) 288. Having accurately identified the legal principle, Cameron J. went on to reject certain statements made to him in the course of argument by the appellant and to observe that the settlement provided some benefit to the appellant. He then said:

I am not persuaded that the duress alleged by Mrs. Matutschovsky existed to the point of coercion of her will where she was pressed into such a position that she had no realistic alternative.

[22] In my view, there was no error in the application of the governing legal principle to the allegations of the appellant. It was open to Cameron J. to come to this assessment, and absent any error in law or palpable and overriding factual error this court cannot interfere.

[23] I would dismiss the appeal with costs to the respondent in the amount of $3,000.

Released:

“DEC 29 2003” “Doherty J.A.”

“JL”