Condoyannis v. Foundos, 2010 ONCA 279

CITATION: Condoyannis v. Foundos, 2010 ONCA 279

DATE: 20100416

DOCKET: C50035

COURT OF APPEAL FOR ONTARIO

Gillese, Lang and Rouleau JJ.A.

BETWEEN

Haroula Condoyannis

Applicant (Respondent)

and

Anthony Foundos

Respondent (Appellant)

Cheryl Goldhart and Kristen Normandin, for the appellant

P. James Zibarras and Kevin D. Toyne, for the respondent

Michelle Booth for Murray Lightman

John J. Pirie for Richard Stone

Heard: April 6, 2010

On appeal from the judgment of Justice Nancy L. Backhouse of the Superior Court of Justice dated January 19, 2009, with reasons reported at [2009] O.J. No. 217 (S.C.).

ENDORSEMENT

[1] Mr. Foundos and Ms. Condoyannis were married for 22 years. They separated in September, 1990. They have two children, now adults. At the time of separation, the parties had only two significant family assets, both of which had been purchased during the marriage using family funds: the matrimonial home and the family business. The family business was a company that owned a gas bar and automobile repair centre on Islington Avenue in Toronto. Mr. Foundos was the sole shareholder of the company.

[2] During the divorce proceedings, Mr. Foundos took the position that although the business had been valued at approximately $1.1 million, it had no value because the land on which it was located was environmentally contaminated and the cost of remediation would exceed any equity in the business. Ms. Condoyannis did not have the necessary funds to obtain her own valuation of the business. She did not trust Mr. Foundos, believing that he would find some way to benefit from the business and deprive her of her share in it.

[3] In 1996, the parties attended a case conference and executed Minutes of Settlement.

[4] In 1999, the family home was sold and both parties received their share of the proceeds, in accordance with the terms of the Minutes of Settlement.

[5] In 2006, Mr. Foundos sold the family business for $900,000 but refused to pay Ms. Condoyannis any of the proceeds of sale. The business was sold without any environmental cleanup having been performed.

[6] Ms. Condoyannis brought an application in which she sought, among other things, to share in the proceeds of sale of the family business.

[7] The issues in the proceeding were bifurcated. The first trial was devoted to interpreting para. 5 in the Minutes of Settlement, which reads as follows:

5. If the business of the husband is sold within four years, and the value of the business at the time exceeds the total of the following:

A. current encumbrances;

B. notional real estate commission;

C. soil removal;

D. reasonable costs of sale;

E. current business loans;

then the wife shall be entitled to thirty-five per cent of the aforesaid net proceeds of sale. The wife shall have the option of obtaining at her own expense a proper business valuation. If the wife’s valuation shows that the value of the business exceeds the total of A, B, C, D & E above, then the husband shall have the option of having he business sold or of buying the wife’s interest. In either event, the wife shall get thirty-five per cent of the notional or actual net proceeds of sale.

[8] At trial, Mr. Foundos argued that para. 5 extinguished Ms. Condoyannis’ right to share in the sale proceeds of the business. He contended that para. 5 gave Ms. Condoyannis a right to: (1) share in the sale proceeds from the business, so long as the business was sold within four years from the execution of the Minutes of Settlement, and (2) obtain a valuation of the business within that same four-year period. As she did neither, her rights were extinguished.

[9] The trial judge disagreed. She found that para. 5 was ambiguous. She viewed the ambiguity in para. 5 as relating to the valuation. She noted that while para. 5 gave the wife the right to obtain a business valuation, it did not specify whether that right had to be exercised within the four-year period. The trial judge admitted parole evidence to resolve the ambiguity.

[10] Both parties have sued the solicitors who represented them at the time that the Minutes of Settlement were entered into for negligence. Those solicitors gave evidence at the trial, as did the parties themselves.

[11] Ms. Condoyannis and her solicitor were adamant that she would never have agreed to extinguish her rights to the business after 4 years and that she would not have settled on that basis. Ms. Condoyannis testified that her solicitor told her that whenever the business was sold, she would get 35 per cent.

[12] Mr. Foundos testified that when he signed the Minutes of Settlement, his solicitor advised him that Ms. Condoyannis would have no further claim against the business after the four-year period.

[13] Evidence from both sides established that in the period leading up to the execution of the Minutes of Settlement, two case conferences were held. Only the parties’ then solicitors attended the first case conference. An undated handwritten document initialled by the lawyers and entitled “Proposal for Settlement” was entered into evidence. It was not clear whether the Proposal was prepared at the first case conference and when the changes that had been handwritten on the Proposal had been made. The Proposal was in the handwriting of the husband’s lawyer, except for the last sentence of paragraph 5 which was in the handwriting of the wife’s solicitor. Para. 5 of the Proposal reads as follows:

If business sold within 4 years and there are net proceeds after payment of all encumbrances, business loans and soil removal, legal costs and other expenses of sale, wife will get 35% of net sale proceeds. If business not sold then valuation conducted and wife to receive said interests.

[14] At the second case conference, the parties were in separate areas and the lawyers were negotiating back and forth between them over the period of a few hours. At the end of the negotiations, the husband’s lawyer drafted the Minutes of Settlement that are the subject of this proceeding.

[15] The trial judge preferred the evidence of Ms. Condoyannis and her solicitor. She found that Mr. Foundos was not a credible witness. The trial judge said that Mr. Foundos struck her as “someone who was prepared to do or say anything that would assist him in defeating the wife’s rights”.

[16] The trial judge concluded that, properly interpreted, para. 5 of the Minutes of Settlement gave Ms. Condoyannis entitlement to a 35 per cent interest in the business. The calculation of its worth was to be by way of sale or valuation. When the wife did not proceed to value the business after four years elapsed, the husband was free to sell, at which point the wife’s interest would be quantified, subject to deductions.

[17] The trial judge gave several reasons for so interpreting para. 5. Both parties’ interpretation of the Minutes allowed the wife to participate in changes in the value of the business after separation. By the time the Minutes were signed, the parties had been separated for six years. The parties’ agreement that the wife would participate in the value of the business going forward produced a different approach from the property regime provided for in the Family Law Act, R.S.O. 1990, c. F.3, where value crystallizes at the date of separation. As well, an interpretation that would deprive the wife of her interest in the business would require more specific language. Further, the evidence of both lawyers was that the language used in the Minutes was not intended to alter the intent of the Proposal. Finally, she found that a release by the wife of her rights to the business was never discussed. Whereas the Minutes of Settlement provided for a release of spousal and child support after the completion of the payments called for in the Minutes, there was no similar provision in respect of the business after the four-year period. The Minutes could easily and simply have provided for this.

[18] Costs of the trial were ordered in favour of Ms. Condoyannis in the amount of $150,802.

[19] Mr. Foundos appeals. He makes a number of submissions to support his contention that the trial judge erred in the approach she took to interpreting the Minutes of Settlement. The essence of his position, however, is as follows:

(1) Para. 5 is not ambiguous. The correct interpretation is that which he advanced at trial, namely, that para. 5 gave the wife a right to share in the sale proceeds from the business, so long as the business was sold within four years from the execution of the Minutes of Settlement, or to obtain a valuation within that same period. As she did neither, her rights have been extinguished.

(2) If, however, para. 5 is ambiguous, the trial judge’s interpretation is incorrect. The correct interpretation accords with that which he contends is the unambiguous meaning, identified above.

[20] Mr. Foundos’ former solicitor made submissions to a similar effect.

[21] In his written submissions, Mr. Foundos also seeks leave to appeal the costs order, arguing that he should be entitled to costs of the trial.

[22] The court found it unnecessary to call on the respondent.

ANALYSIS

Interpreting paragraph 5 of the Minutes of Settlement

[23] Mr. Foundos argues that the trial judge erred by interpreting para. 5 in a manner other than that pleaded or argued by either party. He relies on Rodaro v. Royal Bank of Canada (2002), 2002 41834 (ON CA), 59 O.R. (3d) 74 (C.A.), for this contention.

[24] We do not accept that the trial judge was bound to accept one of the interpretations advanced by the parties and that failure to do so amounts to an error of law. In Rodaro, the trial judge developed a novel theory of liability in his reasons for judgment, outside of the pleadings and the case as developed by the parties, and without having heard from the parties on that theory. That is not this case. In the present case, the trial judge had a single task to perform: she was required to interpret para. 5 of the Minutes of Settlement. Both sides were aware that the interpretation of para. 5 was in issue and were fully and fairly heard on the matter.

[25] Nor do we accept that the trial judge erred in law by failing to apply the correct principles of contract interpretation. On a fair and full reading of her reasons, the trial judge appears to have done the following. She examined the Minutes of Settlement within its factual matrix, including the particular words used in para. 5 in their immediate context and in the context of the agreement as a whole. Having done so, she found that there were two reasonably possible interpretations of para. 5. Consequently, she admitted parole evidence to resolve the ambiguity. The parole evidence included evidence of the facts that led to the making of the Minutes of Settlement and of the circumstances as they existed at the time the Minutes of Settlement were made. She made no error in following this approach.[^1]

[26] We agree that para. 5 of the Minutes of Settlement is ambiguous. There is nothing in para. 5 or elsewhere in the Minutes of Settlement that addresses what the wife’s entitlement to the business would be, if any, after four years had passed. Moreover, as the trial judge noted, the Minutes do not contain a release of the wife’s right specific to the business after the four-year period expired, whereas the Minutes do contain a release of any right to spousal and child support after the completion of the payments called for in the Minutes.

[27] Finally, the appellant argues that the Proposal was inadmissible and reference by the trial judge to it constituted a legal error. This submission is based on the principle that evidence of contractual negotiation is not to be considered when interpreting a contract – it is only the final document which is to be considered because it is that document which reflects the intentions of the parties. The appellant relies on Eco-Zone Engineering Ltd. v. Grand Falls-Windsor (Town) (2000), 2000 NFCA 21, 5 C.L.R. (3d) 55 (Nfld. C.A.), at para. 11. That principle is inapplicable to the Proposal. On the evidence of the parties and their solicitors, the Proposal was not part of the negotiations. It was the document which the husband’s solicitor used as the basis for the Minutes of Settlement.

[28] The trial judge was entitled to consider parole evidence to resolve the ambiguity in para. 5 and to make credibility findings, as she did. Both parties testified about the Proposal as it was an integral aspect of the narrative and context. In the circumstances, in our view, the trial judge made no error in considering the Proposal. In any event, even if the Proposal were inadmissible, the trial judge gave other reasons for her interpretation of para. 5, which we find compelling.

The Costs Order

[29] We see nothing in relation to the costs award that warrants granting leave. Ms. Condoyannis succeeded at trial and was presumptively entitled to costs. It is trite law that deference is owed to the trial judge on the matter of quantum, absent some error in principle. We see no such error.

DISPOSITION

[30] Accordingly, the appeal is dismissed with costs to Ms. Condoyannis, fixed in the amount of $15,000, inclusive of disbursements and GST. Mr. Foundos and Mr. Lightman are jointly and severally liable for the costs. Such costs are payable forthwith from the funds being held in trust for Mr. Foundos by Delzotto Zorzi LLP.

“E.E. Gillese J.A.”

“S.E. Lang J.A.”

“Paul Rouleau J.A.”

[^1]: Arthur Anderson Inc. v. Toronto-Dominion Bank (1994), 1994 729 (ON CA), 17 O.R. (3d) 363 (C.A.), at p. 372, leave to appeal to S.C.C. refused (1994), 19 O.R. (3d) xvi.