COURT OF APPEAL FOR ONTARIO

CITATION: Petruzziello v. Albert, 2014 ONCA 393

DATE: 20140513

DOCKET: C56458

Gillese, van Rensburg and Hourigan JJ.A.

BETWEEN

Edmondo Petruzziello

Applicant (Respondent)

and

Viktoria Albert

Respondent (Appellant)

Gregory T.A. Gryguc, for the appellant

Steven S. Sands, for the respondent

Heard: May 9, 2014

On appeal from the order of Justice Jayne E. Hughes of the Superior Court of Justice, dated September 1, 2011.

ENDORSEMENT

[1] Viktoria Albert (the “appellant”) and Edmondo Petruzziello (the “respondent”) entered into a cohabitation agreement (the “Contract”) dated April 25, 2006. After their relationship ended, they entered into Minutes of Settlement on October 26, 2007 (the “Minutes”).

[2] During the legal proceedings that ensued, the appellant called into question the validity of both documents.

[3] By order dated September 1, 2011 (the “Order”), the Contract was declared invalid and unenforceable but the Minutes were declared to be valid and enforceable. In the associated costs order dated May 23, 2013 (the “Costs Order”), the trial judge ordered that no costs, beyond the splitting of the funds held as security for costs, be paid by either party.

[4] On appeal, the appellant contends that the trial judge erred in finding the Minutes to be valid and enforceable.

[5] By way of cross-appeal, the respondent seeks leave to appeal the Costs Order.

[6] For the reasons that follow, the appeal is dismissed and leave to appeal the Costs Order is refused.

BACKGROUND IN BRIEF

[7] The parties were never married. Though the length of their cohabitation was disputed, the trial judge accepted the appellant’s evidence that the parties had a continuous relationship spanning six years. The parties have one child, born in 2002.

[8] In September 2003, the appellant’s visa lapsed and she was denied return access to Canada following a European holiday. The parties prepared an immigration application to Canada and, of necessity, lived in separate residences while the application was processed. The sponsorship portion of the immigration application included a contractual obligation that the respondent would provide financial support to the appellant for a period of three years from the date that the appellant was granted landed immigrant status.

[9] The parties separated on May 1, 2007.

[10] The respondent began proceedings, seeking access to their child. In her answer, the appellant claimed spousal support.

[11] On October 26, 2007, a case conference on all issues took place. As a result of meetings between counsel and the parties that took place at the court that day, the Minutes were executed. Both parties were separately represented during this process.

[12] The Minutes deal with spousal support on a final basis, but the other issues dividing the parties were dealt with on a temporary basis and adjourned for further consideration.

[13] The Minutes were incorporated into a consent order that same day (i.e. October 26, 2007).

[14] In September 2008, the respondent moved to have his child support obligation reduced. The appellant brought a cross-motion in which she raised the validity of the Contract and the Minutes.

[15] The parties agreed to a bifurcation of the issues. A trial to determine the validity of the Contract and the Minutes would proceed first. Subject to the results of the first trial, the claim for spousal support would proceed thereafter.

[16] This appeal follows the trial at the first stage of the bifurcated proceedings.

THE TRIAL DECISION

[17] The trial judge set aside the Contract, pursuant to s. 56(4) of the Family Law Act.

[18] In relation to s. 56(4)(a), the trial judge found that the respondent’s failure to disclose the details of the support obligations arising from the sponsorship agreement was a “significant and material failure” in disclosure.

[19] The appellant also established that s. 56(4)(b) was engaged. The trial judge also found that respondent made it impossible for the appellant to obtain meaningful independent legal advice at the time that she entered into the Contract and, therefore, that the appellant did not understand the nature or consequences of the Contract at that time.

[20] Based on two further findings of the trial judge, s. 56(4)(c) was also engaged. First, the trial judge found that the respondent failed to negotiate in good faith by not disclosing everything relevant to the purpose of the Contract. The trial judge found this non-disclosure was deliberate and intended to mislead the appellant and the lawyers involved in negotiating the Contract. Second, the spousal support provisions in the Contract were such an “extreme departure” from the appellant’s statutory entitlement as to be unconscionable, in part because they obligated the appellant to be in full-time school as a condition of receiving any form of spousal support.

[21] However, the trial judge found the Minutes to be valid and enforceable. Relying on Geropulos v. Geropoulos (1982), 1982 CanLII 2020 (ON CA), 35 O.R. (2d) 763 (C.A.), she stated that as a general rule, settlements of pending litigation between counsel, acting within the scope of their retainer, will be upheld by the courts in order to maintain the integrity of the settlement process. The trial judge found that in negotiating the Minutes, the appellant’s lawyer acted within the scope of his retainer and that he had the authority to settle the spousal support claim on a final basis. She further found that the appellant accepted her lawyer’s advice.

[22] In addition, the trial judge found that the appellant failed to meet the onus imposed on her by s. 56(4) of the Family Law Act.

[23] In relation to s. 56(4)(a), the trial judge found that the appellant failed to pursue further disclosure from the respondent, despite having requested further disclosure in her case conference brief and despite having had the benefit of independent legal advice throughout the negotiations leading up to the Minutes. She noted that nothing precludes a litigant from entering into a final and binding settlement where only partial financial disclosure has been made. In any event, the trial judge found that the respondent had overestimated his income during the negotiation of the Minutes and, therefore, whatever shortcomings there were in respect of disclosure did not cause prejudice to the appellant.

[24] The trial judge rejected the appellant’s claim that she failed to understand the nature and consequences of the Minutes, noting that she was free, following separation, to retain any lawyer that she wished. The trial judge accepted the evidence of the appellant’s lawyer that he reviewed with the appellant, in detail, each provision of the Minutes and that the appellant understood the nature and consequences of the Minutes when she executed them.

[25] Finally, the trial judge found that both parties had had independent legal advice, the Minutes reflected their genuine mutual desire to finalize their spousal support arrangements and there was no evidence of exploitation or material misinformation. While the Minutes were not “overly generous” in the trial judge’s view, she did not find them to be unconscionable. In reaching this conclusion, the trial judge adverted to certain payments that the respondent made to the appellant or third parties on her behalf.

[26] As a consequence of these findings, the trial judge found that she was without jurisdiction to set aside the Minutes.

[27] The trial judge ordered that no costs, beyond the splitting of the funds held as security for costs, be paid by either party. She found that the respondent had not made any enforceable offers to settle since his lawyer did not sign the offers as required by Rule 18(4) of the Family Law Rules. Further, she noted that success was divided because the Contact was set aside but the Minutes were found to be valid. The trial judge also considered the other factors required by Rule 24(11) of the Family Law Rules, including that neither party acted unreasonably in the course of the proceeding. She did note that neither party had been alert to the case law indicating that deference is owed where minutes of settlement have been negotiated between counsel, saying that because that matter was a significant issue in the trial, this omission may have prolonged the trial.

[28] The trial judge also found that there were a number of other relevant matters that the court had to take into consideration in making a costs determination. First, she considered the financial condition of the parties after their relationship ended and their ability to pay a costs award. She found that while the respondent continued to earn a substantial income, the appellant was unemployed and primarily responsible for their young child. Second, she found that the child would be adversely affected if a costs award were made against the appellant, as it would reduce her already limited resources.

THE APPEAL

[29] The appellant argues that the trial judge erred in finding the Minutes to be valid and enforceable. She says that like the Contract, the Minutes were unconscionable and that it was an error for the trial judge to have failed to allow the matter to proceed to the second step of the bifurcated process in which a full hearing about the parties’ finances may have illustrated that unconscionability.

[30] We do not accept this submission. We see no error in the decision below nor in the reasons for decision.

[31] The trial judge correctly articulated and applied the legal principles that guide a court when considering the validity of a settlement agreement, such as the Minutes. One significant consideration, which the trial judge fully recognised, is the established policy that the courts are to encourage the settlement of disputes by recognizing the validity of settlements of pending litigation that parties freely and properly enter into, with the benefit of legal advice.

[32] In the present case, the trial judge found that the appellant’s situation, when the Minutes were negotiated and executed, was materially different than when she executed the Contract. It will be recalled that the Minutes were signed during the course of a case conference when both parties had separate, independent and experienced legal counsel. On the facts as the trial judge found them, the appellant’s lawyer was acting within the scope of his retainer when he negotiated a final resolution of the spousal support issue. Her lawyer prepared materials for the case conference, as well as her answer and claim in the proceedings. The trial judge accepted the appellant’s lawyers’ evidence that he had discussed the risks and benefits of trying to set aside the spousal support provisions in the Contract. The appellant heeded her lawyer’s advice, and agreed to the Minutes.

[33] We see no merit in the submission that the Minutes should be held to be unconscionable pursuant to s. 56(4)(c). The trial judge gave cogent, leally correct, reasons for finding that the appellant failed to discharge her burden in this regard and we adopt those reasons.

[34] Accordingly, there is no basis for disturbing the trial judge’s determination that the Minutes are valid and enforceable.

THE CROSS-APPEAL

[35] Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are strong grounds upon which the appellate court could find that the trial judge had erred in the exercise of his or her discretion: see Brad-Jay Investments Ltd. v. Szijjarto (2006), 2006 CanLII 42636 (ON CA), 218 O.A.C. 315 (C.A.), at para. 21. An appellate court should set aside a costs order only if the trial judge has made an error in principle or if the costs award is plainly wrong: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[36] We see nothing in the costs decision below which rises to this high threshold and, accordingly, would not grant leave to appeal the Costs Order.

[37] The trial judge correctly referred to the relevant factors to be considered in awarding costs under Rule 24(11), including the fact that success was divided, the issues were complex, the lawyer’s rates were appropriate and the time spent proper. Further, the trial judge considered the means of the parties and concluded that it would not be in the child’s best interest to make a large cost award.

[38] A trial judge exercises discretion when awarding costs. That exercise of discretion is entitled to considerable deference. Though a party cannot use their limited financial circumstances as a shield against cost orders, the ability to pay when children are involved, is a relevant factor.

DISPOSITION

[39] Accordingly, the appeal is dismissed and, leave to appeal the Costs Order having been refused, the cross-appeal is also dismissed, with costs to the respondent fixed at $5,000, all inclusive.

“E.E. Gillese J.A.”

“K. van Rensburg J.A.”

“C.W. Hourigan J.A.”