Court of Appeal for Ontario

Date: 2025-04-30
Docket: COA-24-CV-0968
Coram: Grant Huscroft, J. George, L. Favreau JJ.A.

Between

2853753 Ontario Inc., 2853751 Ontario Inc. and Gaurav Tripathi
Applicants (Respondents)

and

Prive Developments Corp., Prive Rougemount Inc., Trevor Rabie, Mathew Elkind aka Matthew Elkind and Prive Capital Master Fund I., an Ontario Trust, by its authorized Administrator, Prive Capital Investment Adminco Inc.
Respondents (Appellants)

Appearances:
Robert B. Cohen and Joshua Jackson, for the appellants
Hugh Scher, for the respondents

Heard: 2025-04-28

On appeal from the judgment of Justice David E. Harris of the Superior Court of Justice, dated August 2, 2024.

Reasons for Decision

Introduction

[1] This is an appeal from a judgment enforcing a settlement agreement entered by the parties in the context of a pending arbitration proceeding.

[2] The settlement agreement required the appellants to pay $5,360,000 to the respondents within 75 days of the agreement. It included a clause providing that if the appellants failed to pay in accordance with the settlement agreement, they would be required to pay an additional $500,000 (the “penalty clause”). The appellants failed to meet the payment deadline and the respondents brought an application to enforce the settlement agreement.

[3] The appellants argue that the application judge made several errors. We dismissed the appeal without calling on the respondents. These are the reasons for our decision.

The application judge did not err by adjudicating the dispute by way of application rather than action

[4] The appellants argue that the application judge should have ordered a trial because of the allegations of fraud and dishonesty made by the respondents on the application. They argue that the application judge was required to assess conflicting evidence and credibility before determining that the respondents had uncovered evidence of fraud and dishonesty. The appellants contend that the decision to proceed by application denied them the procedural safeguards that would have been available in an action.

[5] We do not agree. This was a straightforward application to enforce a settlement agreement and the reasons are correspondingly brief. But they nevertheless address the relevant issues on the application. The application judge found that no material facts were reasonably in dispute. This finding was open to him and there is no basis to interfere with it on appeal.

[6] The allegations of fraud arose from the original dispute between the parties leading to the settlement. They provided context to the dispute, but it was not necessary for the application judge to resolve those allegations in order to find that the settlement was enforceable or that the respondents did not interfere with the appellants’ ability to make payments under the settlement. Referencing this issue in his reasons did not render it a material fact in dispute. The issue was essentially irrelevant given that the appellants’ obligation to pay the settlement agreement was not conditional on obtaining financing, and in any event the application judge found no evidence that the respondents’ allegations hampered the appellants’ financing efforts. These were findings of fact supported by the record. The appellants’ evidence on the application fell far short of supporting a finding that the respondents interfered with their efforts to obtain financing.

The application judge did not err in finding the respondents had not breached their obligations of good faith

[7] The application judge considered and rejected the appellants’ argument that the respondents breached their obligation to act in good faith. He found that none of the components of a breach of good faith were present and concluded that there was “no substance to this argument.” Again, this was a simple case – the appellants did not honour the terms of their settlement agreement with the respondents. The application judge referenced the appellants’ argument and stated that none of the components set out in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, [2021] 1 S.C.R. 32 were present in this case. Nothing more was required.

The application judge did not err in finding the penalty clause was enforceable

[8] The appellants argue that the penalty clause was punitive rather than compensatory and should have been assessed under the principles of unconscionability and relief from forfeiture given the context of the breaches alleged and obstacles created by the respondents.

[9] There is no merit to this argument. The application judge applied the relevant law and found that the penalty clause was not disproportionate, as it represented less than ten percent of the total amount owing under the settlement agreement. Nor was it unconscionable for the respondents to receive additional money for late payment in the circumstances. As the application judge put it, the settlement agreement was a second chance for the appellants. Enforcing the penalty clause was reasonable in the circumstances.

Disposition

[10] The appeal is dismissed. The respondents are entitled to costs in the agreed amount of $20,000, all inclusive.

“Grant Huscroft J.A.”
“J. George J.A.”
“L. Favreau J.A.”