ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-00436815-0000
DATE: 20120822
BETWEEN:
STEVEN BELLISSIMO Applicant – and – ULTIMINO ALFANO, ITALO ALFANO and INVAR BUILDING CORPORATION Respondents
John Pirie and Paul Hughes , for the Applicant
James F. Diamond , for the Respondents
HEARD: June 15, 2012
B. P. O’MARRA, J.
REASONS FOR DECISION
[ 1 ] The Respondents entered into an Indemnity Agreement with their former lawyer Mr. Bellissimo. LawPro paid out a settlement on behalf of Bellissimo. The Applicants resist payment under the Indemnity Agreement on the basis of an alleged improvident settlement.
ISSUE
[ 2 ] Are the Respondents liable for payment to LawPro pursuant to the Indemnity Agreement?
THE FACTS
[ 3 ] Mr. Bellissimo is a lawyer practicing in Ontario and is professionally insured by LawPro.
[ 4 ] The Alfanos, Invar Building Corporation and Bellissimo were among the co-defendants in an action brought by Gold Financial in 2007. Part of that action related to Bellissimo’s release of proceeds of the sale of an industrial property at the direction of the Alfanos and Invar.
[ 5 ] In January of 2006 Justice Spence made an endorsement permitting Bellissimo to pay out the disputed trust funds to Puslinch Investments.
[ 6 ] Bellissimo was advised by counsel for Gold that they would appeal the decision of Justice Spence.
[ 7 ] Counsel for Gold threatened legal action against Bellissimo if he released trust funds pursuant to the instructions of the Alfanos and/or Invar. At the same time Invar maintained that Bellissimo would be in contempt of Court if he did not release the trust funds on their instructions.
[ 8 ] Bellissimo insisted that before he would release funds on the instructions of the Alfanos and/or Invar he would require indemnification for any claims threatened by Gold.
[ 9 ] The Indemnity Agreement was signed on March 3, 2006. It is a single page document.
[ 10 ] On April 5, 2006 a Notice of Appeal was served by Gold.
[ 11 ] On December 11, 2006, the Court of Appeal dismissed the Appeal of Justice Spence’s decision.
[ 12 ] Following the appellate ruling, Puslinch instructed Bellissimo to release the trust funds and he did so.
[ 13 ] In 2007, Gold started an action claiming an interest in the trust funds. Further, Gold claimed to suffer a loss of approximately $2.25 million as a result of the release of trust funds at the direction of the Alfanos, Invar and Puslinch.
[ 14 ] LawPro appointed counsel to represent Bellissimo in the Gold action.
[ 15 ] On August 27, 2007, Bellissimo issued a Statement of Defence and Cross-claim in the Gold action against the Alfanos and Invar for full indemnity based on the Agreement.
[ 16 ] Trial was set for October 2008.
[ 17 ] On September 25, 2008, Bellissimo issued a Rule 49 Offer to Settle the claims against him in the Gold action for the all inclusive sum of $100,000.
[ 18 ] Just prior to trial Bellissimo brought a Rule 21 motion to stay the claim against him as an abuse of process in light of the ruling of Justice Spence and the Court of Appeal.
[ 19 ] Counsel for Gold opposed the Rule 21 motion. It proceeded for two days in October of 2008 before Justice E. MacDonald.
[ 20 ] On October 17, 2008, prior to the release of the decision on the Rule 21 motion, Gold accepted Bellissimo’s Rule 49 Offer to Settle in writing. Law Pro paid the settlement amount and Bellissimo received a full and final release from Gold.
[ 21 ] On October 24, 2007, Justice E. MacDonald released her decision. The Rule 21 motion was allowed.
[ 22 ] It was agreed between Bellissimo, the Alfanos and Invar to await the final ruling in the Gold action before addressing the indemnity issue.
[ 23 ] The trial of the Gold action concluded on June 29, 2009. The decision was released over a year later on September 3, 2010. The Alfanos and related parties were awarded more than $20 million in damages. A complex appeal followed.
[ 24 ] On September 6, 2011, Bellissimo made a further demand for reimbursement of costs expended on the Gold action. The Respondents advised they would not honour the Indemnity Agreement based on an improvident settlement.
POSITION OF THE PARTIES
[ 25 ] In essence the Respondents submit the following:
The Offer to Settle by Bellissimo was improvident and contrary to his assertion in 2006 and 2007 that there was no merit to Gold’s claims.
Had Bellissimo withdrawn his Offer to Settle, or maintained it open for acceptance until submissions began on the Rule 21 motion, not only would the 2007 action have been dismissed but Bellissimo would have been entitled to costs on a substantial indemnity basis.
Absent a specific provision to the contrary in the Agreement the onus is on the Applicant to prove the settlement was reasonable.
[ 26 ] The Applicant submits the following:
There may be an implied term that the settlement be reasonable.
The settlement by Bellissimo was reasonable in all the particular circumstances.
The Applicant is not required to prove he would have been unsuccessful to show that the settlement was justified.
THE LAW
[ 27 ] I proceed on the basis that the Applicant must prove the settlement was reasonable. That is a question of fact.
Family Trust Corp. v. Harrison, [1986] O.J. No. 2555 (Ont. District Court) at para. 12 .
[ 28 ] One factor on the issue of reasonableness is whether the settlement was made “under legal advice”.
Ingram-Ellis v. Edwards , [1991] B.C.J. No. 2651 (B.C.S.C.)
ANALYSIS
[ 29 ] The parties agree that Bellissimo and his counsel were not obligated to consult the Respondents as to Bellissimo’s defence strategy. Bellissimo was free to run his defence as he and his counsel saw fit.
[ 30 ] The Rule 21 motion by Bellissimo on the eve of trial was based on an alleged abuse of process. The test for granting such a motion is “the clearest of cases”.
Atlantic Steel Industries, Inc. v. Cigna Insurance Co. of Canada , 1997 12125 (ON SC) , [1997] O.J. No. 1278 (Ont. C.A.)
[ 31 ] The ruling on the Rule 21 motion was reserved for 8 days before release. That Court carefully considered the drastic remedy being sought. While the result was ultimately favourable it was by no means a foregone conclusion.
[ 32 ] If Bellissimo had lost the Rule 21 motion he would remain enmeshed in a complex civil suit wherein $2.25Million was being claimed. His trial defence would have incurred considerable further legal costs. As of the date of settlement he had already spent approximately $125,000 in legal fees.
[ 33 ] Bellissimo extended the Offer to Settle with the advice of experienced counsel. He was in a vortex of complex civil litigation that had gone on for years.
[ 34 ] The notion that the settlement was unreasonable is premised on the 20/20 vision of hindsight. While Bellissimo felt he would ultimately succeed he was obliged to be aware of the vagaries of litigation.
[ 35 ] In the particular circumstances of this case I find the settlement offer, including timing, was reasonable.
RESULT
[ 36 ] The Respondents are jointly and severally liable for payment of $225,000 plus pre and post judgment interest in accord with the Courts of Justice Act . These amounts are to be paid to LawPro.
[ 37 ] The Applicant is entitled to costs on a substantial indemnity rate fixed at $32,445.20 all inclusive.
[ 38 ] I am grateful to counsel for their helpful submissions on this matter.
B. P. O’Marra J.
Released: August 22, 2012
COURT FILE NO.: CV-11-00436815-0000
DATE: 20120822
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
STEVEN BELLISSIMO Applicant and – ULTIMINO ALFANO, ITALO ALFANO and INVAR BUILDING CORPORATION Respondents
REASONS FOR DECISION
B. P. O’Marra J.
Released: August 22, 2012