ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 03-72/13
DATE: 20140402

BETWEEN:

PESIA MIZRACHI GOLDFLUSS
Applicant

– and –

JESSICA BORTNICK, DANIEL BORTNICK and MICHAEL GOLDFLUSS, in their personal capacity and in their capacity as attorneys of Pola Goldfluss pursuant to a continuing power of attorney for her property, POLA GOLDFLUSS, MARILYN EDITH GOLDFLUSS and MORRIS & MORRIS LLP

Respondents

Brian Morris and Vanessa Playtis, for the Moving Parties, being the Respondents in this Application other than Marilyn Goldfluss

Howard B. Borlack and David Elmaleh, for the Responding Party, being the Applicant in this Application

HEARD: February 6, 2014

WILTON-SIEGEL J.

[1] On this motion, Jessica Bortnick, Daniel Bortnick and Michael Goldfluss, in their personal capacity and in their capacity as attorneys of Pola Goldfluss (“Pola”) pursuant to a continuing power of attorney for her property (collectively, the “Attorneys”), seek an order dismissing the within application of Pesia Mizrachi Goldfluss (the “Application”) on the grounds of res judicata.

[2] Pesia Mizrachi Goldfluss (the “respondent”) also brought a companion motion seeking to strike a supplementary affidavit of Jessica Bortnick sworn October 15, 2013. However, at the hearing, counsel for the respondent stated that the respondent was prepared to have the supplementary affidavit accepted for purposes of this motion on the basis that, if the Application proceeds, the respondent will be entitled to copies of the tape recordings and the transcripts referred to in the supplementary affidavit. Counsel for the Attorneys stated that this was acceptable to the Attorneys.

The Application

[3] In the Application, the respondent seeks thirteen items of relief. The principal relief sought for present purposes comprises the following:

(i) an order removing the Attorneys as attorneys of the property of Pola and nullifying a continuing power of attorney dated December 9, 2010 appointing the Attorneys as Pola’s attorney for property (the “Power of Attorney”) on the grounds it was obtained as a result of duress, undue influence or misrepresentation;

(ii) an order requiring the Attorneys to pass their accounts for the period in which they acted as attorneys of Pola and to return any monies unlawfully received from Pola;

(iii) an order that the Public Guardian and Trustee (“PGT”) appoint a lawyer to represent Pola’s interest and that an expert assess the capacity of Pola to manage property and to revoke and create powers of attorney for property and testamentary documents; and

(iv) an order requiring the Attorneys or their replacements to pay the respondent a monthly stipend of $1,500 for her living expenses, reimbursement for her expenses in travelling to Canada to visit Pola, and an annual payment of $15,000 to allow the respondent and her family to visit Pola in Canada in the future, as well as the authority to stay with her and to take her on day trips without the accompaniment of a third person.

The Companion Proceedings

[4] The res judicata claim is based on the respondent’s actions in two related court proceedings.

The Attorneys’ Application

[5] In the action under court file no. CV-11-424005 (the “Attorneys Application”), the Attorneys brought an action against the respondent’s sister, Marilyn Goldfluss (“Marilyn”), seeking among other things an injunction, which was granted. The only relief sought in the Attorneys’ Application that is similar to the relief sought by the respondent in the Application is a request by the Attorneys for an assessment of Pola.

[6] As a result of Marilyn’s actions, the Attorneys then commenced a motion for contempt (the “Contempt Motion”) within the same proceeding based on alleged breaches of the injunction. The Contempt Motion was then dismissed on consent pursuant to minutes of settlement dated July 10, 2012 (the “Minutes of Settlement”).

[7] The respondent filed an affidavit dated June 13, 2012 (the “Respondent Affidavit’) in the Contempt Motion in support of Marilyn. The Attorneys say that the Respondent Affidavit states that she was content with the support being paid to her by the Attorneys. That is an overstatement. As the Attorneys acknowledged in oral argument, the Respondent Affidavit states only that the respondent was concerned that the Attorneys would cease paying the support that was being paid to her.

The Marilyn Application

[8] In the application under court file no. CV-12-445866 (the “Marilyn Application”), Marilyn sought support from Pola. The relief requested in the Marilyn Application included: (1) an order removing the Attorneys as attorneys of Pola; (2) an order requiring the Attorneys to pass their accounts for the period in which they acted as attorneys of Pola; and (3) an order directing the PGT to arrange for legal representation to be provided to Pola and a determination of her capacity to manage property and to revoke and create powers of attorney for property and testamentary documents.

[9] The respondent was a named respondent in the Marilyn Application. However, no relief was sought against her in that proceeding. The respondent received all the application materials but did not respond in any way. The Marilyn Application was also settled pursuant to the Minutes of Settlement.

The Minutes of Settlement

[10] The respondent was not a party to the Minutes of Settlement. The Attorneys acknowledge that the respondent was not given notice of, and did not participate in, the mediation leading to the Minutes of Settlement. The respondent did not know of the existence or terms of the Minutes of Settlement until after their execution. The Attorneys acknowledge that the respondent did not consent to the terms of the Minutes of Settlement and there is no basis for implying or inferring her consent thereto, whether on the basis of the participation of her brother Alex or otherwise.

[11] The Minutes of Settlement only address matters sought in the Marilyn Application and the Attorneys’ Application. The following provisions of the Minutes of Settlement are relevant for present purposes. First, the Minutes of Settlement state that it is agreed that independent counsel for Pola “is not required at this time”. Second, the Minutes provide that the Attorneys “shall provide a complete accounting to Marilyn … for the period they have acted as attorneys”. Third, the Minutes of Settlement also provide that motions and cross-motions in the Marilyn Application, as well as the Marilyn Application itself, will be “withdrawn, discontinued or abandoned, without costs”. It is understood that no further proceedings were taken by any of the parties to the Marilyn Application, including any withdrawal or discontinuance. With the exception of two issues – independent legal advice for Pola and an accounting by the Attorneys – the Minutes of Settlement therefore did not specifically address any of the matters sought in the Application.

Applicable Law

[12] The doctrine of res judicata provides that a dispute adjudicated with finality is not subject to re-litigation: see Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 20. Two specific aspects of the res judicata doctrine are cause of action estoppel and issue estoppel.

[13] Cause of action estoppel proceeds on the basis that the original cause of action between the parties merges in the final judgment and they are estopped between themselves from re-litigating the cause of action. For res judicata to apply in these circumstances, the Attorneys suggest that four criteria must be satisfied: (1) there must be a final decision of a court of competent jurisdiction in the prior action; (2) the parties to the subsequent action must have been the parties to the prior action or have been parties in a privy relationship with the parties to the prior action; (3) the cause of action in the prior action must not be separate and distinct; and (4) the basis of the cause of action in the subsequent action was argued or could have been argued in the prior action if the parties had exercised reasonable diligence.

[14] Issue estoppel precludes re-litigation of the constituent issues or material facts embraced within earlier litigation: see Danyluk, at para. 24, where Binnie J. describes issue estoppel as extending to the material facts and the conclusions of law or of mixed fact and law that were necessarily, even if not explicitly, determined in earlier proceedings. The pre-conditions to the operation of issue estoppel were set out by Dickson J. in Angle v. Minister of National Revenue, 1974 168 (SCC), [1975] 2 S.C.R. 248, at p. 254, as follows: (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised, or their privies.

[15] Whether the issues in the present proceeding are characterized as issues of cause of action estoppel or of issue estoppel, I note that the Attorneys must establish that there was a final determination by a court of competent jurisdiction in a proceeding to which the respondent or her privy was a party.

Analysis and Conclusions

[16] I propose to address the application of cause of action estoppel or issue estoppel in respect of each of the actions separately.

The Attorneys’ Application

[17] While the Attorneys appear to argue in their factum that the requirements of res judicata are satisfied in respect of this proceeding, they did not pursue this argument at the hearing of this motion. In any event, there is no basis for such a determination. In particular, the respondent was not a party to the Attorneys’ Application nor was any privy of the respondent a party thereto. Merely filing an affidavit in support of Marilyn’s position on the Contempt Motion does not make the respondent a party.

The Marilyn Application

[18] The Attorneys submit that the issues enumerated above that are raised in both the Marilyn Application and the Application are subject to res judicata by virtue of the Minutes of Settlement.

[19] I conclude, however, that the Minutes of Settlement do not give rise to any cause of action estoppel or issue estoppel in respect of the respondent for the following reasons.

[20] First, while the respondent was a respondent in the Marilyn Application, she was not a party to the Minutes of Settlement nor was she in a privy relationship with any party to the Minutes of Settlement. A similar interest to that of Marilyn is not enough to make Marilyn her privy.

[21] Second, and most importantly, the Minutes of Settlement is no more than a private agreement between the parties to the agreement. It cannot ground a claim of res judicata. For the contrary proposition, the Attorneys rely on Mohammed v. York Fire and Casualty Insurance Co. (2006), 2006 3954 (ON CA), 79 O.R. (3d) 354 (C.A.). However, that is a decision regarding the enforceability of a settlement agreement. It does not address the finality of a decision for purposes of res judicata.

[22] Third, I accept that an agreement on the treatment of specific causes of action or issues in litigation could be effective, as a matter of enforcement of contractual rights. However, the Minutes of Settlement did not contain any such agreement. In any event, such an agreement could only be enforceable against the parties to such an agreement. The applicant was not a party to the Minutes of Settlement and, as mentioned, there is no suggestion that her consent can be implied or inferred.

[23] Fourth, a settlement agreement could also foreclose any future action based on the cause of action and/or facts asserted in litigation if it provided for the exchange of full and final releases between the parties to the litigation. However, such consequences are entirely contractual in nature. It would apply only to parties exchanging releases. Absent a court order, a third party’s claims, even a party to litigation, cannot be released. In this case, the respondent did not sign any release of any claims she might have against the Attorneys.

[24] Fifth, a settlement agreement does not constitute a determination of a court for the purposes of the doctrine of res judicata: see M. Tucci Construction Ltd. v. Lockwood, [2002] O.J. No. 440 (C.A.), at para. 1. In order to ground either cause of action estoppel or issue estoppel, an agreement must not only address specific issues but must also be addressed by a court of competent jurisdiction in a manner which has the legal consequence of rendering the determination of such issues in the agreement a final judicial determination for all purposes of the litigation. No such action was ever taken in respect of the Marilyn Application. The Minutes of Settlement were never addressed by a court nor was the Marilyn Application formally dismissed by any court.

[25] Sixth, I do not accept the Attorneys’ argument that the respondent was bound by the Minutes of Settlement, including the releases exchanged pursuant to the Minutes, by virtue of the operation of Rule 38.07(2) of the Rules of Civil Procedure.

[26] It is acknowledged that the respondent did not file a notice of appearance in the Marilyn Application. By virtue of Rule 38.07(2), the respondent was therefore not entitled to receive any notice of further steps in the Marilyn Application or any documentation filed in the proceeding. She was also not entitled to file material, examine or cross-examine, or participate in the hearing.

[27] The consequence of Rule 38.07(2) is that the respondent would have been bound by any judicial determination in the Marilyn Application, if there had been one, notwithstanding the fact that she did not, and could not, participate. However, it is not a consequence of Rule 38.07(2) that the respondent is bound by any consensual agreement reached between the parties that is not the subject of any judicial determination.

[28] Lastly, the Attorneys argue that at the root of the doctrine of res judicata is the concept of equity or fairness and make two arguments based on their view of the equities of the situation.

[29] First, the Attorneys argue that, because the issues in paragraphs 1.a to 1.g in the Application were first raised by the Attorneys in the Marilyn Application to which the respondent was made a party, the respondent was “obligated” to participate in the Marilyn Application if she wished to pursue these issues. They argue that, if the respondent remains entitled to pursue these issues, i.e. if she is not prevented from doing so by the doctrine of res judicata, she must do so within the confines of the Marilyn Application and cannot commence a new proceeding.

[30] I do not accept this submission. The respondent was a respondent in the Marilyn Application. She considered she was not directly involved as the issues pertained primarily to Marilyn’s support and, in particular, no relief was sought against her. She chose not to participate. In doing so, she risked a judicial determination of the issues of interest to her which would bind her. However, these issues were not judicially determined. She is entitled to proceed to have those issues judicially determined in a new proceeding in the Application. There is no provision in the Rules of Civil Procedure that prevents such a result. The Attorneys are free to seek a consolidation of the two proceedings if they so choose.

[31] Second, the Attorneys say that, in this case, it would be unfair to allow the respondent to litigate the matters in paragraphs 1.a to 1.g in the Application because she was aware of the assertion of similar claims in the Marilyn Application, was a party to that proceeding, chose not to participate and “lay in the weeds” until it was completed before commencing the Application.

[32] Res judicata is undoubtedly grounded in the concept of equity. However, while a court has discretion, albeit limited, to decline to apply cause of action estoppel or issue estoppel in circumstances where the preconditions for their application have been met, it is less clear that a court has the discretion to impose cause of action estoppel or issue estoppel where the preconditions for their application have not been met. In any event, however, in this case, the circumstances do not call for its application for the reason that the Attorneys’ description of circumstances is incomplete.

[33] The central reality in this case is that the Attorneys settled privately with Marilyn without addressing the respondent’s rights either directly or by a judicial determination. To bind the respondent contractually, the Attorneys required the respondent’s agreement to the Minutes of Settlement and/or a release from her. They chose not to involve her in the mediation and settlement. She did not have notice of any of these developments until after execution of the Minutes of Settlement.

[34] The Attorneys could also have agreed to a determination of the relevant issues in the Minutes of Settlement and a judicial determination of those issues, by way of court approval of the Minutes of Settlement or otherwise. They also chose not to proceed in this manner. It does not matter that it is quite possible that the respondent would have had no notice of any such hearing before a court, although it is possible that a court would have ordered notice notwithstanding the provisions of Rule 38.07(2)(i).

[35] Therefore, in summary, what has happened is simply that the parties to the Minutes of Settlement have resolved the issues in the Marilyn Application between themselves on a consensual basis without any judicial determination of the issues asserted in the Application. As the issues have not been resolved in the litigation by a judicial determination, the respondent is not prevented by the doctrine of res judicata from raising them in her Application.

Conclusion

[36] Based on the foregoing, the motion of the Attorneys is dismissed. The parties have agreed that costs in the amount of $7,500 shall be payable by Pola. It is so ordered on the basis that this order does not affect the rights of any other person who may wish to address this matter on any passing of accounts by the Attorneys.

Wilton-Siegel J.

Released: April 2, 2014

COURT FILE NO.: 03-72/13
DATE: 20140402

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

PESIA MIZRACHI GOLDFLUSS
Applicant

– and –

JESSICA BORTNICK, DANIEL BORTNICK and MICHAEL GOLDFLUSS, in their personal capacity and in their capacity as attorneys of Pola Goldfluss pursuant to a continuing power of attorney for her property, POLA GOLDFLUSS, MARILYN EDITH GOLDFLUSS and MORRIS & MORRIS LLP

Respondents

REASONS FOR JUDGMENT

WILTON-SIEGEL J.

Released: April 2, 2014