Court File and Parties
Court File No.: 1124A/14 Date: 2019-03-26 Ontario Superior Court of Justice
Between: TRIBECCA FINANCE CORPORATION, Plaintiff – and – BRYAN HARRISON and PAMELA HARRISON, Defendants
And Between: PAMELA DOWNWARD, Third Party Plaintiff – and – RAJAN KAUSHAL and PETER GRIVOGIANNIS, Third Parties
Counsel: Susan Zakaryan, for the Defendant and Third Party Plaintiff, Pamela Downward (Responding Party) Jocelyn Howell, for the Third Party, Peter Grivogiannis (Moving Party) James M. Butson for the Third Party, Rajan Kaushal (Responding Party)
Heard: March 20, 2019
Before: Gray J.
[1] This case started as a simple mortgage enforcement action. The plaintiff, Tribecca, lent $60,000 to the defendant Bryan Harrison, on the security of a mortgage placed on a cottage property owned jointly by Mr. Harrison and his wife Pamela, who now goes by the name Pamela Downward. Mr. Harrison and Ms. Downward were separated at the time, but jointly owned the cottage property which they each continued to enjoy.
[2] Tribecca referred Mr. Harrison and Ms. Downward to the third party, Peter Grivogiannis, a lawyer, for the purpose of providing independent legal advice to them.
[3] The mortgage went into default, and Tribecca commenced enforcement proceedings. Mr. Harrison did not defend the action, and was noted in default. Default judgment has been obtained against him.
[4] Ms. Downward defended the action, primarily on the basis that she was assured by Mr. Harrison and by Rajan Kaushal, the principal of Tribecca, that there would be no personal liability on her part. Mr. Kaushal is the sole shareholder, director and officer of Tribecca. She has brought third party proceedings against Mr. Kaushal, based on what she says was that assurance. She has also brought third party proceedings against Mr. Grivogiannis, on the basis that he did not advise her that she could be personally liable, and on the basis that he did not ensure that she and Mr. Harrison, as between themselves, had independent legal advice.
[5] Tribecca brought a motion for summary judgment against Ms. Downward, which was dismissed by Coats J. on March 10, 2015.
[6] Ultimately, Tribecca and Ms. Downward settled the main action, through a series of emails exchanged between counsel for Tribecca and counsel for Ms. Downward in October, 2017. A formal order dismissing the main action as against Ms. Downward was obtained, dated February 23, 2018.
[7] The third party claim asserted by Ms. Downward continued. On September 27, 2018, counsel for Ms. Downward served Ms. Downward’s Affidavit of Documents and Schedule “A” productions, and sought the same from counsel for Mr. Grivogiannis. An examination for discovery of Mr. Grivogiannis was scheduled for October 29, 2018.
[8] On October 16, 2018, counsel for Mr. Grivogiannis inquired of counsel for Ms. Downward as to the status of the third party claim against Mr. Kaushal. On the same date, counsel for Ms. Downward advised that the third party claim against Mr. Kaushal had been settled, and that he would not be examined for discovery. Counsel for Mr. Grivogiannis inquired as to the terms of the settlement with Mr. Kaushal, but no terms, including any Minutes of Settlement and any release, were provided.
[9] Mr. Grivogiannis now brings this motion for a permanent stay of the third party claim against him, on the basis that the settlement of the third party claim as against Mr. Kaushal was not immediately disclosed to the parties and to the court, and that the settlement changes the landscape of the litigation. In the alternative, she seeks an order that Mr. Kaushal provide an affidavit of documents and submit to oral discovery, and that liability between Mr. Kaushal and Mr. Grivogiannis be several, and apportioned at trial.
[10] Charles Wagman, one of Ms. Downward’s counsel, has filed an affidavit in response to the motion. He deposes that in the email correspondence between himself and Mr. Butson, counsel for Tribecca, which clarified and confirmed the settlement that was reached between Tribecca and Ms. Downward, the parties did not discuss the third party claim against Mr. Kaushal. At para. 23 of his affidavit, he states “At that time, I did not put my mind to the third party claim against Kaushal. I have now spoken with Mr. Butson. He advises and I believe that he too did not put his mind to the third party claim against Kaushal.”
[11] At para. 27 of his Affidavit, Mr. Wagman states “Other than the discussions held and correspondence exchanged with Mr. Butson, no other settlement documents were exchanged. In particular, no formal Minutes of Settlement were prepared or executed.”
[12] At para. 34 of his Affidavit, Mr. Wagman states:
As can be seen from Exhibit “I”, the Order was with respect to the main action and counterclaim only. There is no mention of the third party claim against Kaushal. In addition, the release executed by Ms. Downward and Tribecca did not make reference to the third party claim or Kaushal. From speaking with Mr. Butson, I believe that he and I, on behalf of our respective clients, intended to resolve and settle the matter between our clients in its entirety. There was no mention to continue the third party claim as against Kaushal. We simply did not put our minds to it and did not formalize a settlement as between Ms. Downward and Kaushal.
[13] Mr. Wagman deposes that after the settlement of the main action, he left a number of voicemails for Mr. Bieber, counsel for Mr. Grivogiannis, to discuss the settlement. Those calls were not returned. He also wrote to Mr. Bieber and asked him to call, but Mr. Bieber did not respond. Eventually he spoke to Mr. Bieber by telephone on May 24, 2018. There was discussion of the exchange of affidavits of documents, and examinations for discovery to be held in October, 2018.
[14] At para. 63 of his Affidavit, Mr. Wagman states:
As noted above, when Mr. Butson and I settled the matter on behalf of our clients, neither of us put our minds to the third party claim against Kaushal. It is obvious from our correspondence and discussions noted above, that there was no thought of continuing the action against Kaushal. It was an oversight that Kaushal’s name was not mentioned in the settlement exchanges and that the release executed by our clients did not include a release of him and by him. Likewise, it was inadvertence on the part of Mr. Butson and me to have failed to take steps to dismiss the third party claim as against Kaushal. It does not mean, however, that Ms. Downward proposes to proceed against Kaushal. It means that a formal settlement with Kaushal has not yet been completed. The same settlement terms that were disclosed to counsel for Grigoviannis in February, 2018, applied to the settlement as between Ms. Downward and Kaushal. There are no other allegedly undisclosed settlement terms. All correspondence about the settlement was produced to Mr. Bieber.
[15] Mr. Wagman was not cross-examined on his affidavit.
Submissions
[16] Ms. Howell, counsel for Mr. Grivogiannis, submits that it is now clear that there was a settlement of the third party claim as against the third party, Mr. Kaushal, and that the settlement was arrived at in October, 2017, even though the formal documents were not signed then. She submits that the settlement changes the litigation landscape, and it was necessary that it be disclosed immediately. She submits that up until the settlement, Mr. Grivogiannis and Mr. Kaushal were in the same interest, which was to defeat the third party claim. As between themselves, there was an adversity, in that the nature of the claims against each were different, and it would have been open to Mr. Grivogiannis to argue that there should be a greater degree of responsibility for any damages on the part of Mr. Kaushal. It would have been open to Mr. Grivigiannis to examine Mr. Kaushal for discovery, or at the very least, cross-examine him at trial. Those opportunities have now been lost.
[17] Mr. Howell submits that the absence of prejudice, assuming that were the case, does not relieve the settling parties of their duty to disclose the settlement and its terms.
[18] Ms. Howell submits that the only appropriate remedy in the circumstances is that the third party claim should be stayed. She relies on Handley Estate v. DTE Industries Limited, 2018 ONCA 324, 421 D.LR. (4th) 636; Aecon Buildings v. Brampton (City), 2010 ONCA 898, 328 D.L.R. (4th) 488; Aviaco International Leasing Inc. v. Boeing Canada Inc. (2000), 48 C.P.C. (4th) 44 (Ont. S.C.J.); Moore v. Bertuzzi, 2012 ONSC 3248, 110 O.R. (3d) 611; Pettey v. Avis Car Inc. (1993), 13 O.R. (3d) 725 (Gen Div.); and Laudon v. Roberts, 2009 ONCA 383, 308 D.L.R. (4th) 422. In the alternative, as noted earlier, she seeks an order that Mr. Kaushal furnish an affidavit of documents, submit to oral discovery, and that liability between Mr. Kaushal and Mr. Grivogiannis be several, and apportioned at trial.
[19] Ms. Zakaryan, counsel for Ms. Downward, submits that the motion should be dismissed.
[20] Ms. Zakaryan submits that the failure to disclose the agreement to settle the third party claim as against Mr. Kaushal resulted from mere inadvertence. It is clear that neither Mr. Wagman nor Mr. Butson specifically put their minds to formally settling the third party claim as against Mr. Kaushal. The intention was to resolve all matters between Tribecca and Ms. Downward, and since Mr. Kaushal is the principal of Tribecca, any settlement would have to resolve the third party claim as against him.
[21] Ms. Zakaryan submits that there is no change to the adversarial relationship of any of the parties as a result of the settlement between Ms. Downward and Mr. Kaushal. She submits that the claims against Mr. Kaushal and Mr. Grivogiannis are based on different theories, and the settlement can have no impact on the strategy of Mr. Grivogiannis or prevent him from taking any position that he wishes. It remains entirely open to him to argue that there should be a different level of responsibility as between him and Mr. Kaushal, and that he should only be responsible for a limited amount if he is found liable.
[22] Ms. Zakaryan submits that there is no abuse of process here. This is entirely unlike the main authorities relied upon by Mr. Grivogiannis in that in those cases there was a deliberate decision made to keep the relevant settlement agreements secret which would have the effect of misleading the other litigants and the court as to the true adversarial positions of the parties. In those circumstances, the Court of Appeal held that in order to prevent such a blatant abuse of process, it was necessary to impose a stay. This case is quite unlike those cases, and a stay is not appropriate.
[23] Mr. Butson, counsel for Mr. Kaushal appeared and made submissions only on the alternative order sought by Mr. Grivogiannis, namely, that Mr. Kaushal should provide an affidavit of documents and submit to oral discovery. He submits that there was no adversity as between Mr. Kaushal and Mr. Grivogiannis, so as to give rise to a right of discovery. It remains open to Mr. Grivogiannis to bring a motion, pursuant to Rule 31.10, to examine Mr. Kaushal if that is thought to be necessary. He submits that the landscape of the litigation, as between Ms. Downward and Mr. Grivogiannis, has not changed.
Analysis
[24] The leading cases that are relevant to the issues before me are Aecon, supra, and Handley Estate, supra. In my view, those cases are quite unlike the case before me, and are not overly helpful.
[25] In Aecon, the plaintiff sued the City of Brampton for breach of contract arising from delays in a project.
[26] It was agreed between Aecon and Brampton that Brampton would file a crossclaim, third party claim or other appropriate procedural mechanism against a consultant. It was agreed that the City would prosecute the third party claim against the consultant, and Aecon waived its right to collect any damages from the City in relation to the claim against the consultant, except to the extent that the City was awarded damages or otherwise recovered any sum from a party other than Aecon.
[27] The agreement was disclosed to the consultant several months later, but before the consultant was required to deliver its pleading.
[28] The Court of Appeal held that the agreement changed entirely the landscape of the litigation, and immediate disclosure of the agreement was required. At para. 16, MacFarland J.A. stated:
Here, the absence of prejudice does not excuse the late disclosure of this agreement. The obligation of immediate disclosure is clear and unequivocal. It is not optional. Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party. Where, as here, the failure amounts to abuse of process, the only remedy to redress the wrong is to stay the Third Party proceedings and of course, by necessary implication, the Fourth Party proceedings commenced at the instance of the Third Party. Only by imposing consequences of the most serious nature on the defaulting party is the court able to enforce and control its own process and ensure that justice is done between and among the parties. To permit litigation to proceed without disclosure of agreements such as the one in issue renders the process a sham and amounts to a failure of justice.
[29] In Handley Estate, the plaintiff, through its insurer, commenced a subrogated claim against the vendor and installer of a defective oil tank, and the company that delivered fuel to the tank. The plaintiff failed to sue one of the oil tank vendors in the supply chain. By the time it decided to sue that party, the limitation period for the main action had expired. The plaintiff and one of the defendants entered into an agreement under which the plaintiff agreed to provide financial support to that defendant to prosecute a third party claim. The agreement was entered into in 2011. The agreement was not disclosed until the fall of 2016. It was actually disclosed in stages.
[30] In his reasons for judgment on behalf of the Court of Appeal, Brown J.A. discussed Aecon, supra, as well as a number of other cases. He adopted the following formulation of the question to pose to ascertain whether an agreement triggers the immediate disclosure requirement:
Do the terms of the agreement alter the apparent relationships between any parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation?
[31] Justice Brown concluded that a stay of the third party claim (as well as any fourth party claim) was required. At para. 46, he stated:
Aecon Buildings identified the remedy for a specific kind of abuse of process. As a matter of litigation procedural policy, no unfairness is likely to arise from the application of the Aecon principles. At least one party to a litigation agreement usually is an insurer or other sophisticated participant who should be well aware of the Aecon principles. Where such a sophisticated party fails to comply with its clear disclosure obligation, judicial time should not be spent on inquiring into what, if any, prejudice was caused by a breach of the party’s clear obligation (or, as argued by Aviva, whether the undisclosed litigation agreement somehow actually benefited the parties who knew nothing of its existence).
[32] In my view, the case before me is quite unlike these cases, for two reasons. First, I am not convinced that the agreement significantly changes the landscape of the litigation. Second, it is clear that there was no intent on the part of the settling parties to mislead the court or the other parties in order to advantage Ms. Downward.
[33] The only consequence of the agreement is that Mr. Kaushal is no longer a defendant to the third party claim. There is no agreement that he participate in the trial of the third party claim in any way, or to provide any assistance in any other manner to Ms. Downward. Before the agreement was entered into, Mr. Grivogiannis was subject to a claim by Ms. Downward, based on his alleged negligence in ensuring her interests were protected, and he remains in that situation. The absence of Mr. Kaushal from the proceeding does not affect that state of affairs. It is open to Mr. Grivogiannis to take the position that because of Mr. Kaushal’s actions, some portion of Ms. Downward’s damages should be attributed to him, thus arguably reducing the amount Mr. Grivogiannis should pay, assuming liability is established. Ms. Downward can be cross-examined on the issue at trial, and it is open to Mr. Grivogiannis to bring a motion to examine Mr. Kaushal for discovery if he wishes.
[34] At the end of the day, I am not convinced that this is the sort of agreement that changes the landscape of the litigation such that it is required to be immediately disclosed.
[35] Unlike Aecon and Handley Estate, there was no deliberate decision made to hide the agreement from the remaining parties to the third party claim. It was purely by inadvertence that the agreement was not disclosed. Indeed, it was not until an inquiry was made as to the status of Mr. Kaushal that counsel for Ms. Downward and Mr. Kaushal even realised that there actually was an agreement to let Mr. Kaushal out of the third party claim, and that this naturally followed from the settlement of the main action.
[36] I am far from saying that the failure to disclose an agreement that changes the landscape of the litigation through inadvertence would necessarily mean that a stay of the proceedings would not be granted. Where the landscape of the litigation is significantly altered, a stay may well be required notwithstanding inadvertence leading to non-disclosure. However, that is not this case.
[37] As far as the alternate relief that was requested is concerned, I am not convinced that an order should be made that treats Mr. Kaushal as if he is still in the action if he is not. As observed earlier, it is open to Mr. Grivogiannis to argue that any damages should be reduced on account of any notional liability of Mr. Kaushal, and it is open to him to bring a motion under Rule 31.10 if he wishes.
Disposition
[38] For the foregoing reasons, the motion is dismissed.
[39] I will entertain brief written submissions as to costs from each party, not to exceed three pages together with a costs outline. Ms. Zakaryan and Mr. Butson shall have five days, and Ms. Howell shall have five days to respond. Ms. Zakaryan and Mr. Butson shall have three days to reply.
Gray J.
Released: March 26, 2019
COURT FILE NO.: 1124A/14 DATE: 2019-03-26 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: TRIBECCA FINANCE CORPORATION Plaintiff – and – BRYAN HARRISON and PAMELA HARRISON Defendants AND BETWEEN: PAMELA DOWNWARD Third Party Plaintiff – and – RAJAN KAUSHAL and PETER GRIVOGIANNIS Third Parties REASONS FOR JUDGMENT Gray J.
