Court File and Parties

COURT FILE NO.: CV-16-4167 DATE: 2021 05 11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MARIA RITA TASSONE, Plaintiff AND GORDON TOZER, Defendant

BEFORE: McSWEENEY J.

COUNSEL: M. Binette and A. Hall, for the Plaintiff M. Solmon, for the Defendant

HEARD: March 24, 2021

ENDORSEMENT

[1] This matter was argued as a long motion before me. The Defendant, Gordon Tozer, seeks leave to examine two third-party witnesses in advance of a summary judgment motion brought by his ex-spouse, the Plaintiff Rita Tassone, for possession of mortgaged property. He argues that this evidence is relevant to the motion. Ms. Tassone opposes the motion.

[2] By way of brief background, when these parties separated, each had significant business assets. With the assistance of counsel, they went to mediation and agreed to terms of separation. Their agreement was signed on October 30, 2012 (the “Separation Agreement”).

[3] As a key part of the Separation Agreement, Mr. Tozer agreed to pay Ms. Tassone $3.5 million dollars. To secure this payment obligation, he gave her a charge on the former family home in Caledon.

[4] Mr. Tozer made some payments initially, then fell behind. The full amount owing to Ms. Tassone was due in 2015. There is no dispute that Mr. Tozer had not paid Ms. Tassone, and that the outstanding debt remains over $3 million dollars.

[5] In 2016, Mr. Tozer commenced an application per s. 56 of the Family Law Act, R.S.O. 1990, c. F.3. He asked that the court set aside the Separation Agreement primarily on the basis of Ms. Tassone’s material non-disclosure of financial information. He was wholly unsuccessful at first instance, and Justice André granted summary judgment and costs in favour of Ms. Tassone (Tozer v. Tassone, 2018 ONSC 3726). He then appealed to the Court of Appeal, which dismissed his appeal, expressly found the Separation Agreement to be valid (Tozer v. Tassone, 2019 ONCA 285) and affirmed Mr. Tozer’s obligation to pay Ms. Tassone accordingly.

[6] It is now 2021 and Mr. Tozer has still not paid Ms. Tassone. She commenced this civil claim in August 2019, and now moves for summary judgment to enforce the mortgage. Mr. Tozer responded by cross-motion in November 2019, seeking an order to compel third-party witnesses to reattend for further examinations prior to the return of Ms. Tassone’s summary judgment motion.

Positions of the parties:

[7] Mr. Tozer takes the position that the third-party witnesses, Mr. Dominic Tassone, (the brother of Ms. Tassone), and Mr. Jayson Yu (accountant for Tassone family businesses), may possibly have evidence to support his claim that Ms. Tassone fraudulently misrepresented her financial position to him, which position he relied on in agreeing to the $3.5 million payment in the Separation Agreement. He argues that he is therefore entitled to equitable set-off of damages reflecting the quantum of her misrepresentation against the amount he owes under the Separation Agreement. Because a summary judgment is a final proceeding if judgment is granted, fairness therefore requires that he be granted leave to examine the witnesses before the summary judgment motion is heard.

[8] Ms. Tassone asks that this motion be dismissed. The only issue left for summary judgment is whether she is entitled to an order for possession as part of her enforcement of the Separation Agreement. The proposed third-party evidence is not relevant to that issue. Further, the issue of the sufficiency of her financial disclosure to Mr. Tozer prior to signing the Separation Agreement has already been conclusively decided in her favour by this court and the Court of Appeal. Therefore, this motion should also be dismissed as an abuse of process and Mr. Tozer estopped from re-litigating that same issue.

Issues to be determined on motion:

[9] Issue 1: Is the evidence of the third-party witnesses relevant to the issues to be determined on the summary judgment motion?

[10] Issue 2: Are issue estoppel and abuse of process doctrines applicable, and if so, how should the court exercise its discretion?

Issue 1: Relevance of third-party witness evidence:

[11] Mr. Tozer seeks to examine the third-party witnesses about what Ms. Tassone knew about her business assets prior to signing the Separation Agreement in 2012. He seeks to elicit evidence to support his argument that she intentionally misrepresented her assets to get a better separation deal. Specifically, counsel on the motion stated that the proposed witnesses “have relevant evidence regarding value of assets misrepresented to [Mr. Tozer]”.

Issue 1 - Law

[12] I accept the law cited by Mr. Tozer’s counsel for the proposition that the test of relevance has a particularly low threshold in the context of a pending summary judgment motion. The question on this motion is whether the proposed witnesses have evidence that is “possibly relevant”: Seelster Farms v. Ontario, 2017 ONSC 4756, at para. 38.

[13] Mr. Tozer argues that the evidence of Mr. Yu and Mr. Tassone is potentially relevant to his equitable set-off claim. His counsel conceded in argument that the witnesses may or may not have the evidence required to make out Mr. Tozer’s allegation of fraudulent misrepresentation, but that there is enough potential relevance to “negative a fishing expedition”.

[14] Counsel for Mr Tozer concedes that the validity of the Separation Agreement and of the mortgage are no longer in question as a result of the Court of Appeal decision. However, Mr. Tozer contends that if he can prove that Ms. Tassone committed civil fraud by intentionally misrepresenting her assets in the negotiation process back in 2012, then he can ask the Court to apply the defence of equitable setoff in his favour, and thereby reduce his Separation Agreement debt to zero.

[15] Ms. Tassone’s counsel argued that her summary judgment motion is about enforcement of the Separation Agreement. The Court of Appeal has expressly upheld her entitlement to the funds promised to her in that agreement, stating that Ms. Tassone “is entitled to the full amount of what is due under the Agreement, subject to any payments that might have been made [by Mr. Tozer]” (at para 12). To be clear with respect to “any payment that might have been made”, there is no dispute between the parties that the amount currently claimed by Ms. Tassone has already been reduced by the payments (totalling less than $500,000) made by Mr. Tozer between 2012 and 2015.

[16] I should note further, with regard to issues no longer in dispute, that in its decision at para 13, the Court of Appeal also ruled that the issue of consolidation of the family law and the civil mortgage claim was properly found to be moot, and that “[c]ounsel for the appellant [Tozer] acknowledged that the decision in this case resolves claims 1(a), (b), (c), and (f) of his statement of claim in the other proceeding, and we express no views on any other issues concerning the mortgage”. The claims 1(a), (b), (c), and (f) included Mr. Tozer’s claims: to set aside the Separation Agreement and mortgage; for a declaration of no funds by him to Ms. Tassone under the mortgage agreement; for leave to issue a certificate of pending litigation; and for an order that Ms. Tassone refund to him the amounts (other than child support) that Mr. Tozer has already paid to her under the Separation Agreement.

Issue 1 - Analysis

[17] I accept, for the purpose of Mr. Tozer’s argument, that both of the proposed third-party witnesses have evidence relevant to the issue of what Ms. Tassone knew or did not know about the value of her business assets in the period between the parties’ separation around 2008 and the signing of their separation agreement in October 2012.

[18] Ms. Tassone’s knowledge, however, is not relevant to the upcoming summary judgment motion. In that motion, Ms. Tassone seeks to enforce her entitlement under the Separation Agreement. Specifically, in the face of Mr. Tozer’s non-payment from 2015, when the mortgage came due, for over five years, Ms. Tassone seeks an order for possession of the mortgaged property. The third-party evidence is not related to the enforcement proceeding. Mr. Tozer does not suggest that either Mr. Dominic Tassone or Mr. Jayson Yu has any knowledge about the enforcement terms of the Separation Agreement.

[19] As stated above, the Court of Appeal has ruled that Mr. Tozer is obligated to pay to Ms. Tassone the funds he agreed to pay her in the Separation Agreement. That is what her summary judgment seeks to do.

[20] Mr. Tozer argues that he has pleaded something different in the current civil litigation in which he pursues equitable set-off damages, and that the proposed witnesses may possibly or potentially offer relevant evidence. Although he admits that the validity of the Separation Agreement and sufficiency of disclosure leading to it are not longer issues he can dispute, Mr. Tozer argues that his new allegations of misrepresentation amounting to fraud are the legal basis of a whole new, different cause of action. If the witnesses help him prove intentional fraud, he can then argue entitlement to equitable set-off damages equal to the entirety of the amount owing pursuant to the Separation Agreement.

[21] This argument has no factual foundation, because the court has already ruled that in the negotiation leading to the Separation Agreement, Ms. Tassone did not withhold or fail to disclose any material information. Having been found not to have committed the alleged act (failing to disclose material information), she cannot, as a matter of logic, have done so intentionally and fraudulently.

Issue 1 – Conclusion

[22] I conclude on Issue 1 that the examination of Mr. Tassone and Mr. Yu is not relevant to Ms. Tassone’s upcoming motion for summary judgment. Mr. Tozer’s motion for leave to cross-examine these witnesses can be dismissed on this basis alone.

Issue 2: Are the doctrines of issue estoppel and abuse of process applicable in these circumstances?

[23] Ms. Tassone argues that permitting the requested third-party examinations amounts to an abuse of the court’s process, as the issue to which the examinations relate – the sufficiency of her financial disclosure prior to the signing of the Separation Agreement - has already been conclusively determined in Mr. Tozer’s family law application. Thus, he should not be permitted to re- litigate the same issue.

[24] Mr. Tozer argues that issue estoppel does not apply, but if it does, this case falls within the “special circumstances” recognized by the courts in which the interests of justice require the court to exercise its discretion to permit re- litigation of an issue previously decided.

Issue 2 - Law

[25] The applicable test and relevant authorities are set out succinctly in Mr. Tozer’s reply factum at paras. 2-5. There is a two-step test for determining the applicability of these common-law doctrines. The first step requires a finding that the parties are the same in both proceedings, that the issue already determined is the same as the issue before the court, and third, that it was a final order in that proceeding: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, at para. 25.

[26] If the conditions in the first step are met for issue estoppel, the second step is engaged. As set out in Mr. Tozer’s reply factum at paras. 9 through 13, at this step, the court is required to consider whether in the circumstances of the specific case, the primary considerations of the integrity of the justice system and ensuring fairness to the parties requires the court to permit the issue to be litigated anew in the present proceeding.

[27] Mr. Tozer argues that the proceedings are different (civil versus family), and that the remedy he seeks is different. Specifically, he is no longer seeking to set aside the Separation Agreement on the basis of non-disclosure, but is now seeking to advance a new claim, specifically, his claim for damages for fraudulent misrepresentation and the resulting remedy of equitable setoff where fraud is proved.

[28] He also argues that to the extent that Ms. Tassone seeks to enforce the mortgage by which his payment obligation under the separation agreement was secured, he should be treated as a mortgagor and have a fresh opportunity to demonstrate fraudulent misrepresentation, such that the debt owing should be reduced.

Issue 2 - Analysis

[29] In applying the facts to the first step of the analysis, I find that first two of the three preconditions are met: the parties are the same; and the André J. summary judgment order, and the ONCA order upholding it, are both final orders.

[30] With respect to the third precondition – whether the issue is the same - Mr. Tozer argues that the issue previously decided did not expressly consider whether the material non-disclosure by Ms. Tassone was intentional.

[31] I do not agree with Mr. Tozer that he raises a different issue in this case than in his application to set aside the Separation Agreement.

[32] With respect to the third precondition, I conclude that the issue being pursued through proposed questioning of the third-party witnesses is, again, relating to the nature and sufficiency of Ms. Tassone’s pre-Separation Agreement disclosure such that she is able to rely on its terms to enforce it in the present case. This issue has already been determined and affirmed by the Court of Appeal, as referenced above.

[33] Having found all preconditions met for the application of issue estoppel, Mr. Tozer may pursue re-litigation of that issue through the proposed third-party witness examinations unless he can point to evidence of “special circumstances” on which the court should exercise its discretion in his favour in order to prevent unfairness and harm to the integrity of the justice system.

[34] Mr. Tozer also invited the court to consider the “special circumstances” analysis in Ernst & Young Inc. v. Central Guaranty Trust Company, 2006 ABCA 337. In that decision, the Alberta Court of Appeal emphasized that in order to demonstrate that issue estoppel should not apply, the moving party must show that despite having exercised reasonable diligence, the facts on which he bases his argument for a different outcome on the previously litigated issue were not available to him in the first proceeding: at para. 42. When the information was either known to him, or could have been known with the exercise of reasonable diligence, assessed on an objective standard, issue estoppel will apply. The Alberta Court of Appeal identified some circumstances where the special circumstances exception will apply, which include allegations that the decision in the first proceeding was obtained by fraud: at para. 44.

[35] Summarized by the Supreme Court of Canada in Toronto (City) v. Canadian Union of Public Employees, Local 79, 2003 SCC 63, at para. 52, (“CUPE”), the relevant considerations for exercising judicial discretion to permit re-litigation require consideration of whether Mr. Tozer has established evidence showing that:

a. the first proceeding was tainted by fraud or dishonesty;

b. there fresh, new evidence, previously unavailable, that conclusively impeach the original result; or,

c. that fairness to Mr. Tozer requires that the original result should not be binding in the new context.

[36] Taint by fraud or dishonesty: The question here is whether the result in the original proceeding was obtained by fraud. The proceeding referred to in this part of the test is the ONSC proceeding upheld at the Court of Appeal for Ontario. On appeal, Mr. Tozer had an opportunity to seek leave to file such fresh evidence he felt to be relevant to appellate review. He was unsuccessful on appeal. No fraud or dishonesty by Ms. Tassone was found by the Court of Appeal.

[37] Fresh, new evidence conclusively impeaching original result: In this case, the question of new evidence that was previously unavailable, and allegations of fraud, are related. The evidence sought in this case – of what Ms. Tassone knew of certain transactions prior to October 2012 - is information that Mr. Tozer could have sought earlier with reasonable diligence. Justice André found on the evidence that Mr. Tozer had direct knowledge of the existence of the projects related to the alleged fraudulently misrepresented values of the businesses, because he himself was involved in those projects. The reply factum of Ms. Tassone on this motion, at paras. 12-14 and 26, summarizes the evidence in relation to this point.

[38] I am not satisfied on the evidence that there is fresh, new evidence, not previously available, which impeaches or casts into doubt the ONSC and OCA decisions upholding the Separation Agreement. However the test Mr. Tozer must meet is higher still than that: he must adduce evidence conclusively impeaching the original result. He has failed to do so.

[39] As found by Justice André, the parties were sophisticated, and by Mr. Tozer’s own admission, he himself (and therefore by implication both parties) was “under no legal obligation to provide a valuation of my various business interests” and each accepted disclosure of the other. Although Mr. Tozer has expended significant energy to resist the enforcement of the terms of the Separation Agreement by attacking his ex-wife’s integrity and credibility with escalating allegations (from material non disclosure to fraudulent misrepresentation), the fact remains that Justice André has already considered his arguments, weighed the evidence, and dispositively resolved the issue of the sufficiency of financial disclosure during the Separation Agreement negotiation process.

[40] Fairness considerations: The third and final factor of the analysis, whether framed as fairness considerations or the existence of “special circumstances”, requires a balancing. Specifically, the court must consider where fairness to the specific litigant seeking re-litigation outweighs the importance that no party should be “twice vexed in the same cause” and the broader countervailing interests: CUPE, at para. 50. Those broader interests include finality in litigation, avoiding disproportionate consumption of court resources, contributing to overall delay in the administration of justice, and public confidence in the availability of court services: CUPE, at para. 51.

[41] In considering where fairness lies as between the parties in this case, I must consider the emphasis placed by the Ontario Court of Appeal on keeping family matters in family courts: Cunningham v. Moran, 2011 ONCA 476, at paras. 39-41. The Court of Appeal stated that family law litigants should not be permitted to use the civil law system to circumvent the applicable family law statutory schemes: at para. 40.

[42] I also agree with counsel for Ms. Tassone that permitting Mr Tozer to continue his efforts to attack the integrity of the bargain he struck in the Separation Agreement amounts to a collateral attack on the family law application: Cunningham, at para. 41.

[43] Of course, a court is concerned where the evidence suggests that one party was unsophisticated and did not fully comprehend the dimensions of their contractual obligations. Mr. Tozer seeks to invoke an equitable doctrine, to provide a remedy for an unfair process where he has not, in his view, been able to obtain justice in the prior proceeding. I find that the evidence does not support Mr. Tozer’s argument either of his own non-comprehension nor of unfair process. Indeed, the process leading to the Separation Agreement was expressly found to be fair to Mr. Tozer by both André J. and the Court of Appeal: Tozer, 2018 ONSC 3726, at para. 50; Tozer, 2019 ONCA 285, at para. 13.

[44] Another factor in the balancing, which weighs in favour of preventing Mr. Tozer from taking further litigation steps in his quest to find more evidence of ex- wife’s disclosure prior to their 2012 Separation Agreement, is the court’s role to support bargains struck by separating spouses: parties may settle their disputes when they see fit, despite opportunities for further disclosure, so long as the manner by which the agreement is reached is fair: Quinn v. Epstein Cole LLP, 2007 CanLII 45714 (ON SC), 87 O.R. (3d) 184, at para. 53. Family law legislation, and the courts, aim to uphold agreements made between parties to family law disputes to settle their own matters: Quinn, at paras. 53-57.

[45] I disagree with moving party counsel as to the applicability of Rosati v. Reggimenti, 2018 ONSC 2. Counsel points out that the court in Rosati permitted Ms. Reggimenti to pursue a separated claim for fraudulent misrepresentation against Mr. Rosati after she had failed to set aside their separation agreement.

[46] Mr. Tozer argues he is entitled to do the same, because his circumstances are analogous to those of Ms. Reggimenti. I disagree. The Rosati case is distinguishable on its facts: Ms. Reggimenti was dependent on her wealthy ex- husband and entitled to spousal support. Mr. Rosati’s conduct over several years of high conflict family law litigation, established on the court’s record, established sufficient income information withholding and misrepresentation that the balance of fairness ultimately favoured Ms. Reggimenti having an opportunity to separately plead and attempt to prove fraudulent misrepresentation, despite the fact she had in the meantime wanted to stop the fight and agreed to less than Mr. Rosati agreed she was entitled to.

[47] The Rosati decision does not assist Mr. Tozer as the circumstances between the parties were vastly different. The judicial analysis underpinning Ms. Reggimenti’s entitlement to pursue a separate civil fraud claim arises from their unequal bargaining power, the aggressive litigious behaviour of Mr. Rosati, and his extensive non-compliance with court orders and his disclosure obligations. There was sufficient contextual evidence that his multiple misrepresentations and concealments of information appeared deliberate as to persuade the court that Ms. Reggimenti should be permitted to pursue a civil fraud claim.

[48] In the case before me, the motion judge’s finding that that Mr. Tozer and Ms. Tassone struck a bargain in a fair manner, and the Court of Appeal has affirmed that bargain. In their circumstances, both Mr. Tozer and Ms. Tassone chose neither provide to the other, nor to pursue for themselves, the full disclosure to which they would have been otherwise entitled at law, in exchange for the certainty of a bargain which they could both live with.

[49] In summary, I conclude for the reasons above that Mr. Tozer has failed to discharge his onus of identifying “special circumstances” in which the court should exercise its discretion to permit him to examine the proposed third-party witnesses. The relevant fairness considerations weigh in favour of preventing re- litigation in this case.

Conclusion:

[50] In conclusion on Mr. Tozer’s motion, the issue upon which he seeks to examine third-party witnesses is not relevant to Ms. Tassone’s summary judgment. To the extent it is relevant to a separate setoff claim related to Ms. Tassone’s assets prior to the date of the Separation Agreement, it is an issue previously decided, such that an abuse of process would be condoned if the motion were allowed.

[51] Mr. Tozer’s motion is dismissed.

Order:

[52] Mr. Tozer’s motion to examine third-party witnesses in advance of the summary judgment motion is dismissed with costs.

[53] At the conclusion of argument before me, the parties agreed that costs of this motion be fixed in the amount of $15,000. The plaintiff Ms. Tassone was successful and is entitled to costs. Mr. Tozer is directed to pay costs of $15,000 to Ms. Tassone within 30 days.

Digitally signed by Justice L. McSweeney Date: 2021.05.11 '18:44:22 -04'00

MCSWEENEY J.

Date: May 11, 2021

COURT FILE NO.: CV-16-4167 DATE: 2021 05 11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MARIA RITA TASSONE, Plaintiff AND GORDON TOZER, Defendant

ENDORSEMENT

McSweeney J.

DATE: May 11, 2021