Court File and Parties
NEWMARKET COURT FILE NO.: CV-17-133840 DATE: 2021-01-19 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Kirill Kalinitchenko and Racheli Ashurov, Plaintiffs AND: Allure at the Gates of Aurora Inc., Randy Zanette, Mark Zanette and Stephen Zanette, Defendants
BEFORE: The Honourable Mr. Justice H. Leibovich
COUNSEL: David R. Conway, for the Plaintiffs collectdebt@hotmail.com Brett D. Moldaver, for the Defendants brett@moldaverbarristers.com Milton A. Davis and Ian P. Katchin, for the Non-Parties mdavis@foglers.com, ikatchin@foglers.com
HEARD: January 12, 2021, in writing
ENDORSEMENT
[1] The plaintiffs commenced an action for, among other things, specific performance of a new home purchase agreement. On June 6, 2019, the plaintiffs obtained a court order prohibiting the defendants from taking steps to convey, sell, transfer, encumber or otherwise dispose of the subject property. On January 14, 2020, Minutes of Settlement were entered, and the plaintiffs agreed to accept $400,000 as a full and final settlement. On January 14, 2020 the June 6, 2019 order was set aside. The Minutes of Settlement set out a payment schedule, but the defendants failed to make any payments. In addition, the defendants listed the subject property for sale, and it has now been sold to a third party with a closing date of February 25, 2021. The plaintiffs have brought this motion to, in effect, scuttle the sale to the third party. They claim that because they are seeking, under Rule 49.09(b) of the Rules of Civil Procedure, to set aside the Minutes of Settlement and proceed with their action, the June 6, 2019 order is still in effect. In addition, they have brought a motion for contempt of court.
[2] The responding defendants state that Rule 49.09(b) does not apply as the settlement resulted from a negotiated Minutes of Settlement, not an accepted offer to settle. Furthermore, there can be no contempt of court, as the order prohibiting the defendants to deal with the property had been set aside.
[3] The third party purchasers have brought an application to intervene in this motion. I would deny the request to intervene. In my view, the proposed intervenors would merely repeat the submissions of the defendants and would not make a useful contribution to the resolution of the issues. The motion to intervene is dismissed.
[4] For the reasons set out below, the plaintiffs’ motion is also dismissed. I agree with the defendants, Rule 49.09(b) does not apply. The plaintiffs’ only option is to seek judgment on the Minutes of Settlement. Furthermore, irrespective, the June 6, 2019 court order prohibiting the defendants from dealing with the property is no longer in effect. It was set aside on January 14, 2020.
Relevant Facts
[5] A court order was issued on June 6, 2019, prohibiting the defendants from taking steps to convey, sell, transfer, encumber or otherwise dispose of the property pending determination of the plaintiffs’ action.
[6] A motion for summary judgment was scheduled for January 14, 2020. The parties attended with counsel and entered into Minutes of Settlement. The handwritten document is contained in the plaintiffs’ motion material. In accordance with paragraphs “I” to “III” of the terms of settlement, the defendants were to pay to the plaintiffs the sum of $400,000 as follows:
i) $50,000 by February 14, 2020; ii) $50,000 by March 16, 2020; iii) $50,000 by April 16, 2020; iv) $50,000 by May 18, 2020; v) $50,000 by June 18, 2020; and vi) $150,000 by July 17, 2020.
[7] In exchange for the defendants’ promise to pay, the plaintiffs agreed in paragraph “VI” of the Minutes of Settlement that the defendants would be at liberty to sell or convey or otherwise deal with the property. The parties then attended the same day in Court before Corkery J., who endorsed the record:
The action has settled. Minutes of Settlement are attached. The June 9, 2019 order is no longer of any force or effect.
[8] There is no dispute that the reference to June 9, 2019, as opposed to June 6, 2019, is a simple error and the intent of the endorsement is to set aside the June 6, 2019 order.
[9] Despite reminders and demands forwarded to the defendants’ lawyer on February 21, 24, 27, March 2, 16, April 20, May 21, June 18 and August 18, 2020, the defendants never made any payment to the plaintiffs.
[10] The plaintiffs initially instructed their counsel to proceed with a motion for summary judgment based upon the Minutes of Settlement. Prior to the COVID-19 lockdowns, a motion date of August 6, 2020 was secured with the Court. As the motion date of August 6, 2020 approached, but prior to motion materials being exchanged, the Court advised that due to COVID-19, the motion would not proceed as scheduled and that a new date would have to be obtained. The plaintiffs then decided to seek an order under Rule 49.09(b) to forego the Minutes of Settlement and proceed with the action. The defendants were advised of this on September 11, 2020. In November 2020, the property was listed on MLS for $3.375 million and the property was sold for $3.35 million to Anjum and Rakesh Nayyar. The defendants did not tell the Nayyars that there were any restrictions.
Law and Analysis
The Motion to Intervene
[11] Rule 13.01 of the Rules of Civil Procedure provides:
13.01 (1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,
(a) an interest in the subject matter of the proceeding;
(b) that the person may be adversely affected by a judgment in the proceeding; or
(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.
(2) On the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and may make such order as is just.
[12] As stated by Backhouse J. in Affleck v. Ontario (Attorney General), [2019] OJ No 891, 2019 ONSC 1292 at para. 15:
The well-established factors to consider in determining whether to grant leave to intervene pursuant to Rule 13.01 and the extent of the intervention are:
(1) the nature of the case;
(2) the issues that arise;
(3) whether the issues are essentially private or whether they involve a public interest component;
(4) the likelihood of the proposed intervenor making a useful contribution to the resolution of the issues; and
(5) whether the proposed intervenor's participation would be unfair to the immediate parties
[13] I find that it would be unfair to the plaintiffs if I allowed the proposed intervention. The third party purchasers are clearly aligned with the defendants. The legal arguments they intend to make refuting the plaintiffs’ request are made by the defendants. The relevant facts surrounding their involvement are also set out by the defendants. I do not see their proposed participation as making a useful contribution to the resolution of the plaintiffs’ motion. In addition, their proposed participation has the potential to unduly complicate the issues.
The Plaintiffs’ Motion
[14] The plaintiffs seek the following orders:
An order requiring the defendants to comply with the court’s order dated June 9, 2019 by removing, deleting, cancelling and/or retracting the MLS listing for the sale of 39 Davina Circle, Aurora, in particular MLS #N4946226, and refraining from taking steps to convey, sell, transfer, encumber or otherwise dispose of such property until this Court orders otherwise;
A contempt order against the defendants for failure to comply with the court’s order dated June 9, 2019; or
In the alternative, a new order in the same terms as found in paragraph “2” of the court’s order dated June 6, 2019.
Is Rule 49.09(b) of the Rules of Civil Procedure applicable?
[15] The plaintiffs’ claim that the June 6, 2019 order remains in effect is linked to their claim that they can avail themselves of Rule 49.09(b) and set aside the Minutes of Settlement and continue the original action. The plaintiffs, in essence, submit that since the defendants defaulted on the terms of the Minutes of Settlement, the plaintiffs have the option of invoking Rule 49.09(b), which states:
49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may,
(a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; or
(b) continue the proceeding as if there had been no accepted offer to settle.
[16] The plaintiffs submit that because they are proceeding under Rule 49.09(b) it is as if the January 14, 2020 order, which set aside the June 6, 2019 order, does not exist. As stated in their factum:
Rule 49.09(b) clearly states that in the event of a default, the innocent party may continue the proceeding as if there had been no accepted offer to settle. The Plaintiffs have made such an election, and as a result, paragraph “VI” of the Minutes of Settlement that led to the setting aside of the Order dated June 6, 2019 can no longer be of force and effect (for reference, see Motion Record, Tab 2C, Page 19). The proper result of the Plaintiffs’ election is that the prohibiting Order dated June 6, 2019 remains in full force and effect and that the Defendants are currently taking steps to breach that Order. [emphasis added]
[17] The plaintiffs further submit that by relisting and selling the property the defendants are in contempt of court by violating that June 6, 2019 order.
[18] I disagree. Rule 49.09(b) does not apply. Rule 49.09 applies when a party to an accepted offer to settle fails to comply with the terms of the offer. However, in this case, the Minutes of Settlement arose, not out of an accepted offer to settle, but out of negotiations that took place the day of the motion for summary judgment.
[19] As stated by Sproat J. in Vanderkop v. Manufacturers Life Insurance Company 2005 CanLII 39686 (ON SC), [2005] OJ No 4661, at paras. 14 and 15:
This motion was framed as a Rule 49 motion. Rule 49 encourages parties to settle by imposing cost consequences.
A case settled by offer and acceptance under Rule 49 is treated somewhat differently than Minutes of Settlement. Rule 49.09 provides if there is a failure to comply with the terms of settlement a party may move for judgment and the judge may grant judgment or the party may continue the action.
In contrast, a party to Minutes of Settlement (which may precede any action) who simply agrees to settle for $50,000 only has the option of moving for judgment in that amount. That is why parties will often stipulate that in default of payment judgment will be in a higher amount or that the action will proceed.
[20] Woollcombe J. came to the same conclusion in Exponents Canada Inc. v. Sharma, 2015 ONSC 2940 at paras. 6 and 7:
Both counsel proceeded under Rule 49 on the basis that what was before me was "an accepted offer to settle", as contemplated by Rule 49.09. The difficulty with this position is that there is a difference between "an accepted offer to settle" under Rule 49, and a negotiated settlement agreement. The evidence before me, including Justice Emery's endorsement and the "Minutes of Settlement", makes clear that what happened here was that a settlement agreement was reached, rather than "an accepted offer to settle".
Since there was no "accepted offer to settle", I do not have jurisdiction, under Rule 49.09(b), to set aside the agreement on the basis advanced by the plaintiffs…
[21] The only option for enforcement available to the plaintiffs is to move for judgment for the amount owing under the Minutes of Settlement. Rule 49.09(b) does not apply.
Irrespective of Rule 49.09(b) the June 6, 2019 order is not in effect
[22] Even if Rule 49.09(b) applied, the June 6, 2019 order was set aside on January 14, 2020 by Corkery J. There is no dispute that Corkery J., even though he referenced June 9, 2019 as opposed to June 6, 2019 in his endorsement, was setting aside the June 6th order. The plaintiffs do not argue that this mistake means that the order is still in effect. Rather, the plaintiffs argue that the defendants defaulted on the terms of the Minutes of Settlement so they should not get the benefit of the setting aside of the June 6th order. As submitted in their factum:
The Defendants are the authors of the undoing of the Minutes of Settlement. The Plaintiffs are the innocent parties. It would lead to an unjust result to allow the Defendants to retain the benefit they were to receive under the Minutes of Settlement while failing to pay the required $400,000.00.
[23] I disagree. The defendants concede the obvious, that they defaulted on the terms of the Minutes of Settlement and they attempted to explain why in their responding materials. However, the June 6, 2019 order was set aside by a subsequent court order. The Minutes of Settlement is the document that binds the parties and it does not provide for what should happen in the event of default, more specifically it does not prohibit the defendants from taking steps to convey, sell, transfer, encumber or otherwise dispose of the property if they failed to make the requisite payments.
[24] The June 6, 2019 order is not in effect. The defendants have not been in breach of that order.
[25] There is no contempt of court. The parties voluntarily entered into Minutes of Settlement on January 14, 2020, with the intention that it would bring the litigation to an end. The plaintiffs, in response to the defendants’ default, scheduled a motion to enforce the settlement and obtain a Judgment for the settlement amount. That was the proper route. However, the plaintiffs are now using a contempt motion to seek to undue the Minutes of Settlement that have not worked out favourably. As stated by Monahan J. in Tan-Jen Ltd. v. Di Pede, 2017 ONSC 6800 at paras. 42 and 43:
In reality, the Defendants are attempting to leverage the alleged improper storage by Tan-Jen of two of the Moulds into a re-opening of the entire Underlying Litigation. The effect, if not the purpose, of the Contempt Motion is to avoid the binding effect of the Settlement Agreement.
The courts are rightly wary of the overuse of the contempt power, for fear that this would trivialize the very dignity and legitimacy that the power is intended to protect. I find this concern of particular relevance here, where the Defendants invoke the court's contempt power to accomplish indirectly what could not be done directly. This ignores the public law dimension of the court's civil contempt power, reducing it to a mere instrument to be deployed in civil litigation in furtherance of private rather than public ends.
Should a new order, similar to the June 6, 2019 prohibition order, be issued?
[26] I would not issue a new order. To do so would have the court, in effect, rewriting the agreement reached by the parties. The Minutes of Settlement contain no security for the plaintiffs and it specifically allows the defendants to deal with the property. It states:
The defendants shall be at liberty to convey or otherwise deal with the property.
[27] Furthermore, the plaintiffs have remedies. They can enforce the settlement and obtain Judgment for the amount that is owed.
Disposition
[28] I therefore order that:
The motion to intervene is dismissed;
The plaintiffs’ motion is dismissed;
The defendants shall provide a bill of costs and its submissions with respect to costs within 10 days. The costs submissions shall not be more than two pages;
The plaintiffs shall submit a bill of costs with respect to the non parties’ motion and its submission on the defendants’ costs request and the costs the plaintiffs are seeking from the non parties, within 15 days. The costs submissions shall not be more than three pages; and
The non-parties shall submit their response with respect to costs within 20 days. The costs submissions shall not be more than two pages.
Justice H. Leibovich
Date: January 19, 2021