COURT FILE NO.: CV-17-571788
DATE: 20220708
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ALEXANDRA DUSSAULT and PATRICK DUSSAULT
Plaintiffs
– and –
SYLVIA TONG, LUIS STEVE QUINTANA, SUZANNE CATHERINE LEWIS, KELLER WILLIAMS ADVANTAGE REALTY BROKERAGE
Defendants
– and –
LIAN CONG CAO, carrying on business as JIN YAI CONSTRUCTION and ZHANG SHENG CHOW, carrying on business as JIN YAI CONSTRUCTION
Third Parties
Simon Bieber and Jordan Katz, for the Plaintiffs/Responding Parties
Michael Farace, for the Defendants/Moving Parties, Sylvia Tong and Luis Steve Quintana
Hans P. Engell, for the Defendants, Suzanne Catherine Lewis and Keller Williams Advantage Realty Brokerage
LIAN CONG CAO, CARRYING ON BUSINESS AS JIN YAI CONSTRUCTION, Self-represented Third Party
ZHANG SHENG CHOW, CARRYING ON BUSINESS AS JIN YAI CONSTRUCTION, Self-represented Third Party
HEARD: January 31, 2022 and June 17, 2022
vella j.
REASONS FOR DECISION
[1] The Defendants, Sylvia Tong and Luis Steve Quintana (collectively, the “Vendors”), seek an order permanently staying the action as a result of a lack of a timely disclosure of what they describe as a “Pierringer” settlement agreement which resulted in the Plaintiffs, Alexandra Dussault and Patrick Dussault (collectively, the “Purchasers”), dismissing the action as against the Co-defendants, Suzanne Catherine Lewis and Keller Williams Advantage Realty Brokerage (collectively, the “Brokers”).
[2] The Vendors amended their notice of motion to seek a declaration that the Purchasers and Brokers had indeed made a settlement. The Brokers agree that there has been a binding settlement agreement. At the outset of the motion, the Purchasers conceded that they had entered into a binding settlement agreement with the Brokers.
[3] The issue I must determine is whether the settlement agreement reached between the Purchasers and the Brokers is the type of litigation settlement agreement that had to be disclosed promptly to the Vendors as the remaining defendants.
[4] In order to decide this issue, I must consider what type of settlement agreements are subject to immediate disclosure, and whether the settlement agreement that is the subject of this motion falls under that category.
[5] For the reasons that follow, the motion is dismissed, with the exception that a declaration will issue declaring that a binding settlement agreement was reached as between the Purchasers and the Brokers, the terms of which are reflected in correspondence exchanged between their respective lawyers and dated November 27, 2019.
Steps Leading to the Settlement Agreement and Disclosure
[6] The Purchasers sued the Vendors for breach of an Agreement of Purchase and Sale with respect to a residential property. The Purchasers sued the Brokers for, inter alia, an order requiring them to disgorge their real estate commissions in the sum of $18,960.82. The Vendors issued a third party claim against their contractors (collectively, the “Third Parties”) seeking contribution and indemnity.
[7] There were cross claims issued as between the Vendors and the Brokers, seeking contribution and indemnity from each other.
[8] The Vendors reached a settlement with the Brokers whereby they agreed to dismiss the action on a without costs basis.
[9] A chronology of the litigation steps surrounding the settlement is as follows:
(a) On October 16, 2018, a mediation was held. After the mediation, the Purchasers concluded that there was no liability as against the Brokers.
(b) By exchange of correspondence on November 27, 2019, the Purchasers and Brokers confirmed a settlement which would result in the action being dismissed against the Brokers on a without costs basis in exchange for a standard full and final release in favour of the Brokers.
(c) On December 12, 2018, the Brokers provided their consent to the Purchasers to execute a dismissal order releasing them from the action on a without costs basis. The Vendors’ consent was not sought.
(d) Prior to the examinations for discovery, the Brokers delivered an Affidavit of Documents, but did not produce a copy of their Schedule A productions.
(e) On May 29, 2019, Quintana (one of the vendors) was examined for discovery;
(f) On May 29, 2019, Tong (the other vendor) was examined for discovery.
(g) On May 30, 2019, Patrick Dussault (one of the purchasers) was examined for discovery.
(h) On June 19, July 10, and August 29, 2019, the third parties (Jin Mai construction) were examined for discovery;
(i) On September 24, 2019 Alexandra Dussault (the other purchaser) was examined for discovery;
(j) The Purchasers set this action down for trial on March 2, 2020. The Brokers have never been examined for discovery as the Purchasers cancelled that discovery as a result of the settlement.
(k) The cross claims as between the Vendors and the Brokers remain outstanding.
[10] The Vendors learned for the first time, during the course of the examination for discovery of Patrick Dussault that the Purchasers had reached a settlement whereby the Brokers were to be let out of the action. However, the Purchasers refused to answer any questions relating to the terms and conditions of the settlement claiming settlement privilege.
[11] This Notice of Motion was issued on or about July 26, 2021.
Issue and Analysis
[12] The main issue in this motion is whether the settlement reached as between the Purchasers and the Brokers is the type of litigation settlement agreement that, pursuant to well-known cases including Handley Estate v. DTE Industries Limited, 2018 ONCA 324, 421 D.L.R. (4th) 636, Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, 328 D.L.R. (4th) 488, Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66, 466 D.L.R. (4th) 324, and Laudon v. Roberts, 2009 ONCA 383, 308 D.L.R. (4th) 422, had to be immediately disclosed. If it is, then was it disclosed too late such that the action against the Vendors must be stayed. There is no in-between remedy if this type of settlement agreement is determined to have been disclosed late.
[13] As stated in Handley, at para. 45:
By contrast, Aecon squarely addressed the consequences that should flow from a specific kind of abuse of process – a party’s failure to disclose immediately an agreement that alters the adversarial posture of the litigation. Several clear messages emanate from Aecon:
(i) The obligation of immediate disclosure of agreements that “change entirely the landscape of the litigation” is “clear and unequivocal” – they must be produced immediately upon their completion: at paras. 13 and 16;
(ii) The absence of prejudice does not excuse the late disclosure of such an agreement: at para. 16;
(iii) “Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party”: at para. 16; and
(iv) The only remedy to redress the wrong of the abuse of process is to stay the claim asserted by the defaulting non-disclosing party. Why? Because sound policy reasons support such an approach:
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 the 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: at para. 16
[14] After the conclusion of oral argument, the Ontario Court of Appeal released its latest decision on this issue in Poirier v. Logan, 2022 ONCA 350. The parties, on consent, drew this decision to the court’s attention and sought leave to make further submissions which I granted.
[15] In Poirier at paras. 47 and 48, the Court of Appeal summarized the test for determining the nature of the settlement agreements that must be immediately disclosed or else attract the harsh remedy of a permanent stay, drawn from the leading four prior appellate decisions:
…Neither a change in the position of the parties reflected in the pleadings, nor a “sham” inquiry, are essential parts of the disclosure test. As I have indicated, it is settled in this court’s jurisprudence that the obligation to disclose arises where the settlement agreement changes entirely the landscape of the litigation in a way that significantly alters the adversarial relationship among the parties to the litigation or the “dynamics of the litigation”: Aecon, at para. 13; Tallman, at para. 12; Handley Estate, at paras. 12, 29 and 37; Laudon, at para. 39….
To be sure, it may almost invariably be the case that if this inquiry is satisfied the settling party’s pleadings will no longer fully reflect the post-settlement state of the litigation, but the authorities do not support the proposition that a finding that a settlement agreement has altered the adversarial relationship disclosed in the pleadings is a condition precedent to a determination that an obligation to disclose has arisen.
[16] The issue before me is still to determine whether or not the settlement agreement reached between the Purchasers and the Brokers is the type that is subject to the immediate disclosure requirement. If it is, then it was not immediately disclosed and it is clear that the action will have to be stayed. However, it is equally clear that not all settlements fall subject to this immediate disclosure requirement and that the lack of immediate disclosure in such cases will not constitute an abuse of process.
[17] The Vendors submit that the Brokers have changed the adversarial relationship between the parties such as to have entirely changed the litigation landscape. They point to the fact that the Brokers had denied paragraph 17 in the statement of claim that alleged they were mere conduits of the misrepresentations attributed by the Purchasers to both the Vendors and the Brokers. In their statement of defence, the Brokers also denied making any such representations in the first place, and also specifically denied being a conduit of those representations allegedly made by the Vendors. The Vendors urge that this represents a change in the adversarial position as reflected in the pleadings. However, the Vendors also denied paragraph 17 in their own statement of defence.
[18] Furthermore, the Vendors and Brokers have maintained their cross claims as against each other, and there is no evidence suggesting that prior to the settlement they presented a unified front against the Purchasers or had a standstill agreement.
[19] Mr. Matlofsky, at the respective examinations for discovery of the Purchasers, steadfastly refused to allow them to answer questions about the settlement on the basis of settlement privilege thus giving rise to a suspicion by the Vendors that there was more to this settlement than a simple exchange of a consent dismissal order without costs and a standard form of release.
[20] There is evidence from Mr. Matlofsky, given at his cross examination, to the effect that it was as a result of information received from the Brokers’ lawyer, Mr. Engell, that he concluded that the Brokers were mere conduits of the subject [mis]representations and therefore the Purchasers concluded that they had no real prospective of liability against the Brokers.
[21] The Vendors ask that the court draw an adverse inference against the Purchasers and find that there were terms of the settlement that effectively required the cooperation of the Brokers to provide helpful evidence to the Purchasers against the Vendors. If there was a term of the settlement that made the active cooperation of the Brokers part of the consideration, this could give rise to a financial incentive on the part of the Brokers to tailor their evidence at trial and would be fair game on cross examination: Waxman v. Waxman, 2022 ONCA 311, at para. 33.
[22] Mr. Matlofsky submitted two affidavits on behalf of the Purchasers, as counsel. He affirmed that there were no terms to the settlement that required the Brokers’ cooperation, no documents been provided by the Brokers to the Purchasers, and no other evidence or information beyond what has been disclosed to all of the parties at the same time has been provided to the Purchasers. He further deposed that what occurred was a “simple settlement”; meaning: the Purchasers agreed to settle the matter by virtue of a without costs dismissal order and release, and nothing else. He was unshaken in his cross examination on these crucial matters.
[23] Mr. Matlofsky deposed that it was as a result of his further review of the documents exchanged in the litigation to that point that he formed the view that the Brokers were unlikely to have any liability to the Purchasers because “their alleged misrepresentations likely extended only to what they were told by their clients, the Vendor Defendants”.
[24] He then wrote to Mr. Engell, the lawyer for the Brokers, on November 27, 2018 that the Purchasers were prepared to release the Brokers from the action on a without costs basis. This letter was disclosed in the evidence.
[25] Mr. Engell responded the same day in a letter accepting the offer on the condition that the Purchasers provide a full and final release in advance to consenting to a dismissal order. While there was some delay in obtaining the release, the Purchasers conceded at the motion that a settlement had been achieved notwithstanding the lack of a signed release from them. Mr. Engell’s letter was also produced in evidence.
[26] By letter dated December 11, 2018, Mr. Matlofsky provided a form of Consent and draft Order. However, Mr. Matlofsky neglected to consider that as a result of the cross claims, he might need the consent of the Vendors to this dismissal. He never sought that consent.
[27] By letter dated December 12, 2018, Mr. Engell provided his consent to the draft Order and authorized Mr. Matlofsky to sign it on his behalf.
[28] No release has been signed in favour of the Brokers. I have not been asked to weigh in on what the implied terms of this release might be.
[29] The complete correspondence exchanged, including enclosures, between the two lawyers pertaining to this settlement negotiations from November 27 to December 12, 2018 have been produced. There is no indication in any of this correspondence that there were any other terms to this settlement other than a release and consent dismissal, and no suggestion that there would be an underlying understanding that the Brokers would cooperate with the Purchasers against the Vendors “behind the scenes”.
[30] Mr. Matlofsky deposed in his affidavit that there has been no discussion or agreement with the Brokers to provide any evidence or cooperation to the Purchasers, nor any discussion of a Pierringer agreement or other form of agreement that would result in any payment or consideration to the Purchasers from the Brokers.
[31] Furthermore, he deposed that he never discussed with Mr. Engell the cross claims between the Brokers and the Vendors, or the potential impact that the release of his clients would have on the cross claims, nor is there any suggestion that the purchasers will indemnify the Brokers for any amounts that may be found owing to them under the crossclaim.
[32] Mr. Matlofsky deposed that on each of December 23, 2018 and January 31, 2019, he left voicemail messages for Mr. Farace (the Vendors’ lawyer) or his assistant and, in one of those messages, advised that he intended to obtain a dismissal Order against the Brokers.
[33] Mr. Farace wrote a letter to Mr. Matlofsky on February 7, 2019 confirming Mr. Matlofsky’s advice left on a voicemail that he was seeking a dismissal order against the Brokers. Mr. Farace asked for a copy of the Dismissal Order once obtained.
[34] There were no active litigation steps taken between December 18, 2018 and January 31, 2019.
[35] However, Mr. Matlofsky has been unable to have the proposed dismissal order issued and entered because the Vendors have not consented and indicated clearly their intention to maintain their cross claim against the Brokers, notwithstanding the Purchasers’ settlement with the Brokers.
[36] Mr. Engell was examined as a witness in aid of this motion under rule 39 by Mr. Farace. Mr. Engell was unshaken in his answers concerning the settlement agreement. He confirmed that there is a binding settlement agreement. He was also clear that there was no element of the settlement that requires the cooperation of the Brokers or any commitment to otherwise aid the Purchasers against the Vendors as part of the settlement. The terms of the settlement comprised only of a consent dismissal order on a without costs basis and a release to be signed by the Purchasers in favour of the Brokers. He also testified that it was his understanding that the settlement with the Purchasers would not interfere with the existing cross claims as between the Vendors and the Brokers.
[37] Mr. Engell also confirmed under oath that he had delivered the Brokers’ Affidavit of Documents and Schedule A productions to all of the parties, including the Brokers. Furthermore, he specifically confirmed that:
(a) The settlement agreement he reached with Mr. Matlofsky did not contain any terms other than those reflected in the November 27, 2018 exchange of correspondence;
(b) Did not contain any financial terms;
(c) There was no agreement to provide testimonial evidence or other assistance to the Purchasers and there had been no discussions concerning this issue; and
(d) No information was provided to the Purchasers independent of what was contained in the Brokers’ mediation brief which was also provided to the Vendors.
[38] Mr. Quintana swore an affidavit on behalf of the Vendors. The Vendors’ lawyer, Mr. Farace, did not submit an affidavit. The Vendors also rely on excerpts from the examinations for discovery conducted. A large part of Mr. Quintana’s affidavit is devoted to identifying and attaching various documents and transcripts. He describes the “Undisclosed Settlement Agreement” as changing the litigation landscape in the action “since the Defendant Vendors have made a cross claim against the Co-Defendants and the Co-Defendants have made a cross claim against the Defendant Vendors”.
[39] Mr. Matlofsky takes issue with some of the matters raised in Mr. Quintana’s affidavit, notably surrounding Mr. Matlofsky’s communications with Mr. Farace. Mr. Matlofsky also produced exhibits that supports his version of events as they relate to the settlement agreement and litigation steps taken. For example, Mr. Quintana deposed in his supplementary affidavit that he was advised by Mr. Farace that he did not receive a Request to Admit from Mr. Matlofsky. However, in Mr. Matlofsky’s reply affidavit, he attached documentary evidence in which Mr. Farace’s legal assistant confirmed that she received the Request to Admit. Accordingly, where the evidence diverges, I prefer the evidence of Mr. Matlofsky over that of Mr. Quintana.
[40] In my view, all that has been proven based on the evidentiary record is that the Purchasers have entered into a simple settlement agreement with the Brokers, in which the Purchasers have agreed to release the Brokers from the main action on a without costs basis. The Brokers will receive a standard full and final release.
[41] There is no evidence that supports the Vendors’ speculation that the Purchasers illicitly received secret information or otherwise secured the Broker’s cooperation to assist the Purchasers in their claims against the Vendors at all, much less that will entirely change the litigation landscape.
[42] The Vendors still have a right to conduct an examination for discovery against the Brokers (I have not been advised that the Vendors consented to the setting down of this action, and hence rule 48 should not be engaged against them).
[43] There is no impediment to the Vendors bringing a motion challenging the Purchasers’ refusals in relation to the subject settlement agreement. There was no such motion before me, and it would properly be brought before an Associate Judge at this point in time. However, in light of Mr. Matlofsky’s and Mr. Engell’s evidence, and the production of the letters comprising the settlement, this may be moot. I am not ruling on this issue.
[44] The mischief aimed to be corrected by the remedy of a stay to rectify late or non-disclosure of settlement litigation agreements is set out in Handley Estate at para. 39: “To maintain the fairness of the litigation process, the court needs to ‘know the reality of the adversity between the parties’ and whether an agreement changes ‘the dynamics of the litigation’ or the ‘adversarial orientation’”.
[45] This mischief is not presented on the facts supported by the evidentiary record before me. In my view, it would be an unduly harsh result to hold that every settlement agreement in which the only terms and consideration are a standard release and consent dismissal order on a without costs basis gives rise to the immediate disclosure requirements and consequences described in cases such as Poirier. Such a result would also be contrary to the established jurisprudence.
[46] In the event that it ends up that there was some form of cooperation or assistance acquired by the Purchasers from the Brokers as a result of this settlement, then that may lead to grounds for a reconsideration under r. 59.06(2). However, there is no reason to doubt the sworn evidence of Mr. Matlofsky and Mr. Engell, both officers of this court, that there was no such cooperation or assistance component to this simple settlement agreement.
[47] This is a case of a simple settlement agreement. This type of simple settlement agreement has been found by this court to fall outside the immediate disclosure requirement since its terms do not typically entirely change the litigation landscape in a way that significantly changes the adversarial relationship amongst the parties or the “dynamics of the litigation”; see Caroti v. Vuletic, 2021 ONSC 2778; Mann Engineering Ltd. v. Desai, 2021 ONSC 2245, 77 C.P.C. (8th) 430, and Performance Analytics Corp. v. McNeely, 2021 ONSC 8297.
Costs and Disposition
[48] Accordingly, the motion is dismissed.
[49] This court declares that a binding settlement agreement was reached as between the Purchasers and the Brokers, the terms of which are reflected in correspondence exchanged between their respective lawyers respectively dated November 27, 2019.
[50] If the parties cannot agree on costs, I will receive submissions not to exceed 3 pages double spaced form the plaintiffs within 10 business days. The defendants will then have 10 business days to provide responding submissions, also not to exceed 3 pages.
Justice S. Vella
Date: July 8, 2022
COURT FILE NO.: CV-17-571788
DATE: 20220708
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ALEXANDRA DUSSAULT and PATRICK DUSSAULT
Plaintiffs
– and –
SYLVIA TONG, LUIS STEVE QUINTANA, SUZANNE CATHERINE LEWIS, KELLER WILLIAMS ADVANTAGE REALTY BROKERAGE
Defendants
– and –
LIAN CONG CAO, carrying on business as JIN YAI CONSTRUCTION and ZHANG SHENG CHOW, carrying on business as JIN YAI CONSTRUCTION
Third Parties
REASONS FOR DECISION
Vella J.
Released: July 8, 2022