COURT FILE NO.: CV-10-00003100-0000

DATE: 2023 01 04

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Francesco Falcone, Liberato Falcone and Filippo Antonio Falcone, Plaintiffs

AND:

Carmela Zita Kapeleris, Defendant

BEFORE: Justice P. A. Daley

COUNSEL: J. Figliomeni and Q. Giordano – for the Plaintiff Francesco Falcone

J. Newton – for the Defendant Carmela Zita Kapeleris

HEARD: October 17, 2022

Judgement

Overview:

1This action has its origins in an acrimonious and long-standing dispute between the parties, who are family members, over the distribution of the assets of an estate.

2The plaintiffs, other than Francesco Falcone, did not attend at court on this matter, nor were they represented by counsel. For the reasons outlined in paragraphs 4 – 6 of my endorsement of September 19, 2022, I concluded that due and proper service of the within motion was effected upon the non-appearing plaintiffs and, as such, I validated the method of service used by counsel for the defendant.

3The defendant brings a motion seeking to enforce a settlement set out in signed Minutes of Settlement.

4It is the position of the defendant that this action resolved at the “courtroom door” on January 6, 2020, when the matter had been called to proceed to trial before Tzimas J.

5The parties, with the assistance of their counsel, executed written Minutes of Settlement before the trial began and Tzimas J. endorsed the trial record that the matter had settled in accordance with the Minutes of Settlement filed.

6Although the Minutes of Settlement and the schedule attached to the minutes are detailed, the essential elements of the settlement were: (a) that the defendant was to pay to the plaintiffs $300,000 and (b) that the defendant was to sell a property located at 250 Sheldon Ave., Toronto (the “Property”), which at the time of the settlement was held in her name.

7The parties were to share in the proceeds of sale from the Property in accordance with the provisions of the schedule, attached to the Minutes of Settlement as follows:

a. The net proceeds from the sale that are over $750,000.00 are to be split 75/25 in favour of the plaintiffs;

b. The net proceeds from the sale that are under $750,000.00 are to be split 50-50.

8While the plaintiffs, in responding to the defendant’s motion, take issue with many aspects of the defendant’s position and the enforceability of the Minutes of Settlement, the core issue in dispute is what constitutes “net proceeds of sale.”

9As set out in the reasons below, I have concluded that the parties did reach an agreement to settle the disputed issues in the action and, further, that their agreement should be enforced.

Evidentiary Record and Factual Background:

10Counsel for the plaintiffs acknowledged in his submissions that the parties had in fact reached an agreement to settle, despite the plaintiffs’ position set out in response to the defendant’s motion that there were several aspects of the alleged settlement that the parties had not agreed upon. Thus, the determination of the defendant’s motion will largely turn upon an objective interpretation of the settlement agreed to as set forth in the Minutes of Settlement and the schedule attached, and further, whether the parties have complied with their respective obligations under the terms of the settlement.

11The Property was held in joint tenancy by the defendant and her mother, Rosa Zita, prior to her death. The plaintiffs are her sister, Mary Falcone’s children and thus her nephews.

12As a result of the position taken by the defendant that, following her mother’s death, she was the sole beneficial owner of the Property, the plaintiffs brought this action against her seeking various relief related to the Property, including its ownership and rents collected by the defendant.

13The parties executed Minutes of Settlement, which included a schedule of terms and conditions. The terms of the Minutes of Settlement provided as follows:

(a) 250 Sheldon Ave., Toronto (the “Property”) shall be sold and the proceeds distributed in accordance with Schedule “A” hereto;

(b) The Defendant shall pay to the Plaintiffs by Certified funds payable to “John M Gray in trust” the sum of $300,000.00 (three hundred thousand dollars) in Canadian funds all-inclusive within 30 (thirty) days of the date of these Minutes of Settlement;

(c) Save and except as set out in Paragraphs 1 – 2 alone and Schedule “A” the Defendant shall have no liability whatsoever to the Plaintiffs for their claims including interest and costs. In particular, but without restricting the generality of the foregoing, each of the parties shall bear his or her own legal costs;

(d) The Plaintiffs and the Defendant shall execute and deliver a mutual and comprehensive Full and Final Release of each other and all persons related to them in a form reasonably satisfactory to their counsel; and

(e) This action shall be dismissed on consent and without costs. The Defendant shall take out the Order.

14The defendant’s position is that certain expenses incurred by her relating to the sale of the Property also must be taken into account in determining the net proceeds of sale.

15The defendant also submits that Schedule “A” to the Minutes of Settlement at paras. XII and XIII supports her position that, in addition to deducting taxes to calculate the net proceeds of sale, the deduction of expenses is also used to calculate the net proceeds of sale.

16It is common ground that the defendant, in complying with the Minutes of Settlement, paid to the plaintiffs $300,000 within the time required.

17The parties further agree that the Property was sold to an arm’s length purchaser on September 30, 2020, for a gross sale price of $870,000.

18As considered below, the plaintiffs took the position that the parties had not reached a full agreement on primary issues as there was no agreement on who would be the listing agent, what the listing price would be, the process for changing the listing price, how the parties would negotiate and accept any offers, and which lawyer would be retained to act on the closing of the transaction.

19Despite these after-the-fact issues raised by the plaintiffs, the transaction for the sale of the Property was completed with their agreement.

20The Minutes of Settlement and the schedule attached call for the calculation of the funds to be distributed between the defendant and the plaintiffs as follows: (a) add the gross proceeds of sale and; (b) subtract real estate commission, legal fees, realty taxes, capital gains taxes and expenses that relate to the sale of the Property.

21The monies currently standing in a solicitor’s trust account for the credit of these parties and to be distributed to them total $754,094.56. The expenses incurred to close the transaction have not been deducted from this amount.

22The breakdown of the monies standing in trust results from the following calculation: sales price of $870,000 less 2.5% real estate agent commission nets $825,862.49. From that sum has been deducted the purchaser’s deposit monies of $20,422.50, $1507.99 with respect to legal fees and disbursements, $607 toward realty taxes paid to the City of Toronto and $90,075.20 with respect to capital gains taxes on the sale of the property to be paid by the defendant to the Canada Revenue Agency.

23The schedule appended to the Minutes of Settlement provided among other things as follows:

a. The expense from the sale of Sheldon Avenue, including standard MLS Real Estate Commission rates subject to paragraph 3 above, and real estate lawyers’ charges shall be shared equally between the Plaintiffs and the Defendant; and

b. The Defendant shall use her best efforts to reduce or eliminate the capital gains tax payable on the sale of Sheldon Avenue. Capital gains tax arising from the sale of Sheldon Avenue shall be shared equally between the Plaintiffs and the Defendant.

24The parties disagree about the capital gains tax incurred with respect to the sale of the Property. The Plaintiffs assert that the Defendant failed to comply with the “best efforts” requirement that called for her to reduce or eliminate capital gains tax payable on the sale of the Property.

25Although it does not form part of the Minutes of Settlement, the defendant acknowledges that, at the time of the sale, the parties entered into what has been referred to as a side agreement whereby the defendant offered to compensate the plaintiffs a 50% entitlement of $9000, being the difference between the highest selling price that the ultimate buyer would agree to and what the plaintiffs demanded that the defendant attempt to get from that buyer.

26It is asserted on behalf of the defendant that this sum is to be shared on a 50-50 basis, however the plaintiffs assert that it is to be shared on a 75/25 split in favour of the plaintiffs. It is the defendant’s position that the shared adjustment with respect to the $9000 price difference was agreed upon at 50-50, namely $4500 each, contrary to the plaintiffs’ position that they are entitled to $6750 out of that adjustment. The evidence with respect to this readjustment completed after the Minutes of Settlement were executed is entirely contained in email exchanges where the plaintiffs state that they wish to have that sum shared at $2250 each and in responding email correspondence in which the defendant advises the plaintiffs that she will compensate the plaintiffs for their share of the $9000 difference between the price of $879,000 and $870,000. No specific share amount was stated during these negotiations, however the plaintiffs agreed that the defendant could proceed to conclude the sale of the property at $870,000.

27In selling the Property the defendant incurred additional expenses relating to the sale including:

(a) $377 relating to discharging a line of credit against the Property;

(b) payment of a property tax adjustment in accordance with the agreement of purchase and sale on outstanding property taxes owed in the sum of $2222;

(c) payment of outstanding carrying costs incurred for the Property while it was listed on the market at $2370.17;

(d) repairs to the ceiling of the home at $282.50;

(e) virtual staging fees at $224.87; and

(f) tax assessment interest at $661.20.

28The total of the additional expenses was $6137.84, an amount the defendant paid; and the defendant submits that she is entitled to be reimbursed for half that sum by the plaintiffs.

29It is therefore the defendant’s position that the total net proceeds of sale after deducting the additional expenses totals $747,956.72, as provided for in the Minutes of Settlement and its schedule. The Minutes define “net proceeds of sale” as “after the deduction of expenses and taxes as set out above.”

30Schedule “A” to the Minutes of Settlement expressly provides for the disbursement of the net proceeds of sale as follows:

a. The Defendant shall use her best efforts to reduce or eliminate the capital gains tax payable on the sale of Sheldon Avenue. Capital gains tax arising from the sale of Sheldon Avenue shall be shared equally between the Plaintiffs and the Defendant;

b. To the extent that the sale price is $750,000 or less, fifty percent (50%) of the net proceeds of sale, after the deduction of expenses and taxes as set out above, shall be paid to the Plaintiffs and fifty percent (50%) of the net proceeds of sale, after the deduction of expenses and taxes set out above, shall be paid to the Defendant. The net proceeds of sale shall be held in trust by the real estate lawyer or paid into court pending agreement between the parties or Court Order directing disbursement of the funds; and

c. If the sale price is more than $750,000 the Plaintiffs shall receive 75% of the net proceeds of sale above some $150,000 and the Defendants [sic] shall receive 25% of the excess net proceeds of sale above $750,000.

31While the monies from the sale of the Property remain in trust, the parties have had ongoing litigation, including cross- examinations of witnesses specifically with respect to the defendant’s obligation to pay capital gains tax and whether or not the tax liability was properly met and efforts were made by her to reduce the impact of capital gains tax on the proceeds from the sale of the Property.

32It is also provided in the schedule appended to the Minutes of Settlement as follows: “The Defendant shall provide the Plaintiffs with a redacted income tax return and redacted Assessment Reassessment in connection with payment of the capital gains tax.”

33Over the course of the litigation leading to the defendant’s motion, the plaintiffs have sought production of unredacted income tax returns and records, which production was not provided for in the Minutes of Settlement or in the appended schedule. The plaintiffs have attempted to demonstrate that the defendant has manipulated or otherwise mishandled her tax liability with respect to capital gains tax to their detriment. There is no such evidence of this and there is no requirement contained in the Minutes of Settlement that the plaintiffs are to be provided with the defendant’s unredacted tax records.

Legal Framework:

34The plaintiffs have submitted that this court lacks jurisdiction to hear the defendant’s motion pursuant to rule 49.09, based on the decision in Exponents Canada Inc. v. Sharma, 2015 ONSC 2940. However, counsel for the plaintiffs did not cite the earlier Court of Appeal decision in Donaghy v. Scotia Capital Inc./Scotia Capitaux Inc., 2009 ONCA 40. See also: Dodla v. Dodla, 2022 ONSC 5648 at para. 15.

35In Donaghy, the court directly addressed the issue raised by counsel for the plaintiffs at paras. 10-13, where, per curiam, the court stated:

The issue now raised by the appellant was not raised in any prior proceedings. As we understand the appellant's argument, he contends that the original motions judge had no jurisdiction to hear the motion because the alleged settlement preceded the litigation and was therefore not a Rule 49 settlement. The appellant contends that if the original decision was made without jurisdiction, all subsequent decisions including the decision of this court are void and it is as if none are made. This argument entirely misconceives the nature of jurisdiction and ignores the essential need for finality in litigation. Jurisdiction refers to a court's authority to hear and determine a matter before the court. If a court has authority to determine a matter before it, the court does not lose jurisdiction if it makes the wrong ruling.

The authority of the court to hear a motion to enforce a settlement is beyond question. Pursuant to s. 97 of the Courts of Justice Act, R.S.O. 1990, c. C.43 "the Court of Appeal and the Superior Court of Justice . . . may make binding declarations of right, whether or not any consequential relief is or could be claimed". Section 96 also preserves the common law.

A contract to enforce a settlement was enforceable at common law. Thus, the court had jurisdiction to enforce the settlement by making a declaration as to whether the settlement was binding on the appellant.

The method chosen to enforce the settlement was a motion pursuant to rule 49.09. Whether the motions judge made the correct decision in enforcing the settlement pursuant to rule 49.09 is irrelevant to the question of jurisdiction. The appellant sued in the Superior Court and the respondent brought a motion for judgment according to the terms of an agreement. The motions judge had jurisdiction to hear and decide the issue of whether or not the proposed action was in fact the subject of a binding settlement precluding further litigation, regardless of what rule the motion was brought under.

36A two-step test governs motions to enforce purported settlement agreements. Firstly, it must be determined if there was an agreement to settle, and secondly, it must be determined whether the agreement should be enforced: Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 2007 ONCA 497; see also Stefanchuk v. LeLiever, 2022 ONCA 697.

37On a motion to determine whether a concluded settlement exists, it is not necessary to inquire into the actual state of mind of the parties or to consider the parole evidence of one party’s subjective intention. Where a purported settlement agreement is in writing, it is to be measured by an objective reading of the language chosen by the parties to reflect their agreement: Olivieri v. Sherman, 2007 ONCA 491 at paras. 44 – 45.

38On construing the objective meaning of an agreement, Middleton J.A. stated, in Lindsey v. Heron & Co., 1921 538 (ON CA), [1921] OJ No. 75 (QL) at pp. 98 – 99:

The apparent mutual assent of the parties essential to the formation of a contract, must be gathered from the language employed by them, and the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on the subject.

39As to the finality of a purported settlement, it has been stated that settlements entered into with the assistance of counsel should be upheld except in the clearest of cases and in exceptional cases: Donaghy v. Scotia Capital Inc., 2004 7702 (ON SC) (Karakatsanis J. as she then was) at para. 15.

Analysis:

A – Do the Minutes of Settlement Constitute a Binding Agreement?

40On the day this action’s trial was set to start, the parties, with their counsel’s advice, negotiated a resolution of the issues at stake in the action and executed Minutes of Settlement setting out the terms as agreed to, along with specific details about implementing the settlement contained in Schedule “A” to the Minutes of Settlement.

41The Minutes were executed by the parties and witnessed by their respective counsel.

42In accordance with the terms of the settlement, the defendant paid to the plaintiffs the sum of $300,000 within 30 days of the date of the Minutes of Settlement.

43Having found an arm’s length purchaser, the sale of the Property closed on September 30, 2020, as called for in Schedule “A” for a gross sales price of $870,000.

44It was submitted in the factum filed on behalf of the plaintiffs that there was no binding agreement as the parties were not ad idem on several aspects of the purported settlement terms.

45The plaintiffs submitted that there was no binding settlement as there was no agreement on several terms including: (1) who was to be engaged as the listing real estate agent to sell the Property; (2) the amount of the listing price for the Property; (3) the process to be used in negotiating the sales price and the acceptance of an offer; (4) who was to be retained as the lawyer to close the sale transaction.

46Notably, at the time the defendant’s motion was heard, all the terms referenced above had been resolved by subsequent agreements with the further assistance of the parties’ lawyers.

47Counsel for the plaintiffs acknowledged that if the court were to accept the submissions made on behalf of the plaintiffs and conclude that the parties had not reached a settlement as documented in the Minutes of Settlement, it would be arguable that the plaintiffs should have returned the $300,000 that had been paid to them by the defendant.

48During his submissions, counsel for the plaintiffs eventually acknowledged that the Minutes of Settlement did constitute an agreement of the parties to settle the action.

49It was further acknowledged that the only remaining issue, in general terms, was whether the Minutes of Settlement should be enforced and, further, how the terms and conditions should be implemented.

50I have concluded that the parties had reached an agreement to settle their disputes as framed in this action, and that the two essential terms were the payment of the $300,000 by the defendant to the plaintiffs and the sale of the Property with the net proceeds to be distributed to the parties in accordance with their agreement.

51These essential terms were clearly agreed to by the parties and both terms have been fully complied with given that the Property has been sold and the monies have been paid to the plaintiffs in accordance with the Minutes of Settlement.

52Furthermore, the parties, by their conduct, have confirmed the existence of a settlement agreement by carrying out the requirements of these essential terms: see Olivieri at para. 44.

53Thus, I have concluded that there was an agreement between these parties to settle the issues at stake in this action.

B – Should the Minutes of Settlement Be Enforced?

54On the evidence adduced by these parties, there are primarily four issues in dispute as to the implementation of the terms of the Minutes of Settlement, namely:

(a) the calculation of the net proceeds from the sale of the Property;

(b) the treatment of expenses incurred on the sale of the Property;

(c) the capital gains tax incurred on the sale of the Property and its treatment in calculating the net proceeds of sale; and

(d) the “side deal” adjustment.

55The parties disagree as to the calculation of the “net proceeds of sale” as referred to in Schedule “A.”

56The defendant submits that the net proceeds of sale results from the deduction of the real estate commission, legal fees and disbursements, realty taxes, capital gains tax and minor expenses directly related to the sale of the property. On the defendant’s calculation of the net proceeds of sale, that results in the sum of $747,956.72.

57This sum is, according to the defendant, to be further adjusted as a result of the deduction of additional expenses on a 50-50 basis as between the defendant and the plaintiffs and further by the deduction of 50% of $9000 relating to the “side deal.”

58The additional expenses incurred by the defendant relating to the sale of the Property total $6137.84. Given the purchase price achieved, it is the defendant’s position that these additional expenses are to be shared on a 50-50 basis as between the plaintiffs on the one hand and the defendant on the other. There is no need to consider, in any detail, the additional expenses which are outlined in the materials on this motion, as they clearly are expenses that are directly related to the sale of the property and were necessarily incurred solely for that purpose. Further, there is no specific issue taken by the plaintiffs with each of the expense items incurred by the defendant on the disposition of the Property.

59Considering the intention of the parties as determined on an objective examination of the Minutes of Settlement, I have concluded that the additional expense amount, like other expenses incurred, should be shared on a 50-50 basis as between the plaintiffs on one hand and the defendant on the other.

60As to the “side deal” as it is referred to by the parties, this arose from separate negotiations the parties entered into at the time the offer to purchase was delivered with respect to the Property.

61In her evidence on this motion, the defendant acknowledged that, subsequent to the execution of the Minutes of Settlement and at the point in time where the parties were in the process of considering an offer to purchase the Property, she agreed to compensate the plaintiffs 50% of $9000, being the difference between the highest selling price that the ultimate buyer would agree to and what the plaintiffs demanded that the defendant attempt to get from the buyer.

62The defendant submits that the sum of $9000 should be treated on a 50-50 basis, whereas the plaintiffs submit that that amount should be shared in the sum of $2250 each. I am satisfied that, having considered the evidence regarding this issue, the expressed proposal from the defendant was that this sum would be split 50-50 as between the plaintiffs on the one hand and the defendant in accordance with the splitting of the net proceeds of sale called for in Schedule “A.” On all the evidence available, and in keeping with the splitting formula as provided for in the Minutes of Settlement and Schedule “A,” I have concluded that this is the proper treatment of this sum and is consistent with the agreement as a whole and with identifying the parties’ intentions.

63As to the amount paid by the defendant in respect of capital gains tax, as considered below, the plaintiffs assert that the defendant did not take reasonable efforts to reduce or avoid that tax. The plaintiffs further assert that they are entitled to a more fulsome accounting and production of unredacted tax documents.

64The parties disagree as to the calculation of the “net proceeds of sale” as referred to in Schedule “A.” It is the plaintiffs’ starting point that no capital gains tax should be considered in determining the net proceeds of sale, although the reason for that position is not clearly articulated.

65In its decision in Potter v. Bragg, (1998) 1988 8724 (NS SC), 16 RFL (3d) 323, the Nova Scotia Supreme Court, in considering what constitutes “net proceeds of sale,” stated at pg. 331:

In commercial transactions dealing with the sale of real estate it is the normal and usual practice that the mortgage on the property must first be paid out of the proceeds of sale followed by the vendor’s share of the taxes and legal fees prior to the balance of the proceeds being paid to the vendor. There is no way in which the agreement in question can be interpreted other than to give the normal interpretation of net proceeds which is the plain and unequivocal meaning of the words.

66The ruling in Potter is apt in the present case and furthermore, the language of both the Minutes of Settlement and Schedule “A” is clear and unambiguous in their intention. Specifically, the Minutes call for the parties to share equally in capital gains tax arising from the sale of the Property.

67The plaintiffs assert that the defendant failed to use her best efforts to reduce or eliminate capital gains tax liability payable on the sale of the Property.

68The plaintiffs further seek unredacted copies of the defendant’s tax records for the relevant point in time.

69On her cross-examination on this motion, the defendant testified that she did use best efforts to reduce or eliminate capital gains tax by reducing her personal income through apportioning the majority of her earned income to her husband’s personal income.

70There is no evidence adduced by the plaintiffs that supports their contention that the defendant has failed to comply with the terms of the settlement by using her best efforts to reduce or eliminate capital gains tax.

71The terms of the settlement must be viewed objectively as they were incorporated in writing in the Minutes of Settlement. The Court must not consider what may have been in the parties’ minds or consider parole evidence as to one party’s subjective intention.

72The Minutes of Settlement do not provide for any mechanism by which the plaintiffs can ascertain what “best efforts” were exercised by the defendant in reducing or eliminating capital gains tax, nor are the plaintiffs entitled to obtain production of unredacted tax records contrary to the expressed terms in the Minutes.

73The defendant has submitted, as schedule “B” to her notice of motion, a spreadsheet setting out the calculation of the net proceeds of sale. I have considered that schedule and the calculations set out therein, in combination with the affidavit evidence and submissions made by both counsel, and for the reasons expressed, I am satisfied that the Minutes of Settlement must be enforced, and that the allocation of the deductions and adjustments set out in the Schedule are in keeping with the objective interpretation of the Minutes of Settlement, as well as Schedule “A” attached.

74Taking the net proceeds of sale at $747,956.72 and further adjusting that sum by $4500 as to the defendant’s share relating to the “side deal” and further deducting from the plaintiffs’ share, 50% of the additional expenses, I agree with the submission on behalf of the defendant that the plaintiffs’ share of the net remaining is $378,478.36 and the defendant’s share is $375,616.20.

Conclusion:

75In the result, the defendant’s motion is granted. She is entitled to judgment in accordance with the Minutes of Settlement and the Schedule “A” forming part thereof, whereby the law firm Kormans LLP shall forthwith disperse the funds held in trust for these parties on the following terms: (a) to the defendant in the sum of $375,616.20; and (b) to the plaintiffs in the sum of $378,478.36.

76As to the costs of this motion, counsel for the moving defendant shall serve and file submissions as to costs of no longer than two pages along with a costs outline within 15 days from the date of release of these reasons followed by similar submissions by counsel on behalf of the plaintiffs within 15 days thereafter. No reply submissions shall be delivered.

Daley J.

Date: January 4, 2023

COURT FILE NO.: CV-10-00003100-0000

DATE: 2023 01 04

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Falcone et al.

AND:

Kapeleris