Court File and Parties

COURT FILE NO.: FS-22-102391 (Brampton) DATE: 2024-06-05 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Mumtaz Ali Applicant

-and-

Shazia Mumtaz Respondent

Counsel: Ash Mazinani, for the applicant Helen Fernandes, for the respondent

Heard: March 1, 2024 by video conference Justice R. Chown

Endorsement

[1] At a settlement conference on July 13, 2023, the parties believed they had reached a full and final settlement. They signed minutes of settlement. These minutes were incorporated into a consent order of Doi J. dated July 13, 2023. The minutes and order deal with spousal support and equalization.

[2] The applicant brings this motion to enforce the settlement. The notice of motion seeks an order directing how the real estate lawyer should pay out the funds from the sale of the matrimonial home. The draft order sets out the amounts the real estate lawyer should pay to each of the parties as well as to Legal Aid Ontario. The motion also seeks an order compelling the respondent to “return” an Infiniti that the respondent has been using but that is registered in the applicant’s name.

[3] The “grounds” section of the notice of motion does not refer to any specific rule under the Family Law Rules or any specific legislative provision in the Divorce Act or Family Law Act.

[4] The respondent opposes the proposed distribution of funds. She asks me to order a distribution of the funds from trust on a different basis. She also asks me to order that the Infiniti be transferred to her for $19,000. She has not brought a motion to set aside the settlement, or any motion.

[5] I encouraged the parties to consider further compromise on the basis that they might both be unhappy with my decision, in that there was a possibility I could decide that no settlement had been reached, and that the litigation would then have to continue. After being given an opportunity to discuss resolution, the parties indicated they wished to proceed with the motion.

Result

[6] I have determined that the motion to enforce should be dismissed. This dismissal is without prejudice in that either party may, at trial, assert that there has been a settlement. The parties may also amend their pleadings to assert that there was a settlement or to deny it.

Issues

[7] I have identified the following issues, most of which have not been addressed by the parties.

1. Jurisdiction. Under what rule(s) would I make the requested orders?
2. What is the test in a motion to enforce a purported settlement?
3. Is there a genuine issue about whether there was a settlement?
4. Does the fact that the minutes of settlement were incorporated into an order change the analysis?
5. Was the settlement the result of either a unilateral or a mutual mistake?

Background

The Settlement

[8] The minutes have not been filed as part of the motion materials. The consent order is in the materials, and it refers to the minutes of settlement. Mr. Mazinani stated in submissions that the order closely follows the minutes of settlement.

[9] The order does not say words to the effect that “all other claims are dismissed.” However, it is styled as a final order in the application. The preamble includes:

The court heard an application/ motion made by ( name of person or persons ) The Applicant, Mumtaz Ali.

Further, Mr. Mazinani said that the minutes do say that all issues between the parties are resolved by the settlement. The respondent has not suggested otherwise. The parties seem to agree that when they signed the minutes of settlement, they thought all issues between them had been resolved. However, this is an important point, so it would have been helpful to have the minutes of settlement.

[10] The consent order deals with equalization as follows:

3. The Applicant, Mumtaz Ali, shall pay the Respondent, Shazia Mumtaz, an equalization payment of $50,000.00, payable to the Respondent, Shazia Mumtaz, from the Applicant, Mumtaz Ali's, share of the proceeds of sale of the matrimonial home located at 73 Feathertop Lane, Brampton, ON.

4. The parties shall direct the real estate lawyer, Mr. Arvind Sapra, holding the net proceeds of sale of the matrimonial home to release 50% of the net proceeds to each party, except that the Respondent, Shazia Mumtaz, shall receive an extra $50,000.00 from that Applicant, Mumtaz Ali's, share of the net proceeds of sale to satisfy the aforementioned equalization payment.

[11] The order does not address any specifics regarding how the $50,000 equalization was calculated. The order does not address who gets the Infiniti.

[12] The respondent says she did not have full disclosure at the time of the settlement. The applicant denies this. The respondent says her lawyer at the time of the settlement (not Ms. Fernandes) pressured her to settle and failed to identify the issue I will discuss below regarding the line of credit. She asserts that the equalization was not fair to her.

[13] The applicant, citing Frenkel v. Canada, at paras. 10 to 11, responds that the competence of counsel is rarely, if ever a reason to set aside an agreement. The applicant further asserts he compromised on spousal support, agreeing to pay $3,000 indefinitely. The consent order specifically indicates at para. 5, “In lieu of the fact that the Applicant, Mumtaz Ali, is paying an inflated amount of spousal support, there shall be no child support payable for the children” (who are currently ages 24 and 22).

[14] On the available record, the proper inference is that both parties compromised to reach the settlement. They each elected not to detail in the minutes the basis of the equalization. Their reasons for wording the minutes the way they did may have been strategic, or simply result-oriented. It may have been easier to spell out the lump-sum result rather than trying to spell out a joint position on how the figure was arrived at.

[15] It must be taken that the settlement is a complete package, and that each party may have compromised more than they wanted to on some aspects because they were satisfied with compromise by the other party on other aspects. That kind of trade-off is effectively the applicant’s position as to what occurred. In these circumstances, it is not possible to unwind only part of the settlement, such as equalization.

[16] The Supreme Court noted in Rick v. Brandsema, 2009 SCC 10, at para. 50, “the best way to protect the finality of any negotiated agreement in family law is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme.” Where there is a trade-off resulting in a departure from substantive compliance with the legislative scheme (e.g., more on spousal support in exchange for less on child support and equalization), there is a greater risk that the settlement will not be upheld. That is not to say, however, that trade-offs are unacceptable. Settlements that do not strictly follow the legislative regime because they involve trade-offs can of course be valid and are frequently approved and upheld, but the point is that settlements involving such trade-offs may be more vulnerable to attack.

Sale of the Matrimonial Home

[17] The closing date for the sale of the matrimonial home was June 29, 2023, i.e., two weeks before the July 13, 2023 settlement conference. At the time of the settlement, the parties both believed the net proceeds of sale would be $618,794.49.

[18] The real estate lawyer did not prepare a trust statement for the sale until August 24, 2023 (i.e., more than a month after the settlement). It shows that the net proceeds of sale were $610,653.56. The respondent relies on this approximately $8,000 difference as significant.

[19] More importantly, however, the respondent says she was shocked when she received the trust ledger statement from the real estate lawyer and saw that $318,496.07 had been paid to Scotiabank. The mortgage balance owing to Scotiabank was only $103,222.17. She was not aware that the parties’ Scotiabank joint line of credit had a balance of $215,273.90 that also had been paid from the proceeds of sale.

The Applicant’s Unilateral Use of The Joint Line of Credit

[20] The respondent says that two days after separation the applicant withdrew (unilaterally and without telling the respondent) $160,000 from the joint line of credit. The respondent says she was not aware of this until reviewing the real estate lawyer’s trust ledger in August 2023.

[21] On July 4, 2023 (i.e., nine days before the settlement), the real estate lawyer sent the parties the payout details from the closing. These showed that the bank had been paid the $318k amount. The respondent has not denied that she would have received this; however, the applicant’s evidence on this point is contained in his reply affidavit.

[22] The respondent acknowledges that she was aware that $49k had been used from the line of credit to pay for the Infiniti vehicle, [1] but she says she did not know of the applicant’s unilateral withdrawal of $160k from the line of credit.

[23] In response to a question from me, Mr. Mazinani advised that the statements for the line of credit were sent to the matrimonial home and the respondent always had access to the account information. This is supported by a review of exhibit A to the respondent’s affidavit dated February 26, 2024, which is a copy of the September 2021 statement.

The Legal Aid Lien

[24] Another issue with the settlement is that it did not specifically deal with the legal aid lien. Legal Aid Ontario has a lien relating to the respondent’s legal fees. That lien was registered against the property at the time of the sale. The real estate lawyer held $40,000 aside to pay off this lien. The respondent acknowledges that this is her debt alone, and not a debt of the applicant, but she draws a parallel between this debt and the applicant’s unilateral post-separation withdrawal of $160,000 from the line of credit, which she says is his debt alone.

The Infiniti

[25] Although it is registered in the name of the applicant, the Infiniti was purchased prior to separation and was apparently paid for at least in part out of the joint line of credit. The Infiniti was used by the respondent, and she is still using it. Post separation, the applicant “found out” the respondent’s address and removed the car without the respondent’s consent or knowledge. The respondent reported it stolen and after police involvement the car was returned to her. The applicant now asks for the car to be “returned” to him, asserting that it is his. The respondent asks that the vehicle be transferred to her, and she proposes to pay him $19,000 for it. [2] The applicant believes it is worth approximately $28,000.

[26] The applicant listed the Infiniti in his Form 13.1 dated November 17, 2022, indicating that he had a $40,000 interest in the Infiniti, it was financed, and it was used by the respondent. However, in his Form 13B dated July 4, 2023 (unsigned and described as “for negotiation”) he listed its value as “N/A” under both the applicant and respondent columns. That is, on this form he did not indicate it was his.

Analysis

Issue #1. Jurisdiction. Under what rule(s) would I make the requested orders?

[27] As I indicated at the outset of these reasons, the notice of motion does not refer to any rule or legislative position. Similarly, the respondent did not bring any motion but rather simply stated in her affidavit what order she seeks. She also did not set out or seemingly consider the basis for the court’s jurisdiction to make the order she requests.

[28] Had they considered the question of jurisdiction, it would have focussed the parties on the applicable evidentiary and legal requirements for the motion. I do appreciate that it is not obvious what rule the applicant ought to have cited.

[29] Rule 18(13) (failure to carry out terms of accepted offer) is perhaps inapplicable because the settlement was achieved through minutes of settlement, not through acceptance of an offer under rule 18. This appears to be an unsettled question: Mihaylov v. Mihaylova, 2023 ONSC 2119, at para. 5.

[30] Rule 26 (enforcement of orders) does not appear to help. The requested order in this motion is far more specific than the consent order. There is no assertion that the respondent is in contempt of the consent order.

[31] The use of Rule 16 (summary judgment) to enforce the settlement in this case is not immediately intuitive because the settlement has been incorporated into an “order”, and the moving party seeks to enforce that order, not to obtain summary judgment in the first place. The “net proceeds of sale” were not fully defined at the time of settlement and thus the notice of motion and draft order seek to identify the specific amounts to be paid from the real estate lawyer’s trust account. The respondent argued that the meaning of the phrase “net proceeds of sale” in the minutes is in dispute. I do not agree that there is any reasonable controversy over what should be included in “the net proceeds of sale.” However, many of these disputes over whether a matter has been settled do get resolved through motions for summary judgment.

[32] Also, the applicant also seeks an order compelling the respondent to “return” the Infiniti to him. Implicit in this request is an assumption that is not justified by the evidence in the record, namely that he is the sole owner of the Infiniti. That aspect of the applicant’s motion would, in my view, require a further finding and order, and a summary judgment motion would be a possible avenue to seek such relief.

[33] Rule 25(19) (changing an order) is inapplicable, from the applicant’s perspective, regarding the disposition of funds from trust. It is applicable with respect to the applicant’s request to return the Infiniti to him because this issue was not addressed in the minutes of settlement. The “Infiniti issue” could potentially fall under rule 25(19)(b) on the basis that the failure to address this was a mutual mistake, or under 25(19)(c) on the basis that the order “needs to be changed to deal with a matter that was before the court but that it did not decide.” However, to obtain the relief the respondent requests in her affidavit, she perhaps should have brought a motion under rule 25(19) to change the order on the basis that the order contains a mistake.

[34] Section 56(4) of the Family Law Act empowers the court to set aside a domestic contract or a provision in it. I suspect that the minutes of settlement would qualify as a domestic contract and if so either party could apply under this section to have it set aside.

[35] The importance of the question as to which rules are applicable is manifest because the applicable rules will govern the test to be applied. The failure of both parties to define the basis for the relief requested in the motion is, on its own, a sufficient basis to dismiss the applicant’s motion.

Issue #2. What is the test in a motion to enforce a purported settlement?

[36] A helpful and succinct statement of the law regarding the enforcements of settlement agreements is found in Zaidi v. Syed (Estate), 2023 ONSC 1244, at para. 13, aff’d 2024 ONCA 406, a case involving a settlement agreement parties reached in connection with an estates dispute:

[12] The law associated with the enforcement of settlement agreements, which is an aspect of the well-settled law of contract, is also well settled...

[13] A settlement agreement is a contract, and the court has jurisdiction at common law and under rule 49.09 to enforce settlements. A motion to enforce a settlement involves two elements. The first element is whether or not there is any genuine issue about the existence of an agreement to settle, and the second is to determine whether there is any reason not to enforce the settlement.

[14] For there to be a binding settlement agreement, there must be a mutual intention to create a legally binding agreement and the essential terms of the agreement must have been agreed upon. However, it is not necessary to have reached agreement on incidental matters, such as the method of payment or the exchange of releases.

[15] There is a strong presumption in favour of the finality of settlements; however, a settlement agreement is a contract and is subject to the law of contract formation, and a settlement agreement can be set aside in the same way that a contract may be rescinded for mistake, fraud, innocent misrepresentation, duress, undue influence, or unconscionability. [Emphasis added, footnotes omitted.]

[37] I should add here that in family cases, settlements can also be set aside under s. 56(4) of the Family Law Act.

[38] “A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all the essential terms of the settlement”: Olivieri v. Sherman, 2007 ONCA 491, at para. 41. The analysis of whether there was a settlement should be treated as a summary judgment motion. That is, it should only be held that there is a settlement if there is no genuine issue requiring a trial on this point. This applies not only in cases of accepted offers, such as in Hashemi-Sabet Estate v. Oak Ridges Pharmasave Inc., 2018 ONCA 839, at para. 27 and Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 87 O.R. (3d) 464 (Div. Ct.), at para. 10, but also in cases involving negotiated settlement agreements: Zaidi.

[39] In this case, the first requirement is met. There is no dispute that the parties intended to conclude and thought they had concluded a binding full and final settlement. The question turns on the second element – whether the parties’ reached agreement on all the essential terms of the settlement.

Issue #3. Is there a genuine issue about whether there was a settlement?

[40] Although the parties both believed they had addressed all issues, they did not address the Infiniti. It has not been established that the parties intended, at the time of settlement, that the applicant was to receive possession of this car back from the respondent. Nor has it been established that the parties intended that registration of ownership would be transferred to the respondent. Rather, it appears that the parties simply did not address the issue at the time of the settlement. Both sides are to blame for this.

[41] The net proceeds of the sale of the matrimonial home were about $610,000. Under the settlement, the respondent would receive about $355,000 of that and the applicant $255,000. If the Infiniti is ascribed to the applicant, this would add between $19,000 and $28,000, [3] or between 7.5% and 11% to the value of his settlement. In percentage terms, these are significant enough that one would think it would have been specifically addressed. The failure to do so can be described as a mutual mistake.

[42] In footnote 2 above, I have identified some problems with the respondent’s approach to her claim for the Infiniti in this motion. For instance, she did not make a trust claim for it in her pleading. However, I would be reluctant to decide this case based on a failure in her pleadings. More importantly, it appears that the respondent’s claim to the Infiniti goes beyond a trust claim. The evidence I have from the applicant is merely that, “The car is registered in my name solely.” Registration is not fully determinative of ownership, and it is not the law that the registered owner of a vehicle is the only owner of the vehicle. Courts consider a variety of factors when determining who is “the owner in a common law sense”: Honan v. Gerhold, (1975), 2 S.C.R. 866, at p. 872 to 873; Hayduk v. Pidoborozny, [1972] S.C.R. 879; Graham v. Lemay, 2016 ONCA 55. The applicant has not provided a copy of the bill of sale or other title documents. He has not established where the money for the car came from. He acknowledges on both his Form 13.1 and 13B that the car was used by the respondent. His form 13B does not ascribe ownership of it to either party. He simply has not established sole ownership of the Infiniti.

[43] The proper disposition of the Infiniti is unresolvable on the current record. A trial would be needed to resolve the question, and resolution may necessitate a complete review of the equalization issue. As I have said, the settlement was achieved with trade-offs and compromises. If the court must decide how the Infiniti affects equalization, it may remain necessary to re-assess equalization in its entirety, and the parties would not be much further ahead.

Issue #4. Does the fact that the minutes of settlement were incorporated into an order change the analysis?

[44] “[I]t is well established that a consent judgment may be set aside on the same grounds as the agreement giving rise to the judgment”: McCowan v. McCowan (1995), 24 O.R. (3d) 707 (C.A.), at para. 19, cited with approval in Brandsema, at para. 64. It therefore appears that the fact that this order was incorporated into a settlement does not impact the question of whether the agreement may be set aside.

[45] Rule 25(19) says: “The court may, on motion, change an order…” [emphasis added]. I do not know whether this implies that the court may only change an order on the motion of a party, and not on its own motion. As I have noted, neither party has specifically requested an order changing the consent order. However, I have found that both parties are in effect asking for a change in respect of the Infiniti, and the respondent is in effect asking for a change in respect of equalization. They may each have had their own strategic reasons for not requesting relief under rule 25(19), but the fact that neither party has taken the position that the order needs to be changed does not alter the reality that the existing consent order does not deal with all the issues between the parties.

[46] In result, the consent order does not change the analysis. There is a genuine issue over whether parties have a settlement.

Issue #5. Was the settlement the result of either a unilateral or a mutual mistake?

[47] On the evidence available in the current record, there is a triable issue on whether the respondent settled the claim while acting under a unilateral mistake. The available materials establish on a balance of probabilities that the respondent did not notice that the $318k figure grossly exceeded the mortgage balance plus the $49k line of credit balance she knew about. That is, at the time of the settlement she still did not appreciate that the applicant had unilaterally withdrawn $160k from the line of credit. With additional inquiry the respondent could have discerned that the applicant had unilaterally withdrawn $160,000 from the line of credit, but based on the available materials the proper conclusion is that she was subjectively unaware of it. To be clear, I make this finding on a balance of probabilities based on the motion record before me. However, this point raises a triable factual issue with a credibility component.

[48] A key fact that detracts from the respondent’s position is that the line of credit statements were sent to the matrimonial home. At the time of the settlement, the respondent failed to observe the discrepancy in what the line of credit balance ought to have been. The following comments of Petersen J. in Thompson v. Broeze, 2018 ONSC 4268, at para. 32, are applicable:

Parties must be encouraged to approach settlement discussions carefully and to take settlement agreements seriously, knowing that enforcement of such agreements cannot easily be defeated. The motivation for parties to settle would be eroded if litigants could avoid enforcement of a settlement because they failed to exercise due diligence in protecting their own interests, were influenced by incorrect and unverified assumptions, or simply had second thoughts about the desirability of the resolution reached. The principle of finality in settlements is even more important where the terms of settlement are negotiated with the assistance of counsel, since the opposing party may reasonably assume that the compromise was reached with the benefit of appropriate and independent legal advice.

[49] In addition, where there has been disclosure but incomplete disclosure, “nothing in s. 56 of the Family Law Act, R.S.O. 1990, c. F.3 precludes a litigant from entering into a final and binding settlement.” The settlement is nevertheless binding unless the litigant shows that the financial disclosure was inaccurate, misleading, or false: Quinn v. Epstein Cole LLP, 2008 ONCA 662, at para. 4.

[50] With that said, it may not be appropriate to treat the respondent’s possible lack of diligence harshly, given the evidence that applicant removed this large sum unilaterally and without notice to the respondent. That kind of conduct should not be rewarded. It should be observed that this feature was also in play in Brandsema in that Mr. Brandsema had made unilateral withdrawals from joint accounts without notifying Ms. Rick. The Supreme Court restored the trial judge’s decision that the settlement was not binding.

[51] In his reply affidavit, the applicant says that the $160,000 drawn from the line of credit after separation was used to pay for the carrying costs of the matrimonial home and the children’s support. That does not help his position, because it in effect means that the applicant was, at least in part, using the respondent’s capital to fund the applicant’s own required child support payments.

[52] In addition, as I have already noted, it may be appropriate to say the parties acted on a mutual mistake when they determined that all issues were resolved, because the settlement did not address the disposition of the Infiniti.

[53] I recognize that neither party advanced the position that there was a mistake. Again, each party may have had its own strategic reasons for not doing so. However, that does not preclude the court from concluding that the settlement was a result of a mistake. If the trial judge were to determine that that is the appropriate factual conclusion, it should not matter if the parties, for their own strategic reasons, had not advanced the argument.

Conclusion and Costs

[54] Unless the parties can resolve or partially resolve this case through compromise, this messy circumstance will only be resolved on a full factual record after a trial. I would encourage the parties to make additional efforts to resolve all the issues between them. If they cannot, I would encourage the parties to at least try to agree whether there was a binding settlement and if so, what it means, so that question of whether there was a settlement does not need to be resolved through a trial.

[55] If the parties and counsel thought that they might benefit from a further settlement conference, with a view to putting the matter to rest, I would be willing to conduct that conference in a one-hour appointment to be arranged at 9:00 a.m. before my regular court day begins. The conference can be arranged in consultation with both the Brampton trial coordinator and the Grey Bruce trial coordinator.

[56] Considering the parties’ failure to address many of the issues in their materials and submissions, there shall be no order for costs for this motion.

Disposition

[57] This court orders:

1. The motion is dismissed without costs. This dismissal is without prejudice to either party asserting at trial that there was a binding and enforceable settlement.

2. Both parties may amend their pleadings to assert that there was a settlement or to deny it. If neither party amends their pleading, the parties should be ready to explain the implications of the existing consent order.

3. The parties may bring a motion, if required, to have some of the funds paid out from trust in advance of trial. For added clarity, either party has leave to bring such a motion.

Chown J. Released: June 5, 2024

Footnotes

[1] Ms. Fernandes acknowledged this in submissions, but the point was not in evidence.

[2] There are many problems with this position, including the following:

• No motion record requests this relief. It is simply requested in an affidavit.
• Nothing other than a printout off the Internet supports the value she requests.
• That printout refers to the wholesale not the retail value, and sets it at $17,000 to $19,800, not $19,000.
• The respondent does not say that this proposal has been made in an effort to resolve the matter. Should I therefore treat it as an admission that the applicant is entitled to the car’s value?
• Ms. Fernandes said in her submissions that the Infiniti was purchased pre-separation after an accident damaged another vehicle, and the Infiniti was paid for in part from the line of credit ($49,000). That would give the respondent a claim to the Infiniti despite the ownership registration. However, this information is not detailed in affidavit evidence.
• The respondent does say in her affidavit that pre-separation one vehicle was always used by her and that, post-separation, she used the Infiniti. That would also support her claim. However, she did not plead a trust claim for the Infiniti or at all.

[3] These are the parties’ respective estimates of the value of the Infiniti.