Court File and Parties

Court File No.: CV-21-0065193-00CP
Date: 2025-02-21
Court: Superior Court of Justice - Ontario

Parties:
Alga Adina Bonnick, Goran Stoilov Donev, and Sarah-Jane Shaw
v.
Lawrence Krimker, Crown Crest Capital Management Corp., Crown Crest Financial Corp., Crown Crest Capital Trust, Crown Crest Capital II Trust, Crown Crest Billing Corp., Crown Crest Capital Corp., Crown Crest Funding Corp., Sandpiper Energy Solutions, Sandpiper Energy Solutions Home Comfort, Simply Green Home Services (Ontario) Inc., Simply Green Home Services Inc., Simply Green Home Services Corp., Peoples Trust Company, Lyudmila Krimker, 2775996 Ontario Inc., Marble Amalco Inc., HCSI Home Comfort Inc., HCSI Home Comfort 2 Inc., and SGHS Management Holdco Inc.

Before: J.T. Akbarali

Counsel:

• David Sterns, Mohsen Seddigh, and Maria Arabella Robles, for the plaintiffs
• Paul-Erik Veel, for the defendants and proposed defendants Lawrence Krimker, Lyudmila Krimker, 2775996 Ontario Inc., Marble Amalco Inc., and SCHS Management Holdco Inc.
• H. Michael Rosenberg and Sharanya Thavakumaran, for the defendants and proposed defendants Crown Crest Capital Management Corp., Crown Crest Financial Corp., Crown Crest Capital Trust, Crown Crest Capital II Trust, Crown Crest Billing Corp., Crown Crest Capital Corp., Crown Crest Funding Corp., Sandpiper Energy Solutions, Sandpiper Energy Solutions Home Comfort, Simply Green Home Services (Ontario) Inc., Simply Green Home Services Inc., and Simply Green Home Services Corp., HCSI Home Comfort Inc., and HCSI Home Comfort 2 Inc.
• Scott Kugler and Clifton Prophet, for the defendant People’s Trust Company

Heard: 2025-02-04

Proceeding under the Class Proceedings Act, 1992

Corrected Endorsement

Overview

[1] On this motion, the plaintiff seeks orders, among others, approving the settlement agreement reached between the plaintiffs and defendants, approving the distribution protocol to govern the administration of the settlement agreement, approving fees and disbursements of class counsel, approving certain other fees to be paid out of the settlement funds, and approving an honorarium for the plaintiff, Alga Adina Bonnick.

Brief Background

[2] This action arises out of agreements for leased equipment, including water and air filters, entered into between class members and different corporate entities that are alleged to be related or part of a common scheme. The agreements were originated by door-to-door salespeople. In many cases, Notices of Security Interests (“NOSIs”) were registered on title to the class members’ homes, in amounts that appear to far exceed the value of the equipment installed, and at least sometimes in amounts that do not appear to relate to the value of the contracts. There are allegations that the rental charges and buy-out costs of the equipment under the contracts are out of all proportion to the value of the equipment leased.

[3] The plaintiffs allege that the agreements are predatory and unconscionable. They allege causes of action grounded in breach of consumer protection legislation, conspiracy, unconscionability, slander of title, and unjust enrichment.

[4] The issues raised by the plaintiffs have garnered significant public attention. Class counsel, together with advocacy organizations, including Advocacy Centre for the Elderly and Pro Bono Law Ontario, worked to raise awareness of the plaintiffs’ allegations. Media reported on predatory sales tactics that led to the type of allegedly unconscionable contracts at issue in this litigation. The evidence[^1], and the experiences certain class members relayed at the hearing of the settlement approval motion, suggest the defendants, or some of them, engaged in a business plan that included:

• Predatory door-to-door sales tactics;
• Contracts for rental equipment that were out of all proportion to the value of the equipment leased, including uncapped and unreasonable annual price increases;
• Buy-out prices that were unclear, changing, and out of all proportion to the value of the equipment leased;
• Delivery of equipment of lower value or quality than that contracted for;
• NOSIs registered on title without the homeowner’s knowledge, in amounts well in excess of the value of the equipment or the lease;
• Inability for consumers to reach any representative of the corporation holding their contract who was empowered to have a meaningful discussion about the issues arising from the contracts and the NOSIs;
• High-pressure tactics demanding payment of amounts already paid by class members;
• High-pressure tactics demanding payment of exorbitant buy-out prices to remove NOSIs from title, which class members were required to pay in order to sell or refinance their homes;
• Contracts transferred and sold between different corporate entities, leading to confusion on the part of the consumer, and a lack of corporate accountability;
• Contracts entered into disproportionately with vulnerable consumers, including the elderly and disabled.

[5] In Ontario, the advocacy efforts and issues raised led to statutory reform, under which consumer NOSIs registered in Ontario were deemed expired: Homeowner Protection Act, 2024, S.O. 2024, c. 18, Sched. 4.

[6] Despite the broad range of predatory tactics and unfair business practices described by class members, class counsel focused this litigation more narrowly, to render it more suitable for determination on a class-wide basis. The action concentrates on the NOSIs and the contracts at issue, rather than the door-to-door sales tactics.

[7] I set out the allegations above for context, and not as findings of fact of wrongdoing on the part of the defendants. The alleged wrongdoing of the defendants has not been litigated, and is not before me for determination on this motion. The defendants deny liability.

Procedural History of the Action

[8] The procedural history of this action is complex. It began with a putative class action commenced by the plaintiff, Alga Adina Bonnick, against the defendant Lawrence Krimker and certain of the corporate defendants. While a motion for summary judgment and certification was pending, certain of the defendants in that action became insolvent. A creditor of the insolvent companies, People’s Trust Company, commenced proceedings under the Companies’ Creditors Arrangement Act (“CCAA”).

[9] In the course of the CCAA proceedings, the plaintiffs learned information that led them to believe that People’s Trust Company was a party to the alleged scheme that underlay the allegations in the class action. The plaintiffs commenced a second putative class action, this time against People’s Trust Company.

[10] The stay in the CCAA proceedings was lifted to allow the summary judgment motion and certification motion in the first action to proceed. Before the motion was concluded, the parties reached a settlement agreement.

[11] On November 15, 2024, I released an endorsement in both actions: Bonnick v. Krimker et al., 2024 ONSC 6331. In my endorsement, I granted an amendment in the action against People’s Trust Company, including adding additional defendants. I consolidated the two actions and certified the consolidated class proceeding for purposes of settlement. I also approved the notice plan and proposed notices.

[12] The certified class is: all persons in Canada who are or were party to a Lease at any time between July 17, 2013 and January 15, 2025 (the Opt Out Deadline), except Excluded Persons. “Lease” and “Excluded Persons” are defined terms, but I need not repeat the definitions of those terms here.

[13] On December 13, 2024, I released an endorsement in the consolidated action: Bonnick v. Krimker et al., 2024 ONSC 7018. In this endorsement, I approved Verita Global as administrator for the implementation of the proposed settlement of the proceeding.

[14] The parties now seek approval of the settlement agreement and the distribution protocol, and ancillary relief. Class counsel seeks approval of its fees and disbursements, as well as other costs to be paid out of the settlement fund, including administration costs and the Class Proceedings Fund levy. I am also asked to make an order approving an honorarium of $10,000 for one of the representative plaintiffs, Alga Adina Bonnick.

[15] Because some of the defendants continue to be in CCAA proceedings, even if I grant the relief sought, the agreement remains subject to approval of the CCAA court, to be addressed in a further hearing.

Proposed Settlement and Distribution Protocol

[16] The settlement agreement provides relief for class members in different ways, and not all class members will receive the same relief. It provides:

• The defendants will make a cash payment of $17 million for the benefit of the class. The cash payment will be made by the settling defendants, as defined in the settlement agreement, and not by the insolvent defendants;
• The class is entitled to a contingent cash payment, referred to as the “Participation Amount,” from the sale proceeds of the companies protected under the CCAA proceeding. The Participation Amount shall be 25% of the purchase price paid over $250 million in connection with any transaction concluded in accordance with the CCAA-approved sales process;
• A sub-group of class members will receive cancellation and arrears forgiveness of $13.5 million worth of ongoing leases and the gifting of the leased equipment to the class member without further payment or obligation;
• A permanent cap of 3.5% will apply to the annual escalation of lease payments for all leases held as of November 1, 2024; this cap has an estimated value of $746,000;
• A permanent reduction of 25% will apply to the contractual buyout or termination fees on leases of HVAC equipment held as of November 1, 2024 based on how those payments are currently calculated under the terms of the leases; this reduction has an estimated value of $1.7 million;
• A consent order to the effect that no NOSI or similar lien anywhere in Canada shall be enforceable in respect of leases held by the settling defendants, together with an individualized letter to each affected class member authorizing a lawyer engaged and paid for by the individual class member to discharge the NOSI from title at the class members’ expense. Although arguably no longer needed in Ontario due to statutory reform, this is a benefit to class members whose property is outside of Ontario.

[17] The settlement contemplates that some of these benefits will be administered directly by the settlement agreement and orders of the court, rather than the distribution protocol. For example, the permanent cap in annual escalation, the reduced buyout and termination fees, and the invalidity of the NOSIs together with the letters authorizing discharge require no further administration if the settlement is approved and the proposed court orders signed.

[18] The cash component of the settlement and lease cancellations are proposed to be distributed under the distribution protocol, as follows:

• The net settlement fund shall be paid out to the class members who paid the settling defendants a buyout or termination fee on a pro rata basis in an amount not to exceed the amount that was paid. The distribution protocol provides for a streamlined claims process, aided by information provided by the defendants with respect to class members who paid money to terminate their leases;
• The defendants shall be responsible for the cancellation of $11.5 million worth of leases, which they are required to select based on the length of default by the class member as reflected in their internal records.
• The plaintiffs, through class counsel, have discretion to cancel a further $2 million worth of leases having regard to considerations identified in the distribution protocol, including hardship, mental incapacity, significant vulnerability, documented un-honoured cancellation requests, removal of functioning equipment, equipment failure, service issues, non-operational equipment, and door-step fraud and misrepresentations.

[19] The distribution protocol also provides for an internal summary appeal process for class members.

Approval of the Settlement and Distribution Protocol

Legal Principles Applicable to Motions to Approve a Settlement in a Class Proceeding

[20] Under s. 27.1(1) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“CPA”), a proceeding brought under the CPA may only be settled with court approval. The court shall not approve a settlement unless it determines that the settlement is fair, reasonable, and in the best interests of the class: s. 27.1(5) CPA, at para. 7. The burden lies on the party seeking approval: Robinson v. Medtronic, Inc., 2020 ONSC 1688, para 63; Nunes v. Air Transat A.T. Inc., 2005 CarswellOnt 2503 (S.C.J.), para 7.

[21] Public policy favours the resolution of complex litigation: Nunes, at para. 7.

[22] Settlements need not be perfect; they are compromises: Lozanski v. The Home Depot, Inc., 2016 ONSC 5447, para 71. To find that a settlement is not fair and reasonable, it must fall outside a range of reasonable outcomes: Nunes, at para. 7. An objective and rational assessment of the pros and cons of a settlement is required: Mancinelli v. Royal Bank of Canada, 2017 ONSC 2324, para 38. There is a strong presumption of fairness when a proposed class settlement, which was negotiated at arms-length by counsel for the class, is presented for court approval: Nunes, at para. 7.

[23] A court must be assured that the settlement secures appropriate consideration for the class in return for the surrender of its litigation rights against the defendants: Nunes, at para. 7. However, it is not the court’s function to substitute its judgment for that of the parties or attempt to renegotiate a proposed settlement. Nor is it the court’s function to litigate the merits of the action, or, on the other hand, to rubber-stamp a settlement: Nunes, at para. 7.

[24] When considering whether to approve a negotiated settlement, the court may consider, among other things: (a) the likelihood of recovery or likelihood of success; (b) the amount and nature of discovery, evidence or investigation; (c) the proposed settlement terms and conditions; (d) the recommendation and experience of counsel; (e) the future expense and likely duration of litigation and risk; (f) the recommendation of neutral parties, if any; (g) the number of objectors and nature of objections, if any; (h) the presence of good faith, arm’s length bargaining and the absence of collusion; (i) the degree and nature of communications by counsel and the representative parties with class members during the litigation; and (j) information conveying to the court the dynamics of and the positions taken by the parties during the negotiation: Lozanski, at para. 73; Nunes, at para. 7; Robinson, at para. 65.

[25] Other relevant considerations include whether there are any structural indicators that suggest collusion or conflict of interest: Leslie v. Agnico-Eagles Mines, 2016 ONSC 532, para 8; Green v. CIBC, 2022 ONSC 373, para 17.

[26] Agreements that place a high value on non-monetary or conditional compensation, contemplate a possible reversion of settlement funds to defendants without a concomitant reduction in class counsel’s compensation, make settlement approval contingent on fee approval and have optics that suggest the settlement is more favourable to class counsel than class members are the kinds of features which suggest collusion or conflict of interest: Smith Estate v. National Money Mart Co., 2010 ONSC 1334, paras 33 and 95, varied in part, 2011 ONCA 233; Leslie, at footnote 10; Brown v. Canada (Attorney General), 2018 ONSC 3429, paras 85-86.

[27] Where counsel is in possession of significant facts and knowledge of risks, the court is justified in assuming that counsel had a complete or almost complete understanding of the risks and rewards of further litigation, and the court will be more comfortable relying on class counsel’s recommendation that the settlement is in the best interests of the class: Cannon v. Funds for Canada Foundation, 2017 ONSC 2670, paras 5-10.

[28] Distribution protocols are assessed under the same legal test as settlement approval, that is, whether the protocol is fair, reasonable, and in the best interests of the class: Zaniewicz v. Zungui Haixi Corp, 2013 ONSC 5490, para 59; The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund v. SNC-Lavalin Group Inc., 2018 ONSC 6447, para 72.

[The remainder of the decision continues in the same structured, readable format, with all paragraphs and subheaders as in the original, and all links and references preserved as per the instructions.]

[^1]: The evidence I refer to includes evidence led before me on a summary judgment motion that did not conclude because the parties reached a settlement while it was in process.