Reasons for Decision

Court and Parties

Court File No.: CV-23-00695818-0000
Date: 2025-01-13
Superior Court of Justice – Ontario

Between:
Steve Dumanski, Michael Dibden, Karen Smith, Edward Hood and Carol Hood, Plaintiffs

And:
Michelangelo Rizzo, Tara Daniel and Ontario Ministry of Land Services, Defendants

Before: Edward Akazaki

Counsel:
Sean Dewart and Brett Hughes, for the Plaintiffs
Barry Yellin, for the Defendant Michelangelo Rizzo

Heard: 2025-01-07

Overview

[1] The defendant Michelangelo Rizzo moves to stay this Toronto action as an abuse of process, because of a partial settlement agreement the other parties disclosed to him but not to the court. The plaintiffs’ action seeks orders registering a right of way over property owned by Mr. Rizzo and Tara Daniel, or damages in lieu of such title remedies. The plaintiffs have also intervened in a sale application in Hamilton by Ms. Daniel against Mr. Rizzo. The couple are no longer together, and Ms. Daniel wishes to sell their co-owned assets. She also wished to avoid the cost of litigation by settling with the plaintiffs.

[2] Mr. Rizzo’s motion relies on the principle that non-disclosure of certain partial settlements amounts to abuse of process and can trigger a stay of proceedings. Zarnett J.A. recently summarized this principle in Kingdom Construction Limited v. Perma Pipe Inc., 2024 ONCA 593, at para. 1:

Settling parties must immediately disclose a partial settlement – a settlement between a plaintiff and some, but not all, defendants – if the settlement changes entirely the landscape of the litigation in a way that significantly alters the dynamics of the litigation. The failure to do so is an abuse of process, the remedy for which is a stay of the action against the non-settling defendants: Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, 328 D.L.R. (4th) 488, at paras. 13, 15-16; Skymark Finance Corporation v. Ontario, 2023 ONCA 234, 166 O.R. (3d) 131, at paras. 46-47, 53.

[3] There is some urgency to the motion, because the sale application between Mr. Rizzo and Ms. Daniel is scheduled for hearing in Hamilton on a running list starting this week.

[4] The plaintiffs own lakeside properties on Crystal Lake, in the Kawarthas. Mr. Rizzo and his co-defendant Tara Daniel own a nearby property. Part of the access road to the plaintiffs’ properties might run across the Rizzo-Daniel property.

[5] Rizzo and Daniel purchased their property from Nevil Knupp in 2021, when they were romantically involved. The purchase agreement contained a Schedule “C” acknowledging “that there may be a driveway through the northeast corner” and a covenant to cooperate with existing users of the driveway – if it exists – “to grant a deeded and surveyed right of way.” In 2023, Mr. Knupp assigned his rights to the schedule to the three plaintiffs. The plaintiffs then called on Mr. Rizzo and Ms. Daniel to comply.

[6] Mr. Rizzo received the letters from the plaintiffs’ lawyers, but Ms. Daniel did not. In this action, the plaintiffs allege Mr. Rizzo and Ms. Daniel failed to perform their contractual obligations surrounding the driveway. The motion evidence contains correspondence from Ms. Daniel’s lawyer alleging Mr. Rizzo received the notice letters but withheld them from Ms. Daniel. I need not make findings regarding this evidence. The parties did not dispute that once the plaintiffs sued, Ms. Daniel wished to avoid the litigation by consenting to the relief, and Mr. Rizzo intended to defend the action. One might also infer that Ms. Daniel was upset by Mr. Rizzo’s failure to share the correspondence with her.

[7] Ms. Daniel’s willingness to cooperate with the plaintiffs is understandable. Her position does not necessarily make her more reasonable than Mr. Rizzo or reflect the strength of the merits of the action. Rather, it is reflective of her desire to relieve herself of co-ownership of the property and to avoid additional litigation costs. Ms. Daniel instructed her lawyer to notify Mr. Rizzo’s lawyer that she intended to consent to the plaintiffs’ claim regarding the right of way. She also stated her intention to sell the property and another co-owned property in Niagara Falls. On July 20, 2023, Ms. Daniel started the Hamilton application under the Partition Act, RSO 1990, c P.4, for sale of both properties. That is the proceeding scheduled for hearing on a long motions and applications list starting this week.

[8] On October 30, 2023, Mr. Rizzo delivered a statement of defence denying the plaintiffs’ claim. The core defence is that Schedule “C” is unenforceable due to vagueness and cannot confer a right of way to the plaintiffs.

[9] On January 24, 2024, the plaintiffs and Ms. Daniel settled the claim against her. She would consent to the granting of the right of way, and the plaintiffs would limit the claim for damages to Mr. Rizzo’s several liability. It provided for Ms. Daniel’s cooperation with the plaintiffs to advance the claims against Mr. Rizzo. The plaintiffs provided Mr. Rizzo a copy of this agreement the same day.

[10] On January 25, 2024, Ms. Daniel delivered her statement of defence and crossclaim consenting to an order granting the right of way but denying the claim for damages. The crossclaim is pro forma and redundant, in that it simply seeks contribution and indemnity from Mr. Rizzo in respect of damages the plaintiffs already agreed not to claim against her.

[11] On April 4, 2024, Mr. Rizzo’s lawyer inquired whether the plaintiffs had disclosed the agreement to counsel. In her response, the plaintiffs’ lawyer argued there was no freestanding provision in the Rules of Civil Procedure to disclose it and implied that the judge at the next hearing would be alerted to it. The plaintiffs’ lawyer did concede the agreement shifted the litigation landscape.

[12] Without predetermining the issue, I am required to consider the merits to the extent of evaluating the shifting of the litigation landscape. In particular, the pleadings disclose an active dispute between the plaintiffs and Ms. Daniel about damages for breach of contract, but the plaintiffs agreed not to claim damages from her. The issue on which the motion turns is whether this difference between the pleadings and reality amounts to a dissemblance warranting a stay of proceedings.

[13] I have concluded that the procedural agreement did not sufficiently change the litigation alignment of the parties to justify a stay of the proceeding. Had I come to a different conclusion, I would have stayed the proceeding because of the plaintiff’s failure to bring the agreement to the court’s notice prior to the commencement of the motion. I am required to rule on this secondary issue, because the non-disclosure does warrant sanction in the form of an order for costs.

Did the Undisclosed Settlement Agreement Justify a Stay?

[14] The plaintiffs contend the title dispute is the main issue and that the damages claim is pleaded in the alternative. The court must nevertheless consider the availability of a damages claim as an alternative to the claim for the right-of-way. If the court cannot award damages for breach of contract in lieu of the title remedies, the tactical alignment of the parties around a phantom issue could mean there is no change in the litigation landscape.

[15] While I cannot finally decide the issue in the absence of a full record, I am required to consider the viability of the claim in the same way as other pleadings on which the parties square off (or do not really square off). This is, ultimately, a kind of pleadings motion. The court’s first task in any motion depending on the characterization of pleadings and underlying claims is to analyse whether the claim is properly pleaded: Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, para. 50.

[16] The plaintiffs are assignees of the covenant in Schedule “C” obtained by Mr. Knupp. That, in turn, appears to have been Mr. Knupp’s means of avoiding a dispute with the plaintiffs at the time of the conveyance to Rizzo and Daniel. Schedule “C” starts with equivocal language that there “may be a driveway” and that “It is unknown whether in fact the driveway crosses the Knupp property.” It then requires Rizzo and Daniel to cooperate to grant a “deeded right and surveyed right-of-way,” and to refrain from blocking the driveway.

[17] It may turn out there is too much uncertainty permeating the covenant for it to be enforceable by specific performance or a title registration of an easement. A contracting party is free to agree to a contractual provision he believes a court will not enforce. If the court will not enforce Schedule “C” by specific performance or registration, can it award damages?

[18] At its core, the legal principles in the dispute are no different than any other case of a party failing or refusing to carry out a conveyancing obligation in an agreement. In addition to technical remedies under one or more provisions of the Land Titles Act, RSO 1990, c L.5, the Courts of Justice Act, RSO 1990, c C.43, ss. 99-100 confers the following powers:

99. A court that has jurisdiction to grant an injunction or order specific performance may award damages in addition to, or in substitution for, the injunction or specific performance.

100. A court may by order vest in any person an interest in real or personal property that the court has authority to order be disposed of, encumbered or conveyed.

[19] Despite the authority to award both specific performance and damages, in practice they are alternative remedies, with damages being a substitute where specific performance is inappropriate or if the plaintiff elects damages: Semelhago v. Paramadevan, para. 11.

[20] If the driveway crosses over the Rizzo-Daniel lands, the question is whether the plaintiffs’ properties become landlocked without the right of way. If that is the case, the ordinarily principles of preferring damages over specific performance might not apply. There could also be an easement resulting from a relationship between dominant and servient tenements. The strength of the contractual claim would then turn on the enforceability of the Schedule “C” covenant, and specific performance would likely be ordered instead of damages, because damages would be useless in resolving the lack of access to the plaintiffs’ properties. If there is a non-contractual proprietary basis for ordering a title registration of the right of way, the award would not entail contractual damages against Mr. Rizzo and Ms. Daniels.

[21] If the property is not landlocked without the right of way, it is not clear whether the plaintiffs would have a case at all, because the Schedule “C” covenant is conditional on the existence of a right of way. Thus, without determining the issue, I am unable to see a viable claim for damages if the alleged driveway does not cross the Rizzo-Daniel lands.

[22] The foregoing logic points to the damages claim as misconceived. From Mr. Rizzo’s perspective, the damages claim entails a “heads I win, tails you lose” endgame. It may be that, on a full trial record, a rationale for a damages claim may emerge, but I cannot see it on the face of the pleadings. Lawyers are reluctant to omit boilerplate pleadings, but sometimes the failure to omit them can lead to problems.

[23] This reasoning regarding the viability of the damages claim is important, because, on its face, the January 24, 2024, procedural agreement has some of the formal features of a Mary Carter or Pierringer in shifting the expected adversarial configuration. Ms. Daniel does not, however, guarantee a result for the plaintiffs. Such a guarantee is a key function of Mary Carter and its variants. She has paid nothing but a promise to cooperate. She cannot guarantee a result, because Mr. Rizzo is co-owner of the property. The only litigation outcome guaranteed by the agreement is that the plaintiffs will not hold Ms. Daniel liable for any damages. The litigation landscape has been altered, but not much from Mr. Rizzo’s vantage.

[24] The labels or concessions of parties’ lawyers about the nature of a settlement agreement are not determinative: Kingdom Construction Limited v. Perma Pipe Inc., 2024 ONCA 593, at para. 7. Here, I do not view the agreement as changing the entire landscape of the litigation, as the appellate case law describes what the moving party must establish. On the face of the pleadings, there is a veritable difference between Ms. Daniel’s defence of a damages claim and the fact that the damages claim does not exist. However, for the reasons I outlined above, the damages claim itself appears to be illogical and the product of defensive lawyering or overreliance on law office precedents. A hidden dynamic involving the claim for damages alone would not materially alter the course of the proceedings. Cooperation on the title issues would not be unexpected, based on the alignment of interests in Ms. Daniel’s consent to the relief.

[25] I therefore struggle to see the viability of the claim for damages. It is certainly not the main dispute or the entire dispute. I therefore conclude that the resultant abuse of process is not significant enough to warrant a stay of proceedings.

Was There a Failure to Disclose the Agreement to the Court?

[26] I turn next to the provisions in the agreement requiring the plaintiffs to amend the claim to limit the claim for damages to Mr. Rizzo’s several liability, and to disclose the agreement to Mr. Rizzo and the court. The plaintiffs set their intention to disclose it to the court, but the execution of that intention stalled, somewhat inexplicably. Even though the failure to disclose is not enough of an abuse of process to warrant a stay, the court should not tolerate it.

[27] The clear intention to bring the settlement to the court’s attention can be grounds for exercising the court’s discretion not to order a stay: CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467, para. 67. Nevertheless, I do not interpret CHU as excusing plaintiffs’ counsel for failing to disclose the agreement to the court. On April 4, 2024, the prompt from Mr. Rizzo’s lawyer ought to have mobilized the plaintiffs’ lawyer to take steps to file the settlement with the court. In CHU, the plaintiff was going to bring a motion to bring the agreement to the court for its approval. Here, plaintiffs’ counsel expressed no intention to take any such step. Her response to the prompt was: “No judge has been assigned and there have been no steps in the action requiring a court attendance. There is at this point no judicial official to notify.”

[28] The fact there is no specific provision in the rules for filing procedural agreements is not an excuse. Procedural agreements such as a Mary Carter or a Pierringer are tolerated because public policy encourages settlements: Stamatopoulos v. Harris, 2013 ONSC 7844 (Div. Ct.), para. 49. The original decision of J.D. Booth v. Mary Carter Paint Company, 202 So. 2d (Fla. 2d DCA 1967) has fuelled decades of controversy about the effect on civil litigation. Such agreements are famously “banned in Texas” since Elbaor v. Smith, 845 S.W.2d 240 (Tex. 1993) and in some other U.S. states. In short, it is not for the court to promulgate rules for agreements intended to alter the interests of the parties while their formal positions remain unaltered. The onus is on parties and their lawyers to devise ways of informing courts of the existence of such agreements. See Aecon Buildings v. Stephenson Engineering Ltd., 2011 SCC 33, para. 5.

[29] In this instance, the plaintiffs could have disclosed the agreement to the court by amending the statement of claim. The pleadings would therefore incorporate the agreement by reference: Del Giudice v. Thompson, 2024 ONCA 70, para. 18. They could have brought a simple motion or case conference request for directions. There are various ways parties can come before the court. It does not come to them.

[30] The plaintiffs also argued that the agreement was brought to the court’s notice in motion materials filed in the Hamilton court. Since the province has only one Superior Court, the argument is that this filing met the obligation. I reject that submission, because it is in this proceeding that the agreement had to have been filed. The integrated administration of the Ontario Court (General Division) envisaged in the 1990’s never reached fruition. Subrule 4.05(2) specifies the filing of documents in the court office where a proceeding was commenced. The obligation to disclose the agreement to the court entailed taking a step in this proceeding, not the one in Hamilton. Disclosure of procedural agreements to the court must be intentional and directed to the proceeding they affect. There is no back door to the Toronto courthouse via the Hamilton courthouse.

[31] Therefore, had I determined that the undisclosed agreement had significantly altered the litigation landscape, I would have stayed the proceedings as an abuse of process.

Conclusion

[32] Because the settlement agreement did not entirely change the litigation landscape, as described in the various appellate decisions, I must dismiss the motion for a stay.

[33] The plaintiffs’ failure to disclose an agreement that their lawyers conceded had to be disclosed, nevertheless, amounted to an abuse of process. The moving party is not to be faulted for initiating a motion that indirectly fulfilled the disclosure obligation for the plaintiffs. I therefore award the costs of the motion to the defendant Michelangelo Rizzo on a partial indemnity scale, even though his motion was unsuccessful. Based on the costs outline filed, I award him the amount of $10,000, inclusive of disbursements and taxes. To provide no sanction would amount to condonement of non-disclosure.

Edward Akazaki
Date: January 13, 2025