Court File and Parties

Court File No.: CV-18-599963 Date: 2025-09-12 Superior Court of Justice - Ontario

Re: Daniel Timothy Smialek and Xiomara Christina Smialek, Plaintiffs And: Status Construction Ltd., Status Homes Inc., Argentino Sisco also known as Tino Sisca, Liam Buck and The Toronto-Dominion Bank, Defendants

Before: Schabas J.

Counsel: Sean Dewart, for the Plaintiffs James Zibarras, for the Defendants Status Construction Ltd., Status Homes Inc. and Argentino Sisco.

Heard: September 2, 2025

Reasons on Motion

Introduction

[1] This is a motion to stay this proceeding brought by the defendants, Status Construction Ltd., Status Homes Inc., and Argentino Sisco (the "moving parties").

[2] The sole ground for the motion is that the plaintiffs have breached the rule set out in Handley Estate v. DTE Industries Limited, 2018 ONCA 324, at paras. 39-40, that "any agreement between or amongst parties to a lawsuit that has the effect of changing the adversarial position of the parties set out in their pleadings into a co-operative one" must be disclosed immediately. Handley holds that a breach of this obligation constitutes an abuse of process and requires that the proceedings be stayed, despite an absence of prejudice to the moving party. As Brown J.A. wrote at para. 39:

The obligation of immediate disclosure is not limited to pure Mary Carter or Pierringer agreements. The disclosure obligation extends to any agreement between or amongst parties to a lawsuit that has the effect of changing the adversarial position of the parties set out in their pleadings into a co-operative one: Aviaco International Leasing Inc. v. Boeing Canada Inc. (2000), 9 B.L.R. (3d) 99 (Ont. S.C.), at para. 23. To maintain the fairness of the litigation process, the court needs to "know the reality of the adversity between the parties" and whether an agreement changes "the dynamics of the litigation" or the "adversarial orientation": Moore v. Bertuzzi, 2012 ONSC 3248, 110 O.R. (3d) 611, at paras. 75-79.

[3] In this case, counsel for the plaintiffs concedes that the settlement reached with the co-defendant Liam Buck changed the adversarial landscape. I agree. In his affidavit signed and disclosed several months after the settlement, Buck recanted much of the evidence he had previously provided on several occasions on behalf of himself and the moving parties. Instead of being in a cooperative relationship as a co-defendant with the moving parties, Buck is now in an adversarial position to them.

[4] There are two issues to be addressed:

(1) whether the disclosure of the settlement provided on March 17, 2023 was sufficient; and, if not

(2) whether the action should be stayed.

Was there sufficient disclosure?

[5] In 2016, the plaintiffs contracted with Status Construction Ltd. ("Status") to rebuild their house which had been destroyed by fire. They allege that Status was controlled by the defendants Argentino Sisco and Buck. Buck was the project manager overseeing the reconstruction. The relationship between the plaintiffs and the defendants deteriorated and construction stopped in the spring of 2018.

[6] In July 2018, the plaintiffs commenced this action and obtained, ex parte, a Mareva injunction freezing the defendants' Ontario assets up to $468,157.00.[1]

[7] A motion to set aside the Mareva order was dismissed by Nishikawa J. on August 2, 2018. Buck swore an affidavit in support of that motion on behalf of the defendants. He was cross-examined on it. The defendants were all represented by the same counsel and provided a common statement of defence.

[8] In December 2018, the defendants commenced a motion for declaratory relief and to vary the order, supported by another affidavit by Buck. In April 2019, the defendants were examined for discovery. Buck's position aligned with the other defendants.

[9] The defendants then had multiple changes in counsel. In January 2020, Buck served a Notice of Intention to Act in person, and in July 2020, he appointed new counsel for himself, Tierney Stauffer LLP.

[10] It appears that the action was not pursued between April 2019 and March 2023. On March 17, 2023, counsel for the plaintiffs (who is not counsel on this motion), advised the moving parties that they had settled with Buck. This disclosure was provided in an email which stated:

I am writing to advise that this week the Plaintiffs and Mr. Buck agreed to settle the proceeding as against Mr. Buck on the following terms:

• Buck shall pay the outstanding amount of the Cost Order to the Plaintiffs in the amount of $61,544.00

• Buck shall provide answers to his outstanding undertakings by no later than the end of the day March 31, 2023

• The Plaintiffs shall cause the Mareva Order to be removed from title to Buck's property and lifted from Buck's assets

• The Plaintiffs shall assign the Cost Order and/or the Writ of Seizure and Sale registered against the real and personal property of Sisca

• Buck shall swear an affidavit correcting prior incorrect evidence and providing further additional evidence he may have

• Aside from the steps that must be taken in furtherance of these Minutes of Settlement, the Plaintiffs shall hold the Action in abeyance as against Buck pending full satisfaction of the settlement terms

• Upon the completion of the terms the Plaintiffs shall cause the Action to be discontinued as against Buck. [Emphasis added]

[11] Counsel for the moving parties immediately sought details of the settlement, including requesting a copy of the Minutes of Settlement and the date when the settlement had been reached. The plaintiffs responded that the settlement had been reached on March 13, 2023, but the Minutes of Settlement were not provided.

[12] Time passed, and on August 15, 2023, plaintiffs' counsel provided the moving parties with an affidavit sworn by Buck on July 27, 2023. That affidavit did far more than correct "prior incorrect evidence"; rather, as counsel for the moving parties wrote on August 28, 2023, Buck resiled from the positions he had taken in his earlier affidavits and evidence and from the position set out in the statement of defence. The moving parties raised concerns that Buck may have disclosed substantial information covered by joint defence privilege.

[13] The moving parties commenced this motion in March 2024. Prior to the original hearing date earlier this year, the plaintiffs, who had been represented by Teplitsky LLP, obtained new counsel following which, on May 29, 2025, the Minutes of Settlement were produced. The Minutes of Settlement contained, among other things, the following paragraph:

Buck shall swear an affidavit, to be drafted by Teplitsky LLP, setting out evidence given by him during a Zoom interview held on October 20, 2022, to be reviewed and approved by Tierney Stauffer LLP, acting reasonably.

[14] In CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467 at para. 61, Sossin J.A. stated that "it is not enough simply to notify the affected parties and the court that an agreement affecting the litigation landscape has been reached"; the details must be provided. As stated by Myers J. in Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2021 ONSC 984, "a settlement can have any number of terms" and opposing counsel should be "told about it forthrightly and immediately." Accordingly, to quote the Court of Appeal in Tallman, compliance with the disclosure obligation is "of such importance [that it] cannot turn on hints offered by opposing counsel": Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66 at para. 20.

[15] As has been noted, "the nature and extent of the obligation to disclose a settlement agreement is governed by the specific facts of each individual case": Dietrich J. in CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2021 ONSC 5946 at para. 65.

[16] The moving parties do not submit that disclosure ought to have been made in October 2022 when Buck was interviewed. Rather, they submit that the plaintiffs did not make adequate disclosure of the settlement on March 17, 2023, following receipt of the signed Minutes of Settlement. I agree.

[17] Counsel's email advised of a settlement and that Buck would swear "an affidavit correcting prior incorrect evidence." That is as far as it went; it did not say that Buck was going to swear an affidavit recanting his prior evidence. Nor did it say that Buck had been interviewed and that counsel for the plaintiffs would be drafting Buck's affidavit.

[18] The email did not bring home to the moving parties that the "adversarial orientation" of the lawsuit had changed: Waxman v. Waxman, 2022 ONCA 311 at para. 22. Accordingly, in my view counsel did not immediately make "forthright" or "clear and unequivocal" disclosure of an agreement which "change[d] entirely the landscape of the litigation": CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467 at para. 55. That only occurred months later when Buck's affidavit was provided in August 2023.

The appropriate remedy

[19] Handley holds that a stay is the appropriate remedy where there has been a failure to immediately disclose an agreement that changes the adversarial landscape. The Court treats the failure to disclose as an abuse of process which "must result in consequences of the most serious nature": Handley, para. 45, citing Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898 at para. 16. The absence of prejudice does not excuse late disclosure. A stay, then, is mandatory in these circumstances.

[20] Counsel for the plaintiffs does not dispute the current state of the law. However, counsel informed me that the Court of Appeal has recently directed that the issue of this mandatory remedy be considered by a five-judge panel in several appeals to be heard together on October 23 and 24, 2025: see Court of Appeal Endorsement, March 28, 2025 in 1086289 Ontario Inc., operating as Urban Electrical Contractors v. The Corporation of the City of Welland, COA-24-CV-0855, and Directions of Case Management Judge Sossin J.A. dated June 6, 2025.

[21] Neither counsel suggested that I adjourn this matter to await the outcome of the Court of Appeal's decision. Instead, counsel for the plaintiff submitted that recent amendments to the Rules of Civil Procedure allow me to grant a less extreme remedy.

[22] On June 16, 2025, Rule 49.14 was amended to codify the requirement of immediate disclosure of partial settlement agreements. It also listed the remedies that the court may impose for the failure to do so, as follows:

(a) make an order for costs, regardless of the outcome of the proceeding;

(b) order or permit further examinations for discovery, to be conducted at the plaintiff's expense;

(c) order additional disclosure or production of documents;

(d) strike out all or part of a party's evidence, including any affidavit made by the party;

(e) adjourn a hearing or other step that permits or requires the attendance of the parties;

(f) stay the proceeding; or

(g) make such other order as is just.

[23] Plaintiffs' counsel submits that the Rule now provides a broader range of remedies and that I am not bound by Handley. He also submits that the Rule is procedural and therefore retroactive, citing s. 52(4) of the Legislation Act, 2006, S.O. 2006, Chapter 21, Sched. F.

[24] I do not accept the plaintiffs' submission.

[25] Rule 49.14 applies broadly to any "partial settlement agreement." It is not limited to settlements which change the adversarial landscape, and does not address that situation at all. In these circumstances, I do not read Rule 49.14 as overruling or changing the remedy compelled by Handley.

[26] It is not necessary, therefore, to also address whether the Rule applies retroactively.

[27] Staying this action is a harsh and drastic result, especially where there appears to be no prejudice. Stays of proceedings are usually reserved for the most serious transgressions, or "clearest of cases", and are generally regarded as an order of last resort.

[28] The failure to adequately disclose an agreement which changes the adversarial landscape may arise from ignorance, or negligence, and delay may not cause any prejudice. Yet the result is the same as missing a statutory limitation period as it bars the action from proceeding.

[29] Nevertheless, at present, I am bound by Handley, and must order that the action be stayed.

[30] The defendants shall be awarded costs on a partial indemnity scale as requested in the amount of $15,470.60, including disbursements and HST.

Paul B. Schabas J.

Date: September 12, 2025

[1] The Toronto Dominion Bank was named as a defendant but no relief was sought against it. When I refer to the "defendants" I do not include the Bank.