



COURT OF APPEAL FOR ONTARIO

CITATION: Petruzziello v. Albert, 2014 ONCA 393

DATE: 20140513

DOCKET: C56458

Gillese, van Rensburg and Hourigan JJ.A.

BETWEEN

Edmondo Petruzziello

Applicant (Respondent)

and

Viktoria Albert

Respondent (Appellant)

Enio Zeppieri and Gregory T.A. Gryguc, for the appellant

Steven S. Sands, for the respondent

Heard: May 9, 2014

On appeal from the order of Justice Jayne E. Hughes of
    the Superior Court of Justice, dated September 1, 2011.

ENDORSEMENT

[1]

Viktoria Albert (the appellant) and Edmondo Petruzziello (the
    respondent) entered into a cohabitation agreement (the Contract) dated
    April 25, 2006.  After their relationship ended, they entered into Minutes of
    Settlement on October 26, 2007 (the Minutes).

[2]

During the legal proceedings that ensued, the appellant called into
    question the validity of both documents.

[3]

By order dated September 1, 2011 (the Order), the Contract was
    declared invalid and unenforceable but the Minutes were declared to be valid
    and enforceable.  In the associated costs order dated May 23, 2013 (the Costs
    Order), the trial judge ordered that no costs, beyond the splitting of the
    funds held as security for costs, be paid by either party.

[4]

On appeal, the appellant contends that the trial judge erred in finding
    the Minutes to be valid and enforceable.

[5]

By way of cross-appeal, the respondent seeks leave to appeal the Costs Order.

[6]

For the reasons that follow, the appeal is dismissed and leave to appeal
    the Costs Order is refused.


BACKGROUND IN BRIEF

[7]

The parties were never married.  Though the length of their cohabitation
    was disputed, the trial judge accepted the appellants evidence that the
    parties had a continuous relationship spanning six years.  The parties have one
    child, born in 2002.

[8]

In September 2003, the appellants visa lapsed and she was denied return
    access to Canada following a European holiday.  The parties prepared an immigration
    application to Canada and, of necessity, lived in separate residences while the
    application was processed.  The sponsorship portion of the immigration
    application included a contractual obligation that the respondent would provide
    financial support to the appellant for a period of three years from the date that
    the appellant was granted landed immigrant status.

[9]

The parties separated on May 1, 2007.

[10]

The
    respondent began proceedings, seeking access to their child.  In her answer,
    the appellant claimed spousal support.

[11]

On
    October 26, 2007, a case conference on all issues took place.  As a result of
    meetings between counsel and the parties that took place at the court that day,
    the Minutes were executed.  Both parties were separately represented during
    this process.

[12]

The
    Minutes deal with spousal support on a final basis, but the other issues dividing
    the parties were dealt with on a temporary basis and adjourned for further
    consideration.

[13]

The
    Minutes were incorporated into a consent order that same day (i.e. October 26,
    2007).

[14]

In
    September 2008, the respondent moved to have his child support obligation
    reduced.  The appellant brought a cross-motion in which she raised the validity
    of the Contract and the Minutes.

[15]

The
    parties agreed to a bifurcation of the issues.  A trial to determine the
    validity of the Contract and the Minutes would proceed first.  Subject to the
    results of the first trial, the claim for spousal support would proceed
    thereafter.

[16]

This
    appeal follows the trial at the first stage of the bifurcated proceedings.

THE TRIAL DECISION

[17]

The
    trial judge set aside the Contract, pursuant to s. 56(4) of the
Family Law
    Act
.

[18]

In
    relation to s. 56(4)(a), the trial judge found that the respondents failure to
    disclose the details of the support obligations arising from the sponsorship
    agreement was a significant and material failure in disclosure.

[19]

The
    appellant also established that s. 56(4)(b) was engaged.  The trial judge also found
    that respondent made it impossible for the appellant to obtain meaningful independent
    legal advice at the time that she entered into the Contract and, therefore, that
    the appellant did not understand the nature or consequences of the Contract at
    that time.

[20]

Based
    on two further findings of the trial judge, s. 56(4)(c) was also engaged. 
    First, the trial judge found that the respondent failed to negotiate in good
    faith by not disclosing everything relevant to the purpose of the Contract.  The
    trial judge found this non-disclosure was deliberate and intended to mislead
    the appellant and the lawyers involved in negotiating the Contract.  Second, the
    spousal support provisions in the Contract were such an extreme departure
    from the appellants statutory entitlement as to be unconscionable, in part
    because they obligated the appellant to be in full-time school as a condition
    of receiving any form of spousal support.

[21]

However,
    the trial judge found the Minutes to be valid and enforceable.  Relying on
Geropulos
    v. Geropoulos
(1982), 35 O.R. (2d) 763 (C.A.), she stated that as a
    general rule, settlements of pending litigation between counsel, acting within
    the scope of their retainer, will be upheld by the courts in order to maintain
    the integrity of the settlement process.  The trial judge found that in
    negotiating the Minutes, the appellants lawyer acted within the scope of his
    retainer and that he had the authority to settle the spousal support claim on a
    final basis.  She further found that the appellant accepted her lawyers
    advice.

[22]

In
    addition, the trial judge found that the appellant failed to meet the onus
    imposed on her by s. 56(4) of the
Family Law Act
.

[23]

In
    relation to s. 56(4)(a), the trial judge found that the appellant failed to pursue
    further disclosure from the respondent, despite having requested further
    disclosure in her case conference brief and despite having had the benefit of
    independent legal advice throughout the negotiations leading up to the
    Minutes.  She noted that nothing precludes a litigant from entering into a
    final and binding settlement where only partial financial disclosure has been
    made.  In any event, the trial judge found that the respondent had
    overestimated his income during the negotiation of the Minutes and, therefore,
    whatever shortcomings there were in respect of disclosure did not cause
    prejudice to the appellant.

[24]

The
    trial judge rejected the appellants claim that she failed to understand the
    nature and consequences of the Minutes, noting that she was free, following
    separation, to retain any lawyer that she wished.  The trial judge accepted the
    evidence of the appellants lawyer that he reviewed with the appellant, in
    detail, each provision of the Minutes and that the appellant understood the
    nature and consequences of the Minutes when she executed them.

[25]

Finally,
    the trial judge found that both parties had had independent legal advice, the
    Minutes reflected their genuine mutual desire to finalize their spousal support
    arrangements and there was no evidence of exploitation or material
    misinformation.  While the Minutes were not overly generous in the trial
    judges view, she did not find them to be unconscionable.  In reaching this
    conclusion, the trial judge adverted to certain payments that the respondent
    made to the appellant or third parties on her behalf.

[26]

As
    a consequence of these findings, the trial judge found that she was without
    jurisdiction to set aside the Minutes.

[27]

The
    trial judge ordered that no costs, beyond the splitting of the funds held as
    security for costs, be paid by either party.  She found that the respondent had
    not made any enforceable offers to settle since his lawyer did not sign the
    offers as required by Rule 18(4) of the
Family Law Rules
.  Further,
    she noted that success was divided because the Contact was set aside but the
    Minutes were found to be valid.  The trial judge also considered the other
    factors required by Rule 24(11) of the
Family Law Rules
, including
    that neither party acted unreasonably in the course of the proceeding.  She did
    note that neither party had been alert to the case law indicating that deference
    is owed where minutes of settlement have been negotiated between counsel,
    saying that because that matter was a significant issue in the trial, this
    omission may have prolonged the trial.

[28]

The
    trial judge also found that there were a number of other relevant matters that
    the court had to take into consideration in making a costs determination. 
    First, she considered the financial condition of the parties after their
    relationship ended and their ability to pay a costs award.  She found that
    while the respondent continued to earn a substantial income, the appellant was
    unemployed and primarily responsible for their young child. Second, she found
    that the child would be adversely affected if a costs award were made against
    the appellant, as it would reduce her already limited resources.

THE APPEAL

[29]

The
    appellant argues that the trial judge erred in finding the Minutes to be valid
    and enforceable.  She says that like the Contract, the Minutes were
    unconscionable and that it was an error for the trial judge to have failed to
    allow the matter to proceed to the second step of the bifurcated process in
    which a full hearing about the parties finances may have illustrated that unconscionability.

[30]

We
    do not accept this submission.  We see no error in the decision below nor in
    the reasons for decision.

[31]

The
    trial judge correctly articulated and applied the legal principles that guide a
    court when considering the validity of a settlement agreement, such as the
Minutes
. 
    One significant consideration, which the trial judge fully recognised, is the
    established policy that the courts are to encourage the settlement of disputes
    by recognizing the validity of settlements of pending litigation that parties
    freely and properly enter into, with the benefit of legal advice.

[32]

In
    the present case, the trial judge found that the appellants situation, when
    the Minutes were negotiated and executed, was materially different than when
    she executed the Contract.  It will be recalled that the Minutes were signed
    during the course of a case conference when both parties had separate,
    independent and experienced legal counsel.  On the facts as the trial judge
    found them, the appellants lawyer was acting within the scope of his retainer
    when he negotiated a final resolution of the spousal support issue.  Her lawyer
    prepared materials for the case conference, as well as her answer and claim in
    the proceedings.  The trial judge accepted the appellants lawyers evidence
    that he had discussed the risks and benefits of trying to set aside the spousal
    support provisions in the Contract.  The appellant heeded her lawyers advice,
    and agreed to the Minutes.

[33]

We
    see no merit in the submission that the Minutes should be held to be
    unconscionable pursuant to s. 56(4)(c).  The trial judge gave cogent, leally
    correct, reasons for finding that the appellant failed to discharge her burden
    in this regard and we adopt those reasons.

[34]

Accordingly,
    there is no basis for disturbing the trial judges determination that the
    Minutes are valid and enforceable.

THE CROSS-APPEAL

[35]

Leave
    to appeal a costs order will not be granted save in obvious cases where the
    party seeking leave convinces the court that there are strong grounds upon
    which the appellate court could find that the trial judge had erred in the
    exercise of his or her discretion:  see
Brad-Jay Investments Ltd. v.
    Szijjarto

(2006), 218 O.A.C. 315 (C.A.), at para. 21.  An appellate
    court should set aside a costs order only if the trial judge has made an error
    in principle or if the costs award is plainly wrong: see
Hamilton v. Open
    Window Bakery Ltd.
, [2004] 1 S.C.R. 303, at para. 27.

[36]

We
    see nothing in the costs decision below which rises to this high threshold and,
    accordingly, would not grant leave to appeal the Costs Order.

[37]

The
    trial judge correctly referred to the relevant factors to be considered in
    awarding costs under Rule 24(11), including the fact that success was divided, the
    issues were complex, the lawyers rates were appropriate and the time spent
    proper.  Further, the trial judge considered the means of the parties and
    concluded that it would not be in the childs best interest to make a large
    cost award.

[38]

A
    trial judge exercises discretion when awarding costs.  That exercise of
    discretion is entitled to considerable deference.  Though a party cannot use
    their limited financial circumstances as a shield against cost orders, the
    ability to pay when children are involved, is a relevant factor.

DISPOSITION

[39]

Accordingly,
    the appeal is dismissed and, leave to appeal the Costs Order having been
    refused, the cross-appeal is also dismissed, with costs to the respondent fixed
    at $5,000, all inclusive.

E.E. Gillese
    J.A.

K. van Rensburg J.A.

C.W. Hourigan J.A.


