



COURT OF APPEAL FOR ONTARIO

CITATION: 1388020 Ontario Corp. v. Machnowski, 2021 ONCA 806

DATE: 20211117

DOCKET: C69019

Doherty, Miller and Sossin JJ.A.

BETWEEN

1388020
    Ontario Corp. and

Dr. Birinder
    Singh Ahluwalia

Plaintiffs (Appellants)

and

Zbigniew
    Machnowski
,
Photon Imaging Incorporated, Zenaida

Pornel
    Machnowski also known as Jenny Machnowski
,

Cardiovascular Care Centre
    Inc. and David Ali

Defendants (
Respondents
)

AND BETWEEN

Zbigniew Machnowski
and
1388020 Ontario Corp.

Plaintiffs (
Appellant
/
Respondent
)

and

Birinder
    Singh Ahluwalia
, BSA Diagnostic Imaging Inc.,

and B.S.A. Diagnostic Imaging
    Inc.

Defendants (
Appellant
)

Paul J. Pape, for the appellants 1388020 Ontario Corp.
    and Dr. Birinder Singh Ahluwalia

David N. Delagran, for the respondents Zbigniew Machnowski,
    Photon Imaging Incorporated and Zenaida Pornel Machnowski

Heard: October 26, 2021 by video conference

On appeal from the
    order of Justice Markus Koehnen of the Superior Court of Justice, dated December
    20, 2020.

REASONS FOR DECISION

[1]

The parties were business partners. A dispute between them led to litigation,
    followed by judicial mediation, and ultimately resolution by way of a
    settlement agreement. The minutes of settlement included a clause  Clause 4  making
    the provision of settlement funds contingent on the respondents production of business
    records. The respondent, Mr. Manchowski, was required to deliver up to the
    accountants, Fuller Landau, all books and records of 1388020 Ontario Corp. in
    their possession. Both parties were to have an opportunity to discuss the appropriateness
    of productions with Fuller Landau, after which Fuller Landau was to advise the
    parties if satisfied with the production of records. After Fuller Landau advised
    that it was satisfied, the appellant Mr. Ahluwalia was to advance the agreed settlement
    funds. Clause 5 provided that any dispute arising out of the minutes was to be
    submitted to the judge who presided over the mediation for determination.

[2]

There was a disagreement between the parties as to the sufficiency of
    the records produced by the respondent. The respondents position was that he satisfied
    his obligation under Clause 4 by producing all the financial statements and tax
    returns he had in his possession. The appellant argued this was not sufficient,
    and demanded production of all supporting records as well. Although Fuller
    Landau initially agreed with the appellant on its understanding that the
    minutes of settlement required production of supporting records, it ultimately
    changed its position and confirmed to both sides that it was satisfied with what
    the respondent had produced.

[3]

The appellant refused to advance the settlement funds on the basis that the
    productions were not sufficient, such that Fuller Landau could not be satisfied
    and was not satisfied with the production. The respondent brought a summary
    judgment motion to enforce the terms of settlement.

The decision below

[4]

Clause 4 provides:

Mr. Machnowski shall direct Keith Pomianowski to deliver up to
    Fuller Landau all books and records of 1388020 Ontario Corp in their
    possession. Mr. Pomianowski shall notify 1388020 Ontario Corp and Mr. Ahluwalia
    and Mr. Machnowski of the date these books and records are delivered. Within 30
    days thereof, Fuller Landau shall advise Mr. Machnowski and Mr. Ahluwalia if
    satisfied with that production of records, of which both parties have the
    opportunity to discuss with Fuller Landau as to appropriateness of productions,
    and Mr. Ahluwalia shall have 80 days from the date Fuller Landaus advice of
    satisfaction to all parties to deliver settlement funds to Beard Winter LLP,
    attn.: David Delagran, which funds shall be by certified cheque or bank draft.

[5]

The motion judge rejected the appellants position that Clause 4 required
    Fuller Landau to advise that it was satisfied with the respondents production only
    if the production included sufficient supporting documentation to establish the
    veracity of the financial statements and tax returns. Clause 4 did not compel a
    level of production needed to put Fuller Landau in a position to verify the
    accuracy of past financial statements and tax returns. Instead, Fuller Landau was
    to review those documents [provided by the respondents] and advise if [it]
    believed anything was missing based on a rough and ready glance and based on
    their experience as accountants.

[6]

The motion judge found that Fuller Landau had done this. After receiving
    initial production from Mr. Machnowski, Fuller Landau asked questions about
    potentially missing documents, Mr. Machnowski produced additional documents,
    and Fuller Landau advised that it was satisfied with the production. The motion
    judge granted summary judgment, enforcing the minutes of settlement.

Analysis

[7]

The appellant did not take issue with the motion judges interpretation
    of Clause 4. The appellant argued instead that Fuller Landau had not complied
    with Clause 4 as understood by the motion judge. According to the appellant,
    Fuller Landau never expressed its satisfaction that the documents produced were
    sufficient to establish the veracity of the financial statements and tax
    returns, as the motion judge found Clause 4 required. Instead, it had merely
    expressed satisfaction that the respondent had produced the documents that he
    said he had in his possession.

[8]

We do not agree. The motion judge made no error in finding that Fuller
    Landau was ultimately satisfied with the production received. The record
    amply supported that conclusion.

[9]

On October 10, 2019, Fuller Landau emailed counsel for the appellant and
    advised that (b)ased on Mr. Manchowskis confirmation we are satisfied with
    the production of those records. Counsel repeatedly pressed the issue with
    Fuller Landau, questioning how it could be satisfied with the production.
    Fuller Landau reiterated on October 11, 2019 that it believed that there are
    no further documents available to deliver to our office. It asked counsel to
    provide it with a detailed list of documents it believed were missing. The
    motion judge noted that there was no evidence of any reply to that request.
    Fuller Landau was not obligated to provide any further justification of its
    decision.

[10]

The
    appellant also argues that the motion judge erred by not considering early
    correspondence which showed that Fuller Landau had initially taken the position
    that the minutes of settlement required the respondent to produce supporting
    documents.

[11]

Fuller
    Landaus initial interpretation of its role under the minutes of settlement is
    not dispositive of any issue. The motion judge did not err in not referring to
    this correspondence. As the motion judge noted, the minutes of settlement did
    not specify what criteria Fuller Landau should use to determine whether production
    was satisfactory. Fuller Landau was entitled to reject its initial
    interpretation of the minutes of settlement as mistaken, as it evidently did.

[12]

It
    is also significant that the appellant chose not to use the dispute resolution
    mechanism set out in Clause 5, which enabled either party to bring any dispute
    over the interpretation of the minutes of settlement to the judge who presided
    over the mediation. Instead of using this mechanism, the appellant simply refused
    to advance the settlement funds.

DISPOSITION

[13]

The
    appeal is dismissed with the costs to the respondents in the amount of $17,500
    inclusive of HST and disbursements.

Doherty J.A.

B.W. Miller J.A.

Sossin J.A.


