No Enforceable Settlement: Civil Fraud at Pretrial Results in Costs Award of $100,000 Payable to the Defendant

31 mai 2018 | Michael Prosia

( Disponible en anglais seulement )

The underlying facts of Paulus v Fleury[1] are unremarkable.  The parties were involved in a motor vehicle collision which occurred on November 10, 2008.  The plaintiffs said that it was a straightforward rear-end collision for which the defendant was entirely liable.  The defendant said that the plaintiffs had suddenly veered into his lane, causing the collision.

The parties attended at a judicial pretrial before Justice Bondy on November 22, 2016.  Liability was the central issue.  The plaintiffs’ lawyer represented that he had two independent witnesses, Boris and Pavlina Eftimov, who would support the plaintiffs’ story.  On the basis of this representation, the parties settled the claim all inclusive for $850,000 on a handshake deal.  No minutes of settlement were executed, although Justice Bondy endorsed the record indicating that the matter had settled.

Immediately following the pretrial, while driving back to his office, counsel for the defendant received a phone call from his private investigator.  Counsel learned that the Eftimovs were not independent witnesses.  It turned out they lived across the street from the plaintiffs’ son, and that the plaintiffs had previously done the Eftimovs’ taxes.  Counsel for the defendant called plaintiffs’ counsel the following day to advise that there was no settlement.

The plaintiffs brought a motion to enforce the $850,000 settlement, which was heard before Justice Heeney.  Counsel for both parties were cross examined, as were the Eftimovs.

The defendant conceded on the motion that there was a settlement, but resisted the motion on the basis that the settlement was induced by civil fraud.  Counsel for the defendant testified that he had tried to call the Eftimovs 10-15 times to speak with him in advance of the pretrial, but they never responded.  Counsel for the plaintiffs conceded that he told the Eftimovs that they had no obligation to speak with defence counsel.

Justice Heeney ultimately agreed with the defendant, finding that the elements of civil fraud had been proven:

I am satisfied on a balance of probabilities that all four elements of civil fraud have been proven. False representations were made by Mr. Greenaway, both as to the independence of the Eftimovs and as to their qualities as good witnesses. He knew, or at the very least was reckless, that these representations were false. These representations caused counsel for the defendant and the adjuster to act, and to largely concede the liability issue and settle the case. And finally, the defendant suffered a loss, in that the case was settled for substantially more money than the defendant would have offered but for the false representations.

Justice Heeney dismissed the plaintiffs’ motion, and awarded costs payable to the defendant on the motion in the amount of $100,000.  Justice Heeney declined to award those costs personally against the plaintiffs’ lawyer on the basis that while the underlying misrepresentation was made by counsel, the decision to pursue the motion to enforce settlement was based on instructions from the plaintiffs.

[1] Paulus v. Fleury, 2018 ONSC 1188, and Paulus v. Fleury, 2018 ONSC 3322

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