In Ntakos Estate v Ntakos1, Justice Schabas of the Ontario Superior Court heard various motions for summary judgment and dismissal in three related proceedings arising from decades-old (and previously litigated) disputes about a closely held family business.
In this lengthy decision that grants motions and dismisses the claims, the Court provides fulsome discussion on many issues relevant to commercial and estates litigators. The Court canvassed limitation periods (pursuant to both the Limitations Act, 2002, and the Trustee Act), releases, the appropriateness of summary judgment and abuse of process.
This blog post provides a short summary of the factual background and provides some key takeaway points for commercial and estates litigators on these common issues.
Factual and procedural background
Dupont Construction Supplies Ltd. was truly a family business. It was founded and owned by three brothers: John, Gus and Ted Ntakos. After John's death, his shares passed to his wife, Anna. Ted and Gus remained in control of Dupont but disagreed about its financial affairs. Several of the Ntakos family members worked in the family business. John's children (Peter, Olga, and Tammy), inherited shares from their mother, Anna, and the acrimony continued.
The disagreement between Gus and Ted culminated in Ted's departure from the business in 2005. In 2006, the Peter, Olga and Tammy brought an action against Gus alleging that he had misappropriated funds from Dupont and orchestrated an improper accounting of shareholder distribution and benefits. The Plaintiffs also alleged negligence and breach of fiduciary duty against Dupont's solicitors. The 2006 Action was settled in 2012 against Gus and in 2015 against Dupont's solicitors and broad releases were provided in both instances.
Anna's Estate and Dupont commenced an estates action against Gus, and Dupont's solicitors and accountants in May 2019. The Plaintiffs in the Estates Action pleaded the same factual circumstances that were the subject of the 2006 Action. Within the Estates Action, it was alleged that new evidence of misconduct of Gus and Dupont's solicitors and accountants came to light that would have influenced the outcome of previous proceedings and settlements.
Shortly thereafter, the Peter, Olga and Tammy (in both their personal capacities and on behalf of Anna's Estate), Dupont and others commenced a separate estates application seeking declarations that certain minutes of settlement and a release be found void ab initio, among other things.
Ted and Gus had each commenced separate proceedings relating to many of the same issues. The Plaintiffs, Peter, Ola, Tammy, Dupont and another family holding company were all represented by the same counsel.
Justice Schabas heard motions by Gus and Dupont's solicitors for summary judgment and/or to strike out various of the proceedings on the basis that they were statute-barred, res judicata, an abuse of process and a nullity because of the settlements and releases arising from the 2006 Action.
In the result, the Court found that both the Estates Action and the Estates Application were statute barred and were an abuse of process because the claims therein were an attempt relitigate issues already litigated and resolved many years prior.
Takeaway points for commercial and estate litigators
a. Summary judgment: "detailed factual foundations" and absent parties
Summary judgment motions were brought by Gus and Dupont's solicitors; Dupont's accountants did not bring its own motion.
The Plaintiffs attempted to resist summary judgment by arguing that because Dupont's accountant was not a party to these motions, the proceedings will not be resolved and therefore summary judgment was not appropriate. The Court rejected this argument, stating: "The fact that one party chooses not to bring a motion for summary judgment does not operate as a veto to prevent others from bringing such a motion."2
Practice point: Counsel should keep this case at the ready in multi-party proceedings where not all defendants join in a summary judgment motion. This is particularly helpful in the current climate where the successful partial summary judgment motions are relatively infrequent.
The Plaintiffs also argued that these matters were inappropriate for summary judgment because a "detailed factual foundation" was necessary and credibility was in issue. Again, the Court rejected the Plaintiffs' argument and determined that it did not need to avail itself of the fact-finding powers contained in Rule 20 because in this case the issues raised involved facts that were largely not in dispute and would depend on a review "prior court proceedings, judgments and documentary evidence including settlements and releases signed by the plaintiffs." The Court emphasized the determinations of whether these claims are res judicata, an abuse of process or are barred by limitation periods would not depend in credibility findings."3
The Court held that: "the issues raised by the moving parties are discrete and, if successful, will avoid a review of the underlying claims which would indeed require lengthy discovery and a trial. Summary judgment is intended for precisely these types of issues."4
Practice point: Summary judgment may still be appropriate and availability even where a matter has had a long and complicated history. Where a party resisting summary judgment attempts to "muddy the waters" or create the narrative that a matter is too detailed or complex for summary judgment, consider whether a decision on a discrete preliminary issue may be determinative and significantly reduce the time and cost required by the Court.
b. Res judicata and abuse of process relating to the Estates Action
Gus and Dupont's solicitors argued that the Estates Action was an attempt to relitigate claims made in the 2006 Action and should accordingly be considered an abuse of process.
The Plaintiffs argued that the discovery of a 2001 invoice that supported a claim that was made in the 2006 Action was sufficient basis to relitigate their claim of alleged misconduct with a novel conspiracy claim.
After considering the content of the claims and affidavit evidence before the Court, Justice Schabas found that the Estate Action "effectively resurrects the claims" made in the 2006 Action and found them to be "fundamentally identical" except that they now included some additional defendants. Re-litigating claims in the "hope of a different outcome" is not permissible.5
The specific circumstances where a party be entitled to relitigate a matter are limited and are as follows: (1) "when the first proceeding is tainted by fraud or dishonesty; (2) when fresh, new evidence, previously unavailable, conclusively impeaches the original results; or (3) when fairness dictates that the original result should not be binding in the new context."6
None of those circumstances were established in this case. Accordingly, the Court concluded that the Estate Action was an abuse of process and res judicata because it raised the same issues that were "addressed, compromised and resolved in the 2006 Action," and dismissed it on that basis.
Practice point: This decision is a helpful reiteration of the specific situations where a party may attempt relitigation. Merely adding new parties and raising a novel cause of action relating to the same, or essentially same, set of facts does not "get around" the rule against relitigating issues.
c. Claims barred by release
The Court also considered whether the previously executed settlements and releases constituted a clear and complete bar against the Estate Action.
Even where a release does not explicitly bar future and unknown claims discovered after its execution, a release can still be enforced to bar claims. In this case, the Plaintiffs led no evidence of any fraudulent misrepresentation to "unravel" the enforceability of the releases.
The Court reasoned that the releases were broadly worded and intended to cover all claims regarding matters that were or could have been pleaded in the 2006 Action. Excerpts from the releases are contained in the decision, which evidence the breadth of the language used:
- The 2012 Release of Gus expressly released him from "unknown claims arising in the future with respect to all matters raised or which could have been raised in the [2006 Action]."7
- The 2015 Release in favour of Dupont's solicitors addresses "not only all known injuries, losses and damages, but also injuries, losses and damages not now known or anticipated but which may later develop or be discovered, including all the effects and consequences thereof."8
- The 2015 Release included a "claims-over" provision stating: ".if the Releasors commence or continue such an action. and the Releasee is added to such proceeding in any manner whatsoever. the Releasors will immediately discontinue the proceedings and/or claims, and the Releasors will be jointly and severally liable to the Releasee for the legal costs incurred in any such proceeding, on a substantial indemnity cost basis." The 2012 Release contained a nearly identical statement.9
Practice point: When considering a potential claim arising from past circumstances, counsel should be wary about the applicability of any releases amongst the parties and carefully consider whether they constitute a bar to the contemplated claim. Additionally, counsel should take note of the language specifically referenced by the Court and consider same against the wording of their existing release templates.
d. Claims barred by expired limitation periods in Trustee Act and Limitations Act, 2002
The date of death marks the beginning of the limitation period for the commencement of an action by an estate trustee by virtue of section 38(3) of the Trustee Act, not the date of discovery of the wrong.10
Fraudulent concealment can toll the limitation period prescribed by the Trustee Act. However, the Estate did not plead or led any evidence that would support a finding of fraudulent concealment that would extend the limitation period, which expired some 12.5 years before the Estate Action was commenced. The Court granted summary judgment on this issue in respect of the Estates Action with respect to Gus, and granted Dupont's solicitors' motion for dismissal pursuant to Rule 21 as an abuse of process.
Also, given the passage of time since Anna's death, the Court noted that the Estate may have lacked the necessary legal capacity to sue as required by Rule 21.01(3)(b).
The Court held that the Limitations Act, 2002 also barred the Estates Action. The Court explained that in accordance with sections 4 and 5(1) of the Limitations Act, thelimitation period begins running when "the material facts on which [the cause of action] is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence."11 The limitation period does not begin to run once a plaintiff is in "full possession of all necessary facts" to prove its claim.
The Court determined that it was clear, from the 2006 Action, that the Plaintiffs had knowledge of the facts underlying the Estate Action. Further, the Plaintiffs pleaded that they discovered "more evidence" in 2016, but waited until 2019 to commence their claim. The Plaintiffs' argument that they now view the evidence in a "new light" was unpersuasive to the Court. On this basis, the Court concluded that there was no genuine issue requiring a trial because it was "plain and obvious" that the action was statute-barred.
Practice point: Estates litigators should always have two years following the date of death diarized with appropriate warnings of the advance of the deadline, regardless of which party they represent. All counsel should conservatively estimate the timing of the start of a limitation period and do so from the time sufficient (rather than all) facts are in hand to support a cause of action.
Family dynamics often play out in court proceedings where family businesses are involved. This case provides a number of takeaway points for litigators, but also sends an important message to litigants. Delayed claims or attempts to revive claims already resolved will fail.
As the Court succinctly stated:
"At the end of the day, the actions commenced by plaintiffs simply cannot overcome the passage of time, previous litigation and broadly worded releases. The wrongs complained of, if they occurred, happened too long ago and too many other steps have been taken, including earlier settlements, which put an end to these disputes and prevents them from being relitigated. It is plain and obvious that the actions are an abuse of process and out of time, and the plaintiffs have failed to raise any genuine issues requiring a trial."12
A special thank you to Noah Walters (Associate) for his assistance with this article.
2. Para 56.
3. Para 54
4. Para 63.
5. Para 69.
6. Para 72.
7. Para 82.
8. IPara 82.
9. Para 88.
10. Para 91.
11. Para 98.
12. ibid at para 124.
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