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Stays - 'No Claims Over' Settlements. Fehr v. Gribilas
In Fehr v. Gribilas (Ont CA, 2023) the Court of Appeal considered a 'no claims over' provision of a settlement contract. Such provisions are advanced by settlor (A) in an attempt to prohibit settlor (B) from making claims against third parties (C) that in turn might make third-party claims against A. A similar device is that of an 'indemnity', which acts to make B guarantee any judgment-debt which A might be subject to if C sues them. The vast majority of unrepresented parties facing settlements that contain such provisions sign them without knowledge of their effect.
In these quotes the court considers whether the lower court properly stayed a 'no claims over'-barred action absent a stay motion by the 'new' third party plaintiff:C. ISSUES
[30] The appellants raise the following issues in their appeal: (1) Did the motions judge err in imposing a stay of the main action in the absence of a motion for a stay by the defendant respondents or a specific claim for a stay under s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”)? ...
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Issue One: There was no procedural defect that prevented the motions judge from staying the main action.
[32] The appellants contend that, in the absence of a motion by the defendant respondents for a stay of proceedings, the motions judge did not have the authority to stay the main action. The defendant respondents did not specifically rely on s. 106 of the CJA or otherwise seek a stay of the professional negligence action. Instead, they sought its dismissal. The appellants argue that there was an onus on the moving parties to provide proper notice of the relief they were seeking, and they failed to do so. It was not sufficient that there was a stay motion by the third party J+W Foods. They assert that the defendant respondents should have moved for a stay, and not to dismiss the main action in a summary judgment motion, and that because of this procedural defect, the order staying the main action should be set aside.
[33] This argument can be addressed briefly. The motions judge had the authority to determine whether the action was an abuse of process and to permanently stay or dismiss the action for that reason. An action can be dismissed as an abuse of process, under the inherent jurisdiction of the court, including to prevent re-litigation of the same issue: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 37. Typically a motion will be brought under r. 21.01(3)(d), however a dismissal for abuse of process can be sought in a summary judgment motion: see e.g., Winter v. Sherman Estate, 2018 ONCA 703, 42 E.T.R. (4th) 181, leave to appeal refused, [2019] S.C.C.A. No. 438, at paras. 7-8.
[34] The appellants were not taken by surprise by the procedure adopted in this case. The effect of the no-claims-over provision of the Release on the main action was raised squarely as an issue in all of the moving parties’ materials.
[35] The third party J+W Foods moved for an order staying or dismissing the main action, based on the no-claims-over provision in the Release, and filed a factum seeking such relief on the basis of Sinclair-Cockburn. And while the defendant respondents did not request a stay, there is no question that they were seeking to have the main action dismissed both on the basis of the merits of the action and in reliance on the no-claims-over provision in the Release. Paul pleaded the Release, and the appellants’ acknowledgment that they had no further interest in the shares of J+W Foods in his statement of defence. In their notices of motion both defendant respondents specifically referred to the no-claims-over clause in the Release, and in their factums in the court below they addressed the effect of the Release as barring any claim against them, and argued that the professional negligence action was an abuse of process.
[36] Finally, the appellants’ factum at first instance makes it clear that they understood and had the opportunity to fully respond to the submission that the no-claims-over provision in the Release justified a stay or dismissal of the main action. Indeed, most of their factum is devoted to this issue.
[37] As such, I would not give effect to this ground of appeal. Irrespective of the failure to plead s. 106 of the CJA specifically, and of the defendant respondents’ request for dismissal of the professional negligence action rather than a stay, whether the main action constituted an abuse of process and should not be permitted to proceed because of the terms of the Release was squarely and properly before the motions judge. . Fehr v. Gribilas
In Fehr v. Gribilas (Ont CA, 2023) the Court of Appeal considered (and dismissed) an appeal of a stay of an action - the action having been commenced in violation of a 'no claims over' settlement clause:Issue Two: The motions judge did not err in staying the main action.
[38] The appellants contend that the motions judge erred in staying the main action rather than simply staying the third party proceedings. Before considering their main submissions on this ground of appeal, I will address a submission made by the appellants’ counsel in oral argument on the appeal: that, because there is no appeal of that part of the motions judge’s order staying the third party action, the circumstances have changed. They contend that it is no longer necessary for the main action to be stayed because the dismissal of the third party action means that there is no possibility of a viable third party claim. The appellants’ counsel also took the position that J+W Foods had no standing to appear in the appeal because of the ongoing stay of the third party proceedings.
[39] This argument can be addressed briefly. Although no one has joined issue on the question whether the third party action should have been dismissed, if the appellant is successful in setting aside the motions judge’s order, such that the main action will continue, then without question the defendant respondents would be entitled to have the entire action restored, including the third party proceedings. The motions that were before the motions judge all sought a stay or dismissal of the main action and not the third party proceedings. The motions judge stayed both. After staying the main action, he stayed the third party action which he described as moot. The defendant respondents assert that if the appellants succeed in setting aside the stay of the main action, it would follow that the stay of the third party proceedings would also be lifted. I agree, and would not give effect to the appellants’ preliminary argument on this issue.
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