Executive Summary: Key Legal and Evidentiary Issues

• Dispute centers on whether a valid and enforceable settlement agreement exists regarding ownership and management of Wright’s Variety and the Corporation.

• Conflicting evidence over the Applicants’ alleged financial contributions and entitlement to shares or employment status.

• Respondents allege fraudulent misrepresentation, lack of meeting of the minds, and that conditions precedent to the settlement were not met.

• Issues of duress, undue influence, and language comprehension in the execution of the settlement agreement are raised.

• Applicants seek enforcement of the settlement or, alternatively, an interlocutory injunction to restrain Respondents from interfering with the business or dissipating assets.

• The Court determined that the matter could not be resolved on the documentary evidence alone and must proceed to trial for proper adjudication.

Background and facts of the case

This case involves a dispute between the Applicants, John Ho Son (also known as John Son) and Byung Hwa Son (also known as Susan Son), and the Respondents, Keun Ik Hwang (also known as Ken Hwang) and 2691765 Ontario Inc., operating as Wright’s Variety. The Applicants and Mr. Hwang had known each other since 1991. In 2018, they agreed verbally to jointly purchase and operate Wright’s Variety, a convenience store and gas station in Paris, Ontario, through a corporation. Due to the Applicants’ bankruptcies, Mr. Hwang was initially the sole shareholder, director, and officer of the Corporation, but the Applicants allege they were to become shareholders in proportion to their contributions once their bankruptcies were removed from their credit reports.

The Applicants claim they contributed $76,000 toward the purchase and $236,500 for the installation of an underground gas tank, totaling $312,500, as well as unpaid labor. They allege that from May 2019 to January 2022, they operated Wright’s Variety in accordance with their verbal agreement, with Mr. Hwang as a passive investor receiving an 18% annual dividend on his monetary contribution. In December 2021, the Applicants sought to formalize their ownership, but Mr. Hwang excluded them from the business and residential property in January 2022.

Alleged settlement and subsequent conflict

After legal proceedings commenced in February 2022, the parties met on March 3, 2022, and discussed settlement. The Applicants allege that a settlement agreement was reached and signed on March 4, 2022, providing for them to be listed as directors and officers and to receive shares in accordance with their contributions. The Applicants returned to work at Wright’s Variety and to the residential property, and Mr. Hwang received $6,000 per month in accordance with the agreement. However, by August 2022, Mr. Hwang again excluded the Applicants, changed the locks, and accused them of misappropriating funds.

Mr. Hwang disputes the Applicants’ claims, stating that he contributed all the funds for the $464,000 down payment, personally guaranteed the $1.2 million vendor take back mortgage (VTB), and obtained the second and third mortgages. He asserts that the Applicants were employees only, not shareholders, and that any agreement was contingent on the Applicants securing $1.2 million in financing and providing proof of their contributions—conditions he claims were not met. Mr. Hwang also alleges that the Applicants’ claimed contributions were actually made from the Corporation’s funds and that the settlement was signed under duress, undue influence, and without his full understanding, as the agreement was in English and he primarily communicated in Korean.

Policy terms and clauses at issue

The enforceability of the March 2022 settlement agreement is central to the dispute. The Respondents argue that the agreement was not final or binding, as it was subject to several conditions precedent: negotiation and execution of a shareholder agreement, the Applicants securing $1.2 million in financing to discharge the VTB, proof of their financial contributions, and cessation of the application. The Applicants argue that the agreement was enforceable and that the Respondents’ failure to comply entitles them to judgment or, alternatively, an injunction.

Court’s analysis and outcome

Justice MacNeil found that the matter could not be resolved on the evidence before the Court. There were significant factual disputes regarding the existence and terms of the settlement agreement, the parties’ intentions, and the fulfillment of conditions. The Court noted concerns about duress, language barriers, and lack of independent legal advice for Mr. Hwang. The evidence was insufficient to grant judgment or enforce the settlement without a full trial.

On the request for an interlocutory injunction, the Court found that while there was a serious issue to be tried regarding the Applicants’ potential ownership interest, the Applicants had not established irreparable harm or that the balance of convenience favored them. The status quo was to be maintained until trial, with Mr. Hwang retaining control of the business.

Final disposition and costs

The Applicants’ motion for enforcement of the settlement agreement and for an interlocutory injunction was dismissed. The dismissal was without prejudice to the Applicants raising the same issues at trial or seeking an injunction if evidence of a potential sale of the Gas Station Property and Wright’s Variety emerged. The Court did not determine costs at this stage, instead urging the parties to agree or to submit written submissions by the specified deadlines. No specific monetary award or costs were ordered at this time, as the matter remains unresolved pending trial.