Executive Summary: Key Legal and Evidentiary Issues

• Enforceability of a settlement agreement reached between DBS and the Hossains, including whether mutual consent and proper legal advice were present.

• Validity and quantum of the construction lien claimed by DBS and the Hossains’ counterclaim for deficiencies and incomplete work.

• Authority of legal counsel to bind the Hossains to the settlement and the effect of their representation during negotiations.

• Allegations of procedural unfairness and lack of informed consent or mental capacity during the settlement process.

• Discretion of the court to enforce a settlement and the threshold for refusing enforcement in the interests of justice.

• Determination and fixing of costs related to the motion to enforce the settlement.

Facts of the case

The underlying action arose from a home renovation and construction project at the Hossains’ property. Dani Building System Inc. (“DBS”) was contracted to complete construction of an extension to the Hossains’ house as well as renovation work. DBS preserved and perfected a lien under the Construction Act, RSO 1990, c C.30 for $76,618.61, representing a claimed unpaid management fee and unpaid amounts for services and materials supplied to the Hossains. When perfecting its lien, DBS asserted priority over the registered charges of the Mortgagee Defendants. The Hossains disputed the validity of the lien and the quantum, and advanced a significant counterclaim against DBS alleging deficiencies and incomplete work. The action was previously discontinued as against Alpine Credits Ontario Limited.

Settlement negotiations and agreement

A settlement conference took place before Wiebe A.J. in September 2024, at the parties’ request, ahead of peremptory trial dates scheduled for July 2025. At the settlement conference, DBS and the Hossains reached a settlement in principle on terms that were ultimately committed to minutes of settlement and signed by all parties. The terms included the Hossains paying DBS $75,000 by March 31, 2025; if payment was not made, they would consent to judgment of $85,000, all-inclusive. The Hossains’ counterclaim would be dismissed without costs, and DBS’s claim against the Mortgagee Defendants would be dismissed or discontinued, without costs, to be coordinated with those defendants. The Hossains signed formal minutes of settlement twice: first on November 14, 2024, and then again on December 31, 2024, using revised and final minutes that were also signed by DBS and the Mortgagee Defendants. Throughout the period of negotiating and signing the settlement documents, the Hossains were represented by counsel.

Dispute over enforcement of the settlement

The Hossains did not make the settlement payment by March 31, 2025, or at any point since that time. By May 2025, the Hossains had opted to act in person and sought to bring a motion to “remove the construction lien and reverse settlement agreement.” DBS brought a motion to enforce the settlement, arguing that all parties agreed to settle and that the Hossains failed to perform the material terms. The Hossains did not dispute that they agreed in principle to terms of settlement or that they signed minutes of settlement, but argued there was no binding settlement due to lack of voluntary and informed consent or proper legal advice. They also alleged procedural unfairness and fundamental mistake, claiming enforcement would result in injustice and deprive them of a fair trial.

Discussion of policy terms and legal principles

The court considered whether a binding settlement was reached, applying an objective approach to the evidence and the conduct of the parties. The court found that a settlement was reached on all essential terms, as reflected in the signed minutes of settlement. The court noted that the Hossains were represented by counsel throughout, and there was no evidence that their lawyers had any limitation in authority or that the Hossains did not understand the settlement terms. The court rejected the Hossains’ arguments regarding lack of informed consent, insufficient legal advice, and procedural unfairness, finding no cogent evidence to support these claims. The court also found no injustice from enforcing the settlement and determined that the settlement reflected a compromise by DBS, affording the Hossains six months to arrange payment. The court emphasized that the threshold for refusing enforcement of a settlement is high and reserved for rare cases with compelling circumstances, which were not present here.

Ruling and outcome

The court granted DBS’s motion and ordered judgment against the Hossains, jointly and severally, for the sum of $85,000. DBS was permitted to enforce or realize upon its lien. The Hossains’ counterclaim was dismissed with prejudice, and they were ordered to execute and provide to DBS a copy of the final release attached as Schedule “B” to the minutes of settlement executed on December 31, 2024. Upon payment in full, DBS would provide necessary consents and cooperation to discharge its lien, with the Hossains responsible for drafting and filing documents and bearing the costs. The action as against the Royal Bank of Canada, Comat Mortgage Corporation, and Ashley Joan Fleischer was dismissed without costs. The Hossains were ordered to pay DBS its costs of the motion, fixed in the amount of $4,000, including HST, payable within forty-five days. The successful party in this decision was Dani Building System Inc., with a total monetary award of $85,000 plus $4,000 in costs ordered in its favor.