Case information

Contracts — Performance — Parties entering into minutes of settlement following years of litigation — Applicant refusing to comply with terms of settlement over production of documents — Where a settlement agreement is dependent on one party providing production and a third party being satisfied with that production, who determines whether production is appropriate? — Is it enough if the producing party simply gives their word that they have produced everything? — Or, is appropriateness to be determined by the third party applying its expertise? — Is a third party’s understanding of its own professional role pursuant to an agreement relevant to its interpretation? — How is the third party’s interpretation of the agreement and subsequent conduct reviewed by a court? — If the third party is a professional, like an accountant, is it reasonable to assume they will adhere to professional obligations and standards in fulfilling any conditions under an agreement?

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The applicant Dr. Ahluwalia and the respondent Mr. Machnowski were business partners in 1388020 Ontario Corp. (“138 Corp.”), which operated as a medical diagnostic clinic. Mr. Machnowski was the bookkeeper, and was responsible for collecting all bank statements, receipts and invoices needed to support annual corporate tax returns and the company’s financial statements. In or about 2010 11, Mr. Machnowski and Dr. Ahluwalia became embroiled in a dispute that led to litigation. In 2017, Mr. Machnowski consented to Dr. Ahluwalia’s motion to remove him as bookkeeper; the accounting firm Fuller Landau took over his bookkeeping duties. In 2019, Mr. Machnowski brought a motion to wind up 138 Corp. A judicial mediation was held that resulted in signed handwritten minutes of settlement. Pursuant to the agreement, Dr. Ahluwalia would pay Mr. Machnowski $950,000 for his shares in138 Corp., but that obligation was contingent on Mr. Machnowski’s production of 138 Corp.’s books and records. The documents produced by Mr. Machnowski were to be reviewed by Fuller Landau, to ensure that the accounting firm was “satisfied” with the production. Dr. Ahluwalia was not satisfied with Mr. Machnowski’s production of documents because it did not include pre 2017 source documents. Mr. Machnowski brought a motion to enforce the terms of the settlement agreement.

The motion judge granted Mr. Machnowski’s motion and ordered Dr. Ahluwalia to pay the settlement funds to Mr. Machnowski, together with pre-judgment interest and costs. Dr. Ahluwalia’s appeal was dismissed.