Handley Comes For Lien Court: Immediate Disclosure Of Settlement Agreements Altering The Litigation Landscape In The Context Of Lien Assignments

• Author: Mr Bruce Reynolds, Evan Rankin and Natasha Rodrigues
• Law Firm: Singleton Urquhart Reynolds Vogel LLP
• Published date: 02 February 2023

Recent case law from the Court of Appeal for Ontario has repeatedly confirmed the strict rule that settlement agreements which "changes entirely" the "litigation landscape" must be immediately disclosed.¹ That case law has now impacted a lien matter for the first time.

In GH Asset Management Services Inc. v. Lo, 2022 ONSC 7218 ("GH Asset"), the Court considered whether disclosure of a settlement and assignment agreement was subject to the immediate disclosure obligation set out in Handley Estate v DTE Industries Limited, 2018 ONCA 324 ("Handley"), and if so, whether such disclosure was timely. The Court ultimately determined that the settlement and lien assignment agreement in question was not a settlement that triggered the immediate disclosure requirement. However, it warned that such agreements may trigger the rule in other cases.

Background

The underlying dispute in GH Asset pertained to work allegedly performed by J&J Property Management Services Inc. ("J&J") at a residential apartment building owned by Jan Ju Lo and Reng Song Lo (the "Los"). The Los entered into a contract with GH Asset Management Services Inc. ("GH Asset Management") for property management services for the apartment building. GH Asset Management then, by verbal agreement, engaged J&J to perform maintenance and renovation services at the building.

Though GH Asset Management initially paid J&J for its services from the rental income it collected on behalf of the Los, the Los eventually began collecting the rent directly, and no further payments were made to J&J for the services it rendered. Ultimately, J&J registered a claim for lien for its alleged unpaid services, and perfected its lien by commencing an action listing the Los, GH Asset Management, and its principal, as defendants. The Los subsequently delivered a statement of defence, counterclaim, and crossclaim, asserting among other things, that GH Asset Management acted without its authority in engaging J&J. As a result, the Los alleged that it was solely liable for J&J's damages.

GH Asset Management and J&J ultimately settled J&J's claim on March 25, 2019, in a document referred to as a "Deed of Assignment of Lien and Lien Action and Undertaking to Produce Documents" (the "Agreement").² In exchange for payment, the Agreement provided that J&J would assign its claims and liabilities related to the apartment building to GH Asset Management and release its claims against GH Asset Management and its principal. In the Agreement...