DIVISIONAL COURT FILE NO.: 380/13(Toronto)

DATE: 20140306

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT – TORONTO

RE: B.O.T. INTERNATIONAL LTD. v. CS CAPITAL LIMITED and TONY CHAINE

BEFORE: NORDHEIMER J.

COUNSEL: M. L. Solmon & R. R. McKeen, for the applicant

H. Daley & J. Wilkes, for the respondent, CS Capital Limited

HEARD: March 5, 2014

E N D O R S E M E N T

[1] The applicant seeks leave to appeal from the order of D. Wilson J. dated August 16, 2013 in which she dismissed the applicant’s motion to enforce a settlement. If the applicant is unsuccessful in obtaining leave to appeal, the applicant then seeks leave to appeal from the costs order made by the motion judge. The applicant relies on both of the tests set out in rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for its request that it be granted leave to appeal.

[2] Rule 62.02(4) reads:

Leave to appeal shall not be granted unless,

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

Since the applicant placed greater emphasis on the second of the two tests, I will address it first.

[3] The motion judge began her reasons[^1] by noting that the applicant had filed a considerable volume of material in support of its motion. She correctly noted that motions to enforce a settlement were intended to provide a speedy mechanism to enforce a settlement where “there has been a clear offer and acceptance”.

[4] The motion judge then set out the background to the motion. She noted that the trial was imminent and that the settlement had been negotiated about five days before the trial date. The motion judge also noted that the settlement offer contained ten terms, one of which provided a mechanism to be used if certain financial records did not substantiate certain represented payments and receipts that were referred to in the settlement offer.

[5] The respondent, CS Capital, took the position on the motion to enforce the settlement that the settlement had been predicated on a representation by the applicant that it had lost significant monies in their mutual investment in another venture. CS Capital says that it was fundamental to its agreement to any settlement that the parties had a common financial failure arising from this venture. Consequently, the settlement offer provided that the applicant had to provide to CS Capital financial records that would substantiate the losses that the applicant had claimed that it had suffered from the venture. It was CS Capital’s position that the documents that the applicant eventually produced did not provide that substantiation and therefore the fundamental premise that lead it to engage in the settlement was false. CS Capital consequently took the position that there was no binding settlement.

[6] The motion judge approached the matter applying the accepted test for the enforcement of a settlement. That test requires that the court first find that there was a concluded settlement agreement and, if there is, then decide whether, in all of the circumstances, the settlement should be enforced.

[7] In considering the first part of the test, the motion judge applied the test set out in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. (2007), 2007 39604 (ON SCDC), 87 O.R. (3d) 464 (Div. Ct.) where Carnwath J. said, at p. :

The first step is to consider whether an agreement to settle was reached. In doing so, the proper approach is to treat the motion like a rule 20 motion for summary judgment. If there are material issues of fact or genuine issues of credibility in dispute regarding whether (i) the parties intended to create a legally-binding relation or (ii) there was an agreement on all essential terms, a court must refuse to grant judgment. [citation omitted]

[8] In deciding whether a settlement agreement had been reached, the motion judge reviewed that record that was before her. She noted that whether all of the relevant financial records called for in the terms of the settlement offer had been produced was in dispute. She also noted that there was conflicting evidence as to whether the applicant had, in fact, lost money in the venture or whether it had, in fact, profited from the venture.

[9] The motion judge concluded, at para. 31 of her reasons:

In my opinion, BOT has failed to meet the first branch of the test for success on a rule 49 motion. Given the evidence before me on this motion, I am of the view that in order to decide if the terms of settlement were met, given the disparity of the evidence from the financial records, I do not think I can accurately draw the proper inferences without the benefit of a trial process, without the ability to question witnesses about the documentation. In short, I do not believe I have a full appreciation of the evidence based on the material before me and thus, I cannot make the necessary dispositive findings. The evidence as a whole does not satisfy me that BOT sustained the losses as alleged and this was a condition to the settlement agreement. Further, I am not persuaded on the evidence before me on this motion that all of the financial records have been produced without editing to enable the Pace to satisfy himself of the amount of losses BOT incurred as a result of its investments in Eco-Ganic.

[10] The applicant seizes on the use of the word “condition”, both in this portion of the motion judge’s reasons as well as in others, to submit that the reasoning of the motion judge reflects error. The applicant asserts that the language used by the motion judge demonstrates that she considered the settlement to be conditional when it was not. The applicant also says that the settlement contained an express provision to address any issue with respect to the “Inflows and Outflows” so, even assuming that a true issue existed about the applicant’s losses from the venture, the parties had directed their minds to it and had provided a remedy to address it. Thus, according to the applicant, the settlement was not conditional but was rather firm and complete.

[11] I do not agree with the applicant’s position. I consider it to be a misreading of the motion judge’s reasons to submit that she held that the settlement itself was conditional. It is unfair to take that word out of the context in which it was used and then dress it up as a conclusion that was not, in fact, reached. In my view, a fair reading of the motion judge’s reasons was that she was not satisfied that the applicant had lost money in the venture which was, at least according to CS Capital, the central prerequisite to the settlement. Some confirmation of the importance of that fact can be found in the terms of the settlement offer that required the applicant to produce various financial records. There is a difference between the settlement being conditional and the settlement being predicated on a certain set of facts.

[12] The applicant says that any consideration of a representation that the applicant had lost money in the venture, and its importance to the settlement, would properly be considered only under the second part of the test, that is, whether, in all of the circumstances, the settlement should be enforced. Again, I do not agree. The conduct of the parties will undoubtedly be relevant to that part of the test. But if parties enter into a settlement based on a flawed appreciation of the real facts of the case, then it is at least arguable that no true settlement has been reached.

[13] In determining whether a settlement was actually reached, the motion judge had to be satisfied that there were no material issues of fact or genuine issues of credibility in dispute as to whether a settlement agreement had been reached. That is the requirement set out in Capital Gains. She concluded, on the record that was before her, that she could not be so satisfied. I do not have any “good reason” to doubt the correctness of that conclusion.

[14] I would note, in any event, that even if I did have good reason to doubt the correctness of that conclusion, the applicant would nonetheless fail the second branch of the test, that is, that the proposed appeal involves matters of “such importance” that leave to appeal should be granted. On that branch of the test, the applicant points to various cases that have held that courts, as a basic principle, encourage settlement. The applicant contends that the conclusion reached by the motion judge in this case undermines the principle of encouraging settlements and that this departure from that central principle is so important that leave to appeal should be granted.

[15] Once again, I do not agree with the applicant. Courts do have a principle of encouraging settlements but only in situations where the settlement is truly mutually agreed upon and in terms that are clear and unambiguous. It is not a part of the principle of encouraging settlements to enforce settlements that have not been fully and freely agreed to or that are based on a set of facts that turn out not to be accurate or that have been misrepresented. As desirable as it may be to encourage settlements, that is not the core role of the court system. Rather, as was observed many years ago in the summary judgment context, under the Rules of Civil Procedure, “the plenary trial remains the mode for the resolution of disputes”.[^2]

[16] In terms of the first test for leave to appeal, the applicant must show that there are conflicting decisions. In that regard, the applicant points to the decision in Maple Leaf HIFU Ontario LP v. Sixty Four Prince Arthur Inc., [2011] O.J. No. 2463 (S.C.J.) which it says is virtually identical to the case here and yet, in that case, the settlement was enforced.

[17] The mere fact that two cases reached opposite results does not mean that those cases are conflicting for the purposes of rule 62.02(4). Conflicting decisions, as used in the rule, mean decisions that conflict on the proper principles to be applied, not decisions that reach different results because of different facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 7405 (ON SC), 7 O.R. (3d) 542 (Div. Ct.). In Maple Leaf, the motion judge concluded that there had been agreement on all of the essential terms of the settlement. In this case, the motion judge determined that she could not reach that conclusion because of the evidentiary disputes. That does not constitute a conflict in principle. It represents the reality that different cases with different facts can lead to different results. I will add that, in any event, on the second branch of the first test, I would not consider it desirable that leave to appeal be granted.

[18] The motion for leave to appeal is dismissed.

[19] The application for leave to appeal the costs order made by the motion judge can be dealt with briefly. The motion judge ordered that the applicant pay costs of the unsuccessful motion to enforce the settlement. The applicant contends that the motion judge ought to have reserved the costs of the motion to the trial judge.

[20] The determination of costs is the quintessential exercise of discretion. While the motion judge might have left the costs to the trial judge, she was not required to do so. On that point, I would note that the presumption is that the costs of a contested motion are normally to be determined at the time that the motion is determined: rule 57.03(1). In any event, in Brad-Jay Investments Ltd. v. Szijjarto, 2006 42636 (ON CA), [2006] O.J. No. 5078 (C.A.) at para. 21, the Court of Appeal held that leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are “strong grounds upon which the appellate court could find that the judge erred in exercising his discretion”. There are no such grounds in this case.

[21] The application for leave to appeal costs is also dismissed.

[22] The respondent, CS Capital Limited, is entitled to its costs of the motion. CS Capital sought the amount of $2,500 for costs. In my view, that is an entirely fair and reasonable amount. I therefore fix the costs of the motion in the amount of $2,500 inclusive of disbursements and HST payable by the applicant to CS Capital Limited within thirty days.

NORDHEIMER J.

DATE: March 6, 2014

[^1]: B.O.T. International Ltd. v. CS Capital Ltd., [2013] O.J. No. 3754 (S.C.J.)

[^2]: Dawson v. Rexcraft Storage and Warehouse Inc., 1998 4831 (ON CA), [1998] O.J. No. 3240 (C.A.)