CITATION: Arisoft Inc. v. Ali, 2015 ONSC 7540
DIVISIONAL COURT FILE NO.: 394/15
DATE: 20151204
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
A.C.J. MARROCCO, SACHS AND VARPIO JJ.
BETWEEN:
ARISOFT INC.
Plaintiff/Defendant by Counterclaim
(Respondent on Appeal)
– and –
SARFRAZ ALI and 7705786 CANADA INC.
Defendants/Plaintiffs by Counterclaim
(Appellants on Appeal)
Ben M. Millard and Marcus P. McCann, for the Respondent, Arisoft Inc.
Sarfraz Ali, for the Appellants on Appeal
HEARD at Toronto: December 2, 2015
REASONS FOR JUDGMENT
Varpio J.
[1] The Defendants appeal the June 16, 2015 Order of Hood J. wherein the learned Justice enforced a putative settlement reached by the parties on December 14, 2015. The mediated settlement was signed by the defendant, Mr. Ali, who attended in his personal capacity and on behalf of the numbered company defendant.
[2] The Defendants appeal the Order and make a variety of claims that can be effectively reduced to the following issues:
a. The Divisional Court has no jurisdiction to hear the matter and that it ought to be remitted to the Ontario Court of Appeal for a hearing;
b. Rule 49.09 of the Rules of Civil Procedure does not apply to this case since Rule 49.09 only deals with accepted Offers to Settle and not Minutes of Settlement;
c. Mr. Ali signed the Minutes of Settlement agreement under duress in that the mediator abused the Defendants’ rights. This abuse was allegedly heightened by the Defendants’ lack of legal representation;
d. The settlement was unconscionable; and
e. The Statement of Claim ought to be summarily dismissed, and the Counterclaim ought to be summarily granted, for several substantive reasons. It should be noted that, in oral submissions, the Defendants resiled from this position and indicated that, if the appeal were granted, a new trial ought to be ordered.
FACTS
[3] The subject litigation involved the cessation of the Defendants’ service arrangment with the Plaintiff, which, according to the Defendants, either involved an employer/employee relationship or a dependant contractor relationship.
[4] The matter progressed through the litigation process and the Defendants retained counsel to assist them. Prior to mediating the matter, counsel got off the record in March 2014. The Defendants brought Law Society complaints as against that counsel. It appears from the materials before the court that the Defendants’ complaints were not pursued as a result of “insufficient evidence of professional conduct”.
[5] The Defendants also brought a Law Society complaint as against Plaintiff’s counsel. This complaint was rejected by the Law Society and, of importance to this litigation, LSUC intake counsel wrote to Mr. Ali on December 5, 2014 and stated that “[i]t appears that you might benefit from some legal advice about the interpretation and application of the Rules of Civil Procedure”. Mr. Ali was also provided with contact information for the LSUC’s Lawyer Referral Service.
[6] The matter was mediated on December 12, 2014 and the matter was purportedly settled as a result of Minutes of Settlement which stated, inter alia, that:
a. “The Defendants shall pay the Plaintiff the sum of $0 in satisfaction of the full value of the Plaintiff’s claim, including their costs, disbursements and HST”;
b. “By way of these Minutes The [sic] Plaintiff shall provide the Defendants with full and final release from any and all claims as a result of the subject matter of this action and the Defendants likewise release the Plaintiff from any and all claims as a result of the subject matter of this action and counterclaim”; and
c. The settlement also provided that “the defendant agrees to these terms of his own violition [sic]. The defendant waives his right to counsel and realizes that by signing this agreement he agrees to be bound by the terms”.
[7] In an email dated December 20, 2014, plaintiff’s counsel asked Mr. Ali if he would sign the release as contemplated by the Minutes of Settlement. On December 22, 2014, Mr. Ali responded to the email by stating “Please send me a signed copy [of the release] in mail, I will review, sign and send back in mail [sic]”.
[8] Shortly thereafter, the Defendants undertook actions that demonstrated that they were dissatisfied with the process by which the Minutes of Settlement were signed. Firstly, they complained to the mediator suggesting impropriety on his part. The mediator responded as follows:
While your accounts of the mediation are vivid and colourful I am no longer prepared to engage with you in this silly exercise. If you are unhappy with the results please feel free to bring a motion to set aside the mediation. In the interim I have contracted [sic] the Mediation Coordinator, who will provide me with a new original Fee Waiver and I will provide her with a money order for the $339.00. Hopefully this will occur within the next couple of days. I would respectfully request that you no longer contact me and would take the time to advise you that you had numerous years to seek legal counsel and thus far in the entire proceeding you appear not to have done so. Perhaps unfortunately to your detriment, I am sorry that you do not understand that the mediation was conducted in one session and you should have been prepared for it and that I have never worked with Mr. Millard [plaintiff’s counsel] before and thus I had no allegiance to him and even more so, if I had worked with him prior, as a neutral my job is to be impartial. I would like to take this opportunity to wish you all the best in your legal endeavours and would remind you not to contact me any further and caution you against besmirching my reputation. Govern yourself accordingly.
[9] Mr. Ali brought a motion seeking to represent the numbered company defendant in future proceedings. In support of the Defendants’ position, Mr. Ali swore an affidavit on April 30, 2015 which stated “Matter was settled on Dec 12, 2014”. Akhtar J. heard the motion and, on May 9, 2015, stated in a brief endorsement: “Application before the Court is dismissed as the matter is moot…”
[10] As a result of directions provided by Akhtar J. in his endorsement, the Plaintiffs brought a motion under Rule 49.09 to have the settlement enforced. The motion was heard by Hood J. on June 15, 2015.
[11] In support of his position at the motion, Mr. Ali swore an affidavit on June 10, 2015 wherein he deposed – under a heading entitled “a grossly unfair and improvident transaction” – that the settlement was unconscionable as a result of:
a. “Plaintiff filed action without any cause of action, without any evidence; it was filed only for some personal reasons to make Defendant unable to earn living for family and kids”;
b. “I, my wife and kids been through too much because of this lawsuit; I my wife and kids suffered mentally, psychosocial, and emotionally; it been the worst time of our lives”;
c. “We suffered financially; I was jobless when Imtiaz Lodhi [Plaintiff’s President] terminated my job, and later I was not able to find job for 3 months because of this lawsuit”;
d. “I worked as dependant contractor and my job was terminated wrongfully”; and
e. “I had lawyer and had to pay thousands of dollars because of this lawsuit”.
[12] Hood J. considered the evidence before him and found that Mr. Ali, despite not having been given judicial permission to appear for the numbered company defendant, “had authority to act on behalf of 7705786 Canada Inc. He has admitted this in affidavit material”.
[13] Hood J. went onto state that:
The Minutes are clear. While paragraph 1 makes no mention of the counterclaim, paragraph 3 provides that the Minutes are a full release of both the claim and counterclaim.
After agreeing to the essential terms of the settlement, the defendants resiled from it. Mr. Ali acknowledged that the matter was settled on December 12, 2014 but he now doesn’t agree with it.
An agreement to settle is a contract. There was a mutual intention to create a legally binding relationship and the contract contains all of the essential terms.
Lay people are competent to enter into contracts without legal advice. As stated in Thompson v. Rogers at paragraph 20, lack of independent legal advice is not a freestanding defence.
Whatever complaints Mr. Ali has about the production of documents, the litigation process, his former counsel, the plaintiff’s counsel or Dr. Ally [the mediator] are irrelevant to the motion.
I therefore order that this matter was settled on December 12, 2014 and order that the claim and counterclaim be dismissed.
[14] Mr. Ali appeals that decision.
JURISDICTION
[15] Mr. Ali claims his appeal ought to be heard in the Ontario Court of Appeal, although we note that he chose to bring his appeal to this Court. A review of the relevant statute reveals, however, that Divisional Court is in fact the appropriate venue for this appeal.
[16] Sections 19(1)(a) and 19(1.2) of the Courts of Justice Act state:
Divisional Court jurisdiction
19.(1) An appeal lies to the Divisional Court from,
(a) a final order of a judge of the Superior Court of Justice, as described in subsections (1.1) and (1.2);
(1.2) If the notice of appeal is filed on or after October 1, 2007, clause (1) (a) applies in respect of a final order,
(a) for a single payment of not more than $50,000, exclusive of costs;
[17] In this case, the Minutes of Settlement provide that the claim is satisfied with the payment of $0 which is, by definition, a sum below the $50,000 threshold. In its entirety, Mr. Ali counterclaimed for $21,420 plus HST, which is also below the threshold. As such, this Court is the proper forum for the appeal which is in keeping with the view of the Ontario Court of Appeal in Sepe v. Monteleone (2006), 2006 ONCA 1173, 78 O.R. (3d) 676 (C.A.), at para. 6:
In our view, the purpose of s. 19(1)(a) is to define an easily applied cut-off line for litigants to determine the proper appeal route in any particular case. The line that was drawn by the legislature is the monetary amount of a judgment or dismissed claim of [$50,000]. The amount chosen does not reflect any concern for the ability of the Divisional Court to properly decide appeals that may involve more than [$50,000]. It is merely a mechanism for directing appeals involving less than the defined amount to one court, and the balance to the other.
RULE 49.09
[18] In regards to the Appellants’ argument that the motion judge erred in relying on Rule 49.09 to find that there was an enforceable settlement, it is clear that the case law has applied the same principles that arise under Rule 49.09 motions when dealing minutes of settlement as opposed to offers to settle (see for example, Royal Bank of Canada v. Central Canadian Industrial Inc., 2007 ONCA 360). As such, this argument runs counter to well-settled law.
LACK OF SETTLEMENT
[19] On a motion to enforce a settlement, the judge hearing the motion is required to ask himself or herself two questions:
a. Was there a settlement?; and
b. If so, should the court exercise its discretion not to enforce the settlement?
In answering the second question, the court is to be mindful of the fact that the discretion not to enforce a settlement is to be exercised rarely as per Srebot v. Srebot Farm Ltd., 2013 ONCA 84 at para.6.
[20] With respect to whether the motion judge erred in refusing to exercise his discretion to refuse to enforce the settlement, it is important to remember that a discretionary decision of a motions judge will only be reversible if that court misdirected itself or came to a decision that was so clearly wrong that it amounts to an injustice as per Penner v. Niagara (Regional Police Services Board), 2013 SCC 19.
[21] In this case there is no basis to challenge the motion judge’s finding that the parties had entered into a settlement agreement. In fact, finding that no settlement existed would run counter to the Defendants’ own evidence before the motion judge. Specifically, Mr. Ali’s affidavit sworn April 30, 2015 states “Matter was settled on Dec. 12, 2014…”. His affidavit sworn June 10, 2015 confirms that he agreed to settle at the mediation and that he signed the Minutes of Settlement on that date. As such, Hood J. was not only entitled to find that a settlement had been reached, he was correct in so finding.
DURESS
[22] The test for duress was described by the Ontario Court of Appeal in Gordon v. Roebuck, (1992) 1992 ONCA 7443, 9 O.R. (3d) 1 at para 8 wherein the Court adopted, and applied, the following test from the House of Lords:
On p. 8 of his reasons [p. 205 O.R., pp. 572-73 D.L.R.] the trial judge states:
To succeed on the ground of economic duress, the plaintiff must prove that his will was coerced and that the pressure exerted to do that was not legitimate. Lord Scarman (in Pao On v. Lau Yiu, [1979] 3 All E.R. 65, [1979] 3 W.L.R. 435 (P.C.), at p. 78 All E.R.) has set out four factors to consider in determining if a party's will has been coerced. They are:
(1) Did he protest?
(2) Was there an alternative course open to him?
(3) Was he independently advised?
(4) After entering the contract did he take steps to avoid it?
[23] The Court of Appeal recently cited Gordon v. Roebuck with approval in Ramdial v. Davis (Litigation guardian of), 2015 ONCA 726 stating at paragraph 42 that: “Duress is the coercion of a person’s will through illegitimate pressure, with one party dominating the will of another at the time that a contract is executed”.
[24] Implicit in Hood J.’s finding is the conclusion that the evidence before him did not reach the threshold required for him to refuse to enforce the settlement on the basis of duress. Hood J. stated that the Appellants’ concerns regarding the mediator were “irrelevant”. It is clear that said choice of wording is incorrect given that the Appellants now claim that Mr. Ali signed the Minutes of Settlement because the mediator refused to allow Mr. Ali to leave the mediation until the Minutes were signed and effectively threatened him so that he would do so.
[25] The Defendants also appear to claim that the duress was heightened since they were not represented by legal counsel and were thus susceptible to untoward pressure.
[26] An examination of the evidence in this matter reveals that this position is untenable. Nine days after the mediation occurred, the Appellant wrote to the Respondent agreeing that he would sign a consent to an order in accordance with the Minutes of Settlement. He did not raise the issue of duress, in spite of the fact that he had had nine days to clear his mind and consult counsel.
[27] On the issue of lack of independent legal advice, the motion judge correctly found that “lack of independent advice is not a freestanding defence.” The Court of Appeal made this clear in Zwaig Associates Inc. v. Simon Mok, 2005 ONCA 458 at para. 2. Further, the evidence before the motion judge was that the Appellant had chosen to proceed to the mediation without a lawyer, in spite of being advised to do otherwise. The Minutes themselves contain an express and clear acknowledgment that the Appellant was entering into the settlement of his own volition and was waiving his right to counsel.
[28] In this case, it was clear to Hood J. that, having entered into the settlement, Mr. Ali on behalf of the Defendants had second thoughts and the Defendants decided they did not want to accept its terms. As pointed out by Power J. in Hegel v. Giles 2006 ONSC 3964, [2006] O.J.No. 556 at para. 37, “[s]econd thoughts do not constitute a valid reason for refusing to enforce agreement.”
[29] Thus, while Hood J.’s use of the word “irrelevant” was unfortunate, it is clear that he rejected the Appellants’ argument regarding duress, as do we, based on Mr. Ali’s conduct after the mediation and his choice to represent himself. Considering all of the circumstances, it is clear that Mr. Ali – on behalf of the defendants – was not forced into signing Minutes of Settlement as a result of duress but instead made a conscious choice he later regretted.
UNCONSCIONABILITY
[30] With respect to the issue of unconsionability, the Alberta Court of Appeal in Cain v. Clarica Life Insurance Co. [2005] ABCA 437 at para 32 attempted to consolidate the various threads of law regarding unconscionability into a clear methodology:
Those authorities discuss four elements which appear to be necessary for unconscionability. (Some cases state some of the four as exceptions to be disproved by the alleged oppressor, but nothing turns on onus in this case.) The four necessary elements are
A grossly unfair and improvident transaction; and
Victim's lack of independent legal advice or other suitable advice; and
Overwhelming imbalance in bargaining power caused by victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and
Other party's knowingly taking advantage of this vulnerability.
[31] This test was applied the Ontario Court of Appeal in Titus v. William F. Cooke Enterprises Inc. 2007 ONCA 573 (at para. 38 and following).
[32] Simply put, the evidence adduced by Mr. Ali regarding a “grossly unfair and improvident transaction” is insufficient to meet the test described above. All the evidence described by Mr. Ali relates to harm allegedly caused by the termination of his employment and the lawsuit that the Plaintiff brought against him, not the impact of the settlement. This evidence is therefore irrelevant to the test because it does not, in any way, describe the nature of settlement and its effect on him and/or the numbered company. Accordingly, we agree with Hood J.’s implicit finding that unconscionability does not apply to this case.
[33] We note that Mr. Ali devoted a considerable portion of his oral argument in attempting to convince the Court that the termination of the Defendants’ relationship with the Plaintiff was unjust and unfair. He effectively submitted that the Plaintiff’s allegations – as contained in their Statement of Claim – were a painful stab at both him and his family. Given the personal importance that this litigation has for Mr. Ali, such feelings are understandable. Nonetheless, we would like to remind Mr. Ali that, upon entering the Minutes of Settlement, the Plaintiff’s claims were effectively dismissed such that no blight upon Mr. Ali’s name or reputation would exist as a result of the Statement of Claim or Minutes of Settlement. Hopefully, this reminder will provide Mr. Ali with some comfort that his name was not besmirched by the process.
CONCLUSION
[34] For the foregoing reasons, the appeal is dismissed.
[35] The parties may make their submissions as to costs in writing, such submissions not to exceed two pages in length. The Plaintiff shall make its submissions within 10 days of the release of this endorsement and the Defendants shall have 10 days after receiving the Plaintiff’s submissions to respond.
VARPIO J.
A.C. J. MARROCCO
SACHS J.
Released: December 4, 2015
CITATION: Arisoft Inc. v. Ali, 2015 ONSC 7540
DIVISIONAL COURT FILE NO.: 394/15
DATE: 20151204
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
A.C.J. MARROCCO, SACHS AND VARPIO JJ.
BETWEEN:
ARISOFT INC.
Plaintiff/Defendant by Counterclaim
(Respondent on Appeal)
- and –
SARFRAZ ALI and 7705786 CANADA INC.
Defendants/Plaintiffs by Counterclaim
(Appellants on Appeal)
REASONS FOR JUDGMENT
Released: December 4, 2015