Court File and Parties

Court of Appeal for Ontario Date: 2024-10-30 Docket: COA-24-CV-0226

Before: Hourigan, Madsen and Pomerance JJ.A.

In the Matter of the Estate of Margaret Ila Johnston, deceased

Between: Mary Ellen Johnston and Karen Hutchinson, in their personal capacity and in their capacity as named estate trustees of the estate of Margaret Ila Johnston Applicants (Appellants)

And: Laura Johnston McLean and Elizabeth Brydges, in their personal capacity and in their capacity as named estate trustees of the estate of Margaret Ila Johnston Respondents (Respondents)

Counsel: Benjamin D. Arkin, for the appellants Jennifer M. Krotz and Inderdeep Toor, for the respondents

Heard: October 23, 2024

On appeal from the judgment of Justice Catrina D. Braid of the Superior Court of Justice, dated January 26, 2024.

Hourigan J.A.:

Introduction

[1] This appeal raises an issue of first impression for this court, being the correct analytical approach to the interpretation of a consent judgment.

[2] The context in which this issue arises is estate litigation that may be briefly summarized as follows. The deceased, Margaret Ila Johnston (“Ila”) [1], owned a farm (the “Farm”) in Rockwood, Ontario. Ila had four daughters: Mary Ellen and Karen (the appellants) and Laura and Elizabeth (the respondents). They were all Ila’s powers of attorney. Ila died in 2020. The fair market value of the Farm on the date of Ila’s death was $1.9 million. Ila’s will provided that her assets would be shared equally among her four daughters.

[3] When Ila was in a long-term care facility, the parties had various court disputes involving her property, including the sale of the Farm. On December 31, 2015, the parties signed minutes of settlement (the “Minutes of Settlement”), which provided, among other items, that the appellants would pay the respondents $422,750 and receive title to the Farm. This amount is based on an agreed-upon value of the Farm of $890,000 (the appraised value as of 2014), less $44,500 real estate commission.

[4] The parties also agreed to a consent judgment (the “Consent Judgment”), which was drafted by the appellants and Elizabeth, and duly issued and entered by the Superior Court of Justice. As alluded to above, it is the interpretation of the Consent Judgment that lies at the heart of this appeal.

[5] The application judge found that consent judgments should be interpreted in accordance with the dictionary definition of the words used in the judgment. She rejected the submission of the appellants that a consent judgment should be interpreted in accordance with the principles mandated by the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. Based on this conclusion, she found that the provision for the sale of the Farm was not part of the Consent Judgment. Instead, she viewed her task as interpreting the meaning of the Minutes of Settlement and the parties’ conduct through the lens of contact law. In applying that contractual analysis, she found that the appellants repudiated the provision for the sale of the Farm and the respondents accepted that repudiation and communicated their repudiation to the appellants.

[6] The appellants submit that the application judge erred in law in her analytical approach to the interpretation of the Consent Judgment. I agree. However, that error is of no moment because applying the surrounding circumstances at the time of entering into the Consent Judgment, as required by Sattva, it is evident that the parties were selective regarding which terms of the Minutes of Settlement would be included in the Consent Judgment. Therefore, I agree with her conclusion that the provision for the sale of the Farm was not included in the Consent Judgment. I also see no error in her finding that the respondents accepted the repudiation of the contract and communicated their repudiation to the appellants. Therefore, I dismiss the appeal.

Background

[7] The preamble of the Consent Judgment states that the motion was for a dismissal and for “a Judgment in accordance with the Minutes of Settlement”. However, the Consent Judgment did not explicitly reference the sale of the Farm or attach the Minutes of Settlement as a Schedule. It did state, “THIS COURT ORDERS that the settlement [of various court proceedings] as set out in the Minutes of Settlement filed with this court, are approved.”

[8] The Minutes of Settlement define a Closing Date for the transfer of the Farm as the later of 30 days after the distribution of funds and February 18, 2016. After the Minutes of Settlement was signed, the parties made limited efforts to execute the transfer of the Farm. The parties appeared to be working together to execute the transfer within the first few months of 2016. However, discussions about obtaining an Agreement of Purchase and Sale (“APS”) and an environmental assessment stalled progress. Between January 2016 and March 2018, the parties communicated with lawyers at Miller Thomson representing Ila to request that they prepare an APS to facilitate the sale of the Farm. Despite receiving a draft copy early in 2016, a final APS was never provided. The appellants agreed that by the summer of 2016, it was clear that Miller Thomson would not be preparing an APS. Nor was there any requirement in the Minutes of Settlement that the firm prepare an APS.

[9] On March 19, 2018, the respondents emailed the appellants and set out the outstanding steps and stated: “the agreement was not intended to extend over a period of time and needs to be fulfilled by taking the following steps” and “if we have not received your Offer to purchase by April 15, 2018, we will understand that you do not intend to fulfil the Minutes of Settlement/Judgment and will take the appropriate course of action.” In response, Karen emailed the respondents and stated: “you are not in a position to impose arbitrary deadlines on this process.” The appellants did not respond in any meaningful way to advise what steps they were taking to complete the sale of the Farm. The appellants brought this application in 2022 to permit them to pay the respondents and receive title to the Farm. The appellants requested that three orders be made: (1) a declaration that the Minutes of Settlement and Consent Judgment are valid and enforceable; (2) the appellants pay $422,750 to the respondents within 60 days of the judgment; and (3) upon payment, BMO Trust Company (the estate trustee) transfer title of the Farm to the appellants. The respondents sought orders directing that the Farm be sold by the estate trustee with the proceeds being distributed in accordance with the will.

[10] As noted, the application judge held that the terms for payment and transfer of the Farm are part of the Minutes of Settlement only, which was a contract and were not incorporated into the Consent Judgment. She observed that if the parties wanted to make every term in the Minutes of Settlement enforceable, each term should have been included in the judgment or at the very least, attached as a Schedule. She found that the word “approved” in the Consent Judgment was insufficient to incorporate the Minutes of Settlement.

[11] On the issue of repudiation, the application judge cited Sanko S.S. Co. v. Eacom Timber Sales Ltd. (1986), 32 D.L.R. (4th) 269 (B.C.S.C.) for the proposition that where time is not of the essence in a contract, the aggrieved party is relieved of their obligations when the delay becomes so long as to go to the root of the contract and amounts to a repudiation of it. On this basis, the application judge found that the appellants repudiated the terms of the Minutes of Settlement as a result of their extreme delay because the parties reasonably expected that the terms of the settlement would be fulfilled promptly. Further, the application judge held that the respondents’ email of March 19, 2018, was notice of their acceptance of the appellants’ repudiation. This notice terminated the contract. Therefore, the appellants were no longer entitled to purchase the Farm pursuant to the Minutes of Settlement.

[12] The application judge directed BMO Trust Company, in its capacity as estate trustee, to sell the Farm on the open market. The application judge ordered costs payable to the respondents in the amount of $39,876.37.

Analysis

(1) Did the application judge err in her analysis of the Consent Judgment?

[13] In support of her finding that consent judgments should be interpreted in accordance with the dictionary meaning of the words used, the application judge relied on Carey v. Laiken, 2015 SCC 17, [2015] 2 S.C.R. 79 which was a case regarding contempt of court orders. This was an incorrect approach and amounted to an extricable error of law. In reaching this conclusion I hasten to add that the application judge did not have the benefit of appellate guidance from this court on this point.

[14] In my view, consent judgments should be interpreted according to the principles of contractual interpretation because they are a species of contract. It must be borne in mind that, “a consent judgment is not a judicial determination on the merits of a case but only an agreement elevated to an order on consent. The basis for the order is the parties’ agreement, not a judge’s determination of what is fair and reasonable in the circumstances”: James G. McLeod in his annotation in the Reports of Family Law to Thomsett v. Thomsett, 2001 BCSC 546, 16 R.F.L. (5th) 427 at pp. 428-29.

[15] Thus, it is the contractual nature of consent judgments that distinguishes them from regular judgments and drives the requirement to determine the intention of the parties. Therefore, there is no principled reason why the analytical approach to them should differ from other contracts. This approach has been adopted by the British Columbia Court of Appeal: see Shih v. Shih, 2017 BCCA 37, at para. 34.

[16] The approach has also been adopted by the Ontario Superior Court of Justice where the surrounding circumstances and intention of the parties have been considered in interpreting consent orders: see for example NHDG (Green Mountain) Inc. v. The Hamilton Teleport Ltd., 2021 ONSC 362, at paras. 27-34; Cetin v. Percival et al., 2022 ONSC 2057, at para. 12; and S.C.H. v. S.R., 2023 ONSC 1549, at paras. 49-55.

[17] Based on the principles of contractual interpretation, the court should read consent orders as a “whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva, at para. 47.

[18] Despite the foregoing, in the circumstances of this case, the legal error made by the application judge is immaterial because when regard is had to the relevant surrounding circumstances, it is evident that only selective terms of the Minutes of Settlement were included in the Consent Judgment. The appellants and Elizabeth drafted the Consent Judgment and chose to expressly include some terms of the Minutes of Settlement but not others. The Consent Judgment reproduces paragraphs one to six and 11(a) and (b) of the Minutes of Settlement. The incorporated terms make the following orders: (1) that certain related proceedings be dismissed or withdrawn, (2) that attorney accounts be approved, and (3) that the costs in a prior proceeding be paid from the assets of the estate.

[19] The evidence establishes that the reason for the selective inclusion of these terms was based entirely on the appellants’ request. Karen wrote to Laura in January 2016, stating: “it is our intention to achieve paragraphs 1-6 of the Minutes of Settlement by seeking an order in the form that was sent to you for your consent.” The specific inclusion of these terms leads to the conclusion that the remaining terms in the Minutes of Settlement were not incorporated into the Consent Judgment.

(2) Was there sufficient evidence of the acceptance of the repudiation?

[20] The appellants do not contest the application judge’s finding that they repudiated the agreement to purchase the Farm. Instead, they take issue with the application judge’s finding that the respondents communicated their acceptance of the repudiation.

[21] The law regarding acceptance of repudiation was stated by this court in Brown v. Belleville (City), 2013 ONCA 148, 114 O.R. (3d) 561, at para. 45, citing John D. McCamus’ The Law of Contracts (Toronto: Irwin Law, 2005), at pp. 659-61:

It appears to be settled law in Canada that where the innocent party to a repudiatory breach or an anticipatory repudiation wishes to be discharged from the contract, the election to disaffirm the contract must be clearly and unequivocally communicated to the repudiating party within a reasonable time. Communication of the election to disaffirm or terminate the contract may be accomplished directly, by either oral or written words, or may be inferred from the conduct of the innocent party in the particular circumstances of the case.

[22] The appellants argue that the respondents’ email of March 19, 2018, did not include an absolute and immediate notice of an intention to treat the contract as terminated. Further, they submit that the application judge failed to consider subsequent emails between the parties wherein the respondents expressed a desire for the Farm sale to be completed. According to the appellants, had the application judge considered these emails, she would have concluded that the respondents did not communicate their acceptance of the repudiation.

[23] I do not find this argument availing. The application judge was entitled to find that the statements “the agreement was not intended to extend over a period of time and needs to be fulfilled by taking the following steps” and “if we have not received your Offer to purchase by April 15, 2018, we will understand that you do not intend to fulfil the Minutes of Settlement/Judgment and will take the appropriate course of action”, amounted to an acceptance of the repudiation of the contract.

[24] The application judge was not required to specifically review all of the evidence after the date of the respondents’ acceptance and can be taken to have considered the evidence in the record on this issue. Given my interpretation of the factual matrix, it is unnecessary to consider the parties’ conduct after the acceptance of repudiation. In any event, I am not satisfied that the emails relied on, read in the context of an on-going family dispute where the parties have been unable after many years to resolve even the most mundane of estate matters, amounted to a withdrawal of the respondents’ acceptance of the repudiation or somehow derogated from the acceptance of the repudiation.

Disposition

[25] The appeal is dismissed. The appellants will pay costs of the appeal to the respondents in the all-inclusive sum of $18,526.

Released: October 30, 2024 “C.W.H.” “C.W. Hourigan J.A.” “I agree. L. Madsen J.A.” “I agree. R. Pomerance J.A.”

[1] First names are used in these reasons for ease of reference.