Court of Appeal for Ontario

CITATION: Padda v. 2074874 Ontario Inc., 2011 ONCA 235

DATE: 20110325

DOCKET: C52338

Armstrong, Juriansz and Watt JJ.A.

BETWEEN

Faqir Padda

Plaintiff (Respondent)

and

2074874 Ontario Inc., 1579240 Ontario Inc. Satnam Khakh and Onkar Taggar

Defendants (Appellants)

James S.G. Macdonald, for the appellants

William R. Gilmour, for the respondent

Heard & released orally: March 21, 2011

On appeal from the order of Justice S.S. Seppi of the Superior Court of Justice dated June 7, 2010.

ENDORSEMENT

[1] The issue raised by this appeal is whether the offer to settle made by the defendants remained open for acceptance after the court appointed a supervisor over the corporate defendants and after the transfer of the plaintiff’s interest in a shareholder loan.

[2] In the offer made pursuant to Rule 49, the defendants offered to settle the proceeding by paying $1.8 million to the plaintiff. Other terms of the offer provided that the plaintiff would transfer his shares in the corporation to the defendants and that the parties would exchange mutual releases. The offer did not expressly refer to the plaintiff’s claim for repayment of the shareholder loan of some $600,000.

[3] The supervision order had a stay provision. Paragraph 18 of the order provided that “all rights and remedies against the corporations or affecting the property are hereby stayed and suspended except with the written consent of the supervisor or leave of the court”. The plaintiff’s right to accept the settlement offer was a right or remedy against the corporations and so, in our view, was subject to the stay provision of the supervision order.

[4] In addition, fresh evidence, which we would admit, establishes that the plaintiff transferred his interest in the shareholder loan to his daughter by way of gift the day before he purported to accept the offer of settlement. As he claimed repayment of that loan in the proceeding, Rule 11 applied to his transfer of his interest in that loan. Thus, the proceeding was doubly stayed, at least in respect of the claim for repayment of the shareholder loan. While the offer to settle was never withdrawn, its acceptance constituted a step in the proceeding. Rule 49.07 reflects this. For the offer to settle to be effective leave of the court was necessary.

[5] Finally, the motion to enforce the settlement was another step in the proceeding. It, too, was also taken without obtaining the leave of the court.

[6] In the result, the appeal is allowed and the order of the motion judge is set aside. The appellants shall have their costs of the appeal and the motion in this court fixed in the amount of $17,500 inclusive of disbursements and applicable taxes, as well as the costs of the motion below in the amount of $2,500 inclusive of disbursement and applicable taxes.

“R.P. Armstrong J.A.”

“R.G. Juriansz J.A.”

“David Watt J.A.”