Court of Appeal for Ontario

Citation: Single Source Contracting Services Inc. v. Valiant Machine & Tool Inc., 2017 ONCA 925

Date: November 30, 2017

Docket: C63584

Panel: Sharpe, Epstein and van Rensburg JJ.A.

Parties

Between

Single Source Contracting Services Inc. Plaintiff (Appellant)

and

Valiant Machine & Tool Inc. Defendant (Respondent)

Counsel

Gino Morga, Q.C., for the appellant

Thomas McRae, for the respondent

Hearing and Appeal

Heard: November 24, 2017

On appeal from: the order of Justice Steven Rogin of the Superior Court of Justice, dated March 3, 2017.

Reasons for Decision

Background

[1] The appellant Single Source and the respondent Valiant were parties to litigation commenced in April 2007. They believed they had reached a settlement at a pre-trial conference, and the actions were marked "settled" by the pre-trial judge, and removed from the trial list. The parties then disagreed about the terms of the settlement. Single Source sought to restore the action to the trial list and Valiant moved to enforce the settlement. By the time the motion judge heard Valiant's motion, the dispute was about the terms of the settlement, and not whether any settlement had been reached.

Motion Judge's Findings

[2] The motion judge examined the draft settlement agreements exchanged between the parties and the affidavit evidence they filed. He found that there was agreement on the material terms, and that the settlement required:

(i) a payment of the inclusive amount of $850,000 from Valiant to Single Source;

(ii) Single Source to initiate a proposal to creditors under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 that Valiant would support, and from which Valiant would not be entitled to any proceeds;

(iii) the dismissal without costs of the actions and counterclaim, and exchange of mutual releases;

(iv) that the settlement would be without admission of liability; and

(v) that the settlement would remain confidential.

The motion judge also ordered that Valiant was entitled to pay the settlement funds into court, or, if the parties agreed, to pay the settlement funds in accordance with a direction signed by Single Source.

Appellant's Contentions

[3] Single Source contends that the motion judge erred in including as a term of the settlement the obligation that it file a proposal to creditors. It also objects to money being paid into court and asserts that it should be able to direct the settlement funds as it sees fit.

[4] The motion judge's interpretation of the parties' agreement, based on his review of the evidence, is entitled to deference, absent an extricable error of law. The appellant asserts that there were a number of such errors in this case.

Analysis of Appellant's Arguments

First Argument: Evidence of Former Counsel

[5] First, Single Source says that the motion judge erred in failing to address and give effect to the evidence of Matthew Todd, its former lawyer, which it says supports the contention that its proposal to creditors was not a term of the settlement.

[6] We disagree. The motion judge considered the draft minutes of settlement exchanged between the parties, which were attached to Mr. Todd's affidavit. Although Mr. Todd stated that "it was never a term of the settlement, nor a requirement that Single Source make a proposal in bankruptcy in order to give effect to the settlement," the drafts that were attached to his affidavit, including a draft of the minutes of settlement that he prepared, and a term sheet on which he inserted handwritten comments, contradicted this assertion. All of the draft settlement documents exchanged between counsel contemplated that Single Source would file a proposal to creditors.

Second Argument: Adverse Inference

[7] Second, Single Source argues that the motion judge ought to have drawn an adverse inference from Valiant's failure to provide an affidavit from its former lawyer, Bryce Chandler, who had left the practice of law.

[8] There is no merit to this submission. Valiant's position was put forward in the affidavit of David Mueller, its director of Corporate Development and General Counsel, who attended the pre-trial conference and was directly involved in the settlement. His evidence was that, not only was the filing of a proposal a term of the agreement, but also that the settlement was delayed while Single Source negotiated with its creditors in advance of the filing. Mr. Chandler's letters and drafts were attached to Mr. Mueller's affidavit. There is nothing that an affidavit from Mr. Chandler could have added to the evidence, nor was there anything in Mr. Todd's affidavit that required a response from Mr. Chandler.

Third Argument: Qualification to File Proposal

[9] Third, Single Source asserts that the order ought not to have included a term requiring it to file a bankruptcy proposal without evidence that it qualified to make a proposal. There is no merit to this argument. This was a term to which the parties agreed, and was not an additional term imposed by the court. No evidence of whether Single Source was in fact qualified to make a proposal was required in order to enforce the agreement the parties had reached. In any event, Single Source offered no evidence to the motion judge or to this court of its inability to make a proposal to its creditors.

Fourth Argument: Assignment Agreement

[10] Fourth, Single Source argues that the motion judge erred in not considering an Assignment Agreement dated June 24, 2014 purporting to assign its claims against Valiant to a third party, Sterling Ridge Investments Inc. Single Source argues that the effect of the Assignment Agreement is that the assignee is entitled to the settlement funds.

[11] There is no merit to this submission. The assignment was raised, after the fact, in Mr. Todd's affidavit. He stated that he was informed of the assignment and its registration under the Personal Property Security Act, R.S.O. 1990, c. P.10 by Single Source's new lawyer. Mr. Mueller deposed that Valiant had no knowledge of the assignment until the appellant retained its present counsel. As such, the assignment was not referred to in the parties' negotiation of their settlement, and could not have affected its terms.

Fifth Argument: Payment Into Court

[12] Finally, Single Source objects to the motion judge's order that monies be paid into court as it contends there is no mechanism for payment out of court. This is incorrect. The parties would have resort to rule 72.03 of the Rules of Civil Procedure for both the payment into court and payment out – whether on consent or by order of the court.

Decision

[13] The appeal therefore is dismissed. Costs to the respondent fixed at $15,000, inclusive of HST and disbursements.

"Robert J. Sharpe J.A."

"Gloria Epstein J.A."

"K. van Rensburg J.A."