COURT OF APPEAL FOR ONTARIO

CITATION: Kearns v. Canadian Tire Corporation, Limited, 2020 ONCA 709

DATE: 2020-11-09

DOCKET: C67413

Lauwers, Brown and Nordheimer JJ.A.

BETWEEN

Jamie Kearns

Plaintiff (Respondent)

and

Canadian Tire Corporation, Limited

Defendant (Appellant)

Stephen F. Gleave, for the appellant

Matthew A. Fisher, for the respondent

Heard: in writing

On appeal from the judgment of Justice Peter J. Cavanagh of the Superior Court of Justice dated August 22, 2019, with reasons reported at 2019 ONSC 4946, 57 C.C.E.L. (4th) 270.

I. OVERVIEW

[1] The appellant, Canadian Tire Corporation, Limited (“Canadian Tire”), terminated the employment of the respondent, Jamie Kearns, effective July 2018. Canadian Tire made termination-related payments to Mr. Kearns in July and September 2018. Mr. Kearns started a wrongful dismissal action in October 2018. Canadian Tire made a further payment to Mr. Kearns on November 23, 2018 (the “November Payment”). The parties went to mediation in December 2018. They settled and executed minutes of settlement (the “Minutes”) that provided Canadian Tire would pay Mr. Kearns $150,000 “in addition to amounts already paid”.

[2] The Canadian Tire representatives who attended the mediation were not aware that the company had made the November Payment to Mr. Kearns. When, in February 2019, those representatives learned of the November Payment, the company took the position that it should be deducted from the settlement amount of $150,000.

[3] Mr. Kearns moved for enforcement of the Minutes. The motion judge granted judgment in favour of Mr. Kearns. Canadian Tire appeals. The company submits that the motion judge failed to properly interpret the Minutes in their full context and erred in disposing of the matter by way of motion on the basis of the evidence filed.

[4] For the reasons set out below, I would dismiss the appeal. As I will explain, the motion judge properly applied the principles of contractual interpretation and it was appropriate for him to dispose of the matter by way of motion.

II. FACTS

[5] Mr. Kearns was employed by Canadian Tire or affiliated dealers for approximately 27 years, until July 2018. At the time of his termination, Mr. Kearns’ employment was governed by an employment contract dated December 10, 2012. It provided that upon termination without cause, Mr. Kearns would be entitled to one month’s notice for each year of service up to a maximum of 24 months’ notice.

[6] On June 21, 2018, Canadian Tire terminated Mr. Kearns’ employment without cause, effective July 13, 2018. At the time of his dismissal, Mr. Kearns was 53 years old and held the position of Associate Vice-President. In 2017, his final year of full employment with Canadian Tire, his income was $307,619.70.

[7] The June 21, 2018 termination letter identified two kinds of compensation, which Canadian Tire called (i) “guaranteed” and (ii) “contingent” payments.

[8] First, the so-called “guaranteed” payments included eight weeks’ base salary in lieu of notice as required under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”). Mr. Kearns also would be paid:

• 12 weeks’ severance pay “based on [his] years of service, and in full satisfaction of [his] entitlement under the ESA”;
• current benefits until September 7, 2018, the conclusion of the ESA statutory notice period and what the letter described as the “Active Employment end date”; and
• certain incentive plan payments.

[9] Second, as “contingent” payments the company offered Mr. Kearns an “Enhanced Separation Package - Additional Notice” that would only be available if he signed a release:

In addition to your entitlements under the ESA, the company is also prepared to provide a lump sum payment equivalent to 30 weeks’ salary of Additional Notice, on a without prejudice basis, in full and final settlement of all issues related to your employment and the cessation of that employment. Payment of Additional Notice is contingent upon a signed Full and Final Release and Indemnity and is payable following the Active Employment end date.

[10] The termination letter stated that if Mr. Kearns did not provide a signed release by a stipulated date, the company’s offer of an enhanced separation package would be revoked and he would “only be provided with the minimum statutory entitlements in accordance with the ESA, as well as amounts required under the terms of [his] offer of employment” (emphasis added)..

[11] Mr. Kearns did not provide the company with a signed release.

[12] On October 16, 2018 Mr. Kearns started an action for wrongful dismissal in which he sought damages of $700,000. Mr. Kearns pleaded that he first worked for Canadian Tire in September 1991 and had been continuously employed with the company between 1996 and 2018. He claimed he was entitled to 24 months’ pay in lieu of notice, together with associated incentive performance payments and benefits. Mr. Kearns also sought aggravated damages, as well as damages for breach of the Human Rights Code, R.S.O. 1990, c. H.19.

[13] In its statement of defence filed on November 20, 2018 Canadian Tire pleaded that the time Mr. Kearns spent working for affiliated dealers did not qualify as time employed by the company. Consequently, Mr. Kearns was employed with Canadian Tire for just over 11 years. Canadian Tire stated that it had provided Mr. Kearns with an appropriate termination package based on relevant factors and the reasonable notice period to which he was entitled.

[14] The parties attended a mandatory mediation session on December 19, 2018.

[15] By the time of the mediation, Mr. Kearns had received three termination-related payments from Canadian Tire:

(i) July 20, 2018: $20,081.24, representing eight weeks’ statutory termination pay, less applicable deductions;

(ii) September 14, 2018: $103,191.49, representing twelve weeks’ statutory severance pay based on the company’s calculation of his years of service plus a pro-rated incentive plan payment, less applicable deductions; and

(iii) November 23, 2018: $115,465.20, less applicable deductions.

[16] In advance of the mediation, Canadian Tire provided Mr. Kearns’ lawyer with its statement of issues signed by its external counsel. Paragraph 5 of Canadian Tire’s statement of issues asserted:

In accordance with the Employment Agreement and the Ontario Employment Standards Act, 2000 (“ESA”), [Canadian Tire] provided [Mr. Kearns] with eight (8) weeks of pay in lieu of statutory notice, twelve (12) weeks' severance pay, and thirty (30) weeks' pay in lieu of additional notice. [Emphasis added.]

[17] Mr. Kearns attended the mediation with his counsel. Canadian Tire was represented by its manager of employee relations and external counsel.

[18] The mediation was successful. Canadian Tire agreed to pay Mr. Kearns $150,000, consisting of $90,000 as a retiring allowance and $60,000 as general damages. Counsel for Canadian Tire drafted the Minutes. The parties discussed two iterations of the draft. Counsel for Mr. Kearns requested that the Minutes include language that the $150,000 payment would be in addition to amounts Canadian Tire had already paid Mr. Kearns.

[19] The parties agreed on and executed a final version of the Minutes, para. 1 of which stated:

In addition to amounts already paid, [Canadian Tire] will provide [Mr. Kearns] a lump sum payment in the amount of $150,000.00 as follows:

(a) $90,000.00 as a retiring allowance; and

(b) $60,000.00, as general damages without deductions or admission of any liability. [Emphasis added.]

[20] Mr. Kearns signed a Full and Final Release and Indemnity, which was attached as “Schedule A” to the Minutes.

[21] What happened next was described by the motion judge in his reasons, at paras. 12 to 17:

The Minutes of Settlement provide that the settlement funds will be paid within 30 days of the date on which [Canadian Tire] receives the documents referred to in the Minutes of Settlement. On January 11, 2019 [Mr. Kearns’] lawyer provided [Canadian Tire’s] lawyer with a direction regarding funds and advised that he looked forward to receipt of the settlement proceeds on or before February 11, 2019.

By email dated February 6, 2019 from [Canadian Tire’s] lawyer to [Mr. Kearns’] lawyer’s business manager, [Canadian Tire’s] lawyer advised that [Canadian Tire] had discovered an overpayment that impacts the settlement payment under the Minutes of Settlement. She advised that on November 23, 2018, payroll personnel at [Canadian Tire] mistakenly paid out “gratuitous” separation support payments that were offered in [Mr. Kearns’] termination letter in exchange for a release.

The payments which [Canadian Tire] stated in the email were made in error were comprised of (i) 30 weeks of additional notice in the amount of $75,304.62; (ii) profit-sharing payment in the amount of $10,471; and (iii) short term incentive plan payment in the amount of $29,688.84 for a total gross payment of $115,465.20 which, less income tax deducted in the amount of $34,639.56, amounted to a net payment of $80,825.64. In this email, [Canadian Tire] advised that the “outstanding difference between the negotiated settlement amount and the overpayment from November 23, 2018 is a non-taxable payment of $45,174.36”. In her email, [Canadian Tire’s] lawyer advised that [Canadian Tire] would be making two payments in the amount of $10,000 (to be transferred to [Mr. Kearns’] RRSP) and $35,174.36 in legal costs to be paid to [Mr. Kearns’] lawyer, in trust.

On February 22, 2019, [Mr. Kearns’] lawyer’s office received a cheque from [Canadian Tire] in the amount of $35,174.36 payable to the law firm’s trust account. Around the same time, [Mr. Kearns’] financial advisor received a cheque from [Canadian Tire] payable to his RRSP in the amount of $10,000. No further amounts were paid by [Canadian Tire].

[Mr. Kearns] brought a motion for judgment for enforcement of the Minutes of Settlement. [Canadian Tire] opposes this motion.

[Canadian Tire] brought a cross-motion seeking judgment in favour of [Mr. Kearns] for the amount set out in the Minutes of Settlement less the amount of $115,465.20 that, [Canadian Tire] alleges, was mistakenly paid to [Mr. Kearns] on November 23, 2018.

[22] Affidavits on the motions were filed by Mr. Kearns, as well as by Canadian Tire employees and its external counsel. On his cross-examination, Mr. Kearns refused to answer a series of questions about what he had told his lawyer and what advice his lawyer had given him concerning the November Payment and the language in the Minutes that the $150,000 was “in addition to amounts already paid”.

[23] Canadian Tire moved before Master Jolley for an order compelling Mr. Kearns to answer those questions. As well, Canadian Tire sought to examine Mr. Kearns’ lawyer pursuant to r. 39.03 of the Rules of Civil Procedure. The Master dismissed both requests: 2019 ONSC 4235.

[24] The motion judge granted Mr. Kearns’ motion to enforce the Minutes and dismissed Canadian Tire’s cross-motion. I will review the motion judge’s key findings when reviewing the errors that Canadian Tire contends he made.

III. ISSUES ON APPEAL

[25] Canadian Tire identifies four issues on this appeal:

(1) Did the motion judge err in applying the principles of contractual interpretation with respect to paragraph 1 of the Minutes?

(2) Did the motion judge err by finding the parties were ad idem on the terms of the Minutes?

(3) Did the motion judge err in failing to find that Kearns acted in bad faith by not disclosing the November Payment in the context of the settlement of his entitlements under his employment contract?

(4) Did the motion judge err by finding that the matter could be resolved on a motion and without the need to exercise his powers under r. 20 or defer the matter to trial?

IV. ANALYSIS

Issues 1, 2 and 3: The motion judge’s interpretation of the Minutes

[26] The first three issues are related. I shall deal with them together.

[27] Canadian Tire submits that the motion judge failed to look at the factual matrix when interpreting the Minutes, in particular the evidence of its two representatives concerning their understanding of matters at the time of the mediation. Canadian Tire acknowledges there is no evidence that anyone raised the November Payment during the mediation. However, it points to the evidence of its manager of employee relations and external counsel who deposed that at the time of the mediation they were not aware the company had made the November Payment to Mr. Kearns. As well, both deposed that they had reviewed pay stubs given to Mr. Kearns in advance of the mediation and none of them disclosed the November Payment. They thought they were trying to settle the outstanding issue of Mr. Kearns’ entitlement to any payments in addition to the July and September 2018 payments.

[28] Canadian Tire contends that the motion judge failed to consider this subjective understanding of its manager of employee relations and external counsel, with the result that he did not take the full factual matrix into account when interpreting para. 1 of the Minutes. As well, this subjective knowledge meant that the parties were not in agreement on the essential term of the settlement amount.

[29] Finally, Canadian Tire argues that Mr. Kearns and his counsel had a good faith duty to disclose at the mediation the receipt of the November Payment. The company submits that Mr. Kearns did not fulfill that reasonable expectation of full disclosure and honesty in settling his exit from employment.

[30] I am not persuaded by these submissions.

[31] The motion judge applied Olivieri v. Sherman, 2007 ONCA 491, 86 O.R. (3d) 778, the controlling authority regarding the enforcement of minutes of settlement. In doing so, he made five key findings.

[32] First, the motion judge found there was no ambiguity in the written terms of the Minutes and held that the document included all terms essential to the formation of a contract: at para. 26.

[33] Second, on the issue of whether Mr. Kearns knew that Canadian Tire was mistaken when it signed the Minutes, there was not a “paucity of evidence” on the point, as Canadian Tire asserted. The motion judge stated, at paras. 29 and 38:

When [Mr. Kearns] received the November 23, 2018 payment, this represented an additional 30 weeks’ salary plus amounts in payment of [Mr. Kearns’] STIP bonus. These amounts were shown on the remittance slip dated November 23, 2018. The payment of these amounts appear to be amounts owing under [Mr. Kearns’] offer of employment, which he was told that he would receive.

[Mr. Kearns] was directly asked, on cross-examination, whether he knew that the November 23, 2018 payment had been made in error and he responded directly that he was not so aware. It was open to [Canadian Tire] to ask follow-up questions on matters that were not the subject of solicitor and client privilege. [Canadian Tire] was not successful in obtaining an order which would allow it to obtain privileged information from [Mr. Kearns] and his legal counsel, and no motion for leave to appeal was made from the order of Master Jolley. [Emphasis added.]

The motion judge therefore held that there was no evidentiary basis upon which a reasonable inference could be drawn that Mr. Kearns knew Canadian Tire was mistaken when it entered into the Minutes: at paras. 29 and 38.

[34] Third, on the basis of that finding, the motion judge held that Canadian Tire had not demonstrated that there was fraud or the equivalent of fraud on Mr. Kearns’ part: at para. 35.

[35] Fourth, the motion judge concluded that the Minutes constituted a valid and binding contract: at para. 35.

[36] Finally, in the motion judge’s view, the circumstances did not support exercising his discretion to decline to enforce the Minutes. The motion judge stated, at para. 39:

[Canadian Tire] submits that the amount of the settlement is so large that it is far in excess of what [Mr. Kearns] would have been entitled or expected to receive. [Canadian Tire] has not shown on the evidence before me that this is so.

[37] I see no reversible error in any of those findings. The motion judge applied the controlling legal principles. As well, Canadian Tire has not demonstrated that the motion judge made any palpable and overriding error of fact.

[38] The motion judge precisely identified the fundamental flaw in Canadian Tire’s position when he wrote, at para. 26:

The problem is not one of ambiguity. The problem, from [Canadian Tire’s] perspective, is that when it entered into the Minutes of Settlement, the persons with authority to commit to the terms of settlement did not know that the November 23, 2018 payment had been made to [Mr. Kearns]. [Emphasis added.]

[39] To this comment I would add that certain factors prevent accepting Canadian Tire’s assertion that the Minutes resulted from a unilateral mistake that justifies their rectification. To put the factors within their proper legal context, to succeed on an assertion of unilateral mistake Canadian Tire must establish that a mistake occurred and there was fraud, or the equivalent of fraud, on Mr. Kearns’ part in that he knew, or must be taken to have known, when the agreement was executed that Canadian Tire misunderstood its significance and he did nothing to enlighten the company: Alampi v. Swartz (1964), 1964 CanLII 303 (ON CA), 43 D.L.R. (2d) 11 (Ont. C.A.), at p. 17; Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720, at para. 15; 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, 150 O.R. (3d) 481, at para. 26.

[40] The first factor is that while the Canadian Tire representatives who attended the mediation may not have known that the November Payment had been made to Mr. Kearns, others in the company certainly knew. Although Canadian Tire adduced evidence to suggest that a clerk had dropped the ball in making the payment and a supervisor had failed to catch the blunder, the payroll records of the company clearly showed that the payment had been made to Mr. Kearns. The company’s representatives at the mediation deposed that they had reviewed the pay stubs for Mr. Kearns.

[41] Second, Canadian Tire’s argument ignores a key principle of contractual interpretation. It suggests that the ““context”, or factual matrix, that the motion judge failed to take into account included the subjective understandings, or state of mind, of the two Canadian Tire representatives at the time of the mediation. But, as taught by Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 58, the factual matrix consists only of objective evidence of the background facts at the time of the execution of the contract – that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contract: see also, Olivieri, at para. 44. Evidence of the undisclosed or uncommunicated subjective knowledge or state of mind of the two Canadian Tire representatives at the mediation does not qualify as part of the factual matrix that could assist the interpretative process.

[42] Finally, Canadian Tire’s position stands at odds with its own statement of issues filed at the mediation. That document was signed by its counsel. In it, the company acknowledged that it had provided Mr. Kearns with “thirty (30) weeks' pay in lieu of additional notice.” That 30 weeks’ pay was part of the “Additional Notice” that Canadian Tire had offered to Mr. Kearns in the termination letter, upon his execution of a release. The statement of issues was sent to Mr. Kearns’ counsel on December 18, 2018, after Canadian Tire had made the November Payment. Canadian Tire’s communication of that information to Mr. Kearns before the mediation offered further support for the motion judge’s finding that there was no fraud or bad faith on Mr. Kearns’ part, in the sense that he knew or must be taken to have known that when the Minutes were executed Canadian Tire misunderstood their significance: at para. 32, citing Alampi, at p. 17.

[43] Accordingly, I see no merit in the first three issues raised by Canadian Tire.

Issue 4: The motion judge’s determination of the matter by way of motion

[44] As its final ground of appeal, Canadian Tire submits that the motion judge failed to address whether it was fair to proceed on the motion to enforce the settlement without resorting to the enhanced powers in rr. 20.04(2.1) and (2.2) available on such a motion. In addition, the company contends that it was unfair to deal with the matter by way of motion because there were “gaps” in the evidence due to Kearns’ refusal to disclose certain information on his cross-examination and his counsel’s refusal to give evidence.

[45] I see no merit in these submissions. They are fully answered by para. 30 of the motion judge’s reasons, in which he stated:

The factual record in relation to this question is complete. There are no genuine issues of credibility requiring a trial. The evidence is that [Mr. Kearns] did not know that [Canadian Tire] was mistaken. There was no common or mutual mistake. The mistake, and I accept on the evidence filed on this motion that there was one, was a unilateral mistake by [Canadian Tire].

[46] The record fully supports those findings by the motion judge.

V. CONCLUSION

[47] Prior to the mediation, Canadian Tire made three termination-related payments to Mr. Kearns. While the company’s payroll records and para. 5 of its mediation statement of issues reflected those payments, the company’s representatives who attended the mediation deposed that they were not aware of the last payment, made on November 23, 2018. As the motion judge noted, at para. 38, on cross-examination it was put to Mr. Kearns that he knew the November Payment had been made in error. He replied that he was not so aware. The motion judge accepted that Canadian Tire had made a unilateral mistake but concluded that there was no fraud or equivalent of fraud on Mr. Kearns’ part. As a result, the motion judge declared that the Minutes constituted a valid and binding contract. I see no reversible error in the motion judge’s analysis and findings.

[48] I would note that this litigation could have been avoided through the simple drafting device of quantifying in the Minutes the “amounts already paid”.

VI. DISPOSITION

[49] For the reasons set out above, I would dismiss the appeal.

[50] Mr. Kearns is entitled to his costs of the appeal. If the parties are unable to agree on the amount, they may file brief written cost submissions, not to exceed three pages, together with bills of costs within 10 days of the release of these reasons.

Released: “PL” NOV 09 2020

“David Brown J.A.”

“I agree. P. Lauwers J.A.”

“I agree. I.V.B. Nordheimer J.A.”