Court of Appeal for Ontario

Date: 20220113 Docket: C69205

Doherty, Tulloch and Thorburn JJ.A.

Between

Idea Notion Development Inc. Plaintiff (Respondent)

And

CTO Boost Inc., Gurminder Kandola and Gursharnjit Kandola Defendants (Appellant)

Counsel: James R. Smith for the appellant, CTO Boost Inc. Aaron Boghossian, for the respondent

Heard: January 4, 2022 by video conference

On appeal from the order of Justice Eugenia Papageorgiou of the Superior Court of Justice, dated February 12, 2021 and reported at 2021 ONSC 289.

REASONS FOR DECISION

[1] The appellant (“CTO”) hired the respondent (“Idea Notion”) to provide software development services on various projects. The work began in August 2018 and was completed about 10 months later. Idea Notion submitted five invoices to CTO totalling about $219,000. CTO made no complaint about the quality of the work, or the invoice amounts.

[2] CTO provided Idea Notion with cheques for their services, however, many of those cheques were returned NSF. As of June 2019, there remained about $200,000 owing to Idea Notion, based on the invoices submitted by it to CTO.

[3] Negotiations in respect of the payment of the outstanding invoices ensued over several months. CTO made two offers to settle. Both were rejected by Idea Notion. On October 17, 2018, CTO made a third offer to settle based on a lump sum payment of $85,000 by CTO, followed by 12 equal monthly payments totalling $115,000, for a total payment of $200,000. On October 22, 2018, Idea Notion, through counsel, accepted CTO’s October 17, 2018 offer.

[4] Three days after accepting the offer, counsel for Idea Notion provided CTO with draft Minutes of Settlement. Discussions concerning those draft minutes occurred between October 25 and November 5, 2018. On November 5, 2018, CTO advised Idea Notion that CTO would not proceed with the settlement, claiming the invoices were fraudulent and inflated.

[5] On November 19, 2018, Idea Notion sued CTO on the original contract. Idea Notion later amended its claim to include a claim for enforcement of the settlement entered into in October 2018.

[6] Idea Notion successfully moved for summary judgment on the claim to enforce the settlement. CTO appeals from that judgment and renews many of the arguments unsuccessfully advanced on the summary judgment motion.

[7] We are satisfied this appeal must fail. As we are in substantial agreement with the motion judge, we need not repeat her careful analysis and need only deal briefly with the grounds of appeal.

Ground #1: Did the motion judge err in allowing Idea Notion to tender “without prejudice” documents relating to the two rejected Offers to Settle made by CTO prior to October 2019?

[8] Normally, “without prejudice” communications made in the course of settlement discussions are inadmissible. They are, however, admissible if disclosure is necessary to prove “the existence or scope of the settlement”: Union Carbide Inc. v. Bombardier Inc., 2014 SCC 35, at para. 35.

[9] CTO denied that it entered into an enforceable agreement to settle (Statement of Defence, at para. 35). Mr. Kandola, the directing mind of CTO, repeated that assertion in his examination.

[10] It was incumbent on Idea Notion to demonstrate the existence of the agreement to settle. To do so, Idea Notion had to refute CTO’s claim that there was no agreement to settle because CTO’s offer was conditional upon CTO being satisfied that the amounts invoiced were correct. Idea Notion also had to refute CTO’s argument that there was no settlement because the October offer did not deal with all of the terms essential to a settlement, including the potential ongoing liability of the personal defendants.

[11] In the course of considering and rejecting these arguments, the motion judge took into account some of the “without prejudice” communications between counsel for CTO and counsel for Idea Notion (e.g. see Reasons, at paras. 46-49, 53-58). The motion judge was entitled to consider the “without prejudice” documents to the extent those documents were relevant to the existence of the alleged agreement to settle. CTO’s arguments that the October offer was conditional, and that it did not contain all essential terms, both went to the existence of an agreement to settle. The contents of the “without prejudice” documents, even though they related to prior offers, were also relevant to whether the parties had reached an agreement in October. Consequently, the “without prejudice” communications fell squarely within the exception to the exclusionary rule described in Union Carbide. The motion judge correctly held the documents to be admissible.

[12] In a related argument, CTO submitted that the “without prejudice” documents were submitted by way of an affidavit that was filed in contravention of r. 39.02 of the Rules of Civil Procedure. Even if there was non-compliance with r. 39.02, CTO was not prejudiced, given our finding that the “without prejudice” documentation was admissible. There is no suggestion that CTO was, in any way, taken by surprise by the documentation, or unable to address the significance, if any, of the documents on the motion. The real complaint is that the documents were inadmissible. We have held the motion judge correctly determined they were admissible.

Ground #2: Did the motion judge err in her analysis of the evidence presented on the summary judgment motion?

[13] The motion judge was entitled to weigh the evidence offered by the parties and make assessments of the credibility and reliability of various aspects of that evidence. She gave several reasons for giving little credence to CTO’s evidence in respect of the bona fides of the invoices provided by Idea Notion. She also gave reasons for giving little weight to the analysis of those invoices allegedly done by Mr. Kandola’s brother (Reasons, at paras. 68-82).

[14] The motion judge’s observations with respect to that evidence were available on the record. She was entitled to make those assessments and we defer to her credibility and reliability findings. Based on her assessment of the evidence, this was an appropriate case for summary judgment.

Ground #3: Was there any basis upon which to give effect to CTO’s fraudulent misrepresentation defence?

[15] The motion judge properly identified the elements of the defence (Reasons, at para. 67). In concluding that the defence provided no reason not to grant summary judgment, the motion judge said:

The most significant problem with CTO’s argument [i.e. that the settlement was procured by fraudulent misrepresentation], however, is that even if the invoices contained errors or “misrepresentations”, fraudulent or otherwise, Mr. Kandola admits that CTO believed there were discrepancies, had access to all the information needed to audit them, and then decided to proceed with settlement negotiations in any event. CTO cannot show that any alleged misrepresentation in the invoices caused it to enter into the settlement. It did so with its eyes wide open as to the possibility of discrepancies for its own business reasons. [Emphasis added.]

[16] The observations of the motion judge are supported by the record. We are also satisfied that the “without prejudice” documentation was admissible on the question of whether any misrepresentation by Idea Notion with respect to the bona fides of the invoices allegedly made during the negotiations had any impact on CTO’s decision to make the offer to settle in October 2018.

Ground #4: Should the motion judge have exercised her discretion and declined to enforce the settlement by way of summary judgment?

[17] There is a discretion to decline to enforce settlement agreements by way of summary judgment motions. This discretion is guided by administration of justice concerns. If the enforcement of the agreement would be unreasonable, result in an injustice, or for some other good reason, not be in the interests of justice, the motion judge can decline to grant summary judgment on the agreement, even though on the evidence an agreement was reached.

[18] The motion judge considered and rejected the arguments that the interests of justice required that she not exercise her discretion in favour of enforcing the agreement on a summary judgment motion (Reasons, at paras. 84-94). As this involves an exercise of discretion, we must defer to the motion judge, absent a determination that the motion judge’s decision is unreasonable or tainted by legal error. In our view, the motion judge’s finding is neither unreasonable, nor based on any legal error.

Conclusion

[19] The appeal is dismissed. Idea Notion is entitled to its costs against CTO, the only defendant involved in the summary judgment motion. We fix those costs at $8,000, inclusive of disbursements and relevant taxes.

“Doherty J.A.”

“M. Tulloch J.A.”

“J.A. Thorburn J.A.”