COURT FILE NO.: 499/06 05-CV-292577 PD2

DATE: 20070905

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Yonge Village Recreation Centre Limited Plaintiff, Respondent -and- York Condominium Corporation No. 201 Defendant, Appellant

HEARD: At Toronto, March 27, 2007

BEFORE: Lane, Matlow* and Linhares De Sousa JJ.

COUNSEL: A. S. Halpert, for the Appellant P.M. Conway, for the Respondent

R E A S O N S F O R J U D G M E N T

LANE J.:

[1] The appellant appeals from the order of J. MacDonald J. dated September 29, 2006 dismissing the appellant’s motion for judgment on an alleged settlement. Leave to appeal was granted on November 17, 2006 on the issue of the relevance of a limitation on the authority of an agent for a client which limitation is unknown to both the client’s solicitor and the solicitor for the opposite party. The motion judge exercised his discretion not to enforce the settlement. The question before us is not whether we would have made the same decision, but whether the motion judge acted upon a wrong principle.

Background Facts

[2] The Yonge Village development was built in 1973. It comprised two rental high-rises, and three high-rise condominiums. Together, they owned a recreational facility, called the Yonge Village Recreation Centre (hereafter YVRC). It contains facilities including an indoor swimming pool, saunas, and other amenities. YVRC Ltd. was incorporated to hold and manage the facility. The shares of YVRC Ltd were apportioned among the two high-rises and the three condominiums on the basis of square footage. The governing document is a lease which provides that the YVRC will be run by a Board of Directors composed of representatives of the Boards of each of the condominium corporations, and representatives of the rental buildings. That Board of Directors is hereafter referred to as the Recreation Centre Committee (RCC). The annual costs of operating, maintaining and repairing the YVRC are determined by the RCC. The RCC passes an annual budget and allocates to each of the participating entities their share of the budget, based on shareholdings.

[3] The original developers sold the two rental buildings in 2001, and the new owner of the rental buildings took the position that it was not bound by the terms of the lease. Litigation (“the Blatt action”) with the three condominium corporations ensued. Ultimately, the new owner paid $330,000 to be released from its obligations under the lease. It gave up its shares in YVRC Ltd, and these shares were divided among the three condominium corporations in the proportions of their interests. Ownership of the YVRC facility itself (actually a unit in YCC 366) was transferred to the three condominium corporations. YCC 201 has a 36% share of the YVRC and is responsible for paying 36% of its annual budget. The costs of upkeep of the Recreation Centre, even closed, are $65,000 plus, annually. When in operation, the costs are approximately $160,000 annually and YCC 201's share is 36%, $57,600.

[4] In recent years, the recreational facilities in the YVRC fell into disrepair, in part as a result of the withdrawal of the two rental buildings (the $330,000 settlement was not paid until 2005). In December 2003, YCC 201's Board of Directors stopped remitting its proportionate share of the budgeted costs of the operation and maintenance of the YVRC. The Board of YCC 201 has continued to collect the money from their owners, but has not remitted it to YVRC. The minutes of the December 2003, Annual General Meeting of YCC 201, indicate that there was a vote of owners taken on withdrawing from the YVRC, and that the votes were 74 in favour of withdrawing, 1 against. The agenda for that December 2003 Annual General Meeting contains an entry “Recreation Centre” but did not tell owners that a vote on withdrawal from the YVRC would be held at the meeting. It is argued that the notice of the meeting was defective so that the vote, even if taken, (which some owners denied) may be invalid by reason of section 47(10) of the Condominium Act, 1998. That any vote actually took place is contested by many owners in YCC 201, who have sent notice to YCC 201's legal counsel that they wish to maintain ownership of, and participation in, the YVRC.[^1]

[5] In 2004, the YVRC was closed by the RCC (now comprised of representatives of YCC 201 and YCC 366), on the recommendation of an engineer, until the roof over the swimming pool could be fixed. Repairs commenced. YCC 201, through its president, Mr. Tartakovsky, continued to collect YCC 201's share of the payments, and continued to refuse to remit them. As a result, this action ensued whereby YVRC seeks to recover in excess of $100,000 in arrears of YCC 201’s share of the operating costs. The remaining owners have continued their contributions and are funding the repairs to the Centre from current income and in part from the monies received from the settlement of the Blatt action.

[6] The plaintiff moved for summary judgment in April, 2006. The motion judge adjourned the motion until September and directed the parties to a settlement conference to be held on June 20, 2006. The parties were to develop business plans showing how the Centre would operate with and without YCC 201.

[7] In mid-April, 2006, Mr. Kay, the manager of the Centre, resigned. He had been the liaison between the plaintiff and its lawyer, Mr. Rubin. Mr. Larry Cohen, a unit owner, agreed to take over the management of the Centre but was not directed to deal with Mr. Rubin. Ms. Tsipeniuk, a unit owner, member of the Board of YCC 366 and its representative on the Recreation Centre Committee, deposed that: “We did not talk about what role Larry would play in the lawsuit.”

[8] Subsequently, Mr. Cohen advised the Committee that he was dealing with Mr. Rubin about the latter’s outstanding accounts. He did not advise them that he had told Mr. Rubin to make an offer to settle the case.

[9] Mr. Rubin understood, from Larry Cohen, that Cohen had taken over Mr. Kay’s role and accepted instructions from Cohen to make an offer. On May 10, 2006, Mr. Rubin sent an offer to counsel for the defendant to accept the arrears, interest and legal fees in return for which the defendant would be released from all future costs and obligations relating to the Recreation Centre. The defendant would assign its rights in respect of the Centre to the remaining partners. Strangely, the offer letter was headed “Without Prejudice”, but the offer was expressed as being made pursuant to Rule 49. It recites that Mr. Rubin has received instructions from the Centre, YCC102 and YCC366 to make the offer.

[10] As explained by Ms. Tsipeniuk in her affidavit, none of those three corporations had any knowledge of the offer. They had established the Recreation Centre Committee to deal with the Centre. The offer had never been discussed with the Committee by Mr. Cohen or by Mr. Rubin. Nor were they told about the counter-offer from the defendant when it was made on May 31, 2006. The defendant accepted the offer on June 20, 2006. When they were told by Larry Cohen that the litigation was over, they “were mystified.” Ms. Tsipeniuk asked Mr. Kay to return to managing the Centre and to “explain to us what was going on.” A meeting was arranged of the Recreation Committee with Mr. Rubin in the first week of August, 2006 on his return from his vacation. The Committee learned “for the first time that he [Mr. Rubin] had been taking instructions from Larry Cohen. Mr. Rubin advised that Larry told him in April that he had taken over Sid Kay’s role. He said that he had drawn the May 10 offer on Larry’s instructions and that Larry had approved it.”[^2] Ms. Tsipeniuk goes on to say that Larry denied giving such instructions, but the Committee has since seen legal bills that persuaded them he had done so.

[11] In searching the office, Ms. Tsipeniuk found a copy of the offer in a fax from Mr. Rubin to Larry at his home, with copies to both Boards which had not reached them. Larry told her that the offer was without prejudice and had no effect.[^3] It is not entirely clear when the search took place, but her affidavit places it as: “since this happened”. That passage comes after she has described the meeting in August when they learned of the offer, counter-offer and acceptance, so the search must have occurred between that meeting and the 15th of August, the date of her affidavit. Alternatively, the date of finding the offer may have been before June 21 because she explains in her supplementary affidavit dated in September, that she accepted Larry Cohen’s explanation that the document was without prejudice and meant nothing, thinking that the court date on June 21 would see the matter decided. It was submitted to us that Ms. Tsipeniuk had admitted in this passage that she saw the offer before it was accepted. The evidence in the September affidavit is not entirely consistent with the earlier evidence, which is reasonably clear that the search must have taken place later than that. There was no cross-examination of Ms. Tsipeniuk, so we are left with the evidence as given. The evidence as a whole does not clearly support the appellant’s submission, nor did the motion judge make such a finding. In the light of all the evidence, he was not in error in not finding that Ms. Tsipeniuk saw the offer before it was accepted.

[12] In her affidavit Ms. Tsipeniuk states[^4]:

26. Practically, the YCC 201 Board of Directors knows when the other two condominium[s] hold meetings of owners. They know that there was no meeting of owners of either corporation, since April 2006, so they know that the May 10 offer was made without authority.

[13] This was characterized as hearsay, but I read it as a statement by the deponent of her knowledge of the practical working of communication among people residing in the same complex, and her deduction from that knowledge that the directors of YCC201 would have been aware that there had been no meeting to authorize an offer that would have required a meeting to authorize. There was no cross-examination on the point (or on any aspect of Ms. Tsipeniuk’s evidence) and no response from anyone who might be knowledgeable about the point. In paragraph 45 of his affidavit, Mr. Fine, former counsel for YCC201, says it is ridiculous to suggest that his client knew that Mr. Rubin had no authority, but does not address Ms. Tsipeniuk’s point. In any event, the point does not figure in the motion judge’s reasons.

[14] A meeting was held on May 23rd with all parties to discuss possible resolution of the litigation. There is a general agreement that the meeting was unproductive. Mr Tartakovsky, one of the attendees from the defendant, agrees that Ms. Tsipeniuk’s description of what occurred is “more or less accurate”, there were discussions about “various amounts” that might be paid by the defendant for a release. He stresses that there were no firm offers and no discussion of withdrawing the May 10 offer. Ms. Tsipeniuk deposed[^5] that neither side mentioned the May 10 offer; her side could not do so as they were unaware of it. Mr Tartakovsky began the meeting by proposing that the defendant pay $60,000 to be released. Ms. Tsipeniuk responded that YCC201 must pay everything they owed, plus compensation for legal fees and the inconvenience of the users of the Centre. Once that money was in the bank, they could discuss letting YCC201 out of the agreement. Discussing that now was a waste of time. Mr. Tartakovsky said YCC201 would pay $100,000 to be let out of the agreement. Ms. Tsipeniuk said this was a waste of time and the representatives of the plaintiff left. She asserts that the plaintiffs made it clear that the release of the defendant from the agreement was not negotiable. This part of the affidavit contradicts her earlier statement that release could be discussed but only after the arrears were in the bank. She was not cross-examined, so there is no explanation. It appears clear that everyone agrees that there was no mention of the written offer of May 10th as such at this meeting.

[15] The counteroffer of May 31st reflected the position taken by Mr. Tartakovsky at the meeting of May 23rd. Ms. Tsipeniuk deposed that they did not know of that counteroffer at the time, but that it would have been rejected had they been told of it.

[16] On June 9th Ms. Tsipeniuk accompanied Larry Cohen and another director to a meeting with Mr. Rubin at the latter’s office. By chance, she had been in the office, learned of the meeting, was curious as to why there was such a meeting and tagged along. They discussed the impending pre-trial and whether to prepare a business plan showing the impact of the withdrawal of YCC201. Ms. Tsipeniuk said they were not prepared to let YCC201 out on any terms; they had to pay in full what they owed. There were many owners in YCC201 who wished to keep the Recreation Centre and Mr. Rubin suggested that signatures of such owners be collected. Subsequently this was done and the result appears as exhibit A to Ms. Tsipeniuk’s affidavit.

[17] There was then a telephone conversation with Mr. Fine on the speaker-phone. It seems that Mr. Fine did not realize he was speaking to anyone but Mr. Rubin, although one entry in his notes of the conversation reads: “Larry Cohen is there.”[^6] Ms. Tsipeniuk deposed that she heard the entire conversation and that Mr. Rubin told Mr. Fine that YCC had to pay all arrears in full and continue their participation and that they were not prepared to work out a plan to let YCC201 out of the Centre. Mr. Fine was angry and said we would have to go to court. She was not cross-examined on any of this.

[18] Mr. Fine deposed[^7] that the June 9th conversation opened with his statement that he thought the parties were fairly close. He explained in his affidavit that this was based on the offer at $160,000 and the counteroffer at $100,000. Mr. Rubin referred to the meeting of May 23rd and said that his clients were prepared to consider a buyout; and that they “were now thinking about three or four years worth of payments over and above the arrears which would be in the range of $250,000 - $300,000. Mr. Fine said that was “not [his] understanding of the number that was on the table.” The two lawyers then confirmed that there were no firm discussions or offers at the May 23rd meeting. In cross-examination[^8], Mr. Fine agreed that the $250K plus figure was mentioned, but maintained that it was not a proposal that YCC201 would have to pay to settle, but just a number quantifying the payments over three to four years. The number on the table was $160,000.

[19] The evidence about June 9th does not indicate that anyone said that there was an offer of May 10 outstanding. The references to what was “on the table” did not bring home to Ms. Tsipeniuk and the other director that they had made an offer about which they had never been told. When the motion judge observed that Mr. Fine mentioned the amount on the table thus adverting to the offer, he was correct so far as those who knew of the offer were concerned.

[20] Ms. Tsipeniuk deposed that on receiving the letter from Mr. Fine accepting the offer, Mr. Rubin called Larry Cohen who claimed that the offer had been withdrawn either at the May 23 meeting or that he had told Mr. Rubin to do so after that meeting. Mr. Rubin wrote to Mr. Fine that there had been a misunderstanding, but Mr. Fine insisted that the case was settled. While this is hearsay coming from Ms. Tsipeniuk, it is all after the crucial events and is not evidence relied on by the motion judge in his reasons.

Findings of the Motion Judge

[21] In oral reasons, the Judge found that the solicitors for the plaintiff made and the solicitor for the defendant accepted the written offer of May 10th. The issue therefore was the exercise of the discretion of the court to refuse to enforce the settlement on the basis that it was made without the knowledge, concurrence and authority of the plaintiff. The learned judge found that the evidence that the plaintiff itself did not authorize this offer was uncontradicted. He acknowledged that there was evidence available to the plaintiff that was not put before the court, but declined to draw an adverse inference from that fact because the witnesses were equally available (except for the plaintiff’s solicitor) to the defendant. He further found that the offer was not withdrawn in the course of the June 9th telephone discussion. Although Mr. Rubin spoke of compromising the issues at figures well above the offered figure, the motion judge found that he “simply mentioned higher figures as a basis for settlement.” He declined to draw the inference that Mr. Fine knew or ought reasonably to have known from this discussion that the written offer did not reflect the plaintiff’s actual settlement position. He accepted Mr. Fine’s evidence that the offer was not withdrawn during that meeting. He found that it was a common negotiating tactic to mention higher figures to persuade the opposite party to accept what was already offered. He continued:

“In any event, I infer from the fact that the respondent’s solicitor did not withdraw the written offer at any time prior to its acceptance that he did not know that it was something that his client did not agree with. If he did not know that, I find that it is not reasonable either to infer or find that he communicated that, such that the applicant’s solicitor knew it.”

[22] Turning to the principles on which the case should be decided, the motion judge held that the defendant had authorized its agent to deal generally with its lawyer, but had not authorized the agent to make the settlement offer. The plaintiff’s lawyer, Mr. Rubin, reasonably thought that the agent, Cohen, spoke for the plaintiff. The plaintiff held him (Cohen) out to Rubin as its agent and Rubin did not know Cohen did not have authority to settle. Mr. Fine also did not know that Rubin was getting instructions from an unauthorized agent. The motion judge acknowledged the decision in Scherer[^9] but felt that the case fell to be decided on the principles in Milios[^10] He referred in the reasons to this passage from Milios:

In my opinion, however, this is not a case where the plaintiff contends that the scope of his agent’s authority was limited. Instead he contends that his counsel, who had general authority to settle the action, was given the wrong settlement message by the plaintiff’s wife with the result that the settlement agreed to was concluded by mistake. Thus I do not think that the statements in [Scherer] about the effect of limitations on an agent’s authority not communicated to the other side has application in this case. This is a case of mistake, not limitation of authority.

[23] The motion judge concluded: “Like in Milios, I find that this is a case of a mistake, since the limitation on the agent’s authority was not known”. He listed a number of additional factors in the exercise of his discretion having to do with considerations of lack of prejudice to the defendant, significant financial prejudice to the plaintiff and the absence of prejudice to third persons. He stated that these factors outweighed the fact that the plaintiff “invested its agent with the appearances of having its authority to give settlement instructions to its solicitor..”. Accordingly, he exercised his discretion to refuse to enforce the settlement because it would be neither fair nor just to do so.

Standard of Review

[24] The standard of review of the decision of a motion judge who has decided a motion on the basis of a paper record was considered by the Court of Appeal in Carter v Brooks [^11] where Morden A.C.J.O. said that, as the case was not one where the judge had the advantage over the appellate court of seeing and hearing the witnesses, the appellant did not have the burden of establishing palpable and overriding error. He continued at paragraph 34:

An appeal, however, is not a rehearing which takes place as though there were not already a decision on the merits of the case. The judge’s decision is entitled to due respect and I think should not be set aside unless the appellant can show the court that the judge erred in his appreciation of the evidence, in the inferences he drew from the evidence, or in his application of the relevant legal principles.

[25] Professor James G. McLeod, in his annotation in the RFL report of the case, suggests that there is no appreciable lessening of the standard of review from that ordinarily applied. If the evidence reasonably supports the conclusions and the proper legal principles were applied, the appeal should fail.

[26] Equity Waste Management [^12] is an acknowledged leading case on appellate review of the evidence where it is wholly or largely in written form. Laskin J.A., for the court, reviewed recent authorities and concluded at paragraph 41, that even where no oral evidence has been heard, a judge’s findings are entitled to deference from reviewing courts: Carter, supra. Even though the traditional advantage of seeing and hearing the witnesses is absent, other important judicial policy considerations dictate the need for deference, or a “non-interventionist approach”.[^13] Laskin J.A. concluded, at paragraph 46, that an appellate court may interfere with a finding of fact if the trial judge or motion judge disregarded, misapprehended or failed to appreciate relevant evidence, made a finding not reasonably supported by the evidence, or drew an unreasonable inference from the evidence. I approach the present appellate review with this standard in mind.

Discussion

[27] The appellant submitted that orders refusing to enforce a settlement, while recognized by Rule 49.09 and the case law, are made only rarely and in exceptional circumstances. The general policy of the court is to enforce settlements even though “second thoughts arise or where unforeseen circumstances occur. Absent special circumstances, judgment will issue.”

[28] There is no disagreement, certainly not from me, that this is the general rule. However, the court has a discretion to exercise in order to see that justice is done. As in all cases of discretion, there is no fixed catalogue of circumstances that do, and those that do not suffice, and decisions of other cases on their specific facts do not govern the exercise of discretion in the present case. This discretion is exercised on a case by case basis and only rarely and in the presence of compelling circumstances.

[29] The appellant’s first attack was upon the quality of the evidence of Ms. Tsipeniuk, the only witness filing an affidavit for the plaintiff respondent. The motion judge was alive to the fact that there were others who might have been called and he made the ruling noted above that he would not draw an adverse inference because their evidence was equally available to the appellant defendant. In my view, that was a reasonable ruling in the circumstances, one of which is that the evidence of Ms. Tsipeniuk is rather better than the appellant asserts.

[30] The appellant asserts that Ms. Tsipeniuk’s affidavit is replete with hearsay. There is certainly some hearsay, but on the central facts she is generally on better ground. She is a unit owner in TCC366, a member of its Board and one of its representatives on the Recreation Centre Committee (RCC). She was personally present at the meetings she describes. Her description of the meeting of May 23 was acknowledged to be “more or less accurate” by the deponent for the appellant, Mr. Tartakovsky. She personally conducted the search of Mr. Cohen’s office that turned up the documents that had not been forwarded to the Boards or the Committee. While it is true that she was not a member of the Board of YCC102, the two Boards had continued the RCC for the purpose of managing the Centre. If neither the RCC nor her Board had received documents or been informed of the negotiations and the offer, matters as to which she had direct personal knowledge, it is no great leap to the conclusion that YCC102 didn’t have the information either.

[31] The appellant asserts that Ms. Tsipeniuk was not directly involved in the matter. This is manifestly not so. She was a member of the Committee to which Mr. Cohen reported and which had the authority to manage the Centre and the litigation. Her evidence was clear that they did not discuss with Mr. Cohen any role for him to manage the litigation. That they had appointed Cohen to manage the Centre does not in any way prevent her from giving evidence as to what she knew, didn’t know or learned from her investigation. If counsel for the appellant seriously doubted the evidence of Ms. Tsipeniuk that she and the other members of the RCC and the two Boards were unaware of the offer made on their behalf, it was open to him to cross-examine her and/or to summon one or more directors to speak to the point. In the absence of other evidence or cross-examination, there is no obstacle to the motion judge accepting at least those parts of her evidence as to which she had some knowledge, which encompasses the evidence he did accept. In particular, she was entitled to describe what was known by the Board and the Committee corporately, which was nothing about any settlement offer. That her evidence was not supported by extracts from minutes of meetings does not prevent the motion judge from accepting it, as he did.

[32] The appellant contends that the plaintiff/respondent conceded that the issue of whether Larry Cohen had authority to instruct Mr. Rubin to make the offer was not before the court on the motion. He relies on a passage from Ms. Tsipeniuk’s affidavit in which she explains that she has been made to understand that the issue of Cohen’s authority was mainly one between the corporation and Mr. Rubin and Mr. Cohen, “which are not of central concern to the court…”.[emphasis added] The appellant goes on to assert that this concession should be presumed to have been relied on by appellant’s counsel in preparing the case. Mr. Fine made an affidavit and he did not make the suggestion that he had relied on this passage. Further, there is nothing in the passage, when carefully read, to indicate that the issue is of no concern to the court; the issue is not withdrawn.

[33] Finally, the appellant relies on a passage in Sopinka [^14] that deals with Formal Admissions. These are described as “a concession made by a party to the proceedings that a certain fact or issue is not in dispute.” Formal admissions are “made for the purpose of dispensing with proof at trial” and when so made are conclusive. In footnote 1, the authors note other phrases describing formal admissions, including “express” or “judicial” or “solemn” admissions. It is perfectly clear that none of these descriptors applies to the passage from Ms. Tsipeniuk’s affidavit. She is not a party. She is not making the statement to dispense with proof, but to explain her understanding of matters. Vitally, she does not say that the issue is withdrawn or of no concern in the present case. The motion judge certainly did not so read it: he describes the very issue in the first paragraph of his reasons as the basis for the requested exercise of his discretion. I reject the submission that the issue was conceded. The motion judge was entitled to consider the issue of the authority of Mr. Cohen to give the instructions to Mr. Rubin.

[34] The appellant’s next submission was that the motion judge erred because the respondent had ample opportunity to correct the mistake and withdraw the offer before it was accepted. This submission is based upon the notions that Ms. Tsipeniuk had admitted receiving a copy of the offer before it was accepted; that the offer was discussed during the June 9th telephone conversation; and that there must have been a discussion about the offer among Rubin, Ms. Tsipeniuk and Cohen around June 9th and a decision not to withdraw the offer. None of these propositions is established by the evidence or found by the motion judge. The first has been discussed at length above and the evidence does not establish, nor did the motion judge find, that Ms. Tsipeniuk had seen the offer. The second supposes that the participants who did not know about the offer must have understood from the discussion that there was an existing formal offer from them on the table. The discussion about what was on the table, as reported in the evidence does not touch on that. Mr. Fine said that Mr. Rubin’s numbers were well beyond what was on the table, but he did not make it clear that the plaintiff had made an offer or had been the one to put the money on the table. In his cross-examination, Mr. Fine was explicit:

Q. 86. Did you ask him if the offer was off the table? A. We weren’t talking about the offer. We were having a conversation outside of the offer.

Q. 87. That wasn’t my question. Did you ask him? You told him “That is not my understanding of the number that was on the table”; you told him that. Did you ask him? A. We didn’t talk about the offer to settle, so I did not ask him and he did not raise it. We didn’t talk about it because the conversation was outside of the offer.

Q. 88. Your note says: “That is not my understanding of the number that was on the table.” Is that not a reference to the offer? A. It’s a reference to the number in the offer. We both knew that the offer was outstanding as well.

[35] The third proposition is pure speculation. Given that there had been no mention in the conversation of a formal offer from the plaintiff, there was no basis on which those who were unaware of it could raise the question of whether to withdraw it. Why Mr. Rubin and Mr. Cohen did not discuss the offer with Ms. Tsipeniuk is a mystery, but there is no evidence that they did, and hers is that they did not.

[36] The plaintiff’s Issue III begins with the statement: “Having held that the respondent invested its agent, Larry Cohen, with the appearance of having authority to give settlement instructions to the respondent’s solicitor, David Rubin; …”. I will discuss this preamble before dealing with the remainder of the submissions on Issue III. This preamble is based on the motion judge’s finding at page 7 of his reasons:

From the perspective of the respondent’s lawyer, I find that this agent [Cohen] spoke for the respondent. The respondent held him out as its agent for the purpose of its dealings with its lawyer. The limitation on the agent’s authority in that he did not have the authority to instruct the solicitor to make the offer, was not known either to the respondent’s lawyer or the applicant’s lawyer.

[37] It seems to me that the finding that the plaintiff “held Cohen out” to Mr. Rubin for the purpose of its dealings with its lawyer goes well beyond the evidence. Mr. Cohen was appointed to replace Mr. Kay who had been manager of the Centre and had also acted as the liaison between the RCC and its counsel, Mr. Rubin. There was no discussion with Mr. Cohen of any role in the lawsuit for him. However, Mr. Cohen himself told Mr. Rubin that he was taking over Sid Kay’s role and Mr. Rubin thereafter took instructions from him. There is no evidence that Mr. Rubin sought or received any confirmation from the RCC that he should take instructions from Mr. Cohen on matters so important as settlement. He appears to have relied on Mr. Cohen’s statement. In his reasons, the motion judge found that other factors outweighed this holding out, so that any further discussion of the point by him was unnecessary, as his result would not be altered. However, from my perspective, some analysis is necessary.

[38] In law, the statement of an alleged agent of his agency does not create agency where none exists. Estoppel arises from acts of the principal, not of the alleged agent: see Fridman: The Law of Agency 1996 at p. 114:

First there must be some statement or conduct on the part of the principal which can amount to a representation that the agent has authority to act on his behalf in the way he is acting. It was made clear by the Court of Appeal and the House of Lords in Armagas Ltd. v Mundogas SA [[1985] 3 All ER 795, 804 (CA); [1986] 2 All ER 385, 389 (HL)] that the relevant representation must come from the principal: it cannot come from the agent himself.

[39] Therefore, it seems to me that there is no foundation in the evidence or law for the finding that the plaintiff held Cohen out as its agent, unless the mere fact of his appointment as manager of the recreational facility had the effect of corroborating Mr. Cohen’s claim to be the agent for giving instructions to counsel. The motion judge did not consider the specific point in his reasons. Managers no doubt are persons of some importance, but the evidence of the money at stake in the litigation, the impact of the litigation on the Centre and the vehemence with which views were held and expressed all demonstrate that the litigation was not of the sort where it can safely be assumed that a functionary like Mr. Cohen, himself an occupant and owner of a unit, would have the authority to settle the case. This was no small case involving a debt to the Centre of a modest amount. This was a case involving the viability of the whole operation. I conclude that the mere appointment of Mr. Cohen as manager of the Centre did not carry with it any element of holding out Cohen as authorized to settle the case. In my view, on the facts of this case, “holding out” cannot be used as a reason for enforcing the settlement arrived at upon the instructions of one who was not the agent of the plaintiff to give such instructions.

[40] The appellant’s final points were whether the motion judge was bound to follow Scherer and therefore erred in following Milios instead. In the latter case, the court discussed the effect of Scherer in the following passage, cited by the motion judge here:

This court made it clear in [Scherer] that once the existence of an agent’s retainer is established any limitations on it will not affect a settlement if those limitations have not been communicated to the other side. In my opinion, however, this [Milios] is not a case where the plaintiff contends that the scope of his counsel’s settlement authority was limited. Instead, he contends that his counsel, who had general authority to settle the action, was given the wrong settlement message by the plaintiff’s wife with the result that the settlement agreed to was concluded by mistake. Thus I do not think that the statements in [Scherer] about the effect of limitations on an agent’s authority not communicated to the other side have application in this case. This is a case of mistake, not limitation of authority.

[41] I agree with the motion judge that this case involves a mistake, as did Milios. There is in this case no issue as to the general authority possessed by Mr. Rubin as counsel to settle the case. The problem does not arise from any limitation on his authority and there was nothing to communicate to the other side. The problem arises because Mr. Rubin mistakenly believed that he had received instructions from his client to settle on the terms he proposed and which were accepted. The evidence is clear and uncontradicted that the plaintiff never gave those instructions. The person Mr. Rubin believed to be the messenger gave him a wrong message.

[42] The motion judge recognized that finding a mistake was not the end of the analysis. He referred to, and made findings that there would be no prejudice to the applicant/defendants apart from the loss of their bargain; that no third parties would be prejudiced by a refusal to enforce; but that the plaintiff would be prejudiced by significant financial prejudice and by an unintended compromise of its rights, if this mistake is enforced against it. On this basis, he exercised his discretion to decline to enforce the settlement.

[43] It is important to observe that this is not a case of a change of heart or a reconsideration. The plaintiff did not give instructions to settle and then realize it had acted foolishly, or had failed to appreciate some unexpected consequence. This plaintiff never gave these instructions to anyone.

[44] For these reasons, I would dismiss the appeal. Costs to be the subject of written submissions to include costs of the summary judgment motion. It being vacation season, the parties shall submit their costs submissions in writing as soon as conveniently possible.

Lane J.

Linhares De Sousa J.

DATE:

• By direction of the Chief Justice, Matlow J. took no part in the preparation of these reasons.

[^1]: Exhibit Book, p. 53. [^2]: Affidavit of Ms. Tsipeniuk, Appeal Book, page 33, paragraph 9. [^3]: Ibid. para. 10 and 12; Supplementary affidavit of Ms. Tsipeniuk, Appeal Book, tab 11. [^4]: Affidavit of Ms. Tsipeniuk. para. 26 [^5]: Ibid. paras. 28-30 [^6]: Exhibit Book Tab 3, sub-tab M, page 179 [^7]: Affidavit of J. Fine, Exhibit Book Tab 3, paragraph 53 [^8]: Transcript of Cross-examination of J. Fine, Exhibit Book, tab 13, QQ 60 to 81. [^9]: Scherer v Paletta (1966), 1966 286 (ON CA), 2 O.R. 524 (C.A.) [^10]: Milios v Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3rd) 218 (C.A.) [^11]: Carter v Brooks (1990), 1990 2623 (ON CA), 2 O.R. (3rd) 321 (C.A.); 30 R.F.L. (3rd) 53. [^12]: Equity Waste Management of Canada Corp. v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3rd) 321(C.A.) [^13]: Per Wilson J. in Goodman Estate v. Geffen (1991), 1991 69 (SCC), 81 D.L.R. (4th) 211 at 236 (S.C.C.); see also Schwartz v. R., 1996 217 (SCC), [1996] 1 S.C.R. 254 at 278-9. [^14]: Sopinka, Lederman and Bryant: The Law of Evidence in Canada, 2nd ed., 1999, page 1051.