Capital Gains Income Streams Corp. et al. v. Merrill Lynch Canada Inc.

Indexed as: Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc.

87 O.R. (3d) 464

Ontario Superior Court of Justice, Divisional Court, Carnwath J. September 25, 2007

Civil procedure -- Settlement -- Motion judge dismissing motion under rule 49.09 for order that settlement had been reached -- Leave to appeal denied -- Motion judge properly applying Rule 20 test to evidence before him in determining whether settlement had been reached -- No conflicting decisions existing on whether Rule 20 approach applies to first step of analysis under rule 49.09 -- No good reason existing to doubt correctness of motion judge's decision -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20, 49.09.

The plaintiffs brought a motion pursuant to rule 49.09 of the Rules of Civil Procedure for an order that the parties had reached a settlement. The motion judge found that he could not say one way or another if a settlement had been reached, and dismissed the motion. The plaintiffs appealed to the Court of Appeal. The appeal was dismissed for lack of jurisdiction, as the order appealed from was interlocutory. The plaintiffs applied for leave to appeal the motion judge's decision to the Divisional Court.

Held, the application should be dismissed.

There are no conflicting cases on the applicability of a Rule 20 approach to the first step of the analysis under rule 49.09, i.e., the determination as to whether a settlement has been reached. In considering whether a settlement has been reached, the proper approach is to treat the motion like a Rule 20 motion for summary judgment. The motion judge applied a Rule 20 test to the evidence before him. He was entitled to come to that decision. There was no reason to doubt its correctness.

APPLICATION for leave to appeal dismissal of a motion for an order that settlement had been reached.

Cases referred to

Bayersiche Landesbank Girozentrale v. R.S.W.H. Vegetable Farmers Inc. (2001), 2001 28050 (ON SC), 53 O.R. (3d) 374, [2001] O.J. No. 745 (S.C.J.); Brzozowski v. O'Leary, [2004] O.J. No. 3230, 2004 CarswellOnt 3178 (S.C.J.); Chan v. Lam, 2002 44912 (ON CA), [2002] O.J. No. 1096, 157 O.A.C. 264, 24 R.F.L. (5th) 327 (C.A.) [Leave to appeal to S.C.C. dismissed [2002] S.C.C.A. No. 245]; Homewood v. Ahmed, [2003] O.J. No. 4677, 42 C.P.C. (5th) 291 (S.C.J.); Legault v. Johnston, [2004] O.J. No. 107, 128 A.C.W.S. (3d) 257 (S.C.J.); Milios v. Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3d) 218, [1998] O.J. No. 812, 18 C.P.C. (4th) 13 (C.A.); Royal Bank of Canada v. Central Canadian Industrial Inc., 2003 41411 (ON CA), [2003] O.J. No. 5251, 180 O.A.C. 275, 128 A.C.W.S. (3d) 45, 2003 CarswellOnt 5214 (C.A.); Vanderkop v. Manufacturers Life Insurance Co., 2006 28085 (ON CA), [2006] O.J. No. 3307, 40 C.C.L.I. (4th) 180 (C.A.), affg (2005), 2005 39686 (ON SC), 78 O.R. (3d) 276, [2005] O.J. No. 4661, 33 C.C.L.I. (4th) 93 (S.C.J.); Weinberg v. Datacom Marketing Inc., [2006] O.J. No. 289, 2006 CarswellOnt 377 (S.C.J.)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20 [as am.], 49.09, 62.02 [as am.] [page465]

R.G. Slaght, Q.C. and Paola Calce, for plaintiffs. James G.D. Douglas and Angela Vivolo, for defendant.

[1] Endorsement by CARNWATH J.: -- The parties negotiated to try and settle litigation between them. Following negotiations, the Moving Parties ("plaintiffs") moved before Cumming J., pursuant to rule 49.09 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194], for an order that a settlement had been reached.

[2] Rule 49.09 provides:

49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may,

(a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; or

(b) continue the proceeding as if there had been no accepted offer to settle.

[3] Cumming J. dismissed the motion, finding he could not say one way or another if a settlement had been reached.

[4] The Moving Parties appealed to the Court of Appeal, both sides submitting Cumming J.'s order was final.

[5] The majority in the Court of Appeal, Doherty and Juriansz JJ.A., found Cumming J.'s order to be interlocutory. [See Note * below] Therefore, the Court of Appeal had no jurisdiction to hear the matter. The majority found the existence of a settlement remained an open question in the litigation, subject to any motion brought in the Divisional Court to seek leave to appeal Cumming J.'s decision.

[6] The Moving Parties now seek leave to appeal Cumming J.'s decision. The motion is denied.

[7] Pursuant to rule 62.02(4)(a), the Moving Parties submit there are conflicting decisions on the application of rule 49.09. With respect, I disagree.

[8] The submissions fail to recognize the two-step analysis required when construing rule 49.09 and its application in the reported cases. [page466]

[9] The first step is to consider whether an agreement to settle was reached. In doing so, the proper approach is to treat the motion like a Rule 20 motion for summary judgment. If there are material issues of fact or genuine issues of credibility in dispute regarding whether (i) the parties intended to create a legally-binding relation or (ii) there was an agreement on all essential terms, a court must refuse to grant judgment. (Bayersiche Landesbank Girozentrale v. R.S.W.H. Vegetable Farmers Inc. (2001), 2001 28050 (ON SC), 53 O.R. (3d) 374, [2001] O.J. No. 745 (S.C.J.))

[10] The second step, once an agreement has been found to exist, is to consider whether, on all the evidence, the agreement should be enforced. In this second step, a Rule 20 approach is not applied, but rather a broader approach, taking into account evidence not relevant to a Rule 20 inquiry.

[11] Thus, Osborne J.A. is reported in 1998 [at p. 233 O.R.]:

In determining whether to enforce a settlement under rule 49.09 all of the relevant factors disclosed by the evidence must be taken into account. When that is done, an appellate court will not generally interfere with the motions judge's decision to grant, or not grant, judgment in accordance with an accepted offer. . . .

(Emphasis added)

(Milios v. Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3d) 218, [1998] O.J. No. 812 (C.A.))

[12] The Moving Parties cite several cases as authority for the proposition that a Rule 20 approach does not apply to the first step analysis of rule 49.09. None of the cases cited are authority for this submission. Each of the cases cited recognize the broader approach to the evidence required in the second step, nothing more. Already noted is Milios v. Zagas, above.

[13] The cases cited by the Moving Parties include: Brzozowski v. O'Leary, [2004] O.J. No. 3230, 2004 CarswellOnt 3178 (S.C.J.); Homewood v. Ahmed, [2003] O.J. No. 4677, 42 C.P.C. (5th) 291 (S.C.J.); Weinberg v. Datacom Marketing Inc., [2006] O.J. No. 289, 2006 CarswellOnt 377 (S.C.J.); Legault v. Johnston, [2004] O.J. No. 107, 128 A.C.W.S. (3d) 257 (S.C.J.); Vanderkop v. Manufacturers Life Insurance Co. (2005), 2005 39686 (ON SC), 78 O.R. (3d) 276, [2005] O.J. No. 4661 (S.C.J.); Royal Bank v. Central Canadian Industrial Inc., 2003 41411 (ON CA), [2003] O.J. No. 5251, 2003 CarswellOnt 5214 (C.A.); and Chan v. Lam, 2002 44912 (ON CA), [2002] O.J. No. 1096, 24 R.F.L. (5th) 327 (C.A.) [Leave to appeal dismissed [2002] S.C.C.A. No. 245].

[14] In Brzozowski v. O'Leary, above, Misener J. cites Milios v. Zagas, above [at paras. 43 and 44]:

As for the case law bearing on the manner in which the judge should exercise his discretion, it is sufficient for me to cite Milios v. Zagas, 1998 7119 (ON CA), [1998] O.J. No. 812 (C.A.) and Fox Estate v. Stelmaszyk, 2003 36922 (ON CA), [2003] O.J. No. 2619 (C.A.). [page467]

Those judgments emphasize the judicial obligation to consider all of the circumstances of the case at hand, and to then decide whether it is fair to enforce the settlement. Although I risk unduly limiting my discretion by saying so, I think the right approach is to consider that a settlement effected pursuant to Rule 49 ought to be enforced, and so judgment ought to be granted, unless the offeror satisfies the judge that, in all the circumstances, enforcement would create a real risk of a clear injustice. It seems to me that the approach is required because it is good public policy to encourage settlement, and it would be quite inconsistent with that policy to decline enforcement unless a good reason for doing so is shown.

[15] At para. 45, in Homewood v. Ahmed, above, Belleghem J. cited Milios v. Zagas, above:

This is not a summary motion for judgment. However, in these circumstances I see no reason why the plaintiff should not be required to "put his best foot forward". The consequences of failure to do so are the same. Assuming, therefore, that he has done so, there is simply no "triable issue", at least vis-à-vis the defendants.

It is clear to me that Belleghem J. applied a Rule 20 approach to the first step analysis.

[16] In Weinberg v. Datacom Marketing Inc., above, Lederman J. is reported at para. 12:

In determining whether to enforce a settlement under Rule 49.09, all of the relevant factors disclosed by the evidence must be taken into account.

[17] In Legault v. Johnston, above, the only issue was a consideration of the second step, that is, the exercise of the discretion vis-à-vis enforcement.

[18] In Vanderkop v. Manufacturers Life Insurance Co., above, Sproat J. accurately described the two-step process in paras. 16 and 17:

My observation, which Mr. Petker agreed with, was that signed Minutes of Settlement were not within Rule 49 as there had been no exchange of a written offer and acceptance and, as such, this was really a motion for judgment. Mr. Petker agreed with this approach and agreed I should decide the case, on the current materials, as if it was a motion for judgment.

The Rule 49 discretion as to whether to grant judgment remains relevant, however, as the cases indicate it is comparable to the pre-Rule 49 discretion applicable to motions for judgment based upon Minutes of Settlement.

[19] In Royal Bank v. Central Canadian Industrial Inc., above, the majority was dealing only with the second step analysis and cited Milios v. Zagas, above, at paras. 10 and 11:

Under rule 49.09, the court has a discretion to grant judgment in the terms of the accepted offer or direct that the proceedings continue as if there had been no accepted offer to settle: see Milios v. Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3d) 218 (C.A.). The appellant did not request the motions judge to direct that the proceedings continue. However, the rule does not seem to require that a [page468] party request the court to send the matter to trial. It was an alternative that was open and not considered by the motions judge. It should also be noted that the appellant was self-represented.

There are troubling aspects to the evidence in this case and, in the words of this court in Fox Estate v. Stelmaszyk (2003), 2003 36922 (ON CA), 173 O.A.C. 378 (C.A.), it does not satisfy our sense of justice to enforce the settlement in those circumstances. We conclude that we should exercise the discretion under rule 49.09 and direct that the proceeding continue as if there had been no accepted offer to settle.

[20] In Chan v. Lam, above, a rule 49.09 motion, the appellant submitted that if Rule 20 were applied, there would have been a genuine issue for trial. Weiler J.A. found that had it been a Rule 20 motion, the motions judge would have been entitled to grant summary judgment. I conclude her finding confirms the application of Rule 20 considerations to the first step analysis of rule 49.09.

[21] For the foregoing reasons, I find no conflicting decisions.

[22] Pursuant to rule 62.02(4)(b), the Moving Parties submit there is good reason to doubt the correctness of Cumming J.'s decision. I am invited to take into account the reasons of Laskin J.A. which found Cumming J.'s decision "unreasonable". On any analysis of stare decisis, I am not bound by this conclusion.

[23] In para. 23, Doherty J.A., writing for the majority, is reported:

I think the motion judge dismissed the motion for judgment in the terms of the settlement agreement because he was unable to determine whether there was in fact a settlement agreement. As he could not conclude there was "an accepted offer to settle", he had no authority to make an order under either rule 49.09(a) or 49.09(b) and should have simply dismissed the motion. In essence, and despite the reference at one point in his reasons to the language of rule 49.09(b), I think that is what the motion judge did.

Further, at para. 32:

. . . The question of whether or not there was a settlement agreement remains a live issue in this proceeding. That, of course, does not foreclose the appellants from pursuing their appellate remedies in the Divisional Court should they choose to do so.

[24] I conclude I am not bound by these pronouncements, particularly where they are found in a decision which concludes the Court of Appeal has no jurisdiction to hear the matter.

[25] I take the view that if leave were granted, a panel of the Divisional Court would be free to find a settlement was reached or that a settlement was not reached. In either case, that would be a final order on the question of the existence of a settlement. It [page469] would also be open to the panel to conclude, as did Cumming J., that it was unable to find whether there was a settlement agreement. I base these conclusions on the sentence found in para. 32: "[T]hat, of course, does not foreclose the appellants from pursuing their appellate remedies in the Divisional Court should they choose to do so." The direction that a settlement agreement remains a live issue is subject to a decision of the Divisional Court panel to the contrary, were leave to be granted.

[26] Therefore, with respect, it is not necessary to consider the findings of the majority as they might bear on the correctness of Cumming J.'s decision, even though those findings were necessary to support the conclusion that the Court of Appeal had no jurisdiction.

[27] Shortly put, Cumming J. applied a Rule 20 test to the evidence before him and concluded he could not say there was a settlement, nor could he say there was not. An experienced judge considered the evidence, heard the submissions of counsel and was unable to resolve the matter, one way or another. He was entitled to come to such a decision. I find no reason to doubt its correctness. The question of whether a settlement agreement was reached remains a live issue in the proceeding.

[28] The motion for leave to appeal is dismissed.

[29] If the parties cannot agree on costs, they may within 15 days make brief written submissions limited to three pages.

Application dismissed.

Notes

Note *: [Editor's note: The judgment of the Court of Appeal can be found at p. 443, supra.]