COURT FILE NO.: CV-10-3831-00
DATE: 20120319
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: NORMERICA INC. and NORTHDOWN INDUSTRIES INC. - and - ECHO GLOBAL LOGISTICS, INC.
BEFORE: LEMON J.
COUNSEL: J. Tausendfreund, for the Plaintiffs D. Foulds and B. Barnes for the Defendant
E N D O R S E M E N T
The Issue
[1] The issue to be determined in this motion is whether various parts of the Defendant’s, Plaintiff by Counterclaim’s, affidavit should be struck as privileged, being part of settlement negotiations between the parties. At the end of argument, I advised counsel that I would not strike the evidence and would provide written reasons. These are those reasons.
Background
[2] The Defendant, Echo, provided logistical management and transportation to the Plaintiffs, Normerica. Normerica claims damages arising from Echo’s alleged breach of contract. Normerica claims damages for lost opportunity, disparagement, and a variety of setoffs and adjustments relating to accounts between the parties. They plead damages totalling $2.5 million dollars. Echo denies that breach of contract and counterclaims for approximately $2.6 million for services rendered to Normerica.
[3] Echo has moved for summary judgment based on the accounts apparently agreed upon between the two parties. Normerica denies that they owe anything to Echo once all of the claims have been adjudicated. That issue is for another day.
[4] In its motion for summary judgment, Echo filed the affidavit of its Chief Financial Officer. Normerica moves to strike the following from the Notice of Motion:
During subsequent negotiations to resolve the Plaintiffs’ failure to pay, the Plaintiffs acknowledged that they owed Echo at least CDN $1,070,558.80 on account of shipments originating in Canada, and at least US $703,096.26 on account of shipments originating in the United States.
Rather than pay Echo the amounts which they acknowledged to be owing, and continue discussions aimed at resolving remaining disputed amounts, the Plaintiffs – without warning – commenced this Action.
The Plaintiffs have continued to refuse to pay Echo even those amounts which the Plaintiffs have previously acknowledged are owing, notwithstanding the fact that Echo has been obliged to pay those carriers who transported the shipments to which Echo’s unpaid invoices relate.
None of the damages claimed in the Plaintiffs’ amended statement of claim may be set-off against the Plaintiffs’ obligation to pay to Echo at least those amounts which the Plaintiffs have acknowledged to be due and owing in respect of services rendered.
[5] Normerica also seeks to strike the following from Echo’s supporting affidavit:
In September 2010, the parties commenced attempts to negotiate a resolution of the Plaintiffs’ unpaid invoices. Echo participated in these discussions in good faith with the goal of reaching an agreement with the Plaintiffs for the payment of the outstanding amounts.
On or about October 13, 2010, the Plaintiff’s provided Echo with two Excel spreadsheets which they claimed reflected a reconciliation of their own records with those that Echo had previously provided.
In an Excel spreadsheet prepared by the Plaintiffs relating to outstanding invoices for shipments originating in Canada (The “Canada Spreadsheet”), the Plaintiffs disputed CDN $252,540.20 out of a total of CDN $1,323,099.00 that has been recorded on the Canada spreadsheet as having been invoiced by Echo. This left the sum of CDN $1,070,558.80 which the Plaintiffs acknowledged was due and owing to Echo on account of Canada-originating shipments. A copy of the Canada Spreadsheet is attached as Exhibit “F” of this Affidavit.
In an Excel spreadsheet prepared by the Plaintiffs relating to invoices for shipments originating in the United States (The “US Spreadsheet”), the Plaintiffs disputed US $620,085.94 out of a total of US $1,323,182.15 that has recorded on the US spreadsheet as having been invoiced by Echo. This left the sum of US $703,096.26 which the Plaintiffs acknowledged was due and owing to Echo on account of US-originating shipments. A copy of the US Spreadsheet is attached as Exhibit “G” of this Affidavit.
The amounts in dispute fell into four broad categories: (1) discrepancies between the rates charged for certain shipments by Echo and the rates which the Plaintiffs claimed should have been charged for those shipments, (ii) fines for late shipments for which the Plaintiffs claimed Echo should be responsible, (iii) invoices for shipments for which the Plaintiffs claimed they could not identify purchase orders, and (iv) a dispute relating to whether the Plaintiffs were entitled to a volume rebate under the terms of the Agreement.
To Echo’s complete surprise, however, rather than commit to paying the amounts which they acknowledged were owing and continuing our discussions aimed at resolving the remaining disputes, the Plaintiffs decided to launch this Action in Ontario without any notice or warning to Echo.
Notwithstanding the fact that they have admitted that they owe Echo at least $1,750,000, the Plaintiffs have refused to pay any monies to Echo on account of such indebtedness.
To the present date, I am aware of no reasons other than those set out in the amended statement of claim in this action for the plaintiffs’ continued refusal to pay at least those amounts which it admits are owed to Echo on account of invoices rendered and unpaid.
[6] Normerica states that the various paragraphs describe without prejudice settlement communications. As such, they should not be put before the Court on the motion. In support of that, the Plaintiffs have filed the affidavit of the Executive Vice-President of Normerica. The important parts of his affidavit are as follows:
I say and believe to be true that the Plaintiff put the Defendant on notice of its intention to pursue available legal remedies by letter dated August 26, 2010. A true copy of which is attached as Exhibit D.
By my review, the Defendant responded to the notice letter of August 26, 2010 by email dated August 27, 2010 in which the Defendant alleged breach of contract by the Plaintiff. A true copy of which is attached as Exhibit E.
Nonetheless, on behalf of the Plaintiff, I took part in settlement discussions with the Defendant after August 26, 2010 on the footing that such negotiations were without prejudice. At no time did the Plaintiff agree to the disclosure of any settlement discussions and objects to same.
I have reviewed the assertions at paragraphs 6, 7, 8 and 9 of the Defendant’s Notice of Motion. These paragraphs speak to settlement discussions without proper reference to the context in which agreements aimed at avoiding litigation were being considered by both parties. A true copy of the Notice of Motion is attached as Exhibit F.
I say and believe to be true that all or parts of paragraphs 6, 7, 8 and 9 of the Defendant’s Notice of Motion are prejudicial and should be struck prior to the hearing of the summary judgment motion.
I say and believe to be true that all of parts of paragraphs 14, 15, 16, 17, 18, 20, 21 and 23 of the affidavit of David Menzel, sworn December 2, 2011, also speak to settlement discussions without proper reference to the context in which agreements aimed at avoiding litigation were being considered by both parties.
[7] The only other evidence that Normerica relies upon to show the context of the alleged settlement negotiations, is the affidavit of Echo:
In September 2010, the parties commenced attempts to negotiate a resolution of the Plaintiffs’ unpaid invoices. Echo participated in these discussions in good faith with the goal of reaching an agreement with the Plaintiffs for the payment of the outstanding amounts.
On or about October 13, 2010, the Plaintiffs provided Echo with two Excel spreadsheets which they claimed reflected a reconciliation of their own records with those that Echo had previously provided.
[8] However, I note Echo’s further description of the context:
The whole character of the discussion between Echo and Normerica at this time was, simply, to arrive at a position wherein Normerica’s assertions of its entitlement to adjustments were specified in relation to our outstanding invoices. Throughout this time, my understanding was that Normerica accepted a balance was outstanding to Echo.
Normerica provided the charts attached at Exhibits F and G of my affidavit of 2 December 2011 (the Charts”) in this spirit. From August to October 2010, Echo and Normerica were in the process of reconciling our accounting. I attach the covering email which accompanied Normerica’s provision of the Charts as Exhibit “B”.
[9] Exhibit B to the affidavit is an email from Normerica Echo dated October 13, 2010, that states: “Hi Dave, This is the CDN reconciliation as promised; I will be travelling on business and will be joining in the conference calls and responding to all mails as much as possible. Thank you.”
Legal Issues
[10] The Plaintiff relies upon Interleasing Inc. v. Ontario (Minister of Finance), 2009 CanLII 63595 (ON SCDC), [2009] O.J. No. 4714 and submits that three conditions must be present for settlement privilege to apply:
(1) A litigious dispute must be in existence or within contemplation.
(2) The communication must be made with the express or implied intention that it would not be disclosed in a legal proceeding in the event negotiations failed.
(3) The purpose of the communication must be to attempt to effect a settlement.
[11] I am satisfied that given the circumstances of this case, it is arguable that a litigious dispute was in existence or within contemplation. I need not deal with that issue as the moving party has failed to satisfy the two further requirements for privilege to apply.
[12] Normerica’s representative simply makes the bald statement that settlement negotiations were ongoing. There is no evidence of an express intention that the communication would not be disclosed. Any implied intention is belied by Exhibit B. Normerica’s letter shows that this was simply a matter of accounting. From a review of the spreadsheets, many items are in agreement. From the context that I have, the agreed amounts are not part of the issue to be resolved between the parties. There may well be litigation arising from the items that are not agreed upon.
[13] Counsel for the plaintiff implores the court to conclude that it “defies common sense” that anyone would produce that information unless it was without prejudice. That is a far more cynical approach to business than I hold. The reason that a businessman would produce the various accounting records should be to show the items that are agreed upon between the two contracting parties and those upon which they do not agree. There is nothing in the materials before me to suggest any compromise of a position that should be privileged. Rather, this is a simple accounting and comparison of records. The “litigious dispute” appears to be contained within the invoices that are not agreed upon and the present claim by Normerica.
[14] Accordingly, the motion is dismissed. I leave it to the judge hearing the summary judgement motion to determine the appropriate weight to be placed on this evidence within the entire dispute between the parties.
[15] Submissions on costs followed and for reasons given at that time, Echo is entitled to its costs fixed in the amount of $5,000.00 payable at the time of resolution or trial.
[16] The summary judgment motion is adjourned to August 1, 2012 at 10:00 a.m. for two hours.
Lemon J.
DATE: March 19, 2012
COURT FILE NO.: CV-10-3831-00 DATE: 20120319
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: NORMERICA INC. and NORTHDOWN INDUSTRIES INC. - and - ECHO GLOBAL LOGISTICS, INC.
BEFORE: LEMON J.
COUNSEL: James Tausendfreund, for the Plaintiffs David Foulds, for the Defendant
ENDORSEMENT
Lemon J.
DATE: March 19, 2012