COURT FILE AND PARTIES

COURT FILE NO.: 12-34639
DATE: 2012-06-12
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: IN THE MATTER OF THE ESTATE OF ALEKSA (ALEX) GALEVSKI, deceased

BEFORE: The Honourable Robert B. Reid

COUNSEL:
B. Yellin, Counsel, for the Objector (Moving Party)
P. Callahan, Counsel, for the Estate Trustee (Responding Party)

HEARD: May 29, 2012

ENDORSEMENT

Introduction:

[ 1 ] Alex Galevski died in April 2007. He had two sons. One is the estate trustee. The other is the residual beneficiary.

[ 2 ] As too often happens, bad blood has come between the brothers. Information about the estate was not readily forthcoming from the trustee. The beneficiary has challenged the trustee’s handling of the estate in a contested passing of accounts.

[ 3 ] Offers to settle were made by the beneficiary. The third was dated March 2, 2012. It was in clear terms. The trustee accepted it unequivocally by letter dated April 10, 2012, but the beneficiary has subsequently denied that a binding settlement was made.

[ 4 ] This motion involves the single issue of whether or not an enforceable settlement occurred when the trustee accepted the March 2 offer.

[ 5 ] To resolve the issue, two questions must be answered:

a. Was the offer open for acceptance on April 10, 2012?

b. In the circumstances, even if the offer was open and accepted, should this court exercise its discretion not to enforce the settlement?

Was the offer open for acceptance?

[ 6 ] The offer stated that unless withdrawn in writing at an earlier time, it was open for acceptance until 5 minutes after “the commencement of the hearing of the Application to Pass Accounts.”

[ 7 ] In a trial, it is commonly understood that the trial commences when evidence begins to be heard, rather than at some preliminary step in the litigation. [^1] Some cases suggest that the trial commences when the judge is present and prepared to hear the matter on its merits. [^2]

[ 8 ] In my view, a better position is to consider that the trial begins when the trier of fact is seized with the matter so that a trial on the merits can commence.

[ 9 ] There is less guidance in applications (as opposed to trials) as to when the hearing begins. This is because, at least in part, there is no clear demarcation in an application between preliminary matters and the actual hearing. For example, when an application is issued, a fixed return date is named. Often there are subsequent adjournments for procedural matters such as cross-examination on affidavits. The beneficiary argues that each time the application comes before a judge, the application is “heard”.

[ 10 ] In this case, several procedural orders were made dated September 8, 2011, February 14, March 20 and April 2, 2012. On each occasion, the matter was adjourned. According to the standard preamble used in the orders, the application was “heard” each time. The most recent order traversed the matter from Brampton to Hamilton to enable an expedited hearing of the dispute.

[ 11 ] I find that the application was not actually heard on any of those preliminary dates since at no time was the application dealt with on its merits, nor was any judge seized of the matter.

[ 12 ] The beneficiary argued that the power to adjourn an application set out in Rule 38.10(1)(a) includes the presumption that the application is heard whenever it comes to court. I consider, however, that the rule is not helpful to resolve the issue in this case, in that it defines powers available to the court once the application is heard, which begs the initial question.

[ 13 ] As a result, I find that offer was open for acceptance on April 10, 2012. It had not been withdrawn in writing. The terms of the offer, drafted by the beneficiary, were clear. There was an acceptance of the outstanding offer on April 11, 2012 when the April 10 letter from the trustee was received by the beneficiary.

[ 14 ] I am satisfied that there was an agreement to settle based on the accepted offer. In coming to this result, I have used the analysis applicable in a rule 20 motion for summary judgment and consider that I have been able to achieve a full appreciation of the evidence and issues sufficient for me to conclude that there is no genuine issue requiring a trial.

Should the accepted offer be enforced?

[ 15 ] Rule 49.09 contemplates the bringing of a motion for judgment in terms of the accepted offer as the trustee has done in this case. It provides that the judge may grant judgment accordingly. The obvious alternative is that in a proper case, the judge has the discretion not to grant judgment.

[ 16 ] The Ontario Court of Appeal has directed that in determining whether or not to enforce a settlement under rule 49.09, the court must take into account all relevant factors disclosed by the evidence. [^3] These include whether or not the offer was clear and unequivocal, whether or not a mistake was made, the reasonableness of the settlement, the degree of prejudice to either party if the settlement is or is not given effect and the effect of the settlement on third parties if the settlement is not enforced.

[ 17 ] The making of a rule 49 offer to settle is one example of the policy found in various components of the rules to foster settlement. Consensual resolution of disputes is to be encouraged, and supported by enforcement except in special circumstances. I agree with the comments of Misener J. in Brzozowski v. O’Leary [^4] , approving of the Milios v. Zagas [^5] reasoning, that:

…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.

[ 18 ] The beneficiary submits that the offer should not be enforced because he thought it would have expired on the date the matter was set for peremptory hearing, namely March 20, 2012. The expiry of the offer on that date would have meant that the beneficiary would not have had to bear additional costs beyond those contemplated in the offer. As well, the beneficiary submits that the offer was based on information provided by the trustee up to the date of the offer, which information had changed by the date of acceptance.

[ 19 ] Considering the offer against the criteria endorsed by the Court of Appeal in Milios v. Zagas ^6 , the offer was clear and unambiguous. It appears to have contemplated the payment of all monies to which the beneficiary believed he was entitled together with the payment of legal fees. There is no effect on third parties regardless of whether the settlement is enforced or not.

[ 20 ] The beneficiary argues that it would be unfair to enforce a settlement which was based on incomplete information from the trustee, allowing the trustee to benefit from his own failure to disclose. Particulars of the increased entitlement of the beneficiary are not detailed, but the subsequent offer made by the beneficiary dated April 16, 2012 included an increase in the beneficiary’s entitlement by a modest $1,334. Therefore, while the fairness argument is compelling in the abstract, it is less so when the quantum attached to the failure to disclose is considered.

[ 21 ] In the Milios ^7 case, there was a clear mistake in communications between the plaintiff and his spouse which led to the acceptance of the offer. Here, by comparison, the alleged mistake by the beneficiary was in believing that his offer had been implicitly withdrawn when the matter came before the court on March 20, 2012. As noted above, the offer was not formally withdrawn, although that could have happened at any point prior to acceptance by the trustee. The main effect of the alleged mistake is that both the estate and the beneficiary incurred additional fees on and since March 20 in pursuing the litigation which were not dealt with in the offer.

[ 22 ] Clearly, the additional costs incurred by the beneficiary created the major dispute following the acceptance of the March 2 offer. This point is made clear in the April 16 offer in which the only change other than the noted addition to the beneficiary’s entitlement was $13,000 in further costs. The beneficiary’s loss of the ability to claim additional costs and the related potential jeopardy of the estate for those costs is the main prejudice that would follow from either the enforcement or the failure to enforce the settlement.

[ 23 ] There is no dispute that the beneficiary had the intention of creating a binding contract when the offer was made, and no dispute that the trustee had a similar intention when the offer was accepted. An inquiry into the subjective intention or actual state of mind of the parties is not proper if the essential terms of the agreement are clear. This proposition is consistent with basic contract law principles and reflects the analysis of the Ontario Court of Appeal in Olivieri v. Sherman . [^8] Therefore, I find that the beneficiary’s unexpressed understanding about the implied withdrawal of the offer is not sufficient to persuade me that I should decline to enforce the agreement.

[ 24 ] As a result, I find that the accepted offer should be enforced. This is consistent with the policy to which reference has been made that settlements are to be encouraged and enforced in normal circumstances. I have not been persuaded that enforcement of the offer will create a clear injustice. As a result, the motion by the trustee is granted.

[ 25 ] If the parties are unable to resolve the issue of costs consensually, the matter of costs can be scheduled to be spoken to on a regular motions list. Alternatively, if the parties do not agree to deal with the matter orally, I am prepared to receive written submissions according to the following timetable: the trustee is to provide to the beneficiary a bill of costs together with brief written submissions within two weeks of this date. The beneficiary is then to provide to the trustee his submissions within a further two weeks. The submissions of the trustee and the beneficiary are then to be filed with the court together with any reply submissions by the trustee by no later than five weeks from this date.

Reid J.

Date: June 12, 2012

[^1]: For example: Jonas v. Barma , [1987] O.J. No. 2344 (Dist. Ct.) ; Capela v. Rush , 2002 49470 (ON SC) , [2002] O.J. No. 1527 (S.C.J.)

[^2]: For example: Bontje v. Campbell, Roy, and Brown Insurance Brokers Inc ., 1994 7356 (ON SC) , [1994] O.J. No. 3025 (O.C.G.D.) at paras. 9-11 , and T.G. v. Childrens’ Aid Society of Ottawa , [2011] O.J. No. 2301 (Div. Ct.) at para. 7 .

[^3]: Milios v. Zagas , 1998 7119 (ON CA) , [1998] O.J. No. 812 (C.A.) at para. 19

[^4]: [2004] O.J. No. 3230 (S.C.J.) at paras. 43 and 44

[^5]: Supra ., fn 3

[^8]: 2007 ONCA 491 , [2007] O.J. No. 2598 at par. 41 - 45