COURT FILE NO.: FS-11-370409

DATE: 2012/11/14

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Sante Centorame, Applicant

AND:

Mary Centorame, Respondent

BEFORE: Herman J.

COUNSEL:
Maurice J. Neirinck , for the Applicant
Craig C. Colraine, Jacqueline Y. Peeters , for the Respondent

HEARD: October 22, 2012

ENDORSEMENT

[ 1 ] This is a motion by the respondent, Mary Centorame (“Mary”), to enforce a settlement. The applicant, Sante Centorame (“Sandy”), takes the position that there is no settlement. In the alternative, if there is a settlement, he submits that it would be unfair, unconscionable and unjust to enforce it in the circumstances.

[ 2 ] At issue is the impact of two events on the enforceability of the parties’ agreement: the delivery of a Notice of Termination by a major customer, between the time of Sandy’s offer to settle and the time of Mary’s acceptance of the offer; and the subsequent loss of that customer.

[ 3 ] Sandy submits, firstly, that there was no offer that was open to Mary to accept because the object of the offer to settle, that is, the business owned by the parties, was fundamentally different as a result of the customer’s delivery of the Notice of Termination. Sandy submits, secondly, that it would be unfair, unconscionable and unjust to enforce the settlement, in view of Mary unfairly taking advantage of the situation and the substantial decline in the value of the business.

[ 4 ] Sandy also took the position in his motion materials that the settlement was unenforceable because Mary had breached the agreement. However, this ground was not argued at the hearing of the motion.

[ 5 ] After the hearing of the motion, Sandy sought to introduce new evidence.

The background

[ 6 ] The parties were married on May 25, 1985.

[ 7 ] The parties have two children, both of whom now live with Mary. One child recently finished university and the other child is in high school.

[ 8 ] During their marriage, the parties built a number of successful businesses that developed, manufactured, sold and serviced processing fluids for the metalworking business (referred to collectively as “Whitecourt”).

[ 9 ] According to Sandy, the parties separated on March 2, 2011.

[ 10 ] According to Mary, the parties did not separate until April 14, 2011. However, prior to that date, she became concerned about Sandy’s mismanagement of Whitecourt. On March 29, 2011, she initiated civil proceedings in an effort to protect the business.

[ 11 ] On May 9, 2011, Sandy commenced family law proceedings.

[ 12 ] On July 27, 2011, in the civil proceedings, Mesbur J. ordered, on consent, that Kalex Valuations be retained to provide a preliminary report of the value of Whitecourt. In her endorsement, she noted that the case had “all the hallmarks of a high conflict case” and recommended that it be actively managed on the Family Team.

[ 13 ] The Kalex Report was delivered on August 16, 2011. It estimated the net value of Whitecourt at $755,000, as of May 31, 2011.

[ 14 ] On August 24, 2011, a child support order was made. The parties agreed to list and sell the matrimonial home.

[ 15 ] The matrimonial home was sold on February 15, 2012, with net proceeds of sale of approximately $1,546,883. Some funds have been released to the parties. About $1,076,273 remains in trust, pending a further court order.

Settlement negotiations

[ 16 ] After the delivery of the Kalex Report, Mary made her first offer to settle. On August 31, 2011, she offered to pay Sandy $400,000 for his interest and shares in Whitecourt.

[ 17 ] Sandy declined Mary’s offer on September 13, 2011. He indicated that he was “not interested, in any circumstances in selling his shares” to Mary.

[ 18 ] Sandy then submitted an offer on September 21, 2011, in which he offered to pay Mary $450,000 for her interest in Whitecourt.

[ 19 ] Mary responded on September 23, 2011. She offered to pay Sandy $500,000 for his interest and shares in Whitecourt. As well, she would pay Sandy a salary of $10,000 per month for one year from the date of the closing of the transaction, although Sandy would cease to attend at Whitecourt upon the acceptance of the offer.

[ 20 ] On the same day, Sandy responded that, as he had previously advised, he was “not prepared under any circumstances to give up his interest in WhiteCourt Oil Corporation”. He asked Mary to provide him with the amount she would be prepared to accept to settle whatever interest she had.

[ 21 ] On November 21, 2011, Mary provided a revised offer to settle, in which she provided three options. Under Option A, Mary would pay Sandy $550,000 for his interest in Whitecourt. Under Option B, Sandy would pay Mary $700,000, which amount included $150,000 for lump sum child support, including arrears. Under Option C, the parties would immediately engage a receiver to arrange for the sale of Whitecourt.

[ 22 ] On January 17, 2012, Sandy provided a further offer in which he offered to pay Mary $377,500 for her interest in Whitecourt. He again indicated that he was not prepared to sell his interest in the company to Mary.

[ 23 ] On January 31, 2012, Mary provided yet another offer. She offered to accept $768,500 from Sandy, which included an amount for Sandy’s interest in Whitecourt, $32,000 in satisfaction of any equalization claim and $100,000 in satisfaction of any claims for child support or section 7 expenses.

[ 24 ] The parties agreed that if they were unable to arrive at a settlement, they would obtain a consent order appointing a receiver on February 13, 2012.

The purported settlement

[ 25 ] On Tuesday, February 7, 2012, Sandy provided the offer to settle that is the subject matter of this motion.

[ 26 ] In the offer, Sandy offered to pay Mary $425,000 in full satisfaction of any claim Mary may have in Whitecourt. Immediately upon the acceptance of the offer, Mary’s association with Whitecourt would cease and she would not longer attend at Whitecourt offices. Sandy would pay monthly child support of $2,804. There would be no equalization paid by either party. The civil proceeding would be dismissed on consent and the family proceeding would be settled by way of Minutes of Settlement, incorporating the terms in the offer and containing comprehensive releases from each party.

[ 27 ] The offer was open for acceptance until noon on February 9, 2012.

[ 28 ] At 4:45 p.m. on Wednesday, February 8, 2012, Corey Hancock of Linamar Corporation, a major customer of Whitecourt, sent an e-mail to Mary, with a copy to Sandy. In the e-mail, Mr. Hancock advised that “due to supply instability for your organization, and a large concern on behalf of our facilities receiving (or not receiving) your product, we are left with no choice but to put you on a 90-day Notice of Termination of our Partnership Agreement”. In the meantime, Linamar would be trying out a competing vendor and would have a final decision for Whitecourt by the end of May 2012.

[ 29 ] Mary’s counsel faxed Mary’s acceptance of Sandy’s offer at 7:58 p.m. on February 8.

Events after Mary’s purported acceptance

[ 30 ] According to Sandy, he did not read the e-mail from Linamar until 9:45 p.m. on February 8, 2012.

[ 31 ] At 8:34 a.m. on Thursday, February 9, 2012, Sandy’s counsel sent an e-mail, withdrawing any outstanding offers to settle.

[ 32 ] At 8:50 a.m., Mary’s counsel responded that Sandy’s offer had been accepted by Mary by fax the previous night.

[ 33 ] At 9:15 a.m., Sandy’s counsel responded: “OK Thanks.”

[ 34 ] At 10:22 a.m. on the same day, Sandy’s counsel sent a letter by fax, in which he acknowledged receipt of Mary’s acceptance of the offer. He confirmed that “your client [Mary] is no longer at the premises and will not return to the premises except pursuant to paragraph 6 of the offer to settle [for the removal of personal property]”. He further advised that the services of Steven Welch, the plant manager, who was understood to be an ally and close friend of Mary, were terminated immediately.

[ 35 ] Later that day, Sandy’s counsel approved a letter to advise the court that the receivership motion would not be proceeding on February 13, pending completion of minutes of settlement.

[ 36 ] During February and March 2012, the parties’ counsel continued to discuss the wording of the minutes of settlement and the releases.

[ 37 ] According to Sandy, just over two months after Mary purported to accept the offer to settle, Linamar made it clear that it was leaving Whitecourt and its account could not be saved.

[ 38 ] On April 11, 2012, Sandy’s counsel wrote a letter stating, “as you and your client are or should be aware, there is no settlement”. He took the position that the acceptance of the offer by Mary was null, void and unenforceable. He noted that Sandy’s offer was based on 100% of Whitecourt’s business when the offer was made. However, only 45% of the business existed when the offer was accepted.

[ 39 ] It was the April 11 letter that led to Mary bringing this motion.

[ 40 ] Sandy was subsequently questioned as to why he instructed his counsel to proceed as though there were a settlement and insist that Mary give up all her association with the company. He answered:

Because I was on the fence. I wasn’t sure if I was going to get…save the company and get Linamar and save it or not, so because I was on the fence, although we tried with Peeters [counsel for Mary] the next day to remove the offer, we were still in limbo. We were still in limbo then. I had a possibility of making that offer go through if I was to save Linamar.

[ 41 ] Sandy was asked whether there was any indication prior to April that he was taking the position that there was no deal because of Linamar. He answered:

Not prior to, because I was not suspicious of failure with Linamar. I never failed with Linamar in my life, of 28 years with them, ever failed once.

[ 42 ] Sandy was asked why he did not resile from the settlement:

Q. …the reason you didn’t instruct Mr. Bookman [Sandy’s counsel] to attempt to resile from the settlement then is because you wanted and thought you could keep Linamar.

A. I hoped.

Q. Yes.

A. I hoped I would be successful in saving the company, correct.

[ 43 ] Elsewhere Sandy responded that: “If we were successful [in keeping Linamar’s business] we would have been able to complete the negotiations of the deal”.

[ 44 ] Sandy was asked why he didn’t give Mary advance warning that there might not be a deal:

Q. Why did you not give Mary a heads up that you were going to take the position that unless you could save Linamar you don’t have a deal?

A. I didn’t think of it. I had a business to run. I didn’t think of communicating that with Mary, directly or indirectly.

Analysis

[ 45 ] The determination of whether the court should enforce a settlement is a two-step process. The first step is to determine whether an agreement to settle was reached. At this stage, the motion is be treated like a motion for summary judgment.

[ 46 ] If the court determines that an agreement was reached, the second step is to consider whether, on the basis of all the evidence, the agreement should be enforced ( Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. (2007), 2007 39604 (ON SCDC) , 87 O.R. (3d) 464 (D.C.), Lavoie v. Chambers , [2009] O.J. No. 1622 (S.C.J.) ).

Was there an agreement to settle?

[ 47 ] Sandy’s position is that there was no settlement because there was no offer that was open for acceptance at the time Mary accepted the offer. That is because of the substantial change in the value of Whitecourt between the time of the offer and the time of its acceptance, resulting from the Linamar Notice of Termination.

[ 48 ] Sandy referred to the decision in Clark Agri Service Inc. v. 705680 Ontario Ltd. (1996), 2 C.P.C. (4 th ) 78 (Gen. Div.) . That case involved an agreement to purchase a grain elevator property and business. Between the time of the offer and the time of the acceptance of the offer, a tornado caused damage to a large grain storage bin, resulting in a substantial reduction in the grain storage capacity of the business. The offeree accepted the offer before the offeror became aware of the tornado damage.

[ 49 ] Quinn J. applied the principle that there is an implied term of an offer that the object of that offer will be in substantially the same condition at the time of acceptance as it was at the time of the offer. The tornado substantially altered the condition of the defendant’s business, such that the business was not the same at the date of the offer and the date of the acceptance.

[ 50 ] A similar conclusion was reached in Thorium Contracting Ltd. v. Vertical Restaurant & Bar Inc. , 2010 ONSC 4539 (S.C.J.). In that case, Stewart J. held that the offer was not capable of acceptance because its fundamental object, in that case, the discharge of a lien, no longer existed.

[ 51 ] The parties disagree as to whether the value of Whitecourt changed substantially between the time of the offer and the time of its acceptance. According to Sandy, there was no indication that Linamar’s business was at risk when he made the offer. However, according to Mary, Sandy was well aware of the problems the business was in and the risk of losing Linamar’s business when he made the offer.

[ 52 ] In my opinion, it is not necessary to make a factual determination as to whether the business was in substantially the same condition at the time of the offer and the time of its acceptance. That is because Sandy’s conduct after Mary’s acceptance of the offer constituted an affirmation of the contract.

[ 53 ] Sandy, at first, tried to withdraw his offer. However, on being advised that Mary had already accepted the offer, he conducted himself over a period of two months on the basis that there was an agreement. Not only did his counsel work with Mary’s counsel to finalize the wording of the minutes of settlement and the releases, but Sandy immediately excluded Mary from the business, in keeping with one of the terms of the accepted offer.

[ 54 ] As noted by Rosenberg J.A. in Samson v. Lockwood , 1998 1920 (ON CA) , [1998] O.J. No. 2471 (C.A.) at para. 46 : “a party who affirms a contract after becoming aware of the nature of the misrepresentation loses the right to rescind”.

[ 55 ] The situation in this case is akin to a misrepresentation. Sandy was aware of the Notice of Termination and yet, over a period of two months, continued to affirm the parties’ settlement through his conduct.

[ 56 ] A party to a settlement cannot have it both ways. If Sandy’s position is that there was no offer to accept once the Notice of Termination was delivered, he was under an obligation to maintain that position once he became aware of the Notice. When questioned, Sandy acknowledged that he was waiting to see whether he could keep Linamar as a customer. In his mind, if things went well, there would be a deal, but if things did not go well, there would be no deal. This position was not communicated to Mary until April 11, more than two months after Mary accepted the offer and after Sandy became aware of the Notice of Termination. In the meantime, Sandy had acted on the agreement and excluded Mary from the business.

[ 57 ] In my opinion, Sandy affirmed the agreement through his conduct and cannot now resile from it. I conclude, therefore, that there was a settlement between the parties.

Should the settlement be enforced?

[ 58 ] The court retains a jurisdiction to decline to enforce a settlement where to do so would be unfair, unjust or unconscionable.

[ 59 ] Having concluded that the parties reached an agreement, I must now consider whether, given all the evidence, the agreement should be enforced.

[ 60 ] Sandy points to several circumstances that, in his submission, would make it unfair, unjust or unconscionable to enforce the settlement.

[ 61 ] Firstly, Sandy maintains that, as a result of losing Linamar’s business, what Sandy paid for is no longer what he agreed to pay for, that is, a successful business.

[ 62 ] Mary disagrees. According to her, the business was in trouble and at risk of losing Linamar as a customer when Sandy made the offer. Furthermore, in her submission, there is no unfairness to Sandy because he was well aware of the situation when he made his offer.

[ 63 ] Secondly, Sandy submits that Mary acted in bad faith. He maintains that Mary had a duty to disclose the Notice of Termination to him. She took advantage of Sandy, faxing in her acceptance late in the evening, instead of waiting until the next morning. Furthermore, Mary refused to accept Sandy’s withdrawal of the offer, in the face of the Notice of Termination.

[ 64 ] Mary denies any bad faith. She said she had decided to accept the offer on the day she received it, that is, the day before she received the Notice of Termination. There was an agreement to proceed with the appointment of a receiver the following week. Mary said she was concerned that proceeding with a receiver would be expensive and would likely result in losing most or all of the value of the business. In her submission, she had no duty to inform Sandy of the Notice of Termination because it was sent to him at the same time it was sent to her.

[ 65 ] In Milios v. Zagas , 1998 7119 (ON CA) , [1998] O.J. No. 812 (C.A.) at para. 21 , the Court of Appeal considered the following factors when it decided that the acceptance of the offer should not be enforced:

(i) no order giving effect to the settlement had been taken out, so that the parties’ pre-settlement positions remained intact;

(ii) apart from losing the benefit of the impugned settlement, the defendant would not be prejudiced if the settlement was not enforced;

(iii) the degree to which the plaintiff would be prejudiced if the settlement was not enforced;

(iv) no third parties were, or would be, affected if the settlement was not enforced.

[ 66 ] Sandy contends that the enforcement of the settlement would result in prejudice to him. According to him, the Linamar Notice of Termination effectively destroyed the business. If the settlement is enforced, he will be forced to pay Mary a significant sum of money for an interest in a business that he says is worthless.

[ 67 ] Sandy also contends that Mary would not be prejudiced if she lost the benefit of the settlement. However, if the settlement is enforced, Mary will be unjustly enriched by $425,000.

[ 68 ] I do not agree that there would be no prejudice to Mary if the settlement is not enforced. Sandy excluded Mary from the business. As a result, Mary was denied: the appointment of a receiver, which the parties agreed would occur in the absence of an agreement; a salary for working in the business, to which she would ordinarily have been entitled; and an opportunity to try and turn the business around and keep Linamar as a customer. She has not had access to the bulk of the proceeds of sale of the matrimonial home, which have remained in trust, and has therefore been unable to proceed with her plans to start a business.

[ 69 ] There is no way to know what would have happened if the receiver had been appointed or if Mary had continued to work in the business. According to Mary, the failure of the business after her departure confirmed her fears that Sandy would be unable to manage on his own.

[ 70 ] The parties’ agreement cannot be unraveled. Sandy affirmed the agreement through his conduct and has made it impossible for the parties to return to the pre-settlement situation. When Sandy excluded Mary from the business, he did so with the knowledge of the Notice of Termination. At that point, he assumed the risk of business losses.

[ 71 ] If a party wishes to assert the position that an agreement is unfair, unjust and unconscionable and should therefore not be enforced, he or she cannot “sit on the fence” and wait to see how things turn out. Sandy made a choice to proceed with the agreement and to try to retain Linamar as a customer. Even assuming Sandy’s version of events, that is, Mary acted in bad faith and there was a substantial change in the value of the business either between the time of the offer and the time of its acceptance or since the time of the acceptance, I cannot conclude that it would be unfair, unjust or unconscionable to enforce the settlement given the circumstances.

New evidence

[ 72 ] After the hearing of the motion, Sandy sought to introduce new evidence with respect to a change in the status of the business that occurred after the hearing of the motion. Mary opposed the introduction of this new evidence.

[ 73 ] In my opinion, new evidence with respect to the subsequent status of the business could not reasonably be expected to alter the result of this motion (see R. v. Palmer , 1979 8 (SCC) , [1980] 1 S.C.R. 759, regarding the criteria for the admission of fresh evidence). It will therefore not be admitted.

[ 74 ] As I have indicated, Sandy affirmed the contract through his conduct, which included excluding Mary from the business. At that point, he assumed responsibility for the operation of the business, along with the associated risks. Therefore, what occurred subsequently would not alter my conclusion with respect to the settlement.

Conclusion

[ 75 ] For the reasons given, above, I conclude that there is a settlement and the settlement should be enforced.

[ 76 ] Mary provided a draft order, incorporating the terms of the settlement and a prior order regarding child support. Counsel for Sandy objected to some of the provisions, in particular, those related to child support.

[ 77 ] I am mindful of the fact that the counsel who argued the motion was Sandy’s counsel in the civil proceedings, not his family law counsel. I would therefore ask the parties to try to settle the terms of the order. If they are unable to do so, they may make an appointment to see me.

[ 78 ] I would encourage the parties to use their best efforts to resolve the matter of costs. If they are unable to do so, they may make brief written submissions (no more than 3 pages in length, plus a costs outline). Mary’s submissions should be provided within 14 days of this decision. Sandy has a further 14 days within which to respond.

Herman J.

Date: November 14, 2012