SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Precise Parklink Inc., Plaintiff

AND:

Imperial Parking Canada Corporation, Defendant

BEFORE: D. M. Brown J.

COUNSEL: A. Gonsalves, for the Plaintiff

P. Henein and D. Waldman, for the Defendant

HEARD: December 20, 2012

REASONS FOR DECISION

I. Motion to interpret and enforce an interim settlement agreement

[1] Imperial Parking Canada Corporation operates commercial parking lots. Precise Parklink Inc. manufactures parking equipment. Back in 2004 Impark contracted with Precise to deploy parking meters at its parking lots. Precise would collect the parking fees from users and remit an amount to Impark on a monthly basis after making agreed-upon deductions.

[2] This past July and August Impark delivered notices terminating this arrangement at some of its parking lots. Precise disputed the entitlement of Impark to do so. Litigation ensued. Impark commenced an application on August 2 and Precise commenced an action on October 9. As noted in a case management decision of this court dated October 9, 2012, the parties agreed to proceed with the dispute by way of action and a discovery plan was approved.

[3] A dispute arose, however, about the quantum of parking lot revenues Precise was remitting to Impark in respect of those parking lots where the arrangement of the parties continued in force. On November 29, 2012 the parties entered into an interim settlement agreement to deal with that issue. (It included participating in a meditation by March, 2013.) A dispute now has arisen about what that settlement agreement means. The dispute centred on the revenue collected by Precise for this past September and October. Impark moved for an order enforcing the Settlement Agreement in respect of the payments for those two months.

II. Governing legal principles

[4] The parties agreed that the November 29, 2012 settlement constituted a binding interim settlement agreement. They disagreed on its meaning. The general principles of contractual interpretation have been set out in a number of recent Court of Appeal decisions which I summarized at paragraphs 109 to 111 in my recent decision in Western Larch Limited v. Di Poce Management Limited.[^1] I have informed myself of those principles.

III. Events leading up to the Settlement Agreement

[5] As mentioned, Impark commenced an application in August concerning its termination of the arrangement with Precise at some locations. Under the arrangement Precise is to remit contractual payments to Impark for a month 10 days following the end of that month. On November 2, 2012 Impark’s counsel wrote to Precise’s regarding the remittances for the month of September which were received by Impark on October 11, 2012. Impark complained that Precise had made two improper deductions, one regarding payments to third parties and the second in respect of rental fees for meters at locations for which Impark had delivered notices of termination. In essence, Precise was setting-off from remittances due for active locations amounts it claimed as damages for the wrongful termination of the arrangement at other locations. Impark objected to those deductions and asked for confirmation by November 7 that Precise would remit the correct funds for the month of September, “failing which we will be required to seek immediate relief on the commercial list, given the urgency of this matter.”

[6] Precise, by its counsel’s response of November 7, refused to do so. Counsel’s letter stated, in part:

Precise takes the position that all fees deducted from the cash reimbursement on October 10 were proper. Some of the fees charged by Precise and deducted from the October 10 cash reimbursement related to rental meters that Impark improperly purported to terminate. As you are aware, our client asserts in its Statement of Claim that the purported Notices of Termination delivered by Impark to our client were improper and invalid. In the absence of proper Notices of Termination, Precise was entitled to deduct its fees on those meters according to the contractual and partnership agreement between the parties and it did so on October 10.

There is no urgency to this matter. Your client can assert a claim to monies that were deducted by Precise in its response to Precise’s Statement of Claim….

[7] On November 13 Impark’s counsel indicated that he would seek a 9:30 appointment on on the Commercial List on November 16. One was held on November 19, at which time Newbould J. gave Impark time for its motion to be heard on December 4.

[8] In the result, Impark did not serve motion materials. Instead, from November 19 until November 29 the parties engaged in negotiations. The parties reached a settlement on November 29 which provided as follows:

1. From the Cash Payments collected every month from the meters currently operating within the Precise and Impark business relationship, Precise will deduct the fees to which it is entitled based on the number of meters not subject to the Notices of Termination delivered by Impark on July 20, 2012 and August 31, 2012, and related services. For any meters that were terminated, Precise will send invoices to Impark which Impark will decline to pay, and which will be the subject matter of the mediation in paragraph 4.

2. Precise will continue to prepare and deliver to Impark invoices setting out the fees deducted in accordance with (1) above.

3. On the 10th day of each month, Precise will remit to Impark the balance remaining after deducting fees in accordance with (1) above.

4. The parties will schedule a mediation of the Action bearing court file no. CV-12-9869-00CL to take place by March 1, 2013.

5. The arrangement set out in (1) to (3) above will continue until the mediation required by (4) takes place. In the event the mediation is unsuccessful, Precise reserves the right to return to its current practice of fee deductions, which includes deducting fees each month related to the meters that Precise claims were improperly terminated by Impark in the Notices of Termination delivered on July 20, 2012 and August 31, 2012, and Impark reserves the right to dispute such conduct in court by way of a hearing.

6. It is understood by both parties that this interim arrangement is for the purpose of resolving the parties’ competing claims to monthly cash revenues during the litigation. This agreement is without prejudice to either party’s position in the Action or the Application bearing court file no. CV-12-9803-00CL. For greater certainty, Precise does not waive its claim to monthly fees in respect of all meters it claims were improperly terminated by Impark in the Notices of Termination delivered on July 20, 2012 and August 31, 2012, and Impark does not waive its claim to have Precise remit to it all cash payments collected after deducting only fees in respect of meters that are in operation after the Notices of Termination.

[9] On December 3 counsel re-attended before Newbould J. who endorsed the record, “This matter has been settled”, and the December 4 motion did not proceed.

[10] That same day, December 3, Impark’s counsel emailed Precise’s asking:

[M]y client has asked when the reimbursements for September and October will be paid over. Can you kindly advise when my clients can expect to receive those funds?

A follow-up inquiry to the same effect was sent on December 5. That elicited the following response that day from Precise’s counsel:

With respect to your question about the reimbursements for September and October, it was clear in my email to you of November 29 the terms on which our clients had agreed to resolve the matter. Nowhere do those terms provide that Precise would pay to Impark the reimbursements for September and October; rather, the terms are prospective. Your client is free to claim any past reimbursements in the litigation and it can be addressed at the mediation.

That position then prompted this motion to enforce the Settlement Agreement.

IV. Positions of the parties

[11] Impark advanced several arguments in support of its position that the Settlement Agreement, properly construed, included the fee deduction arrangement for the cash payments, or revenue remittances, for September and October:

(i) By opening with the phrase “From the Cash Payments collected every month from the meters currently operating within the Precise and Impark business relationship…”, Clause 1 encompassed all meters operating following the summer notices of termination, and therefore cash payments for September and October were included. In other words, under the Settlement Agreement Impark agreed to pay invoices in respect of active meters, but not for terminated meters;

(ii) The Settlement Agreement arose out of a dispute over the September and October cash payments and was made for the purpose of settling the motion which Impark had arranged to bring on December 4, 2012 in respect of that dispute. Impark submitted that the first sentence of Clause 6 reflected that purpose: “It is understood by both parties that this interim arrangement is for the purpose of resolving the parties’ competing claims to monthly cash revenues during the litigation.” The litigation started in August, 2012.

[12] Precise contended that the clear and unambiguous language used in the Settlement Agreement excluded the cash payments for September and October from the ambit of the fee deduction agreement:

(i) First, no clause expressly dealt with past remittances for the months of September and October;

(ii) Second, Clauses 1, 2 and 3 used future-looking language such as “Precise will deduct”, “Precise will continue” and “Precise will remit”, all of which indicated that the agreement covered the first remittance due after it was made – i.e. the December 10 remittance for the month of November;

(iii) Third, if the 2013 mediation failed, under Clause 5 Precise reserved the “right to return to its current practice of fee deductions, which includes deducting fees each month related to the meters that Precise claims were improperly terminated by Impark…” The reference to “return to its current practice”, Precise argued, when coupled with the future-looking language in Clauses 1, 2 and 3, signified an intention that the interim settlement arrangement would start with the December 10 remittance; and,

(iv) Finally, Clause 6 reflected the fact that the agreement was an interim one, pending the mediation, and neither side waived its positions with respect to the monthly cash revenues during the litigation. So, as the last sentence of Clause 6 stated, “Impark does not waive its claim to have Precise remit to it all cash payments collected after deducting only fees in respect of meters that are in operation after the Notices of Termination”. Precise contended that this language would have no practical effect if Precise had to reimburse Impark under the Settlement Agreement for cash payments in respect of September and October. If those were paid, there would be no claim left for Impark to waive since the commencement of the litigation.

V. Analysis

[13] Let me start the analysis not with the words used by the parties in the Settlement Agreement, but with words which do not appear in it. Precise argued that by the time the settlement had been made, it already had deducted the disputed amounts for September and October and, therefore, “the parties would have used very different language if it were their intention that Precise pay those amounts to Impark”. Precise referred to three provincial appellate court decisions (New Brunswick, Manitoba and Prince Edward Island) for the proposition that courts have rejected arguments that contracts include terms that could have been clearly set out, but were not.[^2]

[14] Geoff Hall devoted one section of his text, Canadian Contractual Interpretation Law, Second Edition, to precisely those three cases. Noting that no other provincial appellate courts had followed those decisions and the doctrinal justification for the proposition that the absence of words may be considered in interpreting a contract was problematic in light of the principle that words which are struck out of a contract are not to be taken into account in interpreting it, Mr. Hall expressed the following view:

The proposition that the absence of words may be considered as part of the interpretive process should, therefore, be regarded with extreme skepticism. At the very least, it should probably be limited to what was actually said in Controls & Equipment and P.E.I. Lending Agency, namely that the parties’ failure to express something clearly and unequivocally when such expression was possible tends to indicate that the parties did not agree on the matter which could have been expressed.[^3]

[15] I agree with that approach. In the circumstances of the present case the fact that two sophisticated commercial parties failed to deal expressly with the September and October cash payments merely tends to indicate that they did not agree on a matter. The absence of such express language is not definitive, for it may be that they thought the existing language, while not expressly referring to September and October, otherwise dealt with those months. So, the real analysis requires an examination of the language used by the parties, not a consideration of what language they did not use.

[16] I understand the point made by Impark that the language used in the Settlement Agreement must be understood in the context of the events giving rise to the settlement, namely the existence of a dispute over payments for September and October and the pending hearing of a motion. But two points must be made about this argument. First, the factual matrix is used to understand the meaning of the words actually used by the parties; it does not displace or supplement the words which appear in the agreement. As I summarized the law on this point in the Western Larch case:

On this last point, a consideration of the context in which the written agreement was made is an integral part of the interpretative process, irrespective of whether any ambiguity exists in the text of the document. Courts must always have regard to the context, or what commonly is called the “factual matrix”, and to the objective evidence of the surrounding circumstances underlying the negotiations. That is because while the dictionary, grammatical or plain meaning of the words used by the parties will be important, and often decisive, in determining the meaning of the document, often the meaning of a document is derived not just from the words used, but also from the context or the circumstances in which the words were used. Understanding the meaning of words usually requires knowing the context in which the words were used. As a result, a court needs to read the text of a written agreement in the context of the circumstances as they existed when the agreement was created, including the facts which were known to or reasonably capable of being known by the parties when they entered into the written agreement, the genesis of the agreement, its purpose, and the commercial context in which the agreement was made.[^4]

Second, although the negotiations occurred in the context of a pending motion by Impark, no notice of motion was prepared, so it is not possible to know what relief Impark planned to seek. That said, from the correspondence of Impark’s counsel, there is no doubt that it was the deductions made by Precise from the September cash payments which prompted Impark to threaten a court motion.

[17] Although the factual matrix in this case assists in understanding the nature of the dispute which drove the settlement negotiations, what is of importance is not the reason for the negotiations, but the compromise in fact reached by the parties as reflected in the language used in the Settlement Agreement. When looked at as a whole, in my view the language chosen by the parties in that agreement indicates that they did not intend for the agreed-upon interim fee deduction arrangement to cover the cash payments for September and October.

[18] That interim arrangement, as described in Clauses 1, 2 and 3, would see Precise deduct fees based only “on the number of meters not subject to the Notices of Termination”. That is to say, whereas in September and October Precise had deducted fees for both active and terminated meters, under the settlement it would only deduct fees for the active meters. The opening language of Clause 5 stipulated that fee deductions only for active meters would continue until the mediation took place. The parties then agreed:

In the event the mediation is unsuccessful, Precise reserves the right to return to its current practice of fee deductions, which includes deducting fees each month related to the meters that Precise claims were improperly terminated by Impark…

So, on November 29, the parties agreed that Precise would stop its then current practice of deducting fees for terminated meters and thereafter, until the mediation, only deduct fees for active meters. That language, in my view, expressed a clear intention that the negotiated fee deduction arrangement would commence with the next remittance on December 10 and would not cover the past months of September and October.

[19] The opening language of Clause 1 upon which Impark relied so heavily – “From the Cash Payments collected every month…” – as well as the first sentence of Clause 6 – “for the purpose of resolving the parties’ competing claims to monthly cash revenues during the litigation” - must be read in light of Clause 5 which contemplated Precise altering its “current practice” to the newly negotiated one.

[20] Interpreting the agreement to cover remittances from December forward also gives practical meaning to the concluding language of Clause 6 in which Impark did not waive its claim to have Precise “remit to it all cash payments collected after deducting only fees in respect of meters that are in operation after the Notices of Termination.” I read that language as referring to the deductions Precise made in September and October, whereas the mirror reservation of rights by Precise in the opening language of that sentence would allow it claim back fees which it asserted it should have been able to deduct from November onwards.

VI. Summary

[21] For those reasons, I conclude that the fee deduction arrangement agreed upon by the parties in Clauses 1, 2 and 3 of the Settlement Agreement applied to cash payments for the months of November through to the date of the mediation, and did not cover the cash payments for the months of September and October, 2012. Accordingly, I dismiss Impark’s motion.

[22] At the hearing the parties agreed that the successful party on the motion was entitled to costs of $5,050.00, all in. I therefore order Impark to pay that amount to Precise within 30 days of the date of this order.

[23] I wish to thank counsel for their most concise and helpful factums.

(original signed by)_________

D. M. Brown J.

Date: December 21, 2012

[^1]: 2012 ONSC 7014 [^2]: Controls & Equipment Ltd. v. Ramco Contractors Ltd., 1999 CanLII 32511 (NB CA), [1999] N.B.J. No. 20 (C.A.); McCain Produce Inc. v. P.E.I. Lending Agency, [2010] P.E.I.J. No. 9 (C.A.); Geoffrey L. Moore Realty Inc., v. Manitoba Motor League (c.o.b. CAA Manitoba), 2003 MBCA 71, [2003] M.J. No. 191 (C.A.). [^3]: Geoff R. Hall, Canadian Contractual Interpretation Law, Second Edition (Toronto: LexisNexis, 2012), §3.4. [^4]: Western Larch, para. 110.