SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: CV-12-465214

Motion Heard: February 13, 2013

Re: 2030945 Ontario Ltd.

v.

Markham Village Shoppes Limited

Before: Master R. A. Muir

Counsel:
Alex Minkin, student-at-law, for the defendant
Elena E. Mazinani for the plaintiff

REASONS FOR DECISION

[1] The defendant brings this motion pursuant to Rule 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) for an order striking out certain paragraphs of the plaintiff’s statement of claim.

[2] The plaintiff was a commercial tenant of the defendant from 2003 to 2012. It appears that in November 2011 the defendant approached the plaintiff with a view to negotiating an early termination of the plaintiff’s lease. Various discussions and other communications took place between November 2011 and March 2012. The parties were unable to agree on terms for an early termination.

[3] As a result, in early April 2012 the defendant apparently elected to exclude the plaintiff from the leased premises and changed the locks. The plaintiff commenced this action on October 10, 2012 seeking damages for breach of the lease agreement.

[4] The impugned paragraphs of the statement of claim read as follows:

7. On or about January 2012 the Landlord advised the Tenant that it intended to demolish the building where the business is located.

8. On March 30, 2012 the Tenant was advised by the Landlord’s lawyer that the Landlord intended to demolish the building, effective March 31, 2012, where the business was located and made an offer to the Tenant which did not provide any compensation to the tenant for its loss of income it would suffer or satisfactory replacement of the 2003 leasehold improvements.

9. The tenant therefore declined the defendant’s offer.

[5] The defendant argues that those paragraphs are improper as they refer to the parties’ settlement negotiations and offers to settle their dispute. That dispute is now the subject of this litigation.

[6] The plaintiff takes the position that the impugned paragraphs refer to a unilateral attempt by the defendant to alter the terms of the lease. The plaintiff characterizes the defendant’s conduct as amounting to an ultimatum and not negotiations entered into with a view to settling a dispute.

[7] Rule 25.11 provides as follows:

The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[8] I agree with the defendant that references to settlement offers, discussions and negotiations should not be included in a pleading. The law in this regard is summarized by Master Beaudoin (as he then was) in Canadian Gateway Development Corp. v Canada (National Capital Commission), [2002] O.J. No. 3167 (S.C.J. – Master) at paragraphs 8 and 9 where he states as follows:

8 A Master had jurisdiction pursuant to Rule 25.11(b) to strike out a pleading on the ground that the pleading is scandalous, frivolous or vexatious. Although the defendant correctly submits that a Master cannot generally strike out a defence as being untenable, that it not the nature of the motion here. The law is clear that evidence of privileged communications, such a settlement discussions, should not be before the Court. (See I. Waxman & Sons v. Texaco Canada Ltd., 1968 178 (ON SC), [1968] 1 O.R. 642 (H.C.J.), aff'd 1968 327 (ON CA), [1968] 2 O.R. 452 and Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 2nd Edition, Vancouver, Butterworths, 1999). If such discussions are inadmissible in a civil proceeding, any reference to them in a party's pleadings can be considered scandalous, frivolous or vexatious and should be struck from their pleading.

9 Per Sopinka and Lederman at p. 810, there are three conditions under which settlement discussions will be considered privileged and inadmissible:

(a) a litigious dispute must be in existence or within contemplation;

(b) the communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and,

(c) the purpose of the communication must be to attempt to affect a settlement.

[9] I do not see paragraph 7 as meeting this test. That paragraph merely states the simple fact that the defendant advised the plaintiff in January 2012 that it intended to demolish the building in which the plaintiff carried on business. That statement, by itself, does not amount to a settlement offer or discussion. No reference is made to attempting to achieve a settlement of the dispute. For the same reason, the first portion of paragraph 8 does not meet the test either. It simply repeats the same information as paragraph 7 except that the specific demolition date of March 31, 2012 is referenced.

[10] However, I am satisfied that the portion of paragraph 8 beginning with the words “and made an offer” does meet the test. The same can be said for paragraph 9. In my view, the offer contained in the March 30, 2012 letter from the defendant’s lawyer, Jeffrey Kramer, was simply the culmination of a long period of settlement discussions and negotiations which began in November 2011. It is clear that litigation was within contemplation. The letter begins by Mr. Kramer stating that he was litigation counsel to the defendant. A review of the communications produced on this motion makes it clear that the parties were negotiating on a without prejudice basis. In fact, it is the plaintiff’s representatives that go out of their way to emphasize that fact. Finally, it is clear that the purpose of the “offer” was to attempt to achieve a settlement of this dispute.

[11] Moreover, I do not view the March 30, 2012 letter as an ultimatum. In fact, the letter simply repeats an offer made by the defendant a month earlier. It is true that the letter was sent only one day before the March 31, 2012 deadline to vacate the premises. However, the evidence before the court makes it clear that the plaintiff was fully aware of the March 31, 2012 deadline as early as January 2012. It is specifically referenced in communications between the parties.

[12] I am therefore ordering that part of paragraph 8 and all of paragraph 9 be struck out. However, given the divided success on this motion, there will be no order as to costs.

[13] I therefore order as follows:

(a) the portion of paragraph 8 of the statement of claim beginning with the words “and made an offer” and continuing to the end of the paragraph is hereby struck out;

(b) paragraph 9 of the statement of claim is hereby struck out;

(c) the balance of the relief sought on this motion is dismissed; and,

(d) there will be no order with respect to the costs of this motion.

Master R.A. Muir

DATE: February 14, 2013