CITATION: Schrempf v. Willchuk, 2013 ONSC 2863

COURT FILE NO.: 4346/08

DATE: 2013-05-24

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

JOHN SCHREMPH

Plaintiff

– and –

DEBBIE WILLCHUK

Defendant

Allyson Fox, Counsel for the Plaintiff

Beverley Martel, Counsel for the Defendant

HEARD: April 18 & 19, 2013

REASONS FOR JUDGMENT

Coats J.

ISSUE

Issue

1Pursuant to an Agreed Statement of Facts filed as Exhibit 2 in the trial, the issue for trial was as follows:

Whether there was an agreement between John Schrempf, Laura Carson and Debbie Willchuk that, upon contribution of $10,000 by each of them to the retainer paid to Folger Rubinoff LLP, they would share equally in any proceeds from the litigation, including the Settlement Funds?

Background Facts

Background Facts

2Pursuant to the same Agreed Statement of Facts, the following are the agreed upon background facts:

1. Rudolf Johann Schrempf (“Rudolf”) passed away on March 14, 2002.

2. Rudolf was survived by his children, John Schrempf (“John”), Debbie Willchuk (“Debbie”), Laura Carson (“Laura”) and Alex Schrempf (“Alex”) and by his grandchildren, Ryan Schrempf (“Ryan”) and Scott Schrempf (“Scott”), who are John’s sons.

3. Rudolf was also survived by his second wife, Judy Schrempf (“Judy”) and his brother, Adolf Schrempf (“Adolf”).

4. In or around February 2002, Rudolf retained James B. Wheeler (“Wheeler”) and the law firm Wheeler & Associates for the purposes of preparing a Will and assisting with an estate plan.

5. Wheeler prepared a Last Will and Testament for Rudolf, which Rudolf duly executed and dated February 26, 2002.

6. Under the Will, Adolf was appointed Estate Trustee of Rudolf’s estate. Judy and Alex were appointed alternate estate trustees.

7. Judy, John, Debbie, Laura, Alex, Ryan and Scott were all beneficiaries under the Will.

8. Under the Will, the proceeds from the sale of the matrimonial home, located at 3645 Greenbower Court, Mississauga, Ontario, was to be divided into five equal shares, with one full share delivered to each of Judy, Alex, Debbie and Laura, and the final share divided equally between John, Ryan and Scott.

9. The Will provided that 20 per cent of the value of the residue of Rudolf’s estate was to be paid in equal shares to each of Ryan and Scott.

10. The Will further provided that the residue of Rudolf’s estate was to be divided into four equal shares, with one full share going to each of Judy, Alex, Debbie and Laura. The Will contained a clause specifically excluding John from sharing in the residue of Rudy’s estate.

11. A principal asset of the Estate was a family business, Wiggins Mechanical Contractors Inc. (“Wiggins”), which was wholly owned by Rudolf through a holding company.

12. A second asset of the Estate was a property located at 3645 Greenbower Court, Mississauga, Ontario, which was the matrimonial home of Judy and Rudolf.

13. After Rudolf’s death, Wiggins was sold to Alex.

14. In October 2002, at the time of the sale of Wiggins, there were two competing bids for Wiggins. One bid was from John, Laura and Debbie. The second was from Alex.

15. Adolf, in his capacity as Estate Trustee, accepted Alex’s bid and sold Wiggins to Alex.

16. Wheeler, in his capacity as the solicitor of the estate, assisted Adolf with the sale of Wiggins.

17. The sale of Wiggins was finalized by a Share Purchase Agreement dated March 31, 2013 [I believe this should have read 2003 not 2013]. The purchaser of Wiggins was a holding company, 1555152 Ontario Inc, in which Alex was a 50 per cent owner.

18. Significant issue arose with the sale of Wiggins.

19. The Office of the Children’s lawyer became involved in representing the interests of Scott and Ryan in the estate.

20. After Judy obtained an Order to Pass Accounts and an Order to File Statement of Assets against Adolf, Adolf served a Notice of Application to Pass Accounts on all of the beneficiaries.

21. On or about February 10, 2004, John, Laura and Debbie filed a Notice of Objection to the Estate Accounts. Judy and the Children’s Lawyer subsequently filed Notices of Objection to the Estate Accounts.

22. On February 8, 2005, John, Debbie and Laura personally, and Laura as a Litigation Guardian for Ryan and Scott, issued a Statement of Claim against Wheeler and Adolf. The Statement of Claim sought damages for negligence, default or neglect relating to the sale of Wiggins.

23. All of the court proceedings were consolidated under a single court file number.

24. A trial in the matter was scheduled to commence on April 3, 2006.

25. Fogler Rubinoff LLP represented John, Laura and Debbie in the litigation against Adolf and Wheeler.

26. John, Laura and Debbie each contributed $10,000 towards the retainer paid to Fogler Rubinoff LLP. John and Laura’s contributions were made through personal cheques. Debbie’s contribution was made through a personal cheque from her common-law spouse, Don Beveridge.

27. The Office of the Children’s Lawyer represented the interests of Ryan and Scott.

28. Prior to the trial date, the parties to the litigation, being John, Laura, Debbie, Ryan and Scott by their Litigation Guardian, Laura, Wheeler, Wheeler & Associates, Adolf in his personal capacity and his capacity as Estate Trustee, Judy and Alex, entered into Minutes of Settlement that resolved the outstanding litigation. The Minutes of Settlement were dated March 27, 2006 and were executed by John, Debbie, Laura and Judy on March 30, 2006.

29. The Minutes of Settlement required Wheeler to pay the total sum of $354,000 (the “Settlement Amount”) to Fogler Rubinoff LLP in satisfaction of the claims of John, Debbie, Laura, Judy, Ryan and Scott.

30. The Minutes further required that the Settlement Amount be paid out in four equal shares to Debbie, Laura, Judy and to Laura as Litigation Guardian, in trust for Ryan and Scott.

31. Fogler Rubinoff LLP distributed the Settlement Funds by way of cheques payable to Debbie, Laura and Judy, each in the amount of $88,500. Two further cheques were issue, payable to TD Waterhouse in trust for Scott and Ryan, in the amounts of $43,136.49 and $43,136.48 respectively.

Analysis and Findings of Fact

Analysis and Findings of Fact

3There are really two sub-issues within the larger issue defined above. The first issue is whether an oral agreement existed that upon each of John Schrempf, Laura Carson and Debbie Willchuk contributing equally to the retainer that they would share the proceeds equally. The second issue is whether such an agreement is a collateral agreement to the Minutes of Settlement and Release and if it is, is it valid and enforceable?

4There were four witnesses at the trial; the Plaintiff, Laura Carson (who testified for the Plaintiff), the Defendant, and the Defendant’s partner, Don Beveridge (who testified for the Defendant).

5On the first issue of whether an oral agreement existed, in Picavet v. Clute, 2012 CarswellOnt 4575 (ON S.C.), Healey J. at para. 9 summarized that where there is no written contract documenting the alleged agreement “the court must examine everything occurring between the two parties that is relevant to the alleged agreement in order to decide whether a contract exists.”

6Paragraph 15 of the decision of Cavarzan J. in Summers v. Sawyer, 2005 CanLII 30880 (ON SC), 2005 CarswellOnt 4001 (ON S.C.), provides as follows with respect to binding oral agreements:

Whether or not a binding oral agreement was formed in the circumstances here is a question which engages what has been called the objective principle of contract formation. As stated in S.M. Waddams, The Law of Contracts (5th Edition) at p. 103:

The principle function of the law of contracts is to protect reasonable expectations engendered by promises.

Every definition of contract, whether based on agreement or on promise, includes a consensual element. But the test of whether a promise is made, or of whether assent is manifested to a bargain, does not and should not depend on an inquiry into the actual state of mind of the promisor, but on how the promisor’s conduct would strike a reasonable person in the position of the promisee.

The statement by Blackburn J. in Smith v. Hughes (1871), L.R. 6 Q.B. 597 (Eng. Q.B.) at p. 607 is cited by Waddams:

If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.

7Paragraph 10 of Picavet v. Clute, supra, provides as follows:

It is trite law to say that the absence of assent to an agreement prevents the creation of a legally enforceable contract. Far more complicated is the countervailing question: How does the court satisfy itself that both parties intended to bring an agreement into existence, an agreement containing the terms sought to be enforced? In The Law of Contract in Canada, 5th ed. (Toronto: Carswell, 2006), at p. 15, Professor G.H.L. Fridman describes the approach as follows:

Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. [FN1] The law is not concerned with the parties’ intentions but with their manifested intentions. [FN2] It is not what an individual party believed or understood was the meaning of what the other party said or did that is the criterion of agreement; it is whether a reasonable man in the situation of that party would have believed and understood that the other party was consenting to the identical terms. [FN3] As Fraser C.J.A. said in Ron Ghitter Property Consultants Ltd. V. Beaver Lumber Co.: [FN4]

The parties will be found to have reached a meeting of the minds, in other words be ad idem, where it is clear to the objective reasonable bystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty.

8As set out in Wilson v. Graydon Hall Pizza & Catering Ltd. 1994 CarswellOnt 221 (O.C. of J. (Gen. Div.)), confirmed in appeal at 1996 CarswellOnt 1596 (O.C.A.), where an oral agreement deals with all of the fundamental terms of the contract, the oral contract is binding.

9Applying this law to the evidence before me, I find that a reasonable person in the situation of the Plaintiff would have believed and understood that the Defendant was consenting to the terms that the Plaintiff would pay 1/3 of the retainer, (1/3 to be paid by each of Laura Carson and Debbie Willchuk) and that they would share equally in any proceeds from the litigation, including the settlement funds. This is based on the following:

i. The Plaintiff testified that Mr. Skipper of Fogler Rubinoff represented the Plaintiff and his sisters, Debbie and Laura in the action against Adolf and Wheeler. In March 2006, as the trial approached, the firm wanted a $30,000 retainer for preparation for and attendance at the trial. Around March 20, 2006, there was a meeting at Debbie’s house to discuss the retainer. John, Debbie, Laura and Debbie’s partner, Mr. Beveridge attended. According to John, the meeting had two purposes; firstly, to decide how the retainer was going to be proportioned and secondly, to decide if John was going to participate in the litigation from that point forward. John testified that there were only two options put forward – the three siblings could split the retainer 1/3 each and any proceeds 1/3 each or Debbie and Laura could split the retainer on their own and John would not participate. At the end of the night, John and Laura provided cheques each for $10,000 and shortly thereafter Mr. Beveridge paid the $10,000 on account of Debbie. The only logical conclusion is that when Mr. Beveridge paid the $10,000 on behalf of Debbie, Debbie was agreeing to the 1/3 share agreement. If she didn’t, she owed $15,000.

ii. There is absolutely no reason for John to have paid the $10,000 other than on the expectation he would receive his 1/3 share of the proceeds. Logic supports his position that an oral contract was made. John did not have to pay part of the retainer to protect his children’s interests. His children were represented by the Office of the Children’s Lawyer and had been even before the litigation against Adolf and Wheeler.

iii. Laura testified that after receiving her share of the settlement proceeds she gave 1/3 of her share (adjusted for monies owing with respect to something else) to John. Laura confirmed that at the March 20, 2006 meeting, two options were on the table – each of Laura, Debbie and John could pay 1/3 of the retainer and if they won the lawsuit they would split the proceeds 1/3 each, and if they lost the lawsuit they would pay any costs 1/3 each or Debbie and Laura could pay $15,000 each and share ½ each the proceeds and ½ each any costs. Mr. Beveridge paid Debbie’s $10,000 and Laura believed Debbie had agreed to the 1/3 arrangement. Laura testified in cross that at the meeting Debbie never verbally promised to pay 1/3 of her proceeds to John. To me, this is not indicative that no oral agreement was reached. There were only two options presented at the meeting. Debbie was clearly not happy with the 1/3 proposal; however, in the end, by her providing $10,000 she agreed to this option.

iv. This determination that Debbie accepted the 1/3 proposal and that an oral agreement was reached when she paid her $10,000 retainer (Mr. Beveridge did for her) is not inconsistent with her own evidence or the evidence of Mr. Beveridge. I accept Mr. Beveridge’s evidence that the March 20, 2006 meeting became heated. It is clear that Debbie did not want John to receive 1/3 of the proceeds. She did not agree to this at the meeting. This is consistent with Laura’s testimony and Debbie’s own testimony. However, I find that Debbie ultimately agreed to the oral contract when she provided 1/3 of the retainer. She might have been unhappy about it but she did it and hence the oral contract was formed.

v. I accept Debbie’s evidence that she was not happy with John getting 1/3 of the proceeds as she viewed this as inconsistent with her father’s Will and because John’s children got a share of the estate. It is clear from her evidence and Mr. Beveridge’s evidence that she became upset at the March 20, 2006 meeting. However, her evidence did not contradict that only two options were discussed. She may have been unhappy with the 1/3 each option but by providing $10,000 and only $10,000 she agreed to this option and a contract was formed. Debbie’s subsequent conduct in providing only 1/3 of the required retainer sealed the deal.

vi. Debbie’s explanation that John paid $10,000 to protect his children’s interest is not logical. The children had their own representation. John did not have to pay 1/3 of the retainer to protect their interests. John had no other reason to pay 1/3 of the retainer except to share in the proceeds, if any.

vii. There were only two options presented at the meeting. If Laura wanted a third option – she pay only $10,000, John pay $10,000, Laura pay $10,000 and only she and Laura share any proceeds, it was incumbent on her to clarify this when Mr. Beveridge paid the $10,000 for her. There was no evidence she did so.

10The Defendant argues that she never verbally promised to pay 1/3 of the proceeds to John. John’s and Laura’s evidence supports this. This to me misses the point. There were two options presented. Debbie by paying 1/3 of the retainer (her action) chose the 1/3 of the retainer, 1/3 of the proceeds/loses option. By paying $10,000 the agreement was made.

11The Defendant argued that John invested the $10,000 because he was a Plaintiff in the estate litigation and if the case went to trial he could have been awarded money. He then signed the Minutes with no funds payable to him. I find as set out later in these Reasons that these were two different matters, the settlement of the lawsuit and the retainer funding agreement.

12The case before me can be distinguished from the case of Rogalsky Estate v. Rogalsky [1984] M.J. No. 515 (M.Q.B.). At paragraph 19, Justice Morse determined that he was not satisfied that the parties had any intention that the agreement would be legally binding – they made a moral rather than legal agreement. In the case before me, I find that the parties did intend a legal agreement. Two options were presented to the Defendant. By paying $10,000 towards the retainer she chose the pay 1/3 of the retainer, share 1/3 of the proceeds option. The terms were clear. There was no ambiguity. Each of the three siblings paid their 1/3 toward the retainer and Laura honored the oral agreement and paid 1/3 of her share of the settlement proceeds to the Plaintiff.

13The case before me can also be distinguished from the case of Jones v. Padavatton [1969] All E.R. 616 (C.A.). There were no obscure or uncertain terms in the oral agreement between John Schremph and Debbie Willchuk. Justice Danckwerts referred to the possibility in family affairs of a presumption against the finding of intention to create legal relations. In my view, if there is such a presumption it was rebutted in the case before me. The terms of the agreement were clear and intended to be of a legal nature. There was the requisite intention to create a binding agreement. The Defendant expressed her intention when she provided her 1/3 share of the retainer.

14As set out at page 131 of the Law of Contracts, John D. McCamus, Irwin Law Inc., 2005, in reference to agreements between family members, “it is a common feature of the cases in which an intention to create legal relations is found to be present that the party seeking to enforce the agreement has detrimentally relied on the assumed enforceability of the agreement.” John Schremph did detrimentally rely on the agreement. He provided his 1/3 share of the retainer. He had no logical reason to do so other than in reliance on the agreement. On a balance of probabilities (F.H. v. McDougall, 2008 SCC 53) I find that a legally enforceable oral agreement existed between the Plaintiff and the Defendant.

15Having found that an oral agreement exists, the Defendant argues that the oral agreement is not valid and enforceable because it is a collateral agreement to the Minutes of Settlement and Release (Tabs 6 & 7 of Exhibit 1). The Plaintiff argues that the oral agreement is not a collateral agreement and even if it is, it is not inconsistent with the Minutes of Settlement and Release. I accept the Plaintiff’s position.

16I do not find that the oral agreement is a collateral agreement to the Minutes of Settlement and Release. The parties to each are different. The subject of each is different. The context for each is different. The Full and Final Mutual Release at Tab 6 of Exhibit 1 is between the parties to the various specific pieces of litigation enumerated in the preamble. The litigation involved the administration of the estate and the sale of Wiggins. The direction regarding the settlement funds in the Release detailed how the proceeds of the litigation were to be paid out. Similarly, the Minutes of Settlement at Tab 7 of Exhibit 1 are specific to the estate litigation and the various pieces of litigation identified. The parties to the Minutes are a broader group of people than the three involved in the oral agreement. Again, the Minutes set out how the proceeds of the litigation (the settlement funds) were to be divided. This is distinct from whether there was then an oral agreement between three people Laura, John and Debbie relating to how the retainer was to be paid and any proceeds received to be redistributed between them. The oral agreement was not collateral to the Release and Minutes which ended the estate litigation between the family and the executer and lawyer assisting with the sale of an estate asset.

17As Laura and Debbie each received their ¼ of the proceeds pursuant to the Minutes, they were each free to have contracted as they pleased as to what to do with their share, including the oral contract to give their brother a 1/3 share. The funding of the litigation and how the proceeds would be redistributed because of the funding arrangement was distinct from the settlement of the estate litigation.

18This position is consistent with Panasonic Canada Inc. v. Morrison 2003 CarswellOnt 1834 (ON S.C.) At para 38 of Panasonic, Spence J. quotes from Lord Westbury: “the general words used in a release are limited always to that thing or those things which were specifically in the contemplation of the parties at the time when the release was given.” This is repeated and expanded on in paragraphs 10 and 12 of Ravelston Corp., Re 2006 CarswellOnt 5697 (ON S.C). The context of the Release and Minutes was a settlement of estate litigation and litigation over the sale of Wiggin’s. The oral agreement related to how the litigation was to be funded and proceeds to be apportioned as a result. The oral agreement was not in the contemplation of the Parties to the Release/Minutes which involved a much broader group settling the various pieces of estate litigation, including the main litigation relating to the sale of the business. The dispute on the oral agreement had not yet emerged between John and Debbie. The evidence is consistent that the lawyers drafting the Release and Minutes knew nothing of the oral agreement. The oral agreement is not and cannot be captured by the Release and Minutes.

19Even if the oral agreement is a collateral agreement, it can stand consistently with the Release and Minutes. The Supreme Court of Canada in Hawrish v. Bank of Montreal 1969 CanLII 2 (SCC), [1969] S.C.R. 515 on page 5 of 6 cited the test as articulated in Hoyt’s Proprietary Ltd. v. Spencer as follows:

A distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, is valid and enforceable even though the main agreement be in writing, provided the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement…

20This same test was referred to on page 7 of 8 in Bauer v. The Bank of Montreal, 1980 CanLII 12 (SCC), [1980] 2 SCR 102 and on page 8 of 11 of Carman Construction Ltd. V. Canadian Pacific Railway Co., 1982 CanLII 52 (SCC), [1982] 1 SCR 958. The Plaintiff referred to the case of Corey Developments Inc. v. Eastbridge Developments (Waterloo) Ltd. 1997 CarswellOnt 2139 (Ont. C. of J. (Gen Div.)) The oral agreement in this case does not conflict with the Release and Minutes of Settlement. The Release and Minutes stay in full force and effect. The Release and Minutes provide for a distribution of the settlement proceeds and the oral agreement for a redistribution of the funds received by two Plaintiffs in the estate litigation, Laura and Debbie, to accord with the retainer agreement. John, Laura and Debbie made an oral agreement to fund the litigation on the basis of 1/3 each for the retainer and share 1/3 of the proceeds or loses.

21I am not dealing with the unjust enrichment issue as it was not really pursued by the Plaintiff in final submissions.

Conclusion

Conclusion

22There is an oral agreement. Debbie owes John 1/3 of the amount she received. She received $88,500. One third is $29,500. However, in the Statement of Claim John claimed $27,691. His claim was never amended. Therefore, John is entitled to judgment in the amount of $27,691 and this is so ordered. He is also entitled to prejudgment interest in accordance with the Courts of Justice Act from July 25, 2006 to today and post-judgment interest in accordance with the Courts of Justice Act, thereafter.

Costs

Costs

23If the parties are unable to resolve the issue of costs, the Plaintiff may file brief written submissions (3 pages or less) with a costs outline attached within 30 days of today, the Defendant may file brief written submissions (3 pages or less) in response within 60 days of today and the Plaintiff may file brief reply submissions (2 pages or less) within 75 days of today.