SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-434398

DATE: 20130816

RE: B.O.T. International Ltd., Applicant

AND:

CS Capital Limited & Tony Chahine or his affiliates as he directs, Respondents

BEFORE: Madam Justice Darla A. Wilson

COUNSEL:
Melvyn Solmon & Ryan McKeen, Counsel for the Applicant

Simon Bieber & Julia Wilkes, Counsel for the Respondents

HEARD: July 19, 2013

ENDORSEMENT

[1] The Applicant brings this motion pursuant to Rule 49.09 of the Rules of Civil Procedure for an order granting judgment in accordance with the terms of an accepted offer. This is opposed by the Respondent.

[2] At the outset, I note that the Applicant delivered the following materials for this motion: a motion record that consisted of 2 volumes; a supplementary motion record; a further supplementary motion record; a further further supplementary motion record; a further further further supplementary motion record; an exhibit and undertaking brief; a factum; and a brief of authorities. There were cross examinations of 2 affiants who swore affidavits in support of this motion.

[3] The Respondent filed a motion record, a factum and a brief of authorities, which is the usual responding material on a motion of this nature.

[4] I will make reference to these materials later in my reasons.

[5] Motions under Rule 49.09 are intended to provide a speedy mechanism for obtaining judgment where there has been a clear offer and acceptance and a failure to comply with the terms of the offer. Rule 49.09(b) provides that if there has been a failure to comply with the terms of an accepted offer, the other party may continue the proceeding as if there had been no accepted offer to settle.

[6] In the case before me, the solicitor for the moving party proceeded with the motion for judgment and it does not appear that any consideration was given to proceeding with the action.

BACKGROUND

[7] I do not propose to go into the various business dealings between the parties in the application; they are complicated and numerous. It would have been of assistance had the moving party set out in a succinct fashion the relationship between the principals of the various companies that are involved and referred to in the materials. The affidavit of Joyce Chow filed in support of the motion does not identify what type of business BOT carries on, or who the principals of it are. The Application provides no information either. Ms. Chow deposes she is an “employee” of BOT, but no further details are given. Suffice it to say that Albert Pace [“Pace”] is the President of the Respondent CS Capital [“CS”]. The Respondent Tony Chahine [“Chahine”] was the president of a business known as Cotton Ginny and controlled another known as Eco-Ganic International Inc. [“Eco-Ganic”], both of which failed and were assigned into bankruptcy. CS invested in these companies. BOT invested in Eco-Ganic and claimed to be a creditor of Eco-Ganic.

[8] In this application, B.O.T. International Ltd. [“BOT”] sues to recover $500,000 it alleges was owing pursuant to a payment covenant arising from a financing project for oil wells, known as the Slave Point Project. CS counterclaimed for more than 2 million dollars. Chahine and Pace are involved in other litigation as well.

[9] In any event, the trial of this action was scheduled for November 26, 2012. Settlement negotiations between counsel were undertaken in the period of time leading up to the trial and around the pre-trial conference. It is not disputed that on November 21, 2012, counsel for CS forwarded an e-mail to counsel for BOT with numerous terms on which Pace was prepared to resolve the litigation [see Supplementary motion record, affidavit of Joyce Chow sworn April 26, 2013, exhibit A, page 65]. Counsel for the Applicant and Chahine responded, accepting the offer.

[10] It is important to note that there were 10 terms of the offer set out in the e-mail. The relevant terms for the purposes of the motion are the following: there was reference to the inventory which would be transferred to BOT; and bank records, wire transfer records and other documents accounting for the transactions between BOT and Eco-Ganic would be produced to substantiate the inflows and outflows. The “inflows and outflows” was defined in the e-mail with the settlement offer as the following 3 statements: that BOT paid at least $2 million for inventory it provided to Eco-Ganic and for expenses and that the $2 million figure would be substantiated by BOT and Eco-Ganic’s financial records, including wire transfer records and accounting documentation between Eco-Ganic and BOT; that BOT contributed $395,000 to Eco-Ganic between November 2010 and June 2011; and that BOT was repaid $363,000 of this amount by Eco-Ganic.

[11] The terms of the settlement offer also included a procedure to be followed if the bank records did not substantiate the numbers contained in the inflows and outflows and if there was a dispute about it, the dispute would be resolved by a judge.

Positions of the Parties

[12] According to the Applicant, it produced the required financial documentation and the Respondent CS reneged on the settlement, and failed to follow the proper procedure by bringing an application to have a judge determine the dispute. The Applicant submits that the settlement resolved all issues between the parties and it has complied with the terms of the settlement including providing adequate financial information to the Respondent. Mr. Solmon in his submissions denied that the agreement was conditional on the financial documentation substantiating the losses of BOT in the $2-3 million range

[13] The Respondent states that because CS had lost more than $2 million in its dealings with Eco-Ganic, Pace had to be satisfied that BOT had lost significant money from its involvement with Eco-Ganic and that is why he insisted on the production of banking records to demonstrate that BOT had, in fact, suffered losses. This concern was heightened by the fact that Eco-Ganic was controlled by a relative of Chahine.

[14] It is the position of the Respondent that the records produced by BOT and Eco-Ganic did not substantiate the representations made and he was induced into the settlement by false representations and the “agreement” is not valid.

[15] At the risk of simplifying the matter, the Respondent states that after production of some of the bank records, it became clear that contrary to what he had been led to believe about the inflows and outflows, BOT had not established that it had lost in excess of $2 million to Eco-Ganic and in the period from November 2010 to June 2011, BOT received more from Eco-Ganic than it paid out to it. In his affidavit, Mr. Pace attaches a spreadsheet that summarizes his analysis of the payments made and received.

[16] The Applicant denies this and submits that the losses of BOT were, in fact, much greater. It is the position of the Applicant that BOT lost in excess of $6 million. Counsel denied there were any fraudulent misrepresentations made and argued the settlement was not conditional on any terms. It was submitted by the Applicant that the deal was clear on its face, the parties turned their minds to the issues and the settlement ought to be enforced.

[17] I pause at this point to comment on the materials served and filed by the moving party. They include: a 2 volume motion record with the affidavit of Ms. Chow sworn January 22, 2013; a supplementary motion record with a further affidavit of Ms. Chow sworn April 26, 2013; a further supplementary motion records with an affidavit of Lana Kirsch sworn May 9, 2013; a further further supplementary motion record with an affidavit of Tony Chahine sworn May 14, 2013—he attempts to explain in excess of 50 banking transactions referred to in the Chow affidavit and arising from her cross-examination; a further further further supplementary motion record with a further affidavit of Lana Kirsch sworn May 24, 2013; a book of authorities; a factum; and an exhibit and undertaking brief.

[18] Given the onus on a party moving for judgment in accordance with a settlement, one wonders why it was necessary to include all of these supplementary materials with further affidavits, apparently intended to address issues raised by the Respondent. It must have been clear to counsel for the Applicant that counsel for the Respondent interpreted the evidence in a very different fashion than the solicitor for the moving party did. It is beyond dispute that the business dealings between the parties were complicated. The evidence arising from production of the banking records and other documentation is far from clear.

ANALYSIS

[19] The law is clear that in considering a motion pursuant to Rule 49.09, the court must first determine whether there was an agreement between the parties on the material terms. If this question is answered in the affirmative, then the court will consider whether the settlement ought to be enforced: Milios v. Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3d) 218 (C.A.).

[20] The law is settled that in deciding whether there was a settlement agreement, the court need not look into the actual state of mind of a party: Olivieri v. Sherman 2007 ONCA 491. If the agreement is in writing, the court needs to read it objectively. As well, the court needs to read the supporting documentation in context to determine if there was an agreement on the essential terms of the contract: Bank of Montreal v. Ismail, 2012 ONCA 129.

[21] In the case before me, the solicitor for the moving party relies on an e-mail from Simon Bieber dated November 21, 2012 sent at 216 pm as constituting the settlement agreement (see affidavit of Joyce Chow sworn April 26, 2013, exhibit A, page 64). That e-mail indicated Mr. Bieber had instructions to make the offer that he set out in his e-mail. In response, Mr. McKeen, the solicitor for the moving party stated, “BOT and Mr. Chahine accept this offer.”

[22] As I indicated, the “offer” of the Respondent had 10 terms and it was premised on the “inflows and outflows”, specifically: BOT having paid at least $2 million for inventory that it provided to Eco-Ganic and on account of Eco-Ganic’s expenses from operation; BOT and Eco-Ganic producing financial records to document this; and BOT having paid $395,000 to Eco-Ganic in the period November 2010-June 2011 and being repaid $363,000 by Eco-Ganic for this time period. Point 6 in the e-mail required the production of the bank records of Eco-Ganic and BOT’s wire transfer records to substantiate the amounts referred to above, which were deemed “inflows and outflows”.

[23] In determining whether a settlement was reached between the parties in this case, the court must look at the e-mail with its various terms, considering the other documentation in context. In this case, the inflows and outflows are important and must be scrutinized. While the Respondent urges me to find that false representations were made by BOT to induce the purported settlement, in my view, I do not need to make that finding in order to decide this motion for judgment.

[24] On motions brought pursuant to Rule 49.09, the threshold is high on the moving party; it is similar to the burden that must be proven on a motion for summary judgment. I am guided by the comments of the Divisional Court in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. 2007 39604 (ON SCDC), 2007 CarswellOnt 6003, (Divisional Court), which involved an appeal of a dismissal of a motion pursuant to Rule 49.09. In that case, Carnwath J stated, “The first step is to consider whether an agreement to settle was reached. In doing so, the proper approach is to treat the motion like a rule 20 motion for summary judgment. If there are material issues of fact or genuine issues of credibility in dispute regarding whether (i) the parties intended to create a legally-binding relation or (ii) there was an agreement on all essential terms, a court must refuse to grant judgment. The second step, once an agreement has been found to exist, is to consider whether, on all the evidence, the agreement should be enforced. In this second step, a rule 20 approach is not applied, but rather a broader approach, taking into account evidence not relevant to a rule 20 inquiry...”

[25] I turn to the question of whether there was an agreement to settle. Counsel’s e-mail of November 21 clearly sets out the 10 terms upon which Pace was prepared to resolve the litigation. It is premised upon the inflows and outflows, which had to be substantiated by production of various financial records.

[26] On the evidence before me on this motion, the issue of whether all of the relevant financial records have been produced is disputed. Further, the evidence of Chow in her sworn affidavit is contradicted by the evidence of Pace in his affidavit. During the course of the motion, counsel made reference to various spreadsheets detailing payments made and each party came asked the court to make different findings about the amounts. While counsel for the moving party submitted the evidence was clear that BOT lost more than $6 million, this was disputed by the Pace affidavit and Respondent’s counsel submitted that the bank records produced demonstrate that BOT actually profited by approximately $110,000 instead of suffering losses.

[27] In addition, the evidence on the amount of the inventory is disparate. Chow deposes the inventory contribution was $3 million but during the cross-examination of Chahine, he testified it was in the $250,000 range.

[28] Counsel for the Respondent submits that instead of the full banking records being produced so that the inflows and outflows could be substantiated, select records were provided and some were redacted so it is impossible to determine what transpired.

[29] As the motion judge, I am in no position to make findings on whether the financial records have been produced, whether they demonstrate that BOT suffered financial losses in the $6 million range or whether in fact there was a profit. These questions are best determined by the trial judge who will have the benefit of a complete record and can hear viva voce evidence and will be in a position to make findings of credibility. As noted by Justice Carnwath in Capital Gains v. Merrill Lynch, supra, on a Rule 49 motion, the court must undertake a similar exercise as it does on a summary judgment motion to determine if judgment ought to be rendered without a trial.

[30] In Combined Air Mechanical Services Inc. v. William Flesch et al. 2011 ONCA 764, the Court of Appeal affirmed that a party seeking judgment at an early stage has the onus of satisfying the court that there is no genuine issue for trial. The Court stated, “The motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment or can this full appreciation only be achieved by way of a trial?...the point we are making is that a motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to fully appreciate the evidence and the issues posed by the case. In making this determination, the motion judge is to consider, for example, whether he or she can accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear the witnesses speak in their own words, and without the assistance of counsel as the judge examines the record in chambers. Thus, in deciding whether to use the powers in rule 20.04(2.1) the motion judge must consider if this is a case where meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of a trial narrative, and to experience the fact-finding process first-hand. Unless full appreciation of the evidence and issues that is required to make dispositive findings is attainable on the motion record—as may be supplemented by the presentation of oral evidence under rule 20.04(2.2)—the judge cannot be “satisfied” that the issues are appropriately resolved on a motion for summary judgment.” [paras. 50-55].

[31] In my opinion, BOT has failed to meet the first branch of the test for success on a rule 49 motion. Given the evidence before me on this motion, I am of the view that in order to decide if the terms of settlement were met, given the disparity of the evidence from the financial records, I do not think I can accurately draw the proper inferences without the benefit of a trial process, without the ability to question witnesses about the documentation. In short, I do not believe I have a full appreciation of the evidence based on the material before me and thus, I cannot make the necessary dispositive findings. The evidence as a whole does not satisfy me that BOT sustained the losses as alleged and this was a condition to the settlement agreement. Further, I am not persuaded on the evidence before me on this motion that all of the financial records have been produced without editing to enable the Pace to satisfy himself of the amount of losses BOT incurred as a result of its investments in Eco-Ganic.

[32] In addition, it is not clear to me what amount of inventory BOT had in its possession; the evidence was contradictory and the value of it may have been in the millions or in the hundreds of thousands. I cannot by reviewing the affidavits and the cross examinations of the deponents determine which is the correct figure. By way of example, BOT produced letters to substantiate the value of the inventory in the $3.5 million range. However, the bank records for BOT have been redacted and there is no entry showing a purchase of the inventory which reflects that amount. Other documentation produced by BOT seems to indicate the value of the inventory purchased was in the $1.2 million range. Similarly, while the Respondent submits that BOT made false representations to CS Capital to induce it into settlement, I cannot make that determination on the evidence.

[33] To borrow the language from the Court of Appeal in Combined Air, supra, to make these determinations, which were essential terms of the agreement, I am of the view that the court needs to hear and observe witnesses to have this financial evidence presented by way of a trial narrative—I am simply not satisfied that these issues can be resolved appropriately on a motion and consequently, I cannot find on the evidence as it is presented on this motion that there was a settlement agreement.

[34] As I have stated, the onus on a party moving for judgment on a settlement pursuant to Rule 49 is a heavy one. It is clear to me is that the Applicant has failed to discharge this burden and consequently, its motion must fail.

Costs

[35] Motions to enforce settlements are risky motions because the onus on the moving party is high and it is a two pronged test that must be met. In this case, the moving party failed to discharge its burden. I see no reason why costs ought not to follow the event.

[36] I have reviewed the Costs Outline submitted by counsel. I have considered the factors enumerated under Rule 57, including the time spent, the results achieved, and the complexity of the matter, as well as the application of the principle of proportionality: Rule 1.04(1).

[37] Furthermore, I have taken into account the principles set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario 2004 14579 (ON C.A.), (2004), 71 O.R. (3rd) 291 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant. This motion required significant time expenditures by counsel including reviewing the bank records and conducting cross examinations. I am of the view that costs in the sum of $12,500 inclusive of disbursements and taxes is a reasonable amount and I fix the costs in that sum payable by the Applicant to the Respondent forthwith.

D.A. Wilson J.

Date: August 16, 2013