ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-13-353

DATE: 20131119

BETWEEN:

PETER CATFORD, ELLEN CATFORD and JANE CHARLOTTE VOYVODIC CATFORD

Applicants

– and –

RODERICK ROLAND CATFORD

Respondent

D. Dooley and E. Durant, for the Applicants

H. Turner, for the Respondent

HEARD: September 25, 2013

HEALEY J.

Nature of the Motion

[1] This is a motion to enforce settlement of a proceeding pursuant to rule 49.09(a) of the Rules of Civil Procedure. The basis of the settlement was an offer to settle made pursuant to rule 49.02(1), and seven days later, an acceptance of offer made pursuant to rule 49.07(1).

[2] The moving party, Roderick (“Rod”) Catford, takes the position that the opposing parties are attempting to resile from the settlement, having changed their mind after the fact. Further, Mr. Catford asserts that the applicants’ solicitors are complicit in covering up their clients’ change of instructions by characterizing the situation as that of a simple mistake.

[3] The applicants’ solicitors are asserting that the incorrect notice of acceptance of offer was mistakenly delivered, and that such mistake was an innocent error.

The Law

[4] Settlement of an action is a form of contract, and the rules of contractual interpretation are to be applied by a court, giving effect to the intention of the parties: Thai Agri Foods Public Co. v. Choy Foong Int’l Trading Co., 2013 ONSC 883 at para. 7, citing Grant Sandhills Terminal Marketing Centre Ltd. v. J-Sons Inc., 2008 SKCA 16; KPMG v. Canadian Imperial Bank of Commerce, [1988] O.J. No. 4746 (C.A.).

[5] In Olivieri v. Sherman, 2007 ONCA 491 the Court of Appeal wrote:

41. A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement: Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 2734 (ON CA), 79 DLR (4th) 97 (Ont. C.A.) at 103-4.

42. A determination as to whether a concluded agreement exists does not depend on an inquiry into the actual state of mind of one of the parties or on the parol evidence of one parties’ subjective intention. See Lindsey v. Heron & Co. (1921), 1921 538 (ON CA), 64 DLR 92 (Ont. S.C. (App. Div.)). Where, as here, the agreement is in writing, it is to be measured by an objective reading of the language chosen by the parties to reflect their agreement. As was stated by Middleton J.A. in Lindsey at 98-9, quoting Corpus Juris, vol. 13 at 265;

The apparent mutual assent of the parties essential to the formation of a contract, must be gathered from the language employed by them, and the law imputes to a person an intention corresponding to the reasonable meaning of the words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on the subject.

[6] Using the analysis in Olivieri, the offer and acceptance are clear and unequivocal. It is plain and obvious on the face of the documents that a binding agreement was made.

[7] For reasons more fully explained later, I have determined that the evidence presented on this motion does not establish this to be a “change of mind” case, whereby the clients are trying to walk away from an earlier agreement. The evidence leads this court to conclude that the applicants gave unequivocal and consistent instructions to their counsel throughout. Their instructions were not followed. The outcome was not what they anticipated. The question raised by the evidence is whether that was through solicitor’s incompetence, followed by an attempt to cover-up that course of conduct, or innocent mistake.

[8] Regardless of whether the acceptance of offer is a product of error by virtue of incompetence or slip, the same question must be resolved. The issue to be determined on this motion is whether, in the face of a solicitor’s error, the court should exercise its discretion under rule 49.09(a) to enforce the settlement.

[9] In this instance the court may be guided by the pre-rule 49 case of Acherer v. Paletta 1996 CarswellOnt. 119 (Ont. C.A.). At para. 11 of Acherer v. Paletta the court stated:

A solicitor whose retainer is established in the particular proceedings may bind his client by a compromise of these proceedings unless his client has limited his authority and the opposing side has knowledge of the limitation, subject always to the discretionary power of the Court, if its intervention by the making of an order is required, to inquire into the circumstances and grant and withhold its intervention as it sees fit.

[10] The applicable law requires that this court consider all of the relevant factors disclosed by the evidence to determine whether the enforcement of the settlement would lead to clear injustice: Srevot v. Srevot Farms Ltd., 2013 ONCA 84; Olivieri v. Sherman, supra, and Milios v. Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3d) 218 (C.A.).

[11] Having considered the facts as set out below, by the barest of margins and giving the solicitors the benefit of much doubt, I am ruling that the result in this case came about by innocent mistake. As the evidence shows, there is much to support the opposite conclusion, which is that a substantive error of law was made when the acceptance of offer was delivered at first instance, and that both lawyers manufactured evidence to paint a different picture after the fact. To the extent that such a conclusion could be supported by the evidence, the lawyers in question have no one to blame but themselves, as it is their own lax practices in the areas of docketing, record keeping and note taking that points one in the direction of such a serious allegation. While this ruling must not be seen to excuse such practices, it is that very sloppiness that ultimately leads me to the conclusion that, on the occasion in question, it is plausible that the wrong document was inadvertently delivered to the opposing party. These observations will factor into any assessment of costs that this court may be requested to make in respect of this motion.

Facts

[12] The parties are involved in two proceedings: a vexatious litigant application (CV-13-0353) and a defamation action (CV-11-0624). In the material filed for this motion, the defamation action is sometimes referred to as the main action. There is another proceeding involving Rod Catford and Jane Catford, being court file number 703/13, an application under the Trustee Act, R.S.O. 1990, c.T. 23. That application is not relevant to this motion other than that it is sometimes referred to as the “trust application” in the evidence filed.

[13] This motion has been brought within the vexatious litigant application. In this proceeding, the applicants - Peter, Ellen and Jane Catford - are all represented by both Kara Hamilton and Lex Arbesman, both of the firm Arbesman, Hamilton, Boswall, LLP.

[14] Most of the salient facts are not in dispute, and occurred over a period of seven days from May 17, 2013 to May 24, 2013. As the chronology is important, it is set out below:

May 17, 2013

[15] Rod Catford made an offer to settle the vexatious litigant proceeding. The terms of the offer to settle were that:

1. The application be dismissed;

2. If accepted before 4 p.m. on May 24, 2013, the dismissal would go without costs, save and except costs ordered by this court on May 15, 2013;

3. If accepted after 4 p.m. on May 24, 2013, the respondent would be entitled to his costs on a partial indemnity basis up that date and time, and costs on a substantial indemnification basis thereafter, in addition to the costs ordered by this court on May 15, 2013;

4. The offer would remain open for acceptance until one hour after the commencement of the hearing in this proceeding, at which time it would expire unless earlier withdrawn or amended.

May 21, 2013

[16] Ms. Hamilton sent an email to her client forwarding the offer and recommending the making of a counter offer that “accepts his offer provided he consents to the costs ordered against you being offset against costs ordered against him in the main action. That would just leave the trust application and the main action to deal with”.

May 22, 2013

[17] Rod Catford sent an offer to settle the defamation action, lengthier than the offer made on May 17. The evidence establishes that the fax machines in the opposing lawyers’ offices were not synchronized to the accurate time, with Ms. Hamilton’s being seven or eight minutes behind Ms. Turner’s. According to her evidence on cross-examination, Ms. Hamilton reviewed this offer at approximately 9:38 a.m., meaning that she received and reviewed it immediately after it was sent.

[18] Ms. Hamilton’s evidence is that she had a telephone call with Peter Catford at 9:30 a.m. on May 22 with respect to the offer made on May 17, and her evidence on cross-examination was that the conversation was not long, and that Peter Catford instructed her not to accept the offer. What is not clear is whether this telephone conversation, and the related note made by Ms. Hamilton, refers to the offer in the vexatious litigant application, or in the defamation action. The majority of the note is redacted, but that which is revealed contains the following words in Ms. Hamilton’s handwriting: “discussed could not accept offer as is wording is awful they give more than Rod does. Has to be counter.”

[19] There are two factors suggesting that this note relates to a conversation that refers to the offer to settle in the defamation action. First, there is no clear docket showing the length of this telephone conversation, so it is unknown whether it overlaps the receipt of the offer in the defamation action, reviewed by Ms. Hamilton only eight minutes after beginning her conversation with Peter Catford. Secondly, there is nothing about the offer to settle in the vexatious litigant application that lends itself to a conclusion that either the wording is “awful” or that they (presumably Hamilton’s clients) would be required to pay, concede, or compromise more than the respondent. By contrast, the terms of the offer to settle the defamation action contain an offsetting of costs that have been ordered against each of the parties both in the vexatious litigant application, the defamation action, and an appeal launched within that proceeding. The content of the second offer to settle, being far more involved than the first, suggests that perhaps Peter Catford’s instructions to reject the offer could have been in relation to the offer in the defamation action.

[20] At 9:52 a.m. Ms. Hamilton emailed the offer in the defamation action to her clients, noting in the text of the email that it was basically “the same as the last one”, possibly referring to an earlier offer to settle made by Rod Catford on March 13, 2013.

[21] According to the docket entry made by Ms. Hamilton, all events occurring on May 22 lasted two hours. Her evidence is that at 3:44 p.m. she sent an email to Peter and Ellen Catford regarding the offers in both the vexatious litigant application and in the main action. Some of the email exchange is redacted. With respect to the offer on the vexatious litigant application, she wrote “a counter offer would need to be made but as the majority of the terms as Rod has laid them out would be acceptable. This would not take long (an hour or so) then there would be the costs of receiving and responding to a counter to our counter offer; this is hard to estimate the cost of because the only thing predictable about Rod is his ability to be unpredictable”.

[22] In the afternoon of May 22, 2013, at an indeterminate time, a telephone conference was held with Ms. Hamilton, Mr. Arbesman and Peter and Ellen Catford. The only note that Ms. Hamilton has of that conversation contains a single page of doodles. There is absolutely no indication of the nature of the discussions, her clients’ instructions, or the length of the telephone conversation. Mr. Arbesman has no notes from that telephone conversation.

[23] Mr. Arbesman docketed 1.4 hours for his time working on the file on May 22. His work on that date included a phone call from Peter Catford, for which he has no notes, reviewing the two offers to settle from Rod Catford, receiving and reviewing an email from Peter Catford and responding to that email. There is no evidence of the email correspondence.

May 23, 2013

[24] At 5:24 p.m. Ms. Hamilton sent an email to Peter Catford, outlining the costs that have been ordered against both sides in both proceedings. It is the provision of this information, presumably requested or required by the applicants, in conjunction with the second email sent by Ms. Hamilton the previous day, that compels me to the conclusion that the applicants were concerned with and focused on the costs of these two proceedings. They did not want either settled without resolution of the costs that they have been ordered to pay. Further, even if they did instruct Ms. Hamilton to accept the offer of May 17, they did so on the faulty advice of Ms. Hamilton and/or Mr. Arbesman, as the evidence of Ms. Hamilton indicates that she believed that there would be no negative repercussions from accepting the offer of May 17.

May 24, 2013

[25] It is important to note that Ms. Hamilton’s docket indicates that the entirety of her actions on May 24 took only one hour.

[26] In the morning, at an indeterminate time, Ms. Hamilton’s evidence is that she drafted an offer to settle in the defamation action, as well as the unconditional notice of acceptance in the vexatious litigant application that was ultimately delivered to Rod Catford. The notice of acceptance reads as follows: “The applicants accept your offer to settle dated May 17, 2013”. Her evidence is that she drafted that notice of acceptance despite her clients’ instructions to not settle the vexatious litigant application without set-off of costs, because her thoughts were:

“A conditional acceptance [of the offer] was no longer necessary based on the contents of the proposed counter offer in the defamation action. The counter action in the defamation action included what I had discussed with my clients regarding what could be contained in a counter offer in the vexatious litigant applicant”.

[27] At 2:27 p.m. she emailed the offer to settle the defamation action to Peter Catford. Her evidence is that she did not attach the notice of acceptance as drafted for the vexatious litigant application to this email. In that email she states:

I took a few minutes and whipped up what Lex and I propose we send to Rod as a counter settlement offer on the main action.

We would then accept the offer to settle the vexatious litigant application.

[28] Then occurred a telephone conversation between Ms. Hamilton and Peter Catford, with a note recording a time of 3:30 p.m. The unredacted portions of that note read:

• Asked if he saw my email

• Discussed what he, Ellen & Jane had decided

• What accepting offer on VL means

• What sending counter along with main action counter would mean

• Instructed to send counter offer on main action and to make acceptance of VL offer contingent on settlement of main action

[29] Thereafter, Ms. Hamilton’s evidence is that she revised the notice of acceptance of offer in the vexatious litigant application and revised the offer to settle in the defamation action. There is no specific docket relating to this work, or when it started and stopped; it was all part of the one hour of docketed work done on the file on May 24. There is no evidence that thereafter these revised documents were sent to the client. Oddly, Mr. Arbesman allegedly made a note of Hamilton’s conversation with Peter Catford, recording the time as 3:35 p.m. It is difficult to understand, in the context of all of the other evidence, why he would make a note of such a conversation with his co-counsel, when he failed to make notes of more important matters such as his clients’ instructions. His note indicates that, among other things, his clients wanted acceptance of the vexatious litigant settlement to be conditional on settlement of the main action. His note also states “all other conditions the same”. A separate note to the side of the page states “review revised acceptance – 100% o.k. – no negative for Jane”. Again two aspects strike as odd from this note. The first is that it appears that Mr. Arbesman reviewed only the notice of acceptance, but not the offer to settle the main action, which is far more detailed. The revised notice of acceptance is one line only, and reads “Provided that settlement is reached in court file number 11-0642 concurrently with this file, the applicants accept your offer to settle dated May 17, 2013”. It is also not understandable why Ms. Hamilton was revising the offer to settle in the defamation action, as her testimony states, when Mr. Arbesman’s note appears to indicate that all other conditions are the same. There is no evidence that either of these revised documents were sent to their client.

[30] Ms. Hamilton’s evidence is that, thereafter, she faxed the wrong notice of acceptance in the vexatious litigant application to Ms. Turner. She acknowledged that it was sent at 3:30 p.m. The evidence in regard to her fax transmission history indicates that it was received at 3:37 p.m. in Ms. Turner’s office. It is Ms. Hamilton’s evidence that she picked up the wrong document from the file before taking it physically downstairs to a fax machine, where she personally scanned it and sent it to Ms. Turner’s office.

[31] What is presented by this evidence is that, on its face, Ms. Hamilton had a telephone conversation with Peter Catford at 3:30, was done that conversation by at least 3:35 when she spoke to Mr. Arbesman, revised the notice of acceptance and possibly the offer to settle in the defamation action, showed them to Mr. Arbesman and gave him time to review, and still managed to print them and take them downstairs to manually transmit them, which she did at 3:30. Taken at its most generous, if there is a difference in time between Ms. Turner’s office and Ms. Hamilton’s, which Ms. Turner urged on me as being seven minute apart, then potentially the telephone conversation with Peter Catford, the revising of the documents and review by Mr. Arbesman, and the faxing to Ms. Turner all took place within seven minutes at most.

[32] Exactly ten minutes later, Ms. Hamilton faxed the offer to settle the defamation action, which contained a set-off of costs. Eighteen minutes after that, she faxed an offer to settle in the trust action.

[33] At 3:41 p.m. Ms. Hamilton also emailed the “incorrect” acceptance of offer to Ms. Turner in the vexatious litigant application.

May 27, 2013

[34] At 10:53 a.m., Mr. Arbesman sent email correspondence to Rod Catford in which he confirmed his clients’ acceptance of the vexatious litigant offer, and requested feedback with respect to his clients’ other offers.

[35] At 11:41 a.m. on that same day, Rod Catford responded by indicating that he doubted that there would be much interest in the offer made by Mr. Arbesman’s clients in the main action.

[36] Ms. Hamilton’s evidence is that, at 1:00 p.m. Mr. Arbesman forwarded that email exchange to her, which she read for the first time at approximately 2:26 p.m. At 2:41 p.m., Ms. Hamilton notified Ms. Turner that she had delivered the wrong acceptance of offer by mistake. She attached the conditional acceptance of offer dated May 24 which she indicated was the one she intended to send.

[37] As earlier stated, there are several facts contained above which could lead to the conclusion that both Ms. Hamilton and Mr. Arbesman have fabricated their evidence to cover up the fact that Ms. Hamilton may have intentionally sent the unconditional acceptance of offer on May 24, in addition to the problems in the evidence already noted:

(1) The first is that it is apparent that Ms. Hamilton was focused on the deadline of 4:00 p.m. of May 24. She first faxed the notice of acceptance at 3:30, and thereafter emailed the notice of acceptance at 3:41. Her evidence is that she did so because in the past there have been difficulties with Ms. Turner receiving faxes from Hamilton’s office. This bolsters the conclusion that it was important to her that the acceptance reach Ms. Turner before 4:00 p.m.. This timing was of course important because of the cost consequences of accepting the offer prior to 4:00 p.m.;

(2) A conditional notice of acceptance such as the one that Ms. Hamilton says that she intended to deliver does not, in fact, accept an offer. It is at best a counter offer. There would be no reason to ensure that such a document reached Ms. Turner before 4:00 p.m. on May 24;

(3) It is strongly suggestive from the e-mail of May 24 sent to Peter Catford at 2:27 p.m., that Ms. Hamilton was of the view that the content of her clients’ offer to settle in the main action would permit them to accept the offer to settle in the vexatious litigant application, without reservation. Her evidence with respect to why she drafted an unconditional notice of acceptance makes it clear that she believed that this would be a reasonable course of action;

(4) Given that her client’s evidence was to make sure there was a set-off of costs before the vexatious litigant application was settled, which I accept were always the instructions, it is unclear why an “unconditional” offer of acceptance would ever have been prepared. I infer that, as of the morning of May 24, Ms. Hamilton still clung to the view that it would be reasonable to deliver such a document, and her affidavit evidence confirms such belief;

(5) There is a lack of evidence from May 24 proving that Ms. Hamilton prepared a revised notice of acceptance, being the conditional offer of acceptance. For example there was no evidence that such a document was emailed to the client for review, or printed and placed in hard copy in her file and although the docket for May 24 produced by Ms. Hamilton indicates that she did “review and amend settlement offer and acceptance” the evidence is unclear as to when these matters were docketed.

Prejudice

[38] Milios sets out the factors to guide a motions judge in the exercise of her discretion with respect to whether to enforce settlement.

(a) Whether the parties’ pre-settlement positions remain intact

[39] Neither party has taken steps to implement the settlement reached on May 24 and accordingly each parties’ position remains intact.

(b) Whether the respondent will prejudiced if the settlement is not enforced

[40] The respondent will not be prejudiced other than losing the benefit of the impugned settlement. This is a significant loss given the relief being sought, and the fact that Rod Catford is a lawyer. As a lawyer, having the threat of being declared a vexatious litigant hanging over his head is significant given his profession and the potential loss to his reputation. However, the offer kept intact the cost award of $8,949.90 ordered to be paid to him by this court on May 15, 2013. No compromises or advantages were otherwise conferred on him by the acceptance of that offer. If the settlement is not enforced, he retains the right to collect those costs, along with others ordered to be paid to him by the applicants.

(c) The degree to which the applicants would be prejudiced in relation to any prejudice suffered by the respondent

[41] A consideration of this factor must take into account the loss of bargaining power that would ensue if one action is settled in isolation of the other. This is so because each side, at this point in the litigation, owes significant costs to the other. Mr. Catford owes something in the neighbourhood of $39,000 to the applicants in costs; the applicants cost orders payable to Rod Catford are in the neighbourhood of $12,500. The offers exchanged by each side in the main action suggest that each is hoping to achieve a set-off, albeit with different terms. Enforcing the settlement in the vexatious litigant application prevents the settlement of this proceeding from being used by the defendants as part of an overall settlement, which is what the defendants were hoping to achieve.

(d) Whether any third parties would be affected if the settlement is not enforced

[42] There is no evidence that a third party would be prejudiced if settlement is not enforced.

[43] Courts have recognized that it would be inadequate to enforce a settlement that is contrary to a client’s instructions, particularly where the balance of prejudice weighs more heavily in favour of the party whose lawyer erred: Smith v. Robinson (1992), 1992 7504 (ON SC), 7 O.R. (3d) 550; Draper v. Sisson, 1991 CarswellOnt 446 (O.C.J. (Gen. Div.)). I find that the balance of prejudice does favour the applicants overall.

[44] For the foregoing reasons the motion is dismissed.

[45] If the parties are unable to resolve the issue of costs, they may each have ten minutes to argue costs of this motion on January 3, 2014, commencing at 9:30 a.m. If costs are being sought personally against counsel, notice is to be provided by December 3, 2013.

HEALEY J.

Released: November 19, 2013