ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-05-302574PD1
DATE: 20130207
B E T W E E N:
Thai Agri Foods Public Company Limited and Thai Indochine Trading Inc.
Plaintiffs/Responding Parties
- and -
Choy Foong Int’l Trading Co. Inc. and Franklin K.C. Lam
Defendants/Moving Parties
Victor Butsky,
for the Plaintiffs/Responding Parties
Lawrence Wong,
for the Defendants/Moving Parties
HEARD: January 15, 2013
GOLDSTEIN J.:
INTRODUCTION
FACTS
[1] The Defendants Choy Foong Int’l Trading Co. Inc. (“Choy Foong”) and Franklin K.C. Lam (“Lam”) were in the food business. The Plaintiffs Thai Agri Foods Public Company Limited and Thai Indochine Trading Inc. (collectively referred to as “Thai Agri Foods”) were also in the food business. The Plaintiffs accused the Defendants of using their trade marks by selling products that had the Thai Agri Foods logo and artwork. This action was launched in 2005. The Defendants attempted to register their own trademark. The Plaintiffs complained to the Trade Marks office. There was a hearing before the Canadian Trade Marks Opposition Board (“the Board”). In May 2012 the Board eventually found that the Defendants had breached the Thai Agri Foods trademark.
[2] Commencing in June 2012 the parties turned their minds to settlement. Letters containing proposed terms went back and forth. The negotiations commenced with a letter on June 5, 2012 from Mr. Butsky on behalf of the Plaintiffs setting out four points. Mr. Wong, for the Defendants, purported to accept the offer to settle but asked for some modifications to the terms, including a period to reduce inventory. Letters continued to go back and forth. Elements that were not agreed to be included whether there should be an extension to put the matter back on the trial list, or how long the Defendants would have to dispose of inventory. In each case, Mr. Butsky noted in his correspondence that there continued to be terms to be discussed and memorialized in a final settlement.
[3] The only issues before the Court are whether there is a binding settlement, and, if so, whether it should be enforced. Mr. Wong also raised the issue of dismissal for delay, but at the beginning of the motion I indicated that I did not think his argument on that point had much of a chance, and he abandoned it.
[4] Settlement of an action is a form of contract, and the rules of contractual interpretation will be applied by a Court, giving effect to the intention of the parties: Great Sandhills Terminal Marketing Centre Ltd. v. J-Sons Inc., 2008 CarswellSask 57, 2008 SKCA 16 (Sask.C.A.); KPMG Inc. v. Canadian Imperial Bank of Commerce, 1998 1908 (ON CA), [1998] O.J. No. 4746 (C.A.).
[5] In Olivieri v. Sherman, 2007 ONCA 491 the Ontario court of Appeal set out the principles for determining whether the parties concluded a settlement:
[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 2734 (ON CA), (1991), 79 D.L.R. (4th) 97 (Ont. C.A.) at 103-4.
[42] There is no question but that the first requirement was met: the counter-offer was drafted during the course of a court-directed mediation involving multi-million dollar law suits and in which all parties were represented by experienced legal counsel. It is apparent that the parties intended to enter into a binding legal agreement to resolve all of the outstanding legal proceedings.
[43] In respect of the second requirement, the motion judge found that there was no meeting of the minds in respect of all of the essential terms of the contract. It will be recalled that he held that the counter-offer was conditional on elaboration of the words “disparage” and “scientific” in para. 4(b) of Part A of the counter-offer. In coming to this view, the motion judge relied on the evidence of the respondents. But, the respondents’ evidence was based on discussions they and their counsel had with Mr. Adams during the mediation. Dr. Spino admitted that the respondents and their counsel never discussed the counter‑offer with Dr. Olivieri or her counsel during the mediation, or told them that the counter‑offer was conditional upon finalizing documentation. There was no evidence that all parties shared the view that further negotiation, elaboration or agreement was necessary.
[44] 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 parole evidence of one party’s subjective intention. See Lindsey v. Heron & Co. (1921), 1921 538 (ON CA), 64 D.L.R. 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 his 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] In my view, there was no binding agreement because there was no meeting of the minds. The correspondence indicates that there were ongoing negotiations. There is no question that the Defendants were anxious to settle. Mr. Wong continued to accept the points set out in Mr. Butsky’s letters, but Mr. Butsky consistently insisted that the negotiations were ongoing and that there were still points outstanding. He insists that there were important details that were never settled. For example, upon receipt of the initial settlement offer, Mr. Wong indicated that his client needed time to dispose of existing inventory. That point took time to be worked out; indeed, in my view, it was never worked out. What Mr. Wong characterizes as acceptance of the terms of settlement, Mr. Butsky characterizes as ongoing negotiations. He was careful in his correspondence to indicate that there was no binding settlement agreement. Rather, he characterized it as a framework for discussion. In effect, the Plaintiffs took the position that there could be no settlement until each and every term was negotiated.
[7] I agree that a letter setting out a framework for negotiations or discussions, with acceptance by the other party, does not necessarily constitute a meeting of the minds. The Court must look to the objective facts set out in the written materials: Bogue v. Bogue (1999), 46 O.R. (3d) 1, 1999 3284 (Ont.C.A.). As the Court of Appeal stated:
[12] It is an over simplification to say that there cannot be an agreement to agree. The true legal position was explained by Robins J.A. in Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 2734 (ON CA), 79 D.L.R. (4th) 97 (Ont. C.A.) at pp. 103-04:
As a matter of normal business practice, parties planning to make a formal written document the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange of correspondence, or other informal writings. The parties may "contract to make a contract", that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.
However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the "contract to make a contract" is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself. (Emphasis added)
And at p. 105:
If no agreement in respect to essential terms has been reached or the terms have not been agreed to with reasonable certainty, it can only be concluded that such terms were to be agreed upon at a later date and until that time there would be no completed agreement.
[13] Although the motions judge did not hear any oral evidence, his findings of fact are entitled to deference on appeal: Milios v. Zagas (1998), 1998 7119 (ON CA), 38 O.R. (3d) 218 at p. 222, 18 C.P.C. (4th) 13 (C.A.). In my view, there was evidence upon which the motions judge was entitled to find that a final settlement of all the issues had been reached on December 10 and that there was an agreement in respect to the essential terms. While there was no express discussion about a release, the settlement of the action implied an obligation to furnish releases: Fieguth v. Acklands Ltd. (1989), 1989 2744 (BC CA), 59 D.L.R. (4th) 114, 37 B.C.L.R. (2d) 61 (C.A.). At the end of those negotiations, the parties had bound themselves to the settlement. It only remained for the lawyers to reduce the terms to a formal document. This was not simply an agreement to agree.
[8] The inference that I draw from the correspondence is that the Defendants were anxious to settle, and that the Plaintiffs used their strong negotiating position to extract favourable concessions from the Defendants. There is nothing wrong with this, of course, given that the parties were commercial enterprises run by experienced business people represented by experienced counsel. No agreement was reached at least in part because, as I read the correspondence, the terms demanded by the Plaintiffs shifted. In other words, the settlement was something of a moving target. I do not suggest any improper behaviour at all by the Plaintiffs or their counsel; it was a commercial negotiation designed to reach a favourable outcome. This maximalist position ultimately made it difficult to reach a meeting of the minds.
[9] In my view, these negotiations came close to an “agreement to agree” but did not go all the way to a settlement. The original or preliminary agreement, as modified, does not, in the circumstances of this case, constitute a binding contract. In this case, there was a contract to make a contract but not more: Bogue v. Bogue, supra. There is nothing for the Court to enforce because the contract was not formed.
DISPOSITION AND COSTS
[10] The motion is dismissed.
[11] The parties agreed that there is no reason why costs should not be awarded to the successful party. Costs of this motion are fixed in the amount of $5000.00, payable from the Defendants to the Plaintiffs within 30 days.
GOLDSTEIN, J.
Released: February 7, 2013
COURT FILE NO: CV-05-302574PD1
DATE: 20130207
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Thai Agri Foods Public Company Limited and Thai Indochine Trading Inc.
Plaintiffs/Responding Parties
- and -
Choy Foong Int’l Trading Co. Inc. and Franklin K.C. Lam
Defendants/Moving Parties
JUDGMENT
GOLDSTEIN J.
Released: February 7, 2013