Reid v. 510487 Ontario Ltd., 2015 ONSC 3259
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Scott Reid, Plaintiff
AND:
510487 Ontario Ltd. c.o.b. Casey’s Restaurant and Brien Reid, Defendants
BEFORE: The Honourable Mr. Justice R. Dan Cornell
COUNSEL: Daniel C. Sirois, for the Plaintiff
Ted Tichinoff, for the Defendants
HEARD: April 10, 2015
ENDORSEMENT
1This was originally brought as a motion for summary judgment and for judgment in accordance with minutes of settlement. After a preliminary discussion with counsel, it was agreed that the motion would proceed as a motion for judgment in accordance with minutes of settlement.
2After hearing the motion on April 10, 2015, I endorsed the file that judgment was to go in accordance with the minutes of settlement and draft judgment provided, as amended. I now take this opportunity to provide my reasons by way of endorsement.
3The defendants attempted to file the affidavit of Fran Stefanic in support of their position. This affidavit was delivered after cross-examinations and after the order made by Hennessy J. There was no reasonable explanation advanced as to why such affidavit could not have been delivered in a timely fashion. In view of this, I ruled such affidavit to be inadmissible.
Admissions
4This case involved a dispute between brothers who are shareholders in 510487 Ontario Ltd., a corporation which owned and operated Casey’s Restaurant in Timmins. The assets of the corporation included the restaurant franchise, the land and buildings upon which the restaurant was situate, as well as a cottage on Long Lake. There was one class of common shares. The plaintiff owned 36.3% and Brian Reid owned 63.7% of such shares. There was no shareholders agreement in place.
Background
5The plaintiff commenced a shareholder’s oppression claim against the defendants. Following a full day pre-trial, comprehensive minutes of settlement were executed with the assistance of Gordon J. Each party had legal representation at the time of the pre-trial. The minutes of settlement were reduced to writing and signed by the parties and their lawyers.
Issue
6The sole issue before me is whether the minutes of settlement should be enforced by way of judgment in favour of the plaintiff.
Analysis
7The minutes of settlement are attached and marked as Schedule A. The minutes of settlement make it clear that Brian Reid was to purchase all of Scott Reid’s shares in 510847 Ontario Ltd. The purchase price was fixed in an amount of $450,000. Of this amount, the sum of $300,000 was to be paid on or before May 10, 2013, in a fashion that “will allow Scott to avail himself of the small business capital gains exemptions”.
8The balance of the purchase price in an amount of $150,000 was to be paid by 510897 Ontario Ltd. in annual amounts of $50,000, the first of such payments to be made on December 31, 2013.
9During the course of the negotiations, it was agreed that the Long Lake cottage would be “rolled out” of the corporation. Once this had been done, the minutes of settlement provided that the plaintiff “will be entitled to the benefit of the Capital Dividend Account exemption flowing from the roll out of the cottage.”
10It was also agreed that Brian Reid would pay costs to Scott Reid in an amount of $7,500 by May 10, 2013.
11The share certificates of Scott Reid were to be held in escrow by Scott Reid’s lawyers until such time as all of the payments required by the minutes of settlement had been made. At that point in time, the action was to be dismissed without costs.
12On or before May 10, 2013, Brian Reid provided the plaintiff’s lawyers with a cheque in an amount of $307,500 as required by the minutes of settlement.
13The difficulty arose as a result of paragraph 2 of the minutes of settlement which provides as follows:
The payments refered [sic] to in paragraph 1 will be structured in consultation with the accountants of both parties in a fashion that is tax efficient for both parties.
14The defendants received tax and accounting advice after the minutes of settlement had been signed recommending that the transaction should be structured in a different manner. For some considerable period of time, the parties have attempted to resolve the issue without success with the result that this motion has been brought.
15Counsel for the defendants acknowledged that the defendants had legal representation throughout these proceedings including during the course of the day that the pre-trial was conducted. It was conceded by the defendants that there was no basis to raise an argument of non est factum, nor was there any suggestion that the minutes of settlement were void or unenforceable as a result of mistake. The defendants’ argument appears to rest upon a subjective belief that it would be open to the defendants to alter the terms of the minutes of settlement once they had the benefit of receiving tax advice. The difficulty with this argument is that the law is clear that the subjective intention of the parties at the time that a contact is drawn is not helpful in a case of written contract in the context of commercial relationships. The reason that written agreements are used in a commercial context and otherwise is to avoid the very type of dispute that has been raised in this case, that being the subjective intention of one of the parties. The task that lies before me is to consider the terms of the minutes of settlement and whether such terms constitute an agreement on all of the essential terms. see Dumbrell v. The Regional Group of Companies Inc. 2007 ONCA 59 at paras. 50-51.
16The minutes of settlement specify the purchase price, the date upon which various payments are to be made and the manner in that payments are to be made. The $300,000 payment is to be structured in such a manner that the plaintiff can make use of the capital gains exemption for share sales. The balance of the purchase price was fixed in an amount of $150,000 and the dates on which such payments were to be made was specified. It was also agreed that such payments would not be made by Brian Reid, but rather that such payments would be made by 510487 Ontario Ltd. making use of such payments as could be made from such corporation’s Capital Dividend Account.
17It is clear to me that tax considerations were taken into account at the time that the minutes of settlement were formulated. I make this finding based upon the reference to the use of the capital gains exemption and the payments from the Capital Dividend Account. It is within this framework that paragraph 2 is to be read. I can see nothing in the language of paragraph 2 that would detract from this position, nor that would suggest that paragraph 2 makes the minutes of settlement conditional upon either party receiving approval from their accountant or tax advisor. If the minutes of settlement were to be conditional upon such approval, then it would have been a very simple matter for the minutes of settlement to set this out.
18Brian Reid was cross-examined in advance of this motion. The following exchange took place:
Q. … but there would be tax payable….
A. I know there’s going to be tax payable.
Q. Okay.
A. I’ve been in…. I’ve been in business 31 years. I pay a lot of taxes.
Q. We were talking to Mr. Lefort earlier today, and we talked about the two certainties – death of [sic] taxes.
Q. Okay. So, from this, you know that there’s going to be tax payable, you just don’t know how much?
A. Yes.
Q. And did you understand that after the accountants took care of everything that the minutes provided that the action would be dismissed – it would put an end to the legal action?
A. I was hoping that.
19Given the level of detail contained within the minutes of settlement, it can hardly be said that the minutes are vague, incomplete, or conditional upon the approval of a third party. I am satisfied that there was a meeting of the minds. In view of these findings, it is appropriate that judgment be granted in accordance with the minutes of settlement.
Residual Discretion
20The court has the discretion to decline to enforce a settlement if it is found to be unreasonable, that would result in an injustice or where there is good reason not to enforce it. In order to exercise this discretion, it is necessary that there be no evidence of prejudice to the other party.
21I find nothing unreasonable or fundamentally unfair to either party based upon the evidence that was put before me. To the contrary, it appears that the amount in question is fair given the valuations that had been obtained by each party and the compromise or discount that appears to have been given by the plaintiff in order to reach a settlement. At the risk of repetition, the minutes of settlement also make it clear about who was responsible for the various payments, the manner in which such payments was to be made and the tax treatment of such payment.
22In this case there is evidence that the plaintiff might well be prejudiced if the minutes of settlement were set aside. In his material, Brian Reid has indicated that the entire Casey’s franchise may not be continued. Certain economic changes have occurred in Timmins and elsewhere that have adversely affected revenue. Accepting the information offered by Brian Reid at face value, it is clear that it is likely that the plaintiff would be prejudiced if the minutes of settlement were to be set aside.
Conclusion
23In accordance with these reasons, I order that judgment be granted in accordance with the minutes of settlement and the draft judgment as provided, as amended.
Costs
24The plaintiff is entitled to his costs of this motion. A bill of costs has been submitted in an amount of $54,118.10. This includes disbursements of $10,481.87 and HST in an amount of $6,089.48.
25This bill of costs appears to include all of the legal work done on behalf of the plaintiff and not simply the work which was done in connection with this motion. Bearing in mind the various factors that are to be considered in a costs award and the principle of proportionality, I award costs to the plaintiff fixed in an amount of $17,500 inclusive of disbursements and HST.
The Honourable Mr. Justice R. Dan Cornell
Date: May 22, 2015
SCHEDULE A