CITATION: Ross v. Pinaymootang First Nation, 2015 ONSC 3274
COURT FILE NO.: 04-CV-281243CM2
DATE: 20150601
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
E. ANTHONY ROSS
Plaintiff
– and –
PINAYMOOTANG FIRST NATION, also known as FAIRFORD FIRST NATION, also known as FAIRFORD BAND and HARRIS & HARRIS LLP, also known as HARRIS & HARRIS
Defendants
Tanya Walker and Andrew Ostrom, for the Plaintiff
Darryl R. Buxton, for the Defendant, Pinaymootang First Nation, also known as Fairford First Nation, also known as Fairford Band
Douglas Christie, for the Defendant, Harris & Harris LLP, also known as Harris & Harris
Heard: May 17-19, 2015
REASONS FOR DECISION
dIAMOND J.:
Overview
[1] This proceeding was commenced over 10 years ago. The facts and events giving rise to this proceeding originated in the mid-1990s.
[2] As described in these Reasons, pursuant to the terms of a settlement agreement, this proceeding has been stayed by operation of the consent judgment dated August 10, 2005 of the Honourable Mr. Justice Cullity (the “consent judgment”) in a related proceeding.
[3] The plaintiff brought a motion returnable on July 8, 2010 before the Honourable Madam Justice Roberts (as she then was). The relief sought in the plaintiff’s notice of motion was (a) an order varying the consent judgment to lift the stay of this proceeding, and (b) leave to amend his Statement of Claim in this proceeding.
[4] Prior to the plaintiff’s motion proceeding before Justice Roberts, the parties had agreed that the plaintiff’s request for leave to amend would proceed without prejudice to the balance of the relief sought by the plaintiff on his motion (i.e. an order lifting the stay of this proceeding).
[5] Justice Roberts dismissed the plaintiff’s motion for reasons which I will describe in greater detail hereinafter. However, Justice Roberts held that although the plaintiff’s motion was dismissed, depending upon the outcome of the balance of the plaintiff’s motion seeking to lift the stay of this proceeding, the dismissal was without prejudice to the plaintiff bringing another motion seeking leave to amend.
[6] Since the release of her endorsement, Justice Roberts had case managed this proceeding and ultimately ordered that the plaintiff’s request to lift the stay of this proceeding would proceed as a trial of an issue, with viva voce testimony to be called by the parties.
[7] After further agreement between the parties that, in fact, several issues needed to be tried by the Court, the trial of those issues – including oral evidence from three witnesses – proceeded before me on May 17-19, 2015.
The Facts
[8] The parties filed an Agreed Statement of Facts for which I am grateful. I do note that the defendants consented to the filing of the Agreed Statement of Facts for the purposes of this motion only.
[9] Many of the pertinent facts as set out in my summary can be lifted from the Agreed Statement of Facts. However, as much of the plaintiff’s motion depends upon the interpretation and application of a settlement agreement and the consent judgment, the Court may receive evidence going to the surrounding circumstances, or factual matrix, in which both the settlement agreement and consent judgment were negotiated and concluded. As the Court of Appeal for Ontario stated in Ventas Inc. et al. v. Sunrise Senior Living Real Estate Investment Trust (2007), 2007 ONCA 205, 85 O.R. (3d) 254 (C.A.):
“Contracts are not made in a vacuum, and there is no dispute that the surrounding circumstances in which a contract is negotiated are relevant considerations in interpreting contracts. As this Court noted in Kentucky Fried Chicken, supra, at para. 25, ‘while the task of interpretation must begin with the words of the document and their ordinary meaning, the general context that gave birth to the document or its single ‘factual matrix’ will also provide the Court with useful assistance’.”
[10] Accordingly, the summary which follows comprises both facts set out in the Agreed Statement of Facts, and drawn from the testimony of the three witnesses called at the trial of the issues
The Parties
[11] The plaintiff, E. Anthony Ross (“Ross”) is a civil engineer who obtained a post-graduate degree in environmental engineering. He is also a practicing lawyer and a member of the Bars of Ontario, Nova Scotia, St. Kitts and Nevis and the British Virgin Islands. Ross was called to the Ontario Bar in 1997 and was designated as Queen’s Counsel in 2007.
[12] The defendant Pinaymootang First Nation, also known as Fairford First Nation, also known as Fairford Band (“Fairford”) is a body of indigenous Canadians declared to be a Band for the purposes of the Indian Act R.S.C. 1995 c.I-5. Fairford is located in Manitoba, approximately 237 kilometers north of Winnipeg.
[13] The defendant Harris & Harris LLP also known as Harris & Harris (“Harris”) is a law firm carrying on business in the City of Toronto, Ontario. At the relevant time period, Gregory Harris (“Greg”) practiced in partnership with his father Alan Harris (“Alan”) until Allan retired in or around 2006.
Background
[14] In or around February 1992, Ross was contacted by Chief Edward Anderson of Fairford to discuss retaining Ross for the purpose of commencing a lawsuit against the Government of Canada for damages allegedly arising from the Government of Canada’s authorization of the construction of water control structures and a bridge on First Nation lands, the operation of which resulted in the flooding of the Fairford reserve. At that time, Ross was practicing in the Province of Nova Scotia with his own firm Ross, Barrett & Scott.
[15] On or about August 23 1994, Fairford retained Ross nunc pro tunc effective February 26, 1992. Fairford executed a formal retainer agreement, which was subsequently confirmed by a Fairford Band Council Resolution. At that time, the scope of the retainer agreement was to commence proceedings against both the Government of Canada and the Province of Manitoba in the Federal Court of Canada in relation to the aforesaid matters arising from the construction of the water control structures.
[16] The terms of Ross’ retainer agreement provided that he would receive a contingency fee of 9% of any future judgment or award. In the event that Ross’ retainer was terminated, the terms of the retainer agreement provided that he would be compensated for services rendered to the date of termination.
[17] Fairford’s action was commenced in the Federal Court of Canada. Following a Band election in October 1995, Ross’ retainer agreement was modified by a further letter agreement dated November 29, 1995 submitted to Chief Edward Anderson and subsequently signed by Fairford and adopted by formal Band Council Resolution.
[18] The letter agreement provided, inter alia, that “every effort would be made to address the outstanding accounts owed to Ross from funds Fairford anticipated receiving from the Province of Manitoba by way of gasoline and/or tobacco tax rebates”.
[19] The letter agreement further provided that in the event the anticipated rebates and/or a line of credit from the Toronto Dominion Bank did not materialize, adjustments would be made so that Ross’ account could be addressed from funds expected in 1996.
Ross Moves to Toronto
[20] In December 1996, Ross relocated his practice from Halifax, Nova Scotia to Toronto, Ontario. After a series of meetings between Ross and, inter alia Alan and Greg, Ross joined Harris as counsel to the firm. A formal memorandum provided for the fee arrangements generated after Ross moved to the Harris firm, but further confirmed that Harris had no legal or financial interest in the files belonging to Ross. These files had been opened prior to his relationship commencing with Harris.
[21] By January 1997, Ross formally joined Harris as counsel. None of Ross’ pre-existing retainer agreements were assigned or transferred to Harris.
[22] Ross continued to represent Fairford in its Federal Court action against the Government of Canada. That action was tried in the Federal Court in 1998, resulting in a decision by Justice Rothstein (as he then was) on November 12, 1998.
[23] In that decision, Fairford’s claims against the Government of Canada were unsuccessful. Justice Rothstein did however find that even though the Province of Manitoba was not a named party, it was essentially responsible for the damages suffered by Fairford.
[24] Fairford served a notice of appeal of Justice Rothstein’s decision in January 1999. According to Ross’ evidence, the Government of Canada also cross-appealed some of the findings made by Justice Rothstein. Neither appeal was ever argued, as settlement discussions ultimately ensued between the parties.
[25] In the summer of 1999, Fairford elected Garnet Woodhouse (“Chief Woodhouse”) as its new Chief (each Chief’s term was for three years). Between 1998-2001, Harris delivered a number of invoices to Fairford. Originally, Chief Woodhouse refused to have Fairford remit any payment of those Harris invoices, citing Fairford’s alleged lack of business relationship with Harris.
[26] By June 2001, Ross left Harris and became counsel to Will Barristers in Toronto. None of Ross’ retainers were assigned or transferred to Will Barristers as he maintained carriage of his own files. At the time of Ross’ relocation, the Harris invoices rendered to Fairford totaled over $1,700,000.00.
[27] In late July 2001, Harris continued to try and obtain payment of its outstanding invoices. In response, Chief Woodhouse maintained his previous position that Fairford had no record of any financial arrangement with Harris, and that Ross was the lawyer retained by Fairford to handle the Federal Court action against the Government of Canada.
Harris Commences Proceedings
[28] As a result, in mid-December 2001, Harris issued a Statement of Claim against Fairford seeking, inter alia, payment of its outstanding fees and disbursements totalling $1,729,846.92 (Action No. 01-CV-222236CM1, the “Harris Action”).
[29] For approximately six months, Harris held off serving its Statement of Claim upon Fairford while efforts to negotiate a resolution took place. Of note, while Ross was not a party to the Harris Action, he did participate in those settlement discussions.
[30] When those settlement discussions broke down, the Harris claim was served upon Fairford in the summer of 2002.
Mediation
[31] In or around late January 2004, Fairford terminated Ross’ retainer agreement and retained Robert Roddick (“Roddick”) as its new counsel. By that time, Ross’ docketed time had accumulated and totaled in excess of $3,500,000.00.
[32] After several unsuccessful mediation attempts, a further mediation between Fairford and Harris took place on March 19, 2004. Alexander Robinson (“Robinson”) presided as the mediator. Even though Ross was not a party to the Harris Action, Ross attended and participated in that mediation and was represented by counsel. Ross testified that during the currency of that mediation session, he left to attend to another matter but ultimately did return later in the day.
[33] At the conclusion of the mediation, the parties (Fairford, Harris and Ross) all signed a Memorandum of Understanding, which was essentially a conditional settlement of all matters among the three parties, but still subject to ratification by Fairford’s Chief and Council.
[34] The Memorandum of Understanding was signed by Ross in his personal capacity. It is important to note that in paragraph 1 of the Memorandum of Understanding, Fairford agreed to pay (subject to approval by its chief and counsel) the sum of $2,250,000.00 to settle “all claims and causes of action” between Harris, Fairford and Ross including Ross’ claims through his original firm, through Harris and through Will Barristers.
[35] The Memorandum of Understanding further provided that the $2,250,000.00 would be payable pursuant to the following schedule:
a) $950,000.00 upon the settlement of Fairford’s Federal Court action with the Government of Canada;
b) $650,000.00 upon the receipt of the first payment by Fairford from the Province of Manitoba, and
c) $650,000.00 upon the receipt of the second payment by Fairford from the Province of Manitoba.
[36] All three parties agree that while the first $950,000.00 was to be made payable from settlement funds forthcoming from the Government of Canada, payment of the second and third tranches were essentially dependent upon further settlement funds to be obtained by Fairford from the Province of Manitoba. There is no real dispute between the parties that Fairford, which had previously been under third party management (i.e. akin to a receivership) did not have the money to fund payment of the contemplated second and third tranches.
[37] The Fairford Band Council did not approve the proposed $2,250,000.00 payment, but ratified the Memorandum of Understanding to a maximum sum of $2,150,000.00. In other words, Fairford was prepared to pay $100,000.00 less than the sum recommended at the mediation. According to Ross’ testimony, he viewed the settlement “at an end”, and Fairford’s proposed ratification amounted to a counter-offer which Ross testified that he never accepted.
Ross Commences Proceedings
[38] In order to protect his own interests (namely his claims over and above the amount sought in the Harris Action, and his personal ability to recover payment), Ross commenced the within proceeding on December 22, 2004 (the “Ross Action”) which named both Fairford and Harris as defendants and sought, inter alia, payment of Ross’ outstanding invoices totaling $3,149,747.50 and an order consolidating the Ross Action with the Harris Action.
[39] On February 17, 2005, both the Harris Action and the Ross Action proceeded to a case conference before Master Kelly. In his endorsement, Master Kelly noted that Fairford had settled with the Government of Canada but was continuing its negotiations with the Province of Manitoba. Ross expressed a concern to Master Kelly that he was not currently a party to the Harris Action and thus wanted to bring a motion to be added as a necessary party or intervener defendant. That motion was expected to be opposed.
[40] In addition, both Fairford and Harris took the position that a binding settlement agreement of the Harris Action had been concluded as a result of, inter alia, the mediation before Robinson and subsequent conduct.
[41] Accordingly, Master Kelly set a return date of August 10, 2005 to allow the following motions to be argued:
a) Fairford’s motion to enforce the alleged settlement of the Harris Action;
b) Harris’ motion to enforce the alleged settlement of the Harris Action (presumably a different settlement than the one sought to be enforced by Fairford);
c) Ross’ motion seeking to be added as a party to the Harris Action, and
d) in the alternative to (c) Ross’ motion to consolidate the Harris Action and the Ross Action.
The Three-Way Settlement
[42] As stated above, the motions were scheduled to be argued on August 10, 2005. The parties once again, and commendably, concentrated their efforts upon further settlement negotiations which ultimately resulted in what the parties have described as the “three-way settlement” (Ross, Harris and Fairford) and the “two-way settlement” (Ross and Harris).
[43] Although a written settlement agreement was drafted to codify the terms of the three-way settlement, it appears that settlement agreement was never formally executed by the parties. However, a written settlement agreement dated August 9, 2005 (the day before the scheduled motion) codifying the terms of the two-way settlement was signed by both Ross and Harris. There is no dispute that all three parties were represented by counsel at the time.
[44] Under the three-way settlement, Fairford was to pay the sum of $2,150,000.00 to Harris in three tranches: $950,000.00, $650,000.00 and $550,000.00.
The Consent Judgment
[45] The three-way settlement provided that the parties would consent to a judgment to be issued in the Harris Action. The form of the consent judgment was attached as a Schedule to the executed two-way settlement agreement. The consent judgment was signed by Justice Cullity on August 10, 2005, and is the subject matter of this motion.
[46] The salient portions of the consent judgment are as follows:
(a) Ross was added as a party defendant to the Harris Action;
(b) Fairford would pay the sum of $2,150,000.00 upon the following terms:
(i) $950,000.00 within seven days;
(ii) $650,000.00 on January 1, 2006, or on Fairford’s receipt of the first payment from the Province of Manitoba, whichever shall occur first; and
(iii) $550,000.00 on January 1, 2007 or on Fairford’s receipt of the second payment from the Province of Manitoba, whichever shall occur first.
(c) the Ross Action shall be stayed as against Fairford pending payment of the total settlement;
(d) the Ross Action shall be dismissed as against Fairford upon payment of the total settlement; and
(e) in the event of default the judgment would bear post-judgment interest at the rate of 4% per annum effective from the date of default.
[47] I note that the second and third tranches had specific due dates, namely the earlier of Fairford’s receipt of payments from the Province of Manitoba or January 1, 2006 and January 1, 2007 respectively. I also note that the Harris Action was stayed as against Fairford only, and that post-judgment interest would only commence to run from the date upon which Fairford defaulted upon its payment obligations (as opposed to the date of judgment).
The Two-Way Settlement
[48] The two-way settlement between Harris and Ross was executed on August 9, 2005. It is a rather lengthy, 35-paragraph agreement. The preamble to that settlement agreement summarizes the history of the relationship between the parties, the Harris Action and Ross Action including the then-currently outstanding motions scheduled to be argued the next day. On cross-examination, Ross confirmed that the contents of the preamble were accurate.
[49] Pursuant to the terms of that settlement agreement, Harris and Ross agreed that Fairford had settled all of its disputes with both Ross and Harris in accordance with the terms of the consent judgment. Ross and Harris further agreed that payment of the first $950,000.00 due under the three-way settlement, would be distributed as follows:
(a) $445,594.50 to Ross;
(b) $475,000.00 to Harris;
(c) the balance of $29,405.50 paid in trust to the credit of the Harris Action.
[50] Of importance is the fact that clauses 19 and 20 of that settlement agreement provided that in the event Fairford defaulted upon the payment of the second or third tranches due under the consent judgment, both “Ross and Harris or either of them on notice to the other shall be at liberty to obtain and enforce by such legal means as may be available to them a judgment against Fairford for the unpaid balance of the settlement amount.” Ross acknowledged in cross-examination that the judgment contemplated by clauses 19 and 20 referred to the consent judgment signed by Justice Cullity on August 10, 2005.
[51] Clause 22 provided that subject to any further agreement, to the extent that Ross and Harris disagreed with the allocation of the funds due and owing under the agreement, Ross and Harris were to first engage in informal discussions as to the division of the proceeds, and if such informal discussions proved unsuccessful they would first mediate with Robinson and then engage in binding arbitration in accordance with a formal Arbitration Agreement attached as a schedule to the two-way settlement agreement.
[52] Finally, Clause 23 provided that Ross agreed to bind not only himself personally but also his Nova Scotia law firm and Will Barristers.
The Fallout
[53] On August 11, 2005, Fairford (through Roddick) delivered trust cheques to both Ross and Harris of all three amounts contemplated under the two-way settlement agreement. The first $950,000.00 was fully paid on August 11, 2005.
[54] Fairford never paid the second $650,000.00 installment due on January 1, 2006. Fairford never paid the third $550,000.00 installment due on or before January 1, 2007.
[55] There is no dispute between the parties that Fairford was unable to remit payment of the second and third installments because it was (still) unable to conclude its settlement with the Province of Manitoba. Each of Ross, Greg and Chief Woodhouse all testified before this Court that all parties knew and understood that while the settlement and consent judgment were not conditional upon Fairford concluding its settlement with the Province of Manitoba, the funds due under the settlement and consent judgment were to come from Fairford’s settlement with the Province of Manitoba.
[56] Both during his examination in-chief and cross-examination, Chief Woodhouse maintained that Fairford recognizes and is bound by the terms of the consent judgment and intends to comply with the terms of that judgment by forwarding payment of the outstanding second and third tranches as soon as it receives settlement funds from the Province of Manitoba. Chief Woodhouse testified that it has always been and remains Fairford’s intention to comply with the consent judgment and remit all payments due thereunder.
[57] Neither Ross nor Harris has taken any enforcement steps under the Rules of Civil Procedure since Fairford’s default, other than Ross bringing the within motion seeking to lift the stay of proceedings and amend his statement of claim in the Ross Action.
[58] On cross-examination, Ross testified that there is no provision in the two-way settlement agreement, three-way settlement agreement or consent judgment that speaks to any party being able to lift the stay of the Ross Action.
[59] Interestingly, Ross also testified that while he had a personal belief that it was “customary” not to take enforcement steps against First Nation Bands, he recalled that during the currency of Fairford’s Federal Court action against the Government of Canada, Fairford owed money to an expert whom he had retained to assist with that Federal Court action, and after that expert commenced legal proceedings and took enforcement steps to collect upon a judgment, the expert “ultimately did get paid”.
[60] As set out in the overview to these Reasons, this motion first proceeded before Justice Roberts on July 8, 2010. In dismissing Ross’ motion on the terms described earlier in these Reasons, Justice Roberts held that it would have been an abuse of process to allow the proposed amendments by which Ross seeks a remedy beyond that set out in the consent judgment, a judgment which Ross does not seek to set aside but only vary.
[61] Justice Roberts further held that having agreed to the consent judgment, Ross could not re-litigate it or any matters that were raised or could have been raised in his action that merged into the consent judgment.
Issues to be decided
[62] At the opening of the hearing, the parties submitted an Agreed Statement of Issues for this Court’s determination. At the conclusion of the evidence, and prior to the commencement of argument, I was advised by counsel that several of these issues had been withdrawn and/or resolved among the parties.
[63] For completeness of the record, the following are the original issues listed in the Agreed Statement of Issues submitted by the parties:
Are all or any of the agreements, negotiations and settlements merged into the consent judgment such that the only relevant consideration before the Court is the consent judgment?
Does the failure of Fairford to pay the balance of the consent judgment permit Ross to obtain an order varying, amending or setting aside the consent judgment so as to lift the stay of the Ross Action against Fairford? Specifically:
(a) Should the consent judgment be varied, amended or set aside pursuant to Rule 59.06 of the Rules of Civil Procedure?
(b) May Ross continue the proceeding as if there had been no settlement pursuant to Rule 49.09 of the Rules of Civil Procedure?
(c) Should the stay be lifted pursuant to the inherent jurisdiction of the Court?
(d) Are the obligations of Fairford pursuant to the consent judgment contingent upon receipt of the settlement funds from the Governments of Canada and Manitoba?
(e) Was the consent judgment frustrated by subsequent flooding affecting Fairford or does this flooding constitute a force majeure relieving Fairford of its obligations pursuant to the consent judgment?
- If the consent judgment is varied, amended or set aside:
(a) Would Fairford be entitled to the return of all or a portion of the monies paid by it pursuant to the consent judgment and, if so, who would be liable for repayment?
(b) How should the sum of $29,405.50, plus accrued interest, currently held in trust to the credit of the Harris Action, be apportioned and distributed?
Does the August 9, 2005 settlement agreement between Ross and Harris bind these parties to mediate and arbitrate and preclude further litigation in the Ross action in the event that the consent judgment is varied, amended or set aside?
If Mr. Ross is permitted to continue the Ross Action against either or both Fairford and Harris, is he entitled, pursuant to Rule 26.01, to amend his Statement of Claim, and, in particular:
(a) Are the proposed claims barred by the provisions of the Limitations Act, or do they arise from the same factual nexus as the claims originally pleaded so that the Limitations Act does not apply?
(b) Are the proposed claims legally tenable?
(c) Do the proposed claims merge in the consent judgment?
(d) Do the proposed claims constitute an abuse of process as a collateral tactic on a consent judgment?
(e) Are Fairford and Harris entitled to raise the “three-way settlement as a bar to the Ross Action?
Analysis and the Law
[64] I address each respective issue as follows:
Issue #1: Are all or any of the agreements, negotiations and settlements merged into the consent judgment such that the only relevant consideration before the Court is the consent judgment?
[65] At the commencement of argument, counsel for Ross confirmed that her client now agrees that the agreements, negotiations and settlements described herein all merged into the consent judgment.
[66] While this is no longer a live issue to be determined, for reasons expressed hereinafter my consideration of the consent judgment is nevertheless informed by, inter alia, the two-way settlement, three-way settlement and evidence of the parties.
Issue #2: Does the failure of Fairford to pay the balance of the consent judgment permit Ross to obtain an order varying, amending or setting aside the consent judgment so as to lift the stay of the Ross Action against Fairford?
[67] At the commencement of argument, counsel for the parties confirmed that Issues 2(d) and 2(e) need no longer be determined by this Court. Specifically, the parties agree that Fairford’s obligations under the consent judgment are not contingent upon the receipt of settlement funds from the Government of Canada and the Province of Manitoba, and the consent judgment was not frustrated by any subsequent flooding affecting Fairford, relieving it of any obligations under the consent judgment.
[68] What remains to be determined is whether there are any grounds to support Ross’ request to vary the consent judgment, and lift the stay of the Ross Action imposed by paragraph 3 of the consent judgment.
[69] I begin by addressing Ross’ request to vary the consent judgment pursuant to Rule 59.06 of the Rules of Civil Procedure. Rule 59.06(1) has no application to the facts on this motion, as the consent judgment does not contain “an error arising from an accidental slip or omission”.
[70] Similarly, the provisions of Rule 59.06(2)(a), (b) and (c) are not engaged by the facts on this motion. There is no fraud or facts arising or discovered after the consent judgment was made. Ross is not seeking to suspend the operation of the consent judgment, or carry another order into operation.
[71] Ross focuses his submissions in this regard upon the provisions of Rule 59.06(2)(d), which provides that a party who seeks to “obtain other relief than that originally awarded” may make a motion in the proceeding for the relief claimed.
[72] To begin, pursuant to the order dated February 17, 2005 of Master Kelly, and the subsequent timetable and scheduling orders leading up to the hearing of this motion, notwithstanding Ross’ notice of motion being drafted in the Ross Action only, I am satisfied that Ross’ request to lift the stay of the Ross Action was brought in both the Harris and Ross Actions. Master Kelly’s order, and the subsequent timetables and scheduling orders, all reference both court file numbers.
[73] In Ross’ notice of motion he seeks “an order varying the judgment of Justice Cullity dated August 10, 2005 to lift the stay of proceedings otherwise ordered, on consent, as against the defendant Fairford in the Ross Action.”
[74] There is no dispute that the judgment of Justice Cullity is a consent order. As stated by the Court of Appeal for Ontario in Monarch Construction Ltd. v. Buildevco Ltd. (1988), 26 C.P.C. (2d) 164:
“A consent judgment is final and binding and can only be amended when it does not express the real intention of the parties or where there is fraud. In other words, a consent judgment can only be rectified on the same grounds on which a contract can be rectified.”
[75] This principle was revisited again by the Court of Appeal for Ontario in McCowan v. McCowan (1995), 1995 CanLII 1085 (ON CA), 24 O.R. (3d) 707. In citing Monarch with approval, the Court stated:
“In my view, it is well-established that a consent judgment may be set aside on the same grounds as the agreement giving rise to the judgment. These grounds go to the formation of the agreement, not to its subsequent performance. Evidence of non-performance may, however, be relevant to the issue whether the underlining agreement was so tainted in its formation that it should be invalidated.”
[76] There is no further Ontario appellate authority addressing or otherwise updating the above principles set out in the Monarch and McCowan decisions. Indeed, in the relatively recent decision of Mr. Justice Brown (as he then was) in Yan v. Cheng 2014 ONSC 3111 (S.C.J.), Justice Brown was asked to set aside a consent Mareva injunction and relied upon both McCowan and Monarch in his decision to dismiss that request.
[77] Justice Brown’s analysis focused upon the evidence which could vitiate the formation of the underlying agreement upon which the consent Mareva injunction was based. That analysis was restricted to an assessment of any evidence which could suggest that the formation of the underlying agreement was so tainted that it invalidated the consent Mareva injunction.
[78] Counsel for Ross relied upon two additional authorities in support of her position that all or part of a consent order may be set aside on the assessment of the evidence relating to the performance of the underlying agreement, and not just the formation of the underlying agreement. In Harbelah Enterprises Ltd. v. O’Neil, [1994] B.C.J. No. 1269 (B.C.S.C.), the Court held that as a consent order is in effect a contract, it thus may be set aside upon any ground which would invalidate a contract. One of those grounds justifying the setting aside of the consent order was repudiation, which would allow the injured party to effectively terminate the contract even in the absence of rescission. In other words, if the injured party chooses not to perform his/her obligations under the contract, as is his/her prerogative in the event of repudiation, the contract is effectively terminated.
[79] The Harbelah decision was considered in the decision of Hoey v. Rosseau (Village) [2003] O.J. No. 813 (S.C.J.). In Hoey, the Court was asked to set aside a settlement agreement (which resulted in a brief endorsement dismissing the action without costs) and re-open the trial of that proceeding. While the Court cited the Harbelah decision in support of its purported power to set aside a consent order under circumstances involving repudiation, it does not appear that the appellate decisions in Monarch or McCowan were placed before or considered by the Court in the Hoey decision.
[80] In my view, both Monarch and McCowan remain good law and binding upon this Court. The fact that the party in default does not continue to make required payments cannot, on its own, lead to the conclusion that a consent order, or any part of it, should be set aside. This is inconsistent with the jurisprudence leading up to and following McCowan.
[81] Applying the principles in Monarch and McCowan to the facts of this case, I find that there is no evidence to support a finding that the consent judgment ought to be set aside or varied. An analysis of the evidence giving rise to the consent judgment (i.e. the formation of the contract) discloses, inter alia, the following:
a) all parties were represented by counsel, both at the mediation and at all times leading up to the execution and issuance of the consent judgment;
b) Ross himself is a lawyer with significant experience, including extensive litigation experience;
c) there is no dispute that Ross executed the Memorandum of Understanding, two-way settlement agreement and the consent judgment freely and with the benefit of legal advice;
d) there is no evidence that the parties were under any unilateral, common or mutual mistake; and,
e) Ross admitted in cross-examination that the two-way settlement agreement and consent judgment resolved all of his claims against Harris and Fairford, including those claims raised in the Ross Action.
[82] The two-way settlement agreement and the consent judgment already provided for remedies available to Ross in the event of default by Fairford. Clauses 19-20 of the two-way settlement agreement enable Ross to enforce the consent judgment by any legal means available to him.
[83] The consent judgment required deadlines for payment of the second and third tranches so that in the event of non-payment, an act of default would be triggered, and post-judgment interest would begin to run. Enforcement steps could only be carried out by Ross (or for that matter Harris) in the event of such a default, and those enforcement steps, if undertaken, would seek to recover both outstanding principal and interest.
[84] I therefore conclude that the evidence discloses nothing in the formation of the consent judgment which would invalidate it. While I appreciate that Fairford has remained in default of its payment obligations for over nine years, Ross bargained for and obtained the right to obtain a judgment, and in the event of such default, claim post-judgment interest and enforce that judgment by any legal means available to him. Accordingly, I decline to vary the consent judgment or lift the stay of the Ross Action pursuant to Rule 59.06(2)(d).
[85] With respect to Ross’ reliance upon Rule 49.09 in support of his request to vary the consent judgment and lift the stay of the Ross Action, I do not believe that rule is of any assistance. To begin, the provisions of Rule 49.09 apply where a party to an accepted offer fails to comply with the terms of that offer. In other words, redress under Rule 49.09 is available when parties breach terms of a settlement agreement. On the facts of this motion, the settlement agreement (be it the two-way settlement agreement or three-way settlement agreement) have all merged into the consent judgment. This is further evidenced by Ross having answered Issue #1 in the affirmative.
[86] Further, even if Rule 49.09 was available to Ross, the Court is restricted to grant the relief provided by that rule. Ross could only (a) seek judgment in accordance with the terms of the accepted offer, or (b) continue the Ross Action as if there had been no accepted offer to settle. In other words, the Court could either grant Ross judgment for the unpaid amount of the settlement (a consent judgment which he already has, but has yet to enforce) or “unwind” the settlement and place the parties in their respective positions prior to August 9, 2005. Not only is this relief (understandably) not being sought by Ross on this motion, but that would require both Ross and Harris to return the payments they received from Fairford back to Fairford. Such a result is neither desirable nor available on this motion.
[87] Finally, Ross relies upon the inherent jurisdiction of this Court in support of his request to vary the consent judgment and set aside the stay of the Ross Action. There is no doubt that this Court possesses such an inherent discretion. In Stoughton Trailers Canada Corp. v. James Expedite Transport Inc., [2008] O.J. No. 4864 (C.A.), the Court of Appeal for Ontario confirmed that the Court’s discretion to set aside a consent order can still be exercised “where necessary to achieve the justice of the case”. The Court must still be cautious when asked to set aside consent orders, but may do so where it is necessary to achieve the interests of justice between the parties and the proceeding.
[88] Typically, the Court will need to be satisfied that absent the setting aside of a consent order, the moving party would suffer the type of prejudice that would warrant the Court’s exercise of its residual, limited discretion. In support of that position, counsel for Ross submitted that as Ross was approaching his retirement age, and the second and third tranches had been outstanding for nearly 10 years, it was simply “unfair” for the terms of the consent judgment to continue.
[89] In my view, such a position does and should not invoke this Court’s inherent jurisdiction to vary the consent judgment and lift the stay of the Ross Action. Ross, together with Harris and Fairford, entered into a formal settlement agreement resulting in the consent judgment. I decline to rewrite the terms of a settlement that the parties entered into with legal representation.
Issue #3: If the consent judgment is varied, amended or set aside:
(a) Would Fairford be entitled to the return of all or a portion of the monies paid by it pursuant to the consent judgment and, if so, who would be liable for repayment?
[90] As I have concluded that there are no grounds to vary the consent judgment and lift the stay of the Ross Action, Issue #3(a) is therefore moot.
Issue #3: If the consent judgment is varied, amended or set aside:
(b) How should the sum of $29,405.50, plus accrued interest, currently held in trust to the credit of the Harris Action, be apportioned and distributed?
Issue #4: Does the August 9, 2005 settlement agreement between Ross and Harris bind these parties to mediate and arbitrate and preclude further litigation in the Ross action in the event that the consent judgment is varied, amended or set aside?
[91] At the commencement of argument, Ross and Harris confirmed that the terms of the two-way settlement agreement require them to mediate, and if unsuccessful, arbitrate any disputes arising from the settlement agreement. Ross has further conceded that the scope of those disputes include all of his accounts/invoices rendered to Fairford both in his original Statement of Claim and draft Fresh as Amended Statement of Claim.
[92] As such, Issue #3(b) is to be mediated, and if necessary arbitrated. I make no other finding on the merits of the respective claims of Ross and Harris to the $29,405.50 plus accrued interest being held in trust to the credit of the Harris Action.
Issue #5: If Mr. Ross is permitted to continue the Ross action against either or both the Fairford and Harris, is he entitled, pursuant to Rule 26.01, to amend his Statement of Claim?
[93] As I have concluded that there are no grounds to support an order varying the consent judgment and/or lifting the stay of the Ross Action, Ross is therefore unable to take any further steps, other than enforcement steps, in the Ross Action.
[94] Ross’ motion is therefore dismissed.
Costs
[95] I would urge the parties to agree upon the costs of this motion. In the event that such an agreement cannot be achieved, I would ask that any parties seeking costs of this motion provide their written submissions, limited to four pages in length including a Costs Outline, in accordance with the following schedule:
(a) Any party seeking costs of the motion to serve and file its written submissions within ten business days of the release of these Reasons, and
(b) All responding costs submissions to be served and filed within ten business days thereafter.
Diamond J.
Released: June 1, 2015
CITATION: Ross v. Pinaymootang First Nation, 2015 ONSC 3274
COURT FILE NO.: 04-CV-281243CM2
DATE: 20150601
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
E. ANTHONY ROSS
Plaintiff
– and –
PINAYMOOTANG FIRST NATION, also known as FAIRFORD FIRST NATION, also known as FAIRFORD BAND and HARRIS & HARRIS LLP, also known as HARRIS & HARRIS
Defendants
REASONS FOR DECISION
Diamond J.
Released: June 1, 2015