ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-13-350

DATE: 2015-07-07

B E T W E E N:

ROY V. WILSON

Robert G. Zochodne, Zochodne, Bucci agent for the Plaintiff,

Plaintiff

• and -

BKK ENTERPRISES INC.,
KEN KOZMENSKI, and
BRENDA KOZMENSKI

Daniel Dooley, Dooley, Lucenti agent for the Defendants

Defendants

HEARD: June 25, 2015,
at Thunder Bay, Ontario

Mr. Justice W.D. Newton

Decision On Motion

[1] The issue on this motion is whether certain communications between counsel for the parties constitute a settlement.

[2] This action arises from the advance of $300,000 by the plaintiff to the defendants. In the pleadings, the plaintiff describes this advance as a demand loan and the defendants describe this advance as an investment.

[3] Counsel for the parties had discussions aimed at resolving the action. The plaintiff claims that a telephone discussion and a subsequent email between counsel, both on December 5, 2013, constitute a binding agreement which settles the action. The defendant denies that an agreement was reached. Counsel for the defendants deposed that the conversation and subsequent email constitute only a "framework for possible agreement".

Facts

[4] The email from counsel for the defendants to counsel for the plaintiff following the telephone discussion on December 5, 2013 is set out in full below:

Hi Ian,

As per our conversation this morning, it appears that we have an agreement in principle on the following terms:

• A blanket mortgage over the properties owned by Brenda and Ken Kozmenski, except #5 (the property in Eton Township on 185 acres), in favour of Roy Wilson;

• Payment of $3,000 per month with on interest to Roy Wilson

• Payments to be made on a monthly basis on the 1st of every month;

• A 60 day notice period in case of default, with an undertaking that the Kozmenski’s will notify Roy Wilsonof any address change;

• No penalty clause for every repayment;

• Payment to be made via post-dated cheques.

Prior to finalizing this agreement, the Kozmenski’s will seek consent from the Bank of Montreal to add a subsequent mortgage to properties 6 and 7.

As well, you will seek instructions from Roy Wilson on where to send the money.

Once everything is in place, we will draft a new agreement on our end and send it to you for approval.

Please let me know if I’ve missed anything.

Thanks,

-Jordan

[5] On December 6, 2013, counsel for the plaintiff responded:

Hi Jordan,

I think that is everything.

You can include a direction that all funds are to be payable to ‘Ian A. Wilson in trust’. Post dated cheques for the year could perhaps be delivered on or before January 15, 2014, with the first cheque in any event dated January 1, 2014.

I’ll await your documentation.

Thanks.

Ian

[6] The next communication between counsel for the parties was on December 18, 2013. Counsel for the defendants raised the possibility that the consent from the Bank of Montreal with respect to the mortgages may be an issue.

Hi Ian,

I was able to collect all the relevent terms and conditions relating to the blanket mortgage in favour of BMo on the Charles Street properties (#6 and #7 in your listing).

Attached is a copy of the BMo Set of Standard Charge Terms #8545. Article 10, as it pertains to our situation, basically states that BMo has to approve any subsequent charge in writing.

I haven’t contacted BMo yet, but I think we should be prepared for the eventuality that they don’t allow the blanket mortgage on the two properties in favour of Mr. Wilson.

I’ll be in touch with you as soon as I hear back from BMo.

Take care,

-Jordan

[7] Counsel for the plaintiff responded as follows:

Hi Jordan,

Can you get a current statement of the balances of the mortgages on #5, #6, and #7? The mortgage on #5 is 8.5 years old and the blanket mortgage on #6 and #7 is 6.5 years old.

My recollection from earlier years of real property and commercial landlord tenant litigation is that there is a general principal, or implied term, that such approval or consent cannot be unreasonably withheld by the bank. There is still significant equity available (as calculated below).

A judgment and writ of execution could be the alternative to a mortgage, but l’d think the latter would likely be preferable to your clients.

My real estate lawyer here in Peterborough who did the subsearches may have some ideas. What does your firm’s real estate guy say? I realize that your clients would naturally prefer to have less security taken, but no mortgage on #s 5 to 7 leaves only roughly $116,000 in security.

I think we need to see the mortgage statements in order to determine options that could make this work for everyone including the bank. The blanket mortgage on 6 and 7 was only $84,600 6.5 years ago and the combined MPAC value is $232,000 so there is significant equity remaining.

Those are my thoughts at this point in any event.

Thanks.

Ian

[8] The next day, again by email, counsel for the defendants delivered an amended Statement of Defence and consent and draft order to allow that amendment.

[9] Counsel for the plaintiff replied a day later indicating that he would prepare a Reply and send back the consent to amend the Statement of Defence.

Positions of the Parties

[10] Both parties agree that the basic principles with respect to whether an agreement was created are set out in Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 ONCA 2734 at p12:

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.

[11] The plaintiff argues that the phrase "in principle" is not, in any way, a qualifier. Further, the plaintiff argues that the provision for security requiring the consent of the Bank of Montreal was a condition subsequent which the plaintiff was entitled to waive unilaterally.

[12] The defendants submit that the language used in the December 5, 2013 email demonstrate that an agreement was not reached. The defendants argue that the language used – "agreement in principle", "prior to finalizing", "once everything is in place" – signify that this is not an agreement in which all essential provisions are agreed sufficiently to fulfill the requisites for the formation of a contract. They argue that the consent of the Bank of Montreal was necessary for the mortgage to be in place and that there could not be any agreement until the bank consented.

[13] The defendants further argue that the conduct of the parties in delivering further pleadings subsequent to December 5, 2013 confirms that both counsel knew that this was a framework for resolution only.

Analysis

[14] Objectively, on the evidence, I conclude that an agreement was not made on December 5, 2013. On its plain reading, I find that this document represents, as suggested by the defendants, a framework for potential resolution. That is particularly so given that the consent from the Bank of Montreal is required. I do not accept the plaintiff's position that the consent from the Bank was a condition precedent that could be waived. I conclude that security was an essential aspect of this proposed "framework". My conclusion with respect that is supported by the email from counsel for the plaintiff to counsel for the defendants on December 18, 2013 which speaks to an alternative to the mortgage.

[15] Based on Wallace v. Allen, 2009 ONCA 36, the conduct of the parties, after documentation is prepared, can be considered in determining whether the parties considered themselves bound. The December 19, and 20th, 2013 emails speak to amendments to the Statement of Defence and Reply. If an agreement was reached then further pleadings would not be required. Had an agreement been in place, I would have expected counsel for the plaintiff to question why further pleadings were necessary. I cannot accept that lawyers would waste their time and their clients' money by doing unnecessary pleadings if there was a "done deal".

Conclusion

[16] The plaintiff's motion is dismissed.

[17] Prior to conclusion of argument I asked for submissions from counsel with respect to costs. Both counsel suggested that a range of $5000 to $7500 would be appropriate. I note that cross examinations were not required. I order that the defendants shall have their costs of this motion fixed in the amount of $5000 plus HST.

[18] I am grateful for the assistance of counsel. Each factum was direct and concise, as was oral argument.

“original signed by”______

The Hon. Mr. Justice W.D. Newton

Released: July 7, 2015

COURT FILE NO.: CV-13-350
DATE: 2015-07-07

ONTARIO
SUPERIOR COURT OF JUSTICE

B E T W E E N:

ROY V. WILSON

Plaintiff

• and -

BKK ENTERPRISES INC., KEN KOZMENSKI, and BRENDA KOZMENSKI

Defendants

DECISION ON MOTION

Newton J.

Released: July 7, 2015

/cs