Court File and Parties
COURT FILE NO.: CV-14-503488
DATE: 20150723
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRIAN WILSON
Plaintiff
– and –
NORTHWEST VALUE PARTNERS INC. and NORTHWEST INTERNATIONAL HEALTHCARE PROPERTIES REAL ESTATE INVESTMENT TRUST
Defendants
Counsel: Jeff C. Hopkins, for the Plaintiff Jonathan D. Cocker, for the Defendants
HEARD: July 15, 2015
M. D. FAIETA, J.
REASONS FOR JUDGMENT
INTRODUCTION
[1] The plaintiff Brian Wilson commenced this action for payment of benefits following the termination of his employment in December 2013 as a senior executive with the defendants Northwest Value Partners Inc. (“Northwest Value”) and Northwest International Healthcare Properties Real Estate Investment Trust (“Northwest REIT”) collectively referred to as Northwest.
[2] A mediation was held on the morning of January 26, 2015. Wilson and his counsel, Norman Grosman, were in attendance along with Bernard Crotty, Vice-President of Northwest Value and Northwest’s counsel, Jonathan Cocker. At the mediation the parties agreed to settle this action.
[3] On January 28, 2015 Bernard Crotty learned that Wilson was working with Mohawk Medical General Partner (I) Corp. Northwest and Mohawk are competitors in the healthcare real estate field.
[4] By email dated February 18, 2015 counsel for Northwest advised:
I can advise that our clients are not prepared to accept the terms of the proposed settlement in light of the information we have learned regarding the activities of Mr. Wilson, which our clients view as both inconsistent with his ongoing obligations owed to them and material to the terms of any final resolution of all matters between the parties.
As such, we will be returning the Release executed by Mr. Wilson and we propose that the parties proceed to discoveries.
[5] On June 17, 2015 Northwest commenced an action against Wilson and Mohawk for damages arising from the alleged breach of his non-competition agreement with Northwest.
[6] Wilson brings this motion for judgment in accordance with the settlement agreement. Wilson filed his affidavit in support of this motion.
[7] By cross-motion Northwest asks this Court for an order: (1) declaring that the parties have not reached a settlement; or in the alternative, an order that the enforceability of the settlement agreement is to be determined at trial; (2) that the Wilson action and the Northwest action be consolidated or heard at the same time. In support of its motion, Northwest did not submit the evidence of anyone who attended the mediation on its behalf. Instead, it relied upon the affidavit of Teresa Neto, the former Chief Financial Officer of Northwest REIT.
[8] The central issue in respect of both motions is whether the parties reached a settlement on January 26, 2015.
[9] Northwest submits:
(1) The parties did not execute documents relating to the settlement agreement. Negotiations were at all material times subject to formalization in documents and this was never completed. At no time did Northwest execute settlement documents.
(2) Settlement negotiations did not reach consensus ad idem because Wilson did not disclose a fundamental, material fact, namely that he was employed by a direct competitor. Northwest could not, and did not, agree to a full and final settlement without knowledge of this fact.
(3) In the alternative, settlement negotiations did not reach consensus ad idem because Northwest negotiated under a unilateral mistake of fact, namely, that Wilson was not employed by a direct competitor and in his of his contractual and fiduciary duties.
[10] Accordingly, these motions raise the following issues:
(1) Did the parties agree to settle this action?
(2) If so, should the settlement agreement be enforced?
ANALYSIS
[11] Rule 49.09 of the Rules of Civil Procedure provides:
49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may,
(a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; or
(b) continue the proceeding as if there had been no accepted offer to settle.
[12] In Olivieri v. Sherman, 2009 ONCA 772, at para, 24-28, and 34, the Ontario Court of Appeal indicated that whether a settlement agreement should be enforced requires a two-step analysis.
[13] The first step is to determine whether the parties agreed to settle the action. This determination must be made applying Rule 20 of the Rules of Civil Procedure which is used on a motion for summary judgment.
[14] A Court must refuse to grant judgment if there are material issues of fact or genuine issues of credibility in dispute regarding whether:
(i) the parties intended to create a legally binding relation, or
(ii) there was agreement on all essential terms.
[15] If a settlement agreement is found to exist, then the second step is to determine whether the settlement agreement should be enforced in light of all of the relevant factors disclosed by the evidence. In this second step, Rule 20 is not applied.
ISSUE #1: Did the parties agree to settle this action?
[16] As noted, this issue is to be determined as if it were a motion for summary judgment brought pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[17] When considering a motion for summary judgment the following principles are applicable:
- A court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.[^1] This will occur “… when the process:
(a) allows the judge to make the necessary findings of fact,
(b) allows the judge to apply the law to the facts, and
(c) is a proportionate, more expeditious and less expensive means to achieve a just result”.[^2]
In determining whether there is a genuine issue requiring a trial, a court shall consider the evidence submitted by the parties.[^3]
A court “…is entitled to assume that the parties have respectively advanced their best case and that the record contains all the evidence that the parties will present at trial…The onus is on the moving party to show that there is no genuine issue requiring a trial, but the responding party must present its best case or risk losing…".[^4]
A court may exercise any of the following powers for the purpose of determining whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers to be exercised only at a trial.
Weigh the evidence.
Evaluate the credibility of a deponent.
Draw any reasonable inference from the evidence.[^5]
Order that oral evidence be presented by one or more parties for the purposes of exercising the above powers.[^6]
- The use of the above discretionary powers “…will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.”[^7]
[18] I now turn to apply these principles to the following questions:
Did the parties intend to create a legally binding agreement?
Was there agreement on all essential terms?
Did the parties intend to create a legally binding agreement?
[19] The intention of the parties to create a legally binding agreement is determined by whether such intention is manifest from their words and actions. [Olivieri, tab 3, para 44]
[20] In my view, there is no question that the parties intended to create a legally binding settlement in light of the following words and actions:
(a) the settlement arose during a court-directed mediation of this action where all parties were represented by legal counsel;
(b) the following email was sent by Bernard Crotty to Teresa Neto, the CFO for Northwest at 12:26 p.m. on the day of the mediation:
Wilson settled at 240K…Payment by Feb 12th less payments to lawyer and withholdings
(c) counsel for Wilson made the following handwritten notes on January 26, 2015:
240,000 all in. Pd on or b4 February 13, 2015. Allc to legal fees + ½ mediation fee. Discontinue. 30%
(d) the following email was sent by counsel for Northwest to counsel for Wilson on January 26, 2015 shortly after the mediation concluded:
Thank you for your help with today’s matter. May I ask that you send me the legal fee/disbursement amount today so that I may start the payment process with our client.
(e) The following email was sent by counsel for Northwest to counsel for Wilson one day later on January 27, 2015:
Please find draft settlement documents for your review and execution by your client.
(f) By letter dated February 2, 2015 counsel for Wilson delivered a Notice of Discontinuance to counsel for Northwest;
(g) By letter dated February 3, 2015 counsel for Wilson delivered to counsel for Northwest a copy of the settlement agreement that had been signed by Wilson;
[21] I find that the evidence clearly shows that the parties intended to create a legally binding settlement agreement.
Was there agreement on all essential terms?
[22] As was described above, the email sent on January 26, 2015 at 12:26 p.m. by Bernard Crotty contains the same essential terms as the notes to file written by counsel for Wilson on January 26, 2015.
[23] Further, on cross-examination, Bernard Crotty produced a copy of the settlement agreement that had been signed by Wilson on February 3, 2015 and that Mr. Crotty had subsequently signed.
[24] In summary, there is no genuine issue requiring a trial in relation to whether the parties intended create a legally binding settlement agreement and whether the parties had agreed on all of the essential terms of the settlement. I find that the evidence clearly shows that the parties intended to create a legally binding settlement agreement and that they had agreed on all of its essential terms on January 26, 2015.
ISSUE #2: Should the settlement agreement be enforced?
[25] The guiding principles for deciding whether a settlement agreement should be enforced are as follows:
(1) A settlement agreement should not be enforced if it would create a real risk of injustice. For instance, injustice would arise where the party seeking to enforce the settlement has repudiated it.[^8]
(2) Second thoughts do not constitute a valid reason for refusing to enforce a settlement agreement.[^9]
(3) In Donaghy v. Scotia Capital Inc. [2004] O.J. No. 2157, at para. 15, Justice Karakatsanis (as she then was) stated:
The principle of finality is an important principle. Settlements entered into with the assistance of counsel should be upheld except in the clearest of cases and in exceptional cases. There was no evidence of fraud or mistaken instructions. Counsel agreed on the payments and on the form of the release. There was no evidence of bad faith.
[26] Northwest submits that the agreement should not be enforced because:
(1) there was a material misrepresentation by omission;
(2) there was a unilateral mistake of fact; and,
(3) its ability to pursue its action against Wilson and Mohawk is prejudiced by the settlement agreement.
Material Misrepresentation by Omission
[27] Northwest submits that it would not have agreed to settle this action if it had known that Wilson was working for Mohawk. Northwest submits that Wilson’s engagement with Mohawk violates the terms of its non-competition agreement found in their employment agreement.
[28] Northwest submits that there was an obligation at law on Wilson, as a former executive subject to a non-competition agreement, to report post-employment activities to Northwest. None of the cases provided by Northwest, such as McBride Metal Fabricating Corporation v. H & W Sales Company Inc., 2002 41899 (ON CA), [2002] O.J. No. 1536, stand for that proposition.
[29] Further, there is no reasonable basis for Northwest to argue that the alleged breach of the non-competition provision Wilson’s employment agreement was material to the payment of the bonus prior to his termination:
(1) There is no contractual obligation on Wilson to provide Northwest with information about his post-employment activities. On cross-examination Ms. Neto acknowledged that there is no condition in the bonus plan or Wilson’s employment contract that makes receipt of a bonus conditional upon abiding by any post-employment contractual obligations or that creates an obligation to disclose his post-employment activities;
(2) Northwest confirmed that there was no condition reflected in any correspondence exchanged between the parties that required Wilson to confirm that he was no working with a competitor;
(3) The discussions at the mediation were not made conditional upon Wilson not being employed by a competitor.
[30] In Islip v. SSI Equipment Inc. [2009] O.J. No. 3936, at paras. 155-157, the Court found that post-employment conduct was not material in determining whether the plaintiffs, former employees that had allegedly unfairly competed with the defendants following their termination of employment, were nonetheless to a bonus during their period of employment. The Court stated:
The thrust of the defendants’ argument is that the act of wrongdoers should not result in a benefit for their actions. The breach of one provision of the contract should disentitle them to rely upon the contract when it serves to their benefit.
The plaintiffs say that they did the work, as evidenced by their entitlement to the bonuses, and left a substantial backlog of work…Their actions in opening a competing company should not result in a forfeiture of the bonuses, nor should their conversion or their breach of the restrictive covenant. The defendants can recover their damages for the breaches, but should not be allowed to deny the Islips the fruits of their labour by claiming equity requires it.
I agree with the plaintiffs’ position in this regard. The defendants’ entitlement to damages should not allow them to breach another provision of the contract. One breach by one party does not allow the entire contract or its obligations to be avoided by the other party, unless such breach constitutes a fundamental breach rendering the contract a nullity. The post-employment conduct of the Islip mean is not such a breach. There is evidence the Islips were entitled to bonuses and as such they should be paid the defendants, subject to the right of set-off against the damages awarded against them. [emphasis added]
[31] Further, in Mady Development Corp. v. Rossetto [2012] ONCA, at para 30, the Ontario Court of Appeal adopted the following statement:
…an employer is not free to withhold payment of wages due for past performance, even where the past performance may have involved a time when the employee was acting in breach of his fiduciary duty.
[32] In my view, any alleged breach of fiduciary duty by Wilson in relation to his post-employment activities is not material to his entitlement to a bonus during the period that he was employed with Northwest.
Unilateral Mistake
[33] Northwest submits that the settlement agreement did not exist and, in any event, should not be enforced because Northwest was undertook the settlement discussions under the mistaken belief that Wilson was not employed by a competitor.
[34] In my view, a unilateral mistake will only affect the validity of an agreement if it involves a material term of the contact. As noted above, Wilson’s bonus was not conditional upon his compliance with the non-competition clause in his employment contract nor did Northwest advise Wilson at, or prior to, the mediation that their settlement was conditional upon his compliance with the non-competition clause in his employment contract.
Would the Settlement Render Northwest’s Action Moot?
[35] Northwest submits that the language of the settlement agreement bars it from pursuing a claim against Wilson in respect of his alleged post-termination contravention of his employment contract. I do not agree.
[36] There is no language in the settlement agreement itself that purports to release Wilson from his employment contract. The settlement agreement only requires that Wilson provide a release to Northwest. There is nothing in the Settlement Agreement that requires Northwest to provide a release to Wilson. The settlement documents that have been exchanged between the parties do not include a release that Northwest is required to provide Wilson. In my view, it is commercially unreasonable to interpret the settlement agreement in the manner suggested by Northwest.
[37] Given that Wilson’s employment with Northwest terminated in December 2013, and as a result the non-competition clause of his employment contract does not expire until December 2015, it makes no sense that the settlement agreement in relation to settling the amount of bonus to be paid to Wilson under his employment contract would have also had the effect of relieving him for the next 11 months of his non-competition obligation under the employment contract.
[38] Counsel for Wilson confirmed that Wilson does not take the position that the settlement relieves him of the non-competition obligations under the employment contract.
[39] In my view, Northwest has failed to demonstrate that a real risk of injustice would result by the enforcement of this settlement agreement.
CONCLUSION
[40] I find that the parties entered a settlement agreement on January 26, 2015. Northwest seeks relief from the settlement agreement for reasons that are immaterial to this action and Wilson’s entitlement to a bonus during his period of employment. Northwest’s allegation that Wilson violated the ongoing non-competition provisions of his employment contract are the subject-matter of another action that Northwest has commenced.
[41] For the reasons given above I grant Judgment in accordance with the settlement reached by the parties on January 26, 2015 and as reflected by the Minutes of Settlement exchanged by the parties.
[42] I encourage the parties to make best efforts to resolve the issue of costs. If the parties are unable to do so, then Wilson shall deliver his costs submissions within one week of today’s date. Northwest shall deliver its costs submissions within two weeks of today’s date. The submissions shall not exceed two pages in length exclusive of an outline of costs.
Mr. Justice M. D. Faieta
Released: July 23, 2015
[^1]: Rule 20.04(2)(a). [^2]: Hryniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49. [^3]: Rule 20.04(2.1). [^4]: Lopez v. Dr. M. Douris Dentistry Professional Corp., 2014 ONSC 3675, para. 9 [^5]: Rule 20.04(2.1). [^6]: Rule 20.04(2.2) [^7]: Hryniak, at para. 66. [^8]: Olivieri v. Sherman [2009] O.J. No. 6235, at paras. 34-35. [^9]: Hagel v. Giles 2006 3964 (ON SC), [2006] O.J.No. 556, at para . 37; aff’d 2006 29653 (ON CA), [2006] O.J. No. 3471 (C.A.)