COURT FILE NO.: CV-12-2622-00
DATE: 2015-08-07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
SANDY SCAMURRA
Applicant
- and -
SANDY SCAMURRA & SONS LIMITED, SANDY SCAMURRA CONTRACTING LTD., 726127 ONTARIO INC., ALBERT SCAMURRA, FELIX SCAMURRA, AFJ DISPOSAL INC., TD CANADA TRUST and ROYAL BANK OF CANADA
Respondents
Albert Campea, for the Applicant
Michael N. Freeman, for the Respondents
HEARD: July 7, 2015
REASONS FOR JUDGMENT
Lemon, J.
The Issue
[1] The Applicant, Sandy Scamurra, moves for summary judgment against his brothers, Albert and Felix, and their related companies, based on one of two settlement negotiations. I will refer to the individuals by their first names.
[2] I have been asked to determine:
(i) have the parties to this motion reached a settlement; and
(ii) if so, is it just and appropriate for me to exercise my discretion and grant judgment enforcing the terms of the settlement?
[3] I was not advised of any cross-examinations on the affidavits; no one requested viva voce evidence.
[4] For the reasons that follow, I find that the parties did settle the issues between themselves on September 6, 2013. While further negotiations were entered into in 2014, an agreement was not reached. Given the detailed resolution of the September 2013 agreement, there is no reason why it should not be enforced by a judgment of this court.
Background
[5] In June of 2012, Sandy commenced this application against the various defendants pursuant to the oppression remedy provisions of the Business Corporations Act.
[6] It is agreed that the application was settled on the terms of a share Purchase and Sale Agreement dated September 6, 2013. That agreement included a Share Pledge Agreement dated October 1, 2013. I will refer to them collectively as the 2013 agreement.
[7] In accordance with the 2013 agreement, Sandy agreed to sell to Albert and Felix all of his shares in the respondents, Scamurra Contracting Ltd., Sandy Scamurra and Sons Ltd., and 726127. In return, Albert and Felix were to pay the sum of $450,000 by way of 12 monthly payments of $12,500 each commencing on October 1, 2013, and terminating on October 1, 2014. If the $12,500 monthly payment could not be made, then Albert and Felix were to provide quarterly payments to make-up for the shortfall. These payments were in addition to 120 monthly payments of $2,500 and a $700 car allowance, plus insurance and HST.
[8] The shares were to be held in escrow until such time as the whole purchase price was paid, at which time the shares would be released to Albert and Felix. Upon default, the shares would be transferred to Sandy, or to whomever Sandy might direct.
[9] The agreement went on to stipulate that interest would accrue at the rate of ten per cent per annum on late payments. It also provided that Albert and Felix would be liable for all costs, charges, legal fees and expenses that Sandy incurred in the event of a default. Also upon default, Sandy was entitled to exercise any of his rights and remedies at law.
[10] Sandy says that Albert and Felix immediately defaulted on the first monthly payment, the first quarterly payment, and on every other payment thereafter. There seems to be some dispute about whether every payment was in default. Sandy submits that by September 2, 2014, only $42,000 had been paid of the $150,000 that was due as of that date. Only after counsel became involved, did Albert and Felix pay another $108,000 between October 20, 2014, and March 20, 2015. Be that as it may, Albert and Felix do not dispute that they were in default and only brought their payments into good standing as of March 2015.
[11] On June 11, 2014, through his lawyer, Sandy demanded payment of the total balance owing pursuant to the 2013 agreement, plus interest and costs. In response, Felix indicated to Sandy that he would receive all of his money, and offered to pay him $12,000 per month after August. This was not acceptable to Sandy. As a result of the default, Sandy said that he would proceed with a motion for judgment. However, he also agreed to a settlement meeting with Albert and Felix.
[12] Those negotiations carried on until November 18, 2014, when Albert and Felix through their lawyer, Mr. Neuwald, confirmed that there was a "tentative" resolution. This included:
a. Payment of $33,000 before October 31, 2014 which, by the date of the letter, had been made.
b. Albert and Felix were to provide five post-dated cheques each in the sum of $15,000.
c. Albert and Felix would each provide a mortgage on their respective residences in the amount of $200,000, as a security payment of the monies still outstanding.
d. Albert and Felix would provide a consent to judgment that would not be acted upon unless there was a default in the monthly payments in accordance with the 2013 agreement.
e. Albert and Felix would pay ten per cent interest on the late payments made since the execution of the 2013 agreement.
f. The issue of costs remained to be addressed.
g. The remaining amounts under the 2013 agreement would continue to be paid by Albert and Felix in accordance with the agreement, which amounts were open to be paid in full at any time, and the balance of the agreement would remain in full force and effect, except as amended by the parties.
h. Mutual releases were to be executed and held in escrow pending the completion of the terms of the settlement.
[13] Mr. Neuwald finished by saying "We are looking forward to hearing from you and confirming the terms of this settlement."
[14] Ten days later, on November 28, 2014, Sandy's lawyer, Mr. Campea, wrote to say that Sandy was prepared to settle the default of the 2013 agreement on terms that were essentially, but not wholly the same, as set out in Mr. Neuwald's letter. In particular, he said:
a. The issue of costs had not been agreed-upon.
b. The terms of the settlement offer were not severable from each other.
c. The terms of any settlement was to be embodied in minutes of settlement, a draft of which was to be prepared by Albert's and Felix's lawyer's office, to be reviewed by Mr. Campea.
[15] On February 11, 2015, Mr. Campea again wrote to confirm with Mr. Neuwald that there was an agreement according to his terms set out in the November 28, 2014 letter, except for costs, which was the only outstanding issue.
[16] On February 18, 2015, Mr. Neuwald indicated that he was in the process of preparing the minutes of settlement, and requested that Mr. Campea provide the details of the costs to be considered.
[17] On February 24, 2015, Mr. Campea indicated that his position was that the terms arising from default of the 2013 agreement had been agreed to as set out in his letter of November 28, 2014, except for the issue of costs. He warned that should the matter proceed to court, he would be seeking all available remedies, including costs in accordance with the 2013 agreement.
[18] By March 9, 2015, Albert and Felix took the position that they had not come to terms on a resolution of the breach of the 2013 agreement, as the issue of costs remained outstanding.
[19] This was unacceptable to Sandy. He, therefore, brought this motion.
[20] Albert and Felix agree that the terms of the 2013 agreement required them to make a combination of lump sum / quarterly payments and monthly payments to Sandy. They take the position that all monthly payments required by the 2013 agreement have been made from the outset and are current. Albert and Felix say that the final lump sum payment was made to Sandy on March 20, 2015.
[21] Albert and Felix submit that they were engaged in settlement negotiations in July 2014, in an effort to rectify the problem created by the earlier default in the lump sum / quarterly payments. Correspondence was exchanged between counsel in an effort to reach an agreement. In a letter dated November 18, 2014, their counsel indicated that the parties had reached a "tentative" resolution of the issues. However, on November 28, 2014, Sandy's counsel put forward a proposal that they did not reply to; they did not, at any time, accept the terms set out in that letter. Subsequent communication from their counsel focussed solely upon his request for a breakdown of the legal costs payable to Sandy. No such breakdown has ever been provided. The matter of costs, therefore, remains unresolved.
[22] Further, Albert and Felix say that they will suffer economic hardship if judgment is granted and they are consequently required to pay the entire amount owing to Sandy at this time. They could lose an important business opportunity. The business may encounter difficulty both in borrowing operating funds and also in making an essential capital purchase.
[23] Therefore, they ask that if I find that a settlement has been reached, I should exercise my discretion not to enforce upon the settlement by granting judgment as doing so would create "a real risk of injustice".
Legal Authorities
[24] Rule 49.09 of the Rules of Civil Procedure states,
"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."
Rule 49.09, Ontario Rules of Civil Procedure.
[25] The test to be applied on a motion under Rule 49.09 (1) is a two part test.
(1) The Court must determine whether or not an agreement to settle was reached.
(2) If so, should the agreement be enforced on all of the evidence.
(See: Milios v. Zagas, 1998 CanLII 7119 (ON CA), 38 O.R. (3d) 218 (C.A.)).
[26] If an alleged settlement is based upon the exchange of documents / correspondence, the Court ought to look objectively at such documents in order to determine whether or not the parties have reached an enforceable agreement. However, when deciding whether to exercise its discretion and enforce the agreement, the Court is required to take a broad approach and consider all of the evidence. (See: Olivieri v. Sherman, 2009 ONCA 772, 264 O.A.C. 297).
[27] In the second step of the analysis under Rule 49.09, the Court must be careful and exercise its discretion so as to avoid a risk of injustice. The factors that the Court must consider in determining how to exercise its discretion include:
a. The evidence of mistake.
b. The reasonableness of the agreement.
c. The prejudice to the party seeking to uphold the settlement if it is not enforced.
d. The prejudice to the party seeking to set aside the settlement if it is enforced and in relation to the prejudice to the party who seeks to uphold the settlement if it is not enforced.
e. The effect on third parties if it is not enforced.
(See: Ruder v. 1049077 Ontario Ltd., 2014 ONSC 4389, 243 A.C.W.S. (3d) 54; Richard v. Worth, 2004 CanLII 34517 (ON SC), 73 O.R. (3d) 154 (S.C.)).
Analysis
November 2014
[28] Considering all of the correspondence between the two lawyers, I cannot accept that the parties had come to an agreement to settle the dispute. Mr. Neuwald's letter of November 18, 2014, stated that "we confirm that the parties have tentatively resolved the above noted matter as follows." Further, "the issue of costs remain to be addressed." And finally, "we are looking forward to hearing from you in confirming the terms of the settlement."
[29] In return, Mr. Campea replied on November 28, 2014. There he stated, "we have received instructions to settle . . . on the following terms:", "The issue of costs is not agreed upon." Finally and most significantly, "the terms of this settlement offer are not severable from each other."
[30] Despite reminders from Mr. Campea on December 10, 2014, January 23, 2015, February 11, 2015, and February 12, 2015, there was no acceptance of this offer. The closest that can be considered is Mr. Neuwald's letter of February 18, 2015, where he said: "We are in the process of preparing the Minutes of Settlement in this matter. Kindly advise of your instructions regarding costs as we are unable to finalize the Minutes of Settlement without resolving the matter as to costs."
[31] Costs have never been resolved. Mr. Campea's last offer has never been accepted. Since no terms of his offer could be severed, it follows that the offer has not been accepted and the matter was not settled on terms in 2014.
September 6, 2013
[32] In argument, it was agreed by counsel for Albert and Felix that the September 2013, agreement is binding upon the brothers. Further, it was agreed that Albert and Felix are still in breach of that agreement at least to the extent of interest and costs. There were no submissions that judgement could not be granted on the terms of the notice of motion. Accordingly, subject to Albert and Felix's second argument, judgment may follow on the terms of the 2013 agreement.
Prejudice
[33] Albert and Felix submit that making an order requiring them to comply with the 2013 agreement would "cause us tremendous and irreparable financial harm".
[34] In their affidavit, they submit that:
An order requiring that the full amount owing be paid at this time, rather than in monthly installments as has been agreed, would cause us tremendous and irreparable financial harm. Such harm includes:
(a) We are in the midst of entering into a joint venture that will enhance the waste management sector of our company. We very much doubt that our prospective partner will proceed if we or our company are subjects of a significant Judgment at this time;
(b) We are entering the busiest part of our year. Having to satisfy a Judgment at this time would damage our line of credit and cripple our ability to borrow funds as necessary to complete projects; and
(c) The business is about to purchase a new evacuator at a cost of $200,000. This essential purchase will not be possible if funds must be devoted to satisfying a Judgment.
[35] This evidence, at most, would suggest that there might be difficulties for the company if they were required to comply with the 2013 agreement. I do not see that as the prejudice suggested in the case law. There is no evidence of mistake or any suggestion that the agreement was unreasonable. The evidence of prejudice to Albert and Felix is weak; the prejudice to Sandy if the court fails to enforce the agreement is obvious. Sandy has been astonishingly patient with his brothers; he should not have to wait further for them to live up to their 2013 agreement.
Result
[36] Accordingly, pursuant to the notice of motion, I grant an order for judgment as against the Respondents, Albert Scamurra and Felix Scamurra, in the terms of the Share Purchase and Sale Agreement dated September 6, 2013, including the Share Pledge Agreement attached as Schedule "A" to the Share Purchase and Sale Agreement, which shall include an Order that the Respondents, Albert Scamurra and Felix Scamurra shall pay jointly and severally to the Applicant:
(i) the full balance of the Purchase Price of the Purchased Shares, as defined in the Share Purchase and Sale Agreement at paragraph 2(a);
(ii) the balance outstanding of the car allowance payments as set out in paragraph 2(b) of the Share Purchase and Sale Agreement;
(iii) interest at the rate of ten per cent per annum or in the alternative, interest pursuant to the Courts of Justice Act, R.S.O. 1990, c.C. 43, as amended; and
(iv) a declaration that the Respondents, Albert Scamurra and Felix Scamurra are in default of their obligations pursuant to the Share Purchase and Sale Agreement.
[37] The parties have agreed that as of March 20, 2015, interest was owed in the amount of $13,492.19. I presume that they can calculate interest going forward as of date of judgment.
[38] Sandy also seeks an Order that "the Trustee (as referenced in the Share Pledge Agreement) shall transfer the Purchased Shares to the Applicant or to whom he may direct, in accordance with paragraph 4 of the Share Pledge Agreement." This should not, of course, take effect unless the moneys ordered above are not paid. I shall remain seized of this proceeding in case there are any difficulties confirming the terms of this judgment in accordance with the 2013 agreement.
Costs
[39] If the parties cannot agree upon on costs, written submissions may be made to me. Those submissions shall be no more than ten pages each not including any bills of costs or offers to settle. The Applicant shall provide his cost submissions within 20 days and the Respondents shall respond within 20 days, thereafter. Any reply shall be within ten days of that date.
[40] Given the complexity of the costs to be ordered pursuant to the share purchase agreement and this motion, if the parties jointly wish, I may be contacted by joint conference call to consider a different format of determining those costs.
Lemon, J.
Released: August 07, 2015
COURT FILE NO.: CV-12-2622-00
DATE: 2015-08-07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
SANDY SCAMURRA
Applicant
- and -
SANDY SCAMURRA & SONS LIMITED, SANDY SCAMURRA CONTRACTING LTD., 726127 ONTARIO INC., ALBERT SCAMURRA, FELIX SCAMURRA, AFJ DISPOSAL INC., TD CANADA TRUST and ROYAL BANK OF CANADA
Respondents
REASONS FOR JUDGMENT
Lemon, J.
Released: August 07, 2015