ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-14-497483
DATE: 20150904
BETWEEN:
REDS BY ARVIN INC.
Plaintiff/Defendant by Counterclaim
– and –
MODERN BASICS DISTRIBUTORS LTD.
Defendant/Plaintiff by Counterclaim
Jacqueline Ho, for the Plaintiff/Defendant by Counterclaim
Pauline Bosman, for the Defendant/Plaintiff by Counterclaim
HEARD: August 24, 2015
G. DOW, j
reasons FOR DECISION
[1] The defendant/plaintiff by counterclaim (referred to subsequently as “Modern Basics”) seeks to enforce a settlement entered into between counsel for the parties and confirmed in writing by a letter dated December 8, 2014 from counsel for the plaintiff/defendant to the counterclaim (here and after referred to as “Reds by Arvin”) to counsel for Modern Basics. The letter states, “This is to confirm that we have settled the above referenced matter on the basis that the action and the counterclaim will be dismissed without costs and the parties will execute full and final mutual releases. As agreed, your offices will obtain the Order dismissing the action and counterclaim without costs. Enclosed please find the consent, draft Order and mutual release.”
[2] Counsel for the plaintiff opposes this motion on the basis Ms. Arvin Bindra, the principal of Reds by Arvin, did not give those instructions to her counsel.
Facts
[3] Reds by Arvin entered into a distribution agreement with Modern Basics with regard to cosmetics which Modern Basics repudiated by email to Reds by Arvin November 22, 2013. At that time, Reds by Arvin had failed to pay five invoices totaling $49,909.64. By email letter November 26, 2013, Modern Basics proposed return of the inventory Reds by Arvin had in its possession within the next three weeks, offering to absorb the shipping cost and restocking fee. This did not occur and Reds by Arvin issued its Statement of Claim January 30, 2014 contesting the repudiation (see paragraph 14 of the Statement of Claim).
[4] After the litigation commenced, the parties reached an agreement on what to do with the product of Modern Basics in possession of Reds by Arvin. Modern Basics sent an individual from its place of business in Vancouver to Reds by Arvin’s premises in Scarborough. In addition, it hired to local persons who spent two days counting, packaging and shipping the over 32,000 items back to Modern Basics (plus related shelving and racks). The associated cost was to be added to the issues in the action (Exhibit C to the affidavit of Allison Roberts sworn June 10, 2015 being letters dated March 19 and April 8, 2004). The restocking claim was quantified by Modern Basics to be $13,164.31. The value of the inventory returned was the subject of credit memos for $32,581.09 and $34,960.35 (or a total of $67,541.44).
[5] This would presumably offset the $49,909.64 of unpaid invoices. In addition Modern Basics was claiming $13,164.31 in restocking fees, for a total of $63,073.95. This suggests the settlement Modern Basics seeks to enforce is quite plausible.
[6] In support of its claim the settlement should be enforced, counsel for Modern Basics relies on email contact in December, 2014 and January, 2015. That is, after receipt and review of the draft mutual release enclosed in the letter of December 8 confirming the settlement, counsel for Modern Basics makes changes and returns the revised documents to counsel for Arvin by Reds. Counsel for Arvin by Reds responds in an email January 8, 2015 to “Go ahead and have your client execute the revised release and will have my client do the same.” while also asking for copies of the credit memos. Counsel for Modern Basics has her client sign the revised mutual release and forwards same by ordinary mail under cover of letter January 8, 2015.
[7] On January 12, counsel for Arvin by Reds emails counsel for Modern Basics, “We need to discuss matters. There is no settlement at this stage.” Counsel for Arvin by Reds subsequently asks counsel for Modern Basics to hold off on taking steps “until you hear from counsel for Law Pro”. There is a letter February 17 from counsel for Reds by Arvin repeating the position there is no settlement (without explaining why) and to refrain from taking further steps. On April 9, 2015, counsel for Modern Basics asks, in writing, for “a legitimate reason why the agreed settlement should not be finalized” and receives no response until on or after August 17, 2015 when served with the Responding Record of Reds by Arvin (the Motion Record of Modern Basics is dated June 10, 2015).
[8] Unbeknownst to Modern Basics but deposed by the principal of Reds by Arvin, Ms. Arvin Bindra claims there is an email chain between her and her former counsel starting November 17, 2014 asking what the balance of her retainer is to which there is a redacted response and Ms. Bindra’s response that she did not think she would be proceeding with “the case”. The email does include her needing to speak with one more person “before finalizing”. Ms. Bindra also asked how long it would take to prepare a cheque for presumably her remaining retainer amount.
[9] The legal assistant to counsel for Reds by Arvin responds with “Let me look into it” and Ms. Bindra follows up on December 8 with a message that includes “Just wanted to see if I could swing by sometime this week and pick up my chq. Please let me know.” There is also an email produced dated December 22 to Ms. Arvin attaching the mutual release to be signed and that her cheque would be forwarded upon return of the release. The email response by Ms. Bindra to counsel’s legal assistant on December 25 at 10:41 p.m. is “I noticed M.B. has not forwarded my invoice for the return of merchandise. Does Jonathan have any correspondence with the final invoice?” This email seems to be at odds with the plaintiff’s position there were no instructions to settle which resulted in the letter of December 8, 2014. Finally, counsel emails Ms. Bindra on January 8 that he had received Modern Basics’ executed mutual release and the credit memos requesting Ms. Bindra sign the release with the statement “Given the settlement, you do not owe any funds and M.B. owes you no funds. The court action will be dismissed without costs.”
[10] Ms. Bindra deposes at this point she first became aware of the purported settlement and began attempting to resile from it. Her affidavit lacks complete disclosure of communications between herself and her counsel. This no doubt contains privileged solicitor-client communication which I would note is hers to waive. There is also no direct evidence from her counsel supporting her position.
Issue – Authority to Settle
[11] The seminal case is Scherer v. Paletta, 1966 286 (ON CA), [1966] 2 O.R. 524 and the oft quoted statement by Justice Evans, “A solicitor whose retainer is established in the particular proceedings may bind his client by a compromise of these proceedings unless his client has limited his authority and the opposing side has knowledge of the limitation, subject always to the discretionary power of the Court...”
[12] What is less quoted is that while counsel may have apparent authority to bind and contract his or her client, counsel does not have the power to bind the Court. If there is a want of authority, it may be brought to the notice of the Court. However, if the parties have capacity, and there is no dispute as to the terms agreed upon, the Court should not “embark upon any inquiry as to the limitation of authority imposed by the client upon the solicitor.”
[13] Counsel for the plaintiff cites, among other authorities, two appeal decisions. In Milios v. Zagas, 1998 7119 (ON CA), [1998] O.J. No. 812, Justice Osborne accepts the principle set out in Scherer v. Paletta, supra, but concludes the situation before the Court was an uncontradicted incorrect settlement message having been given to counsel by that party’s spouse. What is clear in the Court’s conclusion was the motions judge had underemphasized the evidence of mistake. That is, the instructions given to counsel to accept the settlement offer was uncontradicted. It is not so clear in the facts at hand as described above that this has occurred. I have particular concerns about the email responses by Ms. Bindra after she was forwarded the draft mutual release on December 22, 2014.
[14] Counsel for the Reds by Arvin also relies on Fabian v. Bud Mervyn Construction Ltd. et al., (1981), 1981 1713 (ON SC), 35 O.R. (2d) 132, a decision of the Divisional Court where the dissenting opinion of Justice Galligan describes two lines of cases dealing with when parties reach an agreement through counsel and then a party attempts to resile from it. The first line holds the agreement will be enforced if the agreement does not require Court intervention (and cites Scherer v. Paletta, supra, as one of the authorities in support of this position).
[15] The second line of cases holds that when the Court is required to “bring about an important term of settlement”, the Court will not enforce an agreement entered into by mistake (again with reference to Scherer v. Paletta, supra). Justice Galligan does acknowledge the statement by Justice Evans that the Court will not embark upon an inquiry as to a counsel’s authority to bind his client but qualifies it to situations where there is no opposition as opposed to where enforcement of the settlement is vigorously opposed. I prefer the comments of the majority where Justice Cromarty repeats Justice Evans’ comment there should be no inquiry as to the limitation of authority where there is no dispute as to the terms agreed upon between the counsel. This is repeated in similar words by the third member of the Court, Justice Labrosse, in dismissing the appeal attempting to overturn the motion judge having given judgment. Justice Labrosse states at the end of his reasons, “If the solicitor did not have the authority to settle which is not borne out by the evidence shown and which, in any event, was not made known to other counsel involved, the matter is one between the client and his counsel.”
[16] While there may be concern the Reds by Arvin is being forced to accept the settlement of her counsel, the plaintiff has failed to provide adequate evidence of the mistake from which the Court should grant the equitable relief sought. The plaintiff’s version of events are not corroborated by evidence from her counsel either in affidavit form or through obtaining his sworn evidence under Rule 39.
[17] As a result, an Order shall issue dismissing both the action and counterclaim and execution of the mutual release by Ms. Bindra. If that does not occur, the Order dismissing both the action and counterclaim shall be with prejudice to either party asserting any further claim against each other arising from the facts alleged in the pleadings.
Costs
[18] I would encourage the parties to settle the costs cognizant of the success of Modern Basics in its motion. Counsel did provide me with their costs outline and indicated Offers to Settle, which may be the subject of dispute, had been exchanged. If the parties cannot agree on the disposition of costs, counsel for Modern Basics shall forward to me within the next 30 days not more than three pages double-spaced in 10 point font its submissions as to costs. Counsel for the plaintiff shall have 30 days to respond (subject to her pending maternity leave in which I will consider an extension request, in writing). Otherwise, those submissions should also be not longer than three double-spaced pages in 10 point font.
Mr. Justice G. Dow
Released: September 4, 2015
COURT FILE NO.: CV-14-497483
DATE: 20150904
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
REDS BY ARVIN INC.
Plaintiff/Defendant by Counterclaim
– and –
MODERN BASICS DISTRIBUTORS LTD.
Defendant/Plaintiff by Counterclaim
REASONS FOR JUDGMENT
Mr. Justice G. Dow
Released: September 4, 2015