Puri Consulting Limited v. Kim Orr Barristers PC, 2015 ONSC 577

COURT FILE NO.: CV-13-477257

DATE: 20150220

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Puri Consulting Limited, Plaintiff

AND:

Kim Orr Barristers PC, Defendant

BEFORE: Carole J. Brown, J

COUNSEL: Philip Anisman, for the Plaintiff

Won-Jin Kim, for the Defendant

HEARD: January 26, 2015

ENDORSEMENT

[1] The plaintiff brings this motion pursuant to rule 49.09 (a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for judgment for costs following the acceptance by the defendant of a Rule 49 offer to settle on the threshold of trial. The plaintiff states that the offer, while it did not say so, did not include costs and that rule 49.07(5) applies. It states that the defendant was aware of this from at least the pre-trial held May 8, 2014, when they attempted to settle on the basis of the offer. The plaintiff takes the position, inter alia, that the offer clearly excludes mention of costs, such that rule 49.07(5) is applicable. It maintains that, as the Rule 49 offer was served well before the scheduled trial (roughly nine months before the trial), costs were not included as they continued to run and that the offer to settle must be interpreted in this context. Alternatively, in the event that the offer is found to be ambiguous, the plaintiff contends that extrinsic evidence of the discussions held during the pre-trial conference as regards the meaning of the offer should be considered. In this regard, it states that rule 50.09 should not be applied, but rather the court, in its discretion, should have resort to rule 2.03 to permit consideration of pre-trial discussions “in the interest of justice.”

[2] The defendant takes the position that the offer was in “full and complete satisfaction of the plaintiff’s claim,” as it states on its face. It maintains that costs were claimed in the statement of claim, and that settlement would have included the claim for costs, as the settlement was made “all inclusive” or “in full and complete satisfaction of the plaintiff’s claim.” In response, the plaintiff maintains that, while the plaintiff also claimed HST in the statement of claim, its offer was “$50,000 plus HST,” which the defendant paid, such that the defendant’s argument is not valid.

[3] The defendant takes the position that the offer is clear on its face and not ambiguous: it was clearly to be in full and final settlement of the claim. Accordingly, no extrinsic evidence should be permitted. The defendant maintains that rule 50.09 is applicable and there is no reason to set it aside in the circumstances of this case. It argues that it is not “in the interest of justice” to apply rule 2.03 in order to permit the plaintiff’s interpretation of the offer to settle. The defendant states that while its interpretation of the offer became evident at the pre-trial conference, the offer was not accepted on that basis, and the plaintiff took no steps thereafter to amend its offer to make it clear that costs were not included in the offer but would be assessed pursuant to rule 49.07(5) or to be treated in some other specified manner. This was not done, although the plaintiff knew the defendant’s interpretation of the offer.

[4] The facts are as follows. In March of 2012, the defendant retained the services of Professor Puri, the principal of the plaintiff, to provide an expert report/affidavit for purposes of its application for leave to appeal from the Court of Appeal’s decision in the matter of Sharma v. Timminco Ltd., 2012 ONCA 107, 109 O.R. (3d) 569. The plaintiff’s work was completed and the Report signed and dated on April 12, 2012, and thereafter filed with the application for leave to appeal in the Supreme Court of Canada. The plaintiff forwarded an invoice to the defendant, including dockets, in the amount of $54,807.03 on July 16, 2012. The plaintiff made repeated requests for payment of the invoice from August 21, 2012 to February 22, 2013, to which the defendant responded that the invoice would be paid. As at February 15, 2013, the total amount outstanding, including interest, was $61,722.40. On September 13, 2012, a further request for payment was made. On September 19, 2012, the defendant advised the plaintiff that it was caught in negotiations with Milberg LLP, a US class action firm which had agreed to pay all costs of the application for leave to appeal. On October 2, 2012, the defendant advised the plaintiff that Milberg would pay the plaintiff’s invoice “by wire.” As at February 22, 2013, the invoice remained outstanding. On March 28, 2013, the plaintiff commenced this action for breach of contract. The plaintiff claimed damages for breach of contract in the amount of $55,714.10, plus $7,242.83 HST; additional interest in accordance with the terms of the contract between the plaintiff and defendant from March 16, 2003, until the trial of this action, plus HST; prejudgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43; and the costs of this action on a solicitor-client basis, plus HST.

[5] The offer to settle was served on December 13, 2013, nine months after the action was commenced.

[6] The pre-trial conference was held on May 8, 2014, and the trial was scheduled for September 8, 2014. On September 4, 2014, the defendant accepted the offer.

[7] The offer to settle stated as follows:

The plaintiff, Puri Consulting Limited, offers to settle this proceeding on the following terms:

1. Payment by the defendant to the plaintiff in the amount of $50,000, plus HST, in full and complete satisfaction of the plaintiff’s claim; and

2. This offer will remain open for acceptance until 1 minute after the beginning of the trial of this action.

The Issue

[8] The issue to be determined by the court on this motion is whether the offer to settle provides for the disposition of costs. In order to answer this question, it must be determined:

1. Whether rule 49.07(5) applies;

2. Whether the offer is ambiguous on its face, and if so, whether extrinsic evidence should be admitted;

3. In determining whether extrinsic evidence should be admitted, whether rule 50.09 should be set aside by virtue of rule 2.03.

Analysis

[9] A clear reading of the offer to settle indicates that it does not include an express provision as regards the disposition of costs. It is the position of the plaintiff that because nothing was indicated in the offer as regards costs, rule 49.07(5) is intended to and does apply. Rule 49.07(5) states as follows:

(5) COSTS – Where an accepted offer to settle does not provide for the disposition of costs, the plaintiff is entitled,

(a) […]

(b) where the offer was made by the plaintiff, to the plaintiff’s costs assessed to the date that the notice of acceptance was served.

[10] The plaintiff maintains that the offer to settle did not refer to costs and, as it was silent in that regard, the above rule is applicable, despite the fact that the offer was “in full and complete satisfaction of the plaintiff’s claim.” In this regard, the plaintiff cites Ontario (Minister of Health) v. McComb, [2002] O.J. No. 181 (S.C.), 110 A.C.W.S. (3d) 984 [McComb], and Schindler Elevator Co. v 1147335 Ont. Inc., 2012 ONSC 505 [Schindler]. I do not find these cases of assistance to the plaintiff. The offer to settle in Schindler was similar to the offer to settle at issue in this case. Importantly, however, the offer in Schindler did not include the terms “in full and complete satisfaction of the plaintiff’s claim.” The court held that had the defendant wanted to settle the action for $75,000 “all inclusive”, it would have served a counter offer for that amount including all costs: Schindler, at para. 28. The Manitoba Court of Appeal has noted that it is “open to argument” whether an offer to settle for an “all inclusive sum” provides for the disposition of costs, though the court also noted that those words “suggest that costs to that date are to be included”: Provincial Drywall Supply Ltd. v. Toronto-Dominion Bank, 2002 MBCA 27, 163 Man. R. (2d) 143, at paras. 31, 34.

[11] In McComb, pursuant to the court’s statement of the background facts, the offer to settle provided for delivery of an affidavit of documents or a list of documents signed by the Attorney General, that the plaintiff would submit to oral examination for discovery and set out a timetable for the discovery. The court stated “the offer to settle makes no mention of the issue of costs.” Nor is there any suggestion that the offer in McComb included the stipulation that it was in “full and complete satisfaction” of the motion. The court in McComb held that the phrase “and other relief” could not be interpreted so as to include costs. I therefore find that McComb is not highly instructive in the circumstances of this case. Conversely, Schindler is instructive in that the offer to settle was similar but for the absence of a phrase such as “all inclusive” or “in full and complete satisfaction of the claim.” Similarly, the offer to settle in Massicotte v. Massicotte (1986), 36 A.C.W.S. (2d) 87 (Ont. Dist. Ct.), 1986 CarswellOnt 4834, offered a lump sum of $20,000 without stipulating that it was “all inclusive” or in “full and complete satisfaction” of the claim. The court found that this entitled the plaintiff to her costs pursuant to rule 49.07(5). Finally, the recent decision in Phanlouvong v. Northfield Metal Products (1994) Ltd., 2015 ONSC 33, is of some assistance. At para. 3, the court contrasts two offers to settle: one which provided for payment of a sum of $50,000 and which would have attracted the cost consequences of rule 49.07(5); and a second offer which provided for payment of a sum of $45,000 “all inclusive,” which was broken down into its constituent components, including costs.

[12] Based on the foregoing, I do not find the offer to settle to be ambiguous on its face. It is clear that it stipulates that the offer is in “full and complete satisfaction of the plaintiff’s claim.” Without such a statement, rule 49.07(5) may have been applicable. With that statement, I am of the view that it settled the entire action, including costs. As a matter of practice, it might have been preferable to include clearer language with respect to costs. However, I am satisfied that there is nothing ambiguous in this regard. The phrase “full and complete satisfaction” provides for the disposition of the plaintiff’s costs. Therefore, the plaintiff is not entitled to have its costs assessed and awarded pursuant to rule 49.07(5).

[13] It is the position of the plaintiff that its settlement offer includes $50,000 “plus HST” which, according to the defendant’s argument, would not have had to be made, as HST was also part of the statement of claim. I do not find this argument persuasive. I find the statement “in full and complete satisfaction of the plaintiff’s claim” is clear on its face. It offers settlement of the entire claim, costs included, on the basis of the amount stipulated. Had the plaintiff wished to have its costs paid in addition to the settlement amount, it should have expressly stated so, or else refrained from using the term “in full and complete satisfaction.”

[14] The plaintiff further submits that due to the ambiguity, which he argues is present, the court should take into account extrinsic evidence of the discussions which occurred in the pre-trial conference. It submits that it became clear in the pre-trial conference that the parties were of divergent views on the offer to settle, as they are in this motion. It is the defendant’s position that in light of that, and in light of the knowledge of the defendant’s position, the plaintiff could have amended the offer to make it clear that costs were not to be included and that it was not “in full and complete satisfaction of the plaintiff’s claim.” The plaintiff did not do so.

[15] As the extrinsic evidence which the plaintiff wishes the court to consider involves statements made in the pre-trial conference, it argues that the requirements of rule 50.09 are not absolute and, in this case, should be dispensed with by the court exercising its discretion under rule 2.03 to do so “where and as necessary in the interest of justice.” It cites a number of cases which, in the circumstances of this case, I do not find applicable or persuasive.

[16] Rule 50.09 provides as follows:

No communication shall be made to the judge or officer presiding at the hearing of the proceeding or a motion or reference in the proceeding with respect to any statement made at a pre-trial conference, except as disclosed in an order under rule 50.07 or in a pre-trial conference report under rule 50.08.

[17] The rule is a codification of one facet of common law settlement privilege. In any event, “[s]ettlement privilege applies even in the absence of statutory provisions or contract clauses with respect to confidentiality, […] Furthermore, the privilege applies even after a settlement is reached. The ‘content of successful negotiations’ is therefore protected”: Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35, [2014] 1 S.C.R. 800 [Union Carbide].

[18] One exception to settlement privilege occurs where a party wishes to prove the existence or scope of a settlement. Extrinsic evidence regarding negotiations leading up to an agreement to settle is therefore admissible where the existence of an accepted offer is contested or where the language of the settlement is ambiguous, i.e. where it is susceptible of more than one meaning. In determining the meaning to be ascribed to the terms of the offer, the terms must be considered objectively, not subjectively. In the context of this case, I have found there to be no ambiguity in the offer to settle, such that extrinsic evidence is not to be considered.

[19] Furthermore, the plaintiff has not provided the court with any case law in which a court did not apply rule 50.09 on the basis of the “interests of justice” exception found in rule 2.03. In Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 CanLII 239 (ON CA), 17 O.R. (3d) 135 (C.A.), [1994] O.J. No. 343, the Court of Appeal was called upon to determine whether the consent of the parties can override rule 50.03 [now rule 50.09] in order to present evidence from the pre-trial conference. The court observed that, as regards the pre-trial conference, the non-disclosure rule set forth at rule 50.03 [now 50.09] has the purpose of maintaining confidentiality in order that counsel and the pre-trial judge may speak openly regarding settlement possibilities. A subsequent court cannot act, e.g. to award costs, on the basis of evidence presented at the pre-trial, even where the parties have consented. In the case of Rogacki v. Belz (2003), 2003 CanLII 12584 (ON CA), 67 O.R. (3d) 330 (C.A.), [2003] O.J. No. 3809, also relied upon by the plaintiff, Abella J.A. (as she then was), concurring in the result, addressed policy questions concerning the mandatory mediation process and rule 24.1.14 as regards confidentiality. She observed that while rule 24.1.14 does not create an enforceable guarantee of confidentiality, there were significant public policy reasons for keeping the mediation sessions confidential. Protecting confidentiality furthered the public policy goal of encouraging settlement discussions. She also observed that rule 24.1.14 codifies the principle that communications made without prejudice in an attempt to resolve a dispute are not admissible in evidence unless they result in a concluded resolution of the dispute. I am satisfied that the public policy goal and the principle enunciated therein are the same as those regarding the pre-trial conference and confidentiality in that context.

[20] I make the following additional comments. In order to consider evidence arising out of a pre-trial conference by dispensing with rule 50.09 and exercising the court’s discretion pursuant to rule 2.03, “in the interests of justice”, I am of the view that there must be a suggestion that the settlement was accepted based on non-disclosure, duress, fraud or illegality: Union Carbide, supra; Comrie v. Comrie, 2001 SKCA 33. Based on all of the evidence before this court, there is nothing to suggest that any of those conditions pertain here. Further, in my view, the rule regarding settlement privilege may be set aside to prove the existence or scope of a settlement agreement arrived at in the context of a confidential settlement conference: Union Carbide, supra; Oceanbulk Shipping & Trading SA v. TMT Asia Limited and others, 2010 UKSC 44, citing Underwood v. Cox (1912), 1912 CanLII 582 (ON SCDC), 26 O.R. 303 (Div. Ct.), 4 D.L.R. 66; Rogacki v. Belz, supra. In this case, no settlement was reached at the pre-trial conference such that its existence or scope must now be proven with the assistance of extrinsic evidence from that pre-trial conference.

[21] If, as the plaintiff urges, the evidence of the pre-trial privileged communications were considered, based only on the evidence before me, they would have indicated only that the parties did not agree as to whether costs were included in the offer to settle. This evidence would clarify nothing. Had the plaintiff intended that costs not be included in the settlement, and if the plaintiff knew that the defendant took the view that costs are included in the phrase “in full and complete satisfaction,” then the offer should have been amended to so state. Unfortunately for the plaintiff, this was not done. Finally, had I found the phrase “in full and complete satisfaction” to be ambiguous, and had I admitted extrinsic evidence of the pre-trial negotiations which, on the record before me, would not have resolved that ambiguity, I would have applied the doctrine of contra proferentem and resolved any ambiguity in favour of the defendant.

[22] Given the defendant’s conduct and long delays, I have come to this decision with reluctance. However, based on the evidence and case law before me, I find that the offer to settle was unambiguous on its face.

[23] Based on all of the foregoing, and the offered settlement “in full and complete satisfaction of the plaintiff’s claim,” I find that costs were included therein. I therefore dismiss the plaintiff’s motion.

[24] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Costs

[25] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown, J

Date: February 20, 2015