2016 ONSC 2593
Court File and Parties
Court File No.: CV-14-507808 Date: 20160420 Ontario Superior Court of Justice
Between: OASIS ADDICTION RECOVERY SOCIETY Plaintiff – and – UPPER CANADA 1ST FINANCIAL GROUP INC. and STEVE ERDELYI Defendants
Counsel: Ilia Valitsky, for the Plaintiff Cameron Wetmore, for the Defendants
Heard: April 15, 2016
FAIETA, j
Reasons for Decision
Introduction
[1] The Defendant Upper Canada 1ST Financial Group Inc. (“UC”) borrowed money from the International Charity Association Network (“ICAN”). A copy of this Loan Agreement was not provided. By agreement dated November 1, 2008, the Plaintiff, Oasis Addiction Recovery Society (“Oasis”), and UC accepted ICAN’s request to transfer the loan, in the amount of $1,290,998.93 from ICAN to Oasis.
[2] Oasis and UC entered a further Loan Agreement dated July 6, 2012 (“2012 Loan Agreement”) in the amount of $1,076,933.06. As security for the loan, UC gave Oasis a first charge and general security over its assets. UC also agreed to repay the loan by making five payments to Oasis with the last payment due on July 30, 2013. The 2012 Loan Agreement also provides for the following indemnity:
[Oasis] agrees to indemnify [UC] and in the future for any and all liability resulting from or that may arise directly or indirectly by Canada Customs and Revenue Agency in respect of the loan amount funds received by [UC] from International Charity Association Network (ICAN) and transferred to Oasis as a result of the [UC’s] original loan agreement with ICAN. [Emphasis added]
[3] On April 15, 2015 the Defendants made the following Offer to Settle (“Defendants’ Offer”):
The Defendants offer to settle this proceeding pursuant to Rule 49 of the Rules of Civil Procedure on the following terms:
- Payment to the Plaintiff in the amount of $265,000.00 as full and final settlement of herein action being payable within 30 business days from date of acceptance;
- Confirmation by the Plaintiff that the indemnification as against Canadian Revenue Agency will continue but will be limited to the amounts paid to date including the settlement amount of $265,000.00;
- Plaintiff to provide a Release acceptable by counsel for the Defendants in favour of both Defendants; and
- This offer to settle is open for acceptance unless withdrawn earlier in writing. [Emphasis added]
[4] Oasis made an offer on July 22, 2015 to the Defendants (“Oasis Offer”). The Oasis Offer was similar to the Defendants’ Offer in that it required the payment of $265,000; however it required payment of this amount by August 4, 2015. It also provided for an indemnity from the Oasis but on different terms:
Oasis… will agree to continue to adhere to the indemnity provision in the July 6, 2012 Loan Agreement. However, such indemnity shall be limited to the amounts received by Oasis ...from Upper Canada…to date, including the settlement amount of $265,000.00, once received. [Emphasis added]
[5] The Oasis Offer expired as it was not accepted by the Defendants.
[6] However, Oasis chose to accept the Defendants’ Offer on September 17, 2015.
[7] Oasis moves, pursuant to Rules 49.09 of the Rules of Civil Procedure, for Judgment in accordance with the Defendants’ Offer.
[8] The parties both agree that the Offer to Settle should be enforced, however they have different views about the regarding the meaning of the indemnity found in paragraph 2 of the Offer to Settle and in particular, the phrase “amounts paid to date”.
[9] Oasis submits that the amount of the indemnity under paragraph 2 of the Offer to Settle is $1,297,325.80 which is comprised of the amount paid by UC to Oasis following the Loan Agreement dated July 6, 2012 ($1,032,325.80) plus the $265,000.00 to be paid pursuant to the Offer to Settle.
[10] The Defendants submit that the amount of the indemnity under paragraph 2 of the Offer to Settle is $1,440,325.80 which is comprised of the amount of the loan that it states has been paid by UC to both ICAN and Oasis ($1,175,325.80) plus the $265,000.00 to be paid pursuant to the Offer to Settle.
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] A two-step analysis is required in order to determine whether a Settlement Agreement should be enforced. [1]
[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. 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.
[14] 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.
[15] However, the parties do not dispute that the parties intended to create a legally binding relation or that there was agreement on all essential terms, nor do they disagree that it should be enforced. Instead, the parties only disagree on the meaning of paragraph 2 of the Offer to Settle and they ask this Court to determine its meaning.
[16] Paragraph 2 of the Offer to Settle states:
- Confirmation by the Plaintiff that the indemnification as against Canadian Revenue Agency will continue but will be limited to the amounts paid to date including the settlement amount of $265,000.00; [Emphasis added]
[17] Obviously paragraph 2 could have been more clearly drafted. It could have simply stated that the Plaintiff agrees to provide an indemnity of a certain amount of dollars to the Defendants.
[18] In Sattva Capital Corp. v. Creston Moly Corp. [2] the Supreme Court of Canada stated that the interpretation of a contract has evolved towards a practical, common-sense approach that is not dominated by technical rules of construction. The Court stated:
[18] …the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine "the intent of the parties and the scope of their understanding"…To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:
No contracts are made in a vacuum: there is always a setting in which they have to be placed...In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. ( Reardon Smith Line, at p. 574, per Lord Wilberforce)
The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement…As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.):
The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. [p. 115]
What is the amount of the indemnity to be provided by Oasis under the Defendants’ Offer?
[19] The indemnity in the Defendants’ Offer has two components:
- “the indemnification…will continue…”; and,
- “will be limited to the amounts paid to date including the settlement amount of $265,000.00”.
[20] The indemnity referenced in the Defendants’ Offer is the indemnity found in the 2012 Loan Agreement between Oasis and UC. There is no limit on the amount of the indemnity found in the 2012 Loan Agreement. It states that Oasis will indemnify UC for “any and all liability” that may result from Canada Customs and Revenue Agency in respect of the loan funds received by UC from ICAN and transferred to Oasis.
[21] The second component of the indemnity in the Defendants’ Offer limits the amount of the indemnity to the “amounts paid to date including the settlement amount of $265,000.00”.
[22] The parties disagree on the amount of the indemnity required under the Defendants’ Offer. Their disagreement turns on their views on the meaning of the phrase “amounts paid to date”. The Defendants submit that the “amounts paid to date” references all amounts that UC paid to ICAN and Oasis. Oasis submits that the “amounts paid to date” only reference the amounts paid by UC to Oasis.
[23] In my view, the following contextual considerations lead to the conclusion that the “amounts paid to date” is $1,175,325.80 and thus the amount of the indemnity required to be provided under the Defendants’ Offer totals $1,440,325.80 once the sum of $265,000.00 is paid pursuant to the settlement.
[24] First, two weeks prior to delivering the Defendants’ Offer, UC provided a document to Oasis entitled “Statement of Account – ICAN Loan – Transferred to Oasis”. It detailed numerous payments made by UC to ICAN and Oasis and payments made by UC to Oasis. It stated “total loan payments by UC: $1,175,325.80”. In my view, this Statement of Account informs what was meant by the phrase “the amounts paid to date” under paragraph 2 of the Defendants’ Offer.
[25] Second, if the indemnity in the Defendants’ Offer was intended to be limited to the amounts received by Oasis from UC, then it would have used the language in the Oasis Offer which expressly stated:
…such indemnity shall be limited to the amounts received by Oasis...from Upper Canada …to date, including the settlement amount of $265,000.00, once received. [Emphasis added]
[26] The Defendants did not accept the Oasis Offer. There was no other material difference between the Oasis Offer and the Defendants’ Offer other than the terms of the indemnity. In my view, had the Defendants intended that the Defendants’ Offer be restricted only to amounts paid by UC to Oasis, then it would have used such language and it would have accepted the Oasis Offer.
[27] Oasis submits that there is no evidence that UC paid any amount in excess of $1,032,325.80 on account of funds loaned. However, it is not commercially reasonable to interpret the Defendants’ Offer in a manner that limits the amount of the indemnity in the manner proposed by Oasis. UC’s position regarding the amount of indemnity to which it was entitled was well known to Oasis prior to its acceptance of UC’s offer given their letter dated April 1, 2016 and the refusal of UC to accept the Oasis Offer. Oasis submits that the indemnity provision in the Defendants’ Offer should be read contra proferentum given that it was drafted by UC. However, there is no need to refer to the contra proferentum principle, which is an interpretive principle of last resort, given that I have been able to ascertain the meaning of the Defendants’ Offer applying general principles of contractual interpretation. [3]
Conclusion
[28] I find that the parties settled this action on September 17, 2015 by Oasis’ acceptance of the Defendants’ Offer. I grant Judgment in accordance with the terms of the Defendants’ Offer. I find that Oasis is obliged, under the Defendants’ Offer to provide the Defendants with an indemnity in the amount of $1,440,325.80.
[29] I encourage the parties to make best efforts to resolve the issue of costs. If the parties are unable to do so, then the Defendants shall deliver their costs submissions within one week of today’s date. Oasis 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. Faieta Released: April 20, 2016
Footnotes: