Court File and Parties

COURT FILE NO.: 26775/15 DATE: 2016-05-16 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

BRYCE CLARK Plaintiff – and – 189557 ONTARIO INC., carrying on business as INNOVATIVE COMPOSITES INTERNATIONAL INC. Defendant

COUNSEL: J. Cond, Counsel for the Plaintiff No one appearing

HEARD: April 15, 2016

RASAIAH J.

reasons on motion

Overview

[1] The plaintiff was terminated by the defendant from his employment. Following the plaintiff’s termination from his employment, the plaintiff and defendant entered into a settlement agreement regarding the termination.

[2] One of the terms of the settlement agreement required the defendant to make twelve salary payments to the plaintiff on a biweekly basis commencing from the date of its execution. The defendant failed to pay all of the salary payments set out in the settlement agreement. The defendant paid only six of the twelve salary payments.

[3] The plaintiff made alternate claims in his statement of claim. First, a claim for a declaration of breach of the settlement agreement, and damages for the breach; and second, in the alternative, for a declaration of wrongful termination with a connected punitive damages claim.

[4] The defendant failed to deliver a statement of defence and was noted in default by the registrar. The claim was not exclusively for a debt or liquidated demanded money and was not therefore an appropriate case for the registrar to sign judgment under Rule 19.04 of the Rules of Civil Procedure, R.R.O 1990, Reg. 194. The plaintiff therefore brought a motion seeking default judgment against the defendant pursuant to Rule 19.05 of the Rules of Civil Procedure.

[5] The plaintiff filed two affidavits with his motion, namely his affidavit, sworn November 28, 2015, and the affidavit of Valerie MacGillvray (law clerk for the Plaintiff’s counsel’s firm) sworn December 14, 2015; and he filed a factum and a casebook.

[6] At the hearing of the motion, the plaintiff pursued only the claim for the breach of the settlement agreement and damages for the breach. The plaintiff claimed fundamental breach with the remedy of rescission, and in the alternative, claimed repudiation.

[7] The plaintiff submitted that fundamental or repudiatory breach entitles the plaintiff to judgment on the basis of the termination provisions of his employment contract because the settlement agreement is null and void as a result of the breaches. He claims $145,519.97.00 CAD. The amount is calculated on what the plaintiff says he would otherwise have been entitled to receive under the termination provisions of the employment contract, less what he had received pursuant to the settlement agreement.

[8] In the further alternative, if the court did not find that fundamental breach with the remedy of rescission, or that repudiation applies, the plaintiff claims he is entitled to damages for breach in the amount of the outstanding payments. The six unpaid settlement payments amount to $12,500.00 USD.

[9] The plaintiff also seeks pre-judgment and post-judgment interest and costs.

Facts in the Statement of Claim

[10] The defendant, namely 1859557 Ontario Inc. carrying on business as Innovative Composites International Inc. carries on business in the field of thermoplastics.

[11] The plaintiff was employed by the defendant. He held various roles. The plaintiff was also a founder of the defendant. From June 12, 2008 to June 13, 2013 the plaintiff was employed as director of manufacturing.

[12] The plaintiff had been provided with a contract for employment by the defendant on June 28, 2008. Pursuant to the contract the plaintiff was to be paid a base salary of $125,000 US dollars per year. In addition he was eligible to receive benefits and bonuses, and to participate in stock option programs. The contract provided that if the plaintiff should be terminated without cause, he would be provided with twelve months prior written notice or paid severance allowance equal to twelve months of his base salary and annual bonus.

[13] He was terminated on June 13, 2013 without cause.

[14] The plaintiff agreed to settle all claims he may have had against the defendant arising from his termination by way of settlement agreement on the following basis: the defendant would provide to the plaintiff three months of his base salary, namely $31,250 US dollars to be paid biweekly commencing on the date of the agreement over a period of six months with the first two biweekly payments being in the amount of $5,208.33 followed by ten biweekly payments of $2,083.34 until paid in full.

[15] The settlement agreement also provided that the plaintiff would be entitled to employee benefits for ninety days; reimbursement for the reasonable cost of his travel to Toronto during the week of June 10-17, 2013; and two bull eye units with an estimated value of $750 US.

[16] The validity, construction and performance of the settlement agreement are to be governed by the laws in force and effect in the Province of Ontario and in Canada.

[17] The defendant made the first six scheduled payments ($18,750.02 US Dollars) under the settlement agreement however did not make the remaining six payments.

[18] Despite several attempts by the plaintiff to recover the remaining payments, the defendant refuses to comply with the terms of the settlement agreement.

[19] The defendant fundamentally breached the settlement agreement by failing to make all payments as required therein. As a result, the defendant has suffered various damages, including lost severance pay and lost benefits participation.

Additional Facts from the Court File and Information from Affidavits Filed

[20] The plaintiff states that following his termination, he negotiated a settlement because he wanted to end his relationship with the defendant on the most agreeable terms possible because he had been one of the founders of the company and did not want to leave on bad terms.

[21] Paragraph 3 of the settlement agreement set out the term of payment to the plaintiff of three months base salary in 12 payments. Paragraph 4 entitled the plaintiff to 90 days of continued employee benefits. Paragraph 5 provided that the plaintiff would be reimbursed for Toronto travel costs incurred for the week of June 10 to 17, 2013. Paragraph 5 provided that the plaintiff would be provided with two bulleye units.

[22] The plaintiff states he was provided assurances that he would be paid the remainder of the payments. The assurances were made verbally and occasionally through email correspondence.

[23] A series of emails were filed for the time period after the settlement agreement was made, namely, August 13, 2013 to June 2, 2014:

(a) By email dated August 13, 2013, the plaintiff was notified that the defendant was going to miss the upcoming payment due to a cash management and financing issue. (b) By email dated August 20, 2013, the plaintiff was advised that payments would resume once the defendant closed the financing they were waiting for. (c) By email dated September 5, 2013, the plaintiff was informed that the defendant was hoping to be able to get payments resumed soon. (d) By email dated September 23, 2013, the plaintiff expressed that he felt he had no choice but to wait for payments to resume but that he has been placed in great financial distress. (e) By email dated September 24, 2013, the plaintiff is advised that the defendant is unable to resume payments until they close (financing) with MBank and MEDC and that the defendant was informed that this was still ten to fourteen days away. (f) By email dated October 11, 2013, the plaintiff is informed that the defendant expects to resume payments at the end of October once the financing is closed and is thanked for his patience. (g) By email dated October 11, 2013, the plaintiff advises that he is forcibly patient and expects payment as soon as possible given information he had that financing had been closed. (h) By email dated October 11, 2013, the plaintiff was informed that payments will resume when the defendant has sufficient funds to do so and they did not have the available funds until financing was closed with MBank and MEDC. The defendant stated that no one was getting paid due to liabilities and the writer indicated “ Let me remind you that you left a virtually bankrupt company and you are very lucky that lawsuits did not materialize. I would suggest keeping this on friendly terms. We will resume payments as soon as practicable” . (i) By email dated November 10, 2013, the plaintiff was advised that payments would be restarted November 22 and is thanked for his patience. (j) By email dated November 11, 2013, the plaintiff was advised that due to the defendant being able to increase a draw request, payments would start tomorrow. (k) By email dated November 18, 2013, the plaintiff thanks the defendant for a payment received last week and makes an inquiry about the remaining eight payments. (l) By email dated December 19, 2013, the plaintiff was advised that the defendant was back in crisis mode and that as a result payments would once again be pushed off and resumed when the defendant can get the business stabilized again. (m) The plaintiff made an inquiry March 2, 2014 which was responded to by email dated March 7, 2014, by which the plaintiff was informed that the defendant was not in a position to resume payments until after an acquisition the defendant was pursuing, that the defendant was very strapped for cash again. (n) By email dated June 1, 2014, the plaintiff is advised that things were very slim on the money front and the defendant was still struggling to make payroll and pay vendors. He is advised that the plaintiff’s payable is still on the books and was invited to call Ken Keely, Chair of the Defendant’s Board, if he had any questions.

[24] The plaintiff attached an email to his counsel that indicated that he saw Ken Keely after the June 1, 2014 email set out above and was advised that it was likely that he would never get paid (without any elaboration as to why and particulars as to what was said by whom to whom).

[25] The plaintiff states that when he entered into the settlement agreement, he relied upon the assertions made to him that the defendant would carry out their portion of the same. Had he known that the defendant would refuse to comply with the terms of the settlement agreement, he wold not have agreed to the settlement agreement and would have sought the full compensation that he was entitled to under the original employment agreement.

[26] The plaintiff signed a full and final release at the same time he executed the settlement agreement, whereby he declared that he had an opportunity to obtain independent legal and other professional advice with respect to the terms of the settlement agreement.

[27] The plaintiff believes that in failing to comply with the settlement agreement that the defendant has fundamentally breached it.

[28] Plaintiff’s counsel wrote to the Chief Executive Officer and Chairman of the Board of Directors of the defendant on two occasions namely December 16, 2014 and February 2, 2015. In these letters, the plaintiff’s position was set out, namely that the defendant’s failure to fulfil the obligations under the settlement agreement in the plaintiff’s view rendered the agreement “null and void” and as “opening the defendant up to full damages pursuant to the employment contract”. The letters demanded payment pursuant to the termination provisions of the plaintiff’s employment contract. No response was received to either letter.

[29] Having received no response, the plaintiff commenced his claim by way of statement of claim issued April 22, 2015. This claim was served on the vice president of the defendant namely Fraser Wray on May 9, 2015, personally by process server Christina Callander as per her affidavit sworn May 12, 2015.

[30] The defendant did not deliver and file a statement of defence. On July 22, 2015 the Plaintiff requisitioned that the defendant be noted in default.

Main Issues

[31] The main issues are:

1. Do the deemed admissions and adduced admissible evidence entitle the plaintiff to judgment for fundamental breach and to the remedy of rescission?
2. Alternatively do the deemed admissions and adduced admissible evidence establish that the settlement agreement was repudiated?
3. If fundamental breach, rescission, or repudiation is not found to apply, what are the damages that the plaintiff is entitled to on the deemed admissions and adduced admissible evidence as a result of the breach?

Law

Default Judgment

[32] Rule 19.02(1) of the Rules of Civil Procedure sets out the consequences of noting default. The defendant who has been noted in default is deemed to admit the truth of all allegations of fact made in the statement of claim.

[33] Rule 19.05(3) of the Rules of Civil Procedure provides that on a motion for judgment, the judge may grant judgment, dismiss the action or order that the action proceed to trial and that oral evidence be presented.

[34] Rule 19.06 of the Rules of Civil Procedure provides that a plaintiff is not entitled to judgment on a motion for judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment.

[35] The Court must determine if the evidence entitles judgment: Nikore v. Jarmain Investment Management Inc. (2009), 97 O.R. (3d) 132, 180 A.C.W.S. (3d) 603 (S.C.J.).

[36] Strathy J. stated in Salimijazi v. Pakjou, [2009] CarswellOnt 2013 (Ont. S.C.J.) at paras 34 and 35, with which I agree:

It seems to me that a judge hearing the motion for judgment under Rule 19.05(1) has a duty to both parties, even though the defendant is not present. That duty is part of the court’s duty in the administration of justice. The duty to the plaintiff is to dispense expeditious and cost-efficient justice where the defendant has ignored the court process. The duty to the absent defendant and to the public is to ensure that justice is indeed done and that manifestly unsustainable claims are not mechanically processed. Rule 19.06 codifies this obligation by requiring the judge to make certain that the facts pleaded do indeed entitle the plaintiff to judgment. It seems to me, as well, that where the plaintiff sees fit to adduce evidence going to liability, and that evidence establishes that part or all of the plaintiff’s claims cannot succeed, justice is not served by granting judgment, simply because the defendant has failed to defend. As Quinn J. noted in footnote 9 to para. 52 in Plouffe v. Roy, where the plaintiff’s evidence at an undefended trial conflicts with the facts as pleaded, the trial judge must necessarily make findings of fact. I can see no reason in principal why the same logic should not apply to a motion for judgment under Rule 19.05(1), where the plaintiff has filed affidavit evidence as to liability.

If the motions judge is required, by rule 19.06, to consider whether the facts pleaded entitle the plaintiff to judgment, it seems to me that where the plaintiff has sworn to additional facts the judge is entitled to consider whether those additional facts show that the plaintiff is not entitled to judgment. A judge presented, as I am, with alternate and inconsistent pleadings on the one hand, and affidavit evidence on the other hand, is not obliged to accept the truth of the pleaded facts that are inconsistent with the plaintiff’s sworn evidence. To this extent, I respectfully express a qualification to the observations of Murray J. in Halton (Regional Municipality) v. Rezaizadeh, above. In doing so, I note that in the case before him, the issue was whether sworn evidence could be used to augment the facts pleaded. In this case, I have concluded that the sworn evidence can be used to qualify or contradict the inconsistent facts pleaded. Without this qualification, judgment might be given to a plaintiff who, on his or her own sworn evidence, is not entitled to judgment.

[37] In Elekta Ltd. v. Rodkin, [2012] CarswellOnt 3928 (ONSC) Brown J. stated, at para. 14:

Accordingly, on a motion for default judgment the inquiry undertaken by the court is the following:

(i) What deemed admissions of fact flow from the facts pleaded in the Statement of Claim? (ii) Do those deemed admissions of fact entitle the plaintiffs, as a matter of law, to judgment on the claim? (iii) If they do not, has the plaintiff adduced admissible evidence which, when combined with the deemed admissions, entitles it to judgment on the pleaded claim?

Settlement Agreements, Discharging a Contract and Remedies

[38] McLachlin C.J.C. wrote in Jedfro Investments (U.S.A.) Ltd. v. Jacyk Estate, 2007 SCC 55 at para 14:

The ways in which a contract can be discharged are well established. It may be discharged by performance, by agreement, by frustration, and by repudiatory or fundamental breach. In addition to these major categories, it is possible to end a contract by merger, alteration or cancellation of a written instrument, and in particular circumstances not relevant here, such as by the death of a party (in the case of a personal contract), bankruptcy and winding up. (See Chitty on Contracts (29th ed. 2004), ch. 21-25.)

[39] Abandonment discharges a contract only if it amounts to a new contract in which the parties agree to abandon the old one: Jedfro Investments (U.S.A.) Ltd. v. Jacyk Estate, 2007 SCC 55 at para 17.

[40] In George v. 1008810 Ontario Ltd., 2004 CarswellOnt 5811 at paras. 31 and 32, an Ontario Labour Relations Board decision, the Chair explained:

A settlement agreement is a form of contract. It is the essence of the law of contract to encourage parties to enter freely into agreements with respect to their obligations to each other by promoting the finality and certainty of those agreements. In general, each party is not only required to honour the commitment which they have made under a contract, but they are required to accept what they have agreed to receive from the other party as fully discharging the other party’s commitment under the contract. The remedy for a breach by one party is an order putting the other party in the same position that they would have been in had the first party done what they agreed to do. The law of contract provides exceptions from this strict result only when fairness requires it.

Two such exceptions are of interest here. They are the doctrines of rescission and repudiation. …

Fundamental Breach

[41] Only a fundamental breach would give the plaintiff the right to treat the settlement agreement as at an end. A fundamental breach is one which deprives the innocent party of substantially the whole benefit of the contract: Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92 at para. 35, referring to Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 2006 ONCA 16346, 211 O.A.C. 141(Ont. C.A.).

[42] There are five factors that can be considered when determining whether conduct has deprived the innocent party of substantially the whole benefit of the contract. The five factors are: (1) the ratio of the party's obligations not performed to that party's obligations as a whole; (2) the seriousness of the breach to the innocent party; (3) the likelihood of repetition of such breach; (4) the seriousness of the consequences of the breach; and (5) the relationship of the part of the obligation performed to the whole obligation: Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92 at para. 35, referring to Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 2006 ONCA 16346, 211 O.A.C. 141(Ont. C.A.).

Rescission

[43] Rescission allows the rescinding party to treat the contract as if it were void ab initio by some vitiating element with the consequent revival of the original claim. The remedy of rescission is available when a party has made a false or misleading representation. The Supreme Court of Canada in Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664 at paragraph 39, on rescission stated:

Where one party to a contract expresses by word or act in an unequivocal manner that by reason of fraud or essential error of a material kind inducing him to enter into the contract he has resolved to rescind it, and refused to be bound by it, the expression of his election if justified by the facts, terminates the contract, puts the parties in status quo ante and restores things, as between them, to the position in which they stood before the contract was entered into.

Repudiation

[44] Repudiation can be by words or conduct evincing an intention not to be bound by the contract: Jedfro Investments (U.S.A.) Ltd. v. Jacyk Estate, 2007 SCC 55 at para 20.

[45] The test is objective. The Ontario Court of Appeal in Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92 at para. 37 wrote:

To assess whether the party in breach has evinced such an intention, the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it. See McCallum v. Zivojinovic (1977), 1977 ONCA 1151, 16 O.R. (2d) 721 (Ont. C.A.). Having said that, when determining whether such an intention has been evinced, the courts rely on much the same analysis as they do in respect of claims of fundamental breach. That is, in determining whether the party in breach had repudiated or shown an intention not to be bound by the contract before performance is due, the court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract.

[46] Ordinary, non-repudiatory breach is consistent with ignoring the terms of an agreement. More is required to establish repudiation: Jedfro Investments (U.S.A.) Ltd. v. Jacyk Estate, 2007 SCC 55 at para 21.

[47] The Court of Appeal in Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576 stated at para. 46:

In objectively construing the purported breaching party’s intention, the surrounding circumstances must be considered. In White v. E.B.F. Manufacturing Ltd., 2005 NSCA 167, 239 N.S.R. (2d) 270, Saunders J.A. wrote, at para. 89: “Proof of such an intention requires an investigation into the nature of the contract, the attendant circumstances, and the motives which prompted the breach.” Earlier this year, Cromwell J., in his concurring opinion in Potter, confirmed the importance of considering the surrounding circumstances. At para. 164, Cromwell J. wrote: “As Lord Scarman put it in Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd., [1980] 1 All E.R. 571 (H.L.), at p. 590, the trial judge and the Court of Appeal in this case were ‘concentrating too much attention on one act isolated from its surrounding circumstances and failing to pay proper regard to the impact of the party's conduct on the other party’.”

[48] The Ontario Court of Appeal in Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92 at para. 35, referring to Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 2006 ONCA 16346 at 155, wrote:

Repudiation does not automatically bring a contract to an end. Rather, it gives the innocent party the right to elect to treat the contract as at an end. If that election is made, the parties are relieved from further performance and the innocent party may sue for damages. As a general rule, the innocent party must make the election and communicate it to the repudiating party within a reasonable time.

[49] In Nikolaev v Fakhredinov, 2015 ONSC 6267, Justice Myers writes:

Rescission is a specific remedy that sets the parties back to the time before the contract was made in specific circumstances where restitution is required or available. A simple breach of contract is not a basis to rescind a contract. Faced with a material breach, the innocent party can sue for damages. Damages will be awarded to be put the innocent party into the position that she would have occupied had the other party performed the contract as agreed. That is a prospective remedy based on the parties’ reasonable future expectations. The remedy for repudiation is not for restitution or to be put back in time as if the agreement never existed.

[50] In BP Global Specials Products (America) Inc. v. Conros Corporation, 2010 ONSC 1094, Newbould J. wrote:

If the innocent party accepts the repudiation, the rights and obligations that have already matured are not extinguished and the prospective obligations embodied in the contract are relevant to the amount of damages. See Guarantee Co. of North America v. Gordon Capital Corp., supra, at paras. 40 and 41. In Highway Properties Ltd. v. Kelly, Douglas and Co., 1971 SCC 123 Laskin J. stated that termination in such circumstances does not preclude a right to damages for prospective loss as well as for accrued loss. In Johnson v. Agnew [1980] A.C. 367, a case involving repudiation by a purchaser of land, Lord Wilberforce stated as applicable:

The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do, in the same position as if the contract had been performed.

[51] The Supreme Court of Canada in Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664 at paragraph 40, stated:

Contrary to rescission, which allows the rescinding party to treat the contract as if it were void ab initio, the effect of repudiation depends on the election made by the non-repudiating party. If that party treats the contract as still being in force and effect, the contract remains in being for future on both sides. Each party has a right to sue for damages for past or future breaches… If, however, the non-repudiating party accepts the repudiation, the contract is terminated and the parties her discharge from future obligations. Rights and obligations that have already matured are not extinguished…

[52] The Court of Appeal in Place Concorde East Limited Partnership v. Shelter Corporation of Canada (2006), 2006 ONCA 16346, 270 D.L.R. (4th) 181 (Ont. C.A.), at para. 51, wrote:

A breach that allows the non-repudiating party to elect to put an end to all unperformed obligations of the parties is an exceptional remedy that is available only in circumstances where the entire foundation of the contract has been undermined, that is, where the very thing bargained for has not been provided.

[53] The Court of Appeal in Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576 referred to the courts being motivated for strong policy reasons to enforce settlements, and agreed that repudiation should be considered a particularly exceptional remedy in the context of settlement agreements.

[54] The question of whether a party repudiated an agreement is a question of fact.

Analysis

Fundamental Breach

[55] There is no question in my view, based on Rule 19 of the Rules of Civil Procedure, the affidavits and the exhibits filed, that the plaintiff has established that he had entered into a valid settlement agreement with the defendant; the terms of the settlement agreement required twelve scheduled payments; that he received only six of twelve payments that were due to him pursuant to the settlement agreement; and that he was entitled to receive the other six payments under this settlement agreement. However, I do not find based on the deemed admissions and the materials filed that the facts support judgment for fundamental breach. I do not find that the plaintiff was deprived of substantially the whole benefit of the contract.

[56] Based on the copy of the settlement agreement filed, the salary payments in this case were not the only obligations under the settlement agreement. The defendant’s obligations also included the provision of employee benefits for a further 90 days, pay for expenses for a Toronto business trip and provide two bulleye units.

[57] As to ratio of obligations not performed to obligations performed, the plaintiff did not assert that he did not receive the 90 days benefits, payment of the Toronto expenses, and the two bulleye units. The plaintiff received $18,750.00 USD of the $31,250.00 USD he was to receive which is sixty percent of the salary payment obligations under the settlement agreement (in analyzing the relationship of the part of this obligation performed to the whole of this particular obligation). This in my view is substantial performance of the obligations of the settlement agreement.

[58] On the issue of seriousness of the breach and consequences, the plaintiff submitted it was serious solely because he was completely deprived of the very thing for which he bargained and that he has incurred costs and legal fees. I do not agree that he was completely deprived of the very thing for which he bargained based on the above. Legal fees and costs as a consequence, in my view, fall under the determination of costs for which the plaintiff has made a claim.

[59] As to the likelihood of the breach continuing, I believe it is likely given the emails filed. The plaintiff was not aware of and did not tender evidence of the current status of the defendant but quite clearly he has not been paid (breach not cured). In this case, however given the other factors and my findings on those factors, fundamental breach is not established by this factor alone and not in this case, in my view.

Rescission

[60] I do not find that the remedy of rescission is available. The admitted facts and materials filed do not establish that a false or misleading representation was made.

[61] This argument is not pleaded in the statement of claim and is the first difficulty for this claim. The plaintiff pleaded a refusal to pay (repudiation), and fundamental breach for not making all of the payments. Even if the plaintiff could stretch that the claim for “fundamental breach for not making all of the payments” is one in the same, with which I disagree, I do not find the evidence entitles the plaintiff to judgment on this basis.

[62] It is not pleaded that the defendant made a false or misleading representation and as such there are no deemed admissions.

[63] The plaintiff states that he would not have entered into the settlement agreement and would have sought the full compensation he was entitled to under the employment contract had he known that the defendant would refuse to comply with the settlement agreement terms. He says that he relied upon the assertions made to him that the defendant would meet their obligations under the settlement agreement.

[64] No documents leading to the settlement agreement or particulars of the negotiations (who said what to whom) were tendered. The plaintiff’s affidavit does not explain either, who made such assertions and when, for me to determine what effect if any they would have had. This is his onus that he has failed to meet.

[65] It appears that there was more to the settlement than the plaintiff negotiating away his rights under the termination provisions of the employment agreement on suggested assertions the obligations would be met. This is gleaned in the email dated October 11, 2013, wherein, amongst other things, the defendant wrote “ Let me remind you that you left a virtually bankrupt company and you are very lucky that lawsuits did not materialize. I would suggest keeping this on friendly terms. We will resume payments as soon as practicable” . This said email suggests that the plaintiff was aware of the defendant’s precarious financial status (virtually bankrupt) on or about the time the settlement agreement was made and entered into. This email also makes a statement that the plaintiff was “lucky that lawsuits did not materialize”. I received no evidence explaining this email. The plaintiff was the director of manufacturing. He was a founder. This said email, in my view, without explanation, calls into question the plaintiff’s stated reliance, and why and how this settlement was reached.

[66] Further, the defendant complied with a significant portion of the settlement agreement obligations and actually made several payments which demonstrated a true willingness to pay and meet its obligations.

[67] Accordingly, I find the failure to make the final six payments is not a basis to rescind the contract.

Repudiation

[68] I do not find that repudiation argument is established.

[69] There is no question, that after waiting for promised payments, the plaintiff who is the innocent party eventually communicated to the defendant that he was treating the breach as making the contract null and void (repudiated). This occurred approximately one year later.

[70] In my view, however, the statement in the claim that the defendant was refusing to comply with the terms of the settlement agreement is not quite accurate and is inconsistent with evidence filed. Looking at the surrounding circumstances, the emails filed objectively suggest a request on the part of the defendant to postpone payments until sufficient funds were available to make the payments, not an outright refusal to pay. In my view, while I agree that the defendant’s financial situation was worsening and communications did not set out with certainty when the payments could be paid, it cannot be said that the defendant was totally rejecting its obligation or expressing to resile from the settlement agreement. It appears the defendant found itself in a situation where it was unable at the point in time the payments were due for financial difficulties to pay.

[71] The plaintiff in his factum suggests that a reasonable person would have concluded that the defendant did not have an intention to be bound by the agreement by not forwarding the remaining settlement amounts owing and without providing concrete indications of its intentions to do so. While the motive is not determinative, reading the emails filed, a reasonable person could conclude that the defendant was struggling financially and that if it had the funds it would pay and it intended to continue to be bound by the agreement.

[72] In my view, it is more fairly characterized as an inability at that time to pay due to the finances of the company. Efforts were being made to restart payments. In fact, based on the timing and dates of the emails filed, it appears clear that the fourth payment, fifth payment and sixth payment were made late and off-schedule. The plaintiff reluctantly acquiesced to that, but nonetheless did so. In particular in the email dated November 18, 2013, the plaintiff thanks the defendant for a payment received last week and makes an inquiry about the remaining eight payments. That payment thus would have been the fourth payment. The plaintiff was paid six of twelve payments. This is important, in that it is part of the circumstances to be looked at and it demonstrates that the defendant missed payments in the past, but expressed an intention to get caught up, and it actually did until the seventh payment came due.

[73] By email dated June 1, 2014, the plaintiff is advised that things were very clim on the money front and the defendant was still struggling to make payroll and pay vendors. He is advised that the plaintiff’s payable is still on the books and was invited to call Ken Keely, Chair of the Defendant’s Board, if he had any questions.

[74] The plaintiff claims that the reasons for non-payment were only vaguely explained. I disagree. The emails filed, in my view, communicate clearly that the reason for non-payment was related to insufficient funds.

[75] Further, and more importantly, a breach that allows the non-repudiating party to elect to put an end to all unperformed obligations of the parties is an exceptional remedy that is available only in circumstances where the entire foundation of the contract has been undermined, that is, where the very thing bargained for has not been provided. I don’t find that to be the case here and I reiterate my findings set out under my analysis on fundamental breach.

[76] Finally, if I am wrong, even if the settlement agreement could be said to have been repudiated, given what was performed with respect to this agreement, the damages in this case, in my view, would not be as though the contract never existed. Damages would have been for the remaining amount owing under the settlement agreement. The plaintiff did not put forth any other damages outside of the original terms of the employment agreement.

Damages

[77] I find that the settlement contract was breached. The conditions to make the payments were breached. The plaintiff is entitled to damages but not based on fundamental breach, rescission and/or repudiation. I find the plaintiff is entitled to the balance of the payments under the settlement agreement, $12,500.00 USD.

Interest

[78] The plaintiff claims pre-judgment and post-judgment interest in accordance with the Courts of Justice Act R.S.O. 1990, c. C.43, as amended.

[79] The payments under the settlement agreement were by its wording to commence the day of execution, namely June 21, 2013. Following the biweekly payment schedule, the seventh payment would have been due September 13, 2013, which is the date the cause of action arose in relation to breach of the settlement agreement. The pre-judgment interest rate for this quarter is 1.3%.

[80] The post-judgment rate applicable is 2%.

Costs

[81] The plaintiff seeks costs. This is a case, in my view, to exercise my discretion to order costs.

[82] The plaintiff submitted a bill of costs, inclusive of fees, taxes and disbursements, in the amount of $4,395.21. The rate of $150.00 per hour charged for plaintiff’s counsel having three years of experience is not unreasonable. The legal issues were very straightforward in this case. The amount claimed in my view is an amount the defendant could reasonably expect to pay in relation to the steps taken in this proceeding if the plaintiff had been successful on either rescission or repudiation. The defendant chose not to defend the claim, and accordingly given the damages issue, the motion was required to obtain judgment. The plaintiff was not successful however on rescission or repudiation for which some hours of research and factum preparation were devoted (seven to eight and a half hours) looking at the dockets. Accordingly, I am of the view there ought to be a reduction, and I find that costs in the amount of $3,000.00, in my view, are appropriate given all of the foregoing.

Foreign Currency

[83] Section 121(1) of the Courts of Justice Act, R.S.O. 1990, c.C.43 as amended, requires that where a person obtains an order to enforce an obligation in a foreign currency, the order shall require payment of an amount in Canadian currency sufficient to purchase the amount of the obligation in the foreign currency at a bank in Ontario listed in Schedule I to the Bank Act (Canada) at the close of business on the first day on which the bank quotes a Canadian dollar rate for purchase of the foreign currency before the day payment of the obligation is received by the creditor. There was no evidence to establish this would otherwise be inequitable nor was there any evidence that the manner of conversion was provided for.

Order

1. The Defendant shall pay to the Plaintiff the principal sum of $12,500.00 USD to be converted into and paid to the Plaintiff in Canadian currency sufficient to purchase the amount of this obligation in the foreign currency at a bank in Ontario listed in Schedule I to the Bank Act (Canada) at the close of business on the first day on which the bank quotes a Canadian dollar rate for purchase of the foreign currency before the day payment of the obligation is received by the Plaintiff, together with: (a) pre-judgment interest at the pre-judgment rate of 1.3 percent per year, for the period September 13, 2013 to the date of this Order, and (b) post-judgment interest at the post-judgment rate of 2 percent per year thereafter.
2. The defendant shall pay costs to the plaintiff fixed in the amount of $3,000.00 CAD.
3. The balance of the plaintiff’s claims is hereby dismissed.

Rasaiah J.

Released: May 16, 2016

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: BRYCE CLARK

• and - 189557 ONTARIO INC., carrying on business as INNOVATIVE COMPOSITES INTERNATIONAL INC. REASONS ON MOTION Rasaiah J.

Released: May 16, 2016