Court File and Parties
COURT FILE NO.: CV-16-127586 DATE: 20170515 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Mark Crawford, Nancy Crawford, Scott Crawford, Erin Osinchuk, Chad Osinchuk, Heather Jayanetti, and Haren Jayanetti Plaintiffs
– and –
Richard Mori, also known as Richard Wayne Mori, Bonnie Mori, also known as Bonnie Mary Mori, RBM Golden Consulting Ltd., 1093942 Ontario Limited, New Cordova Mines Ltd., Gold Insight Resources 2003 Limited, Gold Insight Resources 2004 Ltd., Gold Insight Resources (2005) Inc., and Golden Millenium Health Technology Inc. Defendants
Counsel: Brett D. Moldaver, for the Plaintiffs John Broderick, for the Defendants
HEARD: March 9, 2017
Reasons for Decision
McKELVEY J.:
Introduction
[1] This is a motion brought by the plaintiffs seeking an order to enforce a settlement agreement.
[2] The plaintiffs commenced an action against the defendants. The plaintiffs allege that as a result of misrepresentations by the defendants, Richard and Bonnie Mori, they were induced over a period of six years to invest $283,500 to purchase 1,244,200 shares in a company called Gold Insight Resources Ltd. (“Gold Insight”). Gold Insight is not named as a defendant in this action.
[3] The plaintiffs deny that they were provided with any share certificates for Gold Insight and it was further alleged that Gold Insight had issued about twice the number of shares that Mr. Mori had initially promised to the plaintiffs would ever be issued. The effect of this according to the plaintiffs was to dilute their holdings in Gold Insight. The plaintiffs further allege in the statement of claim that Richard and Bonnie Mori improperly transferred monies from Gold Insight for the personal use of Richard and Bonnie Mori. The plaintiffs allege that as a result of the defendants’ actions, the plaintiffs sustained loss of income together with a loss of income earning ability, diminution in the value of the Gold Insight shares and personal injuries including emotional upset and loss of enjoyment of life. Punitive damages are also claimed in the action.
[4] Following the commencement of the action, there were settlement negotiations between the parties.
[5] On September 9, 2016, the defendants through their counsel submitted a without prejudice offer for $428,537.
[6] On October 5, 2016, plaintiffs’ counsel in a letter dated October 5, 2016 advised that his clients had given instructions to settle the proceeding for the sum of $900,000.
[7] On December 22, 2016, the plaintiffs’ solicitor delivered correspondence to defence counsel stating as follows:
Our clients hereby accept the offer to settle set out in your letter of September 9, 2016.
Upon payment to our firm of the settlement amount of $428,537 in trust (representing the aggregate amount payable to all the plaintiffs), our clients will attend to a dismissal order on consent of the proceeding. We will provide a written direction regarding payment of funds in trust if required.
[8] In the interval between the defendants’ original offer on September 9, 2016 and the plaintiffs acceptance of the offer on December 22, 2016, defence counsel wrote to the plaintiffs on November 23, 2016 and advised as follows:
We have now determined that the shareholders registered for Gold Insight Resources Ltd. records the following common shares registered in the names of your clients as follows:
Crawford, Nancy & Mark 392,000 Crawford, Scott 374,200 Crawford, Mark 128,000 Osinchuk, Erin & Chad 200,000 Jayanetti, Heather & Haren 150,000 Total: 1,244,200
They form part of the total outstanding shares of 20,997,789. It would appear that your clients got exactly what they bargained for, the number of shares referred to in the Statement of Claim prepared by Mr. Chow.
[9] There is no evidence that the defendants withdrew their offer of September 9 prior to its acceptance. The plaintiffs’ position is that the plaintiffs were entitled to accept the defence offer and that there is a binding settlement agreement. The defence take the position that there is no binding settlement agreement.
Analysis
[10] Rule 49.09 is the applicable rule dealing with the failure to comply with an accepted offer. It provides as follows:
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.
[11] In the present case, the plaintiffs have elected to bring a motion for judgment in accordance with the terms of the alleged agreement.
[12] In their factum, the defence argues that the plaintiffs’ offer of October 5, 2016 effectively withdrew or terminated the defence offer of September 9, 2016. This common-law doctrine, however, has been altered by rule 49.07(2) of the Rules of Civil Procedure, which provides as follows:
(2) Where a party to whom an offer to settle is made rejects the offer or responds with a counter-offer that is not accepted, the party may thereafter accept the original offer to settle, unless it has been withdrawn or the court has disposed of the claim in respect of which it was made.
[13] The defendant initially argued that its offer of September 9, 2016 was not a rule 49 offer and therefore was not covered by the provisions of rule 49.07. However, the case law has established that the intention of rule 49 is that it will govern all offers made in writing, whether in letter form or the form set out in the rules. In Lindsay Paper Box Co. v. Schubert International Manufacturing Inc., (1992) 8 O.R. (3d) 437, Justice Lane comments on the argument made in that case that rule 49.07(2) did not apply because the offer was made in letter form and not specifically under rule 49 which contemplates a formal offer. In his decision Justice Lane states,
As to written offers, it is my view that the intention of rule 49 is that it will govern all offers made in writing, whether in letter form or the form set out in the rules...I make no comment on whether an offer in writing expressly stating that it is not under rule 49 would succeed in escaping the rule; that issue is not before me. But since the passing of rule 49 with its sometimes drastic cost consequences, the general expectation of a solicitor receiving a written offer is that the offerer intends to rely upon the making of the offer for its cost consequences.
[14] The same conclusion was reached in Barry v. Barry, [1997] O.J. No. 2894. In that case the court held that in the absence of evidence supporting an inference to the contrary, a settlement offer contained in the form of a letter which complies with the essential requirements of rule 49.02 should be treated as an offer to settle under the rules, not as a common law offer.
[15] In the present case, the defence offer was made in the course of litigation and after the statement of claim had been served. While the offer was in letter form I conclude that the provisions of rule 49 and in particular rule 49.07(2) apply. During the course of argument, the defence agreed that its offer of September 9, 2016 was in fact governed by rule 49. Their position evolved into an argument that the court should exercise its discretion not to enforce the settlement because it would be unjust and not in the interest of justice to do so.
[16] In Capital Gains Income Streams Corp. et al v. Merrill Lynch Canada Inc., (2007) 87 O.R. (3d) 464, the Divisional Court dealt with the process to be followed in considering an application to enforce settlement. The court states that the first step is to consider whether an agreement to settle was reached. The second step, once an agreement has been found to exist, is to consider whether, on all the evidence, the agreement should be enforced.
[17] In the present case I conclude that there was a settlement agreement reached. The defendants’ offer as set out in its letter of September 9, 2016 clearly set out its offer. The offer was not brought to an end by the plaintiffs’ counter-offer and remained open for acceptance. There was an unconditional acceptance of the defence offer by the plaintiffs in their correspondence of December 22, 2016. The terms of the settlement are clear and unequivocal. There is no evidence to suggest that the defence offer was sent without authority or by mistake nor is there any ambiguity about its terms.
[18] There remains however the issue of whether the court should exercise its discretion not to grant judgment in terms of the accepted offer. With respect to a court's consideration for the exercise of its discretion, the Divisional Court in the Capital Gains Income Streams Corp. decision supra sets out the considerations which a court should consider as follows:
Those judgments emphasize the judicial obligation to consider all of the circumstances of the case at hand, and to then decide whether it is fair to enforce the settlement. Although I risk unduly limiting my discretion by saying so, I think the right approach is to consider that a settlement effected pursuant to Rule 49 ought to be enforced, and so judgment ought to be granted, unless the offeror satisfies the judge that, in all the circumstances, enforcement would create a real risk of a clear injustice. It seems to me that the approach is required because it is good public policy to encourage settlement, and it would be quite inconsistent with that policy to decline enforcement unless a good reason for doing so is shown.
[19] This view was echoed in the Ontario Court of Appeal decision in Srebot v. Srebot Farms Ltd., 2013 ONCA 84. In that case the court commented that,
The discretionary decision not to enforce a concluded settlement, especially where the settlement has been partially or fully performed, should be reserved for those rare cases where compelling circumstances establish that the enforcement of the settlement is not in the interests of justice.
[20] In the present case the defence argues that it would be unjust to allow the plaintiff to benefit not only from the granting of the shares in Gold Insight but also from a payment of over $400,000 in addition.
[21] In response to the motion, the defence filed an affidavit from Richard Mori dated February 14, 2017. In that affidavit Mr. Mori states that on November 23, 2016 he instructed his solicitor to write to the plaintiffs’ counsel to indicate the number of shares in Gold Insight which were registered in the names of the plaintiffs. He also makes reference to the fact that the plaintiffs attended by proxy at a special shareholders meeting of Gold Insight which was held on December 12, 2016 to approve an option to purchase agreement between a subsidiary of Gold Insight and Rio Tinto Exploration Canada Inc. He further testifies that an initial $500,000 payment has already been made by Rio Tinto to the subsidiary of Gold Insight.
[22] The defence argues that it would be unjust and unconscionable to allow the plaintiffs to benefit not only from the ownership of the shares of Gold Insight as well as the financial compensation contained in the defendants’ offer of September 9. The defence refers to Mr. Broderick's letter dated November 23, 2016 where he states that the shareholders register for Gold Insight reflects the shareholdings for the plaintiffs. Defence counsel then states, “it would appear that your clients got exactly what they bargained for, the number of shares referred to in the statement of claim prepared by Mr. Chow". The defence therefore argues that it would be unjust for the plaintiffs to receive both the benefit of the shares and the benefit of compensation contained in their offer.
[23] There are a number of difficulties with this assertion. First, there is no information before me to indicate when the share transfer to the plaintiffs of the Gold Insight shares occurred. If the share transfer occurred prior to the defence offer of September 9, it is reasonable to conclude that the shares issued to the plaintiffs would have been taken into account at the time of the defence offer. On the other hand, in the event that this transfer occurred after September 9, and if it were intended that the plaintiffs would not get the benefit of the share transfer as well as the plaintiffs’ monetary offer, there is no explanation as to why the offer of September 9 was not withdrawn by the defendants.
[24] It is also significant to note that the plaintiffs in their statement of claim not only sought specific performance to receive the shares of Gold Insight which they alleged they were entitled to receive. They also claimed damages in the sum of $4,000,000 together with punitive and aggravated damages. The alleged damages included claims for the lost opportunity and lost income caused by the defendants conduct. The issuance of the shares and the offer of financial compensation is therefore, not inconsistent with the claims asserted by the plaintiffs in the action. As a result, the evidence before me does not satisfy me that the plaintiffs have obtained a double recovery by way of this settlement as suggested by the defence.
[25] It is not possible for the court based on the evidence before it, to comment on whether the settlement agreement reached was overly generous to the plaintiffs nor would it be appropriate in my view to enter into this type of analysis. Parties to a settlement agreement are free to negotiate a settlement on terms that are mutually agreeable to them and the reasons for entering into these agreements and the respective benefits they obtain from agreements are not always clear. There are many considerations, some of which are privileged which prevent a court from effectively commenting on whether a settlement is reasonable or not reasonable. What is clear, however is that the plaintiffs’ claims in this action go far beyond a claim to receive the shares of Gold Insight and include substantial claims for damages and punitive damages. The evidence before me does not satisfy me that the settlement is so one-sided as to constitute an injustice which is the thrust of the defence argument.
[26] There is also no evidence to suggest that the defendants’ offer was made by mistake or without authority nor is there any evidence to suggest that the defendants gave instructions to withdraw the offer. I conclude that the defendants have failed to satisfy me that enforcement of the settlement will create a real risk of injustice. The plaintiffs’ motion to enforce the settlement is therefore granted.
[27] With respect to costs, the parties have agreed that the partial indemnity costs of this motion are properly assessed at the sum of $6000 including all disbursements and HST. In light of my decision, I find that the plaintiffs should be entitled to their costs. If the plaintiffs are asserting a claim beyond partial indemnity costs, counsel should schedule an appointment within 30 days to address the matter before me. Otherwise, the plaintiffs shall be entitled to their partial indemnity costs agreed at $6000 from the defendants.
Justice M. McKelvey Released: May 15, 2017