Court File and Parties

Court File No.: CV-11-9210-00CL Date: 2017-03-24 Superior Court of Justice - Ontario

Re: Caja Paraguay de Jubilaciones y Pensiones del Personal de Itaipu Binacional, Plaintiff

And: Eduardo Garcia Obregon a.k.a. Eduardo Garcia a.k.a. Eddie Obregon, Claudia Patricia Garcia a.k.a. Patricia Garcia a.k.a. Claudia Patricia de Garcia a.k.a. Claudia Santisteban, Ligia Ponciano, Managed (Portfolio), Corp., Genesis (LA), Corp. (Ontario Corporation Number 1653094), Genesis (LA), Corp. (Alberta Corporate Access Number 2013145921), FC Int, Corp., First Canadian Int, Corp., Union Securities Limited, Scott Colwell, Marty Hibbs, Hibbs Enterprises Ltd., Columbus Capital Corporation, Antonio Duscio, Leanne Duscio, Leanne Duscio carrying on business as The Queen St. Conservatory, Catan Canada Inc., Vijay Paul, Greg Baker, Bradley F. Breen, Lou Maraj, 2138003 Ontario Inc., Mackie Research Capital Corporation, First Canadian Capital Markets Ltd., First Canadian Capital Corp., FC Financial Private Wealth Group Inc., Jason C. Monaco, Daniel Boase, Paolo Abate, Nikolaos Stylianos Tsimidis, Genesis Land Development Corporation, Limited Partnership Land Pool (2007), and GP LPLP 2007 Inc., Defendants

And Re: Eduardo Garcia, FC Int, Corp., Genesis (LA), Corp. (Ontario Corporation Number 1653094), and Patricia Garcia, Plaintiffs by Counterclaim

And: Upper Canada Explorations Limited, Parkside Resources Corporation, Global Sport Technologies Corp., and Caja Paraguay de Jubilaciones y Pensiones del Personal de Itaipu Binacional, Defendants by Counterclaim

Before: Mr. Justice H.J. Wilton-Siegel

Counsel: Jacqueline L. King and John De Vellis, for the Moving Party/Plaintiff David Milosevic and Caroline Garrod, for the Responding Parties/Defendants, Eduardo Garcia, Patricia Garcia, Managed (Portfolio), Corp., Genesis (LA), Corp. (Ontario Corporation Number 1653094), Genesis (LA), Corp. (Alberta Corporate Access Number 2013145921), FC Int, Corp., and First Canadian Int, Corp.

Heard: February 3, 2017

Endorsement

[1] The plaintiff seeks an order under Rule 49.09 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, declaring that the motion brought by the plaintiff returnable September 19, 2016 (the “Motion”) was settled in accordance with the terms of a draft order sent by counsel for the Garcia Defendants, Mr. Milosevic (“Milosevic”), on November 17, 2016 at 4:44 p.m. (the “November 17 Draft”).

Factual Background

[2] On the Motion, the plaintiff sought, among other relief, orders that the Garcia Defendants (1) refrain from making unfounded allegations to regulatory and policing authorities within and without Canada regarding the plaintiff and its counsel; and (2) remove any allegations against the plaintiff or its counsel from their websites.

[3] The parties commenced negotiations to settle the motion on or before November 1, 2016 in a meeting between counsel. The record evidences that, at all times, Milosevic indicated that he required the approval of his clients to the language of the draft order. Any doubt on this is removed by, among other things, Milosevic’s email sent on November 16, 2016 at 4:25 p.m. regarding certain changes discussed in a conference call earlier that day. After that call, counsel for the plaintiff emailed a revised draft. Milosevic replied to the effect that he would “turn this around with the client in the a.m….” Plaintiff’s counsel did not question Milosevic’s need to do so.

[4] On November 17, 2016, at 1:33 p.m., Milosevic emailed a revised draft order to counsel for the plaintiff at 1:33 p.m. Paragraph 1(j) of the draft order provided as follows:

The Garcia Defendants shall remove the information related to this litigation, as well as all the Allegations and commentaries about any of the Parties, from the website http://latinwitness.com in the section “ Cases Canada ” that make reference to the Plaintiff and to the Plaintiff’s counsel in regards to this litigation. The Garcia defendants may add to this website the statements described in paragraph (i) above.

[5] The parties’ counsel had a conference call at 3:00 p.m. in which it was agreed that an additional paragraph, to be provided by Milosevic and unrelated to the matters addressed in paragraph 1(j), would be added to the draft order. At 4:44 p.m., Milosevic sent an email which added words to paragraph 1(b) of the draft order but did not change the language of paragraph 1(j). This was the form of the November 17 Draft.

[6] At this point, the plaintiff’s lawyers say they believe they had an agreement on all the essential terms. However, the parties had also agreed in the conference call that the draft order needed to be “cleaned up” to correct for grammatical and stylistic errors. On November 18, 2016, the plaintiff’s lawyers sent the “cleaned up” draft order (the “November 18 Draft”) to Milosevic. The email to which this revised draft order was attached concluded with the words “Hopefully this is the final version.”

[7] Paragraph 1(k) of the November 18 Draft, which was the comparable paragraph to paragraph 1(j) in the November 17 Draft, read as follows:

The Garcia Defendants shall remove the information related to this action, as well as all the Allegations and commentaries about any of the Parties, from the website http://latinwitness.com including the portions entitled “ Cases Canada ” that make reference to the Plaintiff and the Plaintiff’s lawyers in regards to this action. The Garcia Defendants may add to this website the statements described in paragraph (j) above.

[8] On November 22, 2016, Milosevic emailed the plaintiff’s lawyers stating “my client has decided he cannot consent to the draft order as is.” The defendant Eduardo Garcia (“Eduardo”) says that he was not comfortable with the changes that the plaintiff’s counsel had made to the November 17 Draft, particularly the substitution of the word ‘including’ in paragraph 1(k) for the word ‘in’. He describes the change as “undisclosed”. He decided that “it was no longer productive to keep negotiating with the plaintiff”.

[9] It is agreed that the inclusion of the word ‘including’ in the November 18 Draft had the effect of extending the application of the relevant paragraph to the entire “Latin Witness” website. The previous draft of the paragraph had applied only to the “Cases Canada” section of the website.

[10] The dispute between the parties has been unnecessarily complicated by the allegation of the Garcia Defendants that the plaintiff’s counsel surreptitiously inserted the word ‘including’ into the November 18 Draft with the intention of changing the effect of the relevant paragraph of the draft order.

[11] The evidence is otherwise. I accept that the drafting lawyer mistakenly believed he was merely giving effect to Milosevic’s understanding of the agreement reached with respect to the relevant paragraph based on Milosevic’s email sent on November 17, 2016 at 1:33 p.m. In addition, plaintiff’s counsel included a “compare doc” copy of the revised draft showing all of the changes he had made to the November 17 Draft. He did not add the word ‘including’ “surreptitiously.” Nevertheless, the inclusion of that word did change the effect of the November 17 Draft.

[12] The language of a draft sent by Milosevic on November 1, 2016 was substantially the same as the November 18 Draft to which Eduardo objected. The wording of the draft of November 1, 2016 was changed by substituting the word ‘in’ for the word ‘including’ in order to restrict the operation of the relevant paragraph to the “Cases Canada” section of the website in a draft revised by Milosevic and sent to the plaintiff’s counsel on November 16 at 2:24 p.m. Plaintiff’s counsel did not raise any objection to this change. Thereafter, the drafts of November 16 sent at 4:23 p.m. by the plaintiff’s counsel, the draft of November 17 sent at 1:33 p.m. by Milosevic, and the November 17 Draft sent by Milosevic were all consistent in the use of the word ‘in’ to narrow the application of the relevant paragraph to the “Cases Canada” section of the website.

Applicable Law

[13] Rule 49.04 contemplates a two-step analysis: (1) a determination as to whether an agreement was reached utilizing the approach and the standard of a summary judgment motion under Rule 20; and (2) if it is determined that an agreement was reached, a consideration of whether the agreement should be enforced taking into consideration broader evidence not relevant to a Rule 20 inquiry.

[14] For a settlement agreement to exist, the court must be satisfied that the parties had a mutual intention to create a legally binding relationship and reached agreement on all of the essential terms of the agreement: see Olivieri v. Sherman, 2007 ONCA 491, 86 O.R. (3d) 778, at para. 41. The test is based on objective evidence, in the sense of what a reasonable person in the position of the parties would have had in mind, rather than subjective evidence of the parties’ actual intentions: see Dela Cruz v. Prudential of America General Insurance Company of Canada at paras. 17-18, referring to dicta of Winkler J. (as he then was) in Toronto-Dominion Bank v. Leigh Instruments Ltd. (Trustee of) (1998), 40 B.L.R. (2d) 1, at para. 410. The test to be applied is whether a reasonable bystander observing the parties would conclude that both parties, in making an offer and in accepting it, intended to enter into legal relations.

[15] The plaintiff’s position is that all essential terms were agreed to with the email containing the November 17 Draft. However, the parties also agreed that the form of the draft order had not been finalized and that the document would be “cleaned up” for a final review by the parties. In doing that “cleanup,” the plaintiff’s counsel changed the wording on a matter of importance to the Garcia Defendants. The plaintiff’s position is that, in the circumstances, the Garcia Defendants were entitled to insist upon the wording of the November 17 Draft but not to walk away from the agreement entirely. I do not think that this is correct as a matter of law.

[16] In short, this is a case of “it is never over until it is over.” It is arguable that consideration is only given in respect of a draft order at the time that the court issues the order. On this basis, there would be no agreement, or more precisely a party would be free to resile from any agreement in principle regarding the wording of a draft consent order, until the time that the order is issued by the court. However, I do not have to decide that issue in this proceeding.

[17] The parties had agreed that final revisions were necessary to clean up the draft. The parties intended to finalise the “cleaned-up” version for the clients or their counsel, as applicable, to review and sign off on. Given this understanding, it is not reasonable to suggest that any agreement could have been reached until a final form of the draft order had been settled. Moreover, as mentioned, I think it is clear that, at all times, Milosevic required the consent of his client.While it is possible that the parties could have agreed to a form of agreement prior to sign off on the final draft, such an agreement would have required clear and express language. There was no such language exchanged between the parties in this case. Further, there is nothing in the actions of either of the parties that evidences an understanding of a binding agreement between them following delivery of the email of Milosevic on November 17, 2016 at 4:44 p.m., to which was attached the November 17 Draft.

[18] For example, to the contrary is the email exchange between the plaintiff’s counsel and Milosevic on November 21, 2016. Plaintiff’s counsel emailed “Hi, David, are we nearing a resolution of this?” to which Milosevic replied “I expect so. Expect to hear from my client before end of day.” There is no suggestion by either party in this exchange that any agreement could be reached before the Garcia Defendants indicated their approval to Milosevic.

[19] Accordingly, the plaintiff’s motion is dismissed.

Costs

[20] The Garcia Defendants seek costs of $7,000 on a partial indemnity basis as the successful party on the motion.

[21] However, while I have found that the parties did not reach an agreement on a consent order, I do not think the Garcia Defendants are entitled to any costs for the following reasons.

[22] As more fully addressed in a companion Endorsement of the Court addressing a motion of the Garcia Defendants for security for costs heard on the same day as this motion, the Garcia Defendants have engaged in conduct in this litigation designed to delay the progress of the action and increase the costs of the plaintiff. They have also engaged in vexatious behaviour outside this litigation. It appears those actions have been designed to frustrate the plaintiff in the hope that it will discontinue the action against the Garcia Defendants.

[23] The failed settlement negotiations with respect to the Motion giving rise to this proceeding must be understood in that light. The Garcia Defendants exhibited bad faith in terminating the negotiations after causing the plaintiff to run up further costs needlessly. If they objected to the change in wording to the November 18 Draft, as they now say, and if they had been acting reasonably, they would have inquired whether the change in the November 18 Draft was an inadvertent error before taking any decision. If they had been acting in good faith, the Garcia Defendants would have insisted on the language in the November 17 Draft after learning that the change in the language was inadvertent.

[24] They did neither of these things. Instead, they used the change in the language of the November 18 Draft as an excuse for terminating the entire negotiation. Moreover, they have never suggested that they would accept the language of the November 17 Draft even after it has become clear that plaintiff’s counsel did not intend to make a substantive change to the November 17 Draft and that the plaintiff continued to be prepared to agree on the basis of the language of the November 17 Draft.

[25] Whether the Garcia Defendants intended to negotiate in bad faith from the outset or decided to do so only as the negotiations were reaching the stage of an agreement is unclear. However, in terminating the negotiations at the stage and in the manner that they did, they acted in bad faith.

[26] I am sympathetic to the position of the plaintiff that the Court should award substantial indemnity costs in such circumstances. The plaintiff submits that an award of $50,000 would be appropriate.

[27] I am not persuaded, however, that such an award would be appropriate given that the plaintiff was unsuccessful on the motion. Instead, I think that each party should bear its own costs of this motion, which I fix at $7,000, and that the remaining costs of the failed negotiations should be included in the remaining costs of the Motion to be addressed by the motion judge as and when the Motion is heard.

Wilton-Siegel J. Date: March 24, 2017