Court File and Parties

Court File No.: CV-10-416000 Date: 2018-06-28 Amended: 2018-09-20 Superior Court of Justice - Ontario

Re: L-Jalco Holdings Inc. and 2173432 Ontario Inc., Plaintiffs/Responding Parties And: Lawrynowicz & Associates and Bhupinder Nagra, Defendants/Moving Parties

Before: Carole J. Brown, J.

Counsel: Matthew Hilbing, for the Plaintiffs/Responding Parties Tanisha G. Tulloch and Sandra L. Secord, for the Defendants/Moving Parties Lawrynowicz & Associates and Bhupinder Nagra Kelly Charlesbois, for the Moving Parties Professional Appraisers et al.

Heard: May 25, 2018

Amended Endorsement

[1] The plaintiffs commenced four separate actions in negligence, breach of fiduciary duty and contract against their former solicitors and certain appraisers for damages arising from a mortgage transaction. These actions are set forth below and will be referred to as follows:

• CV-10-416000, commenced against the plaintiffs lawyers (the “Lawyers Action”, represented at the mediation by Susan Secord);
• CV-10-099721, commenced against the plaintiff’s real estate appraisers in connection with appraisals conducted on properties against which security was being provided on the mortgage transaction (represented at the mediation by Kelly A. Charlebois, and referred to as the “Charlebois actions”);
• CV-10-099103, commenced against other real estate appraisers in connection with appraisals conducted on properties against which security was being provided on the mortgage transaction (represented at the mediation by Kelly A. Charlebois, and referred to as the “Charlebois actions”);
• CV-10-0099722, commenced against JMS Real Estate Appraisers, Christian Perera and Michael Cavanaugh in connection with a further appraisal on a property against which security was being provided on the mortgage transaction, and in which Mr. Cavanaugh represents himself and neither of the two remaining defendants defended the action (“the Cavanaugh action”).

[2] Following a case conference held June 28, 2016, all parties in all of the actions agreed to a full day mediation of all of the actions before Michael Silver to be held October 14, 2016.

[3] The mediation proceeded with all parties in attendance and represented by counsel, except for Mr. Cavanaugh. The discussions were lengthy and hard-fought on all sides. Near the end of the mediation, Mr. Cavanaugh made it known that there may be an impediment to his paying his $50,000 as there were concerns about negative tax implications to doing so. There were further negotiations which ensued in this regard. The mediator proposed several alternatives which were ultimately memorialized in the Minutes of Settlement. The Minutes of Settlement were executed that evening after all parties had full opportunity to read them and obtain their counsel’s advice.

[4] Following execution of the Minutes of Settlement at the mediation on October 14, 2016, Ms. Secord advised that she would prepare full and final releases for execution by the plaintiffs, a full and final mutual release between the lawyer defendants and the appraisers, draft dismissal orders and consents in the main action and the third party claim in the action involving the lawyer defendants. She further requested of counsel for L-Jalco whether the full and final release should provide for payment of the settlement funds in trust to Ms. Ramsey’s firm and requested confirmation of the direction for payment, to which Ms. Ramsey replied that she would obtain instruction from her client.

[5] Following receipt of advice on October 21, 2016 from Barry Polisuk, counsel for Enzo Mizzi, who had acquired JMS Real Estate Appraisers that, until he had further clarity, he had advised his client not to make a payment “for the benefit of Mr. Cavanaugh”, expressing concern that such payment may constitute a breach of the CRA order to pay and result in his client being required to pay a like amount to the CRA. Following this, the parties, including counsel for all parties in the three actions continued to discuss ways of paying the $50,000 owing by Mr. Cavanaugh pursuant to the Minutes of Settlement.

[6] These ongoing discussions are set forth below.

[7] On October 21, 2016, Counsel for the plaintiff and defendant in the two actions had a teleconference to discuss whether there was any reason that Mr. Mizzi could not make the $50,000 payment on behalf of the defendant, JMS Real Estate Appraisers, instead of Mr. Cavanaugh making the $50,000 payment in the Cavanaugh action.

[8] On October 28, 2016, counsel for the defendants, Lawrynowicz & Associates et al, had a teleconference with the mediator and Mr. Polisuk, in which Mr. Polisuk, indicated that he would inquire of his client what he wished to do with respect to the $50,000 payment and whether it could be made on behalf of JMS Real Estate Appraisers or Mr. Perera in the Cavanaugh action.

[9] Counsel for the defendants, Lawrynowicz & Associates, continued to follow-up after the conference call to determine if the mediator had heard back from Mr. Polisuk. Counsel for the plaintiff and the defendant in the Charlebois action were kept informed throughout of the status of the discussions.

[10] On November 3, 2016, Ms. Secord, counsel for the defendants, Lawrynowicz & Associates et al, received a telephone call from the mediator, advising that he had spoken with Mr. Polisuk and did not see the payment from Mr. Polisuk’s client happening. The mediator further advised Ms. Secord that he would contact Ms. Ramsey.

[11] On November 9, 2016, Ms. Secord wrote to Ms. Ramsey and Ms. Charlebois to advise that she would be away from the office for two weeks commencing November 14, 2016, likely without access to email for most of that time. She indicated that if a teleconference were required, it should take place before her departure. She received no response from Ms. Ramsey, counsel for the plaintiff as regards the need to hold a teleconference.

[12] On November 11, 2016, the mediator contacted Ms. Secord to advise that he had spoken with Ms. Ramsey and had asked Ms. Ramsey whether her clients would be prepared to accept $700,000 in settlement of the litigation following the Negative Tax opinion. The mediator told Ms. Secord that Ms. Ramsey had indicated to him that she would recommend this figure to her client, L-Jalco, but was not hopeful that it would be accepted. She indicated that she was not sure what her clients would do.

[13] Ms. Secord and the mediator agreed to speak again upon Ms. Secord’s return to the office in two weeks and after Ms. Ramsey had advised the mediator as to whether L-Jalco would accept $700,000 in settlement.

[14] No one, at that juncture, had discussed or advised any other parties or the mediator that the defendants would not ultimately exercise the third option, namely payment of the $50,000 by the defendants in the other two actions.

[15] On November 15, 2016, Ms. Ramsey, on behalf of the plaintiffs, wrote, indicating that the plaintiffs were treating the Minutes of Settlement as at an end, as no payment and no election had been made within 30 days. This was after Ms. Secord’s correspondence of November 11, indicating that she would be away from the office for two weeks and inquiring as to whether there was any need to hold a teleconference prior to her departure, thus at a time when it was known by all parties that Ms. Secord was away from the office.

[16] There is no evidence to indicate that, until that date, anyone had taken the position that the election and payment were to be made within 30 days. Nor was anyone involved in the mediation operating or conducting themselves as such.

[17] Ms. Secord found the plaintiffs’ letter waiting for her when she returned to the office on November 28. She contacted the mediator. The mediator advised that he had not been copied on that letter, and that he would contact Ms. Ramsey, counsel for the plaintiffs.

[18] Ms. Secord and the mediator spoke further on November 28. The mediator indicated that he had been advised by Ms. Ramsey that the plaintiffs were having “settlement remorse”, were complaining about her conduct as well as that of the mediator at the mediation and that her clients had advised her not to speak further with the mediator. Indeed, since that time, Ms. Ramsey was fired and new counsel was retained. The president of L-Jalco, in his affidavit filed on this motion, further indicated that he felt that the four actions had a settlement value far in excess of $750,000 and that it could be worth more than twice that if the case went to trial.

[19] On November 29, 2016, counsel for the plaintiff and counsel for the defendant in the two separate actions had a further teleconference in which Ms. Ramsey for the plaintiffs stated that she was limited in what she could say and that her instructions were to set the actions down for trial without conducting further examinations for discovery. In that conversation, she did not dispute or deny that she was supposed to get instruction from her clients as to whether they were prepared to settle the matter in the amount of $700,000. She further avoided providing an answer as to whether her clients were prepared to complete the settlement for $750,000.

[20] On December 6, 2017, the plaintiffs served trial records in the actions.

[21] On January 3, 2017, counsel for the defendants were served with a notice of change of lawyer.

[22] On January 6, 2016, counsel for the defendant in the two actions advised the new counsel, Matthew Hilbing, that their clients were electing the third option, namely payment of an all-inclusive sum of $750,000 to L-Jalco.

[23] On January 10, 2017, Mr. Hilbing wrote and took the position that pursuant to what he referred to as the “Conditional Minutes of Settlement”, payment was to have been made to his client within 30 days, which was not done, such that the Minutes of Settlement were at an end. His clients were no longer willing to settle for $750,000. However, he indicated that his clients would be open to further settlement discussions once he was able to review the file.

[24] On February 28, 2017, all counsel held a teleconference in which it was agreed that all parties would reserve the rights to whatever position they may ultimately take regarding the Minutes of Settlement in order to permit Mr. Hilbing to review his file and provide an opinion to his clients. A further teleconference was to be held in April 2017.

[25] Further teleconferences were held on June 23, August 2, August 30 and September 20, 2017. There was no resolution of the outstanding issues. Accordingly, counsel for the defendants commenced this motion to enforce settlement pursuant to the Minutes of Settlement executed October 14, 2016.

Positions of the Parties

Position of the Moving Party Defendants

[26] It is the position of the moving party defendants that the Minutes of Settlement were clear and unambiguous and set forth the various steps for effecting settlement on the basis of, first, Mr. Cavanaugh not receiving a negative tax opinion and paying his $50,000 (paragraph 1), or in the event that he did receive a negative tax opinion indicating that he should not pay the $50,000, alternatives for settlement (paragraphs 2, 3, 4).

[27] It is the position of the moving party defendants that the Minutes of Settlement at paragraph 1 clearly set forth that if each of the parties was to pay the amounts negotiated, this would be done within 30 days.

[28] In the event that the negative tax opinion was received by Mr. Cavanaugh, three alternative possibilities were set forth, none of which had a time limit of 30 days, given that various alternatives would have to be explored and discussions among the parties would have to be undertaken. First, L-Jalco could treat the Minutes of Settlement as at an end. This was not done as the parties continued to discuss alternatives. Second, L-Jalco could decide to settle with the two defendants and proceed further with the action against Mr. Cavanaugh for the $50,000 (paragraph 3). While counsel for the defendants inquired of counsel for the plaintiffs as to whether they would accept $700,000, no response was ever received from counsel for the plaintiffs. Third, counsel for the defendant could elect to pay the additional $50,000 that would have otherwise been payable by Mr. Cavanaugh (paragraph 4). This third option was ultimately communicated to the counsel for the plaintiffs in November 2016 and again in January 2017, when new counsel was retained.

Position of the Responding Party Plaintiffs

[29] It is the position of the plaintiffs that the Minutes of Settlement clearly contemplated provision of the $750,000 in settlement of all actions within 30 days as set forth at paragraph 1 of the Minutes. The plaintiffs maintain that there was no provision for an extension of time for payment in the event that a negative tax opinion was provided by October 21, 2016 from Mr. Cavanaugh’s tax lawyer.

[30] It is of interest that the plaintiffs’ factum clearly states that the plaintiff’s principal was not “overly pleased with the $750,000 figure they had negotiated so hard for”. It further states that the plaintiffs were frustrated with the mediation process especially after November 3, 2016. As well, in their factum, the plaintiffs state that they were not pleased with the way their case had been presented at the mediation and felt pressured to accept less than the case was worth.

[31] It is the position of the plaintiffs that there will be prejudice to them if the Minutes of Settlement are enforced, including, their costs incurred since the mediation, their opportunity to claim 12% interest on the outstanding amounts claimed and, most particularly, that they will lose the opportunity to obtain a judgment for an amount substantially higher than the $750,000 amount negotiated at the mediation.

The Issue

[32] The issues for determination by this Court are whether the Minutes of Settlement executed October 14, 2017 are enforceable and should be enforced.

The Law

[33] Pursuant to Rule 49.09 of the Rules of Civil Procedure, where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly.

[34] A settlement agreement is enforceable as a contract, and the rules of contractual interpretation apply: Dofasco Inc. v National Steel Car Limited, 2012 ONSC 6434. A settlement agreement among parties should be enforced unless the court is satisfied that, in all of the circumstances, there is a real risk of a clear injustice: Hilco Industrial Acquisition Canada ULC v Engreen Maitland Inc., 2016 ONSC 3097.

[35] As to the existence of a settlement, the following factors are to be considered: (i) mutual intention to create a legally binding relationship; and (ii) an agreement on all of the essential terms of the settlement: Tondera v Vukadinovic, 2015 ONSC 5158.

[36] Where there is a mutual intention to create a legally binding relationship, the parties agree on all essential terms and make reference to finalizing mutually acceptable settlement documents, the contract is binding: Fehrman v Goodlife Fitness Centres Inc., 2017 ONSC 4348.

[37] A written agreement to settle is to be measured by an objective reading of the language used by the parties to reflect their agreement. Courts should not be “too quick to find an ambiguity or lack of agreement in the terms of a settlement agreement”: Fehrman v Goodlife Fitness Centres Inc., supra.

[38] Following determination by the court of the existence of a settlement, the court must determine whether to exercise its discretion to enforce the settlement. The factors to be considered by the Court are as follows:

1. Whether the offer was clear and unequivocal;
2. Whether or not a mistake was made;
3. Whether the settlement was reasonable;
4. The degree of prejudice to either party if settlement is not given effect; and
5. The effect of the settlement on third parties if the settlement is not enforced.

See: Marcel Equipment Ltd. v Equipements Benoit D’Amour et Fils Inc..

[39] The discretion to refuse to enforce the settlement should be “rarely exercised”:

In litigation matters, where properly retained solicitors enter into settlements and where there are no known limitations of authority, these settlements ought to be binding upon the parties. It is the policy of the court and it is public policy to encourage the settlement of actions. Where solicitors have entered into settlement agreements on behalf of their clients, it would be contrary to both court and public policy to foster secondary litigation to overturn those settlements.

See: Homewood v Ahmed at para 57.

[40] The court, in deciding whether the settlement should be enforced, will consider whether the parties’ pre-settlement positions remained intact, whether there would be prejudice to the party seeking to enforce the settlement if the settlement were not enforced, the extent of the prejudice to the party seeking to resist the settlement if the settlement were enforced, and whether third parties would be affected if the settlement were not enforced: Hilco Industrial Acquisition Canada ULC v Engreen Maitland Inc., supra.

Analysis

[41] In determining this case, I am mindful of the case law regarding enforcement of Minutes of Settlement relied on by all counsel, including the case law as set forth above.

[42] In this case, all parties were present at the mediation held before mediator, Michael Silver, on October 14, 2017. All parties, with the exception of Michael Cavanaugh (CV-10-099722) had legal representation, namely legal counsel present at the mediation which lasted over eight hours. As counsel for the parties at the motion indicated, the issues in the mediation were fully discussed and all parties’ positions were vigorously defended. The Minutes were “hard fought”. At the end of the day, the parties had arrived at an agreement, memorialized in the Minutes of Settlement executed by the parties that evening. All parties and their counsel had the opportunity to fully review and discuss among themselves the terms of the Minutes of Settlement.

[43] There is no dispute that, a few hours prior to the final agreement being executed, Mr. Cavanaugh expressed concern as regards his payment in settlement of this matter, and a potential tax issue. As a result, the Negative Tax Option clause was written into the Minutes of Settlement, along with the options arising therefrom should Mr. Cavanaugh obtain a negative tax opinion.

[44] As regards the possibility that Mr Cavanaugh may obtain a Negative Tax opinion, the Minutes of Settlement set forth 3 potential possibilities flowing therefrom.

[45] Paragraph 2 sets forth the first potential possibility in the event that the negative tax option were obtained by Mr. Cavanaugh, namely that L-Jalco was entitled to treat the Minutes of Settlement as at an end. On October 21, 2017, when the negative tax opinion was received, L-Jalco did not treat the Minutes of Settlement as at an end. Instead, discussions continued among the parties, counsel and mediator as regards the other two options.

[46] Paragraph 3 of the Minutes of Settlement set forth the second possibility namely that in the event of receipt of a negative tax opinion, L-Jalco may elect to proceed with settlement of the other two defendant actions and proceed to trial with the Cavanaugh action. The option for L-Jalco was discussed among counsel and the mediator after the negative tax opinion was received, and Ms. Ramsey on behalf of the plaintiffs was to obtain instruction from her clients in this regard.

[47] Paragraph 4 of the Minutes of Settlement provided that the other defendants in Court File Nos CV-10-416000, CV-10-099103 and CV-10-099721 may elect to pay the $50,000 that would have otherwise been payable by Mr. Cavanaugh. It was this option that was ultimately pursued.

[48] Prior to this, and after receipt of the negative tax opinion, all counsel and the mediator were in discussion as to, first, whether there was any way to have the other defendants or LawPro pay the $50,000 which was to have come from Mr. Cavanaugh. When this was ultimately determined not to be an option, there was an attempt to determine whether the plaintiffs would settle for $700,000, pursuant to paragraph 3 of the Minutes. As no answer was forthcoming, the other defendants ultimately elected to pay the $750,000, which was communicated to the plaintiffs on November 28, 2016 and January 6, 2017.

[49] While paragraph 1 of the Minutes of Settlement contemplates payment of the full amount by the defendants in Court File Nos. CV-10-416000, CV-10-099103 and CV-10-0099722 within 30 days, the alternative options set forth do not stipulate a time within which payment is to be made and there is no evidence to suggest that any such time limit for the alternatives had been discussed prior to the Minutes being executed. In such a case, with no evidence of or discussions regarding a time limit for the elections and payment, I am of the view that payment would be made within a reasonable period of time. In this case, an option was selected and communicated to the plaintiffs within one month, namely on November 28, when defendants’ counsel inquired as to whether the plaintiffs were prepared to except $750,000 and, thereafter, within three months, on January 6, 2016, when it was communicated to new counsel, Matthew Hilbing, advising that the defendants were prepared to pay the total, all-inclusive sum of $750,000. These time periods, within one month of the Minutes being executed and subsequently again within 2 ½ months, in my view, in all of the circumstances involved, are reasonable and commercially viable periods of time. I note that between November and January, the plaintiffs fired their counsel and ultimately retained new counsel.

[50] While it is the position of the plaintiffs in this matter that the Minutes of Settlement clearly set forth the timeline applicable, namely 30 days, or by November 13, 2016, I am not of the view that the 30 day provision in paragraph 1 is applicable to the options set forth at paragraphs 3 and 4 of the Minutes of Settlement.

[51] I do not find the Minutes of Settlement ambiguous, but rather find them clear and clearly drafted. There were no mistakes in the drafting and none were argued on this motion. I am of the view that the settlement was reasonable from all points of view and took into consideration an issue that arose at the end of the day, namely potential negative tax implications for Mr. Cavanaugh should he pay the $50,000. This action arises from events that occurred in 2010 and, at this juncture, there would clearly be prejudice to either side if the settlement were not given effect or enforced.

[52] I am satisfied that there was a mutual intention to create a legally binding relationship and agreement on all of the essential terms of the settlement. This was done over an eight hour long and hard-fought mediation, with all parties, except Mr. Cavanaugh, represented by able counsel, with an experienced mediator.

[53] There is no evidence that any of the parties contemplated a timeline or a time limit as regards options 3 and 4. Indeed, following receipt of the negative tax opinion, all parties continued to discuss options and no parties made reference to any impending deadline. Upon receipt of correspondence from counsel for the defendants, Ms. Secord, that she would be away for two weeks commencing November 14, 2016 and inquiring as to whether anything should be discussed prior to that time in a teleconference among all counsel, the plaintiffs’ counsel did not make reference to any impending deadline.

[54] I am not satisfied that there will be any prejudice occasioned on the part of the plaintiffs. I do not accept their submissions as regards being precluded from proving their case in court and proving that the case is worth considerably more than the $750,000 negotiated on settlement. It would appear from all of the evidence before me, including the statements made by and on behalf of the plaintiffs, that they have suffered from “settlement remorse”.

[55] I am satisfied, based on all of the motion materials before me and the submissions of all counsel that the Minutes of Settlement are enforceable and are to be enforced, such that the defendants in Court File No CV-10-416000 will pay to the plaintiff $600,000 and the defendants in Court File No CV-10-099103 and CV-10-099721 shall pay $150,000 to the plaintiff. The defendant and third parties will execute full and final mutual releases in a form to be agreed upon by counsel acting reasonably within 45 days of this Order. The plaintiffs shall execute full and final releases in the actions in the standard LawPro form within 45 days of this Order and the actions, including cross-claims and third-party claims will be dismissed with prejudice and without costs. The fees of the mediator have already been paid such that no Order is required.

Costs

[56] The parties provided their bills of costs. I am satisfied, in all of the circumstances, that the defendants Lawrynowicz & Associates and Bhupinder Nagra are entitled to their costs of this action in the amount of $34,707.17, and the defendants, Professional Appraisal Group, Dan Gilliland, Bryan A. Jack, JMS Real Estate Appraisers, Alex Rudenberg and Murray Jones are entitled to their costs of this action in the amount of $13,656.05.

Carole J. Brown, J. Date: June 28, 2018 Amended: September 20, 2018