Court File and Parties

Date: 2019-02-22 Superior Court of Justice - Ontario

Re: FREED DEVELOPMENTS LTD., FREED CORPORATION, 75 PORTLAND PARKING LTD., 2131 YONGE DEVELOPMENTS GP LIMITED, 2131 YONGE DEVELOPMENTS LIMITED PARTNERSHIP, 550 WELLINGTON WEST LTD., KING CHURCH LIMITED PARTNERSHIP, Applicants

And: TARGET PARK (NO. 10) INC., TARGET PARK (NO. 11) INC., and TARGET PARK (NO. 12) INC., Respondents,

Before: Cavanagh J.

Counsel: Meredith Bacal, for the Applicants Emily Hives, for the Respondents

Heard: February 13, 2019

Endorsement

Introduction

[1] The applicants are property managers who collectively entered into four leases with the respondents to operate parking lots. The parties disagreed about the amounts that the applicants claimed were owing under the leases. There were negotiations with a view to settlement.

[2] The applicants contend they accepted an offer to settle the dispute made on behalf of the respondents by their lawyer that resulted in a settlement agreement.

[3] The respondents contend that they did not enter into a settlement agreement with the applicants. They contend that any settlement required execution by the parties of formal written settlement agreements and delivery of postdated cheques, and this was not done.

[4] For the following reasons, I conclude that the application should be granted.

Background Facts

Parties

[5] The applicants Freed Developments Ltd. and Freed Corporation are land developers and property managers. The applicants, 75 Portland Parking Ltd. (“75 Portland”), 2131 Yonge Developments GP Limited (formerly 2292446 Ontario Limited) (“2131 Yonge GP”), 2131 Yonge Developments Limited Partnership (“2131 Yonge LP”), 550 Wellington West Ltd. (“550 Wellington”), King Church Limited Partnership (“King Church”), are wholly-owned subsidiaries of Freed. 75 Portland, 2131 Yonge, 550 Wellington, and King Church (collectively, the “Freed Entities”) are all entities operating in Ontario.

[6] The respondents, Target Park (No. 10) Inc., Target Park (No. 11) Inc., and Target Park (No. 12) Inc. (collectively, “Target Park”), are subsidiaries of Target Park Group Inc., a commercial parking lot operator. Target Park’s sole director is Hercules Modopoulos.

Freed Entities Lease Properties to Target Park

[7] Between October 2011 and September 2014, the Freed Entities entered into four leases with Target Park (the “Leases”). The Leases granted Target Park use of the Freed Entities’ parking facilities and parking assets at the respective properties.

Dispute between the parties in respect of rent under the Leases

[8] The parties became engaged in a dispute concerning the amount of rent that the Freed Entities claimed Target Park owed.

Communications between representatives of the parties with respect to settlement

[9] The applicants and the respondents entered into settlement negotiations.

[10] By email dated July 29, 2016, Mr. Sahu, the controller for Target Park, wrote to Mr. Weinreb, an internal lawyer for the applicants, and provided contact details of the external lawyer, Jordana Enig Stockhamer, to whom he had forwarded a draft release letter. In his email, Mr. Sahu wrote: “Please deal with her and finalize the letter. Herc has very limited role, upon the advise of our lawyer he has to just put his signature on the paper”. Mr. Sahu confirmed in a separate email that it was satisfactory for Mr. Weinreb to contact Ms. Stockhamer directly.

[11] Ms. Stockhamer then dealt directly with Mr. Weinreb. The negotiations continued.

[12] By email dated September 16, 2016, Ms. Stockhamer sent to Mr. Weinreb what was described as a “Settlement and Mutual Release Agreement” which, she wrote, addresses all four of the leases in one document. In her email, Ms. Stockhamer noted that the draft Agreement had not yet been reviewed by her clients and, by copy of her email, she sent the draft agreement to her clients for their review.

[13] By email dated October 14, 2016, Ms. Stockhamer wrote to Mr. Weinreb and advised that she had turned the one agreement into four separate agreements for the four leases. She asked Mr. Weinreb to review the four agreements and to let her know if he had any comments before she forwarded the attached agreements to her client for review.

[14] Mr. Weinreb followed up with Ms. Stockhamer by emails dated February 21, March 31 and April 18, 2017. In these emails, Mr. Weinreb advised of the applicants’ intention to pursue litigation, or commence a claim, if the dispute was not resolved.

Communications that applicants contend resulted in a settlement agreement

[15] By email dated April 19, 2017, Ms. Stockhamer advised Mr. Weinreb that, at her client’s request, she had revised the releases for 550 Wellington and 75 Portland to “show the postdated cheques from May 22, 2017 to April 22, 2018”. Her email states that she attaches copies of the updated releases and she asked Mr. Weinreb’s clients to sign where indicated and return scanned copies to her. She writes that she has asked her client to sign the attached releases as well.

[16] By email dated April 20, 2017, Mr. Weinreb asked Ms. Stockhamer whether there was “any update”. In response, Ms. Stockhamer wrote an email to Mr. Weinreb that reads: “I’m waiting to hear back from Hercules on one of the provisions before I resend the documents to you”.

[17] On the following day, April 21, 2017, Ms. Stockhamer sent an email to Mr. Weinreb and forwarded four documents that she described as “the revised Releases for each of the 4 properties”. Ms. Stockhamer described the revisions that had been made and wrote:

In negotiating the settlement, my client’s intention is that any liability of Target Park (No. 12) Inc. to pay a settlement does not expand past Target Park (No. 12) Inc. to Target Park Group Inc., et.al. This is a reasonable position since there are no indemnitors or guarantors in place for any of the leases.

If your clients agree with this position, then we are fine to proceed with execution of the attached drafts. If your clients do not agree that they can only look to Target Park (No. 12) Inc. for payment of the $107,375.71 and $8,831.18 settlement amounts, then please do not have your clients sign the attached Agreements and instead let me know right away. (Emphasis in original)

[18] On April 25, 2017 Mr. Weinreb wrote to Ms. Stockhamer and advised “[w]e are couriering originals over to your office”. The settlement documents as executed by the applicants were delivered to Ms. Stockhamer.

[19] On May 1, 2017, Ms. Stockhamer sent an email to Mr. Weinreb and advised: “I received your originals. I am holding them in escrow pending receipt of the Agreements and postdated cheques from my client”.

[20] The documents entitled “Settlement and Mutual Release Agreement” for the 55 Wellington Lease and for the 75 Portland Lease provide that Target Park No. 12 shall pay $107,375.71 and $8,831.18, respectively, by way of a series of twelve monthly post-dated cheques dated from May 22, 2017 to April 22, 2018, and that Target Park No. 12 shall deliver the post-dated cheques “upon full execution of this Agreement”.

Communications after May 1, 2017

[21] On May 25, 2017, Mr. Lepper, the applicants’ CFO, sent an email to Mr. Modopoulos (and to the respondents’ controller, Abhiram Sahu) in which he forwarded an email he had received from Mr. Weinreb that reads:

Just got off the phone with Jordana (Target Park’s lawyer). While I believed that we had reached a settlement with them back in late April/early May and were simply waiting on post-dated cheques at this point, I’ve just been advised that Jordana hasn’t heard a peep out of them for quite a while. I think at this point that you need to make one last call to Herc and find out what is happening. If he ignores you or you don’t get a response, unfortunately I don’t think we will have any choice but to commence litigation.

Mr. Lepper’s email to Mr. Modopoulos (which forwarded this email) reads:

Seriously, gentlemen. Let’s avoid this, please. Can we get your confirmation and cheques before end of day today?

[22] The following communications followed:

a. On June 12, 2017 Mr. Weinreb sent an email to Ms. Stockhamer that reads: “Hi. Any word? If not, we are going to commence a claim by the end of the week.”

b. On July 7, 2017, Mr. Weinreb sent an email to Ms. Stockhamer that reads: “We are going to be commencing litigation. Can you please advise which firm will be acting for Target Park?”

c. On July 10, 2017, Mr. Weinreb sent an email to Ms. Stockhamer that reads: “Any word? I have instructions to proceed with a claim on Friday if nothing comes in”.

d. On January 25, 2018, the applicants’ external legal counsel wrote to Ms. Stockhamer and enclosed additional copies of the settlement agreements as executed by the applicants and requested: “Kindly sign back and remit payment pursuant to the agreements”.

e. On February 7, 2018 the applicants’ external legal counsel followed up on her letter and sent an email to Ms. Stockhamer requesting that she “kindly send back the fully executed agreements and have your client remit payment”.

f. On March 5, 2018 the applicants’ external counsel wrote to Ms. Stockhamer and requested that she “[k]indly confirm receipt and provide a response to my correspondence below”.

g. On March 7, 2018, Ms. Stockhamer responded to the email correspondence from the applicants’ legal counsel and advised that her firm no longer represents Target Park in this matter and that she had forwarded the correspondence on to Mr. Modopoulos.

h. On March 8, 2018, the applicants’ external counsel wrote to Mr. Modopoulos, referenced her email correspondence to Ms. Stockhamer dated January 25, February 7 and March 5, 2018, and asked him to “sign back and remit payment pursuant to the enclosed settlement agreements”.

i. Mr. Modopoulos replied the same day and advised: “I have copied my lawyer, I have no idea what you are referring to”. His email was copied to the new lawyer representing Target Park.

j. On March 13, 2018 the applicants’ external counsel wrote to the new legal counsel for Target Park and asked him to “have your client sign back the enclosed settlement agreements and remit payment forthwith”. She enclosed with her letter additional copies of the written settlement agreements that had been executed by the applicants.

[23] Target Park did not return executed copies of the documents and it did not provide post-dated cheques.

Analysis

[24] The issue on this application is whether the respondents entered into an agreement with the applicants to settle the dispute in relation to the four leases.

Legal principles

[25] In Bawitco Investments Limited v. Kernels Popcorn Ltd., 1991 CarswellOnt 836 the Court of Appeal set out at paras. 20-21 the principles that apply when a court is asked to determine whether an agreement was made:

As a matter of normal business practice, parties planning to make a formal written document the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange of correspondence, or other informal writings. The parties may “contract to make a contract”, that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.

However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the “contract to make a contract” is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself.

[26] In Cook v. Joyce, 2017 ONCA 49 the Court of Appeal addressed the requirement that the parties had a mutual intention to create a legally binding contract. The Court of Appeal noted that whether the parties have manifested mutual assent to specific terms usually is determined from their overt acts. A court must employ an objective approach to the evidence, determining what a reasonable observer would have believed the parties intended, taking into consideration the evidence of all the parties as well as the surrounding documentary evidence: Cook at para. 65.

[27] In Cook, the Court of Appeal at para. 72 cited with approval the caution given by Angela Swan and Jakub Adamski in Canadian Contract Law, 3rd ed. (Markham, ON: Lexis-Nexis, 2012) at §4.19:

Intention is always a slippery concept; we all know in general what the concept entails but translating that concept into a workable rule or into a sure guide for courts or lawyers is not easy. The situations where difficulties arise are, of course, those where the offeror’s intentions are either not clear or at variance with what the offeree understood. In these situations, the law has had to take an objective view: the question will be, not what the offeror as a matter of fact subjectively intended, but what a reasonable person in the position of the offeree would have understood the offeror to have intended by doing what was done or by saying what was said. [Emphasis added [by Court of Appeal]].

See also UBS Securities Canada Inc. v. Sands Brothers Canada Ltd., 2007 ONCA 405 at para. 2.

[28] In Apotex Inc. v. Allergan, Inc., 2016 FCA 155 the Federal Court of Appeal addressed at paras. 38-39 the requirements for a settlement agreement in circumstances where the parties agreed that they would execute a formal written agreement, for example, where words such as “subject to formal agreement” appear in an offer or acceptance:

In the end, whether or not a “subject to formal agreement” clause precludes a finding of agreement is a question of construction. That question focuses on “whether the execution of the further contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through” [citations omitted]. In the former case, there is no enforceable contract; in the latter, there is.

This is assessed objectively, looking at the correspondence passing among the parties, with a view to ascertaining whether the parties, through an exchange of matching correspondence, intended to create immediate legal relations [citation omitted]. Some courts have used subsequent conduct of the parties to shed light on whether there has been an agreement on essential terms [citations omitted].

[29] In Apotex, the Federal Court of Appeal also addressed at paras. 42-43 the role of counsel conducting negotiations, and held that the usual law relating to the formation of contracts through agents applies:

Thus, in the case of parties represented by counsel, if both counsel possess the apparent authority to bind their clients - neither has qualified their authority at the outset or neither has qualified an offer or acceptance by saying it is “subject to my client’s approval” or “subject to instructions” - then a matching offer and acceptance by counsel binds the clients. A lawyer’s explicit reservation of the client’s authority to decide whether an offer is accepted means that there can be no agreement until the client is heard from.

Application of legal principles to the evidence

[30] On this application, evidence of the applicants’ and respondents’ overt acts is before me in the form of the written correspondence between their respective representatives, including legal representatives. I disregard the statements of the subjective intentions of the parties that are made in the affidavits of Mr. Weinreb for the applicants and Mr. Modopoulos for the respondents.

[31] The applicants submit that Ms. Stockhamer, as agent for the respondents, had authority to make a binding offer on their behalf and that her April 21, 2017 email constitutes such an offer. The applicants rely on the fact that Ms. Stockhamer did not include any qualifying language in her email that indicated that her authority to bind Target Park was limited or that she needed further instructions. The applicants rely upon the words used by Ms. Stockhamer in her April 21, 2017 email through which, they submit, she expressed her clients’ intention in negotiating the settlement by writing “[i]f your clients agree with this position, then we are fine to proceed with execution of the attached drafts.”

[32] The applicants point out that in her earlier September 16, 2016 email, Ms. Stockhamer expressly disclosed that she did not have authority to bind her clients in respect of draft settlement documents because the documents had not been sent to her client. The applicants also rely upon the fact that in Ms. Stockhamer’s April 20, 2017 email (which was sent one day before her April 21, 2017 email) she wrote that she was waiting to hear back from Mr. Modopoulos on one of the provisions before resending the documents. The applicants submit that, in the circumstances, a reasonable person would have understood that Ms. Stockhamer had sought and obtained instructions for her client to agree to a settlement according to the terms of the forms of agreement that she transmitted.

[33] The applicants submit that a reasonable person in their position, having received the April 21, 2017 email, would have understood that Target Park intended, upon receipt of the agreement of the Freed Entities to the drafts that were attached (through receipt of executed copies), to bind themselves to execute the formal written agreements, the terms of which had been carefully negotiated and agreed upon.

[34] Target Park relies upon the following factual circumstances in support of its submission that, objectively viewed, the parties understood and intended that there would be no binding settlement until the four documents entitled “Settlement and Mutual Release Agreement” had been executed by the parties and settlement cheques were delivered:

a. The July 29, 2016 email from Mr. Sahu to Mr. Weinreb in which he provided the contact information for Ms. Stockhamer and advised that Mr. Modopoulos “has very limited role, upon advice of our lawyer he has to just put his signature on the paper”.

b. The fact that Ms. Stockhamer and Mr. Weinreb were negotiating the terms of formal written agreements to be executed by the parties and which provided that an essential term of the proposed settlements, delivery of postdated cheques, would only take place “upon full execution of this Agreement” (in relation to the Portland Lease and the Wellington Lease).

c. In three emails written in June and July 2017, Mr. Weinreb advised that the Freed Entities would be commencing a “claim” or “litigation”. In these emails, Mr. Weinreb did not assert that a binding agreement had been reached nor did he state that the Freed Entities intended to commence litigation to enforce a settlement agreement.

d. In 2018, representatives of the Freed Entities requested confirmation that a settlement agreement had been reached and delivery of the executed settlement agreements and postdated cheques. It was not until March 13, 2018 that external counsel for the Freed Entities advised that a settlement agreement had been made.

[35] With respect to Mr. Sahu’s email of July 29, 2016, the fact that Mr. Sahu advised that Mr. Modopoulos would have a very limited role and has to “just put his signature on the paper” shows only that the parties intended that a settlement of the dispute in respect of the leases would be through negotiation of the terms of formal written documents that would be executed by the parties. As the Court of Appeal in Bawitco and the Federal Court of Appeal in Apotex noted, parties frequently agree upon all of the essential terms to be included in the written document before it is signed. The question that arises in these circumstances is whether the execution of the formal written document is a condition of the bargain, or whether it is merely the expression of the desire of the parties as to the manner in which an agreement that has been made will go through. In respect of the negotiations between the Freed Entities and Target Park, it is clear that the parties intended that the formal documents would be signed. Mr. Sahu’s email does not shed light on whether execution of the formal documents was intended to be a precondition of the bargain.

[36] The agreement on the terms of the formal documents means that there is no dispute that agreement was reached on all essential terms. If, as the Freed Entities submit, a settlement agreement was made upon acceptance by the Freed Entities of an offer to settle made by Ms. Stockhamer’s April 21, 2017 email, Target Park would be contractually required to execute the four documents to formalize the settlement agreement, which would require Target Park (No. 12) Inc. to deliver the post-dated cheques. The fact that the parties negotiated the terms of formal written agreements through the exchange of drafts which provide for execution by the parties, the terms of which were ultimately agreed upon, instead of negotiating orally or through correspondence, does not signify that once the terms had been settled, execution of the documents would be required before a binding contract would be formed.

[37] The fact that Mr. Weinreb wrote three emails to Ms. Stockhamer in June and July, 2017, (after Ms. Stockhamer’s April 21, 2017 email was sent and after the Freed Entities had returned executed copies of the documents that she had transmitted) in which he advised that the Freed Entities intended to commence “litigation” or a “claim” would not disclose to a reasonable person that the Freed Entities intended and understood in late April 2017 that execution of the settlement documents by all parties was required before a binding settlement agreement was reached. The applicants have commenced litigation to enforce a settlement and, in this litigation, they claim that a binding settlement agreement was reached. The language that Mr. Weinreb used in these three emails is fully consistent with a position that there was a binding settlement.

[38] The fact that external counsel for the applicants requested confirmation that a settlement had been reached and delivery of post-dated cheques does not lead to the conclusion that the parties intended that execution of the four documents was a condition to settlement. In UBS Securities Canada Inc. v. Sands Brothers Canada Ltd., 2009 ONCA 328, Gillese J.A. addressed the argument made in that case that the fact that one of the parties wanted written confirmation from the other party that an agreement had been made indicated that the party that had requested this confirmation did not think there was a binding agreement at that time. Gillese J.A. rejected this argument and wrote at para. 65:

Contrary to Sands Canada’s submission, the fact that Mr. Finemore wanted confirmation of the Agreement is not inconsistent with the Agreement having been concluded at that time. A confirmation is exactly that - confirmation or assurance that a prior agreement had been reached.

[39] In my view, the same reasoning applies to the facts of this case. The letter from external counsel for the Freed Entities dated January 25, 2018 by which she sent additional copies of the executed written agreements and requested that Target Park sign them back and remit payment pursuant to the agreements is not inconsistent with a settlement agreement having been made. This letter is consistent with a request that Target Park comply with its obligations under a completed settlement agreement. The same is true with respect to the emails dated February 7 and March 5, 2018 from the applicants’ external counsel to Ms. Stockhamer.

[40] In my view, the most important evidence that shows the intention of Target Park and the Freed Entities, from an objective perspective, is Ms. Stockhamer’s April 21, 2017 email and the response by the Freed Entities by delivering executed copies of the four written agreements, as had been requested. One day before Ms. Stockhamer’s April 21, 2017 email was sent, she advised Mr. Weinreb that she was waiting to hear back from Mr. Modopoulos on one of the provisions before resending the documents to him. Ms. Stockhamer had the apparent authority to bind her clients, and she did not include language in her April 21, 2017 email which qualified or limited her authority or would have conveyed to a reasonable person in the position of the Freed Entities that she did not have instructions or authority to make a binding offer of settlement.

[41] The words used by Ms. Stockhamer in her April 21, 2017 email that “[i]f your clients agree with this position, then we are fine to proceed with execution of the attached drafts” would convey to a reasonable person that she had sought and obtained instructions from her client to offer to agree to a settlement agreement according to the terms of the forms of agreement that she transmitted. This offer was accepted by the Freed Entities when they sent executed copies of the written agreements a few days later. Upon this acceptance, the respondents were contractually required to deliver executed copies of the four written agreements and Target Park (No. 12) Inc. was contractually required to deliver the post-dated cheques that are called for by the terms of these written agreements. See Apotex at paras. 42-43.

Disposition

[42] For these reasons, I grant judgment in the following terms:

a. A declaration that the respondents made an agreement with the applicants that they would execute and return to the applicants the four written agreements each entitled “Settlement and Mutual Release Agreement” that Ms. Stockhamer received on or about April 25, 2017 and that they are bound by the terms of these written agreements, which included an obligation on the part of Target Park (No. 12) Inc. to deliver post-dated cheques as provided for by the written agreements in relation to the Wellington Lease and the Portland Lease (the “Agreement”).

b. A declaration that the respondents breached the Agreement.

c. Target Park (No. 12) Inc. shall pay to the applicants the amount of $116,206.89 as damages for breach of contract.

[43] The parties agreed that the successful party would be entitled to costs on a partial indemnity scale fixed at $7,500. I fix costs in this amount to be paid by the respondents to the applicants.

Cavanagh J. Date: February 22, 2019