Court File and Parties
COURT FILE NO.: CV-13-114694 DATE: 2019-06-20
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Brian Allen Sherman Applicant – and – Robert Andrew Monteith Respondent
Counsel: Brian Allen Sherman, Self-Represented Robert Andrew Monteith, Self-Represented
HEARD: June 6, 2019
REASONS FOR DECISION
CHARNEY J.:
Introduction
[1] The respondent, Robert Monteith, brings this motion to set aside two consent orders. The first is the Order of Mullins J. dated July 9, 2013, sealing the court file in relation to the Application commenced by Brian Sherman against Mr. Monteith (the “sealing order”).
[2] The second is the Order of Vallee J. dated July 25, 2013 restraining the parties to this application (Mr. Sherman and Mr. Monteith) from effecting a settlement of an action between Monteith Mineralized Solutions Inc. (MMS) and three defendants: Nu-Gro Ltd., Agrium Advanced Technologies Inc. and Agrium Inc. (collectively referred to as “Agrium”) (the “no-settlement order”).
[3] Mr. Sherman consents to the setting aside of the sealing order, but opposes the motion to set aside the no-settlement order.
Facts
[4] This motion involves two separate proceedings.
[5] The first proceeding involves an action between MMS and Agrium. That action was commenced in 2011. In that action, MMS is suing Agrium for breach of a distribution agreement in relation to a natural ingredient pesticide for killing bed bugs. MMS seeks $125 million damages in that action.
[6] The second proceeding is an Application for shareholder oppression brought by the applicant, Brian Sherman, against the respondent, Robert Monteith. In that Application, which was commenced on May 27, 2013, Mr. Sherman, the minority shareholder of MMS, alleges that Mr. Monteith, the majority shareholder of MMS, has oppressed the applicant in various ways (the “shareholder oppression Application”).
[7] Mr. Sherman’s primary complaint in the shareholder oppression Application alleges that Mr. Monteith “plans an early and perhaps inopportune settlement of the Agrium case that he would compel with his majority shareholdings, take the cheque for MMS from our lawyer, take the money from MMS, close the MMS accounts and move to where I could not find him”. Much of the relief requested in the shareholder oppression Application relates to the conduct of the MMS action against Agrium.
[8] In June, 2013, Mr. Sherman brought an urgent motion to the court for, inter alia, an interim order to appoint Mr. Sherman as interim receiver and manager of all aspects of the business of MMS, to require court approval of any proposed settlement of the MMS action against Agrium, and require that any settlement in that action be paid into court. The motion also sought an order that the court file in the shareholder oppression Application be sealed and treated as confidential.
[9] The motion was settled on an interim basis by a consent Order dated July 9, 2013. That Order prevented either party from effecting a settlement of the MMS action against Agrium and sealed the court file related to the shareholder oppression Application. The Order provided:
Until further Order of this Court and without prejudice to the rights of the parties to contest the issues raised by this motion as they see fit on the return of this Application, the parties to this Application are hereby restrained, pending the return date of this Application, from effecting a settlement of Ontario Superior Court of Justice action #11-0245 (at Barrie) through their corporation Monteith Mineralized Solutions Inc.
The contents of this Application file are ordered sealed and treated as confidential, not forming part of the public record.
[10] A second consent Order was obtained on July 25, 2013. Like the first Order, it prevents either party from effecting a settlement of the MMS action against Agrium. This Order provides:
In the interim, until the final hearing of this Application or the trial of the issues of this Application or in the event that one of the parties proposes the making of or acceptance of a settlement offer and without prejudice to the rights of the parties to contest the issues raised by this Application as they see fit at that time, the parties to this Application and anyone on their behalf are hereby restrained from effecting a settlement of Ontario Superior Court of Justice action #11-0245 (at Barrie) through their corporation Monteith Mineralized Solutions Inc.
The balance of this Application shall be adjourned sine die to permit the Applicant to serve and file a Reply Application Record, the parties to conduct examinations and cross-examinations, obtain transcripts and schedule a return date for this Application.
[11] It appears that the shareholder oppression Application has been left to languish since July, 2013, and there have been no further proceedings with respect to that Application.
[12] By email dated July 31, 2013, Mr. Sherman notified Agrium of the two consent Orders, although the Orders themselves were not provided. The email stated as follows:
This is to inform you that on July 25 Madam Justice Vallee gave an order restraining the owners of Monteith Mineralized Solutions Inc, from effecting any settlement of the [Action] until further order of that court in Application # CV-13-114694-00. This is being sent to you as your clients are parties affected by the order. The contents of that Application file are sealed pursuant to the order of Madam Justice Mullins of July 9. Please make sure as well that your client is also aware of this letter to you and please confirm to me that this has been done. It is important for me to know that your client is aware in the unlikely event that you cease acting for them. Thank you.
Brian Sherman Partner, Monteith Mineralized Solutions Inc.
[13] Agrium made numerous requests for further information and sought evidence from MMS’s then counsel about his authority to proceed with the Action in the circumstances. Those requests went unanswered. Agrium was eventually provided with redacted versions of the two Orders, which showed that Mr. Sherman is the applicant and Mr. Monteith the respondent in the Application. The redacted version indicated that Mr. Sherman and Mr. Monteith were restrained from effecting a settlement of MMS’s action against Agrium until the hearing of the Application, which was adjourned sine die.
[14] Based on this information, Agrium brought a motion for a stay of MMS’s action against Agrium, pending the disposition of the shareholder oppression Application. Agrium’s motion to stay was initially dismissed, but leave to appeal to the Divisional Court was granted, and the Divisional Court granted Agrium’s motion to stay the MMS action against Agrium pending the final disposition of the shareholder oppression Application (*Monteith Mineralized Solutions Inc. v. Nu-Gro Ltd, et al*, 2018 ONSC 539).
[15] The Divisional Court decision was released on January 24, 2019. It began by noting that the “appeal arises in highly unusual circumstances”. In granting the appeal and the stay, the Divisional Court stated, at paras. 21 and 22:
The appellants submit that the ability to settle an action is an important component of the authority of a plaintiff to pursue an action. I agree. The importance of that authority was well-described by Justice McCarthy on the leave motion, who was, in turn, referring to reasons given by Justice Mulligan on the refusals motion regarding Mr. Monteith’s cross-examination:
In my view, the issue of whether a stay of proceedings in an action is appropriate when one of the litigants is restrained from settling the action for an indeterminate period is one that is of great importance. There exists a clear tension between one litigant’s right to have a civil matter move forward without undue delay and the opposite litigant’s right to pursue and conclude a resolution of that civil dispute in a timely and cost-effective manner. Here, a court has imposed a restraint upon the ability of the [respondent] to effect a settlement of the [Action] because of the unresolved issue of ownership of the [respondent] corporation. That issue, which remains to be determined in the Application, leaves the purported owner of the corporation, in Mulligan J.’s words, unable to “control these proceedings.” …
In the present case, settlement, which is the most desirable outcome of any civil dispute, is rendered impossible by the orders made in the Oppression Application. [Emphasis added.]
As put by the Supreme Court of Canada in *Kelvin Energy v. Lee*, [1992] 3 S.C.R. 235 at 259, citing *Sparling v. Southam Inc., et al* (1988) 66 O.R. (2d) 225 at 230 (H.C.J.):
The courts consistently favour the settlement of law suits in general. To put it another way, there is an over-riding public interest in favour of settlement. This policy promotes the interests of litigants generally by saving them the expense of trial of disputed issues, and it reduces the strain upon an already over-burdened provincial court system.
[16] The Divisional Court was extremely critical of the terms of the consent Orders, and concluded, at para. 28:
The Newmarket orders undercut the respondent’s authority to pursue this Action so significantly that the failure to grant the stay pending disposition of the application amounts to an injustice. On this basis alone, the appeal is granted.
Analysis
[17] The validity of the no-settlement order was not directly raised in the proceeding before the Divisional Court. That issue is raised for the first time on this motion.
[18] Rule 59.06(2) provides:
(2) A party who seeks to,
(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;
may make a motion in the proceeding for the relief claimed.
[19] The no-settlement order was an order made on consent. The only reason given in the endorsement by Vallee J. for making the Order was that it was on the consent of the parties.
[20] In *D’Onofrio v. Advantage Car & Truck Rentals Limited*, 2017 ONCA 5, the Ontario Court of Appeal held:
A consent judgment is not a judicial determination on the merits of a case but only an agreement elevated to an order on consent. The basis for the order is the parties’ agreement, not a judge’s determination of what is fair and reasonable in the circumstances: *Rick v. Brandsema*, [2009] 1 S.C.R. 295, at para. 64.
[21] In *McCowan v. McCowan*, the Court of Appeal stated:
[I]t is well established that a consent judgment may be set aside on the same grounds as the agreement giving rise to the judgment. These grounds go to the formation of the agreement, not to its subsequent performance.
[22] In *Cookish v. Paul Lee Associates Professional Corporation*, 2013 ONCA 278, at para. 56, the Court of Appeal confirmed the authority of the court to set aside a consent judgment when it is in the interests of justice to do so:
Courts are cautious about setting aside consent orders, of course, but will where it is necessary in the interests of justice to do so: see *Stoughton Trailers Canada Corp. v. James Expedite Transport Inc.*, 2008 ONCA 817, adopting the principles set out in *Beetown Honey Products Inc. (Re)* (2003), 67 O.R. (3d) 511 (S.C.), aff’d without comment on this issue, **, 3 C.B.R. (5th) 204 (Ont. C.A.).
[23] See also the decision of the Divisional Court in *Tibollo Professional Corporation v. Wasserman Associates and Uribe*, 2013 ONSC 2685, at para. 8.
[24] In the present case, the July 25, 2013 no-settlement order was not made “subject to the further order of the court”. Nonetheless, since a consent judgment is not a judicial determination of what is fair and reasonable in the circumstances, it must be subject to such a judicial determination if it is contrary to public policy or subsequent events demonstrate that it is not fair and reasonable.
[25] In this regard, there is a distinction between consent orders intended to finally resolve substantive issues between the parties, and consent orders intended to resolve a procedural issue that may arise within the dispute. The Court’s discretion to set aside the latter is broader than the former. This distinction was highlighted by the Nova Scotia Court of Appeal in *Gates Estate v. Pirate’s Lure Beverage Room*, 2004 NSCA 36, at paras. 28 and 29:
I am conscious of the importance of consent orders in resolving substantive issues in litigation and the reliance rightfully placed upon such orders by litigants and their counsel. However, the rationale for courts not varying this type of consent order is that these orders give effect to agreements reached by the parties after negotiations which may include the litigants compromising their strict legal rights and obligations in order to finally resolve the dispute between themselves. Once the court exercises its discretion and accepts their agreement by granting a consent order, the negotiated terms and the finality the parties sought by their agreement should be respected. For a court to vary the terms of a consent order giving effect to such a negotiated contract may alter the parties’ agreement in a way they would never have agreed to settle for. This is not to say that there will never be a situation where it will be just and equitable to set aside a consent order giving effect to a negotiated settlement.
The order in this appeal is of a different nature. This type of order is used to ensure the carriage of an action proceeds as it should. In this case the order was an attempt to ensure timely documentary disclosure. The involvement of the court in varying this type of order does not carry the same risk of undoing a negotiated agreement of the parties. With interlocutory orders such as this dealing with the litigation process, there is residual discretion to grant relief against dismissal of the action or striking of the defences, in other words to relieve against the sanction provided for failure to comply.
[26] Accordingly, the Nova Scotia Court of Appeal concluded that the Superior Court has inherent jurisdiction to set aside interlocutory consent orders of a procedural nature. This is simply part of the court’s inherent jurisdiction to control its own process. In other words, interlocutory procedural orders are, by their very nature, always subject to the further order of the court.
[27] The consent Order in the present case was not a final settlement of the Application, but was designed as an interim measure, and agreed to on the premise that the shareholder oppression Application would proceed to a final resolution. It did not purport to dispose of the issues in the Application on the basis of any substantive resolution.
[28] Rule 59.06(2) provides that a party may move to have an “order set aside or varied on the ground of fraud or of facts arising or discovered after it was made” [Emphasis added].
[29] The fact that the shareholder oppression Application has not moved forward in six years is a fact that has arisen after the consent order was made. Since the Application has remained static, the Court must revisit the fairness and reasonableness of the consent Order in light of subsequent events.
[30] As the decision of the Divisional Court in Monteith Mineralized Solutions plainly demonstrates, a court order preventing a party to a court action from settling that action is contrary to the “over-riding public interest in favour of settlement”. Given this over-riding public interest, it is an open question whether the court should ever grant an order preventing a party from effecting a settlement of an action unless strict timelines are imposed or it is expressly subject to the further order of the court. Whether the consent Order should ever have been granted in this case, it should not be permitted to continue. As Kiteley J. stated in *Towers, Perrin, Forster & Crosby Inc. v. Cantin*, at para. 12:
When counsel negotiate consent orders on matters affecting only their clients, they can have confidence in the durability of the compromise. The situation may be different where counsel agree and a consent order is made in a matter which affects the parties but which also has an impact on the administration of justice.
[31] A consent order preventing settlement of an action for six years has a direct impact on the administration of justice.
[32] While courts must be cautious about setting aside consent orders, it is my view that it is in the interests of justice to do so in this case.
[33] Accordingly, the motion to set aside the Order of Mullins J. dated July 9, 2013, and the Order of Vallee J. dated July 25, 2013 are granted.
[34] Since the moving party was not represented by counsel, there will be no order as to costs.
Justice R.E. Charney Released: June 20, 2019