Court File and Parties

COURT FILE NOS.: CV-18-00611182; CV-19-616091-00CL DATE: 2019-07-11 SUPERIOR COURT OF JUSTICE – ONTARIO COMMERCIAL LIST

RE: Joseph Rubner, Applicant/Responding Party AND: Marvin Rubner, Respondent/Moving Party

BEFORE: L.A. Pattillo J.

COUNSEL: Sean M. Grayson, for the Applicant/Respondent Aaron Blumenfeld and Graham Splawski, for the Respondent/Moving Party

HEARD: April 17, 2019

Endorsement

Introduction

[1] This is a motion by the respondent, Marvin Rubner (“Marvin”) for an order staying the application commenced by his brother Joseph Rubner (“Joseph”) (the “Motion”) in which Joseph seeks, among other things, to set aside Marvin’s Notice to Arbitrate arising from an alleged settlement of the litigation between them on August 1, 2018.

[2] In addition to the Motion, Marvin has commenced an application for a declaration that he and Joseph entered into a binding settlement agreement on August 1, 2018 or in the alternative an order pursuant to s. 10 of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”) appointing an arbitrator to resolve the disputes under the alleged settlement agreement.

[3] The issue for determination therefore not only on the Motion but also on both Joseph’s and Marvin’s applications is whether Marvin and Joseph reached a binding settlement of the issues between them on August 1, 2018.

[4] For the reasons that follow, I have concluded they did not reach a binding settlement agreement.

Background

[5] In June 2013, Joseph (also known as Yossi) and his sister, Brenda Bistricer commenced an action on the Commercial List (CV-10452-00CL) against Marvin (also known as Moshe), in both his personal capacity and as a trustee of the Bistricer Rubner Family Trust, as well as Kabler Developments Limited (“Kabler”) and Y.A.D. Investments Limited (“Y.A.D.”) (the “Action”). Joseph claimed, among other things, a declaration that he owned one third of the issued and outstanding shares of Kabler plus damages for oppression and breach of various duties. Marvin and Y.A.D. counterclaimed against Joseph, Brenda and their mother Eda for a declaration that he was the beneficial owner of both the common and preference shares of Kabler.

[6] The Action has not proceeded beyond the pleadings. The parties attempted mediation in 2016 which was unsuccessful. Most recently, Marvin and Joseph, together with their counsel and financial advisors, attended mediation on March 6 and July 23, 2018. No agreement was reached. After the mediator left on July 23rd, the parties and their counsel continued to talk.

[7] Late on July 23rd, Joseph’s counsel sent a document by email to Marvin’s counsel entitled “Kabler Deal Points” concerning a resolution of his claim against Marvin (the “July 23 Deal Points”). It was signed by Joseph and set out the following six points:

1. Payment of after-tax value to Joseph of $7,000,000 based on a capital gains tax of 27%.
2. Payments in exchange for shares, as FMV.
3. Payments to be made in 5 equal installments each January 1, commencing January 1, 2019. “Interest” on missed payments only at 5% until made.
4. Full + final mutual release + without costs dismissal.
5. Any dispute(s) re written agreements to be arbitrated by C.J. Winkler.
6. Voting agreement so that Marvin controls all voting of Joseph’s shares.

[8] The July 23 Deal Points document was not signed back by Marvin. Rather, on July 25, Marvin’s counsel sent Joseph’s counsel a draft of a written agreement structure. Joseph’s counsel responded by stating that what was required was a statement of the fundamental deal points, not a comprehensive settlement agreement. He noted that the problem with trying to get a comprehensive agreement could lead to disputes about tax and other matters without a binding agreement in place that includes an arbitration clause to resolve any issues. Marvin’s counsel responded by sending yet another written agreement which he believed “was in line with the agreed principles and does not include new issues and points.” Shortly thereafter, Marvin’s counsel sent a further revised version of the agreement.

[9] On July 31, 2018, Joseph met with his counsel and discussed the Kabler Deal Points and settlement. At the end of that meeting, Joseph’s counsel sent Marvin’s counsel the July 23 Deal Points document with the following additions noted thereon in red (the July 31 Deal Points”):

i. Following point one: “Joseph agrees his interest is 10%” ii. Following point five: “Parties to act in commercially reasonable fashion” iii. Under Joseph’s signature: “I confirm my agreement to the deal points herein and give authority to John Adair to negotiate comprehensive minutes of settlement.” iv. At the bottom, Joseph signed the amended document for the second time.

[10] Once again, the July 31Deal Points document was not signed back by Marvin.

[11] On August 1, 2018, Marvin’s counsel wrote to Joseph’s counsel by email and advised that there were “material terms” that were not referenced in the July 31 document and set them out as follows:

1. The amount payable by Moshe to Yossi is (i) the after tax value on a $7m purchase price presuming a 27% capital gains tax rate (i.e. $5.11 million), and (ii) Yossi’s actual tax liability, with a $7 mm cap on (i) and (ii). [I don’t believe your point 1 is clear in this regard.]
2. Moshe has no obligation to make the first payment until the earlier of (i) Moshe’s resolution of the Kalber dispute with Brenda and (ii) five years from now, but will be liable at 5% per annum for any payments after the due dates in your clause 3.
3. Title to the entirety of Yosi’s legal and beneficial, present and future (including contingent interest in pref shares) ownership interest in Kabler will pass to Moshe at the same time as Moshe makes the 1st 1/5 payment, with Yossi’s remedies for non-payment of any of the last 4 payments being a claim for payment of those amounts plus the 5% per annum “fee”.
4. The voting trust agreement is effective now, such that Moshe going forward will have the right to vote all of Yossi’s legal and beneficial interest in Kabler.
5. While Yossi has given you authority to negotiate minutes of settlement, Yossi and Moshe intend that the Kabler “deal points” agreement are binding and enforceable by either party.

[12] Marvin’s counsel ended the email by noting that he believed that counsel and the clients were all “ad idem” on the above points but it was not clear to him in the document Joseph signed the previous night. He asked for confirmation.

[13] Joseph’s counsel replied 15 minutes later. He stated that they were “ad idem” and agreed but for one small issue regarding Joseph not giving up any future interest he may have to Kabler shares. Marvin’s counsel responds within minutes and clarifies that what Joseph is giving up is his contingent interest in the Kabler pref shares and nothing else. He forwards the Kabler articles and identifies where the special shares are referred to. Joseph’s counsel responds 35 minutes later: “We are as [sic] idem that Yossi will give up any claim to the special shares.”

[14] At 9:45 p.m. on August 1, 2018, Marvin’s counsel sent an email to Joseph’s counsel attaching the July 31 Deal Points document, amended to note “This agreement includes Schedule A attached”. At the bottom below Joseph’s signature, Marvin had written “agreed” and signed it. Schedule A was a copy of the above emails between counsel earlier on August 1, 2018 (the “Amended July 31 Deal Points”).

[15] Marvin’s counsel’s email forwarding the Amended July 31 Deal Points said, in part:

Further to our discussions and emails today, Moshe has “signed back” Yossi’s 1 pager, attaching our email exchange so that we now have all the essential terms of the agreement between Moshe and Yossi re Kabler in one document.

Can you confirm the attached “deal” from Yossi’s perspective (quare (sic) whether he should sign, so both brothers sign the same document?), and that the next step is that I’ll receive some feedback from Yossi’s tax/corporate lawyer regarding our 4 page typed draft sent to you about a week ago?

[16] Neither Joseph nor his counsel provided any substantive feedback to the August 1st email or the Amended July 31 Deal Points. Joseph’s evidence is that he was not advised by his counsel of the Amended July 31 Deal Points until mid-September and he did not agree to it and subsequently changed counsel.

[17] As a result, Marvin served a Notice to Arbitrate dated October 4, 2018 pursuant to point five of the July 23 Deal Points. In serving the Notice, Marvin’s position was that the parties counsel had reached an agreement to settle the litigation on August 1, 2018 which included an arbitration clause.

[18] Joseph countered by commencing an application on December 18, 2018 pursuant to s. 48.1(b) of the Arbitration Act, S.O. 1991, c. 17 (the “Act”), (CV-18-00611182) for an order declaring Marvin’s Notice to Arbitrate in valid on the ground that no settlement was reached between the parties on August 1, 2018. Joseph’s application was transferred to the Commercial List by Order of Hainey J. dated January 21, 2019.

[19] By Notice of Motion dated February 7, 2019, Marvin commenced the Motion seeking, as noted, a stay of Joseph’s application pursuant to s. 7 of the Act.

[20] In addition, Marvin also subsequently commenced an application on the Commercial List in March, 2019 (CV-19-616091-00CL) seeking an order pursuant to s. 10 of the Act appointing the Honourable Warren Winkler as arbitrator pursuant to the arbitration agreement entered into between he and Joseph on August 1, 2018.

Position of the Parties

[21] Marvin submits that based on the exchange of emails between his counsel and Joseph’s counsel between July 23, 2018 to August 1, 2018, the essential terms of a settlement between he and his brother were reached between counsel on August 1, 2018. The settlement included the essential elements of the litigation between Marvin and Joseph and included an arbitration clause.

[22] Marvin submits that given the terms of the settlement, he was entitled to serve the Notice of Arbitration and to have the Honourable Warren Winkler appointed as arbitrator to resolve disputes concerning the settlement.

[23] Joseph submits that no settlement was reached between the parties on August 1, 2018 concerning the essential elements. While Joseph admits that he was prepared to settle based on the July 23 Deal Points and again with respect to the July 31 Deal Points, as evidenced by his signature, he was agreeing to the Deal Points and nothing more. He never agreed to the Amended July 31 Deal Points.

[24] Joseph further submits that his counsel was not authorized to agree to the changes proposed by Marvin’s counsel to the July 23 Deal Points as contained in the Amended July 31 Deal Points. His counsel’s authority, as set out in the July 31 Deal Points, was expressly limited to negotiating comprehensive minutes of settlement.

Discussion

[25] In Olivieri v. Sherman, 2007 ONCA 491; 86 O.R. (3d) 778, at para. 41, Gillese J.A. states in part, citing Bawitko Investments Ltd. v. Kernals Popcorn Ltd. (1991), 1991 CanLII 2734 (ON CA), 79 D.L. R. (4th) 97 (Ont. C.A.) that in order for a settlement to exist, the court must find that the parties had: 1. A mutual intention to create a legally binding contract; and 2. Reached agreement on all of the essential terms of the settlement.

[26] I am satisfied from the evidence that the terms of the July 31 Deal Points as expanded by Marvin’s counsel’s August 1st email and incorporated into the Amended July 31 Deal Points, comprise the essential terms of a settlement of the issues between Marvin and Joseph. The litigation involved Joseph’s claim that he was a 1/3 owner of Kabler and the alleged settlement purports to resolve that claim.

[27] The issue of whether there is a binding settlement turns on the question of whether Marvin and Joseph agreed to the material terms of the settlement. Given how the purported settlement came about, the answer turns on the determination of whether Joseph’s counsel had the authority to agree to the “material terms” that Marvin’s counsel sent by email on August 1 and which Joseph’s counsel confirmed, after a small clarification, he was “ad idem” with.

[28] Black’s Law Dictionary defines ad idem as: “To the same point or matter; of the same mind.” In the context in which it was used, it is clear in my view that by using the term “ad idem” Joseph’s counsel was agreeing to the material terms forwarded by Marvin’s counsel.

[29] It is well-established law that a solicitor of record has the ostensible authority to bind his or her client and that opposing counsel is entitled to rely on that authority, absent some indication to the contrary: Dick v. McKinnon, 2014 ONCA 784 at para. 4.

[30] Joseph submits that his counsel did not have the authority to agree to the additional “material terms” sent by Marvin’s counsel on August 1. Specifically he relies on the addition to the July 31 Deal Points under his first signature which states “I confirm my agreement to the deal points herein, and give authority to John Adair to negotiate comprehensive minutes of settlement.” following which he again signed the document.

[31] In my view, it is clear from the communications that took place between the parties’ counsel respecting settlement that what the parties were seeking to do was agree on the deal points (or material terms) of a settlement following which, comprehensive minutes of settlement would be entered into. Given that context, I conclude that the above wording limits Joseph’s counsel’s authority to negotiating the minutes of settlement after the deal points have been agreed to by both Joseph and Marvin. It does not extend to Joseph’s counsel having the authority to agree to the deal points. It was only Joseph who could agree to the deal points.

[32] The above conclusion is supported by the record and specifically both the July 23 Deal Points document and the July 31 Deal Points document which were each signed by Joseph. Further, the Amended July 31 Deal Points sent by Marvin’s counsel on August 1st, was “signed back” by Marvin. Given the lengthy discussions which had taken place regarding settlement, I am satisfied that both Marvin and Joseph understood they each had to agree to the Deal Points or material terms of the settlement and they each had to sign the document setting out the Deal Points.

[33] I am also satisfied that Marvin’s counsel was aware of Joseph’s counsel’s limitation of authority. In his August 1st email setting out the “material terms” not referenced in the July 31 Deal Points, he specifically notes Joseph’s limitation of authority. In addition, he was also aware that specific agreement to the Amended July 31 Deal Points document was required, either by Joseph’s signature or as confirmed by counsel. Again in his August 1st email, Marvin’s counsel notes that Marvin had “signed back” the July 31 Deal Points document, implying that Joseph had to sign the document to agree to the changes. Further, Marvin’s counsel sought confirmation of Joseph’s agreement to the amended deal or his signature on the document. Neither were forthcoming.

[34] For the above reasons, therefore, I have concluded that no agreement was reached between Marvin and Joseph on the “Deal Points” or material terms of the settlement. There was no mutual intention to agree and accordingly no binding settlement was reached between them on August 1, 2018.

Conclusion

[35] Accordingly, Marvin’s motion for a stay of Joseph’s application is dismissed as is his application for a declaration that he and Joseph entered into a binding settlement agreement on August 1, 2018 or in the alternative an order pursuant to s. 10 of the Act appointing Mr. Winkler as an arbitrator to resolve the disputes under the alleged settlement. The power to appoint an arbitrator arises from the provision in the alleged settlement agreement which provided that any disputes concerning the written agreements were to be arbitrated. As there is no settlement, there is no basis to appoint an arbitrator.

[36] Finally, based on the above, Joseph’s application to set aside Marvin’s Notice to Arbitrate is allowed. The Notice to Arbitrate was served by Marvin based on his position that there was a settlement which provided, in part, for arbitration. As noted, in the absence of settlement, there is no agreement to arbitrate.

[37] Joseph is entitled to his costs of the motion and the applications on a partial indemnity basis. At the conclusion of the argument, both parties submitted Cost Outlines in respect of the three matters.

[38] Joseph claims partial indemnity fees totalling $13,122.92 made up of fees of $12,944.15 (including HST) and disbursements of $178.77. By contrast, Marvin’s partial indemnity costs total $28,275.61.

[39] Based on the issues raised and the work done as outlined in the Cost Outline, and having regard to the hourly rates claimed, I am satisfied that Joseph’s partial indemnity costs claimed are both fair and reasonable. I am also satisfied that they are well within the costs Marvin could have reasonably expected to pay.

[40] Costs to Joseph on a partial indemnity basis, fixed at $13,122.92.

L.A. Pattillo J.

Released: July 11, 2019