Introduction

[1] The plaintiff, Jamie Kearns, commenced this action against the defendant, Canadian Tire Corporation, Limited, for damages for wrongful dismissal. The action was settled at a mediation, and Minutes of Settlement were executed that provided for settlement payments to be made to the plaintiff.

[2] Later, before the settlement payments were made, responsible persons employed by the defendant who had negotiated the settlement discovered that a payment had been mistakenly made by the defendant to the plaintiff before the mediation, of which they were unaware when they made the settlement. The defendant withheld an amount equal to this payment, over the plaintiff’s objection.

[3] The plaintiff moves for judgment to enforce the Minutes of Settlement. The defendant opposes the motion and moves by way of cross-motion for an order that the Minutes of Settlement not be enforced.

[4] For the following reasons, the plaintiff’s motion is granted, and the defendant’s motion is dismissed.

Background Facts

[5] The plaintiff was formerly employed by the defendant. On June 21, 2019, the plaintiff was advised by letter that his employment would be terminated effective July 13, 2018. No cause was alleged.

[6] In this letter, the plaintiff was advised that he was being provided with eight weeks’ base salary as required by the Employment Standards Act, 2000 (“ESA”) and, based on his years of service, he would be provided with a lump-sum payment equivalent to 12 weeks of severance pay. The plaintiff was offered an enhanced separation package which was conditional upon him signing and returning a Full and Final Release and Indemnity. In this letter, the plaintiff was advised that if the defendant did not receive this signed the document, he would only be provided with the minimum statutory entitlements in accordance with the ESA as well as amounts required under the terms of “your offer of employment”. The plaintiff had signed an offer of employment dated December 10, 2012 which provided that, upon termination of his employment without cause, he would be provided with one month of notice per year of service with a minimum of six months and a maximum of 24 months of notice.

[7] The plaintiff did not accept the terms of settlement that were proposed by the defendant in its June 21, 2019 letter and he did not return the signed release.

[8] The plaintiff commenced this action for damages for wrongful dismissal by a statement of claim that was issued on October 16, 2018. The plaintiff claimed $700,000 as damages for wrongful dismissal together with other relief. The plaintiff pleaded that he commenced employment with the defendant on or about September 29, 1991 and that his service with the defendant was continuous between 1996 and 2018.

[9] The defendant served its statement of defence on November 20, 2018. In its statement of defence, the defendant disputed the plaintiff’s position with respect to years of service and pleaded that the plaintiff only worked for the defendant for 11 years and one month.

[10] The parties attended a mediation before an agreed upon mediator on December 19, 2018. The plaintiff attended with his lawyer. The employee relations manager for the defendant attended with the defendant’s lawyer.

[11] At the mediation, the parties reached an agreement to settle the proceeding. Counsel for the defendant prepared an initial draft of Minutes of Settlement and a Full and Final Release and Indemnity. These documents were revised including revisions requested by the plaintiff’s counsel which were agreed to by the defendant’s counsel. The Minutes of Settlement were executed by the defendant and by the plaintiff on December 19, 2018. The Full and Final Release and Indemnity was signed by the plaintiff on December 19, 2018.

[12] The Minutes of Settlement provide that in addition to amounts already paid, the defendant will provide the plaintiff a lump sum payment in the amount of $150,000 as follows:

(a) $90,000 as a retiring allowance; and

(b) $60,000 as general damages without deductions or admission of any liability.

The Minutes of Settlement provide that the settlement funds will be paid within 30 days of the date on which the defendant receives the documents referred to in the Minutes of Settlement. On January 11, 2019 the plaintiff’s lawyer provided the defendant’s lawyer with a direction regarding funds and advised that he looked forward to receipt of the settlement proceeds on or before February 11, 2019.

[13] By email dated February 6, 2019 from the defendant’s lawyer to the plaintiff’s lawyer’s business manager, the defendant’s lawyer advised that the defendant had discovered an overpayment that impacts the settlement payment under the Minutes of Settlement. She advised that on November 23, 2018, payroll personnel at the defendant mistakenly paid out “gratuitous” separation support payments that were offered in the plaintiff’s termination letter in exchange for a release.

[14] The payments which the defendant stated in the email were made in error were comprised of (i) 30 weeks of additional notice in the amount of $75,304.62; (ii) profit-sharing payment in the amount of $10,471; and (ii) short term incentive plan payment in the amount of $29,688.84 for a total gross payment of $115,465.20 which, less income tax deducted in the amount of $34,639.56, amounted to a net payment of $80,825.64. In this email, the defendant advised that the “outstanding difference between the negotiated settlement amount and the overpayment from November 23, 2018 is a non-taxable payment of $45,174.36”. In her email, the defendant’s lawyer advised that the defendant would be making two payments in the amount of $10,000 (to be transferred to the plaintiff’s RRSP) and $35,174.36 in legal costs to be paid to the plaintiff’s lawyer, in trust.

[15] On February 22, 2019, the plaintiff’s lawyer’s office received a cheque from the defendant in the amount of $35,174.36 payable to the law firm’s trust account. Around the same time, the plaintiff’s financial advisor received a cheque from the defendant payable to his RRSP in the amount of $10,000. No further amounts were paid by the defendant.

[16] The plaintiff brought a motion for judgment for enforcement of the Minutes of Settlement. The defendant opposes this motion.

[17] The defendant brought a cross-motion seeking judgment in favour of the plaintiff for the amount set out in the Minutes of Settlement less the amount of $115,465.20 that, the defendant alleges, was mistakenly paid to the Plaintiff on November 23, 2018.

[18] The defendant relies upon the following evidence included in affidavits filed in opposition to the plaintiff’s motion and in support of its cross-motion:

(a) The June 21, 2018 “termination letter” stated that the defendant would provide the plaintiff with only his minimum entitlements under the ESA. The termination letter also offered to the plaintiff a lump sum payment equivalent to 30 weeks’ salary and the plaintiff’s accrued and unpaid perquisites under the defendant’s Short-Turn Incentive Plan and the defendant’s Profit-Sharing Plan. The termination letter stated that these payments would only be provided to the plaintiff in exchange for an executed release. The termination letter gave the plaintiff until June 29, 2018 to accept the offer by returning an executed release.

(b) The defendant advised the plaintiff’s lawyer that it was unable to change the monetary amounts offered in the plaintiff’s termination letter but was willing to extend the period for accepting the offer to August 13, 2018. No settlement was reached, and the plaintiff issued a statement of claim on October 16, 2018. The plaintiff’s lawyer requested that the parties schedule a mediation and, one day later, the parties engaged a mediator to mediate the plaintiff’s action on December 19, 2018.

(c) While preparing the defendant’s statement of defence, the defendant’s internal counsel requested confirmation of the compensation that the plaintiff had received during the notice period. On November 12, 2018, she received copies of paystubs that detailed the amounts paid to the plaintiff following the termination of his employment.

(d) The defendant’s internal counsel commenced drafting the defendant’s statement of issues for the mediation and, when she was doing so, she was aware that the plaintiff had received only his minimum statutory entitlements following the termination of his employment.

(e) During the mediation, the parties confirmed that the plaintiff had been paid his minimum ESA entitlements and Long-Term Incentive Plan payments. The defendant was not aware that the plaintiff was paid any other amounts upon the termination of his employment.

(f) At the mediation, the parties negotiated Minutes of Settlement that included, among other things, an agreement that the defendant would provide the plaintiff with a lump-sum payment in the amount of $150,000 “in addition to amounts already paid” by the defendant to the plaintiff. At the time that the minutes of settlement were negotiated and executed, the defendant was aware of the plaintiff only having been paid his minimum statutory entitlements to termination pay and severance pay under the ESA and Long-Term Incentive Plan payments, with no further amounts paid to the plaintiff. This was based on a review of payroll records provided by the payroll unit of the defendant at the mediation. In his affidavit, the defendant’s representative who attended the mediation, Dale Dreyer, stated that he was not aware of any other amounts having been paid to the plaintiff.

(g) The defendant’s external lawyer who represented the defendant at the mediation prepared an initial draft of the Minutes of Settlement and Full and Final Release and Indemnity. Following the plaintiff’s review of the initial draft settlement documents, the Minutes of Settlement were revised to include references to the plaintiff’s human rights allegations in the settlement recitals, clarification that the defendant would only take out a dismissal order following completion of the settlement payment, and confirmation that the plaintiff had not received Employment Insurance benefits following his employment termination. Counsel for the plaintiff then suggested three more revisions to the Minutes of Settlement which were: (i) inclusion of the words “In addition to amounts already paid” at the beginning of paragraph 1; (ii) clarification that the $60,000 amount be paid without deduction; and (iii) a statement that the Full and Final Release and Indemnity be held in escrow pending payment of the settlement funds.

(h) Following the mediation, Mr. Dreyer was informed that the defendant had inadvertently paid $115,465.20, less applicable deductions, to the plaintiff on November 23, 2018 as pay-out of the payments offered in his termination letter. The defendant’s evidence is that this payment was erroneously paid to the plaintiff after the defendant received a signed release by a similarly named former employee of the defendant: Jennifer Kearns. The defendant’s evidence is that this release was inadvertently attached to the plaintiff’s termination documentation, which was the basis upon which the additional payment was made to the plaintiff.

(i) The defendant’s position is that the settlement that was negotiated at the mediation was on the basis that the plaintiff had only been paid the minimum entitlements under the ESA and, had the defendant known that the plaintiff had received the additional payment, it would not have entered into the settlement.

[19] When he was cross-examined, the plaintiff testified that when he received the payment of $115,465.20 on November 23, 2018, he did not expect this payment and did not know why it was in his account. It was put to him that he knew that the November 23 payment had been made in error and he responded that he was not aware that it was made in error.

[20] The defendant’s employee relations manager, Mr. Dreyer, attended at the mediation. With respect to the short term incentive plan (“STIP”) payments made on November 23, 2018, he testified on cross-examination as follows:

Q. If I can take you to para. 22 of the Statement of Issues. The company provided -- I’m reading. “The company provided the plaintiff with a gross payment of $29,668.84, less all applicable statutory deductions, withholdings and remittances representing the STIP awards allocated through the end of the statutory notice period. The company’s position is that nothing further is owing.” You now understand it to be the case that that amount was paid? That was an accurate statement? He had been provided with that payment?

A. Yes. I understand by the end of the statutory notice period he would have received STIP in lieu payment.

Q. So there was no confusion? You knew that he was paid that amount? That was not something that confused you at the time?

A. No.

There was no re-examination on this evidence.

Analysis

[21] There is a two-step test on a motion to enforce a settlement under rule 49.09 of the Rules of Civil Procedure. The court should inquire first into whether an agreement to settle was reached and, second, whether the agreement should be enforced taking into account all the evidence.

[22] The proper approach at the first step is to treat the motion like a rule 20 motion for summary judgment and, if there are material issues of fact or genuine issues of credibility in dispute regarding whether the parties intended to create a legally binding relation or there was an agreement on all essential terms, the motion for judgment must be dismissed and the issues must be adjudicated at a trial: Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 2007 CanLII 39604 (ON SCDC), 2007 CarswellOnt 6003 (Ont. Div. Ct.) at para. 14; BOT International Ltd. v. CS Capital Ltd., 2003 ONSC 5329 at para. 24.

[23] The defendant submits that there are genuine issues requiring a trial or, in the alternative, the court should exercise its discretion not to enforce the settlement agreement.

Was an agreement to settle reached?

[24] The defendant submits that there are genuine issues requiring a trial with respect to whether an agreement to settle was reached in relation to the following matters:

(a) whether there was consensus ad idem;

(b) the proper interpretation of the settlement agreement and whether the words “[i]n addition to amounts already paid” are ambiguous;

(d) whether the settlement agreement has been performed;

(e) whether the plaintiff has been unjustly enriched;

(f) whether the remedies of rescission and/or rectification are available.

[25] In Oliveira v. Sherman, 2007 ONCA 491, the plaintiff appealed from a decision refusing to enforce a settlement agreement on the ground that there was no meeting of the minds sufficient to give rise to an enforceable agreement. The Court of Appeal addressed whether there was a concluded settlement agreement and explained the applicable legal principles:

A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (a) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement: [citation omitted].

There is no question but that the first requirement was met: the counteroffer was drafted during the course of a court-directed mediation involving multi-million-dollar lawsuits and in which all parties were represented by experienced legal counsel. It is apparent that the parties intended to enter into a binding legal agreement to resolve all of the outstanding legal proceedings.

A determination as to whether a concluded agreement exists does not depend on an inquiry into the actual state of mind of one of the parties or on the parole evidence of one party’s subjective intention. See Lindsay v. Heron Co. (1921), 1921 CanLII 538 (ON CA), 64 D.L.R. 92 (Ont. C.A.). Where, as here, the agreement is in writing, it is to be measured by an objective reading of the language chosen by the parties to reflect their agreement. As was stated by Middleton J.A. in Lindsay at 98-99, quoting Corpus Juris, vol. 13 at 265:

The apparent mutual assent of the parties essential to the formation of a contract, must be gathered from the language employed by them, and the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on the subject.

The Court of Appeal held that, viewed objectively, there was nothing in the agreement to suggest that it was conditional in any respect. The appeal was allowed, and the settlement agreement was enforced.

[26] When I apply these principles to the Minutes of Settlement, I conclude that there is no ambiguity in the written terms, and that the Minutes of Settlement include all terms essential to the formation of a contract. The words “[i]n addition to amounts already paid” are not ambiguous. The plaintiff had already been paid certain amounts by the defendant and the meaning of these words is clear that the amounts to be paid under the Minutes of Settlement are in addition to the amounts already paid. The problem is not one of ambiguity. The problem, from the defendant’s perspective, is that when it entered into the Minutes of Settlement, the persons with authority to commit to the terms of settlement did not know that the November 23, 2018 payment had been made to the plaintiff.

[27] The defendant submits that there is a genuine issue requiring a trial in relation to whether the Minutes of Settlement are unenforceable due to equitable, mutual, and/or common mistake. The defendant submits that it sought evidence from the plaintiff’s counsel in the course of this motion and cross-motion to ascertain further what was in the minds of the parties during negotiation of the Minutes of Settlement and was unsuccessful because the plaintiff’s counsel was not ordered to provide evidence. The defendant submits that, as such, there are extensive gaps in the evidence on what was known to the plaintiff and/or his counsel in the course of negotiating the Minutes of Settlement.

[28] I do not accept this submission. The defendant brought a motion to compel the plaintiff to answer questions concerning the knowledge of his counsel, and it sought to examine the plaintiff’s counsel. The motion was heard by Master Jolley who released her decision on July 10, 2019 dismissing the defendant’s motion. No leave to appeal was sought. The question of whether the plaintiff waived solicitor and client privilege such that his lawyer should be required to give evidence with respect to his knowledge at the time the Minutes of Settlement were entered into has been decided.

[29] The plaintiff’s evidence is that he did not know that the November 23, 2018 payment had been made in error. It is also noteworthy that the defendant’s June 21, 2019 termination letter expressly stated that if the plaintiff did not return the release that was requested, he would be provided with his minimum statutory entitlements as well as amounts required under his offer of employment. The defendant pleaded in its statement of defence that the plaintiff’s years of service were 11 years and one month, and the payment that he received for severance pay under the ESA, 12 weeks, would have been based upon 12 years of service. When the plaintiff received the November 23, 2018 payment, this represented an additional 30 weeks salary plus amounts in payment of the plaintiff’s STIP bonus. These amounts were shown on the remittance slip dated November 23, 2018. The payment of these amounts appear to be amounts owing under the plaintiff’s offer of employment, which he was told that he would receive. There is no evidentiary basis upon which a reasonable inference may be drawn that the plaintiff knew the defendant was mistaken when it entered into the Minutes of Settlement.

[30] The factual record in relation to this question is complete. There are no genuine issues of credibility requiring a trial. The evidence is that the plaintiff did not know that the defendant was mistaken. There was no common or mutual mistake. The mistake, and I accept on the evidence filed on this motion that there was one, was a unliteral mistake by the defendant.

[31] The plaintiff relies on the following passage from G.H.L. Fridman, Q.C. on The Law of Contract in Canada, Fourth Edition (Toronto: Carswell,1999) at p. 274:

The converse of the proposition as to knowledge of the other party’s mistake is that if the unmistaken party is ignorant of the other’s mistake the contract will be valid and neither rescission nor rectification will be possible. Such was the case in Commercial Credit Corporation v. Newell Agencies Ltd. (1981), 1981 CanLII 589 (BC SC), 126 D.L.R. (3d) 728 (B.C.S.C.]. The lessor of an automobile, at the lessee’s request, indicated the price at which the lessee could purchase the vehicle. The price was erroneously understated. That fact was unknown to the lessee, who paid the stipulated amount and took a transfer of title to the vehicle. It was held that the lessor who sold the vehicle was not entitled to rely on the doctrine of mistake and claim the difference between the sale price and the correct price.

[32] The plaintiff also relies upon Cozart v. Cozart, 2007 SKQB 160 at paras. 42-44:

Where one party to a contract is in error on a critical issue, the matter is governed by the principles relating to the law of unilateral mistake. The Saskatchewan Court of Appeal reviewed the doctrine of unilateral mistake in Montreal Trust Co. v. Maley (1992), 1992 CanLII 8264 (SK CA), 105 Sask. R. 195 (C.A.). In Montreal Trust v. Maley, Justice Wakeling cited with favour the test employed by the Ontario Court of Appeal in Alampi v. Swartz (1964), 1964 CanLII 303 (ON CA), 43 D.L.R. (2d) 11 (Ont. C.A.) at para. 16. That test is:

To succeed on a plea of unilateral mistake the defendant must establish:

(1) that a mistake occurred;

(2) that there was fraud or the equivalent of fraud on the plaintiff’s part in that she knew or must be taken to have known when the agreement was executed that the defendant misunderstood its significance and that she did nothing to enlighten the defendant: Blay v. Pollard & Morris, [1930] 1 K.B. 628; Farah v. Barki, 1955 CanLII 3 (SCC), [1955] 2 D.L.R. 657, [1955] S.C.R. 107.

[33] The plaintiff also relies on Harper v. Kami’s Eating & Meeting Place, 1996 CarswellOnt 3647 at para. 8 for the same propositions.

[34] In Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Ltd., 2002 SCC 19, the Supreme Court of Canada, at para. 31, stated the principles that apply to rectification of a contract:

Rectification is an equitable remedy whose purpose is to prevent a written document from being used as an engine of fraud or misconduct “equivalent to fraud.” The traditional rule was to permit rectification only for mutual mistake, but rectification is now available for unilateral mistake (as here), provided certain demanding preconditions are met. Insofar as they are relevant to this appeal, these preconditions can be summarized as follows. Rectification is predicated on the existence of a prior oral contract whose terms are definite and ascertainable. The plaintiff must establish that the terms agreed to orally were not written down properly. The error may be fraudulent, or it may be innocent. What is essential is that at the time of execution of the written document the defendant knew or ought to have known of the error and the plaintiff did not. Moreover, the attempt of the defendant to rely on the erroneous written document must amount to “fraud or the equivalent of fraud.” The court’s task in a rectification case is corrective, not speculative. It is to restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other: [citations omitted]. In Hart, supra, at 630, Duff J. (as he then was), stressed that “the power of rectification must be used with great caution.” Apart from everything else, a relaxed approach to rectification as a substitute for due diligence at the time the contract is signed would undermine the confidence of the commercial world in written contracts.

[35] The defendant has not shown that there was fraud or the equivalent of fraud on the plaintiff’s part. The evidence is to the contrary, that the plaintiff did not know that the defendant was mistaken. Therefore, the Minutes of Settlement constitute a valid and binding contract, and neither rectification nor rescission is possible.

Should the agreement should be enforced taking into account all of the evidence?

[36] The defendant submits that if it is unsuccessful in establishing that there is a genuine issue requiring a trial regarding whether an agreement to settle was reached, I should exercise my discretion under the second step of the test and refuse to grant judgment to the plaintiff having regard to all of the evidence, including what the defendant submits would be an injustice.

[37] In support of this submission, the defendant argues that the plaintiff should not be entitled to rely on “a paucity of evidence” regarding his understanding of the revision to the Minutes of Settlement to add the words “[i]n addition to the amounts already paid” which, the defendant submits, was a revision to the plaintiff’s benefit. The defendant submits that the plaintiff’s “wilful ignorance” with respect to the basis for the revision and the benefit operates to preclude the plaintiff from seeking relief.

[38] I disagree that there is a paucity of evidence on the question of the plaintiff’s knowledge. The plaintiff was directly asked, on cross-examination, whether he knew that the November 23, 2018 payment had been made in error and he responded directly that he was not so aware. It was open to the defendant to ask follow-up questions on matters that were not the subject of solicitor and client privilege. The defendant was not successful in obtaining an order which would allow it to obtain privileged information from the plaintiff and his legal counsel, and no motion for leave to appeal was made from the order of Master Jolley. For reasons I have given, I also disagree that there is any evidentiary basis for me to infer that the plaintiff was “wilfully ignorant” when the Minutes of Settlement were executed.

[39] The defendant’s main basis for its request that an order be made not to enforce the Minutes of Settlement is that it made a mistake when it agreed to pay the amounts in the Minutes of Settlement. The defendant submits that the amount of the settlement is so large that it is far in excess of what the plaintiff would have been entitled or expected to receive. The defendant has not shown on the evidence before me that this is so.

[40] I decline to exercise my discretion to refuse to enforce the Minutes of Settlement.

Disposition

[41] I grant the plaintiff’s motion to enforce the Minutes of Settlement and make the following order:

(a) I declare that the Minutes of Settlement constitute a valid and binding contract.

(b) I order the defendant to pay to the plaintiff the sum of $150,000 less the partial payment of $45,174.36, a net amount of $104,825.64, in accordance with the terms of the Minutes of Settlement.

[42] Counsel for the plaintiff submits that if the plaintiff is successful, he should be awarded costs on a substantial indemnity basis. Counsel relies on the fact that the action was settled, and that the plaintiff will be out of pocket because of the need for unnecessary legal proceedings to enforce the settlement. I disagree that there are proper grounds for an award of costs on a substantial indemnity scale. The defendant has not engaged in reprehensible conduct. Costs should be awarded on a partial indemnity scale.

[43] The plaintiff submitted a costs outline in which costs are claimed on a partial indemnity scale in the amount of $32,730 for fees, $3,543.96 for disbursements and $4,267.90 for HST on fees, a total of $40,641.86. The defendant submitted a costs outline for an amount which is $10,000 lower.

[44] Counsel for the defendant submits that the partial indemnity rate claimed by plaintiff’s counsel who was called to the bar in 2009 ($350) is too high for this case and for counsel with this level of experience. The partial indemnity rate claimed is slightly higher than one-half of the actual rate of plaintiff’s counsel. Although the rate claimed is at the high end for this kind of case, I am satisfied, having regard to the factors in rule 57.01(1) of the Rules of Civil Procedure, that the overall amount claimed is not unreasonable and that it is within a range of costs that the defendant would expect to pay if it was unsuccessful. I fix costs in the amount of $40,641.86 to be paid by the defendant to the plaintiff within 30 days.

Cavanagh J.

Date: August 22, 2019

Kearns v. Canadian Tire Corporation, Limited, 2019 ONSC 4946

Case Summary

Introduction

Background Facts

Analysis

Was an agreement to settle reached?

Should the agreement should be enforced taking into account all of the evidence?

Disposition

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 4

Legal Tests 2