COURT FILE NO.: CV-13-480572
DATE: November 14, 2019
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Prasher Steel Ltd. v. Maystar General Contractors Inc.;
BEFORE: MASTER C. WIEBE
COUNSEL: Angela Assuras for Prasher Steel Ltd. (“Prasher”); Rocco A. Russo for Maystar General Contractors Inc. (“Maystar”).
HEARD: November 12, 2019.
REASONS FOR DECISION
[1] Prasher brings a motion to enforce Minutes of Settlement agreed upon by Prasher and Maystar on July 27, 2017 settling this lien action. This action purported to be the perfection of a $611,061.10 claim for lien Prasher registered in relation to structural steel work Prasher did for Maystar in 2012.
[2] There was initially a discussion about jurisdiction. Ms. Assuras, counsel for Prasher, rightfully reminded me that this action remained subject to the judgment of reference issued by Justice Pollak on October 29, 2013. The last case in the reference, the Prasher action, was settled in July, 2017, close to the ordered 10 trial hearing dates starting August 1, 2017. There was no report. There was also no final order as the settlement involved continued performance by Maystar. The lien bond that Maystar had posted as security for the Prasher claim for lien also remained in place pending the conclusion of the settlement. I was, therefore, satisfied that I had jurisdiction under the judgment of reference to hear this motion either as a motion to enforce a settlement under Rule 49.09 or as a summary judgment motion under Rule 20.
[3] If it is necessary for me to grant leave under Construction Act, R.S.O. 1990, c. C.30 section 67(2) for this motion to be heard, I do so, as it is clearly necessary for the court to hear a motion to enforce a settlement of an action. This would also certainly expedite the resolution of the issues in dispute.
[4] Neither party disputes the existence of the settlement, as both parties admit to signing the Minutes of Settlement. The only question is the enforcement of the settlement. The specific issues in relation to the enforcement of the Minutes are whether Maystar failed to comply with the interest payment provisions of the Minutes, and, if it so failed, whether it should bear the full consequences specified in the Minutes.
[5] The Minutes dated July 27, 2017 are detailed. They were prepared and signed with the benefit of counsel on both sides. They specify a settled amount of $325,000 for payment by Maystar to Prasher. This amount is then specified to be paid in five specified installments by five specified dates, with the first payment to be made by August 31, 2017 and the final payment to be made by August 31, 2018. There is a paragraph giving Maystar the right to pay the full amount of the settlement at any time.
[6] There are then several paragraphs that concern the payment of interest. It is stated that interest at 2.5% per annum is to be paid by Maystar on any part of the settlement amount that remains outstanding starting September 1, 2017, with the accumulated interest to be paid by August 31, 2018.
[7] There are then provisions that apply in the event of non-payment of the principal and interest. Paragraph 6 specifies that, should Maystar fail to pay installments of principal or interest, it will have 10 days to cure this default from the time an email is transmitted to Maystar’s lawyer notifying Maystar of the default. To cure the default, it is stated that Maystar must pay the missed payment plus $500 in legal costs to Prasher’s lawyer within the 10 days. Paragraph 8 of the Minutes clearly states that, if the default in payment of any principal and interest is not so cured within this 10 day period, Maystar consents to judgment of the full Prasher claim for lien, namely $611,061, less any payments of principal.
[8] The evidence on the motion contains the following undisputed facts. On August 11, 2017, Maystar delivered five postdated cheques in payment of the five principal installments, with each cheque make payable on the final day each installment was due. These cheques were cashed in due course. Maystar did not, however, pay any interest.
[9] On September 6, 2018 Maystar’s lawyer, Mr. Ruso, sent a letter to Prasher’s lawyer, Adam Wainstock, requesting a full and final release. That day, September 6, 2018, Mr. Wainstock responded to Mr. Ruso by email, copied to his associate Iris Pichini, saying that Maystar was in default of the Minutes of Settlement for non-payment of interest, and that that email was to be considered written notice of default under paragraph 6 of the Minutes.
[10] There was no payment of interest and costs in the 10 days following receipt of the September 6, 2018 email. On September 19, 2018 at 11:30 a.m. Ms. Pichini sent Mr. Wainstock an email stating that “I was away last week and a bit for the week prior,” apologizing for the delay in responding. She enclosed “our calculation of interest.” The attached calculation totaled $3,652.05. At 10:54 p.m. that evening, some eleven hours later, Prasher counsel emailed Maystar counsel stating that Maystar now owed $611,061.10 since Maystar’s default had not been cured in accordance with the Minutes. This email contained a calculation of the accumulated interest that totaled $3,699.91. The difference between the two calculations was the exclusion by Maystar counsel of 4 days of interest.
[11] On September 21, 2019 Maystar counsel delivered a Maystar cheque for the $3,652.05 (namely the amount of Maystar’s interest calculation plus $500 in legal costs) to Mr. Wainstock, who has held these funds in trust as it did not want to prejudice Prasher’s position on this motion. Prasher then retained Ms. Assuras and brought this motion.
[12] On the motion, Maystar presented the affidavit of its president, Wayne Garrett. The only explanation Mr. Garrett gave for the failure by Maystar to pay the interest was that it was allegedly “impossible” for Maystar to make payment of the interest without a quantification of the interest. He described Mr. Wainstock’s email notice of default on September 6, 2018 as being defective as it did not provide an interest calculation. He described the Minutes as being unclear and vague as they did not specify which party was to do the calculation or whether the parties were to agree on the calculation. He stated that the first proper notice was given to Maystar on September 19, 2018 when Mr. Wainstock provided his calculation. Mr. Ruso made the same argument on the motion.
[13] I do not find that this issue is a genuine issue of fact or law meriting a trial. The Minutes are clear as to how the interest was to be calculated. Paragraph 4 of the Minutes states that 2.5% per annum interest is to be paid on any portion of the settlement amount that remains unpaid on or after September 1, 2017 and is to run until the settlement amount is paid in full. Maystar chose not to pay the entire settlement funds immediately, which it could have done, but chose instead to pay by installments. It provided all installments by five post-dated cheques as specified in paragraph 2 of the Minutes, with the post-dated cheques made payable on the last days of the installment periods. Therefore, the calculation of the interest could easily be done by either side, and there was no need for a notice with a calculation. Indeed, as I suggested to Mr. Ruso, Maystar could have calculated and submitted up front a sixth post-dated cheque for the interest in order to avoid this problem. It chose not to do so.
[14] The most crucial fact in relation to this argument was the email exchange between Ms. Pichini and Mr Wainstock on September 19, 2018, namely after the lapsing of the cure period. Ms. Pichini sent her calculation at 11:37 a.m. that day, while Mr. Wainstock sent his calculation at 10:54 p.m. that night. In short, Maystar did not need a notice with a calculation to pay the interest. It eventually on September 19, 2018 did the calculation itself and two days later, on September 21, 2018, paid the calculated interest. Incidentally, Maystar did not pay the interest Mr. Wainstock calculated. It paid the interest it had calculated. Finally, I note that Mr. Ruso provided me with no authority for this proposition as a matter of law. This is a non-issue.
[15] Mr. Ruso then argued that the non-payment was caused by Maystar’s lawyer, Ms. Pichini. There was also no genuine issue on this point either. Mr. Ruso verbally gave evidence that Ms. Pichini had been away on her wedding and honeymoon after the default notice, and that this caused Maystar not to pay the missed interest and costs. There was no evidence before the court to substantiate this assertion. Mr. Garrett did not address it in his affidavit. There was no affidavit from Mr. Pichini. Furthermore, I notice that the September 6, 2018 default notice was sent to Mr. Ruso, not Ms. Pichini. There was no affidavit from Mr. Ruso as to what he did with that notice. Mr. Ruso’s statements in court were not evidence, and I do not accept them.
[16] Finally, Mr. Ruso argued that I should exercise my discretion under Courts of Justice Act, R.S.O. 1990, c. C.43, section 98 to grant relief from penalties and forfeitures. He asked that I not enforce these terms of the Minutes of Settlement on the grounds that they are penal provisions and unconscionable as they lead to a result that imposes on Maystar a “penalty” payment that is some 78 times the size of the unpaid interest that was just paid a few days late.
[17] Mr. Ruso relied heavily on the decision of Justice Whalen in Factors Western Ltd. v. Stach et al., 2013 ONSC 4392 (SCJ). In this case, there was a contentious action about the alleged sale of fraudulent accounts receivable. There was an interim settlement that was, according to the ruling, paid in full or in a substantial amount. There was then a final settlement involving minutes of settlement. Under the minutes, a payment of $250,000 was to be made over one year in four installments, and there was a consent to judgment in the amount of $250,000 if any installment were not paid. The minutes also specified that if the debtor could not pay any of the installments by a specified date, the debtor was to apply for a loan secured by a mortgage on a property to pay for the outstanding installments, and the creditor was to lift a certificate of pending litigation it had on the subject property to facilitate the mortgage. The debtor paid installments totaling $155,000 but could not pay the final installment of $95,000. He proceeded to arrange the mortgage secured loan, and asked the creditor to lift the certificate. The creditor dragged its feet, but eventually agreed to assist. The mortgage commitment came a day after the final installment was due. The creditor nevertheless obtained a consent judgment for $250,000, and the debtor moved for relief from forfeiture.
[18] Justice Whalen granted the relief. The Judge found in paragraphs 20 and 21 that both the common law doctrine of relief from penalties, determined as such on the date of the contract, and the equitable doctrine of relief from forfeiture, determined as such on the date of the breach of contract, should be analyzed as a question of unconscionability, namely whether the consequences of the breach were “out of all proportion” to the damage incurred by the innocent party. The Judge went on to state in paragraph 29 that the critical issue here was that the Minutes gave no account for the payments that had been made and therefore gave the creditor a $155,000 “windfall.” This was “out of all proportion” to the damage the creditor suffered, which the Judge found to be the unpaid installment of $95,000.
[19] I find this decision to be distinguishable from the case before me. First, the debtor in Factors had no lawyer at the time of the critical events surrounding the final installment, and there was evidence suggesting that creditor took advantage of this by dragging its feet concerning the certificate. In the case before me, both parties had experienced counsel throughout. Here the Minutes were carefully drawn up with the help of counsel on both sides, and Maystar had the same lawyer at the time of the final installment. Prasher took no unfair advantage of Maystar in the case before me. This was not even raised by Mr. Ruso.
[20] Second, and most importantly, in Factors the minutes gave no account for monies paid and there was no concrete indication of the creditor’s actual loss. I note that, while the original lawsuit was for $2.5 million, there had been an earlier interim settlement involving significant payment. This all obviously created the inference that the $155,000 was indeed a “windfall.” In the case before me the Minutes expressly provided for installment payments to be discounted from the consent judgment and for the eventual consent judgment to be in the amount of the Prasher claim for lien. The result, therefore, should this motion be granted, is the payment to Prasher of its claim for lien, a result that arose from Maystar’s noncompliance with the Minutes of Settlement. In short, the Minutes can be viewed as an indirect acknowledgment by Maystar of the merit of the Prasher claim for lien, thereby requiring an even more rigid compliance with the terms of the Minutes including the interest provisions. The consent judgment does not at all seem to be a “windfall” in this context.
[21] Ms. Assuras provided me with decisions where the measure of the damage for the determination of unconscionability was the amount of the original claim. In Haas v. Viscardi, 2018 ONSC 2883(SCJ), there was a claim for damages of $200,000. The plaintiff settled for $30,000 to be paid in three installments, with a provision of a consent to judgment for $60,000 if any of the installments were not paid. The defendant paid installments totaling $20,000 but failed to pay the final $10,000. The court granted summary judgment for the $60,000. On the issue of whether this was disproportionate to the plaintiff’s damages, the court in paragraph 15 used the claimed $200,000 as the measure and found that the result was not extravagant or unconscionable.
[22] In Chilikoff v. West Capital Placer Inc., 2016 ONSC 6354 (SCJ) the plaintiff made a claim of $325,000 and settled for $75,000 to be paid in four installments. The settlement allowed the plaintiff to enforce a judgment of $150,000 without set-off for installments paid in the event any of the installments were not paid. The defendants paid $15,000 and defaulted on the remainder. The plaintiff moved for judgment on the $150,000 consent to judgment. Justice Kristjanson granted the judgment and in paragraphs 16, 17, 20 and 25 used the size of the $325,000 claim as a guide in measuring the fairness of the result.
[23] The Judge in Chilikoff also stated interestingly that the courts are particularly loath to interfere in settlements of lawsuits as the parties have agreed to compromise claims they would otherwise pursue in the civil litigation in return for the certainty of payment without further litigation. Such agreements should, therefore, be enforced to the letter. This policy was echoed by Justice Himel in Sentry Metrics Inc. v. Ernewein, 2013 ONSC 959 at paragraph 19.
[24] I find these decisions persuasive. In the Prasher case before me, as stated earlier, the Minutes can be viewed as an indirect acknowledgment by Maystar of the merits of the Prasher claim for lien. The consent judgment is therefore not disproportionate to Prasher’s damages and is not unconscionable. Furthermore, as there was no evidence that Prasher took unfair advantage of Maystar, the court should make every effort to enforce settlements of actions to the letter.
[25] Mr. Ruso argued that there had been substantial compliance with the Minutes of Settlement as Maystar paid the interest only a few days late. I would have been inclined to accept the argument of substantial compliance if Maystar had done the interest calculation and sent the interest payment either on or about August 31, 2018 or within the cure period. As stated earlier, there was nothing stopping Maystar from doing so. Ms. Pichini performed the interest calculation on her own and the difference between Ms. Pichini’s calculation and Mr. Wainstock’s calculation was only a few days of interest. But this did not happen. As I stated to Mr. Ruso, based on the evidence in the motion, the inference could more readily be drawn that Maystar was not acting in good faith in compliance with the Minutes, and that it was instead gambling to see whether Prasher would walk away from enforcing the Minutes despite the non-payment of interest.
[26] Mr. Ruso tried to distinguish the cases argued by Ms. Assuras by stating that in these cases the defendants did not pay the final installment of principal whereas Maystar paid all installments of principal. I do not find this argument meaningful. The Minutes in the Prasher case clearly contemplated a sixth installment payment, namely a payment of interest. That was not paid as contemplated by the Minutes.
[27] For these reasons I conclude that the Maystar consent to judgment in the Minutes of Settlement should be enforced, and that Prasher should be given judgement in the amount of $611,061.10 less the $325,000 in principal payments already made, for a net total of $286,061.10. I so order.
[28] As to costs, as ordered, the parties delivered costs outlines on November 13, 2019. The Prasher costs outlines shows a partial indemnity amount of $10,056.43. The Maystar costs outlines shows a partial indemnity amount of $7,730.27 and a substantial indemnity amount of $10,430.19. If the parties cannot agree on costs, Prasher must deliver written submissions on costs of no more than two pages on or before November 22, 2019. Maystar must deliver written submissions on costs of no more than two pages on or before December 2, 2019. Prasher may deliver reply written submissions of no more than one page on or before December 4, 2019.
DATE: November 14, 2019 __________________________
MASTER C. WIEBE