Court File and Parties

COURT FILE NO.: CV-17-581976 DATE: 2020-02-18 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MELISSA MAGNOTTA as the Representative of the Estate of JOSEPH MAGNOTTA and MELISSA MAGNOTTA, Plaintiffs AND: ZIAOZENG YU, XIAHONG MAO and SUTTON GROUP-ADMIRAL REALTY INC., Defendants

BEFORE: Schabas J.

COUNSEL: Alfred J. Esterbauer and Arleen V. Huggins, for the Plaintiffs Michael R. Kestenberg and Michael Kleinman, for the Defendants

HEARD: February 12, 2020

REASONS FOR DECISION

Introduction

[1] This is a motion by the plaintiffs to enforce acceptance of an offer to settle made by the defendants in litigation arising from a failed residential real estate transaction. The plaintiffs submit that the offer complied with Rule 49, was not withdrawn, and therefore remained open for acceptance when they chose to accept it. The defendants, on the other hand, argue that the offer was not intended to be a Rule 49 offer, as demonstrated by actions by defendants’ counsel, and that it lacked an essential term such that it was incapable of being accepted. Accordingly, as the offer had been previously rejected, the defendants submit that the offer was a common law offer which had been rejected and was therefore no longer open for acceptance. Alternatively, the defendants submit that it would be unjust to require the defendants to comply with the offer and I should therefore exercise my discretion and not enforce it.

[2] For the reasons that follow, I find that the offer was a Rule 49 offer capable of being accepted, and that this is not one of those rare cases where it would be unjust to enforce its terms.

Background Facts

[3] On March 8, 2017, the defendant Xiaozeng Yu (“Yu”), entered into an Agreement of Purchase and Sale with the plaintiffs Joseph and Melissa Magnotta (the “Magnottas”) to buy a property at 39 Westwood Lane in Richmond Hill, Ontario. The purchase price was $2,662,000 and closing was to occur on July 7, 2017. A deposit of $65,000 was paid to the defendant, Sutton Group-Admiral Realty Inc. (the “Sutton Group”), to be held by it until closing.

[4] Conditions were waived on March 13, 2017, and the purchaser had until June 23 to inspect title and make any requisitions. On June 29, 2017, however, Yu’s agent sought a two week delay in closing in order to obtain financing as Yu had been unable to sell her current home. The following day, June 30, 2017, the Magnottas’ lawyer received a letter from Yu’s lawyer containing nineteen requisitions, one of which raised issues about a conversion of the garage to a master bedroom, and whether this had been done legally, in compliance with zoning by-laws and building permits.

[5] The Magnottas’ lawyer responded to the requisitions, even though they were out of time. No extension was granted on the closing date. Yu’s lawyer found the Magnottas’ response on the garage conversion unacceptable, asserting that good title could not be transferred.

[6] The sale did not close on July 7, 2017, and the Magnottas sued. They included as a defendant Yu’s mother, Xiahong Mao (“Mao”), after a mortgage in which Mao was the mortgagee, in the amount of $900,000, was placed on Yu’s home on July 4, 2017, three days before closing. The Magnottas alleged this was a fraudulent conveyance to defeat or hinder their claim for damages. The Sutton Group was also included as a defendant because it held the deposit.

[7] Yu and Mao (the “defendants”) defended, and also crossclaimed against the Sutton Group. The Sutton Group simply filed a Notice of Intent to Defend and has not participated in the litigation.

[8] The Magnottas subsequently sold their home, receiving approximately $900,000 less than they would have received had the sale closed with Yu.

[9] The plaintiffs brought a summary judgment motion which was to be heard on June 24, 2019. A timetable was set and evidence was exchanged.

[10] In the latter part of May, 2019, after further evidence was served and when cross-examinations were scheduled to take place, a number of offers to settle were exchanged by email between counsel. Ian Cantor (“Cantor”) and Sheila Morris (“Morris”), acting for the defendants at the time, made an offer in an email to Arleen Huggins (“Huggins”), counsel for the plaintiffs, on May 25, 2019. The email was marked “without prejudice” and offered to pay the plaintiffs $265,000 – the $65,000 deposit immediately, and $200,000 within two weeks.

[11] On May 27, 2019, in an email also marked “without prejudice”, Huggins rejected that offer and offered to settle for $750,000 payable within 30 days. She noted that they intended to proceed with the cross-examination of Yu on May 30.

[12] The next day, May 28, 2019, Morris emailed Huggins, also “without prejudice”, rejecting the offer of May 27. Morris went on to withdraw the offer of May 25, for $265,000, and made a new offer for $200,000 - $65,000 immediately (presumably from the deposit) and the balance within 30 days. Huggins rejected that offer just over an hour later, in a short email that did not say “without prejudice”.

[13] Later that afternoon, however, Morris made a new offer by email, not marked “without prejudice”, to pay the Magnottas “$500,000 all-in” - $65,000 payable immediately, $200,000 within 15 days and the balance at a date to be determined. In a follow up email, Morris clarified that the $65,000 payment would be from the release of the deposit held by the Sutton Group.

[14] As part of the same email chain, late in the evening of May 28, Huggins rejected the $500,000 offer and conveyed a new offer from the Magnottas for $700,000. In the email, which was marked “without prejudice”, Huggins set out a number of terms, one of which was that Yu would consent to the immediate release of the $65,000 deposit, and another was that Yu would reimburse the Sutton Group for its legal costs, which she said were expected to be “nominal”. The email concluded by saying: “Please accept this as a Rule 49 Offer to Settle.”

[15] The following day, May 29, 2019, Morris responded, still as part of the same email chain, with a counter-offer, marked “without prejudice.” This offer, which is the offer in question in this motion, set out two options for acceptance – one involved payment of $500,000 through a number of payments (“Option A”), and the other one offered, over a longer period, payment of $550,000 (“Option B”, collectively, the “Offer”). Both options stated that Yu would consent to the immediate release of the $65,000 payment. The terms of the Offer did not address the Sutton Group’s costs, but the email concluded with the following sentence: “As discussed, I will wait to hear from you with respect to whether Sutton is agreeable to going without costs.” There was no reference to Rule 49 in the Offer or elsewhere in Morris’s email.

[16] Not long after the Offer was sent, Huggins sent an email to Morris that it was “insufficient” and confirmed that she would proceed with the cross-examination of Yu the following day, May 30, 2019. However, it appears that on May 29 Yu had a falling out with her counsel, which Morris advised Huggins of that evening. The following day, May 30, 2019, Huggins emailed Morris and Cantor asking that they advise Yu’s new counsel that the Magnottas’ offer to settle for $700,000 would be withdrawn at 10:00AM on Monday, June 3, 2019. Morris confirmed that this would be done.

[17] Huggins made one more offer after that, in a letter dated June 6, 2019, to Yu’s new counsel, Michael Kleinman (“Kleinman”) and Esmaeil Mehrabi (“Mehrabi”), for $750,000. As with the Magnottas’ previous offer, Yu would consent to the immediate release of the $65,000 deposit, and Yu would reimburse the Sutton Group for its “nominal” legal costs. The letter also concluded by saying: “Please accept this as a Rule 49 Offer to Settle.”

[18] During the month of June 2019, Yu’s new counsel obtained expert opinion evidence suggesting that the garage conversion was in breach of zoning by-laws, had been constructed without a building permit, and that the plaintiffs’ failure to provide a satisfactory response to the requisitions, even though made late, went to the root of title which, it is argued, would have provided a strong defence to the action. Yu also provided a new affidavit addressing the Mao mortgage, including documentary evidence that Yu had received financial assistance from Mao of approximately $1.2M, of which over $1M had been advanced prior to the registration of the mortgage. This new evidence was served on Huggins on June 25, 2019, just as she was leaving on vacation.

[19] After returning from vacation, on July 3, 2019, Huggins wrote to Kleinman and Mehrabi, stating that while she and her client were “of the view that such material does not impact upon the ultimate merits of the action, it does appear that this matter may not be appropriate for a summary judgment motion.” She then went on to advise that her client had decided to accept “Option B of the Defendants’ Offer to Settle dated May 29, 2019.”

[20] Two days later, on July 5, 2019, Kleinman responded, saying he had not been aware of the Offer and that, in any event, it was not a “formal offer to settle pursuant to Rule 49, and WAS NO LONGER OPEN FOR ACCEPTANCE.” Kleinman went on to say that he was advised by the former counsel that the settlement discussions had taken place in the context of attempting to resolve matters prior to cross-examinations, was marked “without prejudice” and that it was rejected by the plaintiffs such that “there is no offer to settle that is capable of being accepted at this point.” Kleinman went on to note that numerous steps had been taken since the Offer, including the investment by the defendants in obtaining expert evidence. He concluded the letter by confirming: “For the sake of clarity if there are any other offers we hereby confirm that all offers are hereby withdrawn.”

[21] Huggins provided a lengthy response in a letter dated July 26, 2019, citing provisions of Rule 49 and case law supporting her clients’ position that the Offer was a valid Rule 49 offer which had not been withdrawn, and remained open for acceptance.

Issues

[22] This motion raises the following issues:

(a) Does the Offer comply with Rule 49? (b) If the Offer complies with Rule 49, can the presumption that Rule 49 applies be rebutted? (c) If Rule 49 applies and the presumption cannot be rebutted, is this one of the rare cases where the court should not give effect to Rule 49 in order to prevent an injustice?

Analysis

The Offer Complies with Rule 49

[23] The terms of Rule 49 are clear. An offer complies with Rule 49 if the offer is made in writing by a person with authority to make it, is a proposal capable of acceptance, and is served on the opposing party. The offer does not need to be in Form 49A, and can be communicated in correspondence. Pursuant to Rule 49.05, a Rule 49 offer is deemed to be made “without prejudice”. Further, in a departure from the common law, under Rule 49.07 even if an offer is rejected it remains open for acceptance in accordance with its terms unless it is withdrawn: see, e.g., York North Condominium Corp. No. 5 v. Van Horne Clipper Properties Ltd., 70 O.R. (2d) 317 (C.A.) at para. 10. It has also been held that the offer must be “a proposal that can be construed as an offer to settle, open for acceptance and binding if accepted”: Clark Agri Service Inc. v. 705680 Ontario Ltd. at para. 4.

[24] The defendants submit that the Offer was not capable of acceptance because of the uncertainty over the position of the Sutton Group. This, counsel argues, needs to be resolved as an essential term of the settlement: Dick v. Marek, 2009 ONSC 27821 at paras. 64-65.

[25] I disagree. Offers to settle need not involve all parties to a lawsuit. This Offer is between the plaintiffs and the defendants Yu and Mao. It simply requires Yu to consent to the release of the deposit by the Sutton Group. It does not require the Sutton Group to agree to not seek costs in the action, against either the plaintiffs or the defendants, nor is the Offer contingent on the Sutton Group agreeing on a nominal amount for costs, nor does the Offer address who would pay such costs. Indeed, the Offer does not require the Sutton Group to release the deposit, or to do anything at all – it simply requires Yu to consent to the release of the funds.

[26] The issue of the Sutton Group’s costs arose in the course of the exchange of offers in the offer from the plaintiffs on May 28, 2019, who sought to have Yu be responsible for any such costs. Yu and Mao, on the other hand, did not put that in any of their offers, including the Offer, but simply observed at the end of the email which contained the Offer that they would wait to hear “whether Sutton is agreeable to going without costs”. The plaintiffs chose to accept the Offer with that issue outstanding. Presumably, in doing so, the plaintiffs contemplated that, despite Yu’s consent to releasing the deposit, the Sutton Group might not do so without seeking some reimbursement for costs, which they might seek against the plaintiffs or the crossclaiming defendants. And in the meantime, the plaintiffs would not receive the deposit funds. Even if the plaintiffs did not contemplate it, that is simply something that would need to be addressed by the plaintiffs if it was raised by the Sutton Group after receiving the consent; but it does not mean the settlement between the plaintiffs and Yu and Mao lacked “essential terms” or was incapable of being accepted.

[27] In this case the Offer clearly meets the criteria of being in writing, made by a person with authority to make the Offer, and was effectively served on the opposing party. It was a proposal capable of acceptance, was not time limited, and was not withdrawn. As was stated by Quinn J. in Clark Agri Service, at para. 5:

If these features are present, an offer will be presumed to be a Rule 49 offer unless expressly stated otherwise or unless the offeror can demonstrate that he or she did not intend the offer to be a Rule 49 offer. The point was put this way by Blair J. in McDougall v. McDougall (1992), 7 O.R. (3d) 732 (Gen. Div.), at p.735:

Rule 49 was a deliberate departure from the practice as it existed under the former rules and from the common law approach to settlement. Its purpose was to promote settlement and to encourage offers in this respect by using the carrot of cost advantages for the successful offerer and the stick of cost disadvantages for the reluctant offeree. If we are to give maximum effect to this change in procedure and policy, parties should know that if an offer complies in substance with the requirements of rule 49.02 it will be treated as a Rule 49 offer unless it is expressly stated not to be such. [Emphasis added]

[28] In my view, the Offer complies with Rule 49 and should, presumptively, be enforced.

The Presumption that Rule 49 Applies is not Rebutted

[29] The defendants argue that the Offer was not intended to be a Rule 49 offer, and that the surrounding circumstances support that conclusion such that the presumption that Rule 49 applies is rebutted.

[30] On this motion, Morris swore an affidavit stating that the settlement proposals were made in the context of avoiding the additional costs of cross-examinations, and that she did not “specifically draw” the new lawyers’ attention to the Offer or to other settlement communications because she “did not believe at the time of the file transfer that any settlement negotiations or proposals remained open.” She stated, as well: “I did not intend my proposal to have the consequences of a Rule 49 offer to settle. If I did, I would have specifically referenced Rule 49 in my email, as I note Ms. Huggins felt necessary to do in one of her offers.”

[31] While I do not question the veracity of Morris’s affidavit, it is not enough to simply say it was not intended to be a Rule 49 offer. There must be more, as counsel for Yu on the motion, Mr. Kestenberg, conceded. This is for good reason. As the Divisional Court stated in Miller v. Parkway Rental Ltd. at para. 13, “[t]he best place to find the intention of an offer is in the offer itself, not in later affidavits that explain what the offer really intended…. [Q]uite apart from the parol evidence rule, it will undermine Rule 49 if offers come to be interpreted by collateral evidence instead of by their very terms.” The Court continued at paras. 22 – 23:

Because the offer complied substantially with Rule 49, strong evidence is required to rebut the presumption that it is an offer within the rule. The best place to find such evidence is on the face of the offer itself. It would defeat the purpose of s. 49 to interpret offers in light of collateral documents, years of negotiating history, and later affidavits saying what was really intended by the offer.

[32] In this case, it is argued that the fact that Morris did not tell new counsel about the Offer, that the Offer was marked “without prejudice”, and did not refer to Rule 49, are all supportive of the defendants’ position and should rebut the presumption. However, in my view, none of these points assist the defendants.

[33] The fact that Morris did not specifically advise counsel of the Offer adds little to the analysis. At Huggins’ specific request, Morris did tell new counsel of the outstanding offer from the plaintiff and that it was going to be withdrawn shortly. I have little evidence of the extent of communications between the defendants’ sets of lawyers when representation changed, and of what else, if anything, was conveyed by Morris and Cantor to new counsel. However, the entire file was sent to new counsel, and the Offer was contained in an email chain containing previous offers, including the plaintiffs’ offer that Huggins asked be drawn to the attention of new counsel.

[34] The fact that the Offer did not refer to Rule 49 also does not assist the defendants. Any offer made in writing is presumptively a Rule 49 offer. The failure of counsel to refer to the Rule in an offer does not remove it from Rule 49. Although the defendants suggest that Huggins’ reference to it and Morris’s silence on the issue supports the conclusion that it was not a Rule 49 offer, this only highlights that counsel were exchanging offers and, had Morris been making an offer outside Rule 49 she ought to have said so, as the case law I review below makes clear.

[35] As to the “without prejudice” marker, this simply repeats what is stated in Rule 49.05. The review of the exchange of offers, above, indicates that “without prejudice” was used on all but one of the offers – Morris left it out on the offer she made later in the day on May 28, 2019, no doubt inadvertently. But marking an offer “without prejudice” does not suggest that it is made outside Rule 49; to the contrary, it is simply reflecting the Rule. As the Divisional Court observed in Miller v. Parkway Rental, at para. 9:

The words "without prejudice" do not detract from the force of the offer. They simply emphasize that there is no admission of liability and they mirror the provisions of Rule 49.05 which provides that an offer to settle shall be deemed to be an offer of compromise made without prejudice.

[36] In more recent decisions, such as Champlain Thickson Inc. v. 365 Bay New Holdings Ltd., and Crawford v. Mori, 2017 ONSC 2769, this Court has given no weight to the use of the words “without prejudice” on motions to avoid acceptances of settlement offers.

[37] The defendants submit on this point, however, that I should follow the decisions in Roma Construction (Niagara) Ltd. v. Dykstra Bros. Roofing (1992) Ltd. and Empire Life Insurance Co. v. Krystal Holdings Inc.. In Roma, L.M. Walters J. relied on the use of “without prejudice” in an offer to conclude that an offer was not made under Rule 49. Roma was followed by Archibald J. in Empire Life.

[38] In Roma, Walters J. correctly observed at para. 23 that “simply stating that one did not intend the letter to be a formal offer to settle pursuant to the Rule is not sufficient” to displace the presumption. However, the judge continued at para. 24:

There are two additional facts which have persuaded me that the plaintiff did not intend the offer to be a formal Rule 49 offer. First and most importantly the offer was contained in a letter to the defendants' counsel specifically marked "without prejudice". Nowhere in the letter did plaintiff's counsel reveal the right to refer to the offer with respect to the issue of costs following judgment. In such a case an offer to settle is not admissible on the issue of costs. (See Cameron v. Cameron (1978), 3 R.F.L. 277 (Ont. H.C.), Graham v. Dillon (1986), 3 R.F.L. (3d) 1 (B.C. S.C.) and Demeria v. Demeria (1991), 36 R.F.L. (3d) 366 (B.C. S.C.)). Secondly, in all exchanges between the plaintiff and the defendants, defendants' counsel specifically referenced that the offers were made pursuant to the rules. The plaintiff chose to use "a without prejudice" letter. One must assume to intend the consequences that flow from such a correspondence and in my view this is further evidence of the plaintiff's intention to not consider this a formal Rule 49 offer.

[39] In my view, Walters J.’s analysis is incorrect. Without prejudice offers can be raised in considering costs, indeed that is one of the reasons to make such offers: Rule 49.06(2). Further, the cases cited by Walters J. pre-date the existence of Rule 49 or are dated family law decisions from British Columbia. In contrast, the decisions which have considered the Rule closely, including Miller v. Parkway Rental, Clark Agri Service and McDougall v. McDougall, referred to earlier, make clear that any offer that is intended to be “outside” Rule 49 must be clearly and explicitly conveyed. To those I would add the comments of Adams J., who stated in Huh v. 512208 Ontario Ltd. (1992), 7 O.R. (3d) 125 (Gen. Div.), that “because the existing Ontario approach permits written letter offers to trigger Rule 49, parties must be clear that they are making written offers “outside the rules” when they intend to do so.” (See also Matthew Brady Self Storage Corp. v. Instorage Limited Partnership, 2013 ONSC 6475 at paras. 26 – 30, which considered Roma and did not follow it.) Accordingly, I do not agree that is appropriate to “assume” that using the words “without prejudice” take an offer outside Rule 49. To the contrary, the words “without prejudice” simply restate and confirm what is in Rule 49.05.

[40] Morris’s affidavit also refers to the settlement proposals having been made in the context of avoiding the additional costs of cross-examinations, implying that the Offer expired after the flurry of offers failed to reach a settlement and cross-examinations proceeded. However, in similar circumstances the courts, including the Court of Appeal, have rejected finding an implied withdrawal of an offer simply because new steps have been taken in the action, stating that “an effective expiry provision ‘must be clearly expressed as a time beyond which the offer can no longer be accepted and it must have a specified or ascertainable date’": Fox Estate v. Stelmaszyk (2003), 65 O.R. (3d) 846 (C.A.) at paras. 3 and 4; Miller v. Parkway Rental at para. 8.

[41] The defendants also submit that having obtained new evidence in June 2019, including expert evidence which they say changed the case significantly to their benefit, they would not have allowed the Offer to remain open, supporting their position that the Offer was not intended to be a Rule 49 Offer. I cannot give effect to this submission. First, the Offer was made by the former counsel for the defendants, and the new counsel who obtained the new evidence was unaware of the Offer. I cannot infer that the Offer was intended by one set of counsel to be outside the rules based on actions taken later by different counsel.

[42] Second, and more broadly, litigation is a fluid process. Positions change, new evidence emerges, expert evidence is obtained, and countered, and assessments of cases shifts. If working to find or gather new evidence, or the strength of the new evidence, was a basis on which to rebut the presumption that an outstanding offer was not within Rule 49, then there would be uncertainty in whether any offer is covered by the rules, and the objectives of Rule 49 would be undermined.

[43] Further, while in this case the expert evidence obtained by the defendants’ new counsel undermined a summary judgment motion, as the plaintiffs acknowledged, it was not acknowledged that the evidence undermined the plaintiffs’ case. Even if I were to consider the new evidence, I only have it from one side, and it would be unfair to draw conclusions based on it alone. As Adams J. cautioned in Huh, “[t]his type of summary proceeding is not generally appropriate to the making of determinations which would be the very subject-matter of a trial between these parties.”

[44] In my view it would be a very rare case in which a court could or should rely on the strength of a party’s case in considering whether the presumption that Rule 49 applies has been rebutted. Doing so may lead the court to engage in an inappropriate assessment of the merits of the case, and may lead to equally inappropriate speculation on why a party chooses to settle a case, or not. There are many factors that can cause a litigant to resolve a case beyond a simple assessment of the strength of their position, including a desire avoid incurring more legal fees, lack of time and resources, an immediate need for funds that may be unrelated to the action, preferring to use one’s resources for another purpose, or simply a desire to end the stress and uncertainty of litigation and to move on.

[45] Accordingly, I find that the presumption that the Offer is a Rule 49 Offer has not been rebutted. As a result, the fact that the Offer was initially rejected by the plaintiffs is irrelevant, as Rule 49.07 overrides the common law principle that an offer is no longer open for acceptance once it has been rejected.

Should the Settlement not be Enforced?

[46] The caution stated by Adams J. in Huh informs my approach to the final submission by the defendants, which is that I should nevertheless find that this is one of those rare cases where an injustice will occur if the defendants are bound to comply with their Offer, and that I should exercise my discretion to not require compliance with it.

[47] Essentially, the defendants submit that the expert evidence obtained in June 2019 completely changed the case such that it would be unjust to hold them to an offer that pre-dated that change and of which their counsel was unaware. To this, they also argue that it was unreasonable for plaintiffs’ counsel to think that the Offer was still open for acceptance given the new evidence, and it is suggested that she took advantage of an Offer mistakenly left open by the defendants.

[48] In Srebot v. Srebot Farms Ltd., 2013 ONCA 84, the Court of Appeal stated, at para. 6:

The discretionary decision not to enforce a concluded settlement, especially where the settlement has been partially or fully performed, should be reserved for those rare cases where compelling circumstances establish that the enforcement of the settlement is not in the interests of justice.

[49] In Srebot the motions judge, whose decision was upheld by the Court of Appeal, summarized the factors that a judge must consider in exercising the “broad and complete discretion to determine whether to enforce a settlement”: Srebot v. Srebot Farms Ltd., 2011 ONSC 4512 at para. 71. Chapnik J. stated at paras. 72 and 73:

Regarding the manner in which the judge should exercise his or her discretion, the relevant jurisprudence holds that a court retains the discretion to not enforce a settlement that is unreasonable, that in its view would be unfair, would result in injustice, or where there is some other good reason for the court to exercise its discretion not to enforce it [citations omitted].

The Court of Appeal in Milios v. Zagas, 38 O.R. (3d) 218 at para. 21, set out the following factors to be considered in the exercise of discretion:

(a) Whether an order had been taken out or the parties' pre-settlement positions remained intact; (b) Whether the defendant would be prejudiced if the settlement was not enforced, apart from losing the benefit of the settlement; (c) The degree to which the plaintiff would be prejudiced if judgment was granted in relation to the prejudice the defendant would suffer; and (d) Whether third parties are affected if the settlement is not enforced.

[50] In my view, this is not one of the rare cases in which I can conclude an injustice would be caused if the Offer is enforced.

[51] First, as I stated above, it is not appropriate for me to assess or come to conclusions as to the strength of the case, for either side. Aside from not being in a position to do so adequately, allowing a party to avoid an outstanding offer on the basis that its case has improved would create uncertainty and defeat the purpose of the Rule. In coming to this conclusion, I recognize that the plaintiffs subsequently sold their home for approximately $900,000 less than what the defendants had agreed to pay, and that this may have been as a result of the title issues described by the experts in their June 2019 reports. However, I have no evidence that this was the case. Nor do I have before me any expert evidence the plaintiffs might have sought in response to the new evidence. And relying on such evidence in exercising my discretion would simply open the door to permitting parties to avoid what, in retrospect, may have been improvident offers.

[52] Second, this is not a case like Fox Estate in which the plaintiffs’ lawyer knowingly took advantage of a mistake by counsel for the defendants. In that case, in exercising discretion not to give effect to a Rule 49 Offer, Carthy J.A. observed, at para. 11:

My reasoning is that, while the appellants' trial lawyer should have been more careful, he clearly thought the written offer was off the table when he demanded a substantially higher settlement; just as clearly, the respondents' lawyer knew from the amount of the new offer that the appellants' lawyer had made that error. Further, it was unrealistic to conclude that the all inclusive written offer was meant to stand in the face of four days of accumulated trial costs. Respondents' counsel took advantage of appellants' counsel's mistake on the eve of a judicially considered assessment of entitlement. It does not satisfy my sense of justice to enforce the settlement in those circumstances. Equity favours the appellants. [emphasis added]

[53] This case is quite different. When the Offer was accepted it was not on the eve of a judicial assessment, and Huggins did not take advantage of any mistake by the defendants’ new counsel. As she stated in her letter of July 26, 2019, responding to the suggestion by the defendants that she was “likely aware” that new counsel was not aware of the Offer:

Finally, contrary to what is suggested in your letter, I was unaware prior to your letter of July 5, 2019, that you did not know about the outstanding May 29, 2019 offer. Further, I had no reason to believe that you were unaware of same. When the Plaintiff accepted the May 29, 2019 offer on July 3, 2019, you had had over a month to have reviewed the file. I would have assumed that you had been alerted by previous counsel about all offers exchanged between the parties. Furthermore, on June 6, 2019, I sent you a letter with our client’s offer to settle. That should also have prompted you to review your clients’ files for offers, if you had not already done so.

[54] The defendants nevertheless state that it is unreasonable for Huggins to have thought that the Offer was still open in light of the expert opinions served at the end of June. Again, I cannot reach such a conclusion. While the case certainly looked different, and Huggins acknowledged that a summary judgment motion was no longer viable, she did not concede that the case for the plaintiffs was now hopeless, and I should not, and cannot, conclude that either. Nor should I speculate as to why the plaintiffs chose to accept the Offer which, I note, compromised the case at about 50% of the amount of the loss claimed. This compromise also makes it difficult to conclude that one party or the other would be unduly prejudiced such that I should exercise my discretion having regard to the factors set out in Milios v. Zagas.

Conclusion

[55] Accordingly, the motion is granted and judgment shall issue in favour of the plaintiffs in accordance with Option B of the Offer. If the parties cannot agree on costs, the plaintiffs may provide me with written submissions not exceeding three pages, double-spaced and not including supporting documents, within 30 days of the release of these Reasons. The defendants shall then have 14 days to file a response with the same limitations.

Schabas J. Date: 2020-02-18