Karasiewicz v. Chief Peter Collins as a Representative and on Behalf of the Fort William First Nation Band and in his Personal Capacity

[Indexed as: Karasiewicz v. Collins]

Ontario Reports

Ontario Superior Court of Justice

Newton J.

July 29, 2020

152 O.R. (3d) 789 | 2020 ONSC 4601

Case Summary

Civil procedure — Offer to settle — Plaintiff commencing constructive dismissal action and pursuing other statutory remedies — Defendants making settlement proposal — Parties attending to other related matters over next three years before plaintiff accepting offer — Defendants claiming that offer no longer open due to changed circumstances — Plaintiff moving for judgment — Motion dismissed — Offer complied with Rule 49 and presumptively enforceable, but defendants' mistake in failing to place limits on the offer or clearly withdraw it significantly compromised their rights — Enforcement of settlement would not have been just. [page790]

The plaintiff commenced an action in February 2016 for damages for constructive dismissal and intentional infliction of mental suffering. He also pursued other remedies under various statutes. A letter dated September 2016 from defendants' counsel and marked "without prejudice" confirmed an existing settlement proposal of $25,000 to dismiss the claim and complaint before the Canadian Human Rights Tribunal, and asked plaintiff's counsel to review and advise. Subsequently, the parties resolved an application by the defendants to the Workplace Safety and Insurance Appeals Tribunal to determine whether the plaintiff's right to sue was barred. The Human Rights Tribunal elected not to adjudicate the complaint before it while the action was pending. In February 2020, plaintiff's counsel indicated in an e-mail to defendants' counsel that the plaintiff was prepared to accept the $25,000 payment provided the amount was non-taxable. In March, plaintiff's counsel proposed minutes of settlement characterizing the payment as "general damages" with an undertaking to indemnify and save harmless from any tax liability. In April, the defendants replied by stating that they no longer wished to settle, taking the position that the plaintiff had not accepted the 2016 proposal and that the circumstances had since changed because the scope of the claim had been significantly reduced. The plaintiff moved for judgment on the ground that the action was settled by exchange of correspondence.

Held, the motion should be dismissed.

The defendants' proposal complied with Rule 49 and was capable of being accepted. No time limit was placed on it and it was never withdrawn prior to purported acceptance. Marking the offer "without prejudice" did not take it out of Rule 49. The purported acceptance was first conditional upon the settlement proceeds being non-taxable and that condition was subsequently withdrawn with a form of release providing that the proceeds were to be treated as general damages. No argument was advanced to suggest that the defendants would be in a worse position than contemplated in the offer the defendants made. Because of the indemnity with respect to taxes, it was not a counter but rather an acceptance as the benefits were to the defendants.

However, it was not just to enforce settlement. The defendants did not argue that the offer was not withdrawn because of inadvertence or a misunderstanding in solicitor-client communication, but rather that the offer should be deemed to have been withdrawn because of changed circumstances. Such a proposition was impractical and unworkable for efficient communication between counsel. The defendants' failure to place limits on the offer or clearly withdraw it was an error considering the changed circumstances. That error significantly compromised the defendants' rights and the plaintiff ought not to profit by it. It was a matter for the rare exercise of discretion to refuse the settlement.

Magnotta Estate v. Yu, [2020] O.J. No. 1105, 2020 ONSC 1049, 49 C.P.C. (8th) 303, apld

Roma Construction (Niagara) Ltd. v. Krystal Holding, 2009 CarswellOnt 1379 (S.C.J.), distd

Other cases referred to

Catanzaro v. Kellogg's Canada Inc., [2015] O.J. No. 5930, 2015 ONCA 779; Cox v. Baker, [2019] O.J. No. 2589, 2019 ONSC 2859, 47 E.T.R. (4th) 44; Fehrman v. Goodlife Fitness Centres, Inc., [2017] O.J. No. 3731, 2017 ONSC 4348, 11 C.P.C. (8th) 379, 281 A.C.W.S. (3d) 314; Olivieri v. Sherman (2007), 86 O.R. (3d) 778, [2007] O.J. No. 2598, 2007 ONCA 491, 284 D.L.R. (4th) 516, 225 O.A.C. 227, 159 A.C.W.S. (3d) 364; Smith v. Coca-Cola Bottling Co., [2017] O.J. No. 207, 2017 ONSC 396, 275 A.C.W.S. (3d) 526, 33 C.C.P.B. (2d) 120 [page791]

Statutes referred to

Canada Labour Code, R.S.C. 1985, c. L-2

Canadian Human Rights Act, R.S.C. 1985, c. H-6

Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sch. A [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.01(1), 49

MOTION by plaintiff for judgment based on a settlement offer.

J. Lester, for plaintiff/applicant.

B. Smith, for defendant/respondent.

NEWTON J.: —

Overview

[1] This is an action for damages for constructive dismissal.

[2] The plaintiff moves for judgement alleging that this action was settled by exchange of correspondence.

[3] The defendants argue that there is no settlement because

(1) the offer was contained in a "without prejudice" letter and was not a "Rule 49" offer;

(2) if the offer was capable of being accepted, conditions placed on the acceptance by the plaintiff constitute a counteroffer and not an acceptance; and

(3) circumstances have changed since the offer was made and it would be unjust to impose a settlement.

The Facts

[4] The plaintiff commenced this action in February 2016 claiming damages for constructive dismissal and intentional infliction of mental suffering. The plaintiff also pursued other remedies under the Canada Labour Code, R.S.C. 1985, c. L-2, the Canadian Human Rights Act, R.S.C. 1985, c. H-6 and the Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sch. A.

[5] Early on, the parties, through counsel, exchanged settlement positions through correspondence.

[6] The letter dated September 15, 2016 from counsel for the defendants to counsel for the plaintiff is the correspondence in issue. In this letter, marked without prejudice, counsel for the defendant stated:

Further to your letter dated September 2, 2016, the settlement proposal of the Defendants remain an all inclusive payment of $25,000 for all claims [page792] and dismissal of Mr. Karasiewicz's civil action and the complaint before the Canadian Human Rights Tribunal. Please review the above and advise if acceptable.

[7] I note that the offer from plaintiff's counsel preceding this correspondence was not marked without prejudice.

[8] Since then the parties dealt with the other related proceedings. An application was brought by the defendants to the Workplace Safety and Insurance Appeals Tribunal to determine whether the plaintiff's right to sue was barred. The parties resolved that claim. The Human Rights complaint, filed in September 2016, proceeded but the tribunal elected not to adjudicate the complaint while this action was pending by decision dated November 28, 2018.

[9] On February 14, 2020, counsel for the plaintiff sent the following e-mail to counsel for the defendants following a telephone conversation:

As discussed over the phone, please see attached your September 15, 2016 without prejudice letter to Don Shanks regarding settlement of the matter. Should you confirm that the $25,000.00 settlement is non-taxable, our client accepts your client's offer. If your client can draft minutes, I will have my client execute it. Please advise.

[10] By email dated March 2, 2020, counsel for the defendants indicated that he would "follow up" with his client and "get back to you as quickly as I can".

[11] Failing another response from counsel for the defendants, counsel for the plaintiff sent a further e-mail to defendants' counsel on March 24, 2020:

Please see attached the proposed minutes and release for your review on the accepted offer as discussed below and via the telephone. Please confirm the attached document is satisfactory. Failing to hear from you by March 31, I will forward an executed copy of the same.

[12] The proposed minutes of settlement provided for a payment to the plaintiff of $25,000 "characterized as general damages", a release in the "attached form" and a statutory declaration in the "attached form". The release included a nondisclosure clause in favour of the defendants and an undertaking to indemnify and save harmless the defendants from any liability for taxes and any other source deductions. The proposed statutory declaration was not attached to any material filed on this motion.

[13] According to an affidavit filed by the plaintiff, the plaintiff executed the minutes of settlement on March 31, 2020 but there is not any indication that the executed minutes of settlement were forwarded to counsel for the defendants. [page793]

[14] By correspondence dated April 3, 2020 counsel for the defendants responded:

Fort William First Nation does not wish to settle on the terms proposed in the Minutes of Settlement attached to your email dated March 24, 2020.

Mr. Karasiewicz did not accept the proposal as set out in my letter dated September 15, 2016 or my prior letter dated August 22,2016, which was rejected by Mr. Shanks' letter dated September 2, 2016. Mr. Karasiewicz cannot now accept the proposal. In the event there is any doubt, Fort William First Nation withdraws any prior settlement proposals, whether in correspondence or any other form.

[15] Counsel for the defendants also stated in this letter that circumstances had changed:

Mr. Karasiewicz should understand the circumstances have changed considerably since Fort William First Nation made the proposal on August 22, 2016. At that time, Mr. Karasiewicz had recently issued his Statement of Claim and filed a complaint with the Canadian Human Rights Commission.

Subsequent to August 22, 2016 there was significant changes to the court action: a successful Application to the Workplace Safety and Insurance Appeals Tribunal significantly reduced the scope of Mr. Karasiewicz's claims; the Workplace Safety and Insurance Act was amended to broaden the entitlement to traumatic mental stress and chronic mental stress; and a decision by the Canadian Human Rights Commission to cancel the complaint.

Further, WSIAT Decision No. 1227/19 was released October 17, 2019 and is directly applicable to Mr. Karasiewicz's circumstances. In particular, a constructive dismissal based on harassing and bullying conduct is taken away by the Workplace Safety and Insurance Act. As a result, there is no cause of action that Mr. Karasiewicz can pursue at this time.

Positions of the Parties

The plaintiff

[16] The plaintiff begins by emphasizing that the "policy of the court is to enforce settlement" and the "discretion to refuse to enforce a settlement should be exercised rarely". See Catanzaro v Kellogg's Canada Inc., [2015] O.J. No. 5930, 2015 ONCA 779, at para. 9.

[17] The plaintiff argues that ordinary contract law applies to determine whether: (i) the parties had a mutual intention to create a legally binding contract objectively; and (ii) the parties reached an agreement on all essential terms of the settlement: Olivieri v. Sherman (2007), 86 O.R. (3d) 778, [2007] O.J. No. 2598, 2007 ONCA 491 ("Olivieri"), at paras. 41 and 44, and Smith v. Coca-Cola Bottling Co., [2017] O.J. No. 207, 2017 ONSC 396, at para. 8. See Cox v. Baker, [2019] O.J. No. 2589, 2019 ONSC 2859, at para. 25. [page794]

[18] Since the purported offer was in writing, the issue of whether there was a mutual intention to create a binding contract and agreement on essential terms of that agreement can be determined based on an objective reading of the letter: Olivieri, supra, at para. 44.

[19] The plaintiff argues that the offer is clear and unequivocal and that there is no dispute with respect to the essential terms: payment of $25,000 and dismissal of this action and dismissal of the complaint before the Human Rights Tribunal.

[20] As to whether the acceptance was not an acceptance but a counter proposal the plaintiff argues that the offer was clear that the payment would be $25,000 without limitation and that following Fehrman v. Goodlife Fitness Centres, Inc., [2017] O.J. No. 3731, 2017 ONSC 4348, the issue of tax treatment of settlement proceeds and potential liability for source deductions is an issue for the Canadian Revenue Agency.

[21] As to "unjustness", the plaintiff argues that this argument only applies in circumstances of miscommunication or genuine mistake, misunderstandings with respect to fundamental facts, duress/undue influence/unconscionability and illegality of contract. See Cox v. Baker, supra, at para. 39. The plaintiff notes that none of the foregoing circumstances are alleged in this case. Although the defendants allege that circumstances have changed which make the acceptance of their offer unjust, the plaintiff notes that the defendants could have withdrawn their offer but that they did not.

The defendants

[22] The defendants argue that that this is not a Rule 49 offer because it was not described as such and because it was specifically marked "without prejudice". The defendants rely upon Roma Construction (Niagara) Ltd. v. Krystal Holding, 2009 CarswellOnt 1379 (S.C.J.).

[23] Further, the defendants argue that the purported acceptance of the offer was not an acceptance but a "counter" proposal since plaintiff first sought confirmation that the settlement proceeds would be non-taxable and then specified in the Minutes of Settlement that the payment would be as "general damages". The defendants argue that the only damages that the plaintiff could receive were damages for wrongful dismissal which the defendants assert are taxable as a retiring allowance. As such, the defendants argue that there was no "meeting of the minds".

[24] Finally, the defendants argue that it would be unjust to enforce the settlement given that circumstances have changed in [page795] the almost three-and-one-half years between the offer and acceptance. The offer was to pay $25,000 in exchange for dismissal of this action and dismissal of the complaint to the Human Rights Tribunal. In this action the plaintiff claimed damages for wrongful dismissal and intentional infliction of mental suffering in the amount of $1.4 million. The defendants argue that by February 2020 the plaintiff's claim in this action was limited to wrongful dismissal damages of $250,000 and that the claims against Chief Peter Collins were dismissed. The defendants argue that this was a result of their submissions to the Human Rights Tribunal and to the Workplace Safety Insurance Appeals Tribunal.

[25] Specifically, a Workplace Safety Insurance Board claim was made by the plaintiff in November 2015 for bullying and harassment. This claim was denied by an Appeals Resolution Officer in February 2017 but allowed in March 2017 by the Workplace Safety Insurance Appeals Tribunal ("WSIAT"). The defendants then brought an application to WSIAT, in August 2017, for a determination of whether the plaintiff's right to sue was barred under the Worker's Compensation legislation. In 2019, a hearing date was set for May 2019. Before then, the parties settled the application to the Tribunal agreeing that the plaintiff's action for intentional infliction of mental suffering was taken away by the legislation, that the plaintiff would therefore amend his claim in this action removing allegations relevant to the claim of intentional infliction of mental suffering, and dismiss the action against the defendant Peter Collins.

[26] In the meantime, about at the same time of the offer, the plaintiff filed his complaint to the Canadian Human Rights Commission. The defendants filed submissions in November 2016 arguing that the plaintiff should be required to proceed with his Worker's Compensation claim and or his civil claim prior to proceeding with his Human Rights complaint. In September 2018, the Canadian Human Rights Commission issued its report recommending that the commission not deal with the complaint pending the result of his civil action. Further submissions were made by counsel for the defendants and the plaintiff in October and November 2018. In November 2018 the Commission formally decided to not deal with the complaint while the civil action was outstanding without prejudice to its rights to deal with the complaint later. [page796]

Analysis and Disposition

Was this an offer capable of being accepted?

[27] The "offer" was to pay $25,000 "all-inclusive" for dismissal of this action and the Human Rights complaint. This action is still pending as is the human rights complaint subject to the disposition of this action. No time limit was placed on the offer. The offer was never withdrawn prior to purported acceptance.

[28] Although the offer was marked "without prejudice", the defendants did not advance this reason in their counsel's correspondence of March 2 or April 3, 2020. On April 3, 2020 the reasons advanced for rejecting the acceptance was that the acceptance was a counterproposal and that "circumstances" had changed.

[29] "Without prejudice" communication is used to invoke settlement privilege. The purpose of settlement privilege is to allow parties to engage in settlement discussions without those discussions being revealed to the court and used against the offering or compromising party. Without prejudice communication can be reviewed to determine whether a settlement was made and, on occasion, as a tool in apportioning costs between the parties. Notwithstanding the defendant's reliance upon the decision of Roma Construction (Niagara) Ltd. v. Krystal Holding, supra, I conclude that labelling the offer "without prejudice" does not mean that Rule 49 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] is not applicable. As Walter J. said in Roma, unless a party "can demonstrate that it did not intend the offer to be a Rule 49 offer, it will be presumed to be one" (Roma, at para. 21; emphasis added).

[30] However, the conclusion in Roma that the "without prejudice" label means that an offer is not a Rule 49 offer is distinguishable since in that case, the "without prejudice" letter occurred in the context of all other offers being made "pursuant to the Rules". That is not the case here.

[31] Further, I prefer the analysis of Schabas J. in the more recent case of Magnotta Estate v. Yu, [2020] O.J. No. 1105, 2020 ONSC 1049 which counsel did not reference. In disagreeing with the analysis in Roma that the label "without prejudice" takes an offer outside Rule 49, Schabas J. noted [at paras. 23, 27, 35 and 36]:

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 [page797] 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. (1989), 1989 CanLII 4375 (ON CA), 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., 1996 CarswellOnt 2889 (Gen. Div.) at para. 4.

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), 1992 CanLII 7568 (ON SC), 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]

. . . 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.

In more recent decisions, such as Champlain Thickson Inc. v. 365 Bay New Holdings Ltd., 2007 CarswellOnt 7006, and Crawford v. Mori, 2017 CarswellOnt 7249, this Court has given no weight to the use of the words "without prejudice" on motions to avoid acceptances of settlement offers.

[32] In this case, the defendant's offer complies with Rule 49 and should, presumptively, be enforced.

Was the offer accepted or "countered"?

[33] The purported acceptance was first conditional upon the settlement proceeds being "non-taxable" and that condition was [page798] subsequently withdrawn with a form of release that provided that the proceeds were to be treated as "general damages". The release provided for a nondisclosure agreement favouring the defendants and an undertaking and indemnity with respect to any source deductions that the defendant employer might be called upon to pay.

[34] No argument was advanced to suggest that the defendants would in a worse position than contemplated in the offer the defendants made. The obligation was to pay $25,000. I find that, because of the indemnity with respect to withholding taxes, this was not a "counter" but an acceptance as the benefits were to the defendants. As in Fehrman, I conclude that the tax consequences are for the Canada Revenue Agency to consider.

Is it unjust to enforce the settlement?

[35] "The policy of the courts is to promote settlement. The discretion to refuse to enforce a settlement should be exercised rarely" (see Catanzaro v Kellogg's Canada Inc., supra, at para. 9).

[36] In Catanzaro, the court identified mistake as one factor allowing a party to repudiate a settlement. Other factors can include miscommunication, misunderstandings with respect to fundamental facts, duress/unconscionability and illegality. See, for example, Cox v. Baker, supra, at para. 39. This list is not exhaustive, and the factors will vary with the case.

[37] The defendants did not argue that the offer was not withdrawn because of inadvertence or a misunderstanding in solicitor client communication. Instead, the defendants argue that the offer should be deemed to have been withdrawn because circumstances have changed.

[38] With due respect to counsel for the defendants, such a proposition is impractical and unworkable for efficient communication between counsel. Such a rule would promote uncertainty because the question of what circumstances justify deemed withdrawal of an offer are limited only by the imagination of counsel. The failure to place limits on the offer, or to clearly withdraw the offer after circumstances changed, was an error by the defendants. Saying that the offer should be deemed withdrawn because of the change in circumstances is an admission that an error was made.

[39] Framed in this way, the questions for my consideration are these: Should counsel be able to rely upon clear and unequivocal communication from opposing counsel? Should one party be able to profit from the error of another party?

[40] Counsel must be able to rely upon clear and unequivocal communication from opposing counsel and it must be assumed [page799] that counsel intend to have their communication relied upon. As I have concluded, despite the submissions of counsel for the defendants, this was a valid Rule 49 offer.

[41] As the Court of Appeal has directed, the discretion to refuse settlements should be exercised rarely.

[42] Rather than admitting an error or mistake, the defendants simply argue that it would be unjust to enforce settlement because of the change in circumstances. However, although not admitted as an error, I conclude that the failure to place limits on the offer or clearly withdraw the offer was an error by the defendants considering the significant change in circumstances in the years and months following the initial offer. This error significantly compromises the rights of the defendants.

[43] At the time the offer was made, September 2016, the plaintiff was claiming damages in this action against the defendants, including Chief Collins personally, for wrongful dismissal damages in the amount of $100,000, aggravated damages of $150,000, damages of $1 millionfor intentional infliction of mental suffering, and punitive damages in the amount of $150,000. Claims were also advanced under the Canada Labour Code, the Canadian Human Rights Act and the Workplace Safety and Insurance Act.

[44] When the offer was accepted in March 2020,

(a) three-and-one-half years had elapsed apparently with no further negotiations regarding settlement of this action;

(b) the workplace claim was finally resolved by settlement after an appeal was made to WSIAT;

(c) that settlement removed the $1 million claim for intentional interference of mental suffering from this action and dismissed the action against Chief Collins;

(d) the plaintiff's claim was restricted to wrongful dismissal damages; and

(e) the parties made submissions to the Human Rights Commission between 2016 and 2018 resulting in the stay of that complaint while this action was pending.

[45] The error of failing to withdraw or place limits on the offer in these circumstances thus compromised the defendants' rights.

[46] Rule 1.04(1) of the Rules of Civil Procedure provides that the "rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits". [page800]

[47] While the need for counsel to be able to rely upon communication is of vital importance to the functioning of the legal system, in these circumstances I conclude that it is neither just nor a determination on the merits to enforce settlement. The plaintiff should not profit by the error of the defendants.

[48] For these reasons, the application is dismissed.

[49] Submissions on which party should be entitled to costs and the costs sought shall be delivered within 21 days of the release of this decision. The response, if any, is to be filed within ten days thereafter. Submissions are limited to three pages plus cost outline.

Motion dismissed.