Court File and Parties

Court File No.: 21-658113-0000 Date: 2023-06-22 Ontario Superior Court of Justice

Between: John Will, Applicant And: Geo. A. Kelson Company Limited, Respondent

Counsel: Patrick Monaghan, for the Applicant D. Lederman, for the Respondent

Heard: February 1, 2023, and in writing Before: A. P. Ramsay J.

Supplementary Endorsement on Costs

[1] Following the release of my decision, dated January 4, 2023, indexed as Will v. Geo. A. Kelson Company Limited, 2023 ONSC 29, the court received an email dated January 4, 2023, from counsel for the respondent enclosing a copy of the respondent’s offer to settle, dated January 22, 2022. The respondent asked that the court reconsider its decision on costs taking into consideration that the respondent had made an offer to settle. The respondent asks that the court vary the costs award and submits that the court should find that the matter was a wash, or alternatively asks that the matter be referred to an assessment. Counsel for the respondent argues that the delivery of factum and the two days of hearing could have been avoided and relies on its r. 49 offer to settle.

[2] The terms of the respondent’s offer to settle was as follows:

i. The Respondent will pay a lump sum payment to the Applicant in the amount of $82,141.11 representing any interest owing in respect of the principal payments made to him to date.

ii. The Respondent will make an annual payment to the Applicant on September 30 for the next four years (2022 – 2025) in the amounts set out below:

(a) $104,101.20 on September 30, 2022;

(b) $102,173.40 on September 30, 2023;

(c) $100,256.16 on September 30, 2024; and

(d) $ 98,317.80 on September 30, 2025

iii. Each annual payment is calculated based upon a principal payment of $96,390.00 with a prime interest rate of 2% applied to the outstanding principal as of September 30 each year. If the prime interest rate of 2% is increased in any year, the increased rate will be applied to the annual payment to be paid to the Applicant (emphasis added).

iv. If any of the payments owing to the Applicant in items 1 or 2 is not made by the Respondent on or before the due dates set out above, the Applicant can immediately apply to the Court to obtain an Order for payment full of all outstanding amounts owing to him by the Respondent.

v. The parties will enter into a Confidentiality Agreement and Mutual Release acceptable to counsel, acting reasonably (emphasis added).

vi. The Application will be dismissed with the Applicant’s costs to January 23, 2022, to be assessed.

vii. This Offer to Settle expires one minute after the commencement of the hearing of this Application or earlier if withdrawn in writing.

[3] In response, counsel for the applicant forwarded a letter dated January 31, 2023, to the court enclosing the applicant’s offer to settle. Counsel for the applicant asked that if the costs award were revisited, that the court award “party and party costs” to the applicant throughout in the amount of $50,000, plus HST, plus disbursements of $10,242.02 inclusive of HST, but that otherwise, the order made should stand.

[4] The applicant delivered an offer to settle dated January 21, 2021, for $450,000.00, which was comprised of $445,256.63 on account of the capital amount owing to the applicant and $4,743.37 on account of interest owing to the applicant, with a T5 for the $4,743.37, plus costs on a partial indemnity basis.

[5] I convened a case conference hearing on February 1, 2023. While I initially indicated that I was not inclined to reconsider my decision on costs, after hearing submissions from counsel, and reviewing the offers to settle and submissions in writing made by both sides, I revisited the issue afresh.

[6] For the reasons below, I am not inclined to vary my costs award.

[7] Both sides made offers to settle which the court may take into consideration in exercising its discretion with respect to costs. However, the respondent ignores three factors. First, at the conclusion of the application, I invited counsel to make submission on costs, if the parties could not resolve the issue, notwithstanding that neither party had provided a Costs Outline. I indicated to counsel that if the parties could not resolve costs, then each side should advise the court what the opposing party should obtain in costs if successful, and what the unsuccessful party should pay and vice versa. I also advised counsel that if there were offers to settle, counsel should also advise the court of what costs would be on a substantial indemnity basis without identifying which party made the offer. Neither side advised the court of any different scale of costs during their submissions on costs.

[8] Second, in order for the court to enforce an offer to settle, the terms of an offer to settle must be clear, definite, and unequivocal as to what is being offered so the other side is aware of what is being accepted: Yepremian v. Weisz (1993), 16 O.R. (3d) 121 (Gen. Div.); Stetson Oil & Gas Ltd. v. Stifel Nicolaus Canada Inc, 2013 ONSC 5213, at paras. 2-8. A number of authorities have established that in order to attract the costs consequences under the Rule, a r. 49 offer must be crystal clear: Rooney v. Graham (2001), 53 O.R. (3d) 685 (C.A.), Malik v. Sirois (2003), 176 O.A.C. 348 (C.A.), at para. 2, upholding Malik v. Sirois, 2002 ONSC 7008; and Davies v. Clarington (Municipality), 2019 ONSC 2292. This requirement is hardly surprising as it has long been held that an agreement to settle a claim is a contract and, once accepted, is enforceable and binding on the parties: see M.(G.) v. Alter, 2006 CarswellOnt 4190 (S.C.); Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc. (1995), 23 O.R. (3d) 766 (Gen. Div.); Pukec v. Durham (Regional Municipality) Police Services, [2001] O.J. No. 1587 (S.C.).

[9] In this case, paragraphs two to four of the respondent’s offer to settle lack certainty or precision. Paragraph two invites an inquiry by the court into the future capital amount to be paid to the applicant on an annual basis. Paragraph three invites speculation by the court about uncertain events if the interest rate is not 2 per cent. It is difficult to conceive how the amount is to be calculated based on unknown future events. The capital amount mentioned in this paragraph upon which the interest is to be calculated differs from paragraphs 2 (a) to (d).

[10] When comparing an offer to settle under r. 49.10 to determine whether a party’s judgment was as favourable as or more favourable than the party’s offer to settle, all the terms of the offer to settle must be compared, including costs, with all the terms of the judgment: Rooney (Litigation Guardian of) v. Graham, [2001] 53 O.R. (3d) 685 at para. 57 (C.A.). The respondent’s offer to settle contains a non-monetary term in the form of requiring a confidentiality agreement from the applicant.

[11] The applicant did not beat its offer to settle, in the sense that the respondent was not required to make a balloon payment of the capital amount remaining under the term of the agreement. As for the respondent’s offer, the lack of clarity, the inclusion of calculations based on future events, and the inclusion of a non-monetary term, make it clear that the offer does not comply with r. 49.10(2) or the jurisprudence in Ontario interpreting the rule.

[12] Third, the basis of my awarding costs to the applicant is set out in paragraph 44 of my endorsement, which sets out the factors considered in exercising my discretion as to costs. It is evident from my decision that the conduct of the respondent was the basis for the costs award in favour of the applicant. The respondent’s lack of communication to the applicant resulted in the applicant having to retain counsel and commence these proceedings. The applicant has paid taxes on income not received as a result of the conduct of the respondent. There is no evidence before the court on what the loss of use of these funds represents to the applicant, nor can the court speculate. As a result of the respondent’s conduct, the applicant will have to remedy the situation with CRA. It was not clear from the evidence whether the assistance of counsel will be required to do so especially as the co-operation of the respondent will be required. Regardless, it is because of the conduct of the respondent that this information will have to be corrected with CRA. Additionally, as stated in my decision, the respondent’s changing position on how interest was calculated required clarification by the court.

[13] I do not agree with the respondent’s submission that much of the costs could have been avoided if the applicant had accepted the respondent’s offer to settle. In the absence of a costs outline from either party, it is of course difficult to compare the relative time expended in this case. There is sufficient information before me to determine what steps took place before the respondent delivered its offer to settle and to evaluate the reasonableness of the time claimed by the applicant.

[14] Without departing from my earlier observations that the lack of communication by the respondent precipitated these proceedings, a review of the materials before me indicate that the applicant delivered a pre-litigation offer to settle on January 21, 2021. Based on submissions made by counsel for the applicant at the merit hearing, after his client failed to receive any response from the applicant, he too attempted to communicate with the respondent, before the commencement of these proceedings, to no avail.

[15] The Notice of Application was issued on February 25, 2021, a month after the applicant’s offer to settle. Paragraph 2(g) of the Notice of Application indicates:

(g) The Respondent is conducting itself in its relations with the Applicant in a difficult and uncommunicative fashion and has failed to respond to requests made by and on behalf of the Applicant as to (emphasis added):

(i) Its failure to make a payment for the interest owed to the plaintiff as of September of 2020.

(ii) An accounting as to what amount was owed to John Will as of September 30, 2020.

(iii) A breakdown of the calculation of the Applicant’s entitlement to interest as of September 30, 2020.

(iv) The interest rate being used by Kelson for calculations of the Applicant’s entitlement commencing January of 2017.

(v) Any schedule of payments that will be followed concerning payments of the debt owed by the Respondent to the Applicant.

[16] The respondent does not deny the lack of communication but provided one explanation for the failure to respond in an affidavit and another on cross examination. As I noted in my earlier Reason for Decision, this was not communicated to the applicant, nor is there any explanation as to why there was no response to the counsel for the applicant when he was retained. The explanation does not explain the silence when the applicant retained counsel and attempted to engage. I note the following passage from the applicant’s factum regarding the impact of respondent’s failure to communicate:

As known by Kelson, John Will is approaching retirement and the funds owed by Kelson are important to him and his family. The lack of communication by Kelson and Kelson’s failure to respond to him and his counsel has made him anxious.

[17] On a review of the materials, a number of significant steps were taken in the proceeding, well before the respondent delivered its offer to settle. The applicant’s affidavit is sworn in June 2021. The applicant’s economic expert’s report dated June 25, 2021. The applicant’s expert affidavit is sworn on June 25, 2021. The applicant’s application record is dated June 28, 2021. The respondent’s expert report is dated November 2021. The respondent’s offer to settle is dated January 24, 2022. The cross examination of the applicant took place on January 25, 2022. Given the extensive terms of the offer, it would be unreasonable for the court to presume that this would afford applicant’s counsel sufficient time to review the offer to settle with his client and obtain informed instructions.

[18] I therefore reject the respondent’s request to have the matter of costs referred to an assessment.

[19] Having heard the submissions on behalf of the parties, I see no basis to depart from the default practice of fixing costs in accordance with r. 57.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and in accordance with the principles articulated by the jurisprudence in fixing costs: see, Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 (C.A.).

A. P. Ramsay J. Released: June 22, 2023