Court File and Parties

COURT FILE NO.: FS-18-056-00 DATE: 2023 10 13

ONTARIO

SUPERIOR COURT OF JUSTICE

AURELIA URNESS Applicant

Michael H. Murray, for the Applicant

• and -

LARRY McDONALD Respondent

G. Edward Oldfield, for the Respondent

JAMIE NICOLAS McDONALD Third Party

Julia M. Fischer, for the third party

HEARD: September 29th, 2023

REASONS FOR JUDGMENT

LEMAY J

[1] The Applicant, Aurelia Urness and the Respondent, Larry McDonald, were married on August 8th, 2009 and separated on December 1st, 2017. Although the Respondent is the moving party on this motion, I will refer to the parties as the Applicant and the Respondent throughout these reasons. The Respondent Jamie McDonald is the Respondent’s adult son from a previous marriage. I will refer to him as Jamie throughout these reasons.

[2] The Respondent owned some farm properties prior to his marriage to the Applicant. During the marriage, several additional farm properties were purchased, and the Applicant was put on title for some of the properties the Respondent had owned previously.

[3] The issues in dispute were bifurcated. First, a trial was held before Chown J. over the issue of valuing the farm properties and farm equipment and a decision rendered. The second part of the bifurcated trial was to start in April of this year when the parties advised that the matter was settled. This settlement came about after the Applicant served a Rule 18 offer on the Respondent, the Respondent provided some suggested amendments to that Offer and there was some correspondence between the parties. The trial was cancelled.

[4] After some detailed discussions between the parties and their counsel, the Applicant’s counsel ultimately advised that the Applicant was taking the position that there was no agreement between the parties as to the terms of the settlement. Counsel for the Respondent then brought this motion, which seeks to enforce the terms of the agreement that he asserts the parties reached.

[5] For the reasons that follow, I find that there was, and remains, an agreement between the parties and have provided directions to enforce that agreement. In my view, the parties were ad idem on all of the essential terms of the agreement. As a result, the parties are bound to that agreement. The action is at an end.

Factual Background

a) The Parties and the Litigation

[6] The Respondent has been farming on land in Bruce County for most of his life. At the time that he met the Applicant, he had been divorced from his previous wife and had at least one adult child, Jamie. Jamie is also involved in the farming business and is a party to this action.

[7] The Applicant had also been involved in farming and was a real estate agent at the time that she and the Respondent got married. The farm business was expanded during the marriage.

[8] The parties separated on December 1st, 2017. The litigation in this case has been complex. I cannot say how contentious it has been.

[9] An eleven-day trial was held before Chown J. in 2021. This trial was limited to the issue of the valuation of the farm properties and various farm assets. Chown J. issued a decision on this matter in February of 2022 (see Urness v. McDonald, 2022 ONSC 1014). Chown J. has also issued further procedural directions in this matter over the past year.

[10] The second part of the bifurcated trial was to proceed on a list in Walkerton starting on April 4th, 2023. In the meantime, in the fall of 2022 the parties had retained the services of BDO Canada to prepare a Farm Property Analysis outlining various issues that would arise if the Court ordered the sale or other disposition of various farm properties. In particular, this analysis showed that there would be some taxable capital gains for both parties if the properties were sold. The Respondent, specifically, would have a very considerable taxable capital gain. As a result, the parties discussed resolving the matter. I now turn to those discussions.

b) The Settlement Discussions

[11] On March 31st, 2023, the Applicant served an offer to settle on the Respondent. The major points of that offer were as follows:

a) The Respondent would pay the Applicant the sum of $3,500,000 b) The Applicant would transfer her interest in the farm properties in which she had a registered ownership interest to the Respondent and would release all further claims against those properties. c) The Applicant would assume responsibility for the mortgage indebtedness owed by the parties to Farm Credit Canada. d) The Applicant would deliver vacant possession to the house and buildings on the farm property where she was residing “within ninety days after the closing.” e) The Respondent would assume liability for all of the claims made by Jamie and would hold the Applicant harmless against those claims. f) Each party would bear their own costs. g) The payment would be a full and final settlement of the equalization claims and all other claims between the parties.

[12] The Respondent replied to this offer to settle by way of a letter on April 3rd, 2023. The only adjustments to the terms offered by the Applicant were a reduction in the sum to be paid to $3,400,000 and the transfer of some chattels in the matrimonial home to the Respondent.

[13] This response produced a further letter from counsel for the Applicant, who advised that the settlement terms were acceptable subject to two adjustments, as follows:

a) That the $3,400,000 was confirmed to be tax-free; and b) That the divorce would proceed on an uncontested basis following the transfer of the properties and funds to ensure that the parties receive access to the spousal rollover provisions.

[14] Later that same day, Mr. Murray (counsel for the Applicant) sent an e-mail to Mr. Oldfield (Counsel for the Respondent) and Ms. Fischer (counsel for Jamie) in which he suggested that the parties advise the trial coordinator as follows:

The above noted matters were scheduled to proceed before the Honourable Mr. Justice Chown tomorrow. The parties have reached a settlement regarding the same but are in the process of confirming/finalizing a tax and timing issue regarding the transfer of properties and payments between them. As such the matter does not need to proceed tomorrow, but we would like to keep the matter open in the event that some judicial input is required in regard to the implementation of the settlement terms.

Please notify his Honour and let us know if you require us to attend in-person tomorrow or if we can proceed via Zoom to update the court.

[15] Ms. Fischer responded with confirmation that she was fine with this messaging, and Mr. Oldfield responded with “I have instructions. We are settled. Mike, please send your email to Ms. Reilly.”

[16] The matter was removed from the trial list. An endorsement was issued by Chown J. on April 4th, 2023 advising that the parties have settled and were finalizing minutes of settlement. They wanted a further date in the event that there were difficulties with the drafting of the minutes of settlement. There were a series of subsequent appearances before Chown J., but I do not need to address these any further.

[17] I do not have much detail as to what transpired between the parties during this time period, but there were ultimately several drafts of minutes of settlement exchanged between the parties. The last set of minutes was exchanged on June 30th, 2023. The draft came from counsel for the Respondent.

[18] In the early afternoon of June 30th, 2023, the Applicant instructed her counsel to write to the Respondent’s counsel and advise that the minutes needed two changes, as follows:

a) The last sentence of paragraph 5 needed to be removed. That sentence reads “In the event that financing requirement fro the settlement create a scenario in which Jamie McDonald may have to take title to one or more properties, then Aurelia Urness will consent provided that she receives tax advice to the effect that she will not have any negative tax consequences for doing so.” b) Addition of a section that said that the Applicant would receive 6 percent interest, payable on the last day of each month, until settlement funds in full were received.

[19] The matter did not resolve and proceeded to this motion.

c) The Motion

[20] At the same time as this final correspondence was exchanged, the parties were in the midst of a two-day mid-trial pre-trial with McGee J. This pre-trial was held on June 29th and 30th, 2023. The pre-trial had come about because of the fact that a motion to enforce the settlement had been brought by the Applicant. A cross motion had been brought by the Respondent.

[21] McGee J. provided the parties with a timetable and other directions to re-file their materials for this motion. Ultimately, the Applicant’s motion was withdrawn and the Respondent’s motion was re-drafted and placed before me on a regular motions list on September 29th, 2023.

[22] The trial date remains set for the sittings starting November 14th, 2023. As a result, I advised the parties that I would get a decision out as promptly as possible.

Positions of the Parties

[23] The Respondent’s position on this motion is simple. He asserts that there is a binding settlement of the issues between the parties, and asks the Court to enforce that settlement. He rejects the Applicant’s position that essential terms of the agreement were left out, and argues that the parties reached an agreement, rather than merely making an agreement to agree.

[24] The Applicant, on the other hand, argues that there was no valid or binding agreement between the parties. She argues that essential terms of the agreement, including a closing date, were not agreed upon. In the alternative, the Applicant argues that the Respondent failed to carry out the terms of the agreement and that the Applicant should be entitled to carry on as if there was no agreement under Rule 18(13)(b) of the Family Law Rules.

[25] Jamie’s counsel generally adopted the same position as the Respondent and provided only brief supplemental submissions. She also provided case-law and an Affidavit, which I have considered.

Issues

[26] There are two issues to be resolved on this motion, as follows:

a) Was there a settlement of this matter? b) If there was a settlement, did the Respondent fail to carry the settlement out?

[27] I will deal with each issue in turn.

Issue #1- Was There a Settlement?

[28] Yes.

[29] The law on what constitutes a binding settlement begins with the Court of Appeal’s decision in Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CarswellOnt 836, (1991) 79 D.L.R. (4th) 97. At paragraphs 20 and 21, the Court stated:

[20] As a matter of normal business practice, parties planning to make a formal written document the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange of correspondence, or other informal writings. The parties may "contract to make a contract", that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.

[21] However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the "contract to make a contract" is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself.

[30] The intention of the parties is not a subjective test but, rather, an objective one to be seen from “the eyes of a hypothetical onlooker”. It focuses on the parties’ actions, communications and conduct. Lundrigan v. Andrews, 2009 ONCA 160 at para. 8.

[31] These principles have also been adopted in family law cases. See, for example, Ward v. Ward, 2011 ONCA 178, (2011) 332 D.L.R. (4th) 537 at para. 53 and Halpern v. Halpern, 2014 ONSC 4246 at para. 20.

[32] In determining whether a settlement exists, counsel for the Applicant directed my attention to the decisions in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 2007 CarswellOnt 6003, (2007) 87 O.R. (3d) 464 (S.C.J.) and Dick v. Marek, 2009 CarswellOnt 3179 (S.C.J.). Both cases deal with the approach to be adopted by the Court in considering whether there is a settlement under Rule 49.09 of the Rules of Civil Procedure.

[33] In Merrill Lynch, Carnwath J. states, at paras. 9 and 10:

[9] The first step is to consider whether an agreement to settle was reached. In doing so, the proper approach is to treat the motion like a rule 20 motion for summary judgment. If there are material issues of fact or genuine issues of credibility in dispute regarding whether (i) the parties intended to create a legally-binding relation or (ii) there was an agreement on all essential terms, the court must refuse to grant judgment.

[10] The second step, once an agreement has been found to exist, is to consider whether, on all the evidence, the agreement should be enforced. In this second step, a rule 20 approach is not applied, but rather a broader approach, taking into account evidence not relevant to a rule 20 inquiry.

[34] Counsel did not provide me with a case that adopted the same approach in considering family law settlements. However, the Respondent’s counsel did not argue that it would be incorrect to adopt this approach. Therefore, I will follow it in this case, mindful of the fact that Merrill Lynch was decided before Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. Therefore, any disposition on the first stage will require a consideration of the enhanced powers set out in Hryniak.

[35] I start with the observation that there are almost no facts in dispute in this case. There were no oral representations made between the parties and no issues about whether letters were received or understood. In my view, what is in dispute is the legal characterization of what happened between the parties. As a result, there are no credibility issues that need to be resolved. Instead, I have to determine whether the facts as set out above support the conclusion that there is an enforceable agreement.

[36] The Applicant argues that the parties did not have an agreement because there were a series of items that were not addressed in the original exchange of correspondence. Those items were set out in the Applicant’s factum at paragraph 14, and can be summarized as follows:

a) The Respondent was to purchase the properties from the Applicant, rather than simply completing a spousal transfer b) The Respondent would pay a deposit of $125,000.00 within thirty (30) days of the agreement being signed. c) The Respondent sought to include a clause permitting Jamie McDonald to take title to one or more of the properties. d) The closing of the transaction would not take place until September 29th, 2023. e) The minutes of settlement included specific language in respect of the Appellate proceedings. f) The minutes of settlement included an enforcement clause that, if financing could not be obtained, then the Applicant would have a first charge on the Respondent’s property.

[37] Most of these items can be dealt with summarily. The difference between a purchase and a transfer, on the facts of this transaction, is not significant. The deposit is to the advantage of the Applicant, and the specific language in respect of the Appellate proceedings is simply making the fact that this is a full and final resolution of the issues between the parties clear. I see no reason to remove or modify any of these clauses.

[38] This brings me to the closing date. Counsel for the Applicant argues that the closing date is an essential term of the agreement. In the alternative, he argues that, in family law, the monies should be paid immediately. On the facts of this case, I reject both arguments.

[39] I start with the claim that the closing date was an essential term of the agreement. I reject that argument for four reasons.

[40] First, in his Affidavit, the Respondent points out that the financing for a transaction of this nature cannot be completed overnight. I accept this evidence and note that it was not seriously disputed by the Applicant. The amount of money in this case is $3.4 million. It would be surprising to discover that a farming family, whose assets are mostly land, would have this kind of money immediately available. Time will be needed to raise this money. In his Affidavit, the Respondent suggests that a ninety (90) day period is a reasonable one. I agree with the Respondent’s position.

[41] Second, the principle of reasonability applies to the parties agreement. In argument, I asked counsel whether the principles of commercial reasonability should apply to the parties’ agreement. Counsel for the Applicant argues that principles of commercial reasonability do not apply in a family law context because applying those principles would be interfering with equalization and would be ignoring the special processes of family law.

[42] I have concluded that it is not necessary for me to apply the contracts cases that articulate the principles of commercial reasonability to the facts before me. All that is necessary is for me to conclude (as I have) that it is reasonable for the Respondent to need time to raise the money to pay the settlement and that the need for this time would have been in the reasonable contemplation of the parties when the offers were exchanged.

[43] Third, there are the terms of the Applicant’s offer. It is instructive that the Applicant required a specific term giving her ninety (90) days to move out of the matrimonial home but did not make any mention of a specific closing date, or a deadline for obtaining financing. This suggests that the parties (and particularly the Applicant) turned their minds to the issue and decided that a specific closing date was not essential to their agreement.

[44] Finally, there is the conduct of the parties around and immediately after the negotiations were concluded. That conduct persuades me that the parties viewed themselves as having reached a settlement for two reasons:

a) The e-mail to the Trial Coordinator, reproduced at paragraph 14, clearly indicates that the parties all approved the draft and all agreed that the matter had been settled. This is distinguishable from the decision in Halpern, supra. In Halpern, counsel for one of the parties sent an e-mail saying that the matter was “essentially” settled (para 28). In Halpern, there were also changes to essential terms of the agreement that were made by one side and not agreed to by the other side (para 24). Neither of these facts are present in this case. b) The parties agreed to remove the matter from the trial list and ask the Court for assistance to “implement” the terms of the settlement.

[45] These reasons also address the Applicant’s argument that monies in family law are paid immediately. No case law was cited to support this proposition. In any event, for the reasons set out at paragraphs 40 and 42, I am of the view that the parties were ad idem on the fact that there would need to be a reasonable time period to raise the monies.

[46] For all of the foregoing reasons, I have concluded that the parties had an agreement between them. The terms of that agreement are relatively easy to ascertain. I start with the observation that a close reading of Draft #9 indicates that it is, with the exception of the two issues set out at paragraph 18, simply an expansion of the original offer to settle.

[47] In terms of the two points set out at paragraph 18, I would note as follows:

a) There was no request for an interest rate clause in the original offer to settle. As a result, such a clause should not be included in the final minutes. b) There was no request for any of the properties to be transferred to Jamie to assist with financing. As a result, such a clause should not be included in the final minutes.

[48] There is one other clause that was not included in the original agreement, and it is the language in respect of the first charge being granted to the Applicant if the Respondent cannot obtain the monies. This term is also not to be included in the agreement, as it was not covered off originally. However, the parties have their rights at law if the Respondent cannot complete the transaction. Nothing in these reasons should be taken as precluding the right of the Applicant to seek a first charge against the Respondent’s property if the funds are not paid or for either of the Respondents to seek orders from the Court in respect of enforcement.

[49] This brings me to the closing date. As set out above, I have concluded that the parties were ad idem on the fact that there should be a reasonable amount of time in order for the Respondent to obtain financing. In my view, what is meant by a reasonable time period was made clear in the draft the parties circulated on June 30th, 2023 where they gave the Respondent approximately ninety (90) days. However, the specific date set out in that agreement can no longer apply as the parties have been in litigation since those minutes were exchanged.

[50] Therefore, I conclude that the Respondent should have ninety (90) days from the date that the settlement documentation is complete in order to obtain financing and arrange for the transfer of the funds to the Applicant. The deposit of $125,000 is to be paid thirty (30) days after the agreement is finalized.

[51] For the foregoing reasons, I am of the view that the parties had an agreement. That agreement is the minutes in draft #9, with the modifications set out in paragraphs 47 to 50 of these reasons.

[52] I will now address the second issue that the Applicant has raised.

Issue #2- Did the Respondent Fail to Carry the Settlement Out?

[53] No.

[54] The Rule that the Applicant relies upon is Rule 18(3)(b) of the Family Law Rules. The Applicant argues that the agreement incorporated terms that were not originally included in the offer. I have addressed these arguments in the previous section and have set out what the agreement of the parties was.

[55] The Applicant also argues that the Respondent has not carried out the terms of the agreement because “the presumption would have been on the Respondent to make payment and complete the transfers forthwith or promptly thereafter.” Counsel relies on the decision in Nashid v. Michael, 2010 CarswellOnt 7902 (S.C.J.) in support of this proposition.

[56] There are two problems with the Applicant’s argument. First, there is nothing in the settlement offer that suggests that the transfers of property had to be made “forthwith” or “promptly”. As I have set out in detail above, the precise timing of when the transactions would close was not an “essential term” of the agreement. Instead, the parties envisioned the transaction concluding in a reasonable time after they reached the agreement.

[57] Second, the facts in Nashid are distinguishable from this case. In Nashid, there was a significant change in the materials facts. Specifically, the Respondent had assured the Applicant that the debts from a restaurant would be paid off by insurance proceeds. That assumption turned out to be wrong, which meant that the whole financial basis of the transaction had changed. In this case, the only real issue that the Applicant has raised is the closing date.

[58] For these reasons, I conclude that the Respondent has not failed to complete the transaction. Indeed, at this point, there is no indication in the Court record that he either has (or does not have) financing. He will require a reasonable time period to obtain that financing and I will address that issue in my disposition of the case.

Disposition and Costs

[59] For the foregoing reasons, the Respondent’s motion is granted. The terms of the settlement are as set out in paragraph 51 above. The parties are directed to ensure that the necessary documentation is completed to give effect to the agreement.

[60] Finally, there are the costs of this motion and of the proceeding. The agreement envisions that the parties will each bear their own costs of these proceedings. That clearly means that there are to be no costs of the trials before Chown J. and, by copy of this endorsement, I have advised His Honour of my conclusion in that regard. However, I am less clear as to whether that provision also covers the costs of this motion to enforce the settlement.

[61] As a result, the parties are encouraged to attempt to resolve the outstanding costs of this motion. If they are unable to resolve those costs, then the following timetable shall apply:

a) The Respondent and Jamie shall serve and file their costs submissions within fourteen (14) days of today’s date. Those costs submissions are to be no longer than three (3) double-spaced pages, exclusive of bills of costs, offers to settle and case-law. b) The Applicant shall serve and file her costs submissions within fourteen (14) days thereafter. Those submissions are to be no longer than four (4) double-spaced pages, exclusive of bills of costs, offers to settle and case-law. The Applicant is being given more space to respond as she may have to address two sets of costs. c) There are to be no reply costs submissions without my leave. There are also to be no extensions for the time to provide costs submissions, even on consent, without my leave. In the event that costs submissions are not received in accordance with these timelines, there shall be no costs. d) Finally, as well as uploading their costs submissions to CaseLines, the parties are to provide a copy of those submissions electronically to my judicial assistant, Melanie Powers. She can be reached at melanie.powers@ontario.ca.

[62] I remain seized to address any issues that may arise from these reasons. If it is necessary to speak to me, an appointment for a virtual hearing may be made through the Trial Coordinator in Owen Sound.

LEMAY J

Released: October 13, 2023