CAROL TARASOFF PLAINTIFF - v. -, 2023 SKKB 102

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 102 Date: 2023 05 16 Docket: QBG-SA-00640-2021 Judicial Centre: Saskatoon ___________________________________________________________________________ BETWEEN: CAROL TARASOFF PLAINTIFF - and - CARY TARASOFF DEFENDANT Counsel: Grant A. Richards for the plaintiff Chelsea R.M. Campbell for the defendant ___________________________________________________________________________ FIAT MORRALL J.

May 16, 2023 ___________________________________________________________________________ Introduction [ 1 ] These proceedings are the result of an unfortunate matter where Carol Tarasoff [Carol] is suing her son, Cary Tarasoff [Cary], over an alleged breach of a written agreement dated June 10, 2017 [Agreement of June 10] whereby Carol argues that Cary was contractually obligated to pay all rents to her during her lifetime arising from three parcels of family farmlands [Family Farmlands] that he now owns.

[ 2 ] I am using the first name of each party not out of familiarity or disrespect, but to ensure clarity and ease of reference given their identical last names. [ 3 ] These Family Farmlands had been part of a dispute over a total of five parcels of land resulting from separate litigation between Cary, Carol and Carol’s now deceased ex-husband, Johnny Tarasoff. As a result of Minutes of Settlement dated June 9, 2017 after a pre-trial held on June 8, 2017 arising from that litigation, Johnny Tarasoff received two parcels of land, Carol received two parcels of land and Cary received one parcel of land.

According to Carol, as a result of the execution of the Agreement of June 10, she transferred her two parcels of land to Cary on June 14, 2017 so that he now owned the three parcels of land known as the Family Farmlands on the basis she would be receiving all of the rents due from any lease holder for these Family Farmlands for the rest of her life. [ 4 ] Cary submits that he was pressured and coerced into signing the Agreement of June 10 and that, in fact, an email he sent to Carol on June 5, 2017 and her subsequent reply on the same day [Agreement of June 5] whereby he agreed to split the rents with Carol during her lifetime from any of the farmland he received as a result of the lawsuit constituted the full binding contractual relationship between the two parties.

Cary also asserts various contractual defences. [ 5 ] The Agreement of June 10 is a little over a half a page in length. The email exchange that constitutes the Agreement of June 5 is almost a page in length. Regrettably, this decision will be longer than both documents. The Proceedings [ 6 ] This matter began with Carol issuing a statement of claim naming Cary as the defendant on June 15, 2021. [ 7 ] The claim stated that the Agreement of June 10 required Cary to pay Carol all rents during her lifetime arising from the three separate parcels constituting the Family Farmlands.

Prior to 2021, she claimed that Cary had paid the required rents from the leaseholders to her, but he has refused to pay these rents from 2021 onwards. She requests that any rents collected for the Family Farmlands in 2021 onwards be paid to her and that the Court issue a declaration that she has a life interest in any rents collected pursuant to the Agreement of June 10.

In the alternative, she requests that the two parcels of land she gave to Cary be returned to her. [ 8 ] Cary filed his statement of defence on September 14, 2021. [ 9 ] The defence admitted the nature and contents of the Agreement of June 10 but claimed the following: 1) Cary did not have the capacity to understand the nature and effect of the Agreement of June 10; 2) Carol pressured and coerced Cary into signing the Agreement of June 10 which was entered into without independent legal advice; 3) Carol drafted the Agreement of June 10 in an ambiguous format, with inappropriately defined terms and with the Family Farmlands not being specifically described; 4) The Agreement of June 10 is unconscionable; 5) Alternatively, Carol breached the terms of the Agreement of June 10 by not paying the taxes for the Family Farmlands and by not carrying insurance; 6) Further, there was a new agreement made in November of 2017 that properly described the Family Farmlands whereby the land renter would pay rent to Carol for the 2018-2020 period and Carol would pay all costs associated with the land; and 7) The only relief requested was an order dismissing Carol’s claim with solicitor-client costs in Cary’s favor. [ 10 ] The requirements for mediation were met on December 2, 2021. [ 11 ] A notice of application was filed by Carol against Cary on May 2, 2022 seeking

summary judgment for the amounts owed, an order granting her possession of the land during her lifetime and costs. [ 12 ] Both Cary and Carol were cross-examined by counsel for the parties on July 12, 2022. [ 13 ] Carol filed a reply to the undertakings as a result of her cross-examination on August 11, 2022. [ 14 ] Cary filed a reply to undertaking as a result of his cross-examination on August 15, 2022 [ 15 ] Cary filed an application without notice to seek leave to serve and file a supplementary affidavit on August 25, 2022. [ 16 ] In relation to the

summary judgment matter, the following affidavits, excluding affidavits of service, were filed: 1) Affidavit of Carol sworn April 27, 2022; 2) Affidavit of Cary sworn May 24, 2022; 3) Affidavit of Carol sworn June 3, 2022; 4) Supplemental affidavit of Cary sworn August 25, 2022;

5) Affidavit of Carol sworn September 2, 2022; and 6) Reply affidavit of Cary sworn September 12, 2022. [ 17 ] The following briefs of law and argument were filed: 1) Brief of Law for Carol filed August 15, 2022; 2) Brief of Law for Cary filed August 15, 2022; 3) Reply brief of law for Carol filed August 24, 2022; 4) Supplemental Brief of Law and Argument for Cary filed March 31, 2023; and 5) Reply Brief of law for Carol filed April 17, 2023. [ 18 ] There have been no applications by either party to amend any pleadings or file any counterclaim.

Background Facts [ 19 ] The facts upon which this application is based will be derived from the affidavit material, the transcripts of the unsworn cross examination and the reply to the undertakings. I will review the salient facts in general although I will not parse through every detail.

Given the nature of the legal issues between the parties, I find it most useful to review the material as it was presented to the Court in chronological order. [ 20 ] In Carol’s affidavit sworn April 27, 2022, she avers as follows: 1) She is Cary’s 78-year-old mother. 2) As a result of litigation between her ex-husband, Cary and herself, she received two quarters of family farmland while Cary received one quarter.

She attaches minutes of settlement which reflect this consensus dated June 9, 2017 signed by separate counsel for all three parties. 3) “Prior to signing the … Minutes of Settlement”, she and Cary had verbally agreed to have her transfer to him the two parcels of land received in the settlement in exchange for Cary renting out the land they both received and Cary paying her all the rent less the property taxes for the rest of her life. 4) She appends the Agreement of June 10 to the affidavit.

I will reproduce it in full as follows: 10 June 2017 LAND RENTAL AGREEMENT To Whom it may concern, I, Cary Tarasoff, enter into an agreement with Carol Tarasoff concerning the family farm lands in the RM of Montrose. In the event that I receive any or all of the farm land during the pending lawsuit, its negotiations, or within a later estate, I promise that I will be transferring all rental income from any such lands, to Carol Tarasoff for the duration of her life. Carol will ensure the land taxes are paid and will carry suitable insurance as would any land owner/operator.

I will endeavor to try and help Carol with the lease agreements between her and the farmer of the day. In the event that Carol Tarasoff passes before the point where any farm income is paid out to her, these funds will then remain with myself and will not be considered as owing to the estate unless her estate is in arrears.

This agreement does not involve or include any mineral right income that may become relevant. “Carol Tarasoff”__________ “Cary Tarasoff”_________ Carol Tarasoff Cary Tarasoff “June 10/2017”___________ “10 June 2017”__________ Date signed Date Signed 5) Both she and Cary had input into drafting the Agreement of June 10, but Cary advised her that his legal counsel, Terry Zakreski, would draw up a more formal agreement.

Cary later advised her that the Agreement of June 10 was sufficient. 6) She entered into the Agreement of June 10 for a number of reasons and subsequently transferred title to the two parcels of land she received from the prior litigation to Cary on June 14, 2017. 7) In late 2017, Cary negotiated a three-year lease for the Family Farmlands and Cary, the leaseholder and Carol signed it. In this first lease agreement, the rental income was to be paid directly to Carol. A second lease was entered into on the same terms in March of 2018, but only Cary and the leaseholder signed that document.

In this later lease agreement, the rental income is to be paid directly to Cary.

8) From 2017 to 2020, Carol received rents as a result of both lease agreements less the property taxes and 33% of the rents which Cary indicated represented the income tax payable by him as a result of Cary initially receiving income from the rents. 9) On January 22, 2021, Cary advised Carol by text message that a new three-year lease had been signed and that she would continue to receive all the income. Photographs of the message were appended to the affidavit and it stated as follows: Cary Huh? The farm will remain as is til way after you pass on mom.

There is a new 3 year lease sigmed (sic) so your income is locked in for next 3 years again. What I do or dont do now has nothing to do with the farm or the income (which all will keep going to you). Gotta run.

Have a nice day mom 1:35 pm Fri, Jan 22 From Cary 10) Carol has not received the 2021 or 2022 rents that are due. [ 21 ] In Cary’s affidavit sworn May 24, 2022, he avers to the following: 1) He is the 58-year-old son of Carol. 2) From 1990 to 2012 he worked at his parents’ farm at his own expense and had a verbal agreement with his parents that, upon their retirement, he would receive compensation for his years of unpaid labour including title, in trust, to all five parcels of family farmland. 3) However, neither his father nor Carol provided the promised compensation. 4) When his parents separated in February of 2014, he commenced an action against his parents for the promised compensation and damages. 5) On June 9, 2017, minutes of settlement were executed at a pre-trial conference and he received one quarter of the farmland, Carol received 2 quarters of land as did his father, Johnny Tarasoff. 6) He regrets executing this settlement as he did not obtain all the compensation he felt he deserved as he was in the midst of a psychological breakdown. 7) He is a Canadian Forces’ veteran who was discharged in the fall of 1990 as a result of permanent injuries suffered during his service.

He has been diagnosed with a number of impactful conditions which cause him to live with severe and chronic pain. 8) He attaches a report from a vocational rehabilitation specialist which refers to the above diagnoses and a psychological assessment from a psychologist dated July 3, 2017 based partly on an assessment made on him on June 23, 2017 which details his conditions. 9) He refers to severe psychological distress on June 8, 2017. 10) He relates that he attended the pre-trial in person on June 9, 2017 with the other parties and his lawyer, Terry Zakreski.

In referring to his execution of the minutes of settlement, Cary states, “Looking back, I do not believe that I was in the right state of mind to enter such an agreement.

I could barely function.” 11) He denies that he and Carol “made an agreement prior to the signing of the Minutes of Settlement.” He swears that, after the pre- trial, Carol approached him and said that “she needed to transfer the two quarters she received during the settlement … to me or they would be transferred to my sister.” Carol stated she would do this so long as Cary “agreed to pay her all the rental income for the rest of her life.” Cary stated that he ‘felt obligated to agree to have the land transferred to my name, under Carol’s terms, or [he] would lose the land forever.” 12) He says he does “not recall” if he had input in drafting the Agreement of June 10 but recalls Carol drafting numerous versions and asking Cary to pick one to sign.

He says he understood that Carol was to manage the land and rental income on two quarters only and the Agreement of June 10 did not include the third quarter. 13) He also does not recall asking his former counsel, Terry Zakreski, if he needed a more formal agreement. 14) Following the signing of the Agreement of June 10, he states that Carol led him to believe she was “entirely destitute” and needed income from all three quarters that were transferred to Cary.

He felt bad for his mother and agreed to give her the rental income for the Family Farmlands as long as she managed the land and took care of collecting the rent on her own. This is reflected in the first lease agreement for the Family Farmlands made between the leaseholder, Cary and Carol in 2017. 15) However, Cary encountered numerous problems including the requirement that, as title holder to the lands, he was to report the income on his taxes. The first lease agreement became unenforceable which led to the signing of the second lease agreement of 2018 between Cary and the leaseholder only.

16) In addition, he became the full-time manager of the Family Farmlands with the associated management issues and states, “I was essentially once again working for free for my mother.” 17) In July of 2020, Carol told Cary that she did not have sufficient funds to purchase a home with some of the amenities she felt she needed. Cary “felt bad” for Carol and eventually gifted her $50,000.

While Carol was reluctant to take this money, Cary “pushed it” and told her she could make it up to him by leaving the money to his sons in her will. 18) He indicates that he does not recall sending the text of January 22, 2021 related to the Family Farmlands but states, if he did send it, it was because he felt “obligated” to help his mother as he wanted to reassure her. 19) In February of 2021, he found out that Carol had access to $175,000 in investments and came to believe that she was not, in fact, destitute. He thereafter became upset and told Carol he wanted the $50,000 gift back. She refused.

He then told her that he “would be keeping the rental income from the land until such time that the $50,000 was repaid.” 20) He also told Carol that he would no longer be giving her any rental income from the quarter that had been given to Cary outright in the settlement. 21) He then stated that, if the Court determines this matter to be appropriate for

summary judgment, he wanted to have the psychologist who examined him on June 23, 2017 qualified as an expert witness and have her file an affidavit. [ 22 ] In Carol’s affidavit sworn June 3, 2022, she swears the following: 1) Contrary to Cary’s assertions, she states all matters pertaining to the rightful ownership of the Family Farmlands were settled by the minutes of settlement of June 9, 2017 where all parties involved, including Cary, had legal counsel. 2) She states that it was Cary’s decision to deduct an amount for income tax from the rental income she received for the Family Farmlands. 3) She denies that she advised Cary that she did not have sufficient funds to purchase a home.

She says that Cary advised her that Cary and his wife had decided to give his wife’s mother $50,000 because she was in financial crisis and, as a result, they had decided to gift Carol and Cary’s children $50,000 each as well. 4) She is not qualified to comment on Cary’s state of mind in 2017 when the litigation matters were settled. 5) She indicates that she is prepared to “undo” the Agreement of June 10 so that Cary transfers the two quarters she gave to him back to her and that he can keep all the rent from his quarter and provide her with her rent from her two quarters less the property taxes. [ 23 ] In the unsworn cross-examination of Cary dated July 12, 2022, he states as follows: 1) He agreed that he received payments from the leaseholder with respect to the Family Farmlands on March 15, 2021, October 15, 2021 and March 15, 2022 pursuant to the lease agreement and has not paid these amounts to Carol. 2) He also advised that the land management issues related to the Family Farmlands predated his acquisition of title. [ 24 ] In the unsworn cross-examination of Carol dated July 12, 2022, she states as follows: 1) She agrees that around the 2017 time period she saw that Cary was in a lot of pain and believed his strange behavior was as a result of all the medication he was on. 2) She provides an undertaking to Cary’s counsel to provide an email, if it exists, regarding Cary’s counsel providing her with an additional agreement to sign. 3) She refers to an agreement drafted by Cary and sent to her on June 5, 2017 by email where Cary was going to give her all the rent from the land that he received and undertakes to provide this email to Cary’s counsel. 4) She said she did not look at the Agreement of June 5 closely and later noticed that it referred to sharing the rent which she did not agree with and communicated this to Cary.

Thereafter, when discussing the Agreement of June 10, there was more certainty about which lands pertained to the Agreement. 5) She stated she did not pay the taxes on the Family Farmlands as Cary had already taken everything but the insurance off her cheque when she received rent for the Family Farmlands.

She was also told by Cary not to deal with the insurance. [ 25 ] On August 11, 2022, Carol provided her reply to undertakings which contained the following: 1) An email dated June 9, 2017 she wrote to her counsel, Greg Kuse, which partly states, “Cary said he is having Terry do up an agreement that the rent comes to me till I die though.” 2) An email dated June 5, 2017 (Agreement of June 5) from Cary to Carol which states as follows: Hi Mom, See what you think and give comments to this please: 5 June 2017

LAND RENTAL AGREEMENT To Whom it may concern, I, Cary Tarasoff, enter into an agreement with Carol Tarasoff concerning the family farm lands in the RM of Montrose. In the event that I receive any or all of the farm land during the pending lawsuit, its negotiations, or within a later estate, I promise that I will be sharing all rental income from any such lands, with Carol Tarasoff. The amount of this share will be determined by the gross income from the renter/farmer of the land at current market rates, minus the yearly costs for taxes and insurances to protect this land.

The net farm income will then be divided equally between myself and Carol Tarasoff while she is alive. In the event that Carol Tarasoff passes before the point where any farm income is paid out to her, these funds will then remain with myself and will not be considered as owing to the estate.

This agreement does not involve or include any mineral right income that may become relevant. _____________________ ____________________ Carol Tarasoff Cary Tarasoff _____________________ ____________________ Date signed Date Signed [ 26 ] In Cary’s supplemental affidavit sworn August 25, 2022, he states as follows: 1) After hearing Carol talk about the email exchange of June 5, 2017, he realized he had forgotten about it as “I have had considerable problems with my memory as a result of the pain medication I was taking in 2017, the physical pain I was in, and the mental stress I was under.” 2) He then finds the email pertaining to the Agreement of June 5 and notes Carol’s response to it sent 62 minutes later stating: I think you need to say “until her death” not until she passes.

Passes could mean giving up something----too vague. Otherwise looks good. Love Mom 3) He does not recall discussing this matter with Carol again until after the pre-trial. 4) He avers that until the pre-trial he and Carol had taken the same position about what they believed was owed to him by virtue of Cary’s verbal agreement with his parents.

However, during pre-trial, they could not discuss the matter as Cary’s father was adamant he should not receive any land. 5) He then states, “I have not been able to accurately explain why I settled for significantly less than what I believed was owed to me, other than to say that my understanding was that Carol was not supposed to get the rental income from all the land that came to us through litigation.” 6) He also advises he is unable to explain why the Agreement of June 10 is phrased as it is as he cannot remember. 7) He says, “I would not have agreed to accept only one quarter of land if Carol and I had not already agreed that I would be getting her land as well, and that I would be getting at least some rental income for it.” 8) He acknowledged that he previously stated in his earlier affidavit that he and Carol did not have any agreements prior to pre- trial. [ 27 ] In Carol’s affidavit sworn September 2, 2022, she states that, after reviewing the contents of the Agreement of June 5, she telephoned Cary and informed him of their verbal discussion pertaining to the fact that she would be receiving all the rental income, not half.

Thereafter, he agreed to this alteration which resulted in the Agreement of June 10. [ 28 ] In Cary’s affidavit sworn September 12, 2022, he denies the phone conversation referred to in Carol’s affidavit of September 2, 2022. He states he is a draftsman by trade and his standard practice in all matters is to immediately generate a revision and send a response by email. Issues [ 29 ] Initially, in the briefs of law filed, Cary had indicated that he was contesting the applicability of the

summary judgment procedure requested by Carol to address the issues outlined between the parties. However, during argument at the

summary judgment hearing, Cary reversed this position and indicated he was no longer contesting using the

summary judgment procedure. As well, there was an indication in Cary’s affidavit that expert evidence may be tendered relating to his state of mind during the June 2017 events. However, I was advised during arguments by counsel that no expert evidence was being tendered.

[ 30 ] From a review of the submissions of the parties, I would frame the issues as follows: 1. Can this lawsuit be appropriately resolved using the

summary judgment procedure? 2. Are there any binding agreements as between Carol and Cary and, if so, what is the substance of any binding agreement? 3. Are there any contractual defences available to Cary based on the evidence filed? 4. Are there any alternate grounds that would vitiate any binding agreements found? 5. Can Cary’s provision of $50,000 to Carol apply to equitably set off the unpaid rents should I find the Agreement of June 10 binding? 6. What is the appropriate remedy? 7. Who should be entitled to costs? Analysis

Summary Judgment [ 31 ] The question of whether it is appropriate to grant

summary judgment under Rule 7-5(1)(

b) of The Queen’s Bench Rules was recently considered by the Saskatchewan Court of Appeal in Michel v Saskatchewan , 2021 SKCA 126 , as follows: 108 The agreement by the parties to use the

summary judgment procedure therefore required the Chambers judge to be mindful of Rule 7-5(1)(b). As I have noted, when that rule applies, before judgment can be granted using this process, the court must be " satisfied that it is appropriate to grant

summary judgment " (emphasis added). 109 In Casbohm v Winacott Spring Western Star Trucks , 2019 SKQB 44 , [2019] 9 WWR 714 [ Casbohm ], affirmed 2021 SKCA 21 , Kalmakoff J. (as he then was) explained that Rule 7-5(1)(b) "may properly be interpreted as all parties agreeing that there is no genuine issue requiring a trial with respect to the issues upon which they seek

summary judgment" (at para 9). Still, in that situation, the use of the

summary judgment process is not automatic. Justice Kalmakoff explained the reasons for this as follows: [10] That said,

summary judgment is not automatic just because all parties agree that a matter should be determined that way. A court should grant

summary judgment under Rule 7-5(1)(

b) only if doing so results in a fair process that allows for just adjudication of the issues between the parties : Magna Electric Corp. v Tesco Electric Ltd ., 2015 SKQB 35 , 469 Sask R 15. The purpose of the rules relating to

summary judgment is to eliminate unnecessary trials, not to eliminate all trials. While the

summary judgment rules must be interpreted broadly, in a way that favours proportionality and fair access to affordable, timely and just adjudication of claims (see Hryniak v Mauldin , 2014 SCC 7 , [2014] 1 SCR 87 [ Hryniak ] and Pervez v Caskey , 2013 SKQB 377 , [2013] 12 WWR 794), they must not be applied in a fashion which compromises the fairness of the procedure or the justness of the outcome . (Emphasis added) The Ontario Court of Appeal came to the same conclusion in Royal Bank of Canada v 1643937 Ontario Inc ., 2021 ONCA 98 at para 26 , 145 OR (3d) 561. 110 Rules 7-5(1)(

a) and 7-5(1)(

b) therefore reach the same end point. Under both rules, the court should only grant

summary judgment if it is satisfied that it is able to reach a fair and just determination on the merits. However, in the context of this case, the fact that the parties agreed on the use of the

summary judgment procedure meant that neither party bore an onus, initial or otherwise, of satisfying the court that the use of the procedure was justified. The resolution of that question was left to the Chambers judge, in keeping with Rule 7-5(1)(

b) and the direction given in Casbohm . [ 32 ] Given the parties have agreed that the

summary judgment process should be used to resolve all the issues before the Court, I must examine whether I am able to make a fair and just determination of the issues based on the evidence before the Court. [ 33 ] From a review of the facts and law, I conclude that the

summary judgment process is the appropriate forum for resolving the issues between the parties.

Given the potential costs and delay involved in proceeding to a trial involving viva voce evidence, the numerous affidavits already filed along with the fact that cross-examination has already taken place and Cary’s decision not to tender the psychologist as an expert, I find that a trial would add little to enhance the fairness or justness of the outcome of these proceedings. [ 34 ] While there are some inconsistencies in the evidence presented before this Court, a trial with further discovery of documents, examination and cross-examination would not enhance the fact-finding process as there is an ample factual matrix already present in the various affidavits and the fulsome cross-examination.

Given that some of the important facts related to this matter happened close to six years ago, additional viva voce questioning about these historical events will not add anything more noteworthy to the testimony of the parties given the recollections already recorded. The viva voce testimony of a 78-year-old woman and a 58-year-old man with admitted memory problems would be a largely fruitless endeavour. [ 35 ] Further, given the test for contractual

interpretation generally involves objective assessment rather than an examination of the subjective intention of the parties at the time, the assessment process will involve the Court placing little reliance on testimony related to the party’s intentions. While the defences proffered by Cary require a more subjective analysis, I find that his strategic decision to proceed using the

summary judgment process with the evidence already filed with the Court need not be overly scrutinized given his appearance with experienced legal counsel related to this matter. As will be noted from a review of this decision, little turns on disparate assessments of credibility involving some of the conflicting evidence of the parties’ beliefs in a certain state of

affairs. In the end result, I find that the necessary facts and context have been fully canvassed by the parties. [36] Therefore, from my review, the parties have put their “best foot forward” at this time, and I find that I am able tomake a fair and just determination of the issues based on all the evidence put forward by the parties. [37] I will now turn to adjudicating the merits of the issues between the parties.

Binding Agreements [38] The parties disagree on which “Agreement” constitutes a binding contractual relationship between the parties.Carol endorses the Agreement of June 10 while Cary is a proponent of the Agreement of June 5. [39] The recent decision of the Saskatchewan Court of Appeal in Neigum v Van Seggelen, 2022 SKCA 108, 474DLR (4th) 673 [Neigum], provides the following concise restatement of the requirements that must exist for contract formation: 54 … In order for a contract to exist there must be a consensus ad idem, or a meeting of the minds, with regard to all of the essentialterms.

This requirement will not be met where "a material term is not resolved, and is left vague and imprecise, without the tools to refineit" (Tether [2008 SKCA 126] at para 62). Put another way, a contract is only formed where it would be clear to an objective reasonablebystander that (

i) the parties intended to contract, (ii) the parties reached an agreement on all essential terms, and (iii) the essential termsare sufficiently certain (see: Jans Estate v Jans, 2020 SKCA 61 at para 34, 59 ETR (4th) 53 [Jans Estate]; Carruthers v Carruthers, 2021SKCA 52 (Sask.

C.A.) at para 66, 56 RFL (8th) 110; and Matic v Waldner, 2016 MBCA 60 at para 57, 330 Man R (2d)1 07 (leave toappeal to SCC refused, )). [40] The Neigum decision involved a matter where the Court found that there was a failure of consensus ad idem onan essential term related to who would bear the tax consequences triggered by the removal of equipment sale proceeds of a corporation.While the Court recognized that it should be reluctant to void contracts on the basis of uncertainty, adjudicating bodies must also striveto avoid interpreting uncertainties in ways that create an unintended agreement.

In this regard, the Court in Neigum stated as follows: 57 To put this succinctly, uncertainty created by the absence of an explicit term will not necessarily render a contract or settlementagreement invalid on that basis. However, where the term is one that is essential to the agreement, in the sense that it is central to theparties' own understandings of what has been offered and accepted, that uncertainty means there is a failure of consensus ad idem and, assuch, no enforceable contract or agreement.

In Mosten Investments LP v The Manufacturers Life Insurance Co. (Manulife Financial),2021 SKCA 36, [2021] 9 WWR 1, this concept was described in the following way: [67] There can be no enforceable contract without consensus ad idem. The concept it expresses underpins the fundamental requirementsof contract formation, namely, offer, acceptance, consideration and communication. It holds that every party to an enforceable contractmust have the same understanding as to the content of each of its fundamental requirements.

For an enforceable contract to come intoexistence, the parties must reach consensus ad idem as to what has been offered and accepted and as to the consideration therefor. Thiscan only occur where those promises have been communicated to, and understood by, all of the parties. Consensus ad idem is essential tocontract formation and enforcement and it is, therefore, the object of contract

interpretation. 58 As the jurisprudence instructs, in order to properly find that consensus ad idem exists, a court must be able to determine there was ameeting of the minds that was "manifest to the reasonable observer" and that this consensus existed with respect to "all the essentialterms of the agreement", and that those essential terms are sufficiently certain (Tether at para 62; Anderson [2021 SKCA 117] at para 72;Jans Estate at para 34). [41] In terms of the rationale a Court must employ to make this determination, the Court of Appeal, in Boutin vBoutin, 2023 SKCA 41, has provided the following guidance: 32 As this Court affirmed in its per curiam decision in Mosten Investments LP v The Manufacturers Life Insurance Company (ManulifeFinancial), 2021 SKCA 36 at para 66, [2021] 9 WWR 1 [, "[t]he goal of all contract

interpretation is to ascertain consensus ad idem...[which]...arises when all parties understand and accept the contractual commitments each party has made to the others". As the Courtalso said, "the issue is not what the parties subjectively understood or intended, or later came to think the agreement was" (at para 69).Rather, the correct approach is that described in the following statement in Geoff R. Hall, Canadian Contractual

Interpretation Law, 3ded (Toronto: LexisNexis, 2016) at 50-51, which was adopted in Mosten, at para 69: It is a fundamental precept of the law of contractual

interpretation that the exercise is objective rather than subjective. "The goal ininterpreting an agreement is to discover, objectively, the parties' intention at the time the contract was made." [Emphasis added.] Theobjective approach applies to both the words of the contract and their context. Therefore, the exercise is not to determine what the partiessubjectively intended but what a reasonable person would objectively have understood from the words of the document read as a wholeand from the factual matrix.

"Bearing in mind the relevant background, the purpose of the document, and considering the entirety of thedocument, what would the parties to the document reasonably have understood the contested words to mean?" [Emphasis added.] Putanother way, "[i]n interpreting a contract, what is relevant is the parties' outward manifestations...". 33 Further, "[t]he first principle of contract

interpretation is that the parties to a contract are presumed to have intended what the text ofthe contract actually says...This is the cardinal presumption of contract

interpretation and it places the written agreement of the parties atthe core of the interpretive process" (Mosten at para 73). While it is proper to take the surrounding circumstances in which the contractwas formed into account, they cannot be permitted to overwhelm the language chosen by the parties. In Sattva Capital Corp. v CrestonMoly Corp., 2014 SCC 53, [2014] 2 SCR 633 [Sattva], Rothstein J. summarized these fundamental precepts as follows: [57] ... The

interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract(Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them todeviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility CellularInc. (1997), (BC CA), 101 B.C.A.C. 62).

34 One other applicable principle must be mentioned — the limitations to what constitutes "surrounding circumstances" for thepurposes of interpreting a contract. The following explanation was provided by Rothstein J. in Sattva: [58] The nature of the evidence that can be relied upon under the rubric of "surrounding circumstances" will necessarily vary from caseto case. It does, however, have its limits.

It should consist only of objective evidence of the background facts at the time of the executionof the contract (King [2011 MBCA 80], at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within theknowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below,this includes, in the words of Lord Hoffmann, "absolutely anything which would have affected the way in which the language of thedocument would have been understood by a reasonable man" (Investors Compensation Scheme, at p. 114).

Whether something was orreasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact. The reference to the parol evidence rule is significant.

The Supreme Court has since confirmed that "[e]vidence of one party's subjectiveintention therefore 'has no independent place' when considering the circumstances surrounding the formation of a contract" (emphasis inoriginal, S.A. v Metro Vancouver Housing Corp., 2019 SCC 4 at para 30, [2019] 1 SCR 99, citing Eli Lilly & Co. v Novopharm Ltd., (SCC), [1998] 2 SCR 129 at para 54). 35 These principles determine the correct approach to evidence of negotiations that precede contract formation. It has often been saidthat such evidence is not admissible for the purpose of construing the agreement.

However, that overstates the matter; its admissibilitydepends on the purpose for which it is tendered. As I have emphasized, the subjective intentions of a party are not relevant for thepurpose of determining the consensus recorded in the final agreement. For that reason, evidence of pre-contract negotiations that istendered to prove those subjective intentions for that purpose is inadmissible.

These principles are reflected in the following commentadopted by MacKinnon A.C.J.O. in Craighampton Investments Ltd. v Ayerswood Developments Ltd. (1984), 4 OAC 124 (WL) (CA): ...When equals negotiate at length and arrive at a written agreement which can be interpreted by itself or by reference to matters whichmust be taken to have been known to both of them and which show the sense or meaning that the words must be taken to have had whenthe agreement was made, it verges on idle activity for a court to rehash the negotiations, activities and conduct of the parties and heartheir now professed expression of what their intentions were at an earlier time. 36 However, evidence of negotiations may be of a different kind and may be tendered for a different purpose.

It may be evidence ofthe surrounding circumstances or factual matrix that is properly taken into account when determining the meaning of the writtenagreement. Such evidence may, for example, demonstrate the commercial objectives of the parties in forming the agreement (LangleyLo-Cost Builders Ltd. v 474835 B.C. Ltd., 2000 BCCA 365 , [2000] 7 WWR 46 (BCCA) at para 29, or may "establish that a factwhich may be relevant as background was known to the parties" (Chartbrook Limited v Persimmon Homes Limited, [2009] UKHL 38 atpara 42.

As Rothstein J. explained in Sattva, "[t]he goal of examining such evidence is to deepen a decision-maker's understanding of themutual and objective intentions of the parties as expressed in the words of the contract" (emphasis added, at para 57). This Courtsummarized what is permitted in Mosten: [83] ... (

g) The nature of the evidence upon which an interpreting court may rely consists "only of objective evidence of the background facts atthe time of the execution of the contract" (Sattva at para 58, citing King v Operating Engineers Training Institute of Manitoba Inc. 2011MBCA 80 at paras 66 and 70, 270 Man R (2d) 63), namely, "knowledge that was or reasonably ought to have been within the knowledgeof both parties at or before the date of contracting" (Sattva at para 58). [Footnote omitted] [84] Aggregating this guidance in the most encompassing of terms, relevant extrinsic evidence will include anything that tends toestablish the facts known, or facts that reasonably ought to have been known, to all parties at or before the date of contracting and thatdeepens the interpreting court's understanding of the mutual and objective intention of the parties as expressed by the words of thecontract (Sattva at paras 57, 58 and 60).

Broadly stated, the proper approach to contract

interpretation involves the determination ofconsensus ad idem on the basis of the text of the contract as a whole together with a matrix of extrinsic evidence that objectivelymanifests what the parties understood the contested contract text to mean at the time of contract formation. 37 There is also authority for the proposition that direct evidence of the intentions of the parties may be admissible where there isambiguity, or at a minimum, where there is latent ambiguity; that is, ambiguity that becomes apparent only when the language of theagreement is viewed in light of the surrounding circumstances: John D.

McCamus, The Law of Contracts, 3d ed (Toronto: Irwin Law,2020) at 808. … [42] In the context of the factual matrix before the Court relating to two written “Agreements” that were drawn upduring a short period of time, the decision of Martel v Mohr, 2011 SKQB 161, [2011] 9 WWR 150 [Martel], is instructive in detailingthe importance of the subsequent conduct of the parties in considering the existence of a contractual relationship where they state: 39 Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), (ON CA), 79 D.L.R. (4th) 97, [1991] O.J. No. 495(Ont.

C.A.), is a leading Canadian decision on agreements to agree.

It aptly sets out the issues at p. 104: ... when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not beensettled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent upon the making of a formalcontract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that theirlegal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannotconstitute an enforceable contract.

In other words, in such circumstances the "contract to make a contract" is not a contract at all. ... 40 As Bawitko states, there are three separate principles contained within the basic notion that an "agreement to agree" isunenforceable. The first proposition is that there is no enforceable contract where essential terms of the agreement have not been agreedto, but have been left to the parties for future agreement. The second proposition is that there is no enforceable contract where theprovisions of what has been agreed to are insufficiently certain.

The third proposition is there is no enforceable contract where the partiesintend that a preliminary agreement is not to create binding contractual relations until a subsequent formal document is executed. In

examining all of the situations, the parties' subsequent conduct is an important factor. Conduct takes on great importance in assessingwhether an arrangement goes beyond an unenforceable agreement to become a binding contract. It is clear that the courts have a stronginclination to find a binding contract if the parties acted as if they thought they had one. Subsequent conduct reinforcing a conclusionthat there was a binding contract has been relied upon by many courts including decisions in Calvan Consolidated Oil & Gas Co. v.Manning, (SCC), [1959] S.C.R. 253 (S.C.C.); Canada Square Corp. v.

Versafood Services Ltd. (1981), (ON CA), 34 O.R. (2d) 250 (Ont. C.A.) and Imperial Oil Ltd. v. Young (1998), (NL CA), 167 Nfld. & P.E.I.R.280, 21 R.P.R. (3d) 65. [43] Given the disagreement between the parties in relation to whether there was acceptance, the following excerptsfrom Ziola v Petrie, 2021 SKCA 97, [2021] 10 WWR 123, are helpful in framing the discussion: 45 The law is clear that an acceptance of an offer must be clear, unambiguous and absolute: Harvey v Perry (SCC),[1953] 1 SCR 233 at 237 [Harvey].

In Harvey, the Supreme Court of Canada held that even though a contract could have been found hadthe negotiations stopped at an earlier stage, the actions of the parties in continuing to negotiate and settle the terms of the contractindicated that, at least from the point of view of one of the parties, there had never been a completed agreement. 46 The highly contextualized nature of an inquiry as to whether a contract was entered into at all is illustrated by comparing Pelley vMorguard Trust Co., (1989), (NL SC), 78 Nfld & PEIR 238 (NLSC), (stating that an offer is "agreeable" does notconstitute acceptance (at para 19)) with Gateway Industries Ltd. v MacMillan Bathurst Inc., (1990), (MB KB), 66Man R (2d) 210 (QB), reversed in part (1991), (MB CA), 76 Man R (2d) 304 (CA), leave to appeal to SCC refused,[1992] 2 SCR vii (acknowledging that an offer that is "agreeable" does constitute acceptance). [44] From the case law, it is apparent that any contractual analysis of either agreement must begin without theassumption that either are binding contracts as an inquiry must be made as to whether there was a “meeting of the minds” on all theessential terms with respect to both the Agreement of June 5 and the Agreement of June 10. [45] This matter also illustrates the dangers attached to the entry of contractual relations between family membersusing self-generated documents without either party taking the time to have the document independently reviewed by counsel.

Whilethere is something to be said for the use of simple, uncomplicated language, individuals rarely contemplate the numerous complicatedpitfalls that occur as a result of unfortunate life events which befall us all on a regular basis. Assuming and preparing for life’s calamitiesis a lawyer’s stock in trade.

The Agreement of June 5 [46] From my review of the relevant background and purpose, along with the entirety of the Agreement of June 5,there are several important factors which militate against an objective, reasonable observer concluding that a binding agreementencompassing all essential terms has been made. [47] Firstly, I find that the timing of the creation of the Agreement of June 5 detracts from its ability to be interpretedas a binding document.

Given the pre-trial with respect to the litigation between Cary, Carol and Johnny Tarasoff had not yet occurred, itis reasonable to assume that there was significant uncertainty remaining by all parties as to whether an agreement would be reached onthe pre-trial date and what the exact nature of that agreement would be. While the document appears to contemplate that Cary couldreceive “any or all the farm land”, the lawsuit could have been resolved in any number of different ways including monetary recompenseor transfers of other material.

There is no evidence that the parties knew what the future held in terms of the negotiations. While I amaware that the Agreement of June 10 contains this same phrase related to “any or all the farm land”, I find that the signing of thesettlement minutes of June 9 provided a crucial step towards consensus. [48] I find that, despite the land not being specifically identified according to specific land title description, in thecontext of the dispute, the words “family farm lands in the RM of Montrose” sufficiently describes the object of the contract.

There is noquestion that both parties are well aware given their family situation which lands are contemplated by the use of this terminology.However, the issue remained related to the inherent uncertainty of the upcoming negotiations related to the lawsuit. Therefore, in thiscontext, I find that an objective observer would require something more than a “looks good” in an email to create a binding contractualrelationship. This brings me to my next point. [49] Secondly, I find that the language used in distributing the document to Carol and in Carol’s purportedacceptance also militate against an

interpretation of a contractually binding document. With Cary sending the document to Carol with theintroduction “See what you think and give comments to this please:” and Carol’s response requesting to change some wording along withher assessment recorded as “otherwise looks good”, I find that an objective observer would interpret this document as an openingnegotiating salvo as part of an intention to contract between the parties. I find that these comments clearly show that this document was adraft subject to revision by the parties.

Additionally, Carol wished minor changes to occur prior to endorsing the contents of thedocument. While the changes were minor, they reflect that the document was not to be the final word. [50] I also find that the use of the words “looks good” in this context is reminiscent of the comment made in thedecision of the Saskatchewan Court of Appeal in Tether v Tether, 2008 SKCA 126 at para 30, 56 RFL (6th) 250, where the Courtattributed a comment by counsel to “take a stab” at preparing a judgment with the adverb “noncommittally”.

I find that using the words“looks good” is akin to an individual responding “sure” when asked whether they enjoyed a movie. While the comment may connotegeneralized acceptance, it is less than a ringing, unqualified, committed endorsement of a particular point of view. I find that “looksgood” does not necessarily equate to an unqualified “yes”. In my estimation, it means “Probably yes”.

Therefore, in objectivelyexamining this comment related to this factual matrix, I do not find that “looks good” qualified as a clear, unambiguous and absoluteacceptance of this contract. [51] Of note, this homemade contract provided for Carol’s and Cary’s signatures to be endorsed on the documentwhich was never done. While not always legally necessary to contract formation, I find that objectively the lack of executiondemonstrates that some further formality was necessary for the completion of the contract which had not yet occurred. The fact that this

did not occur is another factor militating against contractual formation. [ 52 ] In reviewing contractual formation from an objective perspective, context is everything. This was not a contract for the supply or purchase of chattels where the vast majority are entered into without formal contract in a short period of time (as noted in Access Container, Inc. v The Container Guy Ltd. , 2020 SKQB 314 at para 17 ). This matter relates to a land rental agreement that would bind Carol and Cary for the rest of Carol’s life.

These circumstances objectively call out for a modicum of greater formality having regard to the subject matter.

I find that two short, largely forgotten, unsigned, informal email exchanges in the morning three days before important negotiations related to contentious litigation are to take place do not objectively constitute a binding contractual relationship. [ 53 ] Thirdly, as can be gleaned from a review of my factual presentation of this matter, it is clear that the Agreement of June 5 was largely forgotten or ignored by Cary or anyone else from June 5, 2017 to July 12, 2022, which is a period in excess of five years.

Of even more importance, it is also clear that both parties were following the terms of the Agreement of June 10 as Cary was paying Carol all the rent for the Family Farmlands minus some deductions until the disagreement arose as result of the “discovery” of Carol’s investments. I find that an objective observer would determine that the parties behaved as though the terms in the Agreement of June 5 were not followed from which the logical inference would therefore flow that there was no meeting of the minds with respect to the terms contained in the Agreement of June 5.

In applying the principles noted in the Martel decision, I find it is objectively clear that the parties subsequent conduct demonstrates the “draft” and non-binding nature of the exchange of emails that make up the Agreement of June 5. I also find it is objectively clear that the Agreement of June 10 is built upon portions of the wording of the Agreement of June 5.

There are similarities in format including the reference to the contingency of the receipt of farmland which, at the time of the Agreement of June 10, had been resolved by the June 9, 2017 settlement minutes that had been endorsed by all parties and their legal counsel. [ 54 ] Fourthly, I note that no application to amend has been made with respect to Cary’s statement of defence so as to include reference to the existence and validity of the Agreement of June 5.

Given Rule 13-18(4) of The Queen’s Bench Rules requires that a party intending to plead a different version of facts must plead the different version in their pleadings, I could conclude that Cary’s original admission of the existence and nature of the Agreement of June 10 in paragraph 3 of his statement of defence remains binding and effective absent an amendment.

Further, given the Agreement of June 5 is not referenced as a contractual document in his statement of defence as a different version of facts, the Court would generally have difficulty considering it as an alternate stand-alone document capable of creating binding contractual relations in this lawsuit. [ 55 ] Under Rule 13-19, it is open for this Court to consider refusing a party to call evidence of a different version of facts and/or assessing costs in situations where a party relies on alternate facts.

Given that Carol has had an opportunity to respond to these allegations, I find that this ground is not wholly fatal to Cary’s submissions respecting the Agreement of June 5. While I will not consider this misstep in my assessment related to the existence of contractual relations pertaining to the Agreement of June 5, it will impact my assessment of costs which I will discuss at the end of this judgment. [ 56 ] Therefore, for both the factual and legal reasons outlined in the first three grounds, I find that the Agreement of June 5 is not a binding contractual relationship between the parties.

Further, I find that any of these grounds by themselves as well as in combination are enough to objectively determine that there was no contractual relationship between the parties as a result of the Agreement of June 5.

Agreement of June 10 [ 57 ] I will now turn to consider whether the Agreement of June 10 constitutes a binding contractual document between the parties. [ 58 ] While both parties have accepted the existence of this agreement signed and dated by both Cary and Carol on June 10, 2017, Cary has pled that this document is ambiguous with inappropriately defined terms without specifically described land. [ 59 ] Therefore, the Court must perform the analysis outlined in the Neigum decision to determine whether there was a meeting of the minds in relation to this document. [ 60 ] As noted previously, the imperfect homemade nature of this agreement opens itself up to argument and criticism due to the imprecise definition of the land in question and general nature of some of the terms.

However, imperfect contracts are not invalid contracts. Neigum requires the Court to determine whether an objective bystander would understand that the promises given by either party have been properly communicated and understood by the contracting parties . If it is clear that the parties did not agree on an essential term of the contract, then it is also clear that there was no meeting of the minds between the parties which would be essential for the creation of a contract.

It is not for the Court to analyze the conflicting evidence so as to manufacture intention. [ 61 ] However, from my review of the relevant background and purpose, along with the entirety of the Agreement of June 10, I find that an objective bystander would conclude there to be a binding contractual document encapsulating the meeting of the minds of both Carol and Cary. Let me explain. [ 62 ] Firstly, I take into account the timing of the document. It was created and signed after a settlement had been reached with respect to the lawsuit between Cary, Carol and Johnny Tarasoff.

Given that the farmland had been apportioned to the various parties and there would be certainty with respect to that resolution, it would be objectively logical that precise contractual relations could thereafter be formed. Both Carol and Cary would know what they were giving away and what they were getting in return. While there was mention in the Agreement of June 10 of a contingent event related to “the pending lawsuit”, those events had been in fact determined. Unfortunately, likely due to the homemade nature of the document, the language used had not caught up to the actual events.

However, given the date the document was signed and acknowledged by Cary and Carol, an objective observer would find that no uncertainty remained in relation to ownership of the farmland in question. [ 63 ] Secondly, I take into account the language used and signed nature of the document. As stated in my analysis of

the Agreement of June 5, the fact that the Family Farmlands are not specifically defined is of no consequence to the parties’understanding of the land involved. Firstly, there is clear objective evidence that, as a result of the minutes of settlement of June 9, thelands in question had been specifically apportioned. Secondly, as evidenced by the subsequent lease agreements signed and executed invarious fashions by both Cary and Carol with the leaseholder, there was no question which properties were in issue.

Thirdly, the transferof the two quarters owned by Carol to Cary less than a week after the settlement also clearly indicates that the parties are aware of whichlands formed part of the Agreement of June 10. Fourthly, by limiting the geographical region of the “family farm lands” to the “RM ofMontrose”, further clarity and specificity was obtained. [64] The signed nature of the agreement is also important. I find it provides a measure of confidence that there ismutual agreement with respect to the terms.

Objectively, I find that this measure of formality demonstrates something more consideredbetween the parties than a perfunctory email or a nod of the head. The signatures enhance the clarity and certainty of the acceptance tocontract. [65] Thirdly, the fact that the terms of the agreement were followed for close to four years is an important factor toconsider when analyzing the matter using an objective standard.

As noted in my analysis of the Agreement of June 5, it is clear that bothparties were abiding by the binding terms as they understood them in the Agreement of June 10 until a dispute arose in February 2021 asa result of some financial disclosures made by Carol. There is absolutely no evidence before me of any dispute or continuing expresseddistress over any term of this agreement between June 10, 2017 and February 2021.

On January 22, 2021, there is specific evidence thatCary continues to endorse the substance of the Agreement of June 10. [66] Additionally, the lease agreements of 2017 and 2018 both pertain to the three quarters of land making up theFamily Farmlands. The lease agreement of 2017 directs that all the cash rental income will go to Carol. While the lease agreement of2018 directs that all cash rental payments will go to Cary, the affidavit evidence indicates this was done for income tax purposes onlyand did not constitute a new distinct agreement.

Further, the affidavit evidence filed by both parties also demonstrates without questionthat the precipitating factual event that ended the continuing payments of lease monies is related to allegations of Carol’s unjustenrichment rather than contract formation issues. [67] In this context, I find that the terms of the Agreement of June 10 are objectively clear as the words used wereunambiguous and the terms provided by those words were essentially followed, with some minor variations for tax reasons, by bothparties for years.

I find the terms are as follows: 1) The rental income from any lease of the three quarters of Family Farmlands would be paid solely to Carol for the rest of her life. 2) Carol will pay the property taxes and carry insurance for the Family Farmlands. 3) If Carol dies before any rental income owing to her is paid, Cary would keep the rental income unless Carol’s estate is inarrears. [68] Therefore, having regard to all these factors either individually or in combination, I find that an objectivebystander would conclude that the above-noted terms of the Agreement of June 10 constitute a legally binding contract.

Contractual Defences [69] In his statement of defence, Cary raises issues related to capacity, duress and unconscionability that he arguesimpact the validity of the contract. While these defences are distinct in law, some of the factual matters underpinning each analysis todetermine the existence of such a defence will be similar. Capacity to contract [70] While pled in his statement of defence but not specifically argued in Cary’s briefs of law as a separate distinctdefence, Cary alleged that he did not have the capacity to understand the nature and effect of the Agreement of June 10.

The evidencethat could be related to capacity can be found in Cary’s affidavits of May 24, 2022 and August 25, 2022 as well as the first part of Carol’sunsworn cross-examination of July 12, 2022. [71] The law pertaining to capacity to contract was recently set out in the decision of R.M.K. v N.K., 2020 ABQB328, 41 RFL (8th) 73, as follows: 131 There is a presumption in law that an adult has the capacity to contract. The burden or onus is on anyone attempting to show a lackof capacity on a balance of probabilities: Hittinger v.

Turgeon, 2005 ABQB 257 at para 22, citing Chitty on Contracts, 28th ed (London:Sweet & Maxwell, 1999 at para 8-001) and Chuvalo v. Chuvalo, 2018 ONSC 311 at para 20 [Chuvalo]. If the Court concludes that theevidence is ambivalent or equivocal or does not reach the standard of proof of balance of probabilities, then the Court will make afinding against the party who bears the burden of proof: Chuvalo at para 23. 132 The case Bank of Nova Scotia v. Kelly (1973), (PE SCTD), 5 Nfld. & P.E.I.R. 1, 41 D.L.R. (3d) 273 (P.E.I.

S.C.)[Kelly] set out a test for determining capacity to contract which has been followed by other Canadian Courts. For the contract to be valid,both parties must have: (

a) the ability to understand the nature of the contract; and (

b) the ability to understand the contract's specificeffect in the set of circumstances to which it pertains. The question is not whether the contracting party whose capacity is in questionfailed to understand the nature and effect of the contract; rather, the question is whether the person was capable of understanding it: Kellyat para 10. 133 Thus, a person is, in law, mentally incompetent when they are, by reason of their mental state, unable to understand the nature andterms of the contract and of forming a rational judgment of its effect upon their interests: Fowler Estate v. Barnes (1996), 142 Nfld. &P.E.I.R. 223 (Nfld. T.D.), at paras 25 and 26 [Fowler Estate].

134 The contract of a mentally incompetent person is not void per se, but only voidable on it being shown that the other party had actualor constructive knowledge of such mental incompetency, failing which such a contract, if fair and bona fide, is binding: Kelly at para 6,cited with approval in Watmough v. Cap's Construction Ltd., , (1976), 1 Alta. L.R. (2d) 250 (Alta. Dist. Ct.)) at para 14,and Fowler Estate at para 25. 135 The general theory of the law in regard to "contracts made by parties affecting their rights and interests is that in all cases theremust be free and full consent to bind the parties. Consent is

an act of reason accompanied by deliberation." Where there is "a want ofrational and deliberate consent the contracts of persons of unsound mind are generally deemed to be invalid": Bunio v. Alberta (PublicTrustee), 2005 ABQB 137 at para 5, citing Royal Trust Co. v. Diamant, [1953] 3 D.L.R. 102 (B.C. S.C.), at para 6. 136 The contractor is required to be capable of appreciating, not the interests of others as with testamentary capacity, but his or her owninterest.

However, so far as the degree of understanding or capacity is concerned, there is no real difference from testamentary capacity.An individual does not require any higher or lower degree of capacity to consider their own interest versus the interests of other persons:Lynch Estate v. Lynch Estate (1993), 8 Alta. L.R. (3d) 291 (Alta. Q.B.), at para 95 [Lynch Estate], citing Rogers, Re(1963), (BC CA), 42 W.W.R. 200, 39 D.L.R. (2d) 141 (B.C. C.A.) at 147-148 [Re Rogers]. 137 Furthermore, it is not mental incapacity in the abstract which renders the contract liable to be set aside.

The mental incapacity mustbe such that it impairs the ability to contract, that is, the ability to understand the nature of the transaction being entered into and itsgeneral effect or consequences. 138 The understanding and competence required to uphold the validity of a transaction depend on the nature of the transaction. There isno fixed standard of sanity which is requisite for all transactions. What is required, in relation to each particular matter or piece ofbusiness transacted, is the party in question should understand the general nature of what he is doing: Malley v.

Red River Valley MutualInsurance Co., 2010 MBQB 111 at paras 9 and 10, citing Gibbons v. Wright (1954), 91 C.L.R. 423 (Australia H.C.), which was citedwith approval in Egli (Committee of) v. Egli, 2005 BCCA 627, and citing Chitty on Contracts, 28th ed (London: Sweet & Maxwell,1999) at 488; and Lynch Estate at para 96, citing Beaney, Re, [1978] 2 All E.R. 595 (Eng. Ch. Div.) at 601. 139 A number of cases point out the need to be sensitive to suspicious circumstances surrounding the execution and preparation of awill. This caution can also be applied where it is the execution of a contract which is at issue.

Something in the physical appearance ofthe contractor or in the surrounding circumstances such that a reasonable person in his position would have or should have realized thatthe individual lacked proper mental capacity, may put the other contractor upon enquiry.

The other party cannot wilfully shut their eyes.However, as already stated, mental incapacity in the abstract is not the focus, only mental incapacity that impairs the ability to contract. 140 Courts of equity will not interfere if a contract entered into with a mentally incompetent person is fair and was made in good faith, ifthe other party to the contract had no knowledge of his or her mental incapacity and did not take advantage of that person. The contractwill only be set aside if it is unfair to the mentally incompetent individual.

If it is fair, the person will be without a remedy: Pickering v.Pickering (1985), 38 Sask. R. 211 (Sask. Q.B.), at para 2, citing Wilson v. R., [1938] 3 D.L.R. 433 (S.C.C.), [Wilson]; Royal Bank v. Unick (1994), (AB KB), 154 A.R. 81, 19 Alta. L.R. (3d) 254 (Alta. Q.B.) at paras23 to 25, citing Côté, An Introduction to the Law of Contract at 78, Fridman, the Law of Contract (2nd ed) at 146-47 and Schulze v.Ruzas (1982), (AB KB), 40 A.R. 60 (Alta. Q.B.); Fowler Estate, citing Kelly and Perell, Remedies and the Sale ofLand (Toronto and Vancouver; Butterworths 1988) p. 8; and Hardman v.

Falk, [1955] 3 D.L.R. 129 (B.C. C.A.), atparas 2 and 11, citing Wilson at 436. 141 Even where a person who had entered into a contract has been later found by a court not to be mentally competent he may be foundto have had capacity if it can be shown that the contract was fair and reasonable and was entered into when he had a lucid interval: LynchEstate at para 100. This is because a person who suffers from a cognitive impairment is competent as long as the act in question takesplace during a lucid interval: Banks v. Goodfellow (1870), L.R. 5 Q.B. 549, 39 L.J.Q.B. 237, [1861-73] All E.R. Rep. 47 (Eng.

Q.B.)[Banks]. [72] The Saskatchewan Court of Appeal in Van De Geer Estate v Penner, 2006 SKCA 12, [2006] 7 WWR 575 [VanDe Geer], had concisely stated these principles as follows: 26 The parties agree that the governing law in relation to the capacity issue was correctly summarized by Maurice J. in Pickering v.Pickering (1985), (SK KB), 38 Sask. R. 211 (Sask.

Q.B.) at para. 2: [2] A contract made by a mentally incompetent person not so found by prior judicial determination is voidable and will be set aside if theother party knows of his deficiency; or, if the other party is unaware of his deficiency, the contract is unfair to him (Wilson v. The King, (SCC), [1938] 3 D.L.R. 433 (S.C.C.)). A person is, in law, mentally incompetent when he is by reason of his mentalstate unable to understand the nature and effect of the contract. 27 It has been long established that a plaintiff alleging lack of capacity bears the onus of proving that point.

See: Imperial Loan Co. v.Stone, [1892] 1 Q.B. 599 (Eng. Q.B.) at p. 601; Michael Furmston, Cheshire, Fifoot and Furmston's Law of Contract, 14th ed.(Markham: Butterworths LexisNexis, 2001) at p. 497. Accordingly, the analysis of this issue must begin by considering whether thatonus was discharged.

If it was not, that is the end of the matter. [73] From an analysis of the case law, I would frame the concepts and questions to determine as follows: 1) Cary bears the onus of proving mental incapacity to enter into the Agreement of June 10. 2) Was Cary capable of understanding the nature of the Agreement of June 10 and its general effects and consequences? 3) Was Cary capable of appreciating his own interests in agreeing to the terms of the Agreement of June 10? 4) If Cary’s mental incapacity is proven, the Agreement of June 10 is voidable if Carol is found to have actual or constructive

knowledge of such incapacity and the terms of the Agreement of June 10 are unfair. [ 74 ] I find that, given the evidence proffered, it is quite clear that Cary has not discharged his onus demonstrating mental incapacity.

Further, even if I am in error on that point, I find that Carol did not have knowledge, constructive or actual, of Cary’s incapacity and, further, I find the Agreement of June 10 was fair. [ 75 ] The following analysis in Van De Geer has implications pertaining to my assessment of the weight of the evidence in the case at bar: 30 In my view, the best reading of the trial judge's reasons is that the evidence did not establish Van De Geer's incapacity. Two passages in the reasons are particularly significant in this regard.

First, at the opening of para. 35, the trial judge goes no further than accepting the doctors' evidence that Van De Geer's mental capacity was "somewhat impaired." As the judge no doubt knew, the law does not recognize halfway houses in this area. A person either has capacity or does not. A finding that an individual's capacity is "somewhat impaired" does not amount to a finding of incapacity. 31 Paragraph 37 of the reasons for decision is even more significant because Van De Geer's lack of capacity claim was significantly based on her alleged inability to remember the sale transaction.

The trial judge did not accept her evidence in that regard and, after reviewing the factual considerations which underpinned his conclusion, said "I therefore am not satisfied that the evidence is sufficient to void the contract on the basis of Iris's lack of capacity on August 10, 1999." This seems to be a direct rejection of the notion that Van De Geer lacked capacity. 32 At the same time, I acknowledge that the trial judge went on, perhaps out of an abundance of caution, to deal with other matters.

He said that, even if Van De Geer lacked capacity, the Penners had no knowledge of the situation and the agreement was fair. However, this additional layer of reasoning does not undercut his root conclusion.

I therefore proceed on the basis the trial judge found that McAlister had not proven Van De Geer lacked capacity. [ 76 ] The first issue to determine is whether Cary has met his onus proving that he was without the mental capacity to enter the Agreement of June 10. [ 77 ] I have found that Cary has not met his onus in this regard for the following two reasons. [ 78 ] Firstly, I find that his bare allegations combined with the material by the psychologist in his affidavit material is insufficient in proving mental incapacity related to the Agreement of June 10.

Firstly, by choice, he did not provide any expert evidence in this regard despite the report appended to his affidavit. There could be many valid reasons for proceeding in this fashion. I will not speculate. However, given the type of medically significant opinion required to prove mental incapacity, I find that proceeding without such expertise in this matter does not meet the necessary onus of proof. The case law requires proof of more than a diagnosis of being “somewhat impaired”.

Therefore, a diagnosis of incapacity requires a complex understanding of the human mind and a detailed opinion relating to how specific disparate factors would lead to a positive inference of such an absolute condition. There was no such evidence proffered here. [ 79 ] Secondly, I note that Cary did not provide any material with respect to his legal counsel’s observations of Cary at the time of the early June 2017 settlement. That lack of evidence is telling.

While Cary would no doubt be very stressed owing to the nature of the settlement discussions, this would not be especially rare in the context of contentious litigation. It is also clear that he suffered considerable pain as a result of his multitude of lasting injuries. Perhaps his counsel at the time noticed something. Perhaps not. However, this gap in the evidentiary record detracts from a finding of mental incapacity.

In this factual matrix, in order for Cary to meet his onus, he should provide proof from third parties and/or others who were there to witness his physical and mental condition at or close to the time of the execution of the contract. Cary’s self-assessment as being “in no condition” to perform a task is not adequate proof in this matter. This is especially so given Cary’s admitted issues with memory.

Analogously to the factual situation in Van De Geer , Cary’s lack of memory as to the circumstances of the transaction is also not proof that a capacity issue exists. [ 80 ] Even if I am in error with respect to my assessment of the evidence relating to Cary’s mental incapacity, I find that Carol was not aware, actually or constructively, of Cary’s mental incapacity and I also find that the Agreement of June 10 is fair, having regard to all the circumstances. [ 81 ] While Carol states in her cross-examination that she saw “a lot of strange behaviour maybe with Cary” and “chalked it all up to the medication he was on and the pain that he was dealing with”, it is noteworthy that this statement is only in relation to what she had witnessed in 2017 and did not have any specific temporal connection to the Agreement of June 10.

Further, the type of strange behaviour she credits Cary with relates to being angry with her for things she had not done. There is nothing in her comments or actions in any of the evidence from which a Court could infer that she knew that Cary was mentally incapacitated. Cary had counsel during the settlement proceedings. He drafted rational emails (and at least one agreement) pertaining to events related to upcoming litigation. Carol trusted Cary enough to transfer two quarters of land less than a week after the settlement.

There are no indicia from which a Court could infer Carol believed or should have known Cary was mentally incapacitated at the time the Agreement of June 10 was signed. [ 82 ] Further, in relation to the Agreement of June 10, I find that the terms were more than fair to Cary. [ 83 ] Carol was 73 years old when she transferred the two quarters, worth (in 2017) $304,000 according to the affidavits of value on the Land Title certificates, to Cary on June 14, 2017.

Using the present life expectancy tables in The Queen’s Bench Rules (under Clause 9-21(1)(a)), at that age Carol could expect to live for another 15.1 years. Pursuant to the Agreement of June 10, Cary must provide Carol with the rent to the one quarter he obtained for the rest of her life. Using the lease agreements of 2017 and 2018 which provided for $28,700 in rental income per year and dividing that rental income by three as the lease agreements do not differentiate the lease value for each separate quarter of land, Cary’s annual rent for one quarter would be valued at $9,566.67.

If that value were multiplied by 15 using the life expectancy tables, the amount received by Carol would be $143,500.05 over her expected lifetime. This amount also does not account for any deductions or taxes that Carol may be required to pay Cary.

[ 84 ] Therefore, given that Cary is receiving more than twice the value for what he gave up to Carol, I find that the Agreement of June 10 is a bargain for Cary and the terms are fair, for him. [ 85 ] Cary has not met any of the requirements to vitiate the Agreement of June 10 in relation to mental incapacity. Duress [ 86 ] In Cary’s statement of defence, he pleads duress in relation to the Agreement of June 10 in that he felt he was pressured and coerced into signing the contract along with the fact that he did so without independent legal advice.

He relies on evidence contained in his affidavits of May 24, 2022 and August 25, 2022. [ 87 ] In Kidd v Kidd , 2020 SKQB 249 [ Kidd ], this Court recently outlined the essential elements required to establish duress so as to render a contract voidable as follows: 66 In this case, the Order would not be subject to modification on grounds of duress, as there was no pressure that amounted to coercion or compulsion. In Dairy Queen Canada, Inc. v. M.Y. Sundae Inc. , 2017 BCCA 442 at paras 48-51 , (2017), [2018] 5 W.W.R. 637 (leave to appeal to the Supreme Court of Canada refused, [2018] S.C.C.A.

No. 92 (QL)), Hunter J.A. described the defence of duress as follows: [48] Duress is a common law defence to the enforceability of a contract. If duress is made out, the agreement is voidable at the instance of the party who signed under duress: Jestadt [2013 BCCA 183 , 44 BCLR (5th) 109] at para. 45. [49] Economic duress is now recognized as a form of duress that may constitute a defence to the enforceability of a contract. [50] For the essential elements of the defence, the trial judge relied upon the following passage in Lei v.

Crawford , 2011 ONSC 349 at para. 7 : Duress involves coercion of the consent or free will of the party entering into a contract. To establish duress, it is not enough to show that a contracting party took advantage of a superior bargaining position; for duress, there must be coercion of the will of the contracting party and the pressure must be exercised in an unfair, excessive or coercive manner . [51] As the trial judge pointed out, this passage was endorsed by this Court in Jestadt at paras. 48-49 .

I can see no error in the test the trial judge considered to be applicable. [Emphasis added] [ 88 ] In Dai v Zuo , 2015 ONSC 3008 , the Court framed the tests in the following fashion: 76 The following legal principles apply: • an agreement obtained through duress is voidable at the instance of the party subjected to the duress unless by another agreement or through conduct, either expres

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