SSE HOLDINGS, LLC v. SSE IP, LLC, 2020 FC 983

Date: 20201005 Docket: T-917-17 Citation: 2020 FC 983 Montreal, Quebec, October 5, 2020 PRESENT: Mr. Justice Gascon BETWEEN: SSE HOLDINGS, LLC and SSE IP, LLC Plaintiffs and LE CHIC SHACK INC. Defendant PUBLIC JUDGMENT AND REASONS I. Overview [ 1 ] In 2017, the Plaintiffs, SSE Holdings, LLC and SSE IP, LLC [together, Shake Shack] brought an action for trademark infringement against the Defendant, Le Chic Shack Inc. [Chic Shack].

In 2019, as the matter was progressing towards trial, the parties agreed to enter into a Court-assisted mediation governed by Rules 387 to 389 of the Federal Courts Rules , SOR/98-106 [ Rules ]. A mediation session presided by Prothonotary Steele – who also acts as the case management judge in this proceeding – took place on December 18, 2019 [Mediation Session]. Shake Shack is of the view that, at the end of the Mediation Session, the parties had an agreement to settle the action.

Chic Shack disagrees and denies that any settlement was reached at the mediation or afterwards. [ 2 ] On June 8, 2020, Shake Shack brought a motion to enforce what it argues are the terms of the alleged settlement [Motion].

In its Motion, Shake Shack seeks an order from the Court: 1) declaring that, during the Mediation Session, the parties entered into a binding transaction agreement to put an end to the present litigation; 2) that the parties prepare in good faith a formal settlement and license agreement on the basis of a term sheet dated December 20, 2019 [Term Sheet]; 3) that the Court remains seized of this matter in the event there is a disagreement on the drafting of the formal agreement; 4) vacating the dates set aside for the trial of this matter in November 2020; 5) awarding the costs of the Motion to Shake Shack; and 6) granting such further and other relief as to this Court may seem just. [ 3 ] The issue before the Court is whether the parties had agreed to settle. [ 4 ] T he Motion proceeded before me by video conference on August 13, 2020.

After hearing the submissions of the parties, I reserved judgment on the Motion. On August 20, 2020, I dismissed Shake Shack’s Motion, with reasons to follow. These are my reasons for dismissing the Motion. [ 5 ] For the reasons detailed below, Shake Shack’s Motion fails for lack of supporting evidence.

Further to my review of the parties’ written and oral submissions and materials, I am not satisfied that Shake Shack has presented clear and convincing evidence sufficient to satisfy the Court, on a balance of probabilities, that a settlement agreement on the terms alleged by Shake Shack has been reached by the parties at the end of the Court-assisted Mediation Session. Three main evidentiary findings lead me to this conclusion.

First, in a direction dated December 23, 2019, Prothonotary Steele expressly stated that the mediation was " “adjourned at the request of the parties” " [December 2019 Direction], and neither the parties nor the mediator took any of the steps prescribed by Rule 389 when " “a settlement of all or part of a proceeding is reached” " at a dispute resolution conference. Second, Shake Shack has failed to persuade me that the parties have reached an agreement on all essential elements of the transaction contemplated by them during the Mediation Session.

More specifically, viewed objectively, the size of the exclusivity zone where Chic Shack could continue to use its trademark was an essential element on which there was no agreement. Third, the terms upon which Shake Shack claims that a settlement has allegedly been reached, as summarized in the Term Sheet, differ from the evidence provided by one of its own representatives contemporaneously with the end of the Mediation Session. Moreover, the Term Sheet does not conform with how the elements of the alleged transaction were later presented to Prothonotary Steele by counsel for Shake Shack in January 2020. II.

Background A. The parties [ 6 ] Shake Shack operates and licenses SHAKE SHACK restaurants in the United States and internationally, and owns assets such as the SHAKE SHACK word and design marks. SHAKE SHACK restaurants are modern day " “roadside” " burger stands serving premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. It is not disputed that Shake Shack has been successful in the United States and internationally over the last 15 years and that SHAKE SHACK has become an iconic brand (especially with the younger generations).

Despite the fact that there is still no permanent SHAKE SHACK restaurant in Canada, Shake Shack claims that its brand nonetheless quickly became known in Canada.

[ 7 ] LE CHIC SHACK is a restaurant located in Quebec City. It was founded around June 2012 by Mr. Evan Price and his sister Ms. Alexandra Lucy Price. Mr. and Ms. Price are both members of the Price family, who is involved in a number of local businesses in the Quebec City area. There is currently only one LE CHIC SHACK restaurant, located in the old part of Quebec City, in the same building as the Musée du Fort (owned by the Price family), across from the legendary Château Frontenac. LE CHIC SHACK restaurant offers premium gourmet burgers, made of high quality, locally sourced, fresh ingredients.

Chic Shack has been using the trademark LE CHIC SHACK in Canada in association with restaurant services since 2012. The type of restaurant and offering of LE CHIC SHACK is similar to the SHAKE SHACK restaurants. B. Procedural history [ 8 ] Shortly after a successful SHAKE SHACK pop-up event in Toronto in January 2017, Chic Shack sent a cease and desist letter threatening Shake Shack with litigation. [ 9 ] In June 2017, Shake Shack responded by initiating the present proceeding.

As of the date of its Statement of Claim, Shake Shack had secured its trademark registration for SHAKE SHACK whereas Chic Shack’s trademark applications were still pending. Shake Shack thus alleged trademark infringement pursuant to

section 20 of the Trademarks Act , RSC 1985, c T-13 [ TMA ], depreciation of goodwill pursuant to

section 22 and passing off pursuant to paragraph 7 (b). Chic Shack obtained its trademark registrations for LE CHIC SHACK and LE CHIC SHACK & Design in July 2017 and September 2019, respectively. As a result, Shake Shack amended its Statement of Claim to challenge the validity of these registrations. [ 10 ] In its action, Shake Shack is seeking a declaration that the use of the trademark LE CHIC SHACK by Chic Shack depreciates the value of its SHAKE SHACK trademark and creates confusion.

Shake Shack also requests that a permanent injunction be issued to prevent Chic Shack from using its trademark, as well as damages (or an accounting of profits). [ 11 ] In defense to the Statement of Claim, Chic Shack alleges that the SHAKE SHACK brand had not achieved the level of recognition that would be required to claim prior rights as of 2012. In its defense and counter-claim, Chic Shack seeks a declaration that the registration for SHAKE SHACK based on a declaration of use filed in 2017 is invalid in view of the prior pending applications for LE CHIC SHACK.

Chic Shack also seeks a permanent injunction preventing Shake Shack from using the SHAKE SHACK marks in Canada. [ 12 ] In sum, this is a trademark case where both parties have registered trademarks they agree are confusing when used in association with similar restaurants. The main issue on the merits will be who has prior and valid rights.

For the purpose of this Motion, there is no need to review the parties’ respective trademarks and allegations in any further detail. [ 13 ] In July 2019, the Court ordered that the trial would take place in Quebec City for a duration of five (5) days, starting on November 23, 2020. In a direction issued on July 30, 2019, Prothonotary Steele established a

schedule fixing the time frame for completing the pre-trial steps in the proceeding. This direction also provided that a pre-trial conference and mediation would be held in Montreal for a duration of one (1) day. Prothonotary Steele eventually confirmed, on September 10, 2019, that the mediation would be convened on December 18, 2019, specifying that the representatives of the parties to the mediation needed to have full settlement authority. C.

The Mediation Session [ 14 ] On December 10 and 11, 2019, the parties exchanged and filed under seal their respective mediation briefs. [ 15 ] On December 18, 2019, Prothonotary Steele led the Mediation Session. In attendance on behalf of Shake Shack were Mr. Ronald Palmese, Jr., Shake Shack’s General Counsel and Corporate Secretary, and Mr. Michael Kark, Shake Shack’s Chief Global Licensing Officer, together with Shake Shack’s counsel, Mr. Guay and Mr. Dupont. Mr. Price represented Chic Shack, and he was accompanied by Chic Shack’s counsel, Mr. Lauzon and Ms.

Hébert-Tremblay. [ 16 ] In its pre-mediation brief, Shake Shack stated, under its views on mediation, that its management’s position has always been that it should not have to give any money to a business that they and consumers see as a copycat, and that Shake Shack preferred to pay legal fees instead.

Shake Shack was however willing to explore some form of co-existence with Chic Shack, and it entered the mediation committed to find a reasonable business solution satisfactory to both parties. [ 17 ] In its pre-mediation brief, Chic Shack notably laid out the bases upon which it would consider a negotiated settlement.

These included four distinct possible options, described as follows: 1) Shake Shack simply buys out Chic Shack at a price that reflects past investments, developed goodwill and expansion potential; 2) Chic Shack phases out the use of LE CHIC SHACK, adopts a new mark and is properly compensated; 3) Chic Shack’s radius for exclusive expansion is defined and the compensation varies with the degree of the geographical limitations imposed; or 4) Shake Shack abandons all plans for an eventual Canadian expansion. [ 18 ] There is some dispute between the parties as to what was said and done during the Mediation Session, but here is a

summary of how the day unfolded. [ 19 ] Initially, the mediation appeared to crawl along at a snail’s pace, but discussions picked up around mid-day. Shake Shack made the first concrete offer, proposing: 1) to pay Chic Shack’s legal fees (estimated at |||||||||| ) and 2) that the parties would co-exist without any restriction across Canada, letting the free market decide how successful they are in Canada.

Chic Shack’s first response to Shake Shack’s proposal was that: 1) it preferred to define an exclusivity zone of 50 or 100 kilometers [kms] around its existing location in Quebec City, where Shake Shack could not open any restaurants (i.e., no co-existence between Chic Shack and Shake Shack in the zone), and 2) Chic Shack was looking for financial compensation for abandoning its expansion projects elsewhere. At that point in time, however, Chic Shack did not propose any specific monetary terms. [ 20 ] Later in the afternoon, Mr.

Price suggested that the parties had made good progress with settlement discussions, and he proposed to suspend the mediation and to continue the discussions in the following weeks. Mr. Palmese expressed his frustration with Mr. Price’s suggestion and asked him to make an actual proposition with a number. Following a short break, Chic Shack made the following proposal:

1) an exclusivity zone of 100 kms for Chic Shack around its existing location in Quebec City; 2) a |||||||||| upfront payment to compensate Chic Shack’s legal fees; and 3) a |||||||||| payment for each SHAKE SHACK restaurant opened in Canada (with no limit in time or on the number of restaurants). [ 21 ] Shake Shack came back with the following counter-offer on the monetary terms: a |||||||||| lump-sum payment or a |||||||||| upfront payment coupled with a |||||||||| payment for each of the first 10 SHAKE SHACK restaurants opened in Canada.

As part of its counter-offer, Shake Shack also proposed not to enter Quebec City for five (5) years.

However, Chic Shack was unwilling to entertain any offer that included a sunset on the geographical limitations of the exclusivity zone, no matter how that zone would be defined. [ 22 ] In order to resolve the trademark issues raised in the litigation but also in the oppositions in the Trademarks Office, Shake Shack also proposed, in general terms and as part of its counter-offer, to acquire Chic Shack’s trademark rights and trade name, and to license those back exclusively to Chic Shack (with minimal control provisions), in order to allow Mr. Price and Ms. Price to continue their existing operations.

According to Mr. Palmese, this aspect of the counter-offer (i.e., the structure of the future arrangement between the parties) was accepted by Mr. Price. [ 23 ] Shake Shack claims that the parties had then reached an agreement on how the settlement transaction would be structured in terms of Shake Shack acquiring Chic Shack’s trademark rights and licensing those back. The discussions continued on the financial component of the deal and the geographical limitations of the exclusivity zone. While Mr.

Price again suggested that the parties should call it a day and pick up the discussions after the Christmas holidays, Mr. Palmese insisted that the parties continue their discussions as, in his words, they were getting " “very close to a meeting of the minds” " . [ 24 ] According to Shake Shack, the parties eventually reached an agreement on the monetary aspect of the deal (having already agreed earlier on the structure of the transaction) when Shake Shack accepted Mr.

Price’s latest counter-offer, namely: 1) a |||||||||| upfront payment and 2) a |||||||||| payment (indexed annually) for each of the first 10 SHAKE SHACK restaurants opened in Canada. [ 25 ] Shake Shack maintains that the parties’ representatives then shook hands to confirm their agreement on the financial terms as well as the structure of the deal (i.e., acquisition and license back of Chic Shack’s trademark rights within an exclusivity zone), and agreed that their counsel would follow up within 48 hours (before the holidays) to reiterate the settlement terms in writing, as well as to confirm the exact radius of the exclusivity zone.

According to Mr. Palmese, the parties agreed on the principle that the exclusivity zone would be greater than just Quebec City but, its representatives not being familiar with the area, Shake Shack wanted to see the 100 kms radius on a map and confirm it with their team in New York. Mr. Price and Chic Shack disagree with this assessment of the discussions on the issue of the exclusivity zone. [ 26 ] I pause to note that this chronology of the discussions emanates from the written testimonies filed by the parties in this Motion.

At no point during the Mediation Session did either of the parties put the contents of their discussions or the proposed terms of an agreement in writing, nor did a party share any written terms of agreement with the other. Similarly, at the end of the Mediation Session, no written document was prepared and exchanged between the parties, until the Term Sheet (to which I shall return) was drafted by counsel for Shake Shack on December 20, 2019 and sent to counsel for Chic Shack. [ 27 ] Shortly after the end of the Mediation Session, Prothonotary Steele issued her December 2019 Direction.

This direction read as follows: The mediation commenced on December 18, 2019 is adjourned at the request of the parties. Given that the session was adjourned given time constraints, the parties are encouraged to pursue their discussions beyond the Court’s process. The Court wishes to commend the parties for their efforts, and their respective counsel for their assistance, throughout the mediation.

The Court remains at the parties’ disposal should they wish to resume the mediation at any time. (emphasis added) [ 28 ] Following the adjournment of the mediation, Prothonotary Steele issued a further order on December 24, 2019 regarding amendments to the

schedule for the pre-trial steps and filings in the action. Similarly, on February 5, 2020, another order was issued regarding additional revisions to the timetable leading up to the trial. [ 29 ] Further to two letters received from counsel for each party on January 20 and 21, 2020 (to which I shall also come back later), Prothonotary Steele presided a confidential case management conference on January 27, 2020 to discuss the settlement agreement claimed to have been reached at the Mediation Session by Shake Shack.

No further orders or directions were however issued by Prothonotary Steele regarding the adjourned mediation, neither after this case management conference nor later in the course of the proceeding. D. The Rules on Court-assisted mediations [ 30 ] The Mediation Session was a Court-assisted dispute resolution conference organized under the Rules . Neither of the parties disputes this. Prothonotary Steele’s Direction of July 30, 2019 leaves no doubt on this point. [ 31 ] The provisions of the Rules dealing with " “Dispute Resolution Services” " and governing the Mediation Session are found at Rules 386 to 391.

It is useful to reproduce in their entirety those portions that are relevant for the purpose of this Motion. They read as follows: DISPUTES RESOLUTION SERVICES SERVICE DE RÈGLEMENT DES LITIGES Ordonnance de la Cour 386

(1) La Cour peut ordonner qu’une instance ou une

Order for dispute resolution conference 386

(1) The Court may order that a proceeding, or any issue in a proceeding, be referred to a dispute resolution conference, to be conducted in accordance with rules 387 to 389 and any directions set out in the order. […]

Interpretation 387 A dispute resolution conference shall be conducted by a case management judge or prothonotary assigned under paragraph 383(c), who may (

a) conduct a mediation, to assist the parties by meeting with them together or separately to encourage and facilitate discussion between them in an attempt to reach a mutually acceptable resolution of the dispute; […] Confidentiality 388 Discussions in a dispute resolution conference and documents prepared for the purposes of such a conference are confidential and shall not be disclosed. Notice of settlement 389

(1) Where a settlement of all or part of a proceeding is reached at a dispute resolution conference, (

a) it shall be reduced to writing and signed by the parties or their solicitors; and (

b) a notice of settlement in Form 389 shall be filed within 10 days after the settlement is reached. Report of partial settlement

(2) Where a settlement of only part of a proceeding is reached at a dispute resolution conference, the case management judge shall make an order setting out the issues that have not been resolved and giving such directions as he or she considers necessary for their adjudication. Notice of failure to settle

(3) Where no settlement can be reached at a dispute resolution conference, the case management judge shall record that fact on the Court file. […] question en litige dans celle-ci fasse l’objet d’une conférence de règlement des litiges, laquelle est tenue conformément aux règles 387 à 389 et aux directives énoncées dans l’ordonnance. […] Définition 387 La conférence de règlement des litiges est présidée par un juge responsable de la gestion de l’instance ou le protonotaire visé à l’alinéa 383c), lequel :

a) s’il procède par médiation, aide les parties en les rencontrant ensemble ou individuellement afin de susciter et de faciliter les discussions entre elles dans le but de trouver une solution au litige qui convienne à chacune d’elles; […] Confidentialité 388 Les discussions tenues au cours d’une conférence de règlement des litiges ainsi que les documents élaborés pour la conférence sont confidentiels et ne peuvent être divulgués.

Avis de règlement 389

(1) Si l’instance est réglée en tout ou en

partie à la conférence de règlement des litiges :

a) le règlement obtenu est consigné et signé par les parties ou leurs avocats;

b) un avis de règlement, établi selon la formule 389, est déposé dans les 10 jours suivant la date du règlement. Règlement partiel

(2) Si l’instance n’est réglée qu’en

partie à la conférence de règlement des litiges, le juge responsable de la gestion de l’instance rend une ordonnance dans laquelle il fait état des questions litigieuses pendantes et donne les directives qu’il estime nécessaires pour leur adjudication.

Avis de non-règlement

(3) Si l’instance n’est pas réglée à la conférence de règlement des litiges, le juge

responsable de la gestion de l’instance consigne ce fait au dossier de la Cour. […] [ 32 ] Rule 387 thus expressly provides that a mediation set up under the Rules is conducted by the mediator to assist the parties " “in an attempt to reach a mutually acceptable resolution of the dispute” " (emphasis added). Rule 388 ensures that the mediation process is confidential. In filing their submissions and evidence in the context of this Motion, both Shake Shack and Chic Shack have indeed invoked Rule 388 in respect of the discussions and documents prepared for the purpose of the mediation.

Finally, Rule 389 sets up a specific process to be followed when a settlement of a proceeding is reached in the context of such mediations. Whether the settlement is total or partial, Rule 389(1) imposes the obligation ( " “shall” " ) to reduce the settlement to writing and to have it signed by the parties or their counsel.

For its part, Rule 389(2) adds another requirement where the settlement reached is only partial: in such a case, " “the case management judge shall make an order setting out the issues that have not been resolved” " and giving directions that he or she deems necessary. [ 33 ] In the present case, Prothonotary Steele did not make any order pursuant to Rule 389(2) and no settlement was reduced to writing and signed by the parties or their counsel pursuant to Rule 389(1).

In addition, I observe that Prothonotary Steele did not confirm the existence of any agreement reached in the Court-assisted mediation process she had presided, even if she was invited to do so by Mr. Guay, counsel for Chic Shack, in his January 20, 2020 letter addressed to her [January 2020 Letter]. III. Evidence on the Motion [ 34 ] On this Motion, the evidence provided by Shake Shack consisted of two affidavits each supported by numerous documents attached as exhibits. One was signed by Mr. Palmese [Palmese Affidavit] while the other was from Mr. Kark [Kark Affidavit]. Both were signed on June 3, 2020.

In response, Chic Shack filed an affidavit signed by Mr. Price on July 6, 2020 [Price Affidavit], as well as a prior affidavit he had submitted in the course of this action. Mr. Price was cross-examined on his affidavit on July 17, 2020 [Price Cross-examination], and a video of the cross-examination was provided to the Court. Neither Mr. Palmese nor Mr. Kark were cross-examined on their respective affidavits. [ 35 ] Further to my detailed review of this evidence, here is a

summary of what, in my view, the testimonies and documents establish as far as the mediation is concerned. A. Shake Shack [ 36 ] The main elements established by Mr. Palmese in his affidavit show that: 1 . Mr. Palmese’s " “gut feeling” " was that Mr. Price was trying to leverage Chic Shack’s alleged expansion plans to get a larger payout from Shake Shack (Palmese Affidavit at para 43); 2 .

The first offer made by Shake Shack included a monetary dimension (to pay Chic Shack’s legal fees estimated at |||||||||||| ) as well as a territory dimension (the right for each party to co-exist without any restriction across Canada) (Palmese Affidavit at para 46); 3 .

The response from Chic Shack, as conveyed by Prothonotary Steele, specified that: 1) Chic Shack preferred to define an exclusivity zone of 50 kms or 100 kms around its existing location in Quebec City where Shake Shack could not open any restaurants (as opposed to a co-existence between Chic Shack and Shake Shack anywhere); and 2) Chic Shack was looking for a financial compensation for abandoning its expansion projects and for the value to Shake Shack of the Canadian market (Palmese Affidavit at para 47); 4 . Mr. Palmese felt that Mr.

Price approached the mediation by " “playing games” " (Palmese Affidavit at para 48); 5 . The first formal offer from Mr. Price included: 1) an exclusivity zone for Chic Shack of 100 kms around the existing location of LE CHIC SHACK restaurant in Quebec City; 2) a | |||000000000||| upfront payment to compensate Chic Shack’s legal fees; and 3) a |0 |||||| payment for each SHAKE SHACK restaurant opened in Canada (with no limit in time or in the number of restaurants) (Palmese Affidavit at para 57); 6 .

A few offers and counter-offers were exchanged, " “all building on the three elements of Chic Shack’s first formal offer” " (Palmese Affidavit at para 58); 7 . Mr. Palmese specifically indicated that he made a counter-offer " “on the monetary terms” " when he referred to Shake Shack’s offer of a |000 |||||| lump-sum payment or a |0 |||||||| upfront payment coupled with a |||||||| | payment for each of the first 10 SHAKE SHACK restaurants opened in Canada. Mr. Palmese then also proposed not to enter Quebec City for five (5) years (Palmese Affidavit at paras 59-60); 8 . Mr.

Palmese referred to Chic Shack refusing to include a sunset on the geographic restriction imposed by the exclusivity zone (Palmese Affidavit at para 60); 9 . Mr. Palmese stated that, assuming the parties " “could work through the other settlement terms” " , Shake Shack would be agreeable to this perpetual restriction (namely, not to enter the area around Quebec City with no time limit) (Palmese Affidavit at para 60); 10 . Mr.

Palmese expressly stated that " “[h]aving reached an agreement with Chic Shack on how the transaction would be structured in terms of Shake Shack acquiring Chic Shack’s trademark rights and licensing those back, the rest of the discussion focused on the financial components of the deal and, to a lesser extent, the exact geographical definition of the exclusivity zone […]” " (Palmese Affidavit at para 63);

11 . Mr. Palmese specified that Mr. Price’s counter-proposal was on the " “monetary terms” " when the latter offered a |00 |||||||| upfront payment and a |000 |||||||| payment (indexed annually) for each of the first 20 SHAKE SHACK restaurants opened in Canada (Palmese Affidavit at para 64); 12 . Mr. Palmese said at one point, late in the afternoon, that the parties were getting " “very close to a meeting of the minds” " , thus indicating that no such meeting of the minds had yet occurred (Palmese Affidavit at para 65); 13 . Mr.

Palmese stated that the parties had finally reached an agreement on " “the monetary aspect of the deal […]: a) |000 |||||| upfront payment [and] b) | |||||||| payment (indexed annually) for each of the first 10 SHAKE SHACK restaurant [sic] opened in Canada” " (Palmese Affidavit at para 67). No mention was made of the territorial restriction or exclusivity zone at that point in time; 14 . Mr.

Palmese referred to an " “agreement on the financial terms as well as the structure of the deal (i.e., acquisition and license back of the trademark rights within an exclusivity zone)” " but not to an overall deal (Palmese Affidavit at para 68); 15 . Mr. Palmese also mentioned that the parties’ attorneys also agreed that, from a trademark law perspective, some parameters had to be defined to avoid any confusion in the consumers’ minds between the CHIC SHACK and SHAKE SHACK restaurants, considering that confusingly similar trademarks were held by two very distinct entities. According to Mr.

Palmese, the parties agreed that the exact wording would be determined by the lawyers in the course of drafting the formal license agreement following the Mediation Session. There were apparently no further discussions between the parties on this issue throughout the mediation (Palmese Affidavit at para 62); 16 . Mr. Palmese indicated that the parties agreed to work through the possibility of opening additional restaurants in the exclusivity zone within the following 48-hour timeframe, taking into account the overall settlement terms (Palmese Affidavit at para 69); 17 . Mr.

Palmese affirmed that the exact radius of the exclusivity zone was not agreed upon and needed to be confirmed. He acknowledged that Chic Shack was asking for 100 kms but added that Shake Shack wanted to see it on a map and to confirm (Palmese Affidavit at para 68); 18 . Mr. Palmese indicated that Mr. Kark and himself had reviewed the Term Sheet and confirmed that " “it was in line with [their] recollection and understanding of what was agreed-upon” " (Palmese Affidavit at para 74); 19 . After the exchange of emails between counsel on December 20, 2019 and in January 2020 (which I will address in a moment), Mr.

Palmese suspected that Mr. Price might have had a " “change of heart” " (Palmese Affidavit at para 78); 20 . At no point did Mr. Palmese suggest or state that a geographical restriction to the exclusive use of Chic Shack’s trademark was secondary or non-essential. [ 37 ] I find that the Palmese Affidavit was comprehensive, clearly drafted and well nuanced in its statements. Throughout his written testimony, Mr.

Palmese carefully distinguished the various phases of the discussions between the parties, as well as the main dimensions of the contemplated transaction: monetary terms, structure of the deal, and exclusivity zone. In the absence of cross-examination, there are no reasons to question Mr. Palmese’s credibility. [ 38 ] Turning to the Kark Affidavit, Mr. Kark essentially adopted Mr. Palmese’s recollection of the events that punctuated the Mediation Session and the 48 hours that followed (Kark Affidavit at para 19). Mr.

Kark further indicated that, immediately after leaving the Court’s premises at the end of the Mediation Session, he sent an email to Shake Shack’s CEO, CFO and Chief Development Officer, to report having reached an “agreement in principle” with Chic Shack on the terms set out in his email. This 7:48 pm email of December 18, 2019 sent by Mr. Kark and attached to his affidavit [Kark Email] is a key document. It is worth citing in its entirety as it expressed Mr. Kark’s understanding of the alleged agreement, contemporaneously with the end of the Mediation Session.

The Kark Email read as follows: It’s been a hell of a day! Here is where we ended with an agreement in principle. |00 |||||| upfront |00 |||||| ( |00 |||| per first 10 shacks) We own his mark and license it back and he can operate in Quebec City (100 km radius) as long as he operates Le Chic Shack. He can only open additional locations in this area radius and no where else in Canada. Still a few details to work through but generally I think we ended up in a great place. After his attorney fees he doesn’t walk with much…and we will end up paying less and over a longer period than we would have paid to litigate.

Sincere appreciation and respect to Mr P who brought his game face today. This could have ended a lot of different ways (none of them beneficial) had Ron not driven the entire room the way he did. He may have missed his calling as a litigator? Now we need to go get a deal done and capitalize on this frozen tundra (-16c here tonight)! [ 39 ] In my view, this Kark Email, written in plain and concise terms immediately after the Mediation Session, deserves significant weight. In the case of inconsistency with the narrative contained in the written testimonies of Mr. Palmese and Mr.

Kark in their affidavits, I shall prefer the evidence coming from this document. [ 40 ] Further to the Mediation Session, counsel for the parties had several exchanges on December 20, 2019 and in January 2020 with respect to the agreement alleged to have resulted from the Mediation Session. All of these exchanges were attached as exhibits to the

Palmese Affidavit in Mr. Palmese’s discussion of the events following the mediation. As will be seen later in these reasons, it is important to describe those various emails and letters in detail. This evidence is as follows: A . Mr. Lauzon (counsel for Chic Shack) first wrote to Mr. Dupont (counsel for Shake Shack) around 9:46 am to inform him that he was leaving on vacation at noon that day and to inquire as to when he could expect to hear back from Shake Shack, noting that the remaining points were fairly minor [RP-16 Email]; B . In his 10:57 am email of December 20, 2019 to Mr. Lauzon [RP-17 Email], Mr.

Dupont responded that a “one-pager” term sheet " “avec les principaux points de l’entente” " was forthcoming, and he indicated that he would send it " “pour qu’on puisse au moins confirmer que nous avons une entente de principe” " (emphasis added). He also referred to Shake Shack intending to pay the lump-sum amount before December 25 and that he would need some information in order for Shake Shack to issue the cheque; C . In his 11:05 am email of December 20, 2019 to Mr. Dupont [RP-18 Email], Mr. Lauzon simply said " “OK, merci ! " " ” " to the previous email; D .

In his 11:07 am email of December 20, 2019 to Mr. Lauzon [RP-19 First Email], Mr. Dupont indicated that he would send the " “key points” " as soon as he gets approval from his client. He further stated that he would be able to start preparing a draft agreement " “[a]ssumant que nous sommes tous sur la même longueur d’ondes pour les key points” " (emphasis added); E . In another subsequent 12:07 pm email of December 20, 2019 to Mr. Lauzon [RP-19 Second Email], Mr.

Dupont referred to the " “key points” " that Shake Shack retained from the mediation, mentioned that " “nous avons diminué le 100 kms à 50 kms” " " and that " " “cela ne fait probablement pas de différence dans les faits” " (emphasis added). He added: “ Je présume que ce n’est pas un problème” (emphasis added). He further stated that " « Shake Shack aurait besoin que nous confirmions notre entente de principe aujourd’hui » " (emphasis in original). Furthermore, this RP-19 Second Email contained, in capitalized, bold letters, the following heading note: " « SOUS TOUTES RÉSERVES – DISCUSSIONS DE RÈGLEMENT » " ; F .

In his 2:07 pm email of December 20, 2019 to Mr. Dupont [RP-20 Email], Mr. Lauzon, responded that " “les “key points” contiennent de nouveaux éléments qui méritent sérieuses réflexions” " , and that Chic Shack would come back after the holidays; G . In his 2:49 pm email of December 20, 2019 to Mr. Lauzon [RP-21 Email], Mr. Dupont tried to get Chic Shack’s conditional confirmation of the monetary terms and banking information so that Shake Shack could process the upfront payment before the end of its fiscal year, subject to finalizing the written agreement after the holiday season. Mr.

Dupont said: " “Pouvez-vous au moins confirmer que le point 5 relatif au paiement correspond bien à ce qui a été discuté, le tout conditionnel à finaliser les autres termes au retour des vacances?” " (emphasis added); H . In his 3:49 pm email of December 20, 2019 to Mr. Dupont [RP-22 Email], Mr. Lauzon replied that his instructions were to wait after the holidays and that there was notably a " “deal breaker” " in the key points sent by Shake Shack that, in Chic Shack’s view, had not been discussed; I . On January 8, 2020, Mr.

Lauzon sent an email to counsel for Shake Shack containing Chic Shack’s detailed response to the Term Sheet [RP-23 Email]. In that response, Chic Shack indicated, among other things, that it was willing to limit the exclusivity zone to a radius of 50 kms, but that making its license " “valid as long as Le Chic Shack is owned by Mr. Evan Price and Lucy Price” " was a " “definite deal breaker” " . Chic Shack notably asked that the license be valid " “as long as Le Chic Shack or any of its sub-licensees use the trademark in the defined territory” " .

Chic Shack also materially modified the monetary terms as the initial proposal did not reflect " “the actual business potential of an expansion in Canada” " ; the monetary terms were increased to a payment of | 000| | |||||||||| upfront in addition to ||0000|| | |||||||||| (indexed annually) for each of the first 50 SHAKE SHACK restaurants opened in Canada, for a total which was several times higher than what was discussed at the Mediation Session. [ 41 ] The Term Sheet forwarded by Mr.

Dupont in the RP-19 Second Email is another important document as it contains the terms of the alleged agreement upon which Shake Shack is asking the Court to order the parties to prepare a formal settlement and license agreement. The Term Sheet expressly listed seven (7) key points. For ease of reference, I reproduce them verbatim below: 1. Shake Shack acquires Le Chic Shack’s entire rights in LE CHIC SHACK tradename and trademarks, including LE CHIC SHACK & Design. 2. Shake Shack licenses back LE CHIC SHACK tradename and trademarks, including LE CHIC SHACK & Design: a. Exclusive license; no sub-license b.

Limited geographically to a radius of 50kms around the existing location c. Valid as long as Le Chic Shack is owned by Mr. Evan Price and Lucy Price d. |||||||| / year 3. Shake Shack undertakes not to open any Shake Shack restaurants within a radius of 50kms around the existing Le Chic Shack restaurant, as long as the aforementioned license is in force 4. Le Chic Shack agrees on some measures to ensure there is no confusion caused with Shake Shack (no reference whatsoever to Shake Shack, no use of the Shake Shack trade dress, no use of Shake Shack’s menu items or similarly named items, etc.) 5.

Payment: a. |||||||| payable by December 24, 2019 (we will need Le Chic Shack’s info ASAP) b. |00|||||| ||00|| (indexed annually according to CPI starting in 2021) payable within 30 days of the opening of each of the first 10

SHAKE SHACK locations in Canada (as the case may be) 6. Discontinuance of litigation (claim and counterclaim), and withdrawal of all opposition and S. 45 proceedings in the Trademarks Office. Le Chic Shacks [sic] undertakes not to oppose any future trademark applications by Shake Shack. 7.

Standard provisions usually found in a settlement agreement (including confidentiality, mutual release, etc.) and a trademark license agreement (including control, etc.) [ 42 ] The last document from Shake Shack’s evidence that needs to be mentioned is the January 2020 Letter addressed to Prothonotary Steele, also attached to the Palmese Affidavit as Exhibit RP-24. In that letter, Mr. Guay informed Prothonotary Steele of the situation and sought her assistance and guidance to resolve it.

The letter referred to the mediation " “adjourned on December 18, 2019” " and requested the Prothonotary’s " “continued assistance in that regard” " , noting that Mr. Price should be held to honor " “the settlement terms entered into at the mediation” " . The January 2020 Letter stated that the parties had " “agreed on all essential elements of a settlement agreement” " , including five (5) points. It is again important to reproduce the exact language used by counsel in this January 2020 Letter. The essential elements of the alleged agreement were described as " “including” " : 1.

The Plaintiffs [i.e., Shake Shack] acquire the Defendant’s [i.e., Chic Shack] rights in the LE CHIC SHACK name and trademark; 2. The Plaintiffs license back those rights exclusively to the Defendant so that it can continue its operations; 3. An exclusivity zone is defined around the Defendant’s restaurant where the Defendant can operate and the Plaintiffs cannot operate or license SHAKE SHACK restaurants (i.e., no co-existence between the parties in the same region, contrary to what was first explored); 4. The Plaintiffs agree to make the following payments to the Defendant: a.

Lump-sum of | |||||||||| payable immediately, and b. |00 |||||| (indexed annually) for the opening of each of the first 10 SHAKE SHACK locations in Canada (as the case may be); and 5. The parties would need to agree on some parameters to ensure there is no confusion between LE CHIC SHACK and SHAKE SHACK. [ 43 ] The January 2020 Letter then went on to affirm that there " “was a meeting of the minds on all essential terms of a settlement such that a binding contract was created” " .

It is implicit that what counsel considered as the essential terms agreed upon were the five (5) points listed immediately above in his letter. The January 2020 Letter further said that the " “only secondary elements that were left outstanding because of time constraints were: 1. The exact radius of the exclusivity zone; 2. Whether the Defendant is limited to its current operation or can open LE CHIC SHACK restaurants under the license; and 3) the drafting of a formal settlement and license agreement with the standard provisions usually found in such an agreement” " .

The January 2020 Letter finally referred to the Term Sheet sent on December 20, 2019, which counsel presented as being meant to " “confirm the essential elements that were agreed to during the mediation” " and to " “resolve the outstanding issues by proposing a 50km radius and not imposing limits on the Defendant’s capacity to open additional restaurants within that exclusivity zone” " . B. Chic Shack [ 44 ] Turning to Chic Shack, the main elements established by Mr. Price in his affidavit and his cross-examination are as follows: A . Mr. Price agreed with Mr.

Palmese’s description of how the mediation unfolded ( " “le déroulement de la séance de médiation” " ), but not how Mr. Palmese interpreted and qualified the events (Price Affidavit at para 3). In his cross-examination, Mr. Price confirmed his agreement with the sequence of events described by Mr. Palmese ( " “la mécanique” " ) but specified that he did not express his agreement with the account or contents of such events (Price Cross-examination at p 52); B .

As early as 2017, in a letter sent on June 12, 2017, counsel for Chic Shack had indicated a willingness to accept that Shake Shack could open restaurants outside the province of Quebec, but that Chic Shack would need to be fairly compensated by Shake Shack in monetary terms (Price Affidavit at para 41); C . Mr.

Price testified that at no point did any party suggest to put anything in writing at the end of the Mediation Session and that no party said it would be desirable to summarize the terms of an alleged agreement or put what had been discussed on paper (Price Affidavit at para 5 and Price Cross-examination at p 82); D . Mr. Price however acknowledged on cross-examination that the parties did not subject their consent to an agreement in writing; E . Mr. Price did not indicate that he agreed to the terms of agreement as these were singled out and formulated by Shake Shack; F . Mr.

Price never said or suggested that the territorial limitation of the exclusivity zone was a minor or secondary element; G . Mr. Price indicated that, at the Mediation Session, he did not have the opportunity to discuss all the points he deemed necessary for a global agreement (Price Affidavit at para 4); H . At the Mediation Session, Mr. Price was preoccupied by another matter involving his CO2 Solutions company, for which he was scheduled to go to Court the day after the mediation. However, he did not divulge that to Shake Shack; I . When he received the Term Sheet on December 20, 2019, Mr.

Price quickly noticed at least one new element that had never been

discussed during the mediation, namely a link between the duration of the proposed license and the ownership of LE CHIC SHACK restaurant by his sister and him (Price Affidavit at para 28). Mr. Price also noted that the right for Chic Shack to operate in the exclusivity zone was linked to the " “operation” " of Chic Shack in the Kark Email, but was now linked to the " “ownership” " of Chic Shack by his sister and him in the Term Sheet (Price Affidavit at paras 59-61); J . Mr.

Price also referred to new conditions having been added in the Term Sheet as well as changes compared to the state of discussions at the end of the Mediation Session (Price Affidavit at paras 66 ff); K . Mr. Price testified that any agreement with Shake Shack needed to include an exclusivity zone where Chic Shack would be entirely free to operate and where Shake Shack would have no presence (Price Affidavit at para 43); L . Mr.

Price indicated that the definition of the exclusivity zone was " “very important” " to Chic Shack, as reflected in the third option for settlement described in Chic Shack’s mediation brief (Price Affidavit at para 45); M . Mr. Price expressly linked the monetary terms to the size of the exclusivity zone: " « En d’autres mots, plus [Chic Shack] était disposée à accepter une plus petite zone exclusive, plus la compensation financière devait être élevée et toute modification à la taille de cette zone dans le cours de discussions amènerait automatiquement des changements à d’autres paramètres faisant

partie d’une entente éventuelle » " (Price Affidavit at para 46 and Price Cross-examination at pp 68-69); N . According to Mr. Price’s recollection, Shake Shack had indicated that they agreed to an exclusivity zone of 100 kms at the Mediation Session (Price Affidavit at para 50). Mr. Price’s " “understanding” " was that Chic Shack would be totally free to open and operate Chic Shack restaurants in this exclusive area, through any business structure (Price Affidavit at para 51 and Price Cross-examination at pp 76-78); O . Mr.

Price testified that a reduction of the exclusivity zone from 100 kms to 50 kms would include numerous local markets in Quebec and represented a 75% reduction in the total geographic coverage of the zone (Price Affidavit at para 53); P . According to Mr. Price, limits to sub-licenses and openings of restaurants in the exclusivity zone, as well as the steps to be taken to ensure non-confusion between the trademarks, were not discussed in the Mediation Session (Price Affidavit at paras 64, 66, 75 and Price Cross-examination at pp 88-92); Q . Mr.

Price indicated that, when he left the Mediation Session, the 100 kms radius was one of Chic Shack’s conditions, an element which was part of the deal ( “un élément qui faisait

partie de l’ensemble” – Price Cross-examination at pp 64-65); R . Mr. Price understood that Shake Shack might want to validate the 100 kms, but he said he had established that the 100 kms was one of Chic Shack’s conditions. He testified that the " “rayon qui était associé à – aux différents “moments” – montants, c’était cent kilomètres (100 km), en quittant la… la… séance de médiation” " (Price Cross-examination at pp 67-68). In Mr. Price’s view, it was clearly 100 kms at the end of the Mediation Session, and the size of the exclusivity zone was clearly linked to the monetary amounts; S . Mr.

Price testified that Chic Shack had intentions to open new LE CHIC SHACK restaurants, but that he did not express it at the Mediation Session. He added that, to his recollection, there were no discussions about that at the Mediation Session and that he was expecting to discuss that further, as the mediation itself had been adjourned and suspended (Price Affidavit at para 36 and Price Cross-examination at pp 83-84); T . On cross-examination, Mr. Price expressly denied having said that changing the name of his restaurant was not very dramatic or important (Price Cross-examination at p 81); U . Mr.

Price explained in detail how Chic Shack arrived at its revised offer on the monetary terms on January 8, 2020 (Price Affidavit at paras 85 ff). [ 45 ] I also find that the Price Affidavit was detailed and nuanced on its statements. I should add that I have looked at and listened carefully to the cross-examination of Mr. Price on his affidavit, and find that Mr. Price was not evasive or hesitant and that he came across as a credible, forthcoming and helpful witness. IV.

Preliminary Issues [ 46 ] Before turning to the merits of Shake Shack’s Motion and to the assessment of the evidence, some preliminary matters must first be addressed. A. The Palmese and Kark Affidavits [ 47 ] Chic Shack challenges certain paragraphs of the Palmese Affidavit and, to a lesser extent, the Kark affidavit, on the basis that they contain arguments, legal conclusions as well as opinions.

More specifically, Chic Shack claims that the two affidavits contain inadmissible opinion evidence on the notoriety or success of the SHAKE SHACK brand, and the alleged resemblance between the SHAKE SHACK and LE CHIC SHACK brands. Chic Shack also submits that some paragraphs contain inadmissible statements on Mr. Palmese’s state of mind or perception of what happened at the Mediation Session. In addition, Chic Shack maintains that the affidavits include improper legal conclusions because Mr. Palmese and Mr.

Kark use words such as " “agreement” " , " “agree” " or " “meeting of the minds” " throughout their testimonies. Chic Shack argues that the impugned paragraphs or portions thereof should be struck from the two affidavits or, alternatively, that the Court should exercise its discretion to give them no weight or probative value ( Abi-Mansour v Canada (Attorney General) , 2015 FC 882 at paras 30-31 ). [ 48 ] I do not agree and I am not convinced by Chic Shack’s arguments on this front.

[49] Regarding affidavits filed before this Court, Rule 81 provides that the alleged facts shall be confined to facts within the deponent’spersonal knowledge and must be delivered "“without gloss or explanation”" (Canada (Attorney General) v Quadrini, 2010 FCA 47[Quadrini] at para 18). Moreover, the Court may strike or disregard all or parts of affidavits where they are abusive or clearly irrelevant, orwhere they contain opinions, arguments or legal conclusions (Quadrini at para 18; Cadostin v Canada (Attorney General), 2020 FC 183 atpara 36).

The general rule is that a lay witness may not give opinion evidence but may only testify to facts within his or her knowledge,observation and experience (White Burgess Langille Inman v Abbott and Haliburton Co, 2015 SCC 23 [White Burgess] at para 14; TorontoReal Estate Board v Commissioner of Competition, 2017 FCA 236 [TREB] at para 78). Expert evidence is an exception to this general rulebarring opinion evidence. The main rationale for excluding lay witness opinion evidence is that it is generally not helpful to the decisionmaker and may be misleading (White Burgess at para 14).

It is not disputed that neither Mr. Palmese nor Mr. Kark are experts in thetechnical sense, and neither the Palmese Affidavit nor the Kark Affidavit were indeed entered as expert opinion evidence. Both Mr.Palmese and Mr. Kark were therefore lay witnesses. [50] The SCC has recognized that "“[t]he line between ‘fact’ and ‘opinion’ is not clear”" (Graat v The Queen, (SCC),[1982] 2 SCR 819, 144 DLR (3d) 267 at p 835).

The courts have thus developed some freedom to receive lay witnesses’ opinions when thewitness has personal knowledge of the observed facts and testifies to facts within his or her observation, experience and understanding ofevents, conduct or actions.

In that respect, the Federal Court of Appeal [FCA] recently stated that opinion from a lay witness is acceptable"“where the witness is in a better position than the trier of fact to form the conclusions; the conclusions are ones that a person of ordinaryexperience can make; the witnesses have the experiential capacity to make the conclusions; or where giving opinions is a convenient modeof stating facts too subtle or complicated to be narrated as facts”" (TREB at para 79).

As such, when a witness has personal knowledge ofobserved facts such as a company’s relevant, real world, operations, the evidence may be accepted by a court or an administrative decisionmaker even if appears to contain or is opinion evidence (TREB at para 80; Pfizer Canada Inc. v Teva Canada Limited, 2016 FCA 161 atparas 105-108). [51] In my view, the Palmese Affidavit and the Kark Affidavit are essentially factual. They contain proper evidence which falls within theboundaries of what the case law mentioned above has recognized as acceptable lay opinion evidence.

I am satisfied that the informationprovided by Mr. Palmese and Mr. Kark in their respective affidavits comes from their personal experience and participation in theMediation Session as duly-authorized representatives of Shake Shack. In their affidavits, they testified to facts within their observation,experience and understanding of the events, conduct or actions.

In addition, even though some of the statements solely reflect their ownperception or reading of the exchanges at the Mediation Session, I find that the information provided in the Palmese Affidavit and the KarkAffidavit is relevant and helpful to this Motion. [52] Furthermore, I am not persuaded that the terms used by Mr. Palmese and Mr. Kark in their testimonies amount to legal conclusions onthe existence of the alleged agreement. Words such as "“agree”" or "“meeting of the minds”" are ordinary words reflecting their views andunderstanding of the events at the Mediation Session.

They establish their personal perception of the events, and I do not read them asoffering legal opinions or conclusions on the issue at stake in this Motion, namely whether the parties legally entered into a settlementagreement. This is for the Court to determine and decide. [53] For all those reasons, I see no ground to strike the paragraphs identified by Chic Shack or to give them no probative value in myassessment of the evidence in this case. B. Settlement privilege [54] Chic Shack also argues that, in the Palmese Affidavit, Mr.

Palmese improperly referred to and relied on a document subject tosettlement privilege, namely an email relating to settlement discussions between the parties subsequent to the Mediation Session. This is theemail dated February 5, 2020 from counsel for Chic Shack, in which Mr. Lauzon made a new offer of settlement in response to the previousexchanges between the parties. It was filed as Exhibit RP-26 to the Palmese Affidavit [RP-26 Email].

Counsel for Chic Shack takesparticular exception with the RP-26 Email and submits that its remoteness to the events surrounding the Mediation Session makes itirrelevant to the issue at stake on this Motion. [55] I do not agree with Chic Shack.

It is well established that the settlement privilege requires the presence of three conditions: a litigiousdispute in existence or within contemplation; a communication made with the express or implied intention that it would not be disclosed tothe court in the event negotiations failed; and a communication made with the purpose to attempt to effect a settlement (Kirkbi AG v RitvikHoldings Inc., 2002 FCT 585 , [2002] FCJ No 793 at para 175).

However, there is an exception to the rule of settlement privilegewhere the communication subject to privilege is not used as evidence of liability for the conduct which is the subject of negotiations or ofweak cause of action, but is used for other purposes. In those circumstances, the privilege does not bar production in court (Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 4th ed, Markham: LexisNexis Canada Inc, at para 14.343; Sabre Inc v InternationalAir Transport Assn, [2009] OJ No 903 at paras 20-21).

More specifically, where a dispute arises as to the existence of a settlementagreement, it is necessary for the Court to have access to documents exchanged by the parties or their counsel in order to resolve theconflict (Bauer Nike Hockey Inc. v Tour Hockey, 2003 FCT 451 (FC) at paras 18-20).

In such circumstances, the documents are entered intoevidence to determine whether the parties effectively reached a settlement, not for the actual contents of the document. [56] This is the case here, as Shake Shack does not rely on the impugned document to establish the liability of Chic Shack in the underlyingaction or the strength of its position, but instead as evidence that the parties had entered into a binding settlement agreement at the end ofthe Mediation Session.

I agree with Chic Shack that, given its date several weeks after the end of the Mediation Session, the RP-26 Emailmay seem less relevant to events that happened on December 18, 2019 than other documents on the record. The RP-26 Email does notdirectly relate to the transaction claimed to have happened at the end of the Mediation Session and arguably articulated terms of a new offerand exposed a new basis for an eventual settlement of this action.

However, since it follows the exchanges between counsel regarding thealleged transaction at the center of this Motion, I am satisfied that it can be admitted into evidence. The issue is not to assess the contents ofthe RP-26 Email and the new terms of settlement then offered by Chic Shack, but to determine whether this correspondence sheds anyfurther light on the existence or absence of an agreement at the end of the Mediation Session.

Just as the emails immediately following theMediation Session on December 20, 2019 and in January 2020 are relevant to assist in establishing this point, so is this RP-26 Email whichis a continuation of the exchanges. The new offer made on that day is not the object of this Motion, but I am not persuaded that thedocument has no relevance in informing the Court on the existence of a prior agreement between the parties. The RP-26 Email will

therefore not be stricken from the record. C. Failure to cross-examine [57] The last preliminary matter relates to a submission made by Shake Shack relating to the Palmese and Kark Affidavits. Shake Shacksubmits that Chic Shack’s decision not to cross-examine Mr. Palmese and Mr. Kark has consequences, and that their evidence standsuncontradicted (Harley-Davidson Motor Company Group LLC v Manoukian, 2013 FC 193 [Manoukian] at para 37).

If, by saying so, ShakeShack implied that the Palmese and Kark Affidavits should be taken by the Court at face value, I do not agree. [58] I accept that a party’s failure to cross-examine a witness may prevent that party from trying to impugn the credibility of such witness.This is what the Manoukian decision cited by Shake Shack stands for. However, a failure to cross-examine does not mean that the Court hasto accept a witness’ evidence without any reservation and does not magically confer additional or irrefutable probative value to this witness’evidence.

Nor does it improve or magnify the sufficiency of the testimonial evidence offered. The Court must still assess the affidavitevidence to determine its probative value and weigh it in the context of the balance of the evidence on the record (Bath v Canada (Ministerof Citizenship and Immigration), (FC) at para 12). [59] In this case, I am satisfied that Chic Shack is not trying to impugn the credibility of Mr. Palmese and Mr. Kark.

It simply submits thatthe evidence adduced by Shake Shack through the Palmese and Kark Affidavits and their supporting exhibits is insufficient to establish, ona balance of probabilities, that the parties entered into a binding settlement agreement at the end of the Mediation Session. It is up to theCourt to determine whether the evidence provided in the Palmese and Kark Affidavits, along with the rest of the evidence on the record, issufficient to meet the balance of probabilities standard, and to assess whether this evidence is supported or contradicted by other evidence inthe record. The sole fact that Mr.

Palmese and Mr. Kark were not cross-examined does not increase the weight of their affidavit evidence. V. Analysis A. Jurisdiction of the Court [60] It is now trite law that the Court may decide contractual issues that are incidental to a matter that is otherwise within its statutoryjurisdiction, including whether the parties have reached a settlement agreement (Salt Canada Inc. v Baker, 2020 FCA 127 [Salt Canada] atparas 14-20; Apotex Inc. v Allergan, Inc., 2016 FCA 155 [Apotex] at paras 12-14).

The Court "“has jurisdiction when the contract law issuebefore [it] is part and parcel of a matter over which [it] has statutory jurisdiction, there is federal law essential to the determination of thematter, and that federal law is valid under the constitutional division of powers”" (Apotex at para 13). The subject matter of Shake Shack’saction, namely trademark infringement, is clearly within the jurisdiction of the Court (Federal Courts Act, RSC 1985, c F-7 at section20; TMA at

section 55). [61] The Court and the FCA have indeed confirmed on several occasions that this Court has jurisdiction to determine whether a settlementagreement has been reached in the context of intellectual property-related disputes, and to enforce such settlement (Apotex at paras 12-14;Domaines Pinnacle Inc. c Beam Suntory Inc., 2015 FC 680 at paras 20-23, aff’d 2016 FCA 212 [Pinnacle]). No party challenges thejurisdiction of the Court to determine whether there has been a settlement of this action. B. Legal framework and principles

(1) The principle of complementarity [62] Shake Shack submits that, since the present dispute and mediation are most closely connected to the province of Quebec, and sincefederal legislation is silent on contractual issues, the Civil Code of Quebec, CQLR, c C-1991 [CCQ] applies. Shake Shack further adds thatthe principles established by the civil law govern this Motion, despite the fact that the Rules provide for specific conditions andrequirements to be followed in the context of Court-assisted mediations.

This statement needs to be slightly nuanced. [63] It is well established in Canadian law that, to interpret a concept of private law not defined in a federal statute, the courts must turn tothe private law of the province where the federal law applies. This principle of complementarity of provincial civil law with federal law isnow codified in

section 8.1 of the

Interpretation Act, RSC 1985, c I-21.

This provision reads as follows: 8.1 Both the common law and the civil law are equallyauthoritative and recognized sources of the law ofproperty and civil rights in Canada and, unless otherwiseprovided by law, if in interpreting an enactment it isnecessary to refer to a province’s rules, principles orconcepts forming part of the law of property and civilrights, reference must be made to the rules, principles andconcepts in force in the province at the time the enactmentis being applied. 8.1 Le droit civil et la common law font pareillementautorité et sont tous deux sources de droit en matière depropriété et de droits civils au Canada et, s’il est nécessairede recourir à des règles, principes ou notions appartenant audomaine de la propriété et des droits civils en vue d’assurerl’application d’un texte dans une province, il faut, sauf règlede droit s’y opposant, avoir recours aux règles, principes etnotions en vigueur dans cette province au moment del’application du texte. [64] The principle of complementarity has been repeatedly applied by the federal courts.

In Canada (Attorney General) v St-Hilaire, 2001FCA 63 [St-Hilaire], the FCA laid it out, recognizing the "“suppletive”" nature of civil law when federal law is silent. In that case, the FCAacknowledged that Parliament’s silence on a matter involving civil and property rights of an individual should be interpreted "“as anacquiescence in the application of the principle of legal asymmetry that characterizes Canadian federal law”" (St-Hilaire at para 58, DécaryJ.A. dissenting on another point).

Justice Décary however also added that, when Parliament legislates on a matter that falls within itsjurisdiction, it may derogate from civil law (St-Hilaire at para 30).

[ 65 ] In Pinnacle , the FCA reiterated that, when the events giving rise to a dispute arise in Quebec, and " “because federal law is silent on the subject” " , the applicable law is the CCQ ( Pinnacle at para 26 ). In a more recent case, Canada v Raposo , 2019 FCA 208 , the FCA has clarified the situations where suppletive provincial law may be displaced and set aside. In that matter, Justice De Montigny, speaking for a unanimous court, stated the following at para 43: [43] As mentioned above,

section 8.1 of the

Interpretation Act recognizes the duality of Canadian legal traditions and expressly enshrines the principle of the complementarity of provincial private law in the

interpretation of federal legislation.

Section 8.2 facilitates the comprehension of bijural texts. It provides that in the event that a provision uses civil law or common law terminology, the civil law terminology will apply in Quebec and the common law terminology will apply in the other provinces. The appellant is correct in pointing out that both of these provisions explicitly give Parliament the option to make provincial law inapplicable (by using the words "unless otherwise provided by law"). However, the appellant has not persuaded me that this result can be achieved implicitly; in addition, the provisions of the C.C.Q. do not appear to me to be "inconsistent" with

section 272.1 of the ETA, or, for that matter, with the principles of tax neutrality and fairness. […] [ 66 ] The principle of complementarity thus e stablishes a presumption that Parliament does not implicitly intend to exclude the application of suppletive provincial legislation in relation to private law, and must do so expressly ( ABB Inc. v Canadian National Railway Company , 2020 FC 817 at para 25 ).

However, when Parliament does provide for a specific enactment of federal legislation, and is not " “silent” " on a matter, there is no need to resort to such suppletive private law ( Le Groupe Maison Candiac Inc. c Canada (Procureur général ), 2020 CAF 88 at para 72 ). [ 67 ] It is therefore recognized that Parliament can derogate from the civil law when it legislates on a subject that falls within its jurisdiction.

In this case, Rule 389 sets up a specific process to be followed when a settlement of a proceeding is reached in the context of a Court-assisted mediation governed by the Rules on Dispute Resolution Services. Whether the settlement is total or partial, Rule 389(1) imposes a specific obligation to reduce the settlement to writing and to have it signed by the parties or their counsel. Furthermore, Rule 387 expressly establishes that the mediation process is anchored in the consent of each party to the process, not only on the consent of one of them. Rule 387(

a) refers to a process aimed at finding a solution which is " “a mutually acceptable resolution of the dispute” " (in French, " « une solution qui convienne à chacune d’elles » " ), indicating that, at its very core, a mediation implies and requires the consent of both parties. [ 68 ] In light of those Rules , this is not a situation where it can be said that the federal law is completely silent on the issue at stake in this Motion, and that the Quebec civil law can simply fill the gap in ignorance of the requirements expressly set out in the Rules . True, Quebec’s civil law frames the context of this mediation.

But the civil law principles do not operate in a vacuum and cannot serve to brush aside the Rules when the Rules explicitly add certain requirements to the civil law requirements.

The Rules are part of federal legislation and are not simply overtaken by the principles of Quebec civil law when, as is the case here, specific requirements have been added for settlement agreements considered in the context of Court-assisted mediations. [ 69 ] Whether the failure to abide by Rule 389 is sufficient, in and of itself, to dismiss a settlement agreement allegedly reached under the Court’s Dispute Resolution Services will be for another day. In this case, for the reasons detailed below, Shake Shack’s Motion fails on the evidence.

However, at the very least, the presence of Rules 387 and 389 is certainly a factor that colors the analysis and that needs to be taken into account in the Court’s overall assessment of the circumstances and in its application of the civil law principles regarding settlement agreements. Stated differently, the Court cannot ignore the requirements of the Rules .

(2) Principles governing the existence of an agreement [ 70 ] Shake Shack and Chic Shack both agree on the civil law requirements that apply to determine whether a settlement agreement has been reached in Quebec. These are found in particular under articles 1385 to 1396 of the CCQ regarding the conditions for the formation of contracts. An agreement to settle an action is a contract. Furthermore, a transaction is a nominal contract, specifically defined at

article 2631 CCQ as " “a contract by which the parties prevent a future contestation, put an end to a lawsuit or settle difficulties arising in the execution of a judgment, by way of mutual concessions or reservations.” " [ 71 ] The relevant provisions of the CCQ read as follows: BOOK FIVE OBLIGATIONS TITLE ONE OBLIGATIONS in GENERAL […]

CHAPTER ii CONTRACTS […] DIVISION III FORMATION OF CONTRACTS LIVRE CINQUIÈME DES OBLIGATIONS

TITRE PREMIER DES OBLIGATIONS EN GÉNÉRAL […]

CHAPITRE DEUXIÈME Du CONTRAT […]

SECTION III

§ 1. – Conditions of formation of contracts I. – General provision 1385. The contract is formed by the only exchange of consent between persons capable of contracting, unless the law also requires compliance with a particular form as a necessary condition for its formation, or that the parties make the formation of the contract to a solemn form. It is also of his essence that he has a cause and an object. II. – Consent 1.– Exchange of consents […] 1387.

The contract is formed when the offeror receives the acceptance and at the place where this acceptance is received, whatever the means used to communicate it and even when the parties have agreed to reserve their agreement on certain secondary elements. 2.– Offer and acceptance 1388. Is an offer to contract, the proposal which includes all the essential elements of the envisaged contract and which indicates the will of its author to be bound in the event of acceptance. […] 1394.

Silence does not constitute acceptance, unless it results otherwise from the will of the parties, the law or special circumstances, such as customs or previous business relationships. […] TITLE TWO NOMINATE CONTRACTS […]

CHAPTER XVII TRANSACTION 2631. The transaction is the contract by which the parties prevent a future dispute, terminate a lawsuit or settle the difficulties which arise during the execution of a judgment, by means of concessions or reciprocal reservations. It is indivisible as to its object. DE LA FORMATION DU CONTRAT § 1. – Des conditions de formation du contrat I. – Disposition générale 1385.

Le contrat se forme par le seul échange de consentement entre des personnes capables de contracter, à moins que la loi n’exige, en outre, le respect d’une forme particulière comme condition nécessaire à sa formation, ou que les parties n’assujettissent la formation du contrat à une forme solennelle. Il est aussi de son essence qu’il ait une cause et un objet. II. – Du consentement 1.– De l’échange du consentement […] 1387.

Le contrat est formé au moment où l’offrant reçoit l’acceptation et au lieu où cette acceptation est reçue, quel qu’ait été le moyen utilisé pour la communiquer et lors même que les parties ont convenu de réserver leur accord sur certains éléments secondaires. 2.– De l’offre et de l’acceptation 1388. Est une offre de contracter, la proposition qui comporte tous les éléments essentiels du contrat envisagé et qui indique la volonté de son auteur d’être lié en cas d’acceptation. […] 1394.

Le silence ne vaut pas acceptation, à moins qu’il n’en résulte autrement de la volonté des parties, de la loi ou de circonstances particulières, tels les usages ou les relations d’affaires antérieures. […]

TITRE DEUXIÈME DES CONTRATS NOMMÉS […]

CHAPITRE DIX- SEPTIÈME DE LA TRANSACTION

2631. La transaction est le contrat par lequel les parties préviennent une contestation à naître, terminent un procès ou règlent les difficultés qui surviennent lors de l’exécution d’un jugement, au moyen de concessions ou de réserves réciproques. Elle est indivisible quant à son objet. [ 72 ] These provisions emphasize that a contract, including a transaction, is formed by the sole exchange of consents (article 1385 CCQ), which corresponds to the common law requirement of a " “meeting of the minds” " ( Quebec (Agence du revenu) v Services Environnementaux AES inc. , 2013 SCC 65 [ AES ] at para 32 ) . I observe that

article 1378 CCQ further provides that a contract is an " “agreement of wills” " . [ 73 ] Pursuant to

article 1388 CCQ, a proposed contract must include all the " “essential elements” " of the intended agreement. But the silence of the offeree does not imply acceptance of an offer (article 1394 CCQ). [ 74 ] The CCQ does not require any particular form for transactions.

I agree with Shake Shack that a transaction is formed as soon as the parties agree on the essential elements thereof, even if the parties decide to reserve agreement as to certain secondary elements (and even if they never reach an agreement on these secondary elements) and/or to subsequently confirm their agreement in writing. [ 75 ] However, other requirements may also arise, when legislation or regulations create special requirements for certain types of contracts, such as the need for an agreement to be in writing ( Apotex at para 40 ).

As noted by the Supreme Court in AES , whereas, as a rule, the formation of a contract does not depend on the adoption of a particular form, some agreements are often required by law to be in writing ( AES at para 32 ). It is notably the case for contracts that are highly regulated, such as consumer contracts. The existence of possible formal requirements for contracts is indeed contemplated at

article 1385 CCQ, which expressly provides that a contract is formed by the only exchange of consent between persons capable of contracting, " “ unless the law also requires compliance with a particular form as a necessary condition for its formation” " (emphasis added) . Evidently, in this case, Rule 389 comes to mind. [ 76 ] In their written and oral submissions, the parties referred extensively to the Apotex decision, where the FCA discussed the requirements for a settlement agreement. I pause to signal that the

summary of the requirements for a settlement agreement made by the FCA in Apotex were restricted to common law jurisdictions ( Apotex at para 16 ). On their part, the requirements applicable in Quebec must take into account the relevant articles of the CCQ.

That said, the principles applicable in Quebec for the formation of a settlement agreement and flowing from the CCQ are not too dissimilar from the requirements articulated by the FCA in Apotex . [ 77 ] As reaffirmed in Apotex , for an agreement to be reached, it is not required that the parties agree on all the elements; it is only required that they agree on the essential ones (Apotex at para 30 ). This notion of essential terms is central to the law concerning settlement agreements, and it is echoed at

article 1388 CCQ. It is indeed quite central to the outcome of this case. I should add that a settlement agreement must be on all elements that are essential to both parties, and not only to the party claiming the existence of an agreement ( Taillefer c Taillefer , 2017 QCCS 1255 [ Taillefer ] at para 74 ). [ 78 ] To decide whether there is a binding settlement agreement and what terms of the agreement are essential, the Court must apply an objective standard, not a subjective one. The matter is fact-specific, and a determination is to be made on a case-by-case basis.

In other words, t he Court must find on the evidence before it that, objectively viewed, the parties had a mutual intention to create a contract. As stated in Apotex , the test is " “whether a reasonable bystander observing the parties would conclude that both parties, in making a settlement offer and in accepting it, intended to enter into legal relations” " (citations omitted) ( Apotex at para 22 ).

The Court is to look at the specific facts in light of the practical circumstances of the case and determine whether an " “honest, sensible business[person] when objectively considering the parties’ conduct would reasonably conclude that the parties intended to be bound or not by the agreed-to terms” " (citations omitted) ( Apotex at para 32 ). An objective assessment implies an assessment of the actual conduct of the parties, as opposed to the parties’ intentions ( Apotex at para 48 ).

The words and acts of those involved, judged by an objective standard, allow to measure whether there was an actual agreement to the matter at issue. [ 79 ] Similarly, to determine whether there is an agreement on the " “essential” " terms, the Court must adopt an objective standpoint, undertake an evidence-based factual inquiry and consider the subject matter of the dispute objectively to determine whether the parties reached an agreement on all essential elements.

Here again, the Court has to put itself in the shoes of a reasonable businessperson and assess whether there was something essential on which there was disagreement and still needed to be finalized.

The test remains the same: whether an " “honest, sensible business[person] when objectively considering the parties’ conduct would reasonably conclude” " that an element was essential ( Apotex at para 32 ). [ 80 ] The fact that a further document may be required to formalize the agreement between these parties is not an impediment to finding that a settlement document is a binding contract, if the terms in the document contain agreement on all of its essential terms.

I finally underline that the subsequent conduct of the parties can shed light on whether there has been agreement on essential terms ( Apotex at para 39 ). [ 81 ] In light of the CCQ provisions and the case law concerning the formation of contracts, the applicable requirements for concluding to the existence of a settlement agreement can be summarized as follows: 1) for there to be a binding settlement contract, there must be a matching offer and acceptance on all terms essential to the agreement; 2) the acceptance must be unequivocal; 3) as for any other agreements, there must be considerations flowing both ways; 4) the terms must be sufficiently certain; 5) there can be an offer and acceptance so as to create a binding contract even where there is no written agreement or where the parties contemplate the execution, at a

later date, of a formal document evidencing the terms of the agreement; 6) on-going negotiations as to a more formal document do not necessarily mean that an offer or acceptance has been repudiated; 7) the Court must assess the evidence objectively, whether it is on the existence of the agreement, the certainty of its terms or their essential character. [ 82 ] Before turning to the analysis of the evidence, I make three final observations on the legal framework and the case law. [ 83 ] First, all the cases referred to by Shake Shack regarding decisions issued by the courts and confirming a settlement agreement were preceded by detailed written exchanges between the parties and the absence of doubts regarding the existence of an agreement.

This is not the case here, as no written document has been prepar

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