Cement Accents Manitoba Inc et al v Wagner Construction et al, 2023 MBCA 59

Citation: Cement Accents Manitoba Inc et al v Wagner Construction et al, 2023 MBCA 59 Date: 20230628 Docket: AI22-30-09821 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Christopher J. Mainella Madam Justice Jennifer A. Pfuetzner Madam Justice Lori T. Spivak BETWEEN : CEMENT ACCENTS MANITOBA INC., ) R. A. McFadyen DARA PRYCHUN and PATRICK PRYCHUN ) for the Appellants ) (Plaintiffs) Respondents ) J. D. Kendall and ) B. E.

Roach - and - ) for the Respondents ) WAGNER CONSTRUCTION & CEMENT ) Appeal heard: ACCENT INC. and PATRICK WAGNER ) February 8, 2023 ) (Defendants) Appellants ) Judgment delivered: ) June 28, 2023 SPIVAK JA [ 1 ] The defendants appeal an order granting the plaintiffs’ motion to enforce a settlement pursuant to r 49.09 of the MB, Court of King’s Bench Rules , MR 553/88 (the Rules ).

They submit that the motion judge erred in determining the terms of the settlement agreement reached by the parties. [ 2 ] The motion judge concluded that the settlement agreement bound both the corporate defendant, Wagner Construction & Cement Accent Inc. (Wagner Construction), and the individual defendant, Patrick Wagner (Wagner), to the payment of the settlement funds and granted an order to that effect.

The defendants contend that the payment obligation under the settlement agreement was that of Wagner Construction alone. [ 3 ] For the following reasons, I would grant the appeal and set aside the order of the motion judge, with costs. Background [ 4 ] The plaintiffs filed an action claiming breaches of a distributorship agreement between the plaintiff, Cement Accents Manitoba Inc., and Wagner Construction. The plaintiffs also sought damages against Wagner personally for negligent misrepresentation. Wagner was the principal and directing mind of Wagner Construction.

In their statement of defence, the defendants denied any breach of the distributorship agreement and asserted that Wagner acted only in his capacity as a director and that there was no basis for his personal liability. [ 5 ] Examinations for discovery were scheduled to proceed on March 23 and 24, 2021 (the examinations). Settlement discussions took place leading up to that time. On March 22, 2021, plaintiffs’ counsel set out the plaintiffs’ instructions on settlement in an email to defendants’ local counsel (local counsel) (different than counsel on this appeal) which read as follows: Without Prejudice

Hi Andrew​​ – My instructions, which are reasonable, are as follows: 120k settlement, all in; 20k down (within 30 days); balance within 60 days; consent judgment against the company only; however, if there is a failure to perform, the releases cannot be relied on and the NOD is not filed meaning that my client’s would be free to proceed against Mr. Wagner but will have to prove their case not having the consent judgment. Minutes of Settlement setting this all out to be prepared.

Please confirm, otherwise we proceed tomorrow at 10:00. . . . [ 6 ] Local counsel forwarded the email to the defendants’ Alberta counsel (Alberta counsel) describing the “offer” as “reasonable” and recommending acceptance. [ 7 ] The next morning, on March 23, 2021, when the examinations were to commence, an agreement to settle the action was reached at a meeting involving the parties and their counsel. [ 8 ] Thereafter, on March 24, 2021, plaintiffs’ counsel sent draft minutes of settlement to defendants’ counsel (the original minutes of settlement).

Paragraph 1(a), which dealt with the payment obligation, stipulated that the “ the Defendants will pay the Plaintiffs the sum of $120,000.00 ” (emphasis added) by way of an initial payment of $20,000 and a subsequent payment of $100,000. As security for the payment obligation, the original minutes of settlement also provided that Wagner Construction execute a consent to judgment and consent judgment for $120,000 that was attached as schedules A and B (collectively, the consent judgment).

It was further specified that, in the event of default in payment, the plaintiffs would be at liberty to file the consent judgment against Wagner Construction and have the full right and discretion to pursue any remedies, including “resuming the Action” against Wagner personally. [ 9 ] Following provision of the original minutes of settlement, plaintiffs’ counsel and local counsel continued to exchange emails regarding the drafting of the minutes of settlement.

Apart from requesting a change in the interest rate in the event of default and the timing of the payment of $100,000, local counsel advised that the original minutes of settlement were acceptable. Thereafter, on May 27, 2021, upon review by Alberta counsel, the defendants proposed further revisions to make the payment obligation under paragraph 1(

a) specific to Wagner Construction (along with corresponding changes to paragraphs 3(

a) and 5(

a) which referred back to the payment obligation under paragraph 1(a)). [ 10 ] As a consequence, the plaintiffs filed a motion for enforcement of the settlement seeking judgment in the amount of $120,000 against both defendants pursuant to r 49.09. At the hearing of the motion, neither party took issue with the fact that an agreement to settle the action was reached on March 23, 2021. The matter in dispute was whether the parties agreed that Wagner would also be liable as a payor of the settlement funds.

The plaintiffs argued that the settlement agreement obligated both Wagner Construction and Wagner to pay $120,000 and, since the defendants failed to comply, they were entitled to judgment against both. The defendants countered that the payment obligation rested solely with Wagner Construction. [ 11 ] In an endorsement dated April 12, 2022, the motion judge found that the settlement agreed to by the parties included Wagner’s personal liability for the payment of the settlement funds.

In so concluding, he interpreted the original minutes of settlement as jointly binding Wagner and Wagner Construction and took into account that local counsel had indicated that this document was acceptable (save for changes regarding the timing of the $100,000 installment and interest). In his view, Wagner was attempting to resile from the deal by the revisions to the minutes of settlement put forward on May 27, 2021.

The motion judge did not grant judgment for $120,000 against both defendants but, instead, granted an order in favour of the plaintiffs that the original minutes of settlement (subject to the timelines for payment as amended) were binding on the defendants. The Parties’ Positions [ 12 ] The defendants argue that the motion judge misapprehended the evidence and made palpable and overriding errors in determining the nature of the settlement agreement and concluding that Wagner was bound by the payment obligation.

They argue that the motion judge failed to properly consider the initial email from plaintiffs’ counsel setting out the terms of the settlement and erroneously misinterpreted the original minutes of settlement as requiring Wagner to pay. [ 13 ] The plaintiffs submit that the motion judge made no reviewable error in concluding that, under the terms of the settlement, Wagner became liable as a payor of the settlement funds. According to the plaintiffs, the original minutes of settlement provided for Wagner’s personal responsibility and the motion judge was entitled to rely on the lack of objection by local counsel.

They say that appellate intervention is not warranted. Analysis and Decision Enforcement of Settlement Agreements Rule 49 [ 14 ] Relevant to this appeal are the following provisions of r 49 which state: WHERE AVAILABLE Offer 49 .02(1) A party to a proceeding may make an offer to settle any one or more of the claims in the proceeding by serving on any other party an offer to settle on specified terms (Form 49A).

ACCEPTANCE OF OFFER Generally 49.07(1) An offer to settle may be accepted by serving an acceptance of offer (Form 49C) on the party who made the offer, at any timebefore it is withdrawn or expires. FAILURE TO COMPLY WITH ACCEPTED OFFER 49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may, (

a) make a motion to a judge for judgment or an order in the terms of the accepted offer, and the judge may grant judgment or makean order accordingly; or (

b) continue the motion or proceeding as if there had been no accepted offer to settle. [15] In Jonathan M Woolley & Prof Karen Busby, Manitoba King’s Bench Rules Annotated (Toronto: Thomson Reuters,2023) vol 1 (loose-leaf updated 2023, release 2), ch 2, subchapter XII,

part XI at

section 2:51, r 49 is explained as follows (at pp 2-167 to2-168): . . . INTRODUCTORY NOTE The purpose of R. 49 is to encourage settlements. If any party to an action or motion makes an offer to settle which is not accepted and,if the judgment subsequently obtained is as favourable or more favourable to the party who made the offer, certain cost consequencesfollow. . . . Where a party to an accepted offer fails to comply, the other party may apply for

summary judgment. . . . . . . [16] As noted by this Court in Pearson v Plester (1989), (MB CA), 65 DLR (4th) 463, r 49 adds aconvenient procedure for enforcement of a settlement agreement made under the rule whereby the judge may grant judgment if satisfiedthat settlement was reached (see para 9). [17] In this case, the applicability of r 49.09 to enforce the settlement agreement was never raised as an issue by the parties.

In fairness to the motion judge, he therefore did not address the plaintiffs’ ability to proceed under this rule. [18] However, r 49 contemplates that the offer to settle and its acceptance be in writing to be enforceable under the rule. Both rr 49.02(1) and 49.07(1) refer to service of an offer to settle and service of an acceptance of an offer with suggested forms (thoughadherence to the precise format of the forms is not required) (see Dreger v Dreger, 1994 CarswellMan 412 at paras 4-5 (QB)).

Here,while the offer to settle was contained in the initial email and, thus, in writing, the acceptance, which occurred at a meeting before thescheduled examinations, was not. Accordingly, enforcing this settlement within the rubric of r 49 was not available. [19] In Chan v Lam, 2002 CarswellOnt 901 (CA), the Court addressed a situation such as this, where the settlementagreement was not entirely in writing but the motion for enforcement was brought under r 49 of the ON, Rules of Civil Procedure, RRO1990, Reg 194 (the Ontario Rules).

Chan is instructive as the Rules were closely modeled upon the Ontario Rules and r 49 of theOntario Rules is similar to r 49 of the Manitoba Rules (see Manitoba Hydro Electric Board v John Inglis Co Limited et al, 2001 MBQB289 at para 13). In Chan, the Court confirmed the inapplicability of r 49 to enforce the settlement but noted that this could be done by amotion for

summary judgment. The Court treated the specification of r 49 as an irregularity and instead determined the appeal as if themotion had originally been brought for

summary judgment and decided pursuant to r 20 of the Ontario Rules. In Weiler JA’s words (atpara 23): The offer to settle was a Rule 49 offer. The notice of motion before Wein J. states that the motion is brought under Rule 49. Rule 49contemplates that the offer to settle and its acceptance be in writing to be enforceable. . . . Here, the agreement was arrived at by aprocess and is not entirely in writing. This point does not appear to have been raised before Wein J. Where parties reach a settlementthat does not arise from the operation of Rule 49, the settlement may be enforced by a motion for judgment.

Where, as here, the issue ofwhether a settlement had been reached was fully argued, the fact that the notice of motion specified Rule 49 is an irregularity and thecourt is entitled to grant the relief necessary to secure a just determination of the matter in dispute. See Rule 2.

[20] I will have more to say about how this appeal should therefore be treated later on in these reasons but, before doing so,believe it useful to highlight the jurisprudence that has recognized the applicability of

summary judgment principles to motions under r49 and the ability to alternatively enforce a settlement agreement pursuant to

summary judgment under r 20. Rule 49 /

Summary Judgment Principles / Rule 20 [21] Ontario courts have accepted that r 20

summary judgment principles are applicable to r 49.09 motions in determiningwhether an agreement to settle was reached. In Capital Gains Income Streams Corp v Merrill Lynch Canada Inc, (ON SCDC), 2007 CarswellOnt 6003 (Sup Ct J (Div Ct)), Carnwath J held that, when dealing with a motion under r 49.09 for judgmenton the terms of the settlement agreement, a two-step process should be followed (at paras 9-10): The first step is to consider whether an agreement to settle was reached. In doing so, the proper approach is to treat the motion like arule 20 motion for

summary judgment. If there are material issues of fact or genuine issues of credibility in dispute regarding whether (i)the parties intended to create a legally-binding relation or (ii) there was an agreement on all essential terms, a court must refuse to grantjudgment. . . . The second step, once an agreement has been found to exist, is to consider whether, on all the evidence, the agreement should beenforced.

In this second step, a rule 20 approach is not applied, but rather a broader approach, taking into account evidence not relevantto a rule 20 inquiry. [22] In Hashemi-Sabet Estate v Oak Ridges Pharmasave Inc, 2018 ONCA 839 at paras 27-28, the Court confirmed the two-step analysis for enforcement under r 49 with the altered framework for granting

summary judgment outlined in Hryniak v Mauldin, 2014SCC 7. In other words, the first step involves addressing if there are genuine issues requiring a trial as to whether the parties intended tocreate a legally-binding relationship or whether there was an agreement on all essential terms. [23] Moving on to make a related point, apart from the application of

summary judgment principles in the context of r 49.09motions, settlement agreements may be enforced under the

summary judgment r 20. As recognized in Poste v Mitchell-Poste, 2009MBQB 201 (at para 34): The Court of Queen’s Bench Rules provide two separate

summary procedures by which litigants may seek to enforce settlement. Theseare motions for judgment based upon a settlement (Rule 49.09) and motions for

summary judgment which may include but are notlimited to settlement situations (Rule 20). . . . [24] I also note that, in the Manitoba Court of King’s Bench, litigants have often brought motions for judgment in respect ofa settlement agreement pursuant to both rr 20 and 49.09, and r 20

summary judgment principles have been consistently applied inmotions brought under r 49.09. (See, for example, Aleph-Bet Child Life Enrichment Program Inc et al v Kalo, 2006 MBQB 107;McWhirter v McWhirter, 2012 MBQB 235; Chanel v Chanel, 2022 MBQB 70; Johnson v Miazga, 2022 MBQB 80; and Sherbeth et al vSherbeth et al, 2022 MBKB 213.) [25] All this to say that the plaintiffs could have and should have proceeded with

summary judgment under r 20 to enforcethe settlement rather than r 49. I will now address how this appeal should be dealt with given their reliance on the incorrect rule. The Motion Should Be Treated as a

Summary Judgment Motion Under Rule 20 [26] As in Chan, I consider the failure to bring the motion under the proper rule as an irregularity and would determine thisappeal as if the matter had been properly brought as a

summary judgment motion under r 20. (See also AC Concrete Forming Ltd v JACConcrete Structures and Drain Inc, 2018 ONCA 272, where the Court treated a motion for enforcement of an oral settlement broughtpursuant to r 49 of the Ontario Rules as a motion for

summary judgment under r 20.) [27] Authority for treating the pleading of r 49 as an irregularity which the Court can correct is found in r 2 of the Rules. This empowers the Court, where necessary and in the interests of justice, to dispense with compliance with any rule. Also relevant is r 1which states that the rules should be liberally construed to secure the just, most expeditious and least expensive determination ofproceedings. Here, the issue of the nature of the settlement was fully argued before the motion judge and

summary judgmentconsiderations are, in any event, applicable to motions under r 49. Substituting the proper rule will provide a just determination of thisdispute and is proportionate. [28] Having so determined, I turn to the applicable standard of review. Standard of Review [29] The applicable standard of review on

summary judgment is well-established. The decision to grant or deny a motionfor

summary judgment is a discretionary decision. Appellate intervention is only justified if there is an error in law; a palpable andoverriding error on the facts; or the decision is so clearly wrong as to be unjust (see Dakota Ojibway Child and Family Services et al vMBH, 2019 MBCA 91 at paras 36-37; Bibeau et al v Chartier et al, 2022 MBCA 2 at para 50; and Vale Canada Limited v UrbanmineInc, 2022 MBCA 18 at para 8).

The Motion Judge Erred in Determining the Nature of the Settlement Agreement [30] In my view, the motion judge made palpable and overriding errors in concluding that the settlement agreement boundWagner to pay. As I will explain, treating this as a r 20 motion, the plaintiffs would not be entitled to

summary judgment of $120,000against both defendants. [31] Let me first state that I take no issue with the fact that the motion judge had sufficient evidence to decide the matter ona

summary process and that a trial was not required. A fair and just disposition of this dispute can be made on the record and the processpermits the finding of the necessary facts and the application of the relevant legal principles to determine the matter (see Dakota at paras108-11). Neither party suggested a trial was required to resolve this matter. Rather, the parties agreed that a settlement was reached withdiffering positions as to the nature of its terms. [32] It is useful to begin with a review of the legal principles applicable to contract formation. [33] An agreement to settle a claim is a contract.

Three elements are required for a binding contract: the intention tocontract; settlement of essential terms; and sufficiently certain terms. These elements should be considered from the viewpoint of anobjective reasonable bystander in light of all the circumstances and taking into account all material facts, such as written or oralcommunications and the conduct of the parties, including subsequent conduct. The subjective intentions of the parties are not relevant tothis analysis. The law is not concerned with the parties’ subjective intentions but with their manifested intentions.

An agreement isbinding if it contains the essential terms, even if the parties agree that it will be subsequently recorded in a formal document (seeBawitko Investments Ltd v Kernels Popcorn Ltd (1991), (ON CA), 79 DLR (4th) 97 (Ont CA); Olivieri v Sherman,2007 ONCA 491 at para 41; Matic et al v Waldner et al, 2016 MBCA 60 at paras 55-64, 71; Agropur MSI, LLC v The WinningCombination Inc, 2020 MBQB 188 at para 18; and Aleshka v Fettes et al, 2021 MBQB 14 at para 19). [34] In light of these principles, I will explain how the motion judge erred.

In doing so, I am mindful that the motion judge’sfindings as to the nature of the settlement agreement involve questions of mixed fact and law subject to a palpable and overriding errorstandard absent an extricable question of law which is reviewed for correctness. [35] I agree with the defendants that the motion judge made palpable and overriding errors in applying the objectivereasonable bystander test. Specifically, he: (

i) failed to consider the key evidence manifesting the intentions of the parties (i.e., the initialemail); and (ii) misapprehended the terms of the original minutes of settlement. The Initial Email [36] One should not lose sight of the fact that the parties reached a settlement on the morning that examinations were tocommence at a meeting between the parties and counsel. There is no suggestion that the parties made their agreement conditional uponand subject to the execution of a formal document. An offer and acceptance therefore had taken place as of March 23, 2021.

Theminutes of settlement exchanged between counsel thereafter reflect the effort to document the settlement already agreed to. [37] Accordingly, the key piece of evidence in construing the manifest intentions of the parties is the initial email sent onthe eve of the examinations. As acknowledged by both parties at the hearing, this contained the plaintiffs’ offer to settle. This isconfirmed by local counsel when he forwarded the initial email to Alberta counsel describing it as the plaintiffs’ “offer” andrecommending its acceptance.

Yet, in determining the nature of the settlement reached by the parties, the motion judge failed to considerthis fundamental document and appreciate its significance. In his endorsement, the motion judge does not refer to the initial email or itscontents. Nor does he recognize that this constituted the plaintiffs’ offer to settle. This despite the fact that the initial email was clearevidence as to the terms of the settlement agreement and the only documentary evidence regarding its formation. By ignoring thismaterial evidence and failing to appreciate its legal character, the motion judge erred.

Instead, as I will elaborate on shortly, the motionjudge erroneously focussed on the original minutes of settlement which he misconstrued. [38] The initial email, which was the basis for the settlement concluded the next morning, speaks for itself. It does notsupport the plaintiffs’ position that Wagner agreed to be personally liable for the settlement amount. It is overwhelming evidence to thecontrary. [39] The initial email contemplated a $120,000 settlement, “all in”, to be paid in installments. The initial email indicateswhat happens if payment is not made.

Significantly, the consent judgment to be provided was “against the company only” and, “if there[was] a failure to perform,” the plaintiffs would be “free to proceed against [Wagner] but [would] have to prove their case not having theconsent judgment.” So, the initial email makes clear that, on payment default, the plaintiffs would have a consent judgment for$120,000 against Wagner Construction and have the right to pursue their action against Wagner. [40] From the perspective of an objective reasonable bystander, it is apparent from the initial email that the partiesconsidered the settlement payment obligation to be only that of Wagner Construction.

Why else would a consent judgment be providedsolely by Wagner Construction with the ability to continue the action against Wagner for negligent misrepresentation upon failure topay? If Wagner was jointly liable for the $120,000 following default, as the plaintiffs contend, one would have expected a consentjudgment to be provided by him personally as well. There would be no need to reserve the ability to resume the action against him.

The Original Minutes of Settlement [41] As I have already noted, in interpreting the settlement agreement as providing for a joint obligation to pay, the motionjudge relied on the original minutes of settlement. He found that its terms set out Wagner’s responsibility consistent with the plaintiffs’subjective view regarding the terms of the settlement agreement reached. Of course, the subjective intention of either party is notrelevant to the analysis required under the objective reasonable bystander test.

That aside, not only did the motion judge fail to considerthe original minutes of settlement together with the initial email, he misapprehended its terms in finding that it supported the plaintiffs’

claim. [ 42 ] In fact, the overall structure of the original minutes of settlement bolsters the conclusion that the payment obligation was to rest entirely with Wagner Construction. It is apparent that the basis for the motion judge’s view was that paragraph 1(

a) of the original minutes of settlement stated that the defendants (in plural) were to pay the settlement installments. The motion judge relied exclusively on the use of the word defendants (in plural) in paragraph 1(

a) of the minutes of settlement as supporting Wagner’s liability, but failed to consider other important terms therein which indicated otherwise. [ 43 ] In particular, the motion judge overlooked the terms in the original minutes of settlement that spell out the security to be provided and the agreed upon consequences in the event of default in payment. He did not consider the consent judgment that was attached. Consistent with the initial email, as security for the payment of the settlement funds, only Wagner Construction was to provide the consent judgment for $120,000.

Upon a failure to tender the settlement amount, the plaintiffs would be automatically entitled to enter the consent judgment against Wagner Construction and would be able to seek recovery against Wagner by proving their case against him in the action commenced. In other words, if Wagner Construction failed to pay the plaintiffs the settlement amount, they would have judgment against it for $120,000 but could pursue Wagner for more than the settlement amount in the action.

Unfortunately, in interpreting the nature of the settlement agreement, nowhere does the motion judge take any of this into account which intrinsically relates to the payment obligation and distinguishes between the recourse available against Wagner Construction as opposed to Wagner on default. [ 44 ] To interpret the original minutes of settlement as providing for Wagner’s personal liability to pay the settlement funds is inconsistent with the consent judgment and default provisions. It renders the language allowing for the resumption of the action against Wagner meaningless and nonsensical.

It makes no sense to require, as security for performance, the provision of a consent judgment by only Wagner Construction if Wagner was also responsible for payment of the settlement funds. [ 45 ] I would reject the plaintiffs’ argument that the default provisions in the original minutes of settlement are consistent with a joint obligation as they should be interpreted as giving the plaintiffs an option to either enforce the settlement for $120,000 against Wagner or, alternatively, pursue a greater amount against him by resuming the action.

What is contained in the initial email, which only refers to the ability to prove their case against Wagner upon default, does not correspond with such an

interpretation and amounts to a better deal for the plaintiffs than that contained in their offer. And, again, had it been intended for Wagner to be personally responsible for payment, one would have expected that his liability would also automatically attach by way of a consent judgment. [ 46 ] As well, contrary to the motion judge’s view, local counsel’s indication that the original minutes of settlement were acceptable (subject to minor changes to the timing of the payments and interest), was not determinative.

The motion judge characterized the revisions made on May 27th as an attempt “to resile from a deal that was clearly reached”. However, the changes suggested, which specifically tied the payment obligation to Wagner Construction alone, clarified and accurately reflected the settlement agreement consistent with the other terms. That disagreements emerged in the course of drafting minutes of settlement does not detract from the nature of the agreement arrived at in accordance with the initial email and the discussions on March 23, 2021.

Conclusion [ 47 ] To recap, the motion judge made palpable and overriding errors in the application of the objective reasonable bystander test by failing to consider relevant evidence and fundamentally misapprehending the original minutes of settlement. His conclusion as to the nature of the settlement agreement is not supported by the evidence in light of the contextual analysis required. The plaintiffs are not entitled to

summary judgment against the defendants in the amount of $120,000. From the perspective of a reasonable objective bystander, taking into account all the material facts, the parties reached a binding settlement agreement the essential terms of which obligated Wagner Construction to pay the settlement funds and, upon default, gave the plaintiffs the automatic right to enter judgment against it for the settlement amount and resume the action against Wagner personally. Disposition [ 48 ] For these reasons, the defendants’ appeal is granted and the motion judge’s order is set aside with costs. JA I agree: JA I agree: JA