1 November 2018By Brendan Monahan
In Hashemi-Sabet Estate v. Oak Ridges Pharmasave Inc., 2018 ONCA 839, the Ontario Court of Appeal recently considered the principles relating to the enforcement of an accepted Rule 49 offer to settle. In this case, the Court upheld a motion judge’s decision granting judgment in accordance with an accepted Rule 49 offer. The Court also held that it was open to the motion judge to find that counsel for one of the parties had intentionally submitted inaccurate information to advance her clients’ position, without hearing viva voce evidence on that issue.
Background: The dispute arose when the plaintiff (respondent on the appeal), an estate trustee, sued the defendants, a pharmacy and two individuals, for damages in relation to the opening and operation of a pharmacy. The plaintiff claimed damages in excess of $1 million.
In June 2015, the defendants served the plaintiff with a written Rule 49 offer to settle the action for $55,555.55. The offer provided that it would remain open until the trial of the action.
The plaintiff accepted the offer in writing on the afternoon of September 20, 2016. The defendants disputed the validity of the acceptance on the basis that, among other things, they had served a second offer to settle for a lower amount on September 19, 2016, which expressly revoked the first offer.
Counsel for the plaintiff claimed that the second offer had not been served until later in the afternoon on September 20, 2016, after the first offer had already been accepted. The plaintiff took the position that the acceptance of the first offer was valid and brought a motion for judgment accordingly.
The Motion Decision: The motion judge, Bird J., found that the timing of service of the second offer would be dispositive of the motion. It was only if the second offer was served before the first offer was accepted that the first offer could be considered withdrawn. Under Rule 49, offers to settle can only be withdrawn in writing. The defendants’ contention that the first offer had been withdrawn orally during a pretrial of the action on September 20, 2016 was therefore not valid.
Bird J. ultimately determined that the second offer was not served until the afternoon of September 20, 2016, after the first offer had been accepted. Her Honour found that counsel for the defendants had intentionally altered an invoice from the process server after-the-fact to make it appear as though the second offer was served on September 19, 2016, when it actually had not been served until September 20. Bird J. found in favour of the plaintiff and granted judgment in accordance with the first offer. She also awarded full indemnity costs against the defendants. The defendants appealed.
The Court of Appeal Upheld the Motion Decision: On appeal, the defendants contended that Bird J. failed to recognize and apply the proper test required on a motion to enforce the acceptance of a Rule 49 offer. They also argued that her Honour erred in refusing to hear viva voce evidence in the face disputed issues of credibility.
The Court rejected both grounds of appeal. The Court found that a motion for enforcement of an accepted Rule 49 offer involves a two-step analysis, as set out by the Divisional Court in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. (2007) 87 O.R. (3d) 464. The first step is to consider whether an agreement has been reached. In so doing, the motion should be treated as a Rule 20 summary judgment motion. The second step is to consider whether, on all the evidence, the agreement should be enforced. The Court found that while Bird J. did not expressly advert to this test, she nonetheless “complied with the substance of the first step … and properly applied the analogous Rule 20 analysis.”1
The Court also found that while it was open to Bird J. to hear viva voce evidence, this was unnecessary. In the Court’s view, the defendants’ inability to produce an affidavit of service from the process server who allegedly served the second offer on the plaintiff on September 19, 2016 was fatal to their case. The Court put it this way:
It was incumbent on the appellants to answer the respondent’s version of events. However, they did not file an affidavit of service from the process server to establish the date and time of service. They never proposed that the process server be called as a witness, nor did they provide an explanation for the absence of an affidavit of service. Indeed, when the motion judge sought an explanation at the hearing before her, none could be given … Based on the record before her, it was open to the motion judge to conclude as she did. At its core, this was not a case of a conflict of evidence, but a lack of evidence.2 [Emphasis added].
The Takeaway: The Hashemi-Sabet decision suggests that the courts will apply a flexible approach to the two-stage test on a motion for enforcement of a Rule 49 offer to settle. Given that such proceedings are treated as summary judgment motions, it is also necessary that parties “put their best foot forward”, as the motion judge is entitled to assume that the record contains all the evidence which the parties will present if there is a trial. It should also be noted that, on the unusual facts of this case, the motion judge drew the conclusion that counsel for the defendants had deliberately taken a position they knew to be false and had altered a document to advance that position. The motion judge’s award of full indemnity costs against the defendants sends the message that this type of conduct will not be tolerated by our courts.
1 Hashemi-Sabet Estate v. Oak Ridges Pharmaasve Inc., 2018 ONCA 839 at para. 37 [“ONCA Reasons”].
2 ONCA Reasons at paras. 34, 35.