


COURT OF APPEAL FOR ONTARIO

CITATION:
Bank
    of Montreal v. Ismail, 2012 ONCA 129

DATE: 20120228

DOCKET: C54380

Lang, LaForme JJ.A. and Pattillo J. (
ad hoc
)

BETWEEN

Bank of Montreal

Plaintiff (Appellant)

and

Fawzia Ismail and Khalid Ismail

Defendants (Respondents)

Joshua J. Siegel, for the appellant

Darren J. Smith, for the respondents

Heard: February 16, 2012

On appeal from the order of Justice Gisele M. Miller of
    the Superior Court of Justice, dated August 31, 2011.

By the
    Court:

OVERVIEW

[1]

The Bank of Montreal appeals from the order of the motion judge
    enforcing a settlement that she concluded the parties had reached under rule
    49.09 of the
Rules of Civil Procedure
.

[2]

The motion judge decided that the settlement included a provision that the
    respondents, Fawzia Ismail and Khalid Ismail, would pay the Bank $357,000 on
    account of the approximately $390,000 owing on their outstanding mortgage. In
    reaching her decision that the Bank had agreed to this reduction in the debt
    owing, the motion judge primarily relied on two pieces of correspondence
    between the parties counsel  the Banks April 8 letter and the respondents
    April 19 letter.

[3]

In our view, the motion judge made a reversible error of interpretation
    when she relied primarily on these two pieces of correspondence without taking
    into consideration the earlier correspondence that was incorporated by
    reference.  A review of the whole of the correspondence establishes that the
    parties did not reach an agreement on the essential term of the amount required
    to payout the mortgage.

[4]

In light of this error, we would allow the appeal, set aside the order
    of the motion judge, and dismiss the respondents motion.

DISCUSSION

[5]

In her endorsement, the motion judge set out the undisputed test to be
    applied on a motion under rule 49.09: (1) was an agreement to settle reached;
    and, (2)  if so, should it be enforced based on all the evidence:
Milios v.
    Zagas
(1998), 38 O.R. (3d) 218 (C.A.)

[6]

The Banks primary argument on appeal is that the motion judge made a
    reviewable error in concluding that the correspondence between the parties
    counsel was sufficient to establish an accepted settlement. The Bank further
    submits that the motion judge erred in failing to exercise her discretion not to
    enforce the settlement. The respondents argue that the motion judge was
    entitled to rely on the two pieces of correspondence to conclude that the
    parties had reached a meeting of the minds on the essential term of the amount
    of the mortgage payout.

[7]

The motion judge considered the Banks April 8 letter and determined
    that its contents did not constitute an offer to settle. However, she
    concluded that the respondents April 19 letter set out clear, unequivocal
    terms of settlement, including payment of $357,000, which were accepted by the
    Bank by its letter of April 26.

[8]

However, this correspondence formed only part of a series of letters
    exchanged between counsel as a result of their litigation.  That litigation
    included the Banks June 2010 action against the respondents for monies due
    under the mortgage.  At the end of June, the Bank also obtained default
    judgment against the respondents and filed a writ of seizure and sale in
    relation to the respondents separate unsecured debt that they also owed to the
    Bank.

[9]

Settlement discussions commenced.  The correspondence as a whole
    demonstrates that the primary focus of the discussion concerned payment terms and
    security for the amount owed on the default judgment.  The secondary focus was
    the issue of the payout of the respondents mortgage and the terms of its
    refinancing. The negotiations began with a discussion of whether the
    respondents would pay $1,000 or $500 monthly towards the default judgment. The
    payout amount for the mortgage was not part of that discussion.

[10]

It
    is in this context that the respondents April 19 letter must be read. However,
    the first sentence of the letter states: Further to your last correspondence,
    I confirm that I have instructions to agree to those terms proposed.  In other
    words, the respondents were agreeing to the Banks earlier terms.  The letter
    then advanced terms to be included in minutes of settlement, including a
    mortgage refinancing of $357,000 with pay-out by May 16.  While this is the
    letter that the motion judge found to be clear and unequivocal, given its plain
    wording the letter must be read with reference to the earlier terms proposed.

[11]

The
    earlier correspondence goes back to the March 10 letter on behalf of the
    respondents confirming resolution of the issue of the payment terms for the
    default judgment. It goes on to state that the settlement will allow for the
    writs of execution [in relation to the default judgment] to be removed on a
    temporary basis to allow our clients to refinance the mortgage in order to pay
    out [the Bank].  To that end, the respondents sought a payment amount for
    the mortgage in order to obtain their refinancing.

[12]

The
    Bank responded on March 22. After addressing terms concerning payment of the
    default judgment, it required that the refinanced mortgage be in an amount no
    greater th[a]n the principal now outstanding on my client[]s mortgage, so that
    my clients writ [of seizure and sale] shall only be subject to that amount.
    The letter also referred to payout of the Banks mortgage, as a separate matter. 
    The payout was not tied to the amount of the refinanced mortgage. Finally, the
    Bank required that the mortgage be paid out within 30 days.

[13]

In
    response on March 29, the respondents took issue with the Banks restriction of
    30 days to accomplish the refinancing and advised that if the Bank insisted on
    that time limit, there would be no settlement. The respondents again requested
    a payout amount for the mortgage. On March 31, the Bank provided a letter
    showing the amount owing on the mortgage as at that date was $356,885.47 for
    principal, $29,040.31 for interest and $4,679.50 for tax account debit for a
    total amount of $390,605.28. In addition, the letter set out approximate legal
    fees for the Banks solicitors of $8,971.57.

[14]

When
    the respondents replied on April 4, they only took issue with the approximately
    $9,000 for legal fees and said there had been no agreement on that issue. The
    respondents otherwise took no issue with the amount of $390,000 required for
    the payout of the mortgage. There certainly was no suggestion of a $357,000
    payout. Besides the amount of the legal fees, the only other contentious issue was
    the proposed extension of the refinancing period from 30 to 60 days.

[15]

On
    April 8, the Bank wrote to the respondents counsel referencing the earlier
    March 10 letter and specifying a refinancing date of May 16, 2011 failing
    which this settlement is null and void. The Bank was offering no concession on
    this or any other point. The April 8 letter again mentioned a refinancing of
    $357,000, but that reference was in connection with the amount it was prepared
    to allow the respondents to refinance in priority to the unsecured debt.

[16]

It
    is with that background that the respondents wrote the letter of April 19. As
    noted, that letter agreed to the Banks terms, which in earlier correspondence
    clearly included a payout of at least $390,000. While the respondents April 19
    letter set out terms to be included in the Minutes Settlement, it did not
    provide draft Minutes of Settlement or specify a payout figure for the
    mortgage. What the letter did do on page 2 was add a sentence asking the Bank
    to advise if these terms do not properly reflect the contents of your latest
    correspondence and my previous letter.  It is worth repeating that the terms
    in the April 19 letter specifically referenced the respondents acceptance of
    the terms proposed by the Bank.

[17]

In
    no correspondence, or any other communication between the parties, was there
    any discussion or agreement to a payout figure other than the approximate
    amount of $390,000 and arguably the proposed legal fees.

[18]

The
    determination of whether a settlement was reached in this case did not require
    an inquiry into the parties subjective intentions. Since the correspondence
    was in writing, the issue could be determined based on an objective reading of
    the contents:
Olivieri v. Sherman
, 2007 ONCA 491, 86 O.R. (3d) 778 (C.A)
    at para. 44.

[19]

In
    any interpretation exercise, the supporting documentation must be read in
    context. In this case, the motion judge erred in focusing on particular letters
    without considering them in the context of the history of the correspondence,
    particularly the correspondence to which they specifically referred.

[20]

When
    the correspondence between the parties solicitors is considered in context,
    there was no agreement on the amount of the payout of the mortgage. The parties
    were at cross purposes on that issue.  There was no settlement.

[21]

In
    view of this conclusion, it is unnecessary to deal with the Banks secondary
    argument that the motion judge also erred in failing to exercise her discretion
    to refuse to enforce the settlement.

RESULT

[22]

Accordingly,
    the appeal is allowed, the order below is set aside, and the respondents
    motion is dismissed.

[23]

Finally,
    the costs awarded to the respondents by the motion judge are set aside and
    costs of the motion in the agreed-upon amount of $2,300 are awarded to the
    Bank. As well, costs of the appeal are awarded to the Bank, fixed in the amount
    of $7,500, inclusive of disbursements and applicable taxes.

Released: Feb. 28, 2012                               S.E.
    Lang J.A.


SEL                                                                  H.S.
    LaForme J.A.


L.A.
    Pattillo J. (ad hoc)


