



COURT OF APPEAL FOR ONTARIO

CITATION: Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA
    576

DATE: 20150819

DOCKET: C59230

Epstein, Pepall and Benotto JJ.A.

BETWEEN

Remedy Drug Store Co. Inc.

Plaintiff (Respondent)

and

Jane Farnham

Defendant (Appellant)

AND BETWEEN

Jane Farnham

Plaintiff by Counterclaim

(Appellant)

and

Remedy Drug Store Co. Inc. and Bruce Moody

Defendants to the Counterclaim

(Respondents)

Matthew P. Sammon and Paul-Erik Veel, for the appellant

David Chernos, for the respondents

Heard: March 9, 2015

On appeal from the order of Justice Graeme Mew of the Superior
    Court of Justice, dated July 25, 2014.

Epstein J.A.:

A.

overview

[1]

On May 8, 2012, the appellant, Jane Farnham, started working for the
    respondent, Remedy Drug Store Co. Inc., as its General Manager and Executive
    Vice President. The employment relationship broke down and came to an end on
    October 28, 2013.

[2]

Leading up to her last day at Remedy, Ms. Farnham forwarded a vast
    number of emails to her personal computer. Further, on her last day of work,
    Ms. Farnham took home with her a volume of printed documents from Remedys
    premises.

[3]

As a result, on November 25, 2013, Remedy commenced an action against
    Ms. Farnham for an injunction, damages and declaratory relief that Ms. Farnham
    had breached her employment contract, her fiduciary duties to the company, and
    her duties of confidentiality. Remedy brought a concurrent motion for interim injunctive
    relief relating to the confidential information Remedy alleged that Ms. Farnham
    had taken from it. Ms. Farnham counterclaimed for damages arising out of the breakdown
    of the employment relationship.

[4]

The parties attempted to settle their differences. A dispute arose over
    whether they reached a settlement agreement and, if so, whether Remedy
    repudiated the agreement. Remedy took the position that it and Ms. Farnham had
    an agreement  one that included a term that a broad forensic sweep of Ms.
    Farnhams personal electronic devices would be conducted to search for Remedys
    confidential information. Ms. Farnham took the position that there was a settlement
    agreement but that it contained no such term. According to Ms. Farnham, she
    only agreed to a simple wipe of her devices of all Remedy information. She did
    not agree that Remedy would be entitled to perform a forensic search of her
    personal computer.  Ms. Farnham also claimed that Remedy had taken steps that
    amounted to a repudiation of the agreement.

[5]

At Remedys request, the motion for an interim injunction was adjourned
    and subsequently resolved.  Remedy then brought a motion to enforce the
    settlement.

[6]

Before the motion judge, success was divided. The motion judge held that
    the parties had entered into an enforceable settlement agreement on the terms
    advanced by Ms. Farnham. In other words, the agreement did not contain the
    forensic sweep term. He then went on to find that Remedy had not repudiated the
    agreement.

[7]

Ms. Farnham appeals. Her primary argument is that the motion judge erred
    in finding that Remedy did not repudiate the settlement agreement.

[8]

For the reasons that follow, I would dismiss the appeal.

B.

Background

(1)

Confidential Information

[9]

As previously noted, on her last day of work with Remedy, Ms. Farnham
    deleted thousands of emails from her company computer. She also printed off 
    and took various Remedy documents.  Prior to that time, she forwarded over 500
    emails  many of which contained attachments  to her personal computer. Ms. Farnham
    said she felt these steps were necessary for protection against any false
    allegations that may arise out of the end of the employment relationship.  Remedy
    says this information is confidential.

(2)

Settlement Negotiations

[10]

On
    December 25, 2013, the parties started to discuss settlement. Two matters were
    primarily at issue in the discussions: (1) financial and severance terms; and
    (2) the return of the documentation taken and the work to be performed on Ms.
    Farnhams personal technological devices to clear them of Remedys information
    (the IT Issue).

[11]

On
    January 6, 2014, Ms. Farnham emailed a settlement proposal to Remedy. In her
    email, Ms. Farnham addressed the IT Issue. She wrote:

Regarding the emails, I will engage a third party IT consultant
    who has been recommended by my lawyer to wipe, purge and certify my devices
    (laptop and iPad) as well as my Yahoo account clean of all Remedy documents. I
    will then swear an affidavit stating that I have returned all documents and
    emails and that I have never and will never do anything to harm you or your
    business. The IT consultant can swear an affidavit confirming these steps have
    been completed. I will do this at my expense. I am suggesting that we use the
    IT consultant recommended by my lawyer as his quote is less than a quarter of
    the quote provided by Remedys lawyers IT consultant.

The next day, Remedy responded by email, saying only
    the following with regard to the IT Issue: The IT firm selected by my law firm
    will do the work at your cost.

[12]

By
    return email, Ms. Farnham indicated that she would pay $2,500 towards the work
    performed by Remedys IT consultant. Remedy responded with some concessions in
    relation to the financial and severance terms, but was silent on the IT Issue.
    On January 9, 2014, Ms. Farnham said: we have an agreement.

[13]

Remedys
    lawyers approached Ms. Farnhams lawyer to draft formal minutes of settlement.
    Although Ms. Farnhams lawyer took the position that minutes were unnecessary
    because the settlement agreement was memorialized in the emails exchanged
    between the parties, he agreed to consider recommending minutes to Ms. Farnham
    that minutes be prepared, as long as they reflected the agreement.

[14]

Remedys
    lawyers prepared draft minutes of settlement. They stated that Ms. Farnham
    would provide her yahoo email account and password and Paragraph 7 of the draft,
    entitled Confidential Information, read in the relevant part: [The IT
    consultant] will take the necessary steps to search and permanently delete all
    of Remedys information from [Ms. Farnhams] devices and the yahoo email
    account by taking the following steps: (1) forensic collection; (2) keyword
    searching; (3) keyword hit reviews; (4) preparing native file date; and (5)
    wiping devices. Ms. Farnham took issue with this sentence, saying it did not
    reflect the simple data wipe the parties had agreed to.

[15]

Under
    the minutes, the motion for injunctive relief would be withdrawn following
    delivery of the password and the devices to Remedy.

[16]

Various
    accusatory emails between the parties ensued. For example, on January 20, 2014,
    Mr. Moody, Remedys President and Chief Executive Officer, wrote to Ms. Farnham
    insisting on Remedys interpretation of the IT Issue:

I will not budge on the sweep of your systems being conducted
    in the manner detailed by my lawyers in previous communications. Again, you
    started this process when you stole the highly confidential and highly damaging
    information. I will maintain my rights to gain as much peace of mind as
    possible through an IT sweep process defined by my lawyers and paid by you. If
    you wish to leave lawyers out, stop going to yours and settle. Your lawyer has
    all the information required for you to settle. At this point, I am happy to
    continue and press forward with an injunction and any other legal avenues
    available to me.

[17]

Additionally,
    on January 21, 2014, Mr. Moody wrote:

The purpose of this email is to be very clear and speak
    directly to you.  I will not accept an agreement that restricts me in any
    fashion as stated above [the IT sweep].  In the final analysis, if you are
    indeed sincere in your words of peace and moving on; you will accept my
    position on these two items which are very reasonable and appropriate given
    your actions.  Alternatively, we will have to go through the courts as it will
    become clear, based on your unwillingness to move that you do in fact have
    something to hide.  You are providing me with no alternative other than taking
    the necessary action to protect my business.

The decision is in your hands Jane.

(3)

Alleged Repudiation and Motion for Enforcement

[18]

On
    February 3, 2014, new lawyers acting for Ms. Farnham wrote to Remedy alleging
    Remedy had, through its words and conduct, repudiated the settlement agreement.
    This February 3 letter made specific reference to Mr. Moodys email of January
    20, 2014, excerpted above. Ms. Farnhams counsel also informed Remedy that Ms.
    Farnham had elected to treat the settlement as at an end and that she would
    proceed with defending the claim and pursuing her counterclaim.

[19]

Remedys
    counsel responded immediately on February 4, 2014 stating that the settlement
    had not been repudiated.  He wrote: If required, Remedy will take all
    necessary steps to enforce the settlement, including in respect of the return
    of Remedys confidential information.  Unless we have your advance confirmation
    on behalf of Ms. Farnham that she intends to honour the terms of the settlement
    reached with Remedy, we intend to appear on February 10, 2014 (the date set for
    the return of the injunction) in order to seek the Courts assistance in
    setting a date and timetable for the enforcement of the settlement.

[20]

Remedy
     then appeared in court on February 10, 2014 and obtained an adjournment of the
    injunction motion. On April 10, 2014, the parties resolved the motion by
    agreeing that Ms. Farnham would place her personal computer in the hands of a
    third party to await further agreement or a court order.

[21]

Remedy
    then moved to enforce the settlement agreement.

C.

MOTION JUDGES DECISION

[22]

Before
    the motion judge, Ms. Farnham maintained that Remedy fired her when she
    rejected a new employment agreement. For the purposes of the motion, the motion
    judge held that it was immaterial whether Ms. Farnham had been dismissed or
    pre-emptively resigned.

[23]

The
    material aspect of the dispute was whether the parties had reached a settlement
    agreement and on what terms, and whether it remained enforceable.  The IT Issue
    was at the centre of the storm.

[24]

The
    motion judge held that the parties had reached a settlement agreement.  At
    para. 33 of his endorsement, he reasoned, Despite the failure to agree on a
    more formal document, the terms of the agreement can, in my view, be distilled
    from the email traffic between the parties which commenced on 25 December 2013
    and culminated with Ms. Farnhams we have an agreement email of 9 January
    2014.

[25]

The
    motion judge found that the terms of the agreement relating to the IT Issue
    were those advanced by Ms. Farnham. At para. 38, the motion judge wrote that [a]n
    objective reading of [the email] exchange between the parties supports the
    conclusion that there had been a compromise  with the process as set out by
    Ms. Farnham but, as a result of a concession subsequently made by Ms. Farnham,
    with such process being undertaken by [Remedys] preferred IT consultant rather
    than Ms. Farnhams.

[26]

In
    other words, the parties did not agree to a full forensic sweep of Ms.
    Farnhams computer.

[27]

With
    respect to Ms. Farnhams claim that Remedy had repudiated the agreement, Remedy
    argued that the emails exchanged after the January 9, 2014 we have an
    agreement message amounted to an interpretive dispute. According to Remedy, it
    was not refusing to perform its obligations under the settlement agreement; rather,
    it was attempting to clarify the terms of the agreement.

[28]

Ms.
    Farnham, on the other hand, asserted that the post-agreement emails went well
    beyond an interpretive dispute. She argued she was confronted with an ultimatum:
    perform the agreement on Remedys terms or risk further legal action, including
    the injunction.

[29]

The
    motion judge held that although Remedy took a hard line, it was prepared to be bound
    by the terms of the agreement.  He said, at para. 46, that, [a]lthough I have
    ultimately disagreed with the position taken by [Remedy] with respect to the
    terms of the settlement agreement, it cannot be said that [Remedys] position
    was so patently unreasonable as to evidence an insistence upon terms and
    conditions which could not possibly have been reasonably implied in the
    circumstances.

[30]

Finally,
    the motion judge reasoned that the fact that Remedy proceeded with its
    injunction did not mean it repudiated the agreement. He noted that, [n]otice
    of the [injunction] motion had already been given when the parties started
    their settlement negotiations in earnest on or about 25 December 2013 and observed
    it was not unusual for parties to negotiate while continuing to litigate.

[31]

Given
    his conclusion that Remedy had not repudiated the agreement, the motion judge
    granted judgment enforcing  the settlement on the terms advanced by Ms.
    Farnham.

D.

issues on appeal

[32]

While
    Ms. Farnham identifies three issues on appeal, her argument centres on whether
    the motion judge erred in failing to find that Remedys conduct amounted to a
    repudiation of the settlement agreement. Ms. Farnhams arguments relating to
    rule 49.09 are closely connected to this one main issue.

E.

ANALYSIS

[33]

I
    first outline the positions of the parties. I then articulate the relevant
    legal principles before applying them to the facts of this case. I conclude by
    discussing the impact of rule 49.09 on the issues at play.

The Parties Positions

[34]

In
    oral argument, Ms. Farnhams primary submission is that Remedy anticipatorily repudiated
    the settlement agreement. In his email sent on January 20, 2014, Mr. Moody, on
    behalf of Remedy, insisted on a term that was not contained in the settlement
    agreement  a broad forensic sweep. And Mr. Moody refused to perform the
    settlement agreement without the new term, threatening to continue with the
    injunction if Ms. Farnham did not comply with his demand. The email manifested
    Remedys intention to no longer be bound by the settlement agreement.

[35]

Moreover,
    Remedy did not, in the interim, perform the non-controversial aspects of the
    settlement agreement.

[36]

Ms.
    Farnham says that Remedy, by this conduct, repudiated the bargain. If the
    parties post-settlement agreement controversy was simply an interpretive
    dispute, Remedy needed to proceed on the basis that its interpretation of the
    agreement might be wrong. But it did not do so.  Remedy refused to accept
    anything other than its view of the agreement.  Significantly, it also proceeded
    with its motion for an injunction.

[37]

Remedy
    argues that it did not repudiate the settlement agreement. It submits that a
    finding of repudiation is exceptional, particularly in the context of
    settlement agreements.

[38]

Remedy
    asserts that what transpired after the lawyers attempted to paper the
    settlement agreement was merely an interpretive dispute over one minor issue in
    the context of the settlement agreement as a whole  the IT Issue. This issue
    was particularly minor for Ms. Farnham, as the settlement included a term
    releasing her from all claims arising out of her use of Remedys confidential
    information.

[39]

Remedy
    submits that the steps it took in relation to the injunction were benign in the
    context of the agreement. Remedys moving forward with the injunction and
    ultimately obtaining a consent order that protected the information in issue
    pending the resolution of the terms of the settlement amounted to nothing more
    than an attempt to preserve its confidential information pending the resolution
    of the dispute over the settlement. According to Remedy, rather than thwart the
    settlement agreement, its injunction proceedings amounted to an effort to
    preserve the status quo while the rights under the settlement agreement were being
    determined.

[40]

Remedy
    also submits that Ms. Farnhams position fails to respect two fundamental tenets
    of the doctrine of anticipatory repudiation. First, Remedys conduct was not so
    serious as to deprive Ms. Farnham of substantially the whole benefit of the settlement
    agreement. Second, Remedys conduct did not amount to a clear and unequivocal
    intention not to be held to the terms of the bargain.

The Applicable Legal Principles

[41]

The
    authorities establish the following principles relevant to this issue.


i.

A Focus on Intention

[42]

Repudiation
    occurs by the words or conduct of one party to a contract that show an intention
    not to be bound by the contract:
Guarantee Co. of North America v. Gordon
    Capital Corp.
, [1999] 3 S.C.R. 423, at para. 40. Anticipatory repudiation
    is essentially the same as repudiation
simpliciter
 the only
    difference is timing. In her treatise,
Canadian Contract Law
, 3d ed.
    (Markham: LexisNexis Canada, 2012), at p. 618, Angela Swan begins her
    discussion of anticipatory repudiation by helpfully outlining the circumstances
    in which this issue typically arises:

The phrases anticipatory breach or anticipatory repudiation
    refer to the situation created when, before the time of performance has
    arrived, one party to a contract tells the other, either explicitly or as an
    inference from something said or done by the party, that,
despite having no justification for its position, it is no
    longer prepared to perform its obligations under the contract
. The
    statement may be made in a letter by one partys solicitor to the other, by an
    oral statement by a party himself or herself to the other, or in any form of
    communication. [Emphasis added. Citations omitted.]

See also John McCamus:
The Law of Contracts
,
    2d ed. (Toronto: Irwin Law Inc., 2012), at p. 689.

[43]

Recently,
    in
Potter v. New Brunswick (Legal Aid Services Commission)
, 2015 SCC
    10, 381 D.L.R. (4th) 1, at para. 149, Cromwell J. (concurring) wrote this about
    anticipatory repudiation: The focus in such cases is on what the party's words
    and/or conduct say about future performance of the contract. For example, there
    will be an anticipatory repudiation if the words and conduct evince an
    intention to breach a term of the contract which, if actually breached, would
    constitute repudiation of the contract.

[44]

Accordingly,
    the same principles guide both anticipatory repudiation and repudiation. Courts
    often use the terms interchangeably because alleged repudiations frequently
    occur before the time of performance has arrived (to borrow Swans phrasing).


ii.

The Test is Objective and the Surrounding Circumstances Should be
    Considered

[45]

The
    test for anticipatory repudiation is an objective one: S.M. Waddams,
The
    Law of Contracts
, 6th ed. (Toronto: Canada Law Book, 2010), at para. 620.
    As Gillese J.A. wrote for this court in
Spirent Communications of Ottawa
    Ltd. v. Quake Technologies (Canada) Inc.
, 2008 ONCA 92, 88 O.R. (3d) 721,
    at para. 37: To assess whether the party in breach has evinced such an
    intention [to repudiate the contract], the court is to ask whether a reasonable
    person would conclude that the breaching party no longer intends to be bound by
    it.

[46]

In
    objectively construing the purported breaching partys intention, the
    surrounding circumstances must be considered. In
White v. E.B.F.
    Manufacturing Ltd.
, 2005 NSCA 167, 239 N.S.R. (2d) 270, Saunders J.A.
    wrote, at para. 89: Proof of such an intention requires an investigation into
    the nature of the contract, the attendant circumstances, and the motives which
    prompted the breach. Earlier this year, Cromwell J., in his concurring opinion
    in
Potter
, confirmed the importance of considering the surrounding
    circumstances. At para. 164, Cromwell J. wrote: As Lord Scarman put it in
Woodar
    Investment Development Ltd. v. Wimpey Construction UK Ltd.
, [1980] 1 All
    E.R. 571 (H.L.), at p. 590, the trial judge and the Court of Appeal in this
    case were concentrating too much attention on one act isolated from its
    surrounding circumstances and failing to pay proper regard to the impact of the
    party's conduct on the other party.


iii.

Subjective Intention Not to Repudiate is Not Determinative

[47]

A
    party can repudiate a contract without subjectively intending to do so. As the
    Supreme Court wrote in
Guarantee Company
, at para. 40:

Repudiation, by contrast, occurs "by words or conduct
    evincing an intention not to be bound by the contract. It was held by the Privy
    Council in
Clausen v. Canada Timber & Lands, Ltd.
[[1923] 4 D.L.R.
    751], that
such an intention may be evinced by a refusal
    to perform, even though the party mistakenly thinks that he is exercising a
    contractual right
" (S.M. Waddams,
The Law of Contracts
(4th
    ed. 1999), at para. 620).42 [Emphasis added.]

[48]

Swan
    confirms this approach at p. 618 of her treatise: The person (or his or her
    solicitor) may believe when the statement is made that he or she has an excuse
    for non-performance and that it is the other party who is in breach of the
    contract. The characterization of the statement as an anticipatory breach [or
    repudiation] will then be made when the dispute goes to trial.

[49]

However,
    the subjective intentions of the breaching party are of some moment.  They may
    assist in determining what the objective intention was. Justice Cromwell made
    this point at para. 171 of
Potter
: while the breaching party's
    motives as such are irrelevant, they may throw light on the way the alleged
    repudiatory conduct would be viewed by a reasonable person. Thus, the driving
    factor behind anticipatory repudiation remains the objective intention of the
    party purportedly about to breach the contract.


iv.

The Seriousness of the Conduct

[50]

A
    finding of anticipatory repudiation is reserved for cases in which the conduct
    at issue can be said to be serious. Before an anticipated breach of contract
    can be characterized as an anticipatory repudiation, the breach must deprive
    the innocent party of substantially the whole benefit of the contract: see
    Swan, at p. 618; Waddams, at ss. 590, 595; McCamus, at pp. 693-694; and
    Fridman,
The Law of Contracts in Canada
, 6th ed. (Toronto: Carswell,
    2011), at p. 585.

[51]

In
Spirent
, Gillese J.A. confirmed an approach that focuses on the
    importance of the disputed term, saying, at para. 37, When considering
    Spirents conduct, it was important to keep in mind that what was involved was
    an anticipatory breach of contract. [I]n determining whether the party in
    breach had repudiated or shown an intention not to be bound by the contract
    before performance is due, the court asks whether the breach deprives the
    innocent party of substantially the whole benefit of the contract. See also
Place
    Concorde East Limited Partnership v. Shelter Corporation of Canada
(2006),
    270 D.L.R. (4th) 181 (Ont. C.A.), at para. 51, where this court wrote, A
    breach that allows the non-repudiating party to elect to put an end to all
    unperformed obligations of the parties is an exceptional remedy that is
    available only in circumstances where the entire foundation of the contract has
    been undermined, that is, where the very thing bargained for has not been
    provided; and
Potter
,
per
Cromwell J.
,
at para.
    164.

[52]

The
    authorities are therefore clear. The conduct in this case  insistence on a new
    contractual term  can amount to an anticipatory repudiation, but
only if
the term is of such importance that the party seeking to rely on the term can
    be said to have exhibited an intention not to be bound by the contract.


v.

Anticipatory Repudiation in the Context of a Settlement Agreement

[53]

I
    agree with the opinion of the British Columbia Court of Appeal in
Fieguth
    v. Acklands Limited
(1989), 59 D.L.R. (4th) 114 (B.C.C.A.), at pp.
    122-123, that anticipatory repudiation should be considered a particularly
    exceptional remedy in the context of settlement agreements. The Court explained
    the rationale for this approach as follows:

It should not be thought that every disagreement over
    documentation consequent upon a settlement,
even if
    insisted upon
, amounts to a repudiation of a settlement. Many such
    settlements are very complicated, such as structured settlements, and the deal
    is usually struck before the documentation can be completed. In such cases the
    settlement will be binding if there is agreement on the essential terms. When
    disputes arise in this connection the question will seldom be one of
    repudiation as the test cited above is a strict one, but rather whether a final
    agreement has been reached which the parties intend to record in formal
    documentation, or whether the parties have only reached a tentative agreement
    which will not be binding upon them until the documentation is complete. Generally
    speaking, litigation is settled on the former rather than on the latter basis
    and parties who reach a settlement should usually be held to their bargains.
    Subsequent disputes should be resolved by application to the court or by common
    sense within the framework of the settlement to which the parties have agreed
    and in accordance with the common practices which prevail amongst members of
    the bar.
It will be rare for conduct subsequent to a
    settlement agreement to amount to repudiation
. [Emphasis added.]

This passage from
Fieguth
has been cited with
    approval by at least three Ontario courts, including this one: see
Bogue v.
    Bogue
(1999), 46 O.R. (3d) 1 (C.A.);
Cellular Rental Systems Inc. v.
    Bell Mobility Cellular Inc.
, [1995] O.J. No. 721 (S.C.), affd [1995] O.J.
    No. 3773 (C.A.); and
Whitehall Homes & Construction Ltd. v. Hanson
,
    2012 ONSC 3307, 23 C.L.R. (4th) 272, at para. 31.

[54]

Courts
    are motivated to enforce settlements for good reason. As Swan puts it at p. 52
    of her treatise, There are strong policy reasons for the courts attitude to
    settlements: it is in everyones interest that litigation be concluded by the
    parties agreement.


vi.

The Relevance of Commencing Legal Proceedings

[55]

Courts
    have recognized that, in certain circumstances, commencing an action may
    constitute repudiation of an agreement: see e.g.
Suleman v. British
    Columbia Research Council
(1990), 52 B.C.L.R. (2d) 138 (C.A.), at p. 142;
    but see
Vrana v. Procor Limited
, 2004 ABCA 126, 25 Alta. L.R. (4th) 201,
    at para. 14. In
Suleman
, the Court noted that the respondent had
    repudiated her employment contract by prematurely filing a writ of summons
    since she failed to establish a case of constructive dismissal: at pp. 142,
    144. However, in
Vrana
, the Court found the employee had not repudiated
    his employment contract by bringing legal action too early.

[56]

Although
    not perfectly analogous, this court has recognized that a non-repudiating
    partys filing of a statement of claim may, but does not automatically,
    constitute an acceptance of a repudiation. For example, in
Domicile
    Developments Inc. v. MacTavish
(1999), 45 O.R. (3d) 302 (C.A.), at pp.
    305-6, this court found that a party did not accept a repudiation when it
    issued a statement of claim seeking specific performance or damages because it
    made clear, in part through a letter to the repudiating party, that it did not
    accept the repudiation.

[57]

In
Place Concorde
, LaForme J.A. was prepared to assume that an election
    to accept a repudiation can be made by commencing an action but held that, in
    the overall context, the pleading did not constitute an election to treat the
    agreement as being at an end.

[58]

Case
    law is thus consistent with the principle that commencing legal action can, but
    does not necessarily, constitute repudiation. The proper inquiry remains
    focused on whether the party bringing legal action evinces an intention, in all
    the circumstances, to repudiate the agreement.

Application of These Principles


i.

Standard of Review

[59]

The
    question of whether a party repudiated an agreement is a question of fact, but
    whether the motion judge applied the proper legal test in determining whether
    there was a repudiation is a question of law. Therefore, in the typical case, a
    blended standard of review applies.

[60]

As
    explained by Saunders J.A. of the Nova Scotia Court of Appeal in
White
,
    at para. 60:

[T]here are mixed standards of review to be applied. When
    deciding, as he did, that the License Agreement had not been repudiated, the
    trial judge was obliged to apply proper legal principles. In that sense the
    standard for our review on appeal, to that segment of his decision making, is
    one of correctness. However, in arriving at that conclusion he was also obliged
    to carefully consider the evidence and make certain key findings. Such findings
    are reviewable on a palpable and overriding error basis, as discussed earlier.

[61]

In
    my view, the motion judges decision is reviewable on a correctness standard
    because he did not articulate the correct legal principles. Specifically, at
    para. 46, he wrote:

Although I have ultimately disagreed with the position taken by
    [Remedy] with respect to the terms of the settlement agreement, it cannot be
    said that [Remedys] position was so patently unreasonable as to evidence an
    insistence upon terms and conditions which could not possibly have been
    reasonably implied in the circumstances.

[62]

Here,
    the motion judge fell into error. The test for anticipatory repudiation is not,
    as the motion judge expressed it, whether the breaching partys position was so
    patently unreasonable as to evidence an insistence upon terms and conditions
    which could not possibly have been reasonably implied in the circumstances. With
    respect, reasonableness has nothing to do with it.  As I have already
    discussed, the correct analysis focuses on what the purported breaching partys
    conduct says about its objective intention in relation to future performance of
    the contract. And this was not a minor misstatement as this error appears to
    lie at the heart of the motion judges analysis.


ii.

Did Remedy Repudiate the Settlement Agreement Through its Words
    and Conduct?

[63]

Although
    I disagree with the basis upon which the motion judge concluded that Remedys
    words and conduct did not amount to an anticipatory repudiation of the
    settlement, I agree with the result he reached. In my view, Remedy did not
    repudiate the settlement agreement through its words or conduct.

[64]

Fundamentally,
    considered objectively and in the light of the surrounding circumstances,
    Remedy did not exhibit an intention not to be bound by the contract. Given the
    motion judges interpretation of the settlement agreement, it is clear Remedy
    was not entitled to insist on a full forensic sweep. And it is also clear that
    Remedy took a hard line with Ms. Farnham in threatening to continue with the
    injunction proceedings if she did not capitulate. However, a reasonable
    person would not conclude that Remedy no longer intended to be bound by the
    settlement agreement:
Spirent
, at para. 37.

[65]

I
    say this for four primary reasons.

[66]

At
    the outset, I think it important to remember that the contract at issue is a
    settlement agreement. The circumstances outlined above do not provide a
    compelling reason for this court to depart from the general principle that it
    is important to hold parties to their settlements. As the Court noted in
Fieguth
,
    at para. 49, It will be rare for conduct subsequent to a settlement agreement
    to amount to repudiation.

[67]

My
    first point is that this is not one of those rare cases.

[68]

Second,
    the term involving the IT Issue is not a term of the contract which, if
    actually breached, would constitute repudiation of the contract. The threatened
    breach of the term that would have given Remedy the right to a technological
    sweep of Ms. Farnhams personal computer would not deprive her of substantially
    the whole benefit of the contract. It would not undermine the foundation of the
    settlement agreement; namely, the financial package.  This is particularly so
    because the settlement agreement contained a term that gave Ms. Farnham a full
    and final release from all claims arising out of her use of Remedys
    confidential information. Accordingly, the precise scope of the technological
    sweep should have been of little, if any, consequence to Ms. Farnham.

[69]

Third,
    Ms. Farnhams reliance on Remedys proceeding with the injunction does not, in
    my view, support a finding of repudiation. As previously noted, the proper
    inquiry remains focused on whether the party moving forward with legal action
    evinces an intention to repudiate the agreement. Here, Remedys counsel
    expressly advised Ms. Farnham that there was no repudiation and then proceeded
    to obtain an adjournment of the injunction motion.  Remedys steps taken in
    relation to its motion for an interim injunction were not tantamount to an
    intention to abandon the settlement agreement. As I see it,  Remedys
    injunction motion was consistent with  not contrary to  the spirit of the
    settlement agreement.

[70]

Fourth,
    it would be a mistake to focus in on the injunction and lose sight of the
    circumstances as a whole. It is an error to concentrate too much attention on
    one act isolated from its surrounding circumstances and fail to pay proper
    regard to the impact of the partys conduct on the other party:
Potter
,
    at para. 164.

[71]

In
    my view, the surrounding circumstances paint the following picture. A dispute
    arose that brought an end to a relatively brief employment relationship. A
    settlement was negotiated and the parties then disagreed on the nature of the
    technological sweep that would be required to ensure that Ms. Farnham no longer
    had possession of Remedys confidential documents. In my view, even without the
    release, the forensic sweep did not go to the root of the contract. However, in
    the light of the release, the forensic sweep was next to meaningless in terms
    of its impact on Ms. Farnham.

[72]

Although
    insistence on a new contractual term can amount to repudiation, this will not
    always be the case, especially when it can be demonstrated that the other
    party is seizing upon small points to get out from under its contractual
    obligation:
AIC Ltd. v. Infinity Investment Counsel Ltd.
(1998), 147
    F.T.R. 233 (F.C.), at para. 42.

[73]

I
    would therefore not give effect to Ms. Farnhams argument that Remedy
    repudiated the settlement agreement.

[74]

And,
    as I will now discuss, I would also reject Ms. Farnhams submissions regarding
    rule 49.09.


iii.

The Impact of Rule 49.09

[75]

Rule
    49.09 provides:

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 in the terms of the
    accepted offer, and the judge may grant judgment accordingly; or

(b) continue the proceeding as if there had been no accepted
    offer to settle.

[76]

Ms.
    Farnham makes two submissions with respect to rule 49.09. As will become
    apparent, I would not give effect to these submissions for much the same
    reasons as I would not give effect to Ms. Farnhams suggestion that Remedy
    repudiated the settlement agreement.

[77]

First,
    Ms. Farnham submits that once the dispute as to the terms of the settlement
    agreement arose, rule 49.09 gave Remedy a choice: it could either proceed with
    its injunction, or it could bring a motion to enforce the settlement. According
    to Ms. Farnham, the motion judge erred in law in permitting Remedy to bring its
    motion for enforcement under rule 49.09(a) subsequent to the steps it took in
    relation to the injunction.

[78]

This
    first submission on rule 49.09 comes down to the following. Through the
    injunction proceedings, Remedy took steps inconsistent with the settlement and,
    under rule 49.09, these steps disentitled Remedy to an order enforcing the
    settlement on any terms.

[79]

I
    disagree.

[80]

Recall
    that Remedy moved for an interim injunction in November, 2013, to restrain Ms.
    Farnham from  damaging the company.  The return date was in February, 2014.   When
    the parties reached their impasse, Remedys counsel immediately wrote rejecting
    the suggestion that the settlement had been repudiated and advised that, in the
    absence of a resolution,  they would attend at court on the return date in order
    to seek the Courts assistance in setting a date and timetable for the
    enforcement of the settlement. No criticism is properly levelled at Remedy in
    these circumstances. Ms. Farnhams argument, if successful, would result in the
    triumph of form over substance.

[81]

As
    the motion judge observed, the injunction motion was initially brought before
    the settlement negotiations began. The application of the doctrine of election
    precludes a party from exercising a right that is inconsistent with another
    right if he has consciously and unequivocally exercised the latter:
Charter
    Building Co. v. 1540957 Ontario Inc. (c.o.b. Mademoiselle Womens Fitness &
    Day Spa)
, 2011 ONCA 487, 107 O.R. (3d) 133, at para. 15. Remedys actions
    were not inconsistent with the settlement agreement. The parties preserved the
    status quo while the enforceability and terms of the settlement agreement were
    determined by a court.

[82]

Ms.
    Farnhams second submission in relation to rule 49.09 goes like this. Once
    Remedy insisted on a contractual term to which it was not entitled (the full
    forensic sweep), Ms. Farnham was at liberty to treat the agreement as at an end
    and continue the proceeding as if there had been no accepted offer to settle,
    pursuant to rule 49.09(b).

[83]

According
    to Ms. Farnham, the motion judge erred when he said, at para. 40: Absent
    agreement between the parties as to what they had agreed to, the issue could
    and should be resolved by way of a motion under rule 49.09(a). Ms. Farnham
    submits that this passage suggests that a disagreement that results in the
    parties failing to complete a settlement must be resolved through a motion to
    interpret the settlement. This, says Ms. Farnham, is not what the rule
    provides.  Rule 49.09(b) gives the other party the right to treat the
    settlement as at an end.

[84]

The
    effect of this error, says Ms. Farnham, is the following. Had the motion judge
    properly applied rule 49.09, he would have accepted that she was entitled to
    and, in fact, did elect to treat the settlement as at an end and continue the
    litigation. Ms. Farnhams argument is that the motion judges interpretation of
    rule 49.09 eviscerates a partys right to make an election under the rule.

[85]

Again,
    I disagree.

[86]

The
    motion judge did not err in resolving the one outstanding issue separating the
    parties by granting judgment in accordance with the terms of the accepted offer
    to settle. It cannot be the case that Ms. Farnham could unilaterally elect to
    proceed with the litigation in the face of Remedys motion to enforce the
    settlement  a motion that was brought to resolve an interpretive dispute over
    a term with very little consequence to Ms. Farnham. Having concluded that
    Remedy did not repudiate the settlement agreement, it would be odd indeed to
    then allow Ms. Farnham to resile from the settlement under the guise of rule
    49.09(b).

[87]

I
    find no error in the motion judges consideration of rule 49.09 in the
    circumstances of this case.

F.

DISPOSITION

[88]

For
    these reasons, I would dismiss the appeal. I would award the respondent its
    costs on a partial indemnity basis fixed in the amount of $12,000 all
    inclusive.

Released: August 19, 2015 (GE)

Gloria
    Epstein J.A.

I
    agree S.E. Pepall J.A.

I
    agree M.L. Benotto J.A.


