



COURT OF APPEAL FOR ONTARIO

CITATION: Magnotta v. Yu, 2021 ONCA 185

DATE: 20210325

DOCKET: C68187

MacPherson, Gillese and
    Nordheimer JJ.A.

BETWEEN

Melissa Magnotta as the
    Representative of the Estate of Joseph Magnotta and Melissa Magnotta

Plaintiffs (Respondents)

and

Xiaozeng Yu
,
Xiahong Mao
and Sutton Group-Admiral Realty Inc.

Defendants (
Appellants
)

Sean Dewart and Mathieu Bélanger, for
    the appellants

Alfred J. Esterbauer, Arleen Huggins,
    and Sydney Hodge, for the respondents

Heard by videoconference:
    February 26, 2021

On appeal from the judgment of Justice Paul
    B. Schabas of the Superior Court of Justice, dated February 18, 2020 with
    reasons reported at 2020 ONSC 1049.

Gillese J.A.:

Overview

[1]

This proceeding stems from a failed real estate
    deal. Offers to settle flowed between the parties. The respondents purported to
    accept an outstanding offer but the appellants claimed there was no offer
    capable of being accepted. The respondents moved to enforce settlement.

[2]

The motion judge found the respondents had
    accepted a valid offer made pursuant to rule 49 of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194. While he had the discretion to not enforce
    the settlement, he chose not to exercise it.

[3]

The issue on appeal is whether the motion judge
    erred in refusing to exercise that discretion. For the reasons that follow, in
    my view, he did not. Consequently, I would dismiss the appeal.

Background

[4]

On March 8, 2017, Xiaozeng Yu entered into an
    agreement of purchase and sale for a residential property in Richmond Hill,
    Ontario (the Property) owned by Melissa Magnotta and the late Joseph Magnotta
    (the Respondents).
[1]
The purchase price was $2,662,000 and July 7, 2017, was the scheduled closing
    date. Ms. Yu made a deposit of $65,000.

[5]

Ms. Yu waived conditions on March 13. She had
    until June 23 to inspect title and make requisitions. On June 29, Ms. Yus real
    estate agent sought a two-week delay in closing so Ms. Yu could obtain
    financing because she had been unable to sell her own home. The following day,
    the Respondents received a letter from Ms. Yus lawyer with many requisitions, the
    most significant of which concerned the conversion of the houses garage into a
    master bedroom, apparently without building permits and in contravention of zoning
    by-laws.

[6]

The Respondents answered the requisitions even
    though they were out of time. Ms. Yus lawyer was not satisfied with the
    Respondents answer on the garage conversion. He asserted that good title could
    not be conveyed in the absence of the Respondents delivering a valid building
    permit, Ms. Yu would not close the transaction, and the agreement was at an
    end. The sale did not close on July 7, 2017.

[7]

In September 2017, the Respondents sued Ms. Yu
    and her mother, Xiahong Mao (the Appellants). Ms. Mao was named because she had
    placed a mortgage on Ms. Yus property in the amount of $900,000 on July 4,
    2017 (three days before the closing date). The statement of claim alleged that
    the mortgage was registered as a fraudulent preference or conveyance.

[8]

The Respondents subsequently sold the Property for
    $900,000 less than what Ms. Yu had agreed to pay for it. They filed a summary
    judgment motion that was to be heard on June 24, 2019.

[9]

In March 2019, the Appellants changed legal
    counsel.

[10]

In late May 2019, counsel for the parties
    exchanged several offers to settle. For the purposes of this appeal, the relevant
    offer is one made by counsel for the Appellants in writing on May 29, 2019 (the
    Offer). The Offer set out two options for acceptance. Option A offered the
    immediate release of the $65,000 deposit, a payment of $200,000 within 15 days,
    and a further payment of $235,000 within 30 days. Option B offered the
    immediate release of the $65,000 deposit, a payment of $200,000 within 15 days,
    and a further payment of $285,000 in 90 days.

[11]

Counsel for the Respondents responded that same
    day. She said the Offer was insufficient and confirmed that she would cross-examine
    Ms. Yu the following morning. Later that day, counsel for the Appellants
    advised counsel for the Respondents that the Appellants had retained new
    counsel.

[12]

The Appellants retained new counsel  not
    counsel on this appeal  on May 30, 2019, at which point her former lawyers
    ceased to be involved in this matter.

[13]

In June 2019, the Appellants new counsel
    obtained expert opinion evidence from a land use planning consultant and a real
    estate lawyer. The former opined that the garage conversion was non-complaint
    with the zoning by-laws and the building code. The latter opined that the
    conversion was not discoverable by a title search and either went to the root
    of title or was a requisition that could be made up to five days prior to
    closing and, therefore, was timely. The expert reports were served on counsel
    for the Respondents on June 25, just as counsel was leaving on vacation.
[2]


[14]

Beginning on June 26, counsel for the
    Respondents was out of the country on a prescheduled vacation.

[15]

On July 3, counsel for the Respondents wrote to
    the Appellants new counsel advising that her clients accepted Option B of the
    Offer. Two days later, the Appellants counsel responded that there was no
    offer to settle capable of being accepted and, in any event, the Offer was no
    longer open for acceptance.

[16]

The Respondents moved to enforce settlement
    based on their acceptance of the Offer.

THE MOTION JUDGES REASONS

[17]

The motion judge found that the Offer complied
    with r. 49: it was made in writing; by a person with authority to make it; effectively
    served on the opposing party; capable of acceptance; not time limited; and not
    withdrawn. Citing
York North Condominium Corp. No. 5 v. Van Horne Clipper Properties
    Ltd.

(1989), 70 O.R. (2d) 317 (C.A.) at para. 10, the motion judge
    observed that even if the Offer had been rejected, it remained open for
    acceptance because it had not been withdrawn.

[18]

As the Offer complied with r. 49, the motion
    judge stated that it should be presumptively enforced. He gave comprehensive
    reasons for why the Appellants had failed to rebut the presumption.

[19]

The motion judge next considered whether he
    should exercise his discretion to not require compliance with the settlement. He
    set out the Appellants position at para. 47 of his reasons:

Essentially, the [Appellants] submit that the
    expert evidence obtained in June 2019 completely changed the case such that it
    would be unjust to hold them to an offer that pre-dated that change and of
    which their counsel was unaware. To this, they also argue that it was
    unreasonable for [Respondents] counsel to think that the Offer was still open
    for acceptance given the new evidence, and it is suggested that she took
    advantage of an Offer mistakenly left open by the [Appellants].

[20]

He concluded that this was not one of those
    rare cases where an injustice would result if the settlement was enforced. He
    gave three reasons for this conclusion.

[21]

First, the motion judge felt it was not
    appropriate for him to assess the strength of the case for either side. He said
    that, apart from being unable to do so adequately, allowing a party to avoid an
    outstanding offer on the basis that its case had improved would create
    uncertainty and defeat the purpose of r. 49. He acknowledged that the Respondents
    sold the Property for approximately $900,000 less than what Ms. Yu had agreed
    to pay and that might have been the result of the alleged title issues, but he
    had no evidence of that. Further, he did not have any expert evidence that the
    Respondents might have led in response to the Appellants new evidence. He said
    that, if he were to rely on that new evidence, it would open the door to
    permitting parties to avoid what, in retrospect, may have been an improvident
    offer.

[22]

Second, the motion judge found that this was not
    a case in which the Respondents lawyers knowingly took advantage of a mistake
    by counsel for the Appellants.

[23]

Third, the motion judge did not accept that it
    was unreasonable for the Respondents counsel to have thought the Offer was
    still open despite the expert evidence served on her at the end of June. He
    acknowledged that the case looked different and that counsel for the Respondents
    had indicated that a summary judgment motion was no longer viable. However, counsel
    for the Respondents did not concede that their case was hopeless, and he could
    not so conclude. The motion judge also stated that he would not speculate as to
    why the Respondents chose to accept the Offer which, he noted, compromised the
    case at about 50% of the amount of the loss claimed. He said that this compromise
    made it difficult to conclude that one party would be unduly prejudiced.

The Issue

[24]

The Appellants do not take issue with the motion
    judges conclusion that the Offer complied with r. 49 and the Respondents
    validly accepted it. The sole issue they raise on appeal is whether the motion
    judge erred in refusing to exercise his discretion to not enforce the
    settlement.

THE GOVERNING LEGAL PRINCIPLES

[25]

There is no dispute about the legal principles
    that govern this appeal.

[26]

Rule 49.09(a) is permissive. If a party to an
    accepted offer does not comply with the terms of the offer, the other party can
    move for judgment in the terms of the accepted offer and the judge may grant
    judgment accordingly. Thus, the judge has discretion whether to enforce the
    settlement.

[27]

The standard of review of the judges exercise
    of discretion to enforce a settlement was articulated by this court in
Milios
    v. Zagas

(1998), 38 O.R. (3d) 218 (C.A.), at para.19:

In determining whether to enforce a settlement
    under R. 49.09, all of the relevant factors disclosed by the evidence must be
    taken into account. When that is done, an appellate court will not generally
    interfere with the motion judges decision to grant, or not grant, judgment in
    accordance with an accepted offer.

[28]

At para. 21 of
Milios
,
Osborne
    J.A., writing for the court, stated that the motions judge erred by not taking
    into account manifestly important factors, including:

- since no order giving effect to the
    settlement had been taken out, the parties pre-settlement positions remained
    intact;

- apart from losing the benefit of the
    impugned settlement, the defendant would not be prejudiced if the settlement was
    not enforced;

- the degree to which the plaintiff would be
    prejudiced if judgment was granted in relation to the prejudice that the defendant
    would suffer if the settlement was not enforced;

- the fact that no third parties were, or
    would be, affected if the settlement was not enforced.

[29]

In
Srebot v. Srebot Farms Ltd.
, 2013
    ONCA 84, this court reiterated the deferential approach it is to take when reviewing
    such decisions. At para. 5, this court stated that the motion judges
    appreciation of the evidence and her related factual findings attract great
    deference. And, at para. 6, it stated that the discretionary decision to not
    enforce a concluded settlement should be reserved for rare cases where compelling
    circumstances establish that the enforcement of the settlement is not in the
    interests of justice.

THE PARTIES POSITIONS

[30]

The Appellants submit that the motion judge referred
    to the factors set out at para. 21 of
Milios

but failed to consider
    them. They say that failure is a legal error and, consequently, this court owes
    no deference to the motion judges discretionary decision to not enforce the
    settlement. The Appellants make four arguments in support of this position.

[31]

First, there is clear evidence of an error. Ms.
    Yus uncontradicted evidence was that she believed there were no offers that
    could be accepted by the Respondents and her new counsel were unaware of the
    outstanding Offer. While the Offer ought to have been withdrawn before it was
    accepted, this mistake by counsel ought not to be visited on the Appellants.

[32]

Second, no order giving effect to the settlement
    had been taken out.

[33]

Third, the motion judge did not carry out a meaningful
    analysis of the relative prejudice to the parties because he failed to consider
    the possibility that Ms. Yu was correct that the Respondents could not convey good
    title. If correct, she did not breach the agreement of purchase and sale and yet,
    because of the enforcement of the settlement, as the blameless party she would
    have to pay $485,000 to the at-fault Respondents because of a lawyers slip. Further,
    while there was compelling evidence of potential prejudice to Ms. Yu, including
    being deprived of having the issues decided on the merits at a trial, there was
    no evidence of prejudice to the Respondents apart from the loss of the
    settlement.

[34]

Fourth, no third parties would be affected by
    the non-enforcement of the settlement.

[35]

The Respondents submit that there is no basis on
    which to interfere with the motion judges discretionary decision and that the
    Appellants are seeking to relitigate the motion by asking this court to engage
    in its own assessment of the evidence. They contend that the motion judge considered
    all the relevant legal principles, made factual findings that withstand scrutiny
    on the palpable and overriding standard, and reasonably concluded that this was
    not one of those rare cases in which it would not be in the interests of
    justice to enforce the settlement.

Analysis

[36]

I accept the Respondents submissions. The motion
    judges factual findings are wholly justified on the record and the Appellants
    do not suggest otherwise. The motion judge also clearly and correctly
    articulated the governing legal principles. Again, the Appellants concede this.
    The Appellants sole quarrel is with the motion judges exercise of discretion. However,
    I am satisfied that the motion judge took into consideration all relevant
    factors when exercising his discretion and, consequently, there is no basis for
    this court to interfere with his decision.

[37]

The Appellants foundational proposition is that
    the motion judge erred in law by failing to take into account the factors set
    out at para. 21 of
Milios
. I reject this proposition for four reasons.

[38]

First, in determining whether to enforce the
    settlement, the motion judges task was to consider all relevant factors:
Milios
,
    at para. 19. The factors identified at para. 21 of
Milios

were
    important in the circumstances of that case. That does not mean that they are
    relevant in all cases and that a failure to advert to them on the part of the
    motion judge is an error in law.

[39]

Second, at para. 49 of his reasons, the motion
    judge quoted para. 21 of
Milios
, showing that he was alive to a
    consideration of those factors. There was no need to mention that no order
    giving effect to the settlement had been taken out and no third-party rights were
    affected because the parties did not contend otherwise.

[40]

Third, the motion judge fully addressed the relevant
    factors as identified by the Appellants. One of those factors was the
    Appellants submission that a mistake had been made which warranted the motion
    judges exercise of discretion. The motion judge disagreed. He found that this
    case was not like
Fox Estate v. Stelmaszyk
(2003), 65 O.R. (3d) 846 (C.A.),
    in which the plaintiffs lawyer knowingly took advantage of a mistake by
    counsel for the defendants. On the contrary, the motion judge found that
    counsel for the Respondents did not take advantage of a mistake on the part of
    new counsel for the Appellants because she was unaware that new counsel did not
    know that the Offer was outstanding. What she did know was that new counsel had
    the Appellants full file for a month before she accepted the Offer. The fact
    that Ms. Yu believed there were no outstanding offers does not undermine the
    motion judges finding that there was no mistake of the sort found in
Fox
    Estate

which justified judicial refusal to enforce the settlement.

[41]

Fourth, the motion judge meaningfully considered
    the Appellants arguments based on the relative prejudice to the parties if the
    settlement were enforced. He acknowledged that the Appellants case appeared to
    have been strengthened as a result of the expert evidence. However, on the
    record before him, the motion judge said that he could not adequately assess
    the parties relative positions on the underlying merits of the case and that
    it would not be appropriate in any case. To the extent that the quoted words
    suggest that it would never be appropriate to assess the underlying merits of
    the case, I disagree because there may be situations in which it would be
    appropriate to make that assessment.  However, I agree with the motion judge that,
    in the circumstances of this case, it would not have been appropriate to engage
    in such an assessment.

[42]

The motion judge gave further reasons on the
    question of the relative prejudice the parties would suffer if the settlement
    were enforced. He said that allowing a party to avoid an outstanding offer on
    the basis its position had improved would create uncertainty and defeat the
    purpose of r. 49. He also noted that he did not have evidence before him that
    it was the title issues that led to the Respondents selling the Property for
    $900,000 less than what Ms. Yu had agreed to pay for it. Further, he did not
    have any expert evidence that the Respondents might have introduced in response
    to that of the Appellants and stated that relying on the latter as the basis
    for exercising his discretion would open the door to permitting parties to
    avoid what, in retrospect, may have been an improvident offer.

[43]

Finally, as the motion judge noted at para. 54
    of his reasons, the fact that the Offer reflected a compromise approaching 50%
    of the amount of the loss claimed made it difficult to conclude that one party
    or the other would be unduly prejudiced in the circumstances.

[44]

In short, contrary to the Appellants assertion,
    the motion judge fully considered their arguments relating to the interests of
    justice and the degree of prejudice that would be suffered by the respective
    parties.

[45]

The motion judge considered all relevant factors
    before concluding that this was not one those rare cases in which the
    interests of justice favoured the exercise of his discretion to refuse to
    enforce the settlement. I see no basis on which to interfere with the motion
    judges decision.

DISPOSITION

[46]

Accordingly, I would dismiss the appeal with
    costs to the respondent fixed at $7,500, all inclusive.

Released: March 25, 2021 J.C.M.

E.E.
    Gillese J.A.

I agree.
    J.C. MacPherson J.A.

I agree.
    I.V.B. Nordheimer J.A.





[1]

Unfortunately, Mr. Magnotta passed away during the
    litigation. Ms. Magnotta continued with the litigation both on her own behalf
    and as representative of Mr. Magnottas estate.



[2]

There is some confusion in the record on when the expert
    reports were served on counsel for the Respondents. I have followed the motion
    judges statement on this matter at para. 18 of his reasons.


