



COURT
    OF APPEAL FOR ONTARIO

CITATION:
    Deschenes v. Lalonde, 2020 ONCA 304

DATE:
    20200520

DOCKET:
    C66312

van
    Rensburg, Paciocco and Thorburn JJ.A.

BETWEEN

Irene
    Deschenes

Plaintiff (Respondent)

and

Pauline Lalonde as
    estate trustee with a will (Executrix) of the

Estate of Charles H.
    Sylvestre,
the Roman Catholic Episcopal

Corporation of the
    Diocese of London in Ontario
, the Estate of John

Christopher Cody, the
    Estate of Gerald Emmett Carter,
John Michael

Sherlock
, St. Clair Catholic
    District School Board, the Sarnia Police

Force, John
    Smith, J. Torrance, Le Conseil scolaire de district des

écoles catholiques du Sud-Ouest,
    the Sisters of Charity of Ottawa

(also known as Grey
    Nuns of the Cross  Soeurs Grises de la Croix)

and
Anthony Daniels

Defendants
    (
Appellants
)

John
    K. Downing and Brian Whitwham, for the appellants

Loretta
    P. Merritt, for the respondent

Heard:
    November 19, 2019

On
    appeal from the judgment of Justice David Aston of the Superior Court of
    Justice, dated November 27, 2018, with reasons reported at 2018 ONSC 7080.

van Rensburg J.A.:


A.

OVERVIEW

[1]

This is an appeal from a judgment rescinding and setting aside a settlement
    agreement and order dismissing the settled action. The respondent, Irene
    Deschenes, alleged that she was sexually assaulted as a child by a priest in
    the early 1970s. She sued the priest and the appellant, the Roman Catholic
    Episcopal Corporation of the Diocese of London in Ontario (the Diocese), claiming
    vicarious liability for the priests actions, and negligence in failing to
    prevent the assaults. The Diocese maintained, and at the time there was no
    reason to believe otherwise, that it had no knowledge of the priests prior
    abuse of others until 1989, many years after the assaults on Ms. Deschenes had
    ceased. Armed with this knowledge, and the fact that the law respecting
    vicarious liability was uncertain, Ms. Deschenes settled her action in 2000 for
    a payment by the Diocese of $100,000.

[2]

In 2006, it came to light that in 1962, the Diocese had received police statements
    alleging that the priest had assaulted three girls well before Ms. Deschenes
    was assaulted. In 2008, Ms. Deschenes commenced a new action against the
    Diocese and others, claiming rescission of the settlement agreement and other
    relief. The parties moved for summary judgment to determine the enforceability
    of the settlement agreement entered into in 2000.

[3]

For the reasons that follow, I would dismiss the appeal. Briefly,
    although the motion judges analysis at times confounded the terminology of misrepresentation
    and mistake, the settlement agreement was properly rescinded for innocent
    misrepresentation. The motion judges conclusions that there was a misrepresentation
    by the Diocese, that it was material, and that it was relied on by Ms.
    Deschenes in concluding the settlement, as well as his conclusion that it would
    be fair and just to rescind the settlement agreement in the circumstances,
    reveal no error.

B.

FACTS

[4]

Ms. Deschenes was sexually assaulted by Charles Sylvestre when she was a
    student at St. Ursula Catholic School and a member of St. Ursulas Parish in
    Chatham, Ontario, which falls within the jurisdiction of the Diocese. Father Sylvestre
    had been ordained as a Roman Catholic priest in or about 1948. He retired in
    1993. In 2006, Father Sylvestre pleaded guilty to having sexually assaulted 47
    girls under the age of 18, including Ms. Deschenes.

[5]

In 1996, Ms. Deschenes commenced an action in the Ontario Court (General
    Division) (the First Action) against Father Sylvestre and the Diocese. She
    claimed damages for the sexual assaults committed against her by Father Sylvestre
    between 1970 and 1973. Among other things, she pleaded that the Diocese was
    both vicariously liable for Father Sylvestres actions and that it was
    negligent in failing to protect her from Father Sylvestre when it knew or ought
    to have known that he was or might be assaulting members of the church.

[6]

Father Sylvestres Statement of Defence denied the allegations of sexual
    assault. The Statement of Defence of the Diocese did not admit any of the
    allegations in the Statement of Claim and denied direct and vicarious liability
    for Father Sylvestres alleged actions. In particular, the Diocese denied that
    it had direct, indirect, actual or constructive knowledge of the alleged sexual
    propensities or acts of Sylvestre and stated that it had no direct, indirect,
    actual or constructive knowledge of the allegations made by the plaintiffs
    until October 1992, well after the alleged assaults had ceased.

[7]

Father Anthony Daniels (now Bishop Daniels) was the deponent of the
    affidavit of documents on behalf of the Diocese and was examined as its
    representative for discovery in the First Action. Father Daniels confirmed that
    he had conducted a search of the records of the Diocese and made diligent
    inquiries to determine when it first learned about the allegations against Father
    Sylvestre. He denied that anyone in the Diocese had any idea of the events
    alleged by Ms. Deschenes, and he specifically stated that no one at the
    Diocese had reason to believe that there were problems with Father Sylvestre until
    1989, when a fellow priest raised concerns about his possible alcohol abuse.

[8]

The parties attended a mediation in the First Action. In its mediation brief,
    the Diocese asserted the following:

There
    were never any complaints about Father Sylvestre, or reason to believe there
    could be any problems with him or his behaviour prior to 1989 when a fellow
    priest raised concerns with the Bishop about possible alcohol abuse by Father
    Sylvestre. He was immediately removed from the parish where he was then
    serving, and sent to a treatment centre.

[9]

Shortly after the mediation, the parties agreed to settle the First
    Action. The relevant terms of the settlement were that: (1) the Diocese would
    pay Ms. Deschenes $100,000; (2) Father Sylvestre would pay the Diocese $50
    per month until his death; (3) Ms. Deschenes would execute a full and final
    release in favour of Father Sylvestre and the Diocese (the Release); and (4) Ms.
    Deschenes would obtain an order dismissing the action. Ms. Deschenes executed
    the Release, received her payment, and the First Action was dismissed on
    consent by order dated October 16, 2000.

[10]

In
    late 2006, certain information came to light: on January 17, 1962, three girls had
    complained to the Sarnia Police Service that they had been sexually assaulted
    by Father Sylvestre, and each had provided a statement to the police to this
    effect. The police, who took no action against Father Sylvestre, provided
    copies of the statements to Monsignor Cook, of the Catholic Social Services in
    Sarnia, who forwarded them to the then bishop of the Diocese, Bishop Cody.
    Bishop Cody passed away suddenly in December 1963, apparently without having
    told anyone about the police statements. Between January 1962 and January 1963,
    Father Sylvestre was on a leave of absence in Roxboro, Québec. The police statements
    were discovered in 2006 by the executive assistant of the bishop of the Diocese
    at the time, in a filing cabinet where they had been misfiled with old
    accounting records. Shortly thereafter, copies of the statements were sent to
    all lawyers representing plaintiffs with outstanding claims against Father Sylvestre,
    including Ms. Deschenes former counsel.

[11]

As
    a result of receiving this information, Ms. Deschenes commenced an action (the
    Second Action) against the Diocese and others in December 2008, seeking to
    rescind her settlement of the First Action and claiming damages against the
    Diocese for, among other things, vicarious liability for Father Sylvestres assault,
    and negligence in failing to prevent the assaults.

[12]

Ms.
    Deschenes position in the Second Action was that she would never have settled
    the First Action on the terms she did had she known that the Diocese had
    information about Father Sylvestres prior abuse of children at the time she
    was assaulted.

[13]

Eventually,
    the parties brought competing motions for summary judgment. The appellants
    moved to dismiss the Second Action on the basis that it was barred by the
    Release. Ms. Deschenes moved for a declaration rescinding or setting aside the
    Release and the related order giving effect to the settlement. Ms. Deschenes
    also sought summary judgment on the issue of liability, leaving damages as the
    only outstanding issue in the Second Action. Judgment was granted in Ms. Deschenes
    favour.

[14]

The
    appellants assert that the motion judge erred in rescinding the settlement
    agreement. They do not appeal the declaration of vicarious liability, which was
    made on consent.

C.

DECISION
    OF THE MOTION JUDGE

[15]

The
    motion judge began his reasons by recognizing, at para. 2, the
    well-established public policy argument favouring finality in litigation, and
    that [s]ettlement agreements and associated releases ought to be enforced
    unless enforcement would create a real risk of injustice.

[16]

The
    motion judge reviewed the evidence of the Diocese in the context of the First
    Action, including its denial that it had failed to supervise Father Sylvestre,
    and the statements on discovery and in the Dioceses mediation brief stating
    that it had no knowledge or reason to believe there were problems with Father
    Sylvestres behaviour nor had there been any complaints. He then described the
    terms of the parties settlement and the events that precipitated the Second Action,
    namely the discovery of the police statements in 2006 and their subsequent
    disclosure to Ms. Deschenes former counsel.

[17]

The
    motion judge explained that actual or constructive knowledge on the part of the
    Diocese was an essential part of Ms. Deschenes negligence claim. The motion
    judge summarized Ms. Deschenes legal position at the time as follows: Ms.
    Deschenes vicarious liability claim was problematic because an employer was
    generally only vicariously liable if the employees conduct was within the
    scope of their employment. He further noted that claims against non-profit
    organizations were even less likely to succeed: at para. 11.

[18]

The
    motion judge considered the affidavit evidence of Ms. Deschenes and her former
    counsel, who both asserted that Ms. Deschenes would not have settled as she did
    in the fall of 2000 had they known about the 1962 police statements. He referred
    to Ms. Deschenes position that the representation by the Diocese that it had
    no knowledge of Father Sylvestres sexual abuse until 1989 constituted a
    misrepresentation of a material fact that she relied on in settling her claim.

[19]

Citing
Guarantee Co. of North America v. Gordon
    Capital Corp.
, [1999] 3 S.C.R. 423, at para. 47, the motion judge
    noted that rescission would be available as an equitable remedy, even if the
    misrepresentation was innocent, provided that the misrepresentation was
    material, substantial or [went] to the root of the contract. He also
    cited
Buccilli v. Pillitteri
, 2012 ONSC 6624, 84 E.T.R. (3d) 208, at
    paras. 173-75, affd 2014 ONCA 432, 96 E.T.R. (3d) 6, as support for the
    proposition that reliance only requires that the misrepresentation was an
    influential part of Ms. Deschenes decision to settle.

[20]

The
    motion judge stated, at para. 14, that he agreed with Ms. Deschenes counsel
    that the misrepresentation in this case cannot be regarded as an innocent
    misrepresentation as the law defines it. He did not question the veracity of
    Father Daniels statement under oath that he had done a diligent search of the
    Dioceses records and found nothing to alert the Diocese to Father Sylvestres
    sexual abuse of young girls before 1989. However, he stated that the Diocese is
    a corporate body, that Bishop Cody knew of the police statements in 1962, and he
    agreed with Ms. Deschenes counsel that Father Daniels ignorance of those
    police reports in 2000 is not the ignorance of the Diocese because Bishop
    Codys knowledge in 1962 or 1963
is
the knowledge of the Diocese: at para.
    14. The motion judge further noted that for the same reason, the
    misrepresentation cannot be considered a mutual or common mistake but is a
    unilateral mistake by the Diocese: at para. 15. These statements by the motion
    judge play a central role in the appellants arguments on appeal and will be
    discussed in more detail in the balance of these reasons.

[21]

The
    motion judge, at para. 16, characterized the misrepresentation as a unilateral
    mistake and considered whether this mistake was material to the settlement
    and relied on by Ms. Deschenes.

[22]

The
    Diocese had submitted that the police statements were not material to the
    settlement because the settlement reflected the same damages Ms. Deschenes
    would have received had the settlement been based in negligence, and the June
    1999 decision of the Supreme Court in
Bazley
    v. Curry
, [1999] 2 S.C.R. 534 had established the liability of the
    Diocese on the basis of vicarious liability. The motion judge described
Bazley
as a landmark case in extending
    vicarious liability to non-profit organizations, and then referred to a
    decision released the same day,
Jacobi v.
    Griffiths
, [1999] 2 S.C.R. 570, where the Supreme Court concluded
    that vicarious liability would not be imposed when the only evidence was in
    relation to sexual assaults that took place off-site and outside working hours.
    The motion judge noted that in
John Doe v.
    Bennett
(2000), 190 Nfld. & P.E.I.R. 277 (Nfld. S.C.)
, a diocese and
    three of its bishops had been found vicariously liable, but that this decision had
    been appealed and was only affirmed by the Supreme Court in March 2004. The
    motion judge observed that [t]he decisions in
Bazley
and
Bennett
provided the plaintiff with strong precedents in her favour, but not
    necessarily decisive precedents: at para. 19. The motion judge also referred
    to the fact that, although the Diocese indicated in 1999 that it would be
    accepting liability on the basis of vicarious liability, it never did so
    formally, and had continued to deny such liability. He stated that the
    vicarious liability of the Diocese in this case was not a certainty in the
    settlement with the plaintiff: at para. 20.

[23]

The
    motion judge referred to Ms. Deschenes motivations in settling the First
    Action, which were informed by the relevant case law at the time and the
    position of the Diocese. He concluded that what he characterized as the
    unilateral mistake of the Diocese was relied on by Ms. Deschenes. He accepted
    her evidence, and that of her former counsel, that the settlement reflected a
    liability discount, and that Ms. Deschenes claim was compromised because of
    the apparent inability to prove the prior knowledge of the Diocese as an
    essential element of the negligence claim and the remaining uncertainty of the
    law regarding vicarious liability: at paras. 21-22.

[24]

The
    motion judge concluded, at para. 23, that the failure to disclose the 1962
    police statements was a material misrepresentation relied on by Ms. Deschenes
    in her decision to settle.

[25]

Finally,
    the motion judge turned to the discretionary nature of the remedy of rescission
    and policy considerations favouring the finality of settlements. In this
    context, he referred to what had come to light since the settlement of Ms. Deschenes
    claim in 2000 regarding the cover-up policy of the Diocese in the 1960s and 1970s
    with respect to allegations of misconduct by its priests. He recognized that
    the Diocese had dramatically changed its ways in Southwestern Ontario and had genuinely
    tried to make amends. Nevertheless, he concluded, at para. 24, that there were
    overarching considerations of fairness and justice that favoured Ms. Deschenes and
    that it would be wrong in the circumstances of this case to protect the
    settlement.

D.

ISSUES

[26]

The
    appellants raise the following issues on this appeal:

1.

Did
    the motion judge err in rescinding the settlement agreement on the basis of
    unilateral mistake?

2.

Did
    the motion judge err in his assessment of materiality?

3.

Did
    the motion judge err in not giving effect to the finality of settlements and
    in relying on findings in another action in deciding whether to grant the
    equitable remedy of rescission?

E.

ANALYSIS

(1)

The
    relevant legal principles

[27]

I
    begin by setting out the relevant legal principles. The point of departure is
    that there is a strong presumption in favour of the finality of settlements:
Tsaoussis
    (Litigation Guardian of) v. Baetz
(1998), 165 D.L.R. (4th) 268 (Ont.
    C.A.), at paras. 15-16, leave to appeal refused, [1998] S.C.C.A. No. 518;
Mohammed
    v. York Fire & Casualty Insurance Co.
(2006), 79 O.R. (3d) 354 (C.A.),
    at para. 34, leave to appeal refused, [2006] S.C.C.A. No. 269. A settlement agreement
    will not be rescinded on the basis of information that has come to light
    following the settlement that indicates that a party has entered into an
    improvident settlement. As the motion judge recognized here, it is not enough
    to revisit a settlement decision based on the better vision of hindsight: at para.
    2.

[28]

A
    settlement agreement, as a contract, may be rescinded on the basis of
    misrepresentation. The interest in the finality of settlements will not trump
    the need to rescind a settlement agreement in such cases. In
Radhakrishnan
    v. University of Calgary Faculty Association
, 2002 ABCA 182, 215 D.L.R.
    (4th) 624, at paras. 30, 43, Côté J.A. stated that [t]he recognized ways to
    upset a settlement contract are the same as those to upset any other contract,
    and that [in a settlement] [i]nterests of finality prevail, unless there are
    contractual problems such as fraud, misrepresentation, duress, undue influence,
    unconscionability, or mutual or unilateral mistake. See also
Teitelbaum v.
    Dyson
(2000), 7 C.P.C. (5th) 356 (Ont. S.C.), at para. 38, affd (2001), 151
    O.A.C. 399 (C.A.), leave to appeal refused, [2001] S.C.C.A. No. 532.

[29]

The
    equitable remedy of rescission is available for a false or misleading representation
    that induces a contract:
Guarantee Co. of North America
, at para. 39.
    Rescission requires proof that the misrepresentation was material and was
    relied on by the party seeking to rescind the contract:
1323257 Ontario
    Ltd. o/a Hyundai of Thornhill v. Hyundai Auto Canada Corp
. (2009), 55
    B.L.R. (4th) 265 (Ont. S.C.), at para. 71;
Barclays Bank v. Metcalfe &
    Mansfield
, 2011 ONSC 5008, 82 C.B.R. (5th) 159, at paras. 156-59, affd
    2013 ONCA 494, 365 D.L.R. (4th) 15, leave to appeal refused, [2013] S.C.C.A.
    No. 374. To be material, a misrepresentation must relate to a matter that would
    be considered by a reasonable person to be relevant to the decision to enter
    the agreement, but it need not be the sole inducement for acting:
York
    University v. Makicevic and Brown
,

2016 ONSC 3718, 33 C.C.E.L.
    (4th) 26, at para. 145, affd 2018 ONCA 893, 51 C.C.E.L. (4th) 30, leave to
    appeal refused, [2019] S.C.C.A. No. 134. Whether a contracting party did in
    fact rely on the misrepresentation, at least in part, to enter into the agreement
    is a question of fact to be inferred from all the circumstances of the case
    and evidence at trial:
Barclays Bank
, at para. 159.

[30]

The
    remedy of rescission is available even if the misrepresentation was made
    innocently, that is, by a party who believed it was true: Where rescission is
    claimed it is only necessary to prove that there was misrepresentation. Then,
    however honestly it may have been made, however free from blame the person who
    made it, the contract, having been obtained by misrepresentation, cannot stand:
Derry v. Peek
(1889), [1886-90] All E.R. Rep. 1 (H.L.), at p. 13,
per
Lord Herschell. In
Kingu v. Walmar Ventures Ltd
., [1986] B.C.J.
    No. 597 (C.A.), McLachlin J.A. (as she then was) set out a list of requirements
    for rescission of a contract on the basis of innocent misrepresentation. In
    addition to the requirement of a positive misrepresentation of an existing fact
    that induced the plaintiff to enter into the contract, in order for rescission
    to be granted, the plaintiff must have acted promptly upon discovery of the
    misrepresentation to disaffirm the contract, no third party may have acquired
    rights for value as a result of the contract, and it must be possible to
    restore the parties substantially to their pre-contract position:
Kingu
,
    at para. 15.

[31]

It
    is apparent from this summary of the legal principles that, in determining
    whether the settlement agreement could be rescinded for innocent
    misrepresentation, the motion judge had to consider: (1) whether the Diocese
    made a misrepresentation; (2) whether the misrepresentation was material to the
    settlement; and (3) whether Ms. Deschenes had relied on the misrepresentation
    in settling the First Action on the terms she did. The record before this court
    indicates that while questions of delay, third-party rights, and the ability to
    restore the parties to their pre-settlement positions were pleaded in the
    appellants Statement of Defence, they were not pressed at the hearing of the
    motions. Nor did they figure in the appeal.

[32]

As
    noted by Côté J.A. in
Radhakrishnan
, a settlement agreement may also
    be rescinded on the basis of unilateral mistake. I will explain why I reject
    the appellants submission that the motion judge, after finding a unilateral
    mistake by the Diocese, erred in this case in rescinding the settlement
    agreement on this basis. The law on rescission for unilateral mistake is that a
    party may seek rescission of a contract for its own unilateral mistake only
    where the mistake goes to a material term of the contract, where the other
    party knows or ought to know of the mistake, and where it would be
    unconscionable for the second contracting party to rely on the contract:
256593 B.C. Ltd. v. 456795 B.C. Ltd
. (1999), 171 D.L.R. (4th) 470
    (B.C.C.A.), at p. 479. See also Gerald H. Fridman,
The Law of Contract in
    Canada
, 6th ed. (Toronto: Thomson Reuters Canada Limited, 2011), at pp.
    252-54;
Toronto Transit Commission v. Gottardo Construction Limited et al.
(2005),
    257 D.L.R. (4th) 539 (Ont. C.A.), at para. 30, leave to appeal refused, [2005]
    S.C.C.A. No. 491. The motion judge did not refer to these principles, and for
    good reason. Although the motion judge characterized the misrepresentation as a
    unilateral mistake of the Diocese, he did not, nor could he have, rescinded
    the settlement agreement for unilateral mistake, where the only mistake he
    found was that of the Diocese, not Ms. Deschenes. Rather, the framework he
    applied was that of rescission for innocent misrepresentation.

[33]

I
    turn now to consider in detail the appellants arguments based on the law of
    unilateral mistake.

(2)

The
    motion judge did not err in applying the law of unilateral mistake; he applied
    the law of innocent misrepresentation

[34]

The
    appellants assert that the motion judge erred in law when he rescinded the
    settlement agreement based on unilateral mistake. Referring to the elements
    that are required to rescind an agreement for unilateral mistake, the
    appellants contend that: (1) the Diocese had no actual or constructive
    knowledge of the mistake at the time it was made; and (2) there was no evidence
    of unconscionable conduct on the part of the Diocese.

[35]

On
    the knowledge point, the appellants argue that the motion judge erred in
    imputing knowledge of the 1962 police statements to the Diocese at the time of
    the settlement when, at para. 14, he agreed with Ms. Deschenes counsel that Father
    Daniels ignorance of those police reports in 2000 is not the ignorance of the
    Diocese because Bishop Codys knowledge in 1962 or 1963
is
the knowledge
    of the Diocese. The appellants submit that because Bishop Cody (who was the
    only person in authority who knew about the statements) had since passed away,
    although the statements existed, no directing mind of the Diocese knew about
    the police statements when the settlement was concluded in 2000. Without actual
    or constructive knowledge on the part of the Diocese that there was a mistake,
    there is no basis for rescinding the settlement agreement on the grounds of unilateral
    mistake.

[36]

According
    to the appellants, the imputation of knowledge requires the application of the
    corporate identification doctrine, which was ignored by the motion judge. The
    appellants refer to the Supreme Court decision in
Canadian Dredge & Dock v. The Queen
, [1985] 1 S.C.R. 662,
    which addresses the circumstances in which, under the corporate identification
    doctrine, liability will be attributed to a corporation for a
mens rea
offence, as well as certain civil authorities where the corporate
    identification doctrine was applied to causes of action requiring knowledge or
    intention on the part of a corporate defendant. The appellants submit that the
    motion judge erred in attributing Bishop Codys knowledge in the 1960s to the
    Diocese some 40 years later.

[37]

The
    corporate identification doctrine, which applies when liability is sought to be
    attributed to a corporation for the wrongdoing of an individual, has no
    application here. Rescinding the settlement agreement on the basis of an
    innocent misrepresentation does not require proof of a crime, or even of an
    intentional wrong by the Diocese that might require an inquiry into whose
    intentional misconduct could be attributed to the Diocese to found liability.

[38]

It
    is unclear why the motion judge made the statement he did at para. 14 about the
    knowledge of Bishop Cody in 1962 and 1963 being the knowledge of the Diocese in
    2002. Perhaps it was simply a rejection of the argument  made obliquely on
    appeal as well  that the institutional memory of the Diocese was somehow lost
    when Bishop Cody died without having told anyone about the police statements.

[39]

Whether
    or not the motion judge, at para. 14, imputed knowledge to the Diocese ultimately
    had no bearing on his decision to rescind the settlement agreement. The
    appellants argument on this point is based on the assumption that the motion
    judge rescinded the settlement agreement for unilateral mistake. However, as I
    will explain, the motion judge did not, and could not have, rescinded the
    settlement agreement on this basis. Instead, the settlement agreement was
    properly rescinded for innocent misrepresentation.

[40]

Rescission
    based on innocent misrepresentation does not require a finding that the Diocese
    had actual or constructive knowledge that the representation was false at the
    time it was made. An innocent misrepresentation is one that is made without
    knowledge that it is wrong: see
Barclays Bank
, at para. 156.

[41]

I
    note here that, although the motion judge said that he accepted that the
    misrepresentation was not innocent, later in his reasons, he stated that he
    was mindful that the evidence of Father Daniels in the original proceeding
    reflected an honest, albeit mistaken belief: at para. 24. Regardless of the
    motion judges characterization of the misrepresentation, the motion judge
    properly found that the requirements for rescinding the settlement agreement on
    the basis of misrepresentation had been made out: the Diocese made a misrepresentation;
    the misrepresentation was material to the settlement; and the misrepresentation
    was relied on by Ms. Deschenes.

[42]

The
    appellants second argument also assumes that the motion judge rescinded the settlement
    agreement for unilateral mistake. The appellants submit that

unconscionable
    conduct had to be established for the motion judge to rescind the settlement agreement
    on the basis of unilateral mistake, and that the finding that Father Daniels
    had an honest but mistaken belief precluded such a finding.

[43]

The
    appellants
insist that, because of the motion
    judges use of the language of mistake on a number of occasions in his reasons,
    his decision to rescind the settlement agreement must have been based on the
    law of unilateral mistake. For example, at para. 15, the motion judge stated
    that
the misrepresentation cannot be considered a mutual or common
    mistake, and that it was a unilateral mistake by the Diocese. Moreover, at
    para. 16, he identified the question as whether the unilateral mistake of the
    Diocese was relied upon by the plaintiff.

[44]

I
    agree that the motion judge, at times, confused the language of mistake and
    misrepresentation and described the misrepresentation as a unilateral mistake
    by the Diocese. The Dioceses misrepresentation could be viewed as a
    unilateral mistake in the sense that it was a one-sided error made on the part
    of the Diocese, but not in the legal sense of the term. Despite this confusion,
    the motion judge only applied the framework of rescission for innocent misrepresentation,
    and made the findings that were necessary to rescind the settlement agreement on
    this basis.

[45]

As
    I have previously noted, a contracting party may obtain rescission on the basis
    of its
own
unilateral mistake where the mistake goes to a material term of
    the contract (something that goes to the root of the contract, or is fundamental
    to the contract), where the other party knows or ought to know of the mistake,
    and where it would be unconscionable for the second contracting party to rely
    on the contract. Indeed, this is the law that the appellants rely on in this
    appeal. There is no question that where there has been a unilateral mistake by
    the innocent party to a contract, a contract can be rescinded only if the non-mistaken
    party knew, or ought to have known, of the innocent partys mistake. The core
    element of knowledge, however, is that of the non-mistaken party. Professor Fridman
    makes this clear when he says, at pp. 252-54:

If
    the party not in error knows or ought to know of the others mistake, any purported
    agreement between them may not be enforceable in equity  on the ground that
    equity will not permit a party to take advantage of the error in offering or
    accepting by the other party. The rationale of such cases is that equity
    penalizes unconscionable conduct, whether it actually constitutes fraud or
    involves something amounting to fraud in the view of equity. It must be unfair,
    unjust or unconscionable to enforce or uphold the contract.

It
    is not necessary for the party seeking to avoid the contract on the ground of
    mistake to prove that the other party caused or induced the mistake (although
    if such causation is established it might lead to rescission for fraud, or for
    innocent misrepresentation). As long as the unmistaken party knows of the mistake,
    without having caused it, that party cannot resist a suit for rectification on
    the grounds of mistake. The same will apply if the other party had good reason
    to know of the mistake and to know what was intended. The converse of the
    proposition as to the knowledge of the other partys mistake is that if the
    unmistaken party is ignorant of the others mistake the contract will be valid
    and neither rescission nor rectification will be possible. [Footnotes omitted.]

[46]

The
    unilateral mistake analysis simply does not fit this case. Here, the mistake
    was that of the Diocese, not Ms. Deschenes. Indeed, as noted above, the motion
    judge characterized the misrepresentation at various points in his reasons as a
    unilateral mistake
by the Diocese
 (emphasis added). To support an
    analysis based on rescission for unilateral mistake, the motion judge would
    have had to have found that
Ms. Deschenes
was the mistaken party and
    that the Diocese was trying to take advantage of her mistake. It may be that Ms.
    Deschenes was also mistaken, in which case, as Professor Fridman notes in the
    passage quoted above, rescission for innocent or fraudulent misrepresentation
    could follow on proof that the other party caused or induced the mistake.

[47]

The proper characterization of what occurred here is
    that the Diocese made a representation that was false when it stated
    repeatedly, including under oath, that no one knew that there was any reason to
    be concerned about Father Sylvestres behaviour before Ms. Deschenes claimed to
    have been assaulted by him, and that there had been no prior complaints. In
    this sense, the Diocese made a mistake. Although the Diocese was mistaken
    when it made the representation, this was not a case of rescission for unilateral
    mistake. Rather, rescission of the settlement agreement was warranted on the
    basis of the law of innocent misrepresentation.

[48]

Although
    there were points in the motion judges analysis where he spoke of a unilateral
    mistake, the motion judge arrived at his decision by applying the test for innocent
    misrepresentation. He identified the misrepresentation made by the Diocese. He then
    assessed the evidence to determine whether the misrepresentation was material to
    the settlement and had been relied on by Ms. Deschenes. Finally, he
    considered factors relevant to the exercise of his discretion in rescinding the
    settlement agreement for misrepresentation, including the importance of the
    finality of settlements.

[49]

Even
    assuming that the motion judge did incorrectly apply the law of unilateral
    mistake, this court has jurisdiction to apply the correct legal framework to
    the evidence:
Courts of Justice Act
, R.S.O. 1990, c. C.43, s.
    134(1)(a);
L.M. v. Peel Childrens Aid Society
, 2019 ONCA 841, 149
    O.R. (3d) 18, at para. 54; and
Ontario (Attorney General) v. Darby Road,
    Welland (In Rem)
, 2019 ONCA 31, 431 D.L.R. (4th) 243, at para. 30. In
    doing so, for the reasons stated above, I would conclude that rescission was
    warranted under the framework of innocent misrepresentation.

(3)

The
    motion judge did not err in his assessment of materiality

[50]

The
    appellants submit that the motion judge erred in finding that the nondisclosure
    of the 1962 police statements was material to Ms. Deschenes decision to settle
    her claim. I disagree.

[51]

The
    conclusion that the misrepresentation was material to Ms. Deschenes decision to
    settle on the terms she did was fully supported by the evidence, and by a
    reasonable understanding of the case law and the legal position of the Diocese
    at the time. The motion judge accepted the evidence of Ms. Deschenes and her
    former counsel that Ms. Deschenes would not have settled her claim as she did
    if they had known about the 1962 police statements.

[52]

At
    the time the First Action was settled, Ms. Deschenes had a difficult case in
    respect of vicarious liability, and she had no evidence that the Diocese knew
    about Father Sylvestres history of abusing girls. She could not make out a
    case of negligence against the Diocese without such evidence. Further, although
    the Diocese contends that it advised Ms. Deschenes counsel in 1999 that it
    would accept vicarious liability for Father Sylvestres actions, the motion
    judge correctly noted that there was no admission in this regard, and that in
    2000, both on discovery and at the mediation, the Diocese continued to deny
    liability on all bases, including vicarious liability.

[53]

Moreover,
    the motion judges determination that Ms. Deschenes did in fact rely on the
    misrepresentation in deciding to enter into the settlement agreement is a
    question of fact that was properly inferred from all the circumstances
of the case and the evidence before the motion judge: see
Fridman, at p. 291;
York University
    v. Makicevic
, 2018 ONCA 893, 51
    C.C.E.L. (4th) 30, at para. 21, leave to appeal refused, [2019] S.C.C.A. No.
    134; and
Barclays Bank
, at para. 159
. This is a finding that can only be disturbed on the basis
    of a palpable and overriding error. No such error has been shown.

(4)

The
    motion judge did not err in failing to enforce the finality of the settlement

[54]

As
    noted by the appellants, settlements are compromises made on the basis of the
    information that is available to the parties at the time. In many instances,
    civil actions are settled on the basis of imperfect or incomplete information.
    In other cases, as here, they are settled after the discovery of documents and
    oral discovery. Settlement decisions are based on the available information and
    the parties assessment of the strength or weakness of their case, informed by
    a consideration of legal precedent.

[55]

Contrary
    to the appellants suggestion, Ms. Deschenes did not seek to resile from the
    settlement simply because new information had come to light which would have
    strengthened her case. Rather, rescission was available because certain key information
    that was provided to Ms. Deschenes by the Diocese was false. Rescission was available
    as a remedy for innocent misrepresentation, which could only be granted once
    the requirements had been met.

[56]

The
    appellants assert that the judgment rescinding the settlement agreement is
    contrary to the principle of finality of litigation. I disagree.

[57]

The
    appropriate framework, which was applied by the motion judge, was to consider
    whether there were grounds to rescind the settlement agreement on the basis of
    the Dioceses innocent misrepresentation, and, in deciding whether to grant the
    remedy of rescission, to address the equitable considerations of whether such a
    remedy would be fair and just. In this context, the motion judge, at para. 24,
    adverted to the appellants arguments with respect to the public policy
    considerations favouring the finality of settlements. After referring to the
    Dioceses historical conduct, he concluded that there were overarching
    considerations of fairness and justice that favoured Ms. Deschenes and that it
    would be wrong in the circumstances of this case to protect the settlement. I
    see no error in the manner that the motion judge exercised his discretion.

[58]

In
    any event, in the circumstances of this case, any interest in the finality of
    settlements could not trump the need to rescind a settlement agreement that,
    based on the evidence, was induced by the Dioceses innocent misrepresentation.

[59]

In
    oral submissions, the appellants advanced another argument in respect of the
    motion judges conclusions at para. 24. The appellants submitted that the
    motion judge erred in relying on the findings and evidence in another case
    against the Diocese involving sexual assaults by Father Sylvestre,
K.M.M.
    v. The Roman Catholic Episcopal Corp.
, 2011 ONSC 2143, when he stated: I
    cannot disregard what has come to light since the settlement of the plaintiffs
    claim in 2000 regarding the cover-up policy of the Church in the 1960s and 70s
    respecting allegations of misconduct by its priests.

[60]

I
    agree that it would not have been appropriate for the motion judge to base his
    decision on whether the requirements of innocent misrepresentation had been
    made out on evidence and findings in another decision. However, that is not
    what the motion judge did here: his findings with respect to the
    misrepresentation, materiality and reliance were all based on the evidence that
    was before him in Ms. Deschenes case. It was only in the context of his
    overall consideration of fairness and justice in deciding whether to rescind
    the settlement agreement, and in responding to the appellants arguments regarding
    the finality of the settlement, that the motion judge referred to what has
    come to light since the settlement.

[61]

Evidence
    that the Diocese had, in the past, attempted to cover up allegations of sexual
    assault was relevant to the consideration of fairness and justice, to be
    weighed in the balance with the arguments of the Diocese in favour of the
    finality of the settlement. The fact that the parties had placed the
K.M.M.
decision before the motion judge as part of the Agreed Facts on the motion
    suggests that they agreed that this decision was both relevant and admissible.
    In any event, whether or not the motion judge was entitled to rely on the
    finding in that case that there had been a cover-up policy by the Diocese,
    there was evidence before him from which a cover-up policy could be inferred:
    in 1962, the police statements were not disclosed by Bishop Cody to anyone in
    authority at the Diocese and Father Sylvestre was transferred out of the
    Diocese and placed on a leave of absence. The motion judges decision did not
    turn on the
K.M.M.
decision.

[62]

There
    is no reason to interfere with the motion judges determination that the
    interests of fairness and justice favoured the equitable remedy of rescission
    in this case.

F.

DISPOSITION

[63]

For
    these reasons, I would dismiss the appeal. I would award costs to Ms. Deschenes
    in the agreed sum of $60,000, inclusive of disbursements and HST.

Released:
    May 20, 2020 (K.M.v.R.)

K. van Rensburg J.A.

I agree. David M.
    Paciocco J.A.

I agree. Thorburn
    J.A.


