



COURT OF APPEAL FOR ONTARIO

CITATION: Barresi v. Jones Lang Lasalle Real
    Estate Services Inc., 2019 ONCA 884

DATE: 20191108

DOCKET: C65204

Feldman, Fairburn and Jamal JJ.A.

BETWEEN

Ryan
    Barresi and 6491243 Canada Inc.

Plaintiffs/Defendants by Counterclaim
(Respondents/Appellants by way of Cross-Appeal)

and

Jones Lang Lasalle Real Estate
    Services Inc.

Defendant/Plaintiff
    by Counterclaim
(Appellant/Respondent by way of Cross-Appeal)

Jock Climie and Larissa Volinets Schieven,
    for the appellant/respondent by way of cross-appeal

Sean Bawden, for the
    respondents/appellants by way of cross-appeal

Heard: October 21, 2019

On
    appeal from the order of Justice Catherine D. Aitken of the Ontario Superior
    Court of Justice, dated March 7, 2018, with reasons reported at 2018 ONSC 837,
    and from the costs order dated April 23, 2018, with reasons reported at 2018
    ONSC 2579.

REASONS FOR DECISION

[1]

The appellant, a real estate investment management company, appeals the
    trial judges decision that it repudiated its contract (the Agreement) with
    the respondents, a real estate broker (Ryan Barresi) and his operating company
    (6491243 Canada Inc.).

[2]

The respondents cross-appeal the trial judges decision to award them substantially
    less in costs than they were  entitled to under r. 49.10(1) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 as a
    result of obtaining a judgment more favourable than their offer to settle: partial
    indemnity costs to the date of service of their offer and substantial indemnity
    costs thereafter. They submit that the trial judge erred by failing to apply
    the rule.

The appeal

[3]

The appellant argues that the trial judge failed to identify and properly
    apply the legal test for anticipatory repudiation, that is, repudiation as to
    the future performance of the contract. It also argues that there could be no
    repudiation here because section S of the Agreement expressly permitted it to
    revoke Barresis status as the Ottawa Practice Lead.

[4]

We disagree.

[5]

The trial judge correctly noted that contractual repudiation occurs by
    words or conduct evincing an intention not to be bound by the contract:
Guarantee Co. of North America v. Gordon Capital
, [1999]
    3 S.C.R. 423, at para. 40. A contractual breach is a repudiation of the
    contract if it is a breach of a contractual condition or of some other
    sufficiently important term of the contract so that there is a substantial
    failure of performance:
Potter v. New Brunswick Legal Aid
    Services Commission
, 2015 SCC 10, [2015] 1 S.C.R. 500, at para.
    145.

[6]

Applying this test, the trial judge found that the appellant had
    recruited Barresi from a competitor to be the Ottawa Practice Lead and the
    go to person at the appellants Ottawa office for investment property
    transactions, but then repudiated the Agreement about a year after it was concluded
    by advising Barresi that: (1) going forward, the respondents could only pursue
    transactions in Ottawa up to a $10 million ceiling, even though the Agreement
    imposed no such ceiling; and (2) transactions above $10 million would be
    exclusively available to the National Retail Investment Group (NRIG) of the
    appellant, which would involve Barresi only as it saw fit. The trial judge
    found that these two limitations undermined Barresis reason for joining the
    appellant, which was to undertake higher value transactions in Ottawa than he
    had formerly.

[7]

The trial judge also found that the respondents accepted the appellants
    anticipatory repudiation of the Agreement, which resulted in the automatic forgiveness
    of a $225,000 loan under a promissory note that formed part of the Agreement.
    However, she dismissed the respondents claim for damages for negligent
    misrepresentation in inducing Barresi to join the appellant because she found
    that any such representations were true when made. It was the later-imposed dollar
    limit that repudiated the agreement.

[8]

The trial judges application of the test for contractual repudiation in
    her detailed reasons was made following a five-day trial with numerous
    witnesses and involved findings of fact and mixed fact and law to which this
    court owes substantial deference. In our view, the trial judge made no palpable
    and overriding error in finding repudiation in this case.

[9]

Finally, whether section S of the Agreement permitted the appellant to
    revoke Barresis status as Ottawa Practice Lead is irrelevant to whether the
    appellant repudiated the Agreement. The respondents did not assert that Barresi
    was removed as the Ottawa Practice Lead. They asserted that the appellant had
    repudiated the Agreement by unilaterally imposing limitations on the
    respondents commercial activities that fundamentally undercut the respondents
    basis for entering the Agreement, namely, to undertake higher-value
    transactions in Ottawa.

[10]

The
    appeal is therefore dismissed.

The cross-appeal as to costs

[11]

The
    respondents seek to cross-appeal the trial judges costs ruling. Leave is
    required.

[12]

The
    trial judge awarded the respondents $40,000 in costs for this five-day trial.
    This was much less than the respondents claim of $125,000 based on their r.
    49.10(1) offer to settle, which was made about two months before trial and
    remained open until trial, in which the respondents had offered to pay the
    appellant $50,000. The respondents later increased this offer twice before
    trial by offering to pay the appellant $100,000, and then $200,000 all-in.
    The appellant did not accept any of these offers or make one itself. It insisted
    on going to trial.

[13]

The
    trial judge accepted that the respondents declaratory judgment for the
    forgiveness of the $225,000 loan was more
favourable
than the terms of their offer to settle, thereby triggering a presumptive entitlement
    under r. 49.10(1) to partial indemnity costs to the date of service of the
    offer and substantial indemnity costs thereafter. This would have resulted in
    the respondents receiving $105,288 for fees and $6,000 for disbursements. But
    the trial judge exercised her discretion to award the respondents only $34,000
    for fees and $6,000 for disbursements because: (1) success was divided, as the
    respondents negligent misrepresentation claim had been dismissed; (2) she
    found that Barresi had acted unreasonably during the litigation process.

[14]

The
    respondents require leave to cross-appeal a discretionary costs order:
Courts of Justice Act
, R.S.O. 1990, c. C.43, s. 133(b). The
    test for leave to appeal costs is high: there must be strong grounds upon
    which the appellate court could find that the judge erred in exercising his [or
    her] discretion:
McNaughton Automotive Limited v.
    Co-Operators General Insurance Company
(2008), 95 O.R. (3d) 365
    (C.A.), at para. 24, citing
Brad-Jay Investments Ltd. v.
    Szijjarto
, 218 O.A.C. 315 (2006) (C.A.), at para. 21. A costs award
    should be set aside on appeal only if the trial judge has made an error in
    principle or if the costs award is plainly wrong:
Hamilton
    v. Open Window Bakery Ltd
.
, 2004 SCC 9, [2004] 1 S.C.R. 303,
    at para. 27.

[15]

The
    respondents say that they meet the test for leave in this case because the trial
    judges reasons for departing from the presumption under r. 49.10(1) involve an
    error in principle and are plainly wrong.

[16]

We
    agree.

[17]

Rule
    49.10 provides a presumption as to costs where an offer to settle is not
    accepted, unless the court orders otherwise. The discretion to depart from
    the presumption as to costs in r. 49.10(1) is not unfettered and must be
    exercised in accordance with the purpose of the rule. The circumstances for
    invoking the exception in r. 49.10(1) should not be so widespread or common such
    that the general rule is no longer, in fact, the general rule:
Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd.
(1987), 58 O.R. (2d) 773 (C.A.), at p. 777. The presumption should be applied in
    the vast majority of cases:
Jarbeau v. McLean,
2017 ONCA 115, 410 D.L.R. (4th) 246, at para. 82; see also
Cimmaster v. Piccione (Manufacturing Technologies Company)
,
    2011 ONCA 486, 336 D.L.R. (4th) 506, at para. 32. This helps ensure that the
    rule is applied in a reasonably predictable fashion, and thereby avoids blunting
    the rules incentives to induce settlements and avoid trials: Mark M. Orkin
    in
The Law of Costs
, loose-leaf, 2nd ed.
    (Toronto: Thomson Reuters, 1987), at §214.1.

[18]

Thus,
    this court has ruled that resort should only be had to the exception where,
    after giving proper weight to the policy of the general rule, and the
    importance of reasonable predictability and the even application of the rule,
    the interests of justice require a departure:
Niagara
    Structural Steel
,
at p. 777.

[19]

Here,
    the trial judge departed from the presumption in r. 49.10(1) on the basis
    that Barresi had acted unreasonably because he could not recall signing the
    Agreement; he had provided his evidence in a confusing fashion; and he had been
    tardy in providing answers to undertakings. She also found that success at
    trial was divided. In our view, in this case, none of these reasons justified departure
    from the presumption in r. 49.10(1).

[20]

First,
    it was an error in principle and plainly wrong for the trial judge to depart
    from the presumption in r. 49.10(1) on the basis that success at trial was
    divided in this case. An offer to settle often involves compromise, premised on
    the notion of divided success in order to avoid trial. Here, the claim that did
    succeed at trial  the $225,000 loan that was forgiven  was more
favourable
than the offer to settle, and therefore triggered
    r. 49.10(1). As this court has noted in
Skye v. Matthews

(1996), 87 O.A.C. 381 (C.A.), at para. 17, [t]here is nothing
    in the offer to settle rules, or the relevant policy considerations, which
    suggests that eligible offers should be viewed on an issue by issue basis. Once
    the respondents obtained a judgment more favourable than their offer to settle,
    thereby triggering the presumption in r. 49.10(1), the trial judge erred by essentially
    relying on the extent to which the judgment was more favourable than their
    offer as a basis to rebut that same presumption. Relying on divided success to
    rebut the presumption in r. 49.10(1) would mean that successful parties would
    obtain the higher costs contemplated by r. 49.10(1) only if they obtain a
    judgment that is more favourable than their offer to settle by a sufficiently
    wide margin. This would frustrate the reasonably predictable application of the
    rule and distort the incentives to induce settlements and avoid trials.

[21]

Second,
    the trial judge contradicted her own comments about litigation misconduct. Elsewhere
    in her reasons, the trial judge found that while Barresi was a tentative
    witness with a poor memory, she accepted that he was not making a conscious
    effort to mislead the court. He simply could not recall details of certain
    relevant events but did not deny them. Where the court finds that a litigant
    simply has a poor memory and is not misleading the court, there is no
    litigation misconduct, and therefore it cannot be said that the interests of justice
    require a departure from the presumption in r. 49.10(1).

[22]

Finally,
    in this case, providing late answers to undertakings during discovery did not in
    itself justify departure from the presumption in r. 49.10(1). While we accept
    that the conduct of a successful party may nullify the salutary effect of an
    offer to settle (Orkin, at §214.6), the impugned conduct here was not
    sufficiently serious and occurred well before trial. To allow such conduct to forestall
    the cost consequences under r. 49.10(1) would again defeat the policy and
    incentives of the rule, because it would mean that no offer to settle could
    have resulted in the higher scale of costs in this case.

[23]

Thus,
    there was no basis for the trial judge to depart from the presumption in r. 49.10(1)
    in this case. The respondents were entitled to partial indemnity costs up to
    the date of service of their r. 49.10(1) offer and substantial indemnity costs
    thereafter.

[24]

We
    therefore grant leave to appeal and allow the cross-appeal.

Disposition

[25]

The
    appeal is dismissed. Leave to cross-appeal is granted and the cross-appeal is
    allowed. The costs order of the trial judge is increased to $111,288, inclusive
    of taxes and disbursements.

[26]

Costs
    of the appeal and cross-appeal are payable to the respondents in the agreed amount
    of $20,000, inclusive of taxes and disbursements.

K. Feldman J.A.

Fairburn J.A.

M. Jamal J.A.


