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A lesson for newly retained counsel: Magnotta v Yu, 2021 ONCA 185

3 minute read

In Magnotta v Yu, 2021 ONCA 185, the Court of Appeal upheld a decision of a motion judge to presumptively enforce settlement. The decision was appealed on the basis that the motion judge erred in refusing to exercise his discretion not to enforce the settlement.

In this case, the respondents were vendors of a real estate property. They had entered into an agreement of purchase and sale with one of the appellants as a purchaser. The appellant failed to close the transaction and the respondents sued. During the course of the litigation, offers to settle were exchanged between the parties. In May 2019, an offer to settle was put forward by counsel for the appellants. Initially, counsel for the respondents rejected this offer.

Counsel for the appellants changed a couple of months later. Shortly thereafter, counsel for the respondents wrote to the appellant’s new counsel to advise that their clients now accepted the previous offer. Counsel for the appellants responded stating that there was no offer capable of acceptance as the previous offer was no longer open for acceptance.

The respondents moved to enforce the settlement on the basis that the offer complied with the requirements set out in Rule 49 of the Rules of Civil Procedure. The motion judge agreed that the offer complied with the Rule 49 requirements and stated that the settlement should be presumptively enforced. The appellants argued that the motion judge should exercise his discretion to not require compliance with the settlement. The appellants’ position was that the respondents took advantage of an offer mistakenly left open by the appellants. The motion judge concluded that this was not a case where injustice would result if the settlement was enforced. The motion judge did not accept that it was unreasonable for the respondents’ counsel to have thought the offer was still open at the time and did not find that the respondents’ counsel knowingly took advantage of a mistake by counsel for the appellants.

The issue raised on appeal was whether the motion judge had erred in refusing to exercise his discretion not to require compliance with the settlement.

The Court of Appeal dismissed the appeal finding that the motion judge took into consideration all relevant factors when exercising his discretion. The Court of Appeal confirmed that the standard of review of a judge’s exercise of discretion to enforce settlement was set out in Milios v Zagas (1998), 1998 CanLII 7119 (ON CA). In that decision, the Court of Appeal set out factors that were important for the motion judge, in that particular case, to consider. In Magnotta, the Court of Appeal clarified that those specific factors are not relevant in all cases and the failure of a motion judge to reference all of them does not amount to an error in law. The Court of Appeal concluded that this case was not a “rare case” where interference with settlement would have been appropriate.

In this case, a mistaken assumption that a rejection of an offer amounted to a withdrawal led to an unintended settlement. When taking over a file counsel must be diligent in completing their file review. Any offers previously made should be unequivocally withdrawn. Most importantly, this case should serve as a reminder that the court’s decision to exercise discretion is just that – discretionary.

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Jacqueline A. Fortner

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