Background
The Hashemi-Sabet Estate (the "Estate’) sued Oak Ridges Pharamsave Inc. ("Pharmasave") for damages for breach of contract, oppression and various other causes relating to the opening and operation of a pharmacy.
On June 8, 2015, Pharmasave made a written Rule 49 offer to settle for $55,555.55, which was to remain open until trial ("the June Offer"). The Estate did not respond to the June Offer before the pretrial.
The matter proceeded to pretrial on September 20, 2016. The matter did not settle and what transpired at the pre-trial is disputed.
The Estate claimed that at the conclusion of the pretrial on September 20, 2016, it served Pharmasave’s counsel with written acceptance of the June Offer by way of fax at 1:27 p.m. Approximately an hour later, at 2:34 p.m., a law clerk of Pharmasave made a phone call to the Estate requesting a copy of the June Offer, which the Estate subsequently sent by email.
Pharmasave took the position that the June Offer had already been revoked orally at pretrial, so the Estate’s subsequent acceptance was ineffective. And, furthermore, even if the oral revocation was not valid, Pharmasave argued that it had served a second Rule 49 offer on September 19, 2016 for $17,333.00, a day before the pretrial, which expressly revoked the first offer (the "Second Offer").
The Estate acknowledged that it had been served with the Second Offer, but stated that it had not been served until 5:23 p.m. on September 20, 2016 – several hours after the Estate had accepted the June Offer and a day after when Pharmasave alleges it served the Second Offer. In support of its position, counsel for the Estate provided that on receipt of the Second Offer the date and time was recorded on the cover letter that enclosed the Second Offer. Furthermore, a lawyer who shared office space with counsel for the Estate, confirmed that at no time between 4:30 p.m. to 7:30 p.m. on September 19, 2016, did anyone attend at the premises to serve documents.
Therefore, the Estate argued that the revocation of the June Offer was not effective as it had been served after the acceptance of the June Offer, thus the respondent’s acceptance of the June Offer stood.
Motion to Enforce Rule 49 Offer
The Estate brought a motion to enforce the June Offer. In granting the judgement, the motion judge found that since the June Offer had been made in accordance with Rule 49, it could only have been withdrawn in writing. Therefore it could not have been withdrawn orally by Pharmasave at the pretrial.
The matter hinged on the timing of the Second Offer... |
The matter hinged on the timing of the Second Offer, which the motion judge found was served after the Estate had accepted the June Offer. In reaching this decision, the motion judge relied on various factors which demonstrated that the June Offer was accepted before the service of the Second Offer. Included in these factors was that the motion judge found that Pharmasave’s counsel had intentionally altered the process server’s invoice to mislead the court to believe that the Second Offer was served on September 19, 2016, when, in reality, it had not been served until September 20, 2016.3
Pharmasave appealed.
Court of Appeal
On appeal, Pharmasave contended that the motion judge had erred in failing to use the two-step analysis required on a motion to enforce a Rule 49 offer as per the test in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. ("Capital Gains").4 Pharmasave also argued that the motion judge had erred in refusing to hear viva voce evidence regarding the issues of credibility. Finally, Pharmasave moved to seek leave to admit fresh evidence.
Issue One: Two-Step Analysis
As per Capital Gains, the first step to consider is whether a Rule 49 agreement to settle had been reached. The second step is to consider whether the agreement should be enforced in consideration of all the evidence.5
The Court found that the motion judge had applied the method described in Capital Gains and had recognized that her task was to determine three issues: (i) whether the first offer was revoked at pre-trial; (ii) the timing of service of the second offer; and (iii) whether settlement should be enforced.6In analyzing the first question, the Court agreed with the motion judge that the revocation of the June Offer was required to be in writing. Thus, the only way Pharmasave could be successful was if the Second Offer was served before acceptance of the June Offer.
With respect to the second question, the motion judge had given six reasons for rejecting Pharmasave’s version of events. Justice Pepall found that the one factor most fatal to Pharmasave’s case was that Pharmasave had known for over a year that the Estate was taking the position that they had not been served until 5:23 pm on September 20, 2016, and yet the Estate had never been provided with an affidavit of service. Justice Pepall noted that this "absence of an affidavit weighs heavily in the respondent’s favour. The case turned on the time of service of the second offer. In the absence of such critical evidence, it was reasonable for the motion judge to find against the appellants."7
Issue Two: viva voce Evidence
The court found that it was unnecessary for the motion judge to hear viva voce evidence in consideration of the two-step test. As with summary judgement motions, motion judges for a Rule 49 offer are permitted to assume that the record contains all the evidence for which the parties will rely if there is a trial.8
Issue Three: Fresh Evidence
In regards to the issue of fresh evidence, the court found that the appellants did not meet the test set out in R. v. Palmer,9 Sengmueller v. Sengmueller,10 and R. v. Truscott:11 namely that the proposed fresh evidence would not reasonably affect the result as it did not include the affidavit of service by the process server serving the Second Offer to the Estate.12
Implications
Rule 49 offers are an excellent tool if used properly. Counsel who intend on extending a Rule 49 offer should note that an oral revocation of an offer is insufficient. Written evidence is needed for the offer to be rescinded.13
1 2018 ONCA 839 [Hashemi-Sabet].
2 Hashemi-Sabet at para 1.
3 Because of this conduct, the motion judge granted full indemnity costs against Pharmasave.
4 (2007) 87 OR (3d) 464.
5 It should be noted that Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87 altered the process for granting summary judgement, does not affect the two-step framework for the enforcement of Rule 49 offers.
6 Hashemi-Sabet at para 29.
7 Hashemi-Sabet, para 32.
8 Martin v. St. Thomas -- Elgin General Hospital, 2018 ONSC 799 para 49; Dawson v. Rexcraft Storage & Warehouse Inc., (1998), 111 O.A.C. 201 para 17; and Chao v. Chao, 2017 ONCA 701 para 24.
9 [1980] 1 S.C.R. 759.
10 (1994), 17 O.R. (3d) 208 (CA).
11 2007 ONCA 575.
12 Hashemi-Sabet, para 43.
13 Rules, 49.04(1).
