As many of you are aware, Estates litigation can be highly contentious and involve bitter disputes, often between family members. Reaching a negotiated settlement is, therefore, a welcome resolution that aims to save the parties great expense and time. Often, these settlements are documented in a form known as ‘Minutes of Settlement,’ constituting a binding agreement. But what happens when one of the parties fails to live up to the terms of the agreement?
That was the issue in Johnston et al v. Johnston et al.,[1] where Madam Justice C.D. Braid clarified that Minutes of Settlement are a contract and one that was repudiated in this case by the applicants.[2]
Background
The dispute concerned a farm property in Rockwood, Ontario (the “Farm”), owned by Mrs. Johnston (the “Deceased”). The Farm had been in her family since 1929 and comprised a two-story farmhouse, a bank barn, and land used as a cash crop operation.[3]
For five years, her four daughters (who were also her co-attorneys) were embroiled in bitter litigation over the sale of the Farm. The litigation was resolved on December 31, 2015, by way of Minutes of Settlement (the “Minutes”). The Minutes, which were drafted to reflect the wording of the Deceased’s Will,[4] included terms which provided that the applicants would pay $422,750 to the respondents and receive title to the farm property.[5]
The parties had numerous disputes, and the property was not transferred by the agreed upon closing date.[6] The applicants, through an email sent by their counsel, stated to the respondents that their intention was to achieve the Minutes by seeking an order. On April 28, 2016, a consent Judgment (the “Judgment”) was signed, however, failed to include the paragraphs from the Minutes which dealt with the transfer of the Farm.
By March of 2018, the respondents provided the applicants with a deadline of April 15, 2018, to fulfill the Minutes, failing which the respondents would understand that the applicants did not intend to carry out their obligations. That deadline passed.
The Deceased died on November 12, 2020. Shortly thereafter, the applicants commenced the within application and in April 2022, the parties consented to the appointment of BMO Trust Company to administer the estate on an interim basis. The applicants also requested orders providing that the Minutes and Judgment are valid and enforceable and allowing them 60 days to pay the respondents for the transfer of title to the Farm.
The applicants submitted that the interpretation of the Judgment should include a consideration of the surrounding circumstances and the intent of the parties (in this case, their anticipation that the Minutes would become a judgment). In rejecting this position, Braid J. offered the following analysis:
Are Minutes of Settlement a judgment or a contract?
Braid J. held that court orders must be read in consideration of the plain dictionary meaning of the words and that any interpretation must be based on this wording, and not on intent or surrounding circumstances. Citing with authority the decision in Carey v. Laiken,[7] Braid J. also held that the first element for a finding of civil contempt is that the order alleged to have been breached must state clearly and unequivocally what should and should not be done.[8]
Applying the decision in Ruskin v. Chutskoff Estate,[9] Her Honour held that “Minutes of settlement in a court proceeding constitutes a contract, and the ordinary law of contracts should apply [emphasis added].”[10]
Repudiation
Braid J. held that repudiation involves conduct by a party demonstrating their intention to not fulfill their contractual obligations, which constitutes a fundamental breach of a contract, depriving the innocent party of substantially or the whole benefit of the contract. In these circumstances, Her Honour held that a reasonable person would conclude that the breaching party no longer intends to be bound by the contract. The contract will be terminated on the grounds of repudiation where the non-repudiating party accepts the repudiation.[11]
Pursuant to Justein v. 3900 Yonge Street Ltd.,[12] Her Honour held that if a contract contains specifics regarding price, land, objects to be purchased, and the parties, the court can infer that the parties reasonably expected that the transaction would be closed within a reasonable period of time. Where there is no express stipulation regarding the time of performance, the law will imply that a term will be performed within a reasonable time. What is ‘reasonable’ will be determined upon the facts of each case.[13]
Finally, Her Honour held that pursuant to Sanko Steamship Co. v. Eacom Timber Sales Co.,[14] where time is not of the essence in a contract, the innocent party is relieved of their obligations when the delay becomes so long as to go to the root of the contract, amounting to a repudiation of it.[15]
Application of the Law
Although the Minutes did not include a time is of the essence clause, there was a reasonable expectation that the terms would be fulfilled promptly. The applicants’ delay, therefore, went to the root of the contract and amounted to a repudiation of it. As such, Braid J. found that the applicants extreme delay repudiated the Minutes and pursuant to Gettle Bros. Construction Co. Ltd. v. Alwinsal Potash of Canada Ltd.,[16] the respondents were justified in treating the ‘contract’ as at an end.
Pursuant to Brown v. Belleville (City),[17] Her Honour held that in order for the respondents to void the contract on the basis of repudiation, they must prove, on a balance of probabilities, that they accepted the repudiation and communicated that acceptance.
Braid J. accepted as evidence for acceptance of the repudiation, a March 19, 2018, email from the respondents to the applicants wherein they note that the Minutes were signed in December 2015 and referred to a closing date of February 18, 2016. Further, their email stated that, “the agreement was not intended to extend over a period of time and needs to be fulfilled by taking the following steps.” The steps set out a final deadline of April 15, 2018, to receive an offer to purchase.[18]
Disposition
Braid J. held that the terms of the Minutes were no longer enforceable and directed the estate trustee to sell the farm property on the open market. The applicants were not, however, prohibited from making an offer to purchase the Farm when it is listed on the open market.
Concluding Thoughts
Parties to a settlement should be fully aware that Minutes of Settlement constitute a binding agreement in the form of a contract. In this case, the Minutes contemplated the execution of a consent judgment which would also give effect to the Minutes. However, the parties were not careful in ensuring that the relevant terms of the Minutes were incorporated into the Judgment. This could have been avoided by either repeating every term of the Minutes in the Judgment or simply attaching the Minutes as a Schedule.
This case demonstrates that as a contract, if the terms of Minutes of Settlement are not fulfilled in a reasonable amount of time (or within the agreed upon deadline), the innocent party can take appropriate steps to end the contract on the basis of repudiation.
Where a negotiated settlement has been reached, parties and counsel alike are reminded to review the terms of agreement and make all necessary efforts to fulfill their contractual obligations in a reasonable period of time.
—
[1] 2024 ONSC 603 [Johnston].
[2] In contract law, repudiation of a contract occurs when one party to the contract demonstrates that they are unwilling/unable to fulfill their contractual obligations. Repudiation, however, is of no consequence unless the other party accepts the repudiation and gives the repudiator notice of their acceptance.
[3] Johnston, supra note 1 at para. 6.
[4] The Deceased’s Will directed that the Farm is not to be sold until at least one year after her death to allow one or more of her children to find a way to keep it in the family, stating “it is my fervent wish that my children will assist one another in ensuring that, if at all possible, the farm will remain in the ownership of one or more of them.”
[5] The Minutes also provided for the withdrawal or dismissal of three court actions while setting out the process for disbursing the Deceased’s funds and setting aside a reserve fund for her ongoing support.
[6] The Minutes provided for a closing date for the transfer of the farm of February 18, 2016. The transfer was stalled in January 2016 by the preparation of an agreement of purchase (“APS”) which contained many errors requiring amendments, the applicants the further stalled the process by stating on December 8, 2016, that they required an environmental site assessment (“ESA”) to be completed before they could proceed with the sale. The terms of the Minutes did not require an APS or ESA, but the applicants unilaterally imposed these requirements before they would permit the distribution of funds.
[7] 2015 SCC 17, [2015] 2 SCR 79 at paras. 33-35.
[8] Johnston, supra note 1 at para. 19.
[9] 2004 SKCA 107, 243 D.L.R. (4th) 432 at para. 22.
[10] Johnston, supra note 1 at para. 22.
[11] See Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, [2007] 3 S.C.R. 679 at para. 20; Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664, [1999] 3 S.C.R. 423 at para. 40; Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 88 O.R. (3d) 721 at para. 37.
[12] 1983 CarswellOnt 648 (H.C.J.).
[13] See Illidge v. Sona Resources Corporation, 2018 BCCA 368 at para. 61.
[14] (1986), 32 D.L.R. (4th) 269 (B.C. S.C.) at para. 20.
[15] Johnston, supra note 1 at para. 37.
[16] (1969), 5 D.L.R. (3d) 719 (SKCA) at para. 21, aff’d [1971] S.C.R. 320.
[17] 2013 ONCA 148, 114 O.R. (3d) 561 at paras. 45 and 55.
[18] Johnston, supra note 1 at para. 48.
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Written by: Brett Book
Posted on: February 14, 2024
Categories: Commentary, WEL Newsletter
As many of you are aware, Estates litigation can be highly contentious and involve bitter disputes, often between family members. Reaching a negotiated settlement is, therefore, a welcome resolution that aims to save the parties great expense and time. Often, these settlements are documented in a form known as ‘Minutes of Settlement,’ constituting a binding agreement. But what happens when one of the parties fails to live up to the terms of the agreement?
That was the issue in Johnston et al v. Johnston et al.,[1] where Madam Justice C.D. Braid clarified that Minutes of Settlement are a contract and one that was repudiated in this case by the applicants.[2]
Background
The dispute concerned a farm property in Rockwood, Ontario (the “Farm”), owned by Mrs. Johnston (the “Deceased”). The Farm had been in her family since 1929 and comprised a two-story farmhouse, a bank barn, and land used as a cash crop operation.[3]
For five years, her four daughters (who were also her co-attorneys) were embroiled in bitter litigation over the sale of the Farm. The litigation was resolved on December 31, 2015, by way of Minutes of Settlement (the “Minutes”). The Minutes, which were drafted to reflect the wording of the Deceased’s Will,[4] included terms which provided that the applicants would pay $422,750 to the respondents and receive title to the farm property.[5]
The parties had numerous disputes, and the property was not transferred by the agreed upon closing date.[6] The applicants, through an email sent by their counsel, stated to the respondents that their intention was to achieve the Minutes by seeking an order. On April 28, 2016, a consent Judgment (the “Judgment”) was signed, however, failed to include the paragraphs from the Minutes which dealt with the transfer of the Farm.
By March of 2018, the respondents provided the applicants with a deadline of April 15, 2018, to fulfill the Minutes, failing which the respondents would understand that the applicants did not intend to carry out their obligations. That deadline passed.
The Deceased died on November 12, 2020. Shortly thereafter, the applicants commenced the within application and in April 2022, the parties consented to the appointment of BMO Trust Company to administer the estate on an interim basis. The applicants also requested orders providing that the Minutes and Judgment are valid and enforceable and allowing them 60 days to pay the respondents for the transfer of title to the Farm.
The applicants submitted that the interpretation of the Judgment should include a consideration of the surrounding circumstances and the intent of the parties (in this case, their anticipation that the Minutes would become a judgment). In rejecting this position, Braid J. offered the following analysis:
Are Minutes of Settlement a judgment or a contract?
Braid J. held that court orders must be read in consideration of the plain dictionary meaning of the words and that any interpretation must be based on this wording, and not on intent or surrounding circumstances. Citing with authority the decision in Carey v. Laiken,[7] Braid J. also held that the first element for a finding of civil contempt is that the order alleged to have been breached must state clearly and unequivocally what should and should not be done.[8]
Applying the decision in Ruskin v. Chutskoff Estate,[9] Her Honour held that “Minutes of settlement in a court proceeding constitutes a contract, and the ordinary law of contracts should apply [emphasis added].”[10]
Repudiation
Braid J. held that repudiation involves conduct by a party demonstrating their intention to not fulfill their contractual obligations, which constitutes a fundamental breach of a contract, depriving the innocent party of substantially or the whole benefit of the contract. In these circumstances, Her Honour held that a reasonable person would conclude that the breaching party no longer intends to be bound by the contract. The contract will be terminated on the grounds of repudiation where the non-repudiating party accepts the repudiation.[11]
Pursuant to Justein v. 3900 Yonge Street Ltd.,[12] Her Honour held that if a contract contains specifics regarding price, land, objects to be purchased, and the parties, the court can infer that the parties reasonably expected that the transaction would be closed within a reasonable period of time. Where there is no express stipulation regarding the time of performance, the law will imply that a term will be performed within a reasonable time. What is ‘reasonable’ will be determined upon the facts of each case.[13]
Finally, Her Honour held that pursuant to Sanko Steamship Co. v. Eacom Timber Sales Co.,[14] where time is not of the essence in a contract, the innocent party is relieved of their obligations when the delay becomes so long as to go to the root of the contract, amounting to a repudiation of it.[15]
Application of the Law
Although the Minutes did not include a time is of the essence clause, there was a reasonable expectation that the terms would be fulfilled promptly. The applicants’ delay, therefore, went to the root of the contract and amounted to a repudiation of it. As such, Braid J. found that the applicants extreme delay repudiated the Minutes and pursuant to Gettle Bros. Construction Co. Ltd. v. Alwinsal Potash of Canada Ltd.,[16] the respondents were justified in treating the ‘contract’ as at an end.
Pursuant to Brown v. Belleville (City),[17] Her Honour held that in order for the respondents to void the contract on the basis of repudiation, they must prove, on a balance of probabilities, that they accepted the repudiation and communicated that acceptance.
Braid J. accepted as evidence for acceptance of the repudiation, a March 19, 2018, email from the respondents to the applicants wherein they note that the Minutes were signed in December 2015 and referred to a closing date of February 18, 2016. Further, their email stated that, “the agreement was not intended to extend over a period of time and needs to be fulfilled by taking the following steps.” The steps set out a final deadline of April 15, 2018, to receive an offer to purchase.[18]
Disposition
Braid J. held that the terms of the Minutes were no longer enforceable and directed the estate trustee to sell the farm property on the open market. The applicants were not, however, prohibited from making an offer to purchase the Farm when it is listed on the open market.
Concluding Thoughts
Parties to a settlement should be fully aware that Minutes of Settlement constitute a binding agreement in the form of a contract. In this case, the Minutes contemplated the execution of a consent judgment which would also give effect to the Minutes. However, the parties were not careful in ensuring that the relevant terms of the Minutes were incorporated into the Judgment. This could have been avoided by either repeating every term of the Minutes in the Judgment or simply attaching the Minutes as a Schedule.
This case demonstrates that as a contract, if the terms of Minutes of Settlement are not fulfilled in a reasonable amount of time (or within the agreed upon deadline), the innocent party can take appropriate steps to end the contract on the basis of repudiation.
Where a negotiated settlement has been reached, parties and counsel alike are reminded to review the terms of agreement and make all necessary efforts to fulfill their contractual obligations in a reasonable period of time.
—
[1] 2024 ONSC 603 [Johnston].
[2] In contract law, repudiation of a contract occurs when one party to the contract demonstrates that they are unwilling/unable to fulfill their contractual obligations. Repudiation, however, is of no consequence unless the other party accepts the repudiation and gives the repudiator notice of their acceptance.
[3] Johnston, supra note 1 at para. 6.
[4] The Deceased’s Will directed that the Farm is not to be sold until at least one year after her death to allow one or more of her children to find a way to keep it in the family, stating “it is my fervent wish that my children will assist one another in ensuring that, if at all possible, the farm will remain in the ownership of one or more of them.”
[5] The Minutes also provided for the withdrawal or dismissal of three court actions while setting out the process for disbursing the Deceased’s funds and setting aside a reserve fund for her ongoing support.
[6] The Minutes provided for a closing date for the transfer of the farm of February 18, 2016. The transfer was stalled in January 2016 by the preparation of an agreement of purchase (“APS”) which contained many errors requiring amendments, the applicants the further stalled the process by stating on December 8, 2016, that they required an environmental site assessment (“ESA”) to be completed before they could proceed with the sale. The terms of the Minutes did not require an APS or ESA, but the applicants unilaterally imposed these requirements before they would permit the distribution of funds.
[7] 2015 SCC 17, [2015] 2 SCR 79 at paras. 33-35.
[8] Johnston, supra note 1 at para. 19.
[9] 2004 SKCA 107, 243 D.L.R. (4th) 432 at para. 22.
[10] Johnston, supra note 1 at para. 22.
[11] See Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, [2007] 3 S.C.R. 679 at para. 20; Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664, [1999] 3 S.C.R. 423 at para. 40; Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 88 O.R. (3d) 721 at para. 37.
[12] 1983 CarswellOnt 648 (H.C.J.).
[13] See Illidge v. Sona Resources Corporation, 2018 BCCA 368 at para. 61.
[14] (1986), 32 D.L.R. (4th) 269 (B.C. S.C.) at para. 20.
[15] Johnston, supra note 1 at para. 37.
[16] (1969), 5 D.L.R. (3d) 719 (SKCA) at para. 21, aff’d [1971] S.C.R. 320.
[17] 2013 ONCA 148, 114 O.R. (3d) 561 at paras. 45 and 55.
[18] Johnston, supra note 1 at para. 48.
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