The Ontario Court of Appeal's October 29, 2015 decision in
Consulting Limited v. Kim Orr Barristers PC is a
cautionary tale about the importance of familiarity with the
specific provisions of Rule 49 of the Ontario Rules of Civil
Procedure, particularly the consequences of Rule 49.07(5) if
an offer to settle is silent on the issue of costs. It is also an
interesting case-in-point about how the much-discussed Sattva
Capital Corp. v. Creston Moly Corp. (e.g.,
here), though generally mandating a high degree of appellate
deference, can nonetheless result in little or no deference being
owed to a judge who "fail[s] to consider the factual matrix
when interpreting [a] concluded agreement" (para. 3).
This appeal arose from an action concerning an account for
services. Relatively early in the proceeding, the plaintiff offered
to settle on the terms of "payment by the defendant to the
plaintiff in the amount of $50,000, plus HST, in full and complete
satisfaction of the plaintiff's claim." The defendant
accepted the offer to settle days before trial. The defendant paid
the plaintiff $56,000 (representing the $50,000, plus HST). Shortly
thereafter, the plaintiff took the position that the offer was
exclusive of costs and, pursuant to Rule 49.07(5)(b), as the
"accepted offer to settle [did] not provide for the
disposition of costs, [it was] entitled [...] to [its] costs
assessed to the date that the notice of acceptance was
served". The plaintiff thus brought a motion, to compel the
defendant to pay its costs. The motion judge found the offer to be
unambiguous, being for the "complete satisfaction of the
plaintiff's action" and thus inclusive of costs. Had she
found ambiguity, she would have found that the offer included costs
pursuant to the contra proferentem rule (holding that the
ambiguous agreement should be construed against the interests of
the plaintiff, who proffered it).
On appeal, Justice van Rensburg, for a unanimous Court, held
that the motion judge had erred by:
interpreting certain words in the
offer to settle excessively literally; and
ignoring the context of the offer to
settle, including Rule 49.07(5), which expressly provides for the
disposition of costs when an offer to settle does not expressly
address this issue.
In the circumstances, and in light of Rule 49.07(5), she ordered
that the defendant pay the plaintiff its costs. This only made
sense in light of Rule 49's purpose to encourage
 The respondent's
interpretation of the Offer, which interpretation was accepted by
the motion judge, would mean that, rather than acting as an
incentive to encourage early settlement, the value of the Offer
would decline over time as the parties approached their trial date
and the appellant's legal costs increased.
 The motion judge erred in this
case by failing to interpret the Offer and acceptance in the
relevant context of the litigation and rule 49. As for her
reference to applying the doctrine of contra proferentem
to the Offer, there was no reason to resort to this principle
without first attempting to determine the meaning of the agreement
by reference to the factual matrix.
 Interpreting the Offer in the
relevant context, it did not provide for the disposition of the
appellant's costs. Accordingly, r. 49.07(5)(b) applies, and the
appellant is entitled to costs, in addition to the amount paid by
Implications of Sattva
Normally Sattva results in deference being given to a
first-instance interpretation of a contract (including, presumably,
a settlement agreement). However, that was not the case here.
Rather, Justice van Rensburg held that the motion judge's
failure to consider the factual
circumstances in which the offer to settle was made warranted
In other words, this case is not just a helpful reminder to
counsel of the need to be aware of the implications of Rule 49.07.
Rather, it also illustrates that a judge's failure to consider
the factual circumstances surrounding a contract may itself amount
to a reversible error, leading to a successful appeal.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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