Remedy Drug Store Co. v. Farnham, 2015 ONCA 576

• Judge: Epstein, Pepall and Benotto, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: March 09, 2015
• Jurisdiction: Ontario
• Citations: 2015 ONCA 576;(2015), 337 O.A.C. 257 (CA)

Remedy Drug Store v. Farnham (2015), 337 O.A.C. 257 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. AU.017

Remedy Drug Store Co. Inc. (plaintiff/respondent) v. Jane Farnham (defendant/appellant)

Jane Farnham (plaintiff by counterclaim/appellant) v. Remedy Drug Store Co. Inc. and Bruce Moody (defendants to the counterclaim/respondents)

(C59230; 2015 ONCA 576)

Indexed As: Remedy Drug Store Co. v. Farnham

Ontario Court of Appeal

Epstein, Pepall and Benotto, JJ.A.

August 19, 2015.

Summary:

The employment relationship between the parties broke down. The employer (Remedy) commenced an action against the employee (Farnham) for an injunction, damages and declaratory relief that Farnham had breached her employment contract, fiduciary duties, and duties of confidentiality. Farnham counterclaimed for damages arising out of the breakdown of the employment relationship. A dispute arose over whether the parties had reached a settlement agreement and, if so, whether Remedy had repudiated the agreement. Remedy claimed that the parties had an agreement, and it included a term that a broad forensic sweep of Farnham's personal electronic devices would be conducted to search for Remedy's confidential information. Farnham disputed that the settlement agreement contained such a term. She only agreed to a simple wipe of her devices of all Remedy's information. She did not agree that Remedy would be entitled to perform a forensic search of her personal computer. She also claimed that Remedy had repudiated the agreement. Remedy brought a motion to enforce the settlement.

The Ontario Superior Court held that the parties had entered into an enforceable settlement agreement on the terms advanced by Farnham and that Remedy had not repudiated the agreement. Farnham appealed.

The Ontario Court of Appeal dismissed the appeal.

Contracts - Topic 3661

Performance or breach - Repudiation - General - The Ontario Court of Appeal discussed the legal principles relevant to a determination of whether a contract had been repudiated, namely: (i) there was a focus on intention; (ii) the test was objective and the surrounding circumstances should be considered; (iii) subjective intention not to repudiate was not determinative; (iv) the seriousness of the conduct; (v) anticipatory repudiation in the context of a settlement agreement; and (vi) the relevance of commencing legal proceedings - See paragraphs 41 to 58.

Contracts - Topic 3664

Performance or breach - Repudiation - What constitutes repudiation - The Ontario Court of Appeal stated that "[r]epudiation occurs by the words or conduct of one party to a contract that show an intention not to be bound by the contract. ... Anticipatory repudiation is essentially the same as repudiation simpliciter - the only difference is timing. ... Accordingly, the same principles guide both anticipatory repudiation and repudiation. Courts often use the terms interchangeably because alleged repudiations frequently occur 'before the time of performance has arrived'" - See paragraphs 42 and 44.

Contracts - Topic 3664

Performance or breach - Repudiation - What constitutes repudiation - The Ontario Court of Appeal stated that "... insistence on a new contractual term - can amount to an anticipatory repudiation, but only if the term is of such importance that the party seeking to rely on the term can be said to have exhibited an intention not to be bound by the contract." - See paragraph 52.

Contracts - Topic 3664

Performance or breach - Repudiation - What constitutes repudiation - The defendant alleged that the plaintiff had repudiated a settlement agreement - The Ontario Court of Appeal stated that "[c]ase law is ... consistent with the principle that commencing legal action can, but does not necessarily, constitute repudiation. The proper inquiry remains focused on whether the party bringing legal action evinces an intention, in all the circumstances, to repudiate the agreement." - See paragraph 58.

Contracts - Topic 4008

Remedies for breach - General - Common law doctrine of election - The defendant (Farnham) alleged that the plaintiff (Remedy) had repudiated a settlement agreement - Farnham argued, inter alia, that through injunction proceedings, Remedy had taken steps inconsistent with the settlement and, under rule 49.09, these steps had disentitled Remedy to an order enforcing the settlement on any terms - The Ontario Court of Appeal rejected the argument - As the motion judge observed, the injunction motion was initially brought before the settlement negotiations began - The application of the doctrine of election precluded a party "from exercising a right that is inconsistent with another right if he has consciously and unequivocally exercised the latter" - Remedy's actions were not inconsistent with the settlement agreement - The parties preserved the status quo while the enforceability and terms of the settlement agreement were determined by a court - See paragraphs 77 to 81.

Contracts - Topic 4008

Remedies for breach - General - Common law doctrine of election - The employment relationship between the parties broke down - The employer (Remedy) commenced an action against the employee (Farnham) for an injunction, damages and declaratory relief that Farnham had breached her employment contract, fiduciary duties, and duties of confidentiality - Farnham counterclaimed for damages arising out of the breakdown of the employment relationship - A dispute arose over whether the parties had reached a settlement agreement and, if so, whether Remedy had repudiated the agreement - Remedy claimed that the parties had an agreement, and it included a term that a broad forensic sweep of Farnham's personal electronic devices would be conducted to search for Remedy's confidential information - Farnham disputed that the settlement agreement contained such a term - She only agreed to a simple wipe of her devices of all Remedy's information - She did not agree that Remedy would be entitled to perform a forensic search of her personal computer - She also claimed that Remedy had repudiated the agreement - Remedy brought a motion to enforce the settlement - The motion judge held that the parties had entered into an enforceable settlement agreement on the terms advanced by Farnham and that Remedy had not repudiated the agreement - Farnham appealed, arguing, inter alia, that through the injunction proceedings, Remedy had taken steps inconsistent with the settlement and, under rule 49.09, these steps had disentitled Remedy to an order enforcing the settlement on any terms - The Ontario Court of Appeal rejected the argument - "The motion judge did not err in resolving the one outstanding issue separating the parties by granting judgment in accordance with the terms of the accepted offer to settle. It cannot be the case that Ms. Farnham could unilaterally elect to proceed with the litigation in the face of Remedy's motion to enforce the settlement - a motion that was brought to resolve an interpretive dispute over a term with very little consequence to Ms. Farnham. Having concluded that Remedy did not repudiate the settlement agreement, it would be odd indeed to then allow Ms. Farnham to resile from the settlement under the guise of rule 49.09(b)." - See paragraphs 82 to 86.

Practice - Topic 9870

Settlements - Repudiation - What constitutes - [See Contracts - Topic 3661 and third Contracts - Topic 3664 ].

Practice - Topic 9870

Settlements - Repudiation - What constitutes - The defendant alleged that the plaintiff had repudiated a settlement agreement - The Ontario Court of Appeal stated that "The question of whether a party repudiated an agreement is a question of fact, but whether the motion judge applied the proper legal test in determining whether there was a repudiation is a question of law. Therefore, in the typical case, a blended standard of review applies. ... [T]he motion judge's decision is reviewable on a correctness standard because he did not articulate the correct legal principles. ... The test for anticipatory repudiation is not, as the motion judge expressed it, whether the breaching party's position was so 'patently unreasonable as to evidence an insistence upon terms and conditions which could not possibly have been reasonably implied in the circumstances.' With respect, reasonableness has nothing to do with it. ... [T]he correct analysis focuses on what the purported breaching party's conduct says about its objective intention in relation to future performance of the contract." - See paragraphs 59 to 62.

Practice - Topic 9870

Settlements - Repudiation - What constitutes - The employment relationship between the parties broke down - The employer (Remedy) commenced an action against the employee (Farnham) for an injunction, damages and declaratory relief that Farnham had breached her employment contract, fiduciary duties, and duties of confidentiality - Farnham counterclaimed for damages arising out of the breakdown of the employment relationship - A dispute arose over whether the parties had reached a settlement agreement and, if so, whether Remedy had repudiated the agreement - Remedy claimed that the parties had an agreement, and it included a term that a broad forensic sweep of Farnham's personal electronic devices would be conducted to search for Remedy's confidential information - Farnham disputed that the settlement agreement contained such a term - She only agreed to a simple wipe of her devices of all Remedy's information - She did not agree that Remedy would be entitled to perform a forensic search of her personal computer - She also claimed that Remedy had repudiated the agreement - Remedy brought a motion to enforce the settlement - The motion judge held that the parties had entered into an enforceable settlement agreement on the terms advanced by Farnham and that Remedy had not repudiated the agreement - Farnham appealed - The Ontario Court of Appeal dismissed the appeal - Fundamentally, considered objectively and in light of the surrounding circumstances, Remedy did not exhibit an intention not to be bound by the contract - Given the motion judge's interpretation of the settlement agreement, it was clear that Remedy was not entitled to insist on a full forensic sweep - It was also clear that Remedy took a hard line with Farnham in threatening to continue with the injunction proceedings if she did not capitulate - However, a "reasonable person" would not conclude that Remedy no longer intended to be bound by the settlement agreement where: (1) this was not one of those rare cases where conduct subsequent to a settlement agreement would amount to repudiation; (2) the threatened breach of the term that would have given Remedy the right to a technological sweep of Farnham's personal computer would not have deprived her of substantially the whole benefit of the contract; (3) Farnham's reliance on Remedy's proceeding with the injunction did not support a finding of repudiation; Remedy's injunction motion was consistent with, not contrary to, the spirit of the settlement agreement; and (4) it would be a mistake to focus in on the injunction and lose sight of the circumstances as a whole - See paragraphs 63 to 73.

Cases Noticed:

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 42].

Potter v. Legal Aid Services Commission (N.B.) (2015), 468 N.R. 227; 432 N.B.R.(2d) 1; 1128 A.P.R. 1; 381 D.L.R.(4th) 1; 2015 SCC 10, refd to. [para. 43].

Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc. (2008), 233 O.A.C. 74; 88 O.R.(3d) 721; 2008 ONCA 92, refd to. [para. 25].

White v. E.B.F. Manufacturing Ltd. et al. (2005), 239 N.S.R.(2d) 270; 760 A.P.R. 270; 2005 NSCA 167, refd to. [para. 46].

Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd., [1980] 1 All E.R. 571 (H.L.), refd to. [para. 46].

Place Concorde East Limited Partnership et al. v. Shelter Corp. of Canada et al. (2006), 211 O.A.C. 141; 270 D.L.R.(4th) 181 (C.A.), refd to. [para. 51].

Fieguth v. Acklands Ltd. (1989), 59 D.L.R.(4th) 114 (B.C.C.A.), refd to. [para. 53].

Bogue v. Bogue (1999), 126 O.A.C. 236; 46 O.R.(3d) 1 (C.A.), refd to. [para. 53].

Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (S.C.), affd. [1995] O.J. No. 3773 (C.A.), refd to. [para. 53].

Whitehall Homes & Construction Ltd. v. Hanson, [2012] O.T.C. Uned. 3307; 23 C.L.R.(4th) 272; 2012 ONSC 3307, refd to. [para. 53].

Suleman v. British Columbia Research Council (1990), 52 B.C.L.R.(2d) 138 (C.A.), refd to. [para. 55].

Vrana v. Procor Ltd. (2004), 346 A.R. 389; 320 W.A.C. 389; 25 Alta. L.R.(4th) 201; 2004 ABCA 126, refd to. [para. 55].

Domicile Developments Inc. v. MacTavish (1999), 120 O.A.C. 375; 45 O.R.(3d) 302 (C.A.), refd to. [para. 56].

AIC Ltd. v. Infinity Investment Counsel Ltd. (1998), 147 F.T.R. 233 (F.C.), refd to. [para. 72].

Charter Building Co. v. 1540957 Ontario Inc. et al. (2011), 282 O.A.C. 126; 107 O.R.(3d) 133; 2011 ONCA 487, refd to. [para. 81].

Statutes Noticed:

Civil Procedure Rules (Ont.) - see Rules of Civil Procedure (Ont.).

Rules of Civil Procedure (Ont.), rule 49.09 [para. 75].

Authors and Works Noticed:

Fridman, G.H.L., The Law of Contracts in Canada (6th Ed. 2011), p. 585 [para. 50].

McCamus, John, The Law of Contracts (2nd Ed. 2012), pp. 689 [para. 42]; 693, 694 [para. 50].

Swan, Angela, Canadian Contract Law (3rd Ed. 2012), pp. 52 [para. 54]; 618 [paras. 42, 48, 50].

Waddams, S.M., The Law of Contracts (6th Ed. 2010), para. 620 [para. 45]; ss. 590, 595 [para. 50].

Counsel:

Matthew P. Sammon and Paul-Erik Veel, for the appellant;

David Chernos, for the respondents.

This appeal was heard on March 9, 2015, by Epstein, Pepall and Benotto, JJ.A., of the Ontario Court of Appeal. Epstein, J.A., delivered the following decision for the court on August 19, 2015.