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Domaines Pinnacle Inc. v. Beam Suntory Inc. et al., 2015 FC 680 (Martineau, J.)
May 26, 2015
Robert Brouillette and Magali Fournier for the Plaintiff/Defendant by Counterclaim, Domaines Pinnacle Inc.
Francois Guay, Ekaterina Tsimberis and Guillaume Lavoie Ste-Marie for the Defendants/Plaintiffs by Counterclaim, Beam Suntory Inc., et al.
The central issue before the Court in this case was “whether the unconditional acceptance of a final offer to settle made under Rule 420 of the Federal Courts Rules, puts an end to the dispute in the Federal Court, and constitutes a transaction that binds the offerors, who refuse to discontinue their counterclaim”.
The trial of this action was scheduled to commence on April 13, 2015. On March 30, 2015, the Defendants/Plaintiffs by counterclaim, Beam Suntory Inc., et. al (collectively referred to as the “Beam Parties”) made a written offer to settle (“the Beam Offer”) pursuant to Rule 420 of the Federal Courts Rules (“the Rules”). The Beam Offer expired on April 13, 2015 at 5 p.m. and provided that: “(1) the Plaintiff would discontinue its action, (2) the Plaintiffs by Counterclaim would discontinue their counterclaim; and (3) each party will bear its own costs”. The Plaintiff/Defendant by Counterclaim, Domaines Pinnacle Inc. (“Pinnacle”) accepted the offer and discontinued its action in the Federal Court on April 1, 2015. The Beam Parties refused to discontinue their counterclaim “on the grounds that Pinnacle did not also discontinue the proceedings it commenced in the Superior Court of Quebec” (“the Provincial Action”). Pinnacle took the position that the offer applied to the Federal Court proceeding only and did not contain an obligation to discontinue the Provincial Action. Pinnacle brought a motion for homologation and enforcement of a transaction seeking an order forcing the Beam Parties to comply with their offer to settle or in the alternative for a permanent stay of the proceedings in the Federal Court. The Beam Parties brought a motion for amendment of its defence and counterclaim to allege bad faith on behalf of Pinnacle and that the filing of the Notice of Discontinuance by Pinnacle of the Federal Court action constituted an abuse of process. The Beam Parties withdrew their motion at the hearing.
Justice Martineau stated that the purpose behind Rule 420 is to provide a “significant incentive to the parties to end their dispute in Court before the commencement of trial” and it is “a judicial economy rule unique to the Federal Court that applies independently of the rules of procedure of the other courts (including the provincial courts)”. The Court held that once an offeror communicates a Rule 420 offer to settle, there is a presumption of intent to commit such that if the offer is unconditionally accepted then the offeror is bound and must comply with it. In the words of Justice Martineau “res judicata applies” and “[n]o trial will be held. Period”. The parties could by mutual agreement set aside the Rule 420 offer and engage in general settlement talks which include proceedings before the Federal Court and other jurisdictions.
Pinnacle’s motion was granted as the final offer did not include the Provincial Action. Justice Martineau stated that where a Rule 420 offer to settle “has been accepted by the opposite party and a discontinuance has been filed, the Federal Court should not hear the case on its merits”. If the offeror refuses to discontinue the proceedings then the Federal Court has both inherent jurisdiction and jurisdiction pursuant to section 50 of the Federal Courts Act to order a permanent stay of proceedings. In dismissing the arguments advanced by the Beam Parties Justice Martineau held that the Federal Court had no statutory jurisdiction to hear contractual disputes and consequently does not have “jurisdiction to set aside a transaction in the case of error or on any other know basis for the annulment of civil law or common law contracts”.
Motion by Pinnacle Granted with costs.
By: Rosamaria Longo, Gardiner Roberts LLP