T-1395-73
Bandag Incorporated (Plaintiff)
v.
Vulcan Equipment Company Limited and Penner
Tire & Rubber Co. Ltd. (Defendants)
Trial Division, Mahoney J.—Ottawa, January 18
and February 4, 1977.
Jurisdiction — Procedure — Motion for judgment on basis
that action settled — Solicitor's capacity to bind his client
Whether Rule 341(b) complied with — Whether judgment on a
contract — Whether acquiescence of parties required to give
Court jurisdiction — Federal Court Rule 341.
Defendants move for judgment on the basis that the action,
which involves a patent infringement, has been settled. Plaintiff
claims that its solicitor had no power and was not held out as
having any power to settle the dispute. Plaintiff claims further
that any judgment would be a judgment on a contract that the
Court would not have the jurisdiction to render if the original
cause of action had been in breach of contract rather than
patent infringement.
Held, the defendants are entitled to the order sought. A
principal is bound by the acts of his agent unless he has notified
third parties that the agent's authority is limited, which was not
the case here. Procedurally, the situation is of a kind contem
plated by Rule 341 and that Rule has been complied with. As
to jurisdiction, all cases of entry of judgment on consent involve
a judgment reflecting a contract between the parties and not a
judgment based on the adjudicated merits of the original cause
of action. However, the Court does not derive its jurisdiction
from the acquiescence of the parties but from its inherent
jurisdiction over its own process.
Scherer v. Paletta [1966] 2 O.R. 524, agreed with.
MOTION for judgment pursuant to Rule 341.
COUNSEL:
G. A. Macklin for plaintiff.
N. H. Fyfe for defendants.
SOLICITORS:
Gowling & Henderson, Ottawa, for plaintiff.
Smart & Biggar, Ottawa, for defendants.
The following are the reasons for judgment
rendered in English by
MAHONEY J.: The defendants move for judg
ment on the basis that this action has been settled.
This is an action for patent infringement involving
two Canadian patents: No. 554,888 whereof the
plaintiff is owner and No. 616,567, owned by
Vakuum Vulk Holdings Ltd., whereof the plaintiff
is exclusive licensee. Following the filing of lists of
documents, solicitors for the parties entered into
negotiations for settlement of the action and even
tually exchanged the following correspondence:
1. Letter, dated November 18, 1975, from
defendants' solicitor to plaintiff's solicitor:
We have now received our client's view concerning the
proposal for settlement set out in your letter of July 23, 1975.
Our client is very concerned with the possibility that if the
question of infringement is not settled by the present litigation,
a further action based on the Schelkmann patent may be
brought either by your client or by the owner of the Schelk-
mann patent, Vakuum Vulk.
1. That Bandag consents to the dissmissal [sic] of the action
and quit claims and releases Vulcan from any claim for
damages or costs to date of the dissmissal [sic] of the action.
2. That Vulcan concents [sic] to the discontinuance of the
counterclaim without costs to Bandag.
3. That Bandag hold Vulcan harmless for any claim for
infringement of the Schelkmann Canadian patent which may
have occurred prior to the date of dismissal of the action.
4. The two parties would agree not to publicize the settle
ment. However, if required, in inquiring of Vulcan's custom
ers, Vulcan may indicate that the parties have settled their
dispute by dismissal of the statement of claim and discon
tinuance of the counterclaim without resolving the issues
involved.
2. Letter, dated December 18, 1975, from plain
tiff's solicitor to defendants' solicitor, captioned
"WITHOUT PREJUDICE":
I have now received instructions from my principals in
respect of the matters set forth in your letter of November 18,
1975.
Our client is willing to agree to items 1, 2 and 4 of the terms
set forth in your letter of November 18 but they cannot agree
to items 3 which applies to third parties not included in this
litigation. We believe that our client has gone as far as it can go
in compromising with your client with a view to disposing of
this litigation, however, this further condition which imposes
upon our client a contingent liability of unknown dimensions in
respect of claims by others beyond the control of our client, is
simply not acceptable to our client.
If your client is not willing to settle this action on the terms
set forth herein, would you please advise me promptly so that I
may obtain instructions from my client to continue with this
action.
3. Letter, dated February 19, 1976, from
defendants' solicitor to plaintiff's solicitor:
With reference to your letter of December 18, 1975, we have
now been informed by our client that it is prepared to proceed
with settlement of this matter in accordance with terms 1, 2
and 4 of our letter of November 18, 1975. We are preparing for
your consideration a draft agreement incorporating these terms
which we shall forward to you shortly.
As appears from the letter of November 18,
there had been earlier correspondence exchanged.
Subsequently, by a letter of March 3, 1976, plain
tiff's solicitor acknowledged the letter of February
19 and indicated his willingness to receive the
draft agreement. On April 13 he enquired as to
when he might receive it and was advised, on April
27, that defendants' solicitor had sent it to his
clients "for approval". On May 6, plaintiff's solici
tor again expressed his willingness to receive it
and, on June 2, it was sent to him. The terms of
the draft sent do not deviate from those set forth
as paragraphs 1, 2 and 4 of the letter of November
18 although there are recitals and a formal presen
tation. On August 16, defendants' solicitors
enquired as to whether plaintiff's solicitor had yet
had an opportunity "to review the document with
your clients", and, on August 27, plaintiff's solici
tor advised that his client "is unwilling to enter
into a settlement on those terms".
The next step was a motion to require the
defendant Vulcan to produce an officer for exami
nation for discovery. The alleged settlement was
raised in opposition but the order was granted with
costs in the cause on December 7, 1976.
The defendants now move for judgment and,
incidentally, to stay the appointment for examina-
tion for discovery. Counsel have been unable to
find any precedent for this procedure in this Court
or its predecessor, the Exchequer Court of
Canada. The motion is opposed both on its merits
and on jurisdictional grounds.
This settlement was arrived at in Ontario and I
accept the following decision of Evans J.A., as he
then was, for the Ontario Court of Appeal', as a
correct and complete statement of the substantive
law applicable:
The authority of a solicitor arises from his retainer and as far
as his client is concerned it is confined to transacting the
business to which the retainer extends and is subject to the
restrictions set out in the retainer. The same situation, however,
does not exist with respect to others with whom the solicitor
may deal. The authority of a solicitor to compromise may be
implied from a retainer to conduct litigation unless a limitation
of authority is communicated to the opposite party. A client,
having retained a solicitor in a particular matter, holds that
solicitor out as his agent to conduct the matter in which the
solicitor is retained. In general, the solicitor is the client's
authorized agent in all matters that may reasonably be expect
ed to arise for decision in the particular proceedings -for which
he has been retained. Where a principal gives an agent general
authority to conduct any business on his behalf, he is bound as
regards third persons by every act done by the agent which is
incidental to the ordinary course of such business or which falls
within the apparent scope of the agent's authority. As between
principal and agent, the authority may be limited by agreement
or special instructions but as regards third parties the authority
which the agent has is that which he is reasonably believed to
have, having regard to all the circumstances, and which is
reasonably to be gathered from the nature of his employment
and duties. The scope of authority is, therefore, largely gov
erned by the class of agent employed provided that he is acting
within the limit of his ordinary avocation or by relation of the
agent to the principal or by the customs of the particular trade
or profession.
A solicitor whose retainer is established in the particular
proceedings may bind his client by a compromise of these
proceedings unless his client has limited his authority and the
opposing side has knowledge of the limitation, subject always to
the discretionary power of the Court, if its intervention by the
making of an order is required, to inquire into the circum
stances and grant or withhold its intervention if it sees fit; and,
subject also to the disability of the client. It follows according
ly, that while a solicitor or counsel may have apparent author
ity to bind and contract his client to a particular compromise,
neither solicitor nor counsel have power to bind the Court to act
in a particular way, so that, if the compromise is one that
' Scherer v. Paletta [1966] 2 O.R. 524 at 526 ff.
involves the Court in making an order, the want of authority
may be brought to the notice of the Court at any time before
the grant of its intervention is perfected and the Court may
refuse to permit the order to be perfected. If, however, the
parties are of full age and capacity, the Court, in practice,
where there is no dispute as to the fact that a retainer exists,
and no dispute as to the terms agreed upon between the
solicitors, does not embark upon any inquiry as to the limitation
of authority imposed by the client upon the solicitor.
I am satisfied that the action was settled.
Whether one takes the view, as the defendants
argue, that the settlement was reached by the
solicitors or the view, argued by the plaintiff, that
it is manifest that its solicitor did not represent
himself as having the authority to settle the action,
but rather made it clear throughout that he was
merely a conduit for communication with his
client, the result is the same. There is no sugges
tion either that the defendants were on notice as to
any limitation on the plaintiff's solicitor's author
ity nor is it suggested that the counter offer of
December 18, 1975 was a mistake. The terms of
the settlement are certain and complete and it does
not matter whether, for the plaintiff, they were
proposed by its solicitor or proposed by it and
merely transmitted by its solicitor.
As to procedure, I am of the opinion that this is
a situation contemplated by paragraph (b) of Rule
341 2 and that the Rule has been complied with.
The plaintiff disputes the jurisdiction of this
Court to grant the order at all on the basis that it
is, in effect, rendering a judgment on a contract, a
judgment which it would not have the jurisdiction
to render if the original cause of action had been
breach of that contract rather than patent
2 Rule 341. A party may, at any stage of a proceeding, apply
for judgment in respect of any matter
(a) upon any admission in the pleadings or other documents
filed in the Court, or in the examination of another'party, or
(b) in respect of which the only evidence consists of docu
ments and such affidavits as are necessary to prove the
execution or identity of such documents,
without waiting for the determination of any other question
between the parties.
infringement. The plaintiff argues that for the
contract to be kept within the four corners of the
action and, thus, within the Court's jurisdiction,
the defendants must raise it in defense by appro
priate amendment to the pleadings, in which event
the matter would be disposed of on the trial of the
action and not by an application under Rule 341.
Alternatively, the plaintiff invites the defendants
to sue on the contract in an appropriate forum and
to seek to stay proceedings in this action pending
disposition of the other. Neither course of action
commends itself to the defendants.
The fact that there has been, so to speak, a
change in the cause of action is not per se a valid
ground for objection. All cases of entry of judg
ment on consent involve a judgment reflecting a
contract between the parties, not a judgment based
on the adjudicated merits of the original cause of
action, whatever it may have been.
To accept the proposition that the Court has no
jurisdiction to enter judgment on the basis of a
settlement would be to deny the Court's jurisdic
tion to enter and enforce consent judgments in
many cases in which this Court would have had no
jurisdiction initially to entertain an action on the
contract. The fact that one party is no longer
willing to give effect to the settlement is entirely
immaterial. The Court does not derive its jurisdic
tion from the acquiescence of the parties so that a
consent judgment is valid simply because no party
changed his mind on the settlement prior to entry
of the judgment. A consent judgment is valid
because this Court has an inherent jurisdiction
over its own process to enable it to carry out the
basic raison d'être it shares with every court of
civil jurisdiction: the resolution of disputes by
judgments and the enforcement, by its officers, of
those judgments.
The defendants are entitled to the order sought
and to their costs of this application and of the
application of December 7, 1976. I take it that all
other costs are disposed of by the terms of settle
ment. The defendants may prepare a draft judg
ment implementing these reasons. Judgment shall
not enter until settled by the Court.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.