Ontario – court finds no obligation to mediate but also holds parties must have a dispute to require mediation – #118

In Mera Software v. Intelligent Mechatronic Systems, 2018 ONSC 5208, Mr. Justice Donald J. Gordon determined that the parties’ mention of mediation in their agreement did not impose mediation as a condition precedent but, if it did, he found no dispute. Gordon J. granted summary judgment in favour of plaintiff under Rule 20.04 of Ontario’s Rules of Civil Procedure, RRO 1990, Reg 194 because no “dispute” existed and there was no need to mediate a non-existent dispute.  The parties’ contract contained no binding agreement to mediate and their litigation had no disagreement requiring mediation.

Mera Software Services, Inc. (“Mera”) provides software development services and products. Intelligent Mechatronic Systems Inc. (“IMS”) provides services and analytics to the automotive industry. Mera and IMS entered into a June 23, 2016 Consulting Agreement (“Agreement”) by which Mera undertook to provide software development services to IMS and IMS undertook to pay Mera.

The Agreement set out how to calculate the fees for Mera’s services and how objections to invoices would be handled. The Agreement also included a clause that mentioned, in the event of a dispute, the parties agreed to “seek an amicable settlement of that dispute by mediation”:

38. Dispute Resolution. The Parties shall work in good faith to resolve any disputes that arise under this Agreement. Where a dispute arises out of or in connection with this Agreement that cannot be resolved by these persons, and it is not related to the IMS obtaining, protecting or enforcing its intellectual property rights, the Parties agree to seek an amicable settlement of that dispute by mediation. If the Parties cannot agree on a mediator within ten (10) days after referral of a matter to mediation, then either party may make application to court to appoint one. The mediation shall be held in Waterloo, Ontario, Canada in accordance with the Arbitration Act, 1991 (Ont.) c. 17, as amended and the costs of mediation shall be shared equally between the Parties.

Mera performed services for IMS from June 2016 to March 2018. Invoices sent by Mera were paid by IMS until October 2017. When Mera’s demands for payment were not met, Mera ceased performing services March 31, 2018 and terminated the Agreement.

Mera initiated an action in Ontario Superior Court on April 13, 2018 seeking $568,190.48 USD as damages for unpaid invoices, plus pre- and post-judgment interest at 18%, and costs. IMS served a June 1, 2018 Statement of Defence in which it resisted Mera’s claims, asserted that IMS had not breached the terms of the Agreement and denied owing the amounts claimed.

Mera served a July 9, 2018 Motion for Summary Judgment under Rule 20.04. Returnable July 19, 2018, the Motion for Summary Judgment was adjourned to September 4, 2018. IMS provided responding materials on August 30, 2018 which reported negotiations between the parties and reference to the Agreement’s paragraph 38. IMS asserted that “mediation had not occurred and insists on the enforcement of its right to mediate the dispute”. IMS requested that Mera’s Motion for Summary Judgment be adjourned until mediation took place.

Mera submitted that IMS presented no evidence of a dispute with Mera’s claim, leaving only a single issue: whether the parties were obliged to mediate before litigating. Mera added that the mention of mediation in clause 38 did not elevate it to a condition precedent. IMS’ failure to identify what was in dispute made mediation meaningless. Mera also distinguished mediation from arbitration, the latter being “a system allowing for decision-making and a stay of the litigation process.”

IMS rested on its Statement of Defence to support its position that there was a dispute between the parties. To resolve that dispute, the mediation provision is “mandatory, a clause specifically negotiated by the parties as part of their agreement.” As well, IMS disagreed with Mera’s distinction between mediation and arbitration, submitting that “mediation can result in resolution.” IMS sought only a stay, not a dismissal, of Mera’s Motion for Summary Judgment, in order to allow for mediation.

Gordon J. made two (2) determinations.

First, he determined that there was no “dispute” between the parties. Despite acknowledging “in general terms”, owing deference to the parties’ agreement and that “mediation is a clear expression of their intentions in resolving disputes”, Gordon J. admitted IMS’s insistence on mediation puzzled him.

[18] However, I fail to see what is in dispute. The statement of defence presents only a generic denial of breach and liability. No detail is provided. Surely, if IMS is taking the position MERA did not provide the services, or that the services were deficient, or that the invoices are improper, such would have been pleaded.

On that basis, he dismissed IMS’ request for an adjournment.

Second, Gordon J. determined that IMS’ affidavit supporting its contestation of Mera’s Motion for Summary Judgment fell short of providing detail. “The affidavit of [IMS’ affiant] does not help identify what is in dispute. Rather, it simply says they want mediation.” IMS’ affidavit material failed to meet a party’s obligation, as respondent to a Rule 20.04 Motion for Summary Judgment, to “set out specific facts showing there is a genuine issue for trial.”

[21] When, as here, the sole issue on this motion is whether mediation ought occur prior to the motion, I conclude the responding party must identify, with some particularity, what the dispute is between the parties. I agree with Mr. Murdoch, IMS has not identified a dispute and, hence, there can be nothing to mediate. The lack of detail in the statement of defence and responding affidavit strongly suggests the mediation request is merely a delaying tactic. There is absolutely no evidence presented by IMS regarding any dispute.

Gordon J. qualified the litigation as a collection matter in which Mera demonstrated services rendered and invoices presented but IMS presented no challenge to Mera’s claims. Gordon J. therefore granted judgment in Mera’s favour for $568,190.48 US plus pre- and post-judgment interest at 18%.

He made no order as to costs but invited them to submit reasons to him within 30 days of the reasons if they disagreed.