IN THE MATTER OF AN ARBITRATION

B E T W E E N:

REGIONAL MUNICIPALITY OF YORK POLICE SERVICES BOARD

(the “Board”)

- and -

THE REGIONAL MUNICIPALITY OF YORK POLICE ASSOCIATION

(the “Association”)

AND IN THE MATTER OF THE GRIEVANCE OF NEIL ORR CONCERNING INDEMNIFICATION FOR LEGAL EXPENSES

David K.L. Starkman. Arbitrator

APPEARANCES FOR THE BOARD

Joy Hulton Counsel Vic Wilson Board Member

APPEARANCES FOR THE ASSOCIATION

Barrier Chercover Counsel David Kingston Association President

A Hearing in this matter was held on November 7, 2000 and January 12, 2001 at Aurora, Ontario PRELIMINARY AWARD

At the commencement of the hearing, the York Police Services Board objected to the jurisdiction of this Board of Arbitration to consider the grievance because, in its submission, the matter had been settled.

BACKGROUND FACTS

The grievor, Neil Orr, began his employment with the York Police Services Board in 1987.

In April, 1996 he was transferred to the Child Abuse Unit to investigate physical or sexual assaults of children less than sixteen years of age, and where the offender was in a position of trust.

In April, 1997 a six month old infant strangled when left unattended in a car seat, and died several weeks later in hospital from the injuries. The grievor was assigned to the investigation.

In August, 1997, the Coroner ordered an inquest into the death, which began on May 4,

1998. The grievor had prepared an inquest brief which was provided to the Crown. At 3 some point during the inquest, the Crown concluded that the police investigation into the death had been inadequate and adjourned the inquest for further investigation.

Following the adjournment, the Board commenced an investigation into the grievor's conduct with respect to the preparation of the inquest brief. A charge of misconduct under the Police Services Act (the “Act”) was laid against the grievor on June 28, 1998. On July

28, 1998 three further charges are laid against the grievor for violations of the Act.

The grievor retained Mr. Leo Kinahan to represent him concerning the charges under the

Act. Because the Board and the grievor were concerned that their respective conduct might be called into question when the inquest resumed, the Board made arrangements to send a lawyer to represent its interests at the resumption of the hearing. In January, 1999, the Board appointed Ms Jean Craig, a lawyer, to represent the grievor at the resumption of the inquest. Upon being advised of Ms Craig’s appointment, the grievor wrote to Ms Craig and advised that he had retained Mr. Kinahan to represent him at the inquest.

The second inquest heard evidence during the period June 1st through 19th, with final submissions being made on June 22nd.

Throughout the period leading up to the resumption of the inquest, the grievor had been requesting that the Board confirm it would reimburse him for Mr. Kinrahan's legal fees incurred for representation at the inquest and the Board declined to make any 4 commitments in this regard.

In June, 1999, Ms Phyllis Carlyle, the senior lawyer for the Region of York, told Mr.

Kingston, the President of the Association, to send in the legal accounts pertaining to the

grievor’s representation at the inquest and the Board would review them and consider

payment.

Mr. Steve O'Melia, the Director of Litigation for York Legal Services, testified that he was

present at the second inquest representing the Police Services Board and the Chief of

Police.

Following a meeting of the Police Services Board in June, 1999 he was advised by Phyllis

Carlyle that the Board was prepared to re-consider its decision concerning indemnification

for the grievor's legal expenses incurred for representation at the inquest, and that the

accounts should be forwarded to his attention for review. Mr. O’Melia stated that his task was to review the accounts and provide comments to Ms Carlyle, and ultimately the Board, as to their reasonableness.

Prior to July 15, 1999 Mr. O’Melia received three accounts dated April 22, May 18, and

June 3, totaling approximately $81,000.00. Mr. O’Melia stated that, when he received the

accounts, the inquest had been concluded. He stated that he knew by looking at the

accounts, that Mr. Kinahan had not billed for time spent in preparation for final argument or 5 for attending at the final argument, but assumed that this would be a relatively small amount. Mr. O’Melia stated that he also assumed that he was in receipt of all the bills that the Association wished to be considered for payment.

Mr. O'Melia phoned Mr. Kinahan to seek clarification about certain matters in the accounts; and requested that Mr. Kinahan provide a full set of accounts that were to be considered for payment. Mr. Kinahan said he would look into the matter.

Mr. O’Melia also stated that, in addition to the three accounts, he received a June 3, 1999 letter from Mr. Kinahan to the Association advising that a further account would be forthcoming. This correspondence provided as follows:

Further to our conversation of a couple weeks ago, please find attached all invoices submitted to date.

With regard to an estimate of how much time remains, the inquest is scheduled to recommence on June 22, 1999 and is expected to be completed by Friday, June 25, 1999.

The Peel Police have been instructed by the Coroner to get a statement from Alex Prebul, however, it is unknown at this time whether or not he will be called as a witness.

If Mr. Prebul is not called as a witness there remains the time required to prepare for closing argument. Although I am unable to ascertain the exact amount of time required fro this preparation, given the number of witnesses called to date substantial review will be required in order to properly prepare those arguments.

I believe that, although there will, in all likelihood, be recommendations pertaining to training issues, within the York Regional Police; the 6 Association, the Police and Constable Orr have all faired relatively well given what could have occurred.

I recognize that the invoices submitted are substantial, however Counsel for the Region of York, Mr. Steve O'Melia, will verify that the work conducted was necessary and the invoices submitted are not inappropriate.

In mid-July Mr. O=Melia recommended payment of approximately $76,000.00, and in early August, the Board authorized this payment.

On August 30, 1999 Mr. O'Melia wrote to the President of the Association in part as follows:

Further to our recent telephone conversation, I enclose The Regional Municipality of York cheque no. 005899 in the amount of $75,924.82, representing payment of all legal accounts submitted to the Police Services Board in respect of the above matter. As we discussed, this payment represents a slight reduction to the face value of those accounts based upon a detailed review thereof and my conversation with Mr. Kinahan. This reduction is in accordance with standard Regional practices for the review and payment of external legal accounts, and is not intended to be critical of Mr. Kinahan.

Please note that this payment is made without prejudice to the Board's position on the proper interpretation of the indemnification provisions set out in section 31 of the Uniform Working Agreement. It is also based on the understanding that it will bring this matter to a conclusion, and I ask that you contact me prior to tendering the cheque if you have any concerns in this respect.

I trust that this satisfactorily concludes this matter.

The Association cashed the cheque.

In February, 2000, Mr. Charles Bourgeois, a solicitor representing the Association, wrote to Mr. O'Melia as follows: 7 We are the solicitors for the Regional Municipality of York Police Association (hereinafter the "Y.R.P.A.") with respect to the above referenced matter.

We can advise that the Y.R.P.A recently conducted an audit of the 1999 legal accounts. Further to this audit, our client discovered that Mr. Leo Kinahan's Statement of Account dated July 16th, 1999 in the amount of $20,365.00 CDN, had not been submitted to the Regional Municipality of York for payment. We are hereby submitting the account for payment and enclose a copy of this invoice for your review and consideration.

In accordance with the above, we request that the Regional Municipality of York make a payment of the outstanding balance ($20,365.00) to our client as soon as possible.

Kindly forward the outstanding funds to our office forthwith.

Thanking you in advance for your anticipated cooperation and prompt attention to this matter.

The Board did not pay the further invoice as, in its opinion, the matter of payment of Mr.

Kinahan's legal bills had been settled in August, 1999.

Mr.Kingston testified that he became President of the Association at about the same time that the second inquest started in June, 1999 and that he had no prior dealings with the issue of the payment of Mr. Kinahan=s accounts for representing the grievor at the inquest.

He stated that the April 22, May 18, and June 3, accounts from Mr. Kinahan were received by the Association. They were reviewed by the Association’s accounts manager, cheques were prepared, and the cheques were signed by himself and the Vice-President. 8 Mr. Kingston testified that he did not know when the fourth bill was received, but that it was after he had sent the three bills to the Region.

According to Mr. Kingston, he believed that the three bills were all there were, and that if he had known of the fourth bill he would not have accepted $76,000.000 as settlement of the matter.

In cross-examination, Mr. Kingston acknowledged that in June, 1999 he provided three accounts to the Region. He acknowledged that the June 3, 1999 letter advising that a further account would be forthcoming was received by the Association, but stated that he did not recall this at the time that the accounts were submitted to the Region for payment.

Mr. Kingston also acknowledged that a fourth account was received by the Association.

This account, in the amount of $20,365.00, was dated July 16, 1999 and was received with a cover letter dated July 26, 1999 from Mr. Kinahan’s office. Mr. Kingston stated that the cheque in payment of this account was dated August 3, 1999 and that he signed it, but stated that he did not recall signing the cheque.

Mr. Kinahan testified that he did not recall talking to Mr. O’Melia about the accounts and did not recall faxing the accounts to Mr. O’Melia or having them delivered.

SUBMISSIONS OF THE PARTIES 9

The Board submitted that there had been a settlement of the issue insofar as a precise dollar amount had been agreed to as a complete and final settlement of Constable Orr’s claims for indemnification of his legal expenses for representation at the inquest.

The Board emphasized the importance of settlements in labour relations matters and reference was made to the decision in Re Sudbury District Roman Catholic Separate

School Board and Ontario English Catholic Teachers Association (1997) 61 L.A.C. (4th)

223 (W. Kaplan) and, Re Government of the Province of British Columbia and Union of

Psychiatric Nurses and British Columbia Nurses’ Union (1997) 66 L.A.C. (4th) 182 (R.

Germaine).

Reference was also made to the decision in Re Canada Post Corp. and Canadian Union of Postal Workers (Winlaw) , (1993) 36 L.A.C. (4th) 216 (T. Jolliffe). In that matter the parties agreed to the settlement of a grievance in which certain monies were paid to the grievor. After the monies had been paid, the Union took the position that interest should have been paid, and that the manner in which the monies were paid had certain adverse income tax consequences for the grievor. The employer took the position that those issues were not arbitrable inasmuch as the matter had been settled.

At pages 235-36 the arbitrator concludes that the parties had a final and binding settlement: 10

..the documentation passing between the parties indicate finality. It does not indicate a partial settlement, i.e., the prospect of the corporation paying money out while some items are still left outstanding, to be taken back before this arbitrator. There was consensus over the whole of the settlement package, even if each and every imponderable was not carefully canvassed for possible inclusion. In my view whether or not the parties chose to address all possible compensation issues in the final package, which might have occurred to the perfectly informed representatives, does not detract from the obvious fact of the matter. Both Mr. Charlton and Mr. Gardiner, acting within their authority, proceeded to finalize the matter as indicated by the exchange of correspondence and, perhaps just as significantly, by the corporation’s presentation of funds which were accepted without any indication at the time that there might be some other outstanding issues which would have to be addressed. In short, the fact that some issues might go unaddressed in a settlement of a compensation package does not mean that the parties have failed to effect settlement if finality is the essence of the understanding reached…

Thirdly, in my view there is no issue here of mutual mistake. In reaching settlement the parties are free to deal with whatever issues they consider to be significant in concluding the matter. The fact that some issues are left off the table whether through happenstance of design, and whether those issues might prove to be significant for one party or the other, does not speak to the issue of mutual mistake. It may well speak to the issue of the parties too casually reaching a settlement without addressing all possible issues or even without having a full understanding as to what all the issues are. The contractual doctrine of mutual mistake speaks to the misunderstanding of a triggering event or raison d’etre of an agreement at a much more fundamental level than where a party is not informed enough to include all possible areas of consideration when agreeing to monetary compensation. Certainly, in my view, an informed consideration of whether there should be a payment of interest is not fundamental to a settlement agreement on compensation.

The Association’s position was that the settlement agreed to by the parties was that the

Board would indemnify Constable Orr for his legal bills with a modest reduction of the bill. 11 According to the Association, what occurred was a mutual mistake as to the total amount

of the legal bill which, at common law, could be corrected.

In the alternative the Association submitted that it had made a unilateral mistake believing

that there were only three accounts when in fact there were four, and that, in circumstances

in which the Board knew that there was a fourth account, the Board should have drawn this

matter to the attention of the Association. The Board’s failure to draw the matter to the

Association’s attention entitled the Association to be granted equitable relief from enforcement of the settlement.

Reference was made to the decision in Stepps Investments Ltd. Et at. V. Security Capital

Corporation Ltd, 14 O.R. (2d) 259 where at p. 270 Mr. Justice Grange discusses the

concept of unilateral mistake in the following terms:

…The case and the defence must stand or fall on unilateral mistake.

It is not, of course, enough that one party is mistaken as to the terms of an agreement to render that agreement void or even to grant that party relief however honest or understandable that mistake may be. All of the cases require something from the opposite party in the way of knowledge or conduct. In Alampi v. Swartz et al., [1964] 1 O.R. 488, 43 D.L.R. (2d) 11 McGillivray, J.A. for the Court of Appeal. at p. 494 O.R., p. 17 D.L.R., stated as follows:

To succeed on a plea of unilateral mistake the defendant must establish:

(1) that a mistake occurred; 12 (2) that there was fraud or the equivalent of fraud on the plaintiff’s part in that she knew or must be taken to have know when the agreement was executed that the defendant misunderstood its significance and that she did nothing to enlighten the defendant: Blay v. Pollar & Morris, [1930] 1 K.B. 628; Farah v. Barki, [1955] 2 D.L.R. 657, [1955] S.C.R. 107.

In McMaster University v. Wilchar Construction Ltd. Et al., [1971] 3 O.R. 801

Thompson J. had this to say at p. 810 about unilateral mistake:

…In equity, to admit of correction, mistake need not relate to the essential substance of the contract, and provided that there is mistake as to the promise or as to some material term of the contract , if the Court finds that there has been honest, even though inadvertent, mistake, it will afford relief in any case where it considers that it would be unfair, unjust or unconscionable not to correct it….

The type of fraud which affords a cause of action for deceit has been precisely classified, but fraud in the wider sense in which the term is used when stated as a ground for equitable relief, is so infinite in its varieties that the Courts have not attempted to define it….new phases of fraud are constantly arising, but all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken. Fraud, in a sense to which equity has attached its disapproval, extends to transactions in which the Court is of the opinion that it is unconscientious for a person to avail himself of the legal advantage which he has obtained.

DECISION

The issue for determination is whether the agreement of the parties to settle the issue of indemnification for the grievor’s legal expenses in the amount of $76,000.00 should be set aside because, at the time the settlement was entered into, the Association was 13 mistaken about the total amount of the account for legal services.

For years Courts have voided contracts based upon the widely accepted test for mistake set in Bell v. Lever Brothers Ltd., [1932] A.C. 161 (H.L.) Per Lord Atkin at p.

225:

The proposition does not amount to more than this that, if the contract expressly or impliedly contains a term that a particular assumption is a condition of the contract, the contract is avoided if the assumption is not true.

Not all invalid assumptions however result in agreements being voided. The Employer referred to the decision in Port Weller Dry Docks, a Division of Canadian Shipbuilding and Engineering Ltd. v. International Brotherhood of Boilermakers, Iron Ship Builders,

Blacksmiths, Forgers and Helpers, Local 680 (Forest Grievance) [1999] O.L.A.A. No.

775 in which the employer asserted that a discharge grievance had been settled and that there was no jurisdiction in the board of arbitration to consider the matter. In arriving at its decision at p. 3 the board states as follows:

…There really is no significant dispute concerning the jurisprudence which governs us. The onus of proving that there was a binding settlement rests on the Company. In determining if this onus has been satisfied we are mindful of the fact that should the Company’s objection succeed the merits of a discharge grievance will not be heard. However, we are also mindful of the fact that the parties themselves can act to deprive us of jurisdiction by entering into binding settlements of grievance and that it is in the interest of good labour relations that they do so. In both the Glace Bay and Vancouver General Hospital decisions the following passage was cited from Chair Munroe’s decision in British Columbia Ferry Corp. and British Columbia Ferry & Marine Workers Union, [1980] 1 Can. LRBR 409:

…before depriving someone of the prima facie right to an adjudication on the merits of a case, an arbitration board… 14 should be thoroughly satisfied not only that a settlement was reached but also that the terms of the settlement were such as to firmly embrace and resolve the issue at hand… First of all, where a settlement has clearly been reached over an arbitrable dispute, that is the end of the matter; neither party may back away from it at a later date. Secondly, so long as the settlement is reached by persons with actual or apparent authority, all levels both of the employer and the trade-union are bound. Thirdly, it is immaterial that the settlement might not have been entered into if one of the parties was possessed of more information at the time the settlement was reached. Finally, to be binding the settlement need not have been arrived at during a formal grievance meeting - i.e. arbitrable matters can be resolved with equal finality in a more informal setting.

In the matter of Re FPC Flexible Packaging Corporation and Graphic Communications

International Union, Local 55-0M, (1998) 77 L.A.C. (4th) 198 (M. Bendel) the Board made the following comments concerning the law of mistake at p. 203:

...we do not intend to explore in detail the law of mistake as it relates to settlements arrived at in the grievance procedure. Mutual mistake is a narrowly applied doctrine in common law. In R. v. Ontario Flue-Cured Tobacco Growers’ Marketing Board, supra, the headnote reads in part as follows:

Although a mere mistake as to quantity will not always avoid a contract, nor is it always avoided even where the mistake is as to the substance of a contract, none the less where parties contract under a false and fundamental assumption going to the root of the contract which both must be taken to have in mind at the time they entered into it as the basis of their agreement, the contract is void.

Agreeing to an unrealistic price, for example, in a contract of purchase and sale as a result of a mistake about the quantity being bought and sold is thus not enough to invalidate the contract. There must be a false and fundamental assumption going to the root of the contract and recognized by both parties as the basis of the contract… 15 In the case of grievance settlements, a narrow application of mutual mistake is particularly appropriate. In a mature collective bargaining relationship, it is almost inevitable that the negotiators of a settlement will not know certain relevant information, either because it has never been brought to their attention or because they have forgotten it. Unlike parties to typical commercial contracts, the parties to a collective agreement have numerous interactions on a daily basis over a period of many years. Given the importance of grievance settlements to a sound collective bargaining relationship, it would be a dangerous development if the gates were opened too wide to the doctrine of mutual mistake in this area. Few settlements would likely be safe from attack on the ground of mistake. In our view, there is no place for an expansive doctrine of mistake in this area. Mutual mistake should only be held to invalidate a settlement where a board of arbitration can say with some certainty that the information in question is of so fundamental a nature that if the parties had known it they would not have negotiated a settlement.

I accept that the burden is on the Board in this case to establish that there has been a settlement which ousts the jurisdiction of this board of arbitration to inquire further into the matter.

I also accept that there is a general reluctance by Courts and Boards of Arbitration to allow parties to withdraw from agreements or contracts. In the labour relations context, there is a need for certainty, that allows both unions and employers to rely on negotiated settlements and to move on. Mistakes which go to the root of the agreement, and which, by their very nature, call into question whether the parties have arrived at a settlement, should be viewed more sympathetically than mistakes about facts or matters which are considerations forming part of the negotiation of a settlement, but which are not properly characterized as the root of the settlement per se. 16 It is not always easy to differentiate between a mistake which goes to the root of the

agreement, and a mistake as to other matters which are important to the negotiation of the

agreement but which are not integral to it.

Against this backdrop I have examined the facts of this grievance. The Board asked the

Association for the legal accounts relating to the representation of the grievor at the

inquest. The Association provided three accounts totaling approximately $81,000.00. The

Board proposed paying approximately $76,000.00 to settle the matter. The settlement was made without prejudice to the Board’s position that, under the terms of the collective agreement, it was not obliged to pay any monies to indemnify a police officer for legal representation at an inquest.

The Association believed at the time that it accepted the payment that the total bill was

$81,000.00. Some five months after settling the matter for $76,000.00 it discovered that

the total legal bill for representation at the inquest was, in fact, approximately $101,000.00,

and the Association says that, if it had known this at the time it entered into the settlement

in August, 1999, it would never have settled for $76,000.00.

In August, 1999 representatives of the Board knew that there was a further account in

addition to the three submitted for payment that would be forthcoming to the Association,

but assumed it would be a small amount of money and therefore that the Association was

not putting it forward for payment. In any event, the Board says that it offered $76,000.00 17 because it was a reasonable sum to pay for representation at the inquest, and this sum was accepted by the Association.

The Association submitted that these facts give rise to mutual or common mistake. This concept is discussed in The Law of Contract in Canada (4th ed.) G.H.L. Fridman at p. 272 in the following terms:

In common mistake cases, the issue would seem to be whether the existence of such shared mistake destroyed the basis of the contract. In these instances there is no question of a lack of consensus ad idem. The parties have clearly agreed on the contract and its terms. However there may be no contract, or the contract may be affected by some equitable remedy such as rectification, because the real underlying intentions of the parties have been foiled. ...

In my opinion, this is not a situation of common or mutual mistake which goes to the root of the agreement and which calls into question whether the parties have reached an agreement. Rather this is an instance of unilateral mistake. This concept was discussed in the matter of Re Transport Labour Relations and Teamsters Union, Local 31, 2134 and 351, (1982) 6 L.A.C. (3d) (D.R. Munroe) at p.268:

I might attempt a summary of Russell L.J.’s judgment in the Riverlate Properties case, it would appear that the courts will grant relief to a unilaterally mistaken party to a contract where the non-mistaken party knew that the document did not give effect to the mistaken party’s intention and where it can be said that such knowledge and any conduct surrounding same are such as to involve the non-mistaken party in a degree of sharp practice.

The issue that the parties in this matter were attempting to resolve was the payment of Mr.

Kinahan’s account for legal services for representing the grievor at the inquest. The 18 Association was mistaken about how much the total account was. The Board knew that the total account was greater than the three accounts submitted for payment, but did not know precisely how much more. The Board did not advise the Association expressly that it knew a further account was forthcoming.

At the time the accounts were submitted for payment however, the Association had been expressly advised by Mr. Kinahan that a further account would be forthcoming. and prior to agreeing to the settlement of this matter with the Board in August, 1999, the Association had received and paid the final account in the amount of approximately $21,000.00. The

Association says that it forgot about this account when the accounts were submitted to the

Board for payment. Mr. O’Melia, on behalf of the Board, contacted Mr. Kinahan and made some inquiries with respect to the accounts. Mr. Kinahan did not recall speaking to Mr.

O’Melia concerning the matter.

In these circumstances, the Association submitted that while it was legitimately mistaken about the totality of the account, the Board knew that the total account was greater than what was submitted for by the Association for payment and took advantage of the

Association by not explicitly bringing this matter to its attention. On the other hand, there was no evidence or suggestion that the Board took any express actions, or made any express representations, which would have caused the Association to believe that the totality of the account was only $81,000.00 or prevented it from discovering that the total bill 19 was approximately $21,000.00 greater prior to accepting the $76,000.00 settlement. In these circumstances, the unilateral mistake is attributable to sloppy accounting practices by the Association

In this matter, the Board says that it was paying the sum of $76,000.00 in full settlement of the claim. The Association says that it was accepting the sum of $76,000.00 as full settlement of the claim which it believed to be only $81,000.00. There is nothing in the settlement letter, or in the history of the matter as discussed by the various witnesses, which makes it clear that the settlement in the amount of $76,000.00 was predicated on the condition that $81,000.00 was the totality of the claim. In the labour relations context, to allow a party to resile from an agreement because of a unilateral mistake, not induced or contributed to by the other party, would render agreements, and particularly monetary agreements settling grievances, too fragile to be useful.

For these reasons, the preliminary motion of the Board is allowed. I find that the issue of indemnification for the grievor’s legal fees for representation at the inquest in June, 1999 has been settled by the parties, and that I do not have the jurisdiction to inquire further into the matter.

Dated at Maberly, Ontario this 19th day of March, 2001 20

______David K.L. Starkman.