Key Issues:

• The plaintiffs sought to strike paragraphs 40 and 59 of the defendants' statement of defence and counterclaim. These paragraphs referred to a proposal made by the defendants to reverse an asset purchase, arguing that it was privileged as a settlement discussion or improper evidence.

Facts:

• The plaintiffs purchased assets from the defendants, who allegedly breached a non-compete agreement and failed to transfer necessary account access.
• The defendants offered to reverse the asset purchase for $100,000, which the plaintiffs rejected. This offer was then included in the defendants' defence.

Court's Analysis:

• The court considered whether the proposal constituted a settlement offer and was thus privileged.
• Citing Canadian Flight Academy v. Oshawa (City), the court held that the substance of the offer, not its "with prejudice" label, determined privilege.
• The court found the proposal could reasonably be interpreted as a settlement offer intended to end litigation, and thus, it was privileged.

Decision:

• Paragraphs 40 and 59 of the defendants' defence were struck with leave to amend.
• The defendants could still argue failure to mitigate without referencing the offer.
• Costs of $7,000 plus HST were awarded to the plaintiffs.

Order: The court issued an order in accordance with this decision.