What happens if a party dies during settlement negotiations?
In the recent decision of Lewicki Estate v. Nytschyk Estate, 2016 ONSC 7459, the Ontario Superior Court of Justice enforced a settlement that was incomplete when one of the parties died. In this case, Ms. Lewicki (“Cherie”) commenced a claim for dependant’s relief against the estate of her late common law spouse (“Joseph”). Cherie and Joseph had a long-standing common-law relationship when he died intestate in 2013. The house in which the two lived for most of their relationship was held in Joseph’s name alone. Cherie had a potentially large dependant’s support claim as well as a claim to the house based on resulting or constructive trust. The parties agreed to a settlement providing that the Estate would transfer title to the disputed property to Cherie. However, Cherie died unexpectedly at age 52, prior to the transfer.
When is a settlement final and binding?
Even though Minutes of Settlement had not been signed, the court applied the decision of the Ontario Court of Appeal in Olivieri v Sherman to find that the parties had entered into a binding deal and granted the net proceeds of the sale of the disputed property to the common law spouse’s Estate.
A settlement agreement is a contract. Like other contracts, the settlement does not need to be in one signed document. Rather, the parties must have “(a) had a mutual intention to create a legally binding relationship, and (b) reached agreement on all of the essential terms of the settlement.”
In this case, a binding agreement was found in the correspondence between counsel.
Counsel for Joseph’s estate proposed a settlement that Cherie accepted in principle. Counsel for the estate subsequently prepared and sent draft minutes to Cherie’s counsel. When the estate did not hear back, counsel for the estate sent an email to Cherie’s counsel threatening to bring a motion to enforce their settlement agreement, yet after Cherie’s death, counsel for the estate claimed there had never been a final settlement agreement. Although counsel on both sides were making additional proposals for the minutes of settlement when Cherie died, the court found these were not essential terms.
Encouraging settlement as public policy
The court has discretion not to enforce a settlement. The court chose not to use its discretion to set aside the agreement in this case as a matter of public policy. The court held that settlement of litigation is encouraged and so settlement agreements should be enforced where there is a valid contract. The court supports settlements, which reduce costs and provide certainty to parties to litigation. In this case, the court found no reason that the settlement should not be enforced.
Thank you for reading.