Sometimes when parties arrive at a settlement, notwithstanding that the settlement may objectively be in their interests, they may not necessarily be pleased with the outcome. If the settlement has been concluded and fully documented, however, a party who has had second thoughts will likely be out of luck if they want to avoid complying with the agreement. This is important because parties should usually be held to the bargains that they make in a settlement.
A settlement does not necessarily have to be in writing to be valid, but like any contract, there must be a “meeting of the minds” on the essential terms of the agreement.
In a recent decision, Daehn v Lalonde, 2021 ONSC 301, the court considered a motion to enforce a settlement where draft minutes of settlement had been exchanged, but not signed. The dispute between the parties underlying the settlement concerned the validity of competing Wills. The parties were engaged in negotiations between January and July 2019, during which time several offers and versions of draft minutes of settlement were exchanged. In mid-July, counsel for the responding parties to the motion advised the moving party that he would no longer be acting for the responding parties, and retracted all offers to settle made by the responding parties.
The moving party took the position that certain conduct by counsel for the responding parties should be taken as akin to acceptance of terms in the minutes of settlement. Such conduct included providing bank statements that had been requested as a condition of settlement, and proposing changes to some terms of the draft minutes without complaint about others. The court did not accept this argument, and did not find acceptance of the agreement by words or conduct of the responding parties.
The court briefly reviewed the law regarding validity and enforcement of settlements. Like a contract, a concluded settlement requires both a mutual intention to create a legally binding contract, and agreement on all essential terms of the settlement.
The court found that the responding parties never agreed to the terms of settlement. Despite the moving party’s argument that the responding parties had agreed to the sole “essential” term, the court found that it cannot be the case that the moving party alone can dictate what terms of the settlement are essential. The court concluded that a settlement cannot be imposed where no agreement was reached.
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According to Rule 49.09 of the Rules of Civil Procedure, a party may bring a motion for judgment in accordance with the terms of an accepted offer and the judge may grant judgment with respect to same or continue the proceeding as if there had been no accepted offer to settle.
In a recent Court of Appeal decision (Hashemi-Sabet Estate v Oak Ridges Pharmasave Inc. 2018 ONCA 839) the Court had to determine whether the motion judge erred in giving judgment in accordance with a Rule 49 offer to settle because said offer was revoked before it was accepted.
The Respondent (the Estate), sued the Appellant for damages for breach of contract, oppression and various other causes of action relating to the opening and operation of a pharmacy.
On June 8, 2015, the Appellant served the Respondent with a written Rule 49 offer to settle the action. In accordance with Rule 49, the offer provided that it would be open until the trial of the action.
In April, 2016, the Appellant retained new counsel, and a Notice of Change of Lawyer was served in accordance with the Rules of Civil Procedure.
On September 20, 2016, the parties attended a pre-trial conference. The Appellant maintains that the June 8, 2015 offer to settle was rescinded orally at the pre-trial conference and that the offer to settle served on September 19, 2016 revoked the June 8, 2015 offer, in any event.
The Respondent on the other hand, maintained that when counsel returned to their office following the pre-trial conference, a written acceptance of the June 8, 2015 offer to settle was sent by fax at 1:27 p.m. on the same day. According to further evidence tendered by the Respondent, opposing counsel’s office called and requested a copy of the June 8, 2015 offer to settle following the pre-trial conference on September 20, 2016 and that a copy was sent to opposing counsel via email at 2:34 p.m. that day (arguably after acceptance of same was sent via fax).
The Respondent acknowledged receipt of the second offer to settle but maintained that it was not served until 5:23 p.m. on September 20, 2016 (hours after the June 8, 2015 offer was accepted).
The Respondent brought a motion for judgment in accordance with the June 8, 2015 offer to settle and the motion judge granted same. The Appellant appealed the decision to the Court of Appeal.
Court of Appeal Decision
The Court agreed with the motion judge. The Court found that the revocation of the June 8, 2015 offer to settle did not comply with Rule 49.02(1) which requires that the revocation be made in writing. As such, the timing of service of the second offer to settle would be determinative of the motion.
The Court held that in determining whether to enforce a Rule 49 offer to settle, a two-step approach is to be undertaken, similar to the pre-Hryniak v Mauldin 2014 Supreme Court of Canada decision Rule 20 summary judgment analysis.
As such, the Court agreed with the motion judge’s analysis in accordance with the above-noted framework was appropriate as follows:
- Whether an agreement to settle had been reached;
- Whether, on all the evidence, the agreement should be enforced.
The Court agreed that the motion judge had to make credibility findings and held that the Respondent’s position was more credible such that the June 8, 2015 was accepted and that judgment in accordance with the said offer should be enforced. In particular, the Court had trouble with the fact that the Appellant had known for over a year that the Respondent took the position that their counsel was not served with the second offer to settle until 5:23 p.m. on September 20, 2016, but did not submit an Affidavit of Service from the process server.
In light of this decision, it is particularly important to be mindful of the particular rules related to Rule 49 offers to settle, both in making an offer to settle and considering to revoke same. Particularly in relation to service of an offer to settle, it may a good idea to serve it in such a manner as to be able to confirm receipt of same by the other side, such as via facsimile. It is important to remember that service via email will not qualify as proper service, particularly if the opposing side maintains the email was never received.
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Today on Hull on Estates, Natalia Angelini and Umair Abdul Qadir discuss Lewicki Estate v Nytschyk Estate, 2016 ONSC 7459, a recent Ontario Superior Court of Justice decision in which the Court considered the enforceability of a settlement between a dependant and an Estate where the dependant died before the settlement was finalized. For more about the decision, please read Suzana Popovic-Montag’s recent blog post.
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If an offer is negotiated and later accepted, how is a court to resolve a later dispute over the form of the release? The Court in Glaspell v. Glaspell Estate, (2008) 36 E.T.R. (3d) 315 held that a release that does not commit a signatory to taking any steps other than those contemplated by the settlement agreement will suffice, even if overly wordy. The parties had reached a settlement agreement: the evidence disclosed mutual intention to create a legally binding contract between the parties and an eventual agreement containing all of the essential terms agreed upon.
Unfortunately, the settlement agreement did not specify the form of release. When it came time to dismiss the action, the plaintiff refused the defendant’s form of release. So the defendant brought a motion to enforce the apparent settlement. The judge allowed the motion and denied the plaintiff’s cross-motion to amend the settlement terms, dismissing the action.
An implied aspect of this decision is that mere form of release is not necessarily an essential or fundamental term of an agreement so long as the essential terms themselves are not altered. The decision does not preclude the possibility in other situations though.
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