At what point does a settlement become final? Is it when the parties agree on all of the terms of the settlement and sign a written agreement, such as minutes of settlement? Or at an earlier time?
In the recent decision of Cox v Baker, 2019 ONSC 2859, the court was asked to make a determination as to whether a binding settlement had been reached. The litigation involved an inter vivos trust (the “Trust”) settled by a mother for the benefit of her two daughters and subsequent generations. After the death of Donna (the second to die of the two daughters), the three living beneficiaries were Donna’s sons, Brett and Brent, and her niece, Marnie. Brett was the sole trustee after Donna’s death.
Prior to her death, Donna was living at a house that was owned by the Trust (the “Property”), with her husband, John. About a year after Donna’s death, in March 2018, John brought an application against Brett, as trustee of the Trust, and against all three of the beneficiaries, personally, seeking, among other things, an interest in the Property by way of resulting and/or constructive trust.
In May 2018, John and Brett ran into each other at Donna’s gravesite. They discussed John’s application, John advised Brett that he would call his lawyer and withdraw his application, and the two shook hands. Thereafter, a number of emails were exchanged between counsel for John, and counsel for Brett, Brent, and Marnie. It appeared that the parties had reached an agreement that John would withdraw his application, without costs, provided that all parties sign a mutual release. However, John subsequently took the position that there was never a binding settlement agreement, as the parties had not agreed on the specific terms of the mutual release. Brett, Brent, and Marnie brought an application to enforce the settlement.
Ultimately, the court concluded that a binding settlement had been reached. Some of the key factors were, in the court’s finding, that there had been a mutual intention between the parties to create a legally binding contract, and that all essential/material terms had been agreed upon. The court also noted that the agreement had been reduced to writing by way of the email exchanges between counsel.
The court specifically considered whether the fact that the parties had not yet agreed on the specific wording of the mutual release was necessary to create a binding settlement. After reviewing the case law, the court concluded that, unless there is some indication that the settlement was conditional on the parties also agreeing on the language for a release, it is not required that the parties agree on the specific terms of such a release before there will be said to be a binding settlement agreement.
The court also commented on the importance of the principle of finality, which demands that settlements entered into with the assistance of legal counsel be upheld, as it is a matter of good public policy to encourage settlement. Settlements of this kind should be upheld other than in exceptional cases, which the present case was not.
This decision is an important reminder that, if the parties have reached an agreement on all essential terms, even if the more minor details have not been agreed upon, and the minutes of settlement and/or release have not been finalized and executed, a binding settlement may still exist. Parties should be aware that once a binding settlement has been reached (which could happen prior to signing minutes of settlement), they cannot simply change their minds. It is important to keep this in mind at all stages of a negotiation, and to be alert as to when it could be said that all essential terms have been agreed upon.
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When a marriage breaks down, spouses often have an overwhelming amount of issues to consider. For many, all they want to do is figure out how to split up the assets (and kids) and move on with their lives. Sometimes, spouses will separate without formally divorcing. Although life after marriage may be the key consideration for most, separated spouses should also take time to consider what happens on their death and whether or not they want their spouse to share in their estate.
Draft a Will
The most obvious way of ensuring that your separated spouse doesn’t benefit from your death is to draft a Will. By setting out one’s intended disposition of assets, a testator will avoid the provisions of Part II of the Succession Law Reform Act, which provides for a share of the Estate to pass to the legally married spouse of a person who dies intestate. But remember, including a provision in the will that the spouse is to be excluded from inheriting is not sufficient to keep a surviving spouse from inheriting on an intestacy (see our recent blog on this topic here).
Of course, if property rights between the spouses have not been settled following separation, the surviving spouse may still be at liberty to elect in favour of equalization of net family property pursuant to the Family Law Act.
Separation Agreements and Release of Intestacy Rights
If the parties have consulted lawyers and formally settled all of the issues surrounding their marriage, they are likely to have entered into a separation agreement. Often, parties to such agreements will walk away thinking that they have fully separated out their lives and settled all issues arising as a result of marriage, cohabitation, or the breakdown of the relationship. However, solicitors drafting such agreements should be careful to properly release each spouse’s interest in the estate of the other, in case of an intestacy. In particular, while no one likes to think of it, cases have occurred where a spouse dies only days after entering into a separation agreement and before they have had the opportunity to draft a Will.
In order to properly release a spouse’s intestate interests in the other spouse’s estate, there must be a specific release of such rights using clear, direct and cogent words (see the leading case in Ontario of Re Winter,  DLR 134 (Ont H Ct)). In Re Winter, the wife released the husband as follows:
The wife of the second part covenants and agrees and does hereby release the husband of the first part from all claims present, past or future against the husband for maintenance, alimony or separation allowance and acknowledges that she has no further claims against the husband nor against the estate of the husband of the first part.
The Court found that although there was a release against the husband’s estate, the release only dealt with claims for “maintenance, alimony or separation allowance” and was not sufficiently clear and cogent for the wife to have released her intestacy rights against the husband’s estate. As a result, the wife inherited on the husband’s intestacy (a result likely to have displeased the other intestate heirs and the husband, had he been alive).
Change Your Beneficiary Designations
Finally, in addition to thinking of the potential intestacy rights of a surviving spouse, don’t forget assets passing outside of the estate. Make sure to have all beneficiary designations on insurance policies, registered accounts (RRSPs and TFSAs), and pensions updated following separation.
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The notes and records of the lawyer who assisted the deceased with their estate planning can play an important role in any estate litigation. As a result, it is not uncommon for a drafting lawyer to receive a request from individuals involved in estate litigation to provide them with a copy of their notes and files relating to the deceased’s estate planning. But can the lawyer comply with such a request?
The central concern involved for the lawyer is the duty of confidentiality which they owe to the deceased. This duty of confidentiality is codified by rule 3.3-1 of the Law Society of Ontario’s Rules of Professional Conduct, which provides:
“A lawyer at all times shall hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship and shall not divulge any such information unless expressly or impliedly authorized by the client or required by law to do so.”
The duty of confidentiality and privilege which is owed to the deceased by the lawyer survives the deceased’s death. This was confirmed by the court in Hicks Estate v. Hicks,  O.J. No. 1426, where, in citing the English authority of Bullivant v. A.G. Victoria,  A.C. 196, it was confirmed that privilege and the duty of confidentiality survive death, and continues to be owed from the lawyer to the deceased. With respect to the question of who may waive privilege on behalf of the deceased following their death, Hicks Estate v. Hicks confirmed that such a power falls to the Estate Trustee under normal circumstances, stating:
“It is clear, therefore, that privilege reposes in the personal representative of the deceased client who in this case is the plaintiff, the administrator of the estate of Mildred Hicks. The plaintiff can waive the privilege and call for disclosure of any material that the client, if living, would have been entitled to from the two solicitors.”
Simply put, the Estate Trustee may step into the shoes of the deceased individual and compel the release of the lawyer’s file to the same extent that the deceased individual could have during their lifetime.
In circumstances in which the validity of the Will has been challenged, the authority of the Estate Trustee is also being challenged by implication, as their authority to act as Estate Trustee is derived from the Will itself. In such circumstances, the named Estate Trustee may arguably no longer waive privilege and/or the duty of confidentiality on behalf of the deceased individual. Should the notes and/or records of the drafting lawyer still be required, a court order is often required waiving privilege and/or the duty of confidentiality before they may be produced.
Whether or not a lawyer can release their file following the death of a client will depend on the nature of the dispute in which such a request is being made, and who is making the request. If there is a challenge to the validity of the Will or the Estate Trustee’s authority, it is likely that a court Order will be required before the lawyer may produce their file regardless of who is requesting the file. If the dispute does not question the Estate Trustee’s authority, such as an Application for support under Part V of the Succession Law Reform Act, the lawyer should comply with the request to release their file so long as the requesting party is the Estate Trustee. If the requesting party is not the Estate Trustee, and the Estate Trustee should refuse to provide the lawyer with their authorization to release the file, matters become more complicated, and may require a court Order before the lawyer may release their file.
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