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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Today on Hull on Estates, Stuart Clark and Charlotte McGee discuss settlement agreements and non-signatories – specifically, if a settlement agreement affects the interests of a non-signatory to the settlement, can such a settlement bind the interests of the non-signatory?
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Estate litigation can be costly both financially and emotionally. As a result, there is often a strong incentive for parties to try to reach a negotiated settlement. Although entering into a settlement which resolves the estate litigation may appear straightforward from the outside, it may become more complicated if all potential financially interested parties are not signatories to the settlement. It is not uncommon in estate litigation for all beneficiaries of the estate to not actively participate in the litigation, leaving it to people such as the Estate Trustee or the other beneficiaries to defend a claim. As a settlement is in effect a contract between parties, if a settlement is reached which affects the interests of a non-signatory to the settlement can such a settlement bind the interests of the non-signatory?
I have previously blogged about section 48(2) of the Trustee Act, and an Estate Trustee’s ability to settle claims on behalf of the estate which can bind the interests of the beneficiaries. While section 48(2) would allow the Estate Trustee to bind the interests of all beneficiaries to the settlement, the Estate Trustee does so at their own potential liability, as it is possible that one or more of the beneficiaries may later challenge the decision of the Estate Trustee to enter into the settlement, potentially seeking damages against the Estate Trustee if they are of the position that the settlement was not reasonable or in the best interest of the estate. As a result of such a risk, it is not uncommon for an Estate Trustee to be hesitant to enter into a settlement on behalf of the estate in contentious situations, not wanting to potentially expose themselves to personal liability if one or more of the beneficiaries should later object to the terms of the settlement. If an Estate Trustee is hesitant to enter into a settlement on behalf of all beneficiaries, but all actively participating parties are otherwise in agreement with the settlement, is there a way to bind the interests of non-participating parties to the settlement?
The Rules of Civil Procedure provide the court with the ability to “approve” a settlement on behalf of parties who are not signatories under certain limited circumstances. This is done in accordance with rule 7.08 of the Rules of Civil Procedure, which allows the court to approve a settlement on behalf of a party who themselves cannot consent to the settlement on account of being under a legal disability (i.e. a minor). Perhaps importantly however, the court only has the authority under rule 7.08 to “approve” a settlement on behalf of a party under a legal disability, and rule 7.08 is not available in circumstances where the non-signatory is fully capable.
The Rules of Civil Procedure do not otherwise appear to provide any mechanism by which a settlement can be approved on behalf of a party who is not under a legal disability. As a result, if the non-signatory who you are you attempting to bind to the settlement is not under a legal disability, the court likely does not have the authority to “approve” the settlement on their behalf under the Rules of Civil Procedure.
Although the court likely does not have the ability to “approve” a settlement on behalf of an individual who is not under a legal disability in accordance with the Rules of Civil Procedure, this does not necessarily mean that there are no other ways to potentially bind the individual to a settlement. One potential solution may be to seek an Order “in accordance” with the terms of the settlement on notice to all interested parties. Should the court issue such an Order, which in effect repeats the terms of the settlement but as an Order of the court, the non-signatories would arguably then be bound to the terms of the settlement as it would now be in the form of an Order of the court.
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I recently attended a panel discussion with judges of Toronto’s Commercial and Estate Lists, the purpose of which was to explore tips for effective practice and advocacy. A key takeaway from this discussion was that case conferences are a valuable tool in a litigator’s toolbox, particularly when litigation becomes contentious.
Case conferences are governed by Rule 50 of the Rules of Civil Procedure. The purpose of Rule 50 is to promote settlement of some or all of the issues in dispute without a hearing, and to obtain orders or directions to ensure that any necessary hearing is expeditious, orderly, and efficient.
Rule 50.13 dictates that a judge may direct a case conference before a judge or case management master, in either an action or application, on his or her own initiative or at a party’s request. A judge can direct a case conferences at any stage of the litigation. Pursuant to Rule 50.13(5), at a case conference, the judge or case management master may:
- identify the issues, noting those that are contested and those that are not;
- explore methods to resolve the contested issues;
- if possible, secure the parties’ agreement on a specific schedule of events in the proceeding;
- establish a timetable for the proceeding; and
- review and, if necessary, amend an existing timetable.
As discussed by my colleague, Kira Domratchev, in her blog on Rule 49 offers to settle, Ontario is a jurisdiction where parties are encouraged to settle their legal disputes prior to reaching the ultimate hearing of a matter. Case conferences are a valuable tool for parties who are looking to narrow the issues before the court, establish a timetable, or potentially reach a full and final settlement.
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On March 27, 2014, I blogged on the issue of settling litigation, but leaving the issue of costs to the court. I noted the decision of Dhillon v. Dhillon Estate, 2009 CanLII 58607 (ON SC), where the matter was settled on the eve of trial, but the parties left the issue of costs to the court. The court declined to make any award of costs, as the factors to be considered in awarding costs had not been determined by the court.
In the decision of Koster v. Koster, 2018 ONSC 6896 (CanLII) released November 19, 2018, the issue arose again. A motion was brought for summary judgment, but as the court determined that it could not decide the question without a trial, the motion was dismissed. The parties then went to mediation, where the matter was settled, except for the issue of costs. Pursuant to the settlement, the entitlement and quantum of costs was to be determined by the court.
There, the court declined to make any costs award. The court referred to the Dhillon decision.
In refusing to award costs, the court stated:
By definition, a settlement is a compromise between the litigants’ positions. Also by definition, it is agreeable to all the parties. It is impossible to say with accuracy why any particular settlement was acceptable to one or other of the parties. Put another way, an award of costs is typically grounded in findings by the court as to the parties’ respective success and the impact of their actions during litigation, which are findings not made in the event of a settlement.
The court also cited from the decision in Waterloo North Condominium Corporation No. 161 v. Redmond, 2017 ONSC 1304 (CanLII). There too, the court declined to determine liability for costs following a settlement. There, the court stated:
Moreover to embark upon a full examination and adjudication of the merits of the parties’ respective substantive claims and defences for the sole purpose of determining the question of costs, when those substantive issues have been settled by the parties, would run counter to the principle in McLellan that costs are incident to a determination of the rights of the parties and are not to be made themselves the subject matter of the litigation.
As I concluded in my March 2014 blog, settling but leaving the issue of costs to the court should be avoided. Courts will be reluctant to relitigate the entire matter in order to make a determination as to who was right and who was wrong and therefore entitled to or liable for costs.
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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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This weekend marks the end of the 105th Tour de France. This year’s race has been full of controversies, first as a result of allegations of doping by pre-race favourite and four-time winner Chris Froome (and a related threatened cyclist strike) and subsequently ranging from disqualification of one cyclist for punching another to the inadvertent tear-gassing of cyclists by French police.
This spring, news surfaced regarding a settlement negotiated in respect of the claims against controversial cycling figure Lance Armstrong. Armstrong’s former teammate, Floyd Landis, had commenced proceedings against him in 2010 under the False Claims Act. The United States government became involved in the fraud proceedings in 2013 after Armstrong admitted to using performance-enhancing drugs after years of public denial.
The litigation commenced by Landis was settled earlier this year. Terms of settlement were reported to involve a payment by Armstrong of $5 million (of the $100 million claimed against him), as well as a payment to Landis of $1.65 million in legal fees. Accordingly, Landis’ one-quarter share in the settlement payment is less than what he will receive in legal fees.
It is not unusual in our work to see settlement terms involving the payment of one or more party’s legal fees as part of or in addition to a settlement payment. Especially where litigation spans the better part of a decade, the legal fees incurred can rival or exceed the quantum of the settlement payment itself and may form an important part of negotiations.
Have a great weekend,
Newlands Estate was a dispute between three siblings over a $30,000.00 painting. The three siblings were beneficiaries and estate trustees of their late father’s estate. Two of the siblings commenced an application in their capacity as Estate Trustee as against their brother and sought advice from the Court regarding the painting which they alleged was an asset of the Estate. They also alleged breach of fiduciary duty and sought costs of the application on a substantial indemnity basis.
The respondent argued that the painting was gifted to him by his late father on the condition that he pay the value of same to the Estate.
In an earlier decision, released in November of 2017, Justice Spies dismissed the application finding that the painting was not an asset of the Estate and that the applicants were obliged to convey ownership of the painting to the respondent personally upon receipt of the full and final payment of $30,000.00. The Court also found that the respondent had not breached his fiduciary duty as Estate Trustee.
In this follow up decision Justice Spies dealt with the Costs of the application. The respondent sought substantial indemnity costs against the applicants personally in the amount of $214,832.00 or alternatively, partial indemnity of $148,218.00.
The Court found that the application was unnecessary and having considered their conduct throughout, ordered them to personally pay substantial indemnity costs to the respondent.
This case is an example of not only the risk of liability that estate trustees must keep in mind when acting in the fiduciary role of estate trustee, but also the risks of not accepting reasonable settlement offers.
Background of Settlement Offers Exchanged
Before the application was commenced the respondent offered to pay the agreed upon value of the subject painting ($30,000.00) to the Estate. He also offered to resolve some other issues regarding the administration of the Estate. The applicants did not provide a formal response to this offer.
After the commencement of the proceeding, the respondent made five offers to settle on various dates. These offers addressed the painting and other administration issues.
In February of 2017, the applicants presented a counter-offer consenting to the release of the painting to the respondent and provided that the application be withdrawn without costs and that the parties bear their own costs. They declined to deal with any of the other terms.
During the course of the litigation, the action became the subject of three Orders setting out deadlines for mediation, cross-examination and scheduling a hearing. The applicants were non-compliant with the Orders for cross-examination and caused the rescheduling of the hearing, all of which led to additional costs incurred by the respondent.
The applicants argued that the respondent’s original offer was not an offer to settle within the meaning of Rule 49 of the Rules of Civil Procedure as it was made before the application began. They acknowledged, however, that the Court has broad discretion to consider pre-litigation offers with respect to costs.
The respondent submitted that his original offer was an offer to settle that the applicants rejected and that this Court has broad discretion to consider any offer in deciding to award substantial indemnity costs.
The Court cited, with agreement, the view expressed in Brough and Whicher Ltd. v. Lebeznick, 2017 ONSC 1392, at para. 20, that a pre-litigation offer is relevant to the consideration of costs, as it can demonstrate whether a party was prepared to be reasonable from the outset and noted that “clearly” the respondent’s original offer indicates that he was prepared to be reasonable.
In the circumstances, Rule 49.10 would only entitle the respondent to partial indemnity costs. The respondent, relying on the decision of the Ontario Court of Appeal in S & A Strasser Ltd. v. Richmond Hill (Town),  O.J. No. 2321 (Ont. C.A.), argued that the Court has broad discretion to consider any offer in deciding to award substantial indemnity costs.
After reviewing the competing authorities, Justice Spies noted:
I do not understand the law to limit my discretion to award solicitor-client costs to only cases where unsubstantiated allegations of fraud, deceit and dishonesty have been made. It has been repeated in a number of cases that the trial judge in Strasser said: “I think this case, in these circumstances, screams for solicitor-and-client costs.” Furthermore, Rule 57.01 (4) gives me authority to award all or part of the respondent’s costs on a solicitor-client basis and Rule 57.01 (1) permits me to consider any offer to settle and Rule 57.01(1) (f) (i) provides that I may consider whether any step in the proceeding was improper, vexatious or unnecessary.
The Court noted that the applicants misused their authority, brought an application that was improper, vexatious and unnecessary to punish the respondent, who was a sibling with whom they did not get along. They used their position as Estate Trustees to shield themselves from personal liability and ran up costs of a quarter million dollars ostensibly to recover a $30,000 painting:
In my view, not ordering them to fully reimburse John for his legal costs would bring the administration of justice into disrepute.
The applicants’ argument that the respondent should only be entitled to costs up to the date of their counter-offer was not accepted in light of their refusal to deal with other issues pertaining to the administration of the Estate and the fact that by the time that offer was served the respondent had incurred substantial legal fees.
Costs were fixed at $180,167 plus HST for a total of $203,589 payable by the applicants personally. Given the applicants’ conduct, this was not a case where costs ought to be paid from the Estate.
The applicants were also ordered to pay the respondent’s full disbursements minus what had been paid out of the Estate.
Substantial litigation costs to be paid personally by an estate trustee is not common, but well within the discretion of the presiding Judge. Parties to estate litigation should assess their personal exposure to costs before launching a lawsuit or motion, similar to those involved in civil litigation cases.
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Ontario is a jurisdiction where parties are encouraged to settle their legal disputes well before reaching the ultimate hearing of a matter, and as such it is not uncommon for opposing parties to exchange offers to settle throughout the duration of the dispute.
An additional incentive provided for under the Rules of Civil Procedure to settle the matter is what is called a “Rule 49” offer to settle. Generally, it operates by ensuring a costs award that is favourable to a party who:
(i) makes an offer to settle that complies with the specifications of Rule 49; and
(ii) achieves a more favourable result at the hearing than offered under the offer to settle.
An offer to settle under this rule can be served by a plaintiff, defendant, applicant or respondent in an action, application, counterclaim, third party claim, crossclaim or motion. This means that this rule is applicable to motions on discrete issues within a legal dispute and is not limited only to offers made to settle the entire dispute.
In order to be eligible for the benefits provided under Rule 49, the following requirements must be met:
(i) the offer to settle must be made at least 7 days prior to the commencement of the hearing;
(ii) the offer to settle must be fixed, certain and understandable; and
(iii) it cannot be withdrawn or expire before the commencement of the hearing.
In deciding whether or not to make an offer to settle under this rule, it is important to take into account the fact that the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.
Where a plaintiff or applicant makes an offer under this rule and the judgment is as or more favourable to that party than the offer to settle, the plaintiff or applicant is entitled to the following:
(i) costs on a partial indemnity basis to the date of the offer to settle; and
(ii) costs on a substantial indemnity basis from that date forward.
Where a defendant or respondent makes an offer under this rule and the judgment is as or less favourable to the plaintiff or applicant than the terms of the offer to settle, the following applies:
(i) the plaintiff or applicant is entitled to partial indemnity costs to the date that the offer to settle was served; and
(ii) the defendant or respondent is entitled to partial indemnity costs from that date forward.
In the event that a party that made an offer to settle under this rule wishes to withdraw it, such withdrawal must be clear and unequivocal.
For more information on the manner in which Rule 49 operates, the Ontario Bar Association summarized the general rules and case law related to it here: https://www.oba.org/getattachment/Sections/Civil-Litigation/Resources/Resources/Litigation-Fundamentals-Sunrise-Series/Offers-to-Settle/Rule49OffersToSettle.pdf
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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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