March 19, 2024
A settlement agreement between parties to a lawsuit is a contract, and will be enforced by the court where the parties:
- had a mutual intention to create a legally binding contract; and
- reached agreement on all of the essential terms of the settlement.
Where the agreement is in writing, the existence of these requirements will be determined objectively (“how would a reasonable person understand this document?”), so evidence from the parties as to their subjective understanding is irrelevant. Such evidence is usually self-serving, and the parties are often unreasonable.
THE CASE
The judge found that the defendant opposing enforcement was unreasonable in 2169289 Ontario Inc. v. Tumback. In particular, he found that the position that there was no enforceable agreement should noy have been advanced, or at least abandoned before the hearing. Time and money were wasted.
At least since COVID, courts are more conscious about delay, and cost. Lawyers time is expensive, and court time is a precious resource.
The issue of whether the agreement ought to be enforced was a reasonable issue to argue in court. Courts will enforce a clear and unambiguous settlement unless by the enforcement would result in a “clear injustice”.
What is a clear injustice?
In an earlier case the Court of Appeal identifies these factors:
- whether the parties’ pre-settlement positions remain intact;
- whether the other party to the settlement will be prejudiced if the settlement is not enforced, apart from losing the benefit of the settlement itself;
- the degree to which the party seeking to set aside the settlement will be prejudiced if judgment is granted as compared to the prejudice the other party will suffer if the settlement is not enforced; and
- whether any third parties will be affected if the settlement is not enforced.
The judge applied these factors and found in favour of the defendant. The settlement agreement was not enforced.
In Canada the winning party on a motion is normally awarded partial indemnity costs. The defendant asked for over $10,000.00 in costs. The judge said that was too much.
The surprising thing is that he did not award the amount suggested by the plaintiff (almost $8,000.00).
Because the defendant’s approach to the motion was unreasonable, even though they won the motion, the judge awarded them only nominal costs of 1,500.00. Like nominal damages, nominal costs are used rarely to send a message about one party’s conduct. Unlike nominal damages, in this case the message was about the conduct of the motion.
TAKEAWAYS
- In most situations, settlements will be enforced.
- If clear injustice would result, the settlement will not be enforced.
- More importantly, courts are becoming more conscious about how lawsuits are conducted, and will express displeasure at unreasonable conduct, by hitting a party in the pocketbook.
HOW WEILERS LLP CAN HELP YOU
At Weilers LLP, we understand the law and, more importantly, understand the art of advocacy necessary to present your case to the court in the reasonable manner.
We are not afraid of hard cases. We like a challenge. If you value efficiency and effectiveness, Weilers LLP may be the right lawyers for you.