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Contracts - Settlement Releases
MORE CASES
Part 2
. ADT Security Services Canada, Inc. v. Fluent Home Ltd.
In ADT Security Services Canada, Inc. v. Fluent Home Ltd. (Div Court, 2023) the Divisional Court interprets the terms of an otherwise-unspecified settlement release:[8] Parties often negotiate release terms that are broader than the effect of a simple judgment – and they are free to do so. Where the parties do not agree on the terms of a release, the court implies a simple release, consistent with ordinary practice and commercial reasonableness, given the overall context of the claim.
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[18] As I indicated at the conclusion of the hearing, this is not a close call. The terms of settlement are simple. The manner in which the agreement was expressed conveyed the parties’ commitment to the settlement, and that commitment was relied on by the parties and the court in vacating the pending trial dates. The precise wording of the release is not an essential term in the context of this settlement: 1648290 Ontario Ltd. v. Akhaven, 2018 ONSC 6122 (Div. Ct.). Likewsie, the precise timing of payment of the settlement funds is not an essential term in the context of this settlement: Canada v. Stephen Moffett Ltd., 2021 FC 1223; Hughes v. The City of Moncton, 2006 NBCA 83. . Briggs v. Durham (Police Services Board)
In Briggs v. Durham (Police Services Board) (Ont CA, 2022) the Court of Appeal considered principles of contractual interpretation, here a settlement release. The points made in para 42, if embodied expressly in settlements, would go far to avoid efforts to re-open litigation once (apparently) settled:[41] In accordance with Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47, a contract must be read as a whole, having regard to the ordinary and grammatical meaning of the words used, consistent with the surrounding circumstances or factual matrix. If based on a review of the wording of the agreement and the factual matrix, there is an ambiguity in the meaning of the agreement, the court can then have regard to external or parol evidence, which may include the subsequent conduct of the parties. However, in doing so, the court must give evidence of subsequent conduct the “appropriate weight having regard to the extent to which its inherent dangers are mitigated in the circumstances of the case at hand, to infer the parties’ intentions at the time of the contract’s execution”: Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512, at para. 56.
[42] In addition, in Biancaniello v. DMCT LLP, 2017 ONCA 386, 411 D.L.R. (4th) 367, at para. 42, this court set out the interpretive principles that specifically apply to a release, which include that the court must “look first to the language of a release to find its meaning”, that “[w]hen a release is given as part of the settlement of a claim, the parties want to wipe the slate clean between them”, and that “[o]ne can look at the circumstances surrounding the giving of the release to determine what was specially in the contemplation of the parties”. . Idea Notion Development Inc. v. CTO Boost Inc.
In Idea Notion Development Inc. v. CTO Boost Inc. (Ont CA, 2021) the Court of Appeal set that the court had discretion not to resolve settlement agreements by summary judgment:[17] There is a discretion to decline to enforce settlement agreements by way of summary judgment motions. This discretion is guided by administration of justice concerns. If the enforcement of the agreement would be unreasonable, result in an injustice, or for some other good reason, not be in the interests of justice, the motion judge can decline to grant summary judgment on the agreement, even though on the evidence an agreement was reached. . Corner Brook (City) v. Bailey
In Corner Brook (City) v. Bailey (SCC, 2021) the Supreme Court of Canada overruled the narrow 'Blackmore' rule of settlement release contracts, such that the wording of such a contract is now read under general contract interpretive principles [following Sattva Capital Corp. v. Creston Moly Corp (SCC, 2014)]:[1] This appeal is about the proper approach to interpreting the scope of a release, whether there is any special interpretive rule that applies specifically to releases, and if not, how the general principles of contractual interpretation this Court set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, apply to the release at issue here.
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[3] There is no special interpretive principle that applies to releases. The decisions below refer to the rule from the House of Lords decision in London and South Western Railway Co. v. Blackmore (1870), L.R. 4 H.L. 610, in which Lord Westbury stated, at p. 623: “The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given.” As I will explain, this “Blackmore Rule” has been overtaken by the general principles of contract law in Sattva. The Blackmore Rule has outlived its usefulness and should no longer be referred to. Any judicial tendency to interpret releases narrowly is not a function of any special rule, but rather a function of releases themselves. See paras 16-43 for the fuller analysis.
. Reid v. Bracebridge
In Reid v. Bracebridge (Div Ct, 2021) the Divisional Court considered an appeal on the terms of a litigation settlement:[37] It is well settled that for there to be a binding settlement, the parties must intend to create a legally binding contract and agreement has been reached on all essential terms: Olivieri v. Sherman, 2007 ONCA 491 at para. 41, citing Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CanLII 2734 (ONCA). Also see: Shete v. Bombardier, 2019 ONSC 4083 (Div. Ct.) at paras. 12-13.
[38] Where the settlement provides for a release, the cases establish that the terms of the release are not terms of the settlement unless the parties have agreed that further agreement to the terms is required. See: Birjasingh v. Coseco Insurance Co. 1999 CanLII 14888 (ONSC) at para. 25; Hedayat v. Murlee Holdings Limited, 2011 ONSC 5826 (ONSC) at para. 19; Sahota v. Sahota, 2016 ONSC 314 (Div. Ct) at para. 32.
[39] As a result, disagreement over the wording of a release does not generally result in repudiation of the settlement. As noted by CJBC McEachern in Fieguth v. Acklands Ltd., 1989 CanLII 2744, (1989) 59 DLR (4th) 114 (BCCA) at para. 44:It should not be thought that every disagreement over documentation consequent upon a settlement even if insisted upon, amounts to a repudiation of a settlement. Many such settlements are very complicated, such as structured settlements, and the deal is usually struck before the documentation can be completed. In such cases the settlement will be binding if there is agreement on the essential terms. When disputes arise in this connection the question will seldom be one of repudiation as the test cited above is a strict one, but rather whether a final agreement has been reached which the parties intend to record in formal documentation, or whether the parties have only reached a tentative agreement which will not be binding upon them until the documentation is complete. Generally speaking, litigation is settled on the former rather than the latter basis and parties who reach a settlement should usually be held to their bargains. Subsequent disputes should be resolved by application to the court or by common sense within the framework of the settlement to which the parties have agreed and in accordance with the common practices which prevail amongst members of the bar. It will be rare for conduct subsequent to a settlement agreement to amount to a repudiation. [My emphasis.] [40] Further, it is also well established that litigation counsel has implied authority to compromise a client’s position based on his or her retainer, unless a limitation of authority has been communicated to the other side: Scherer v. Paletta, 1966 CanLII 286 (ON CA), [1966] 2 O.R. 524 (CA) at paras. 10 & 11.
[41] Rule 49.09 provides that where a party to an accepted offer to settle refuses to comply, the other party may make a motion for judgment in terms of the settlement. The rule gives the judge hearing the motion discretion to grant judgment or continue the proceedings.
[42] The test under Rule 49.09 is whether an agreement to settle was reached and, if so, should it be enforced based on the evidence: Bank of Montreal v. Ismail, 2012 ONCA 129 (CA). . Kearns v. Canadian Tire Corporation, Limited
In Kearns v. Canadian Tire Corporation, Limited (Ont CA, 2020) the Court of Appeal interpreted a settlement contract:[31] The motion judge applied Olivieri v. Sherman, 2007 ONCA 491, 86 O.R. (3d) 778, the controlling authority regarding the enforcement of minutes of settlement. In doing so, he made five key findings.
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[38] The motion judge precisely identified the fundamental flaw in Canadian Tire’s position when he wrote, at para. 26:The problem is not one of ambiguity. The problem, from [Canadian Tire’s] perspective, is that when it entered into the Minutes of Settlement, the persons with authority to commit to the terms of settlement did not know that the November 23, 2018 payment had been made to [Mr. Kearns]. [Emphasis added.] [39] To this comment I would add that certain factors prevent accepting Canadian Tire’s assertion that the Minutes resulted from a unilateral mistake that justifies their rectification. To put the factors within their proper legal context, to succeed on an assertion of unilateral mistake Canadian Tire must establish that a mistake occurred and there was fraud, or the equivalent of fraud, on Mr. Kearns’ part in that he knew, or must be taken to have known, when the agreement was executed that Canadian Tire misunderstood its significance and he did nothing to enlighten the company: Alampi v. Swartz (1964), 1964 CanLII 303 (ON CA), 43 D.L.R. (2d) 11 (Ont. C.A.), at p. 17; Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720, at para. 15; 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, 150 O.R. (3d) 481, at para. 26.
[40] The first factor is that while the Canadian Tire representatives who attended the mediation may not have known that the November Payment had been made to Mr. Kearns, others in the company certainly knew. Although Canadian Tire adduced evidence to suggest that a clerk had dropped the ball in making the payment and a supervisor had failed to catch the blunder, the payroll records of the company clearly showed that the payment had been made to Mr. Kearns. The company’s representatives at the mediation deposed that they had reviewed the pay stubs for Mr. Kearns.
[41] Second, Canadian Tire’s argument ignores a key principle of contractual interpretation. It suggests that the ““context”, or factual matrix, that the motion judge failed to take into account included the subjective understandings, or state of mind, of the two Canadian Tire representatives at the time of the mediation. But, as taught by Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 58, the factual matrix consists only of objective evidence of the background facts at the time of the execution of the contract – that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contract: see also, Olivieri, at para. 44. Evidence of the undisclosed or uncommunicated subjective knowledge or state of mind of the two Canadian Tire representatives at the mediation does not qualify as part of the factual matrix that could assist the interpretative process. . Chatsikiriakos v. Kilislian
In Chatsikiriakos v. Kilislian (Ont CA, 2020) the Court of Appeal held, without any referenced precedent, that a court had authority to decline to enforce a litigation settlement on public policy. The reasoning may have centered on R49.09 ['Failure to Comply with Accepted Offer'] which says that "the judge may grant judgment accordingly" [but if so it is apparent that the court misreferred to it as R49.04]:Should the motion judge have refused to enforce the settlement on public policy grounds?
[17] A court has a discretion to decline to enforce a settlement agreement on public policy grounds. That discretion is exercised sparingly. The moving party must demonstrate sufficiently compelling circumstances to justify the inevitable negative impact non-enforcement of an agreement will have on both the finality principle and the reasonable expectations of litigants who enter into settlement agreements.
[18] As with the exercise of any discretionary power, this court will defer to the motion judge’s exercise of his discretion, absent demonstration of:• a clearly unreasonable result;
• a material misapprehension of the evidence, or a failure to consider material evidence; and
• a failure to correctly apply the controlling legal principles. . Chatsikiriakos v. Kilislian
In Chatsikiriakos v. Kilislian (Ont CA, 2020) the Court of Appeal considered whether a settlement in wrongful dismissal litigation must specify how the funds are allocated by heads of damage (it didn't):Did the agreement contain the essential terms of the settlement?
[12] It cannot be argued the classification of the amount of a settlement into various heads of damages is always an essential element of any agreement to settle a wrongful dismissal claim. This court has held the exact opposite: Perri v. Concordian Chesterfield, 2003 CarswellOnt 6240, aff’ 2004 CanLII 2904.
[13] A settlement is an agreement. The categorization of the parts of the settlement under various heads of damage may or may not be an essential term of any particular settlement agreement. In the present case, there was nothing in the language of the Offer to Settle, or in the terms of the appellants’ acceptance of the offer to suggest the characterization of the amounts of the settlement under various damage heads was essential to, or played any part in, the agreement. Nor do any of the communications by the parties with the trial court, immediately after the settlement, lend any credence to the appellants’ assertion they regarded the characterization of the amounts of the settlement under various heads of damage as essential to the existence of the agreement they had entered into on the advice of counsel.
[14] The two emails relied on by the appellants do not assist their argument. The first, dated May 19, 2019, specifically acknowledges the “$75,000 settlement” and goes on to propose a variation of that settlement. The variation in the settlement agreement proposed by the appellants addresses various concerns, including costs of the action, and the allocation of the settlement amounts as aggravated and moral damages.
[15] The June 21, 2019 email also offers no support for the position there was no settlement agreement. Instead, in that email, counsel for the appellants suggests certain advantages to both parties in characterizing the amount agreed upon in the settlement in the manner suggested by counsel for the appellants.
[16] There was nothing vague or uncertain about the terms of the settlement agreement. The appellants agreed to pay the respondent $75,000. The tax or other regulatory consequences of that payment, if any, to either party, were not any part of the negotiations leading up to the agreement. The absence of terms designating the settlement amount under various heads of damage had no impact on the existence or enforceability of the settlement agreement. . Deschenes v. Lalonde
In Deschenes v. Lalonde (Ont CA, 2020) the Court of Appeal considered an appeal from a summary judgment of an action to set aside a settlement for historic sexual assault by a Catholic priest. On settlement agreements the court stated:[27] I begin by setting out the relevant legal principles. The point of departure is that there is a strong presumption in favour of the finality of settlements: Tsaoussis (Litigation Guardian of) v. Baetz (1998), 1998 CanLII 5454 (ON CA), 165 D.L.R. (4th) 268 (Ont. C.A.), at paras. 15-16, leave to appeal refused, [1998] S.C.C.A. No. 518; Mohammed v. York Fire & Casualty Insurance Co. (2006), 2006 CanLII 3954 (ON CA), 79 O.R. (3d) 354 (C.A.), at para. 34, leave to appeal refused, [2006] S.C.C.A. No. 269. A settlement agreement will not be rescinded on the basis of information that has come to light following the settlement that indicates that a party has entered into an improvident settlement. As the motion judge recognized here, “it is not enough to revisit a settlement decision based on the better vision of hindsight”: at para. 2.
[28] A settlement agreement, as a contract, may be rescinded on the basis of misrepresentation. The interest in the finality of settlements will not “trump” the need to rescind a settlement agreement in such cases. In Radhakrishnan v. University of Calgary Faculty Association, 2002 ABCA 182, 215 D.L.R. (4th) 624, at paras. 30, 43, Côté J.A. stated that “[t]he recognized ways to upset a settlement contract are the same as those to upset any other contract”, and that “[in a settlement] [i]nterests of finality prevail, unless there are contractual problems such as fraud, misrepresentation, duress, undue influence, unconscionability, or mutual or unilateral mistake”. See also Teitelbaum v. Dyson (2000), 7 C.P.C. (5th) 356 (Ont. S.C.), at para. 38, aff’d (2001), 2001 CanLII 32771 (ON CA), 151 O.A.C. 399 (C.A.), leave to appeal refused, [2001] S.C.C.A. No. 532.
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[54] As noted by the appellants, settlements are compromises made on the basis of the information that is available to the parties at the time. In many instances, civil actions are settled on the basis of imperfect or incomplete information. In other cases, as here, they are settled after the discovery of documents and oral discovery. Settlement decisions are based on the available information and the parties’ assessment of the strength or weakness of their case, informed by a consideration of legal precedent.
[55] Contrary to the appellants’ suggestion, Ms. Deschenes did not seek to resile from the settlement simply because new information had come to light which would have strengthened her case. Rather, rescission was available because certain key information that was provided to Ms. Deschenes by the Diocese was false. Rescission was available as a remedy for innocent misrepresentation, which could only be granted once the requirements had been met. . IAP Claimant H-15019 v. Wallbridge
In IAP Claimant H-15019 v. Wallbridge (Ont CA, 2018) the Court of Appeal considered the principles that apply to interpreting a settlement release:[28] As we have said, the appellants acknowledge that the motion judge correctly set out the principles applicable to interpreting a release. The motion judge relied on this court’s decision in Biancaniello v. DMCT LLP, 2017 ONCA 386, 138 O.R. (3d) 210, to summarize those principles.
[29] As acknowledged by this court, the guiding principle was set out in London and South Western Railway v. Blackmore (1870), L.R. 4 H.L. 610: “The general words in a release are limited always to the thing or those things which were specifically in the contemplation of the parties at the time the release was given.”
[30] In Biancaniello, this court set out five principles for determining what was in the contemplation of the parties when interpreting a broadly worded release:1. One looks first to the language of the release to find its meaning.
2. Parties may use language that releases every claim that arises, including unknown claims. However, courts will require clear language to infer that a party intended to release claims of which it was unaware.
3. General language in a release will be limited to the thing or things that were specifically in the contemplation of the parties when the release was given.
4. When a release is given as part of the settlement of a claim, the parties want to wipe the slate clean between them.
5. One can look at the circumstances surrounding the giving of the release to determine what was specially in the contemplation of the parties.
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