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Settlement - Setting Aside

. Dowdall v. Dowdall

In Dowdall v. Dowdall (Ont CA, 2021) the Court of Appeal considered an appeal from a refusal of a judge to convert a family law settlement to an order, where the other side had defaulted on it's terms:
[19] Conversion of an offer to settle into a court order is a discretionary remedy: see Milos v. Zagas (1998), 1998 CanLII 7119 (ON CA), 38 O.R. (3d) 218 (C.A.), at para. 15; Magnotta v. Yu, 2021 ONCA 185, at paras. 26-27.

[20] This court has jurisdiction to hear an appeal of a discretionary order refusing to enforce a final settlement pursuant to r. 18(13)(a) motion under the Rules: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(1)(b). This is because a decision refusing to enforce a settlement agreement is final: Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 2007 ONCA 497, 87 O.R. (3d) 443, at para. 17.

[21] Exercise of this discretion attracts deference. Where the relevant factors disclosed by the evidence are considered, “an appellate court will not generally interfere with the motion judge’s decision to grant, or not grant, judgment in accordance with an accepted offer,” Milos, at para. 19. In the family law context, this court has recognized that significant deference is owed, particularly in matters relating to support orders: Ballanger v. Ballanger, 2020 ONCA 626, at para. 22.

[22] In Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295, at paras. 46-48, Abella J., writing for the court, outlined some of the important principles to be considered in reviewing discretionary orders in the family law context:
[C]ontractual autonomy … depends on the integrity of the bargaining process. Decisions about what constitutes an acceptable bargain can only authoritatively be made if both parties come to the negotiating table with the information needed to consider what concessions to accept or offer. Informational asymmetry compromises a spouse’s ability to do so[.]



[A] duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances….



Such a duty in matrimonial negotiations anchors the ability of separating spouses to genuinely decide for themselves what constitutes an acceptable bargain. It also helps protect the possibility of finality in agreements. An agreement based on full and honest disclosure is an agreement that, prima facie, is based on the informed consent of both parties…. [Internal citations omitted.]
[23] Rule 13 of the Family Law Rules provides for extensive financial disclosure, and an ongoing duty to correct or update documents. Rule 13(15) provides that “[a]s soon as a party discovers that a document that he or she has served under this rule is incorrect, incomplete or out of date, the party shall serve on the other party and, if applicable, file, a corrected, updated or new document, as the circumstances require.”
. Magnotta v. Yu

In Magnotta v. Yu (Ont CA, 2021) the Court of Appeal considers the discretion that a judge has under R49.09 to not enforce a settlement:
THE GOVERNING LEGAL PRINCIPLES

[25] There is no dispute about the legal principles that govern this appeal.

[26] Rule 49.09(a) is permissive. If a party to an accepted offer does not comply with the terms of the offer, the other party can move for judgment in the terms of the accepted offer and the judge “may” grant judgment accordingly. Thus, the judge has discretion whether to enforce the settlement.

[27] The standard of review of the judge’s exercise of discretion to enforce a settlement was articulated by this court in Milios v. Zagas (1998), 1998 CanLII 7119 (ON CA), 38 O.R. (3d) 218 (C.A.), at para.19:
In determining whether to enforce a settlement under R. 49.09, all of the relevant factors disclosed by the evidence must be taken into account. When that is done, an appellate court will not generally interfere with the motion judge’s decision to grant, or not grant, judgment in accordance with an accepted offer.
[28] At para. 21 of Milios, Osborne J.A., writing for the court, stated that the motions judge erred “by not taking into account manifestly important factors”, including:
- since no order giving effect to the settlement had been taken out, the parties’ pre-settlement positions remained intact;

- apart from losing the benefit of the impugned settlement, the defendant would not be prejudiced if the settlement was not enforced;

- the degree to which the plaintiff would be prejudiced if judgment was granted in relation to the prejudice that the defendant would suffer if the settlement was not enforced;

- the fact that no third parties were, or would be, affected if the settlement was not enforced.
[29] In Srebot v. Srebot Farms Ltd., 2013 ONCA 84, this court reiterated the deferential approach it is to take when reviewing such decisions. At para. 5, this court stated that the motion judge’s “appreciation of the evidence and her related factual findings attract great deference”. And, at para. 6, it stated that the discretionary decision to not enforce a concluded settlement should be reserved for “rare cases where compelling circumstances establish that the enforcement of the settlement is not in the interests of justice”.
. Milios v. Zagas

In Milios v. Zagas (Ont CA, 1998) the Court of Appeal illustrates principles to be applied when setting aside a settlement:
The motions judge found that Mrs. Milios clearly instructed the plaintiff's solicitor to proceed to settle in accordance with the defendant's solicitor's May 27, 1996 letter, that the settlement was not unreasonable, but that the defendant's settlement offer may have been accepted by mistake. It was on the basis of these central findings that she granted judgment, under rule 49.09, in accordance with the defendant's May 27, 1996 settlement offer.

Rule 49.09 provides:
49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may,

(a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; or

(b) continue the proceeding as if there had been no accepted offer to settle.
The evidence before the motions judge consisted of the affidavits of counsel for the parties. The correspondence relevant to the settlement of the action was made part of the affidavit material. The motions judge did not hear oral evidence. Nonetheless, the motions judge's findings of fact are entitled to deference on appeal. Appellate intervention is, however, justified if the motions judge disregarded or failed to appreciate relevant evidence, or if she erred in her application of relevant legal factors: see Carter v. Brooks (1990), 1990 CanLII 2623 (ON CA), 2 O.R. (3d) 321, 77 D.L.R. (4th) 45 (C.A.), and Equity Waste Management of Canada Corp. v. Halton Hills (Town) (1997), 1997 CanLII 2742 (ON CA), 35 O.R. (3d) 321, 40 M.P.L.R. (2d) 107 (C.A.).

Rule 49.09(a) does not require the motions judge to enforce the terms of a settlement. The existence of a discretion under the rule flows from the wording of the rule and is consistent with Evans J.A.'s pre-rule 49.09 comments in Scherer v. Paletta, supra. He said at p. 527:
A solicitor whose retainer is established in the particular proceedings may bind his client by a compromise of these proceedings unless his client has limited his authority and the opposing side has knowledge of the limitation, subject always to the discretionary power of the Court, if its intervention by the making of an order is required, to inquire into the circumstances and grant or withhold its intervention if it sees fit . . .
(Emphasis added)

This court made it clear in Scherer v. Paletta that once the existence of an agent's retainer is established, any limitations on it will not affect a settlement if those limitations have not been communicated to the other side. In my opinion, however, this is not a case where the plaintiff contends that the scope of his counsel's settlement authority was limited. Instead, he contends that his counsel, who had a general authority to settle the action, was given the wrong settlement message by the plaintiff's wife with the result that the settlement agreed to was concluded by mistake. Thus, I do not think that the statements in Scherer v. Paletta about the effect of limitations on an agent's authority, not communicated to the other side, has application in this case. This is a case of mistake, not limitation of authority: see Smith v. Robinson (1992), 1992 CanLII 7504 (ON SC), 7 O.R. (3d) 550, 87 D.L.R. (4th) 360 (Gen. Div.).

The defendant relies on the judgment of the Divisional Court in Cambrian Ford Sales (1975) Ltd. v. Horner (1989), 1989 CanLII 4259 (ON SC), 69 O.R. (2d) 431, 37 C.P.C. (2d) 225. In my opinion, the facts in that case, as related to the impugned settlement, are quite different from the facts of this case. In Cambrian, a settlement was enforced where counsel acted on a misapprehension of the facts (the extent of his client's injuries); there was no mistake about the client's settlement instructions, as occurred here. I do not think that Cambrian helps to resolve the issues presented in this case.

As I have said, in deciding to enforce the settlement the motions judge referred to the prospect of the defendant's offer having been accepted by mistake; however, in her analysis, she emphasized two factors -- the clear settlement instructions that Mrs. Milios gave to the plaintiff's counsel and the reasonableness of the "settlement proposal". I assume that her latter reference was to the reasonableness of the plaintiff's acceptance of the defendant's settlement proposal. I will not comment further on the reasonableness of the settlement beyond noting that it represented a substantial compromise from the plaintiff's standpoint when measured against the judgments he held against the defendant or against the plaintiff's offer to settle for about $21,000. I think that the motions judge's conclusion that the settlement was reasonable is problematic; however, for purpose of my analysis I am prepared to accept it.

In determining whether to enforce a settlement under rule 49.09 all of the relevant factors disclosed by the evidence must be taken into account. When that is done, an appellate court will not generally interfere with the motions judge's decision to grant, or not grant, judgment in accordance with an accepted offer. In this case, I think that the motions judge erred in over-emphasizing some factors and in failing to consider others, including prejudice. The motions judge made no reference to the issue of prejudice in her reasons.

I regard the clarity of Mrs. Milios' settlement instructions as a neutral factor in that the plaintiff never suggested that his counsel's settlement authority was limited, or that his counsel's acceptance of the defendant's May 27 settlement offer was ambiguous. The issue is not the authority to settle or the clarity of the plaintiff's acceptance (through his counsel) of the defendant's offer to settle. The issue here centres on the effect to be given to the uncontradicted evidence that the plaintiff's acceptance of the defendant's settlement offer was the product of a mistake caused by Mrs. Milios' misunderstanding of her husband's instructions. The motions judge referred to the evidence of a "miscommunication", but did not resolve the issue of mistake as it related to the plaintiff's acceptance of the defendant's offer. She did not reject the evidence that the plaintiff never intended to accept the defendant's settlement offer and that the communication to the contrary was a mistake. Indeed, in her review of the evidence she specifically referred to the evidence that "Mrs. Milios had misunderstood her husband's [settlement] instructions".

In addition to over-emphasizing the fact that the plaintiff's acceptance was clear and under-emphasizing the evidence of mistake, I think that the motions judge erred by not taking into account manifestly important factors, including:
-- since no order giving effect to the settlement had been taken out, the parties' pre-settlement positions remained intact;

-- apart from losing the benefit of the impugned settlement, the defendant will not be prejudiced if the settlement is not enforced;

-- the degree to which the plaintiff would be prejudiced if judgment is granted in relation to the prejudice that the defendant would suffer if the settlement is not enforced;

-- the fact that no third parties were, or would be, affected if the settlement is not enforced.
When all of these relevant factors are taken into account and weighed, I do not think that the acceptance of the defendant's settlement offer should be enforced. I would, therefore, allow the appeal with costs, set aside the order below and dismiss the defendant's motion, in the circumstances, without cost.




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