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Enforcing Settlements

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Most legal disputes in Canada result in a settlement. Even when the parties are unable to resolve their differences at an early stage and are forced to proceed to litigation, it is far more likely than not that the parties will reach a settlement at some point before trial.

I am frequently asked by clients: what happens if the other side doesn’t comply with the settlement? In short, any settlement reached between the parties can be enforced by the Courts, whether litigation was already commenced or not. However, it is the job of the non-breaching party to take steps to enforce the settlement, which can often take time and money.

Settlements without Formal Documentation

I previously wrote about some of the rules surrounding settlement offers, and the different rules that apply in different circumstances. One important point is that if there is an accepted offer to settle on all the essential terms of the dispute, then there is a binding and enforceable settlement, even if formal settlement documentation or a release are yet to be finalized. The Court has ruled that even emails exchanged between counsel confirming the acceptance of an oral offer can form a legally binding settlement that the Court will enforce.

In the recent Court of Appeal decision of Haider v. Rizvi, a party brought a motion to enforce a settlement and require the opposing party to sign a release. Although the settlement did not prescribe the form of the release that needed to be signed, the Court found that “the content and scope of the release depend on an interpretation of the settlement” and made an order as to which terms needed to be included in the release, and which terms did not.

Motions to Enforce Settlements

Where there is a legally binding settlement, the parties are required to comply with its terms. For instance, a plaintiff may be required to sign a release in favour of the defendant and agree to the dismissal of the action, while the defendant may be required to make settlement payments. If one party accepts an offer to settle but then fails to comply with their end of the bargain, the other party can elect one of the following options:

  1. The party may bring a motion to a Judge for Judgment in the terms of the accepted offer; or
  1. The party may treat the settlement as being at an end and continue the proceeding as if there had been no accepted offer to settle.

Bringing a motion for Judgment in the terms of the accepted offer involves time and expense for the moving party, which is often a source of frustration for a party that has done nothing wrong and is faced with a breach by the other side.

For that reason, parties will sometimes build additional terms into the settlement in the event of a default. For instance, in a recent Court of Appeal decision, the parties had entered into a settlement requiring certain defendants to pay $40,000 in four monthly instalments of $10,000. The settlement also provided that if those defendants defaulted on the payments, the plaintiff could obtain Judgment in the amount of $120,000, less all settlement amounts previously paid. The defendants made the first three payments but failed to make the third payment. As a result, the plaintiff obtained Judgment in the amount of $90,000, being the amount of $120,000 less than $30,000 that was paid. This was significantly higher than what the defendants would have paid if they simply complied with the settlement.

Even if no additional terms are built into the settlement in the event of a default, the successful moving party on a motion to enforce a Judgment will likely be entitled to an award of a portion of their legal costs, in addition to the payments required by the settlement.

If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.

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