Two Courts Refuse to Overturn Settlements

Two cases today addressed the question of when a settlement is enforceable. One was a Court of Appeal decision: Mohammed v. York Fire and Casualty Insurance Company. The other was a decision of Justice Denis Power of the Ontario Superior Court in Hagel v. Giles et al.

In both cases, the settlement sought to be enforced involved a dismissal of the plaintiff’s claim, without costs. In both cases, the plaintiff later tried to have the settlement set aside. Both courts upheld the settlements.

Mohammed v. York Fire

The plaintiff’s home was destroyed by fire in 1997. He sued York Fire and Casualty for payment under a fire insurance policy. York defended on the basis that Mohammed had deliberately set fire to his home.

Mohammed was charged and convicted of arson. In order to obtain Legal Aid funding for an appeal, he obtained an opinion from a senior criminal lawyer, that he had a meritorious appeal.

The civil case came up for trial before the criminal appeal had been heard. Mohammed sought an adjournment of the trial. In the alternative, he asked for a ruling, that the criminal conviction would be inadmissible in the civil action. (There is no doubt that a criminal conviction is admissible as prima facie proof of the elements of the offence. What was really in dispute was whether the pending appeal had any bearing on the admissibility of Mohammed’s conviction.) York’s lawyer provided the court (and counsel for Mohammed) with two authorities in support of his argument, that the convictions were admissible. There seems to be some uncertainty as to when or if the judge or the opposing lawyer actually read these two cases.

The trial judge reserved her decision on the adjournment and the admissibility of the conviction. (As things worked out, the judge did not have to give a decision because the case settled at a pre-trial before another judge. The pre-trial judge made it clear to Mohammed that he had “a very difficult case”. Following a private meeting with the pre-trial judge, Mohammed agreed to a settlement involving a dismissal of his action without costs. The trial judge was advised of the settlement and ordered that the action be dismissed.

Months later, Mohammed’s appeal against his criminal conviction was indeed successful. Once the criminal proceedings had come to an end, he tried to have the civil settlement set aside, on several grounds. The main ones were (1) that there had been a “common mistake” by Mohammed and York as to the law regarding the admissibility in civil trials of criminal convictions while appeals are pending; and (2) that the successful appeal from the criminal conviction constituted new evidence.

The judge who heard Mohammed’s motion to set aside the dismissal of his action rejected his arguments. In today’s ruling, the Court of Appeal upheld the dismissal of Mohammed’s motion, leaving the settlement intact. The Court noted that even though the trial judge might have ruled that the criminal convictions could not be introduced into evidence pending appeal, Mohammed had chosen not to wait for that ruling. He had gone ahead and settled at the pre-trial. Any “mistake” about the law had not brought about the settlement.

As for the argument that the successful appeal of the criminal convictions amounted to fresh evidence, the Court of Appeal made some general observations about the importance of finality:

Minutes of settlement are a contract. A consent judgment is binding. Both are final, subject to reasons to set them aside. Finality is important in litigation. This is so for the sake of the parties who reached their bargain on the premise of an allocation of risk, and with an implicit understanding that they will accept the consequences of their settlement. Finality is also important for society at large, which recognizes the need to limit the burdens placed on justice resources by re-litigation, a limitation reflected in the doctrine of res judicata.

The dismissal of the plaintiff’s action, pursuant to a settlement entered into by him, was upheld.

Hagel v. Giles et al.

In this case, settlement was reached at a mandatory mediation. The plaintiff had consented to a dismissal without costs. Later, he moved to set aside the settlement. The plaintiff had been represented by a junior lawyer at the mediation and claimed to have thought that the senior lawyer acting for him had been consulted and had approved of the settlement. As in the Mohammed case, the court here refused to set the settlement aside.

In this lawsuit, Hagel had sued two OPP officers who had come to his home as a result of a noise complaint from a neighbour. It appears that when he was asked by the police officers to turn down his music, the plaintiff said he would “take it under advisement”. The officers told him that if they had to return, Hagel would be charged under a municipal by-law. This led Hagel to sue, alleging intimidation, abuse of power and other torts.

At the mandatory mediation, the mediator evidently expressed, at some length, her unfavourable assessment of the plaintiff’s claim. She stressed the risk that he would be facing in going forward with the action.

The junior lawyer who represented the plaintiff at the mediation agreed with the mediator and recommended that the plaintiff settle. The defendant agreed to a dismissal without costs and the claim settled on that basis.

On this motion, the plaintiff contended that he had mistakenly believed that the senior lawyer representing him (who was not present at the mediation) had also endorsed the settlement. In fact, that lawyer had not been informed of the settlement until afterwards.

Somewhat surprisingly, the evidence on this motion included an affidavit from the mediator herself. Justice Power elected not to consider that affidavit, although he did not rule on its admissibility.

Justice Power felt that it was significant, that no affidavit evidence had been submitted from the junior lawyer for the plaintiff at the mediation. The plaintiff himself swore that he had felt coerced and “in a state of hopelessness and despair” when he entered into the settlement. Justice Power remarked: “I dare say that Mr. Hagel is not the first litigant to have similar feelings.” But His Honour felt that no legitimate basis had been made out for the settlement to be overturned. In his view, the key fact was that the plaintiff had been represented by counsel at the mediation. He concluded: “In my opinion, the position Mr. Hagel finds himself in results not from any coercion or mistake, but from his having second thoughts about the deal he made. Second thoughts do not constitute a valid reason for refusing to enforce agreements.”

On the motion, Justice Power had to address arguments as to admissibility of evidence about what had taken place at the mediation. Of course, Rule 24.1.14 provides that “all communications at a mediation session and the mediator’s notes and records shall be deemed to be without prejudice discussions”.

However, Power J. ruled that “where a settlement is alleged to have occurred by one party, but is denied by another party, the court, of necessity, must examine what transpired at the mediation”.

Finally, the plaintiff argued that the settlement should not be enforced because there had been no written agreement evidencing the settlement. (Rule 24.1.15(3) provides that “if there is an agreement resolving some or all of the issues in dispute, it shall be signed by the parties or their lawyers”. But Justice Power rejected that argument:

[T]o oust the court’s jurisdiction to enforce an oral settlement under the rules, or otherwise, would require some very clear language in the mandatory mediation rule. In my opinion, no such language can be found in the rule. The requirement that the agreement be signed is a practical rule; however, in my view, the failure to comply with it does not lead to a conclusion that an agreement reached during mediation without signatures is an unenforceable agreement.

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