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Interpretation of minutes of settlement

The Consolidated Practice Direction Concerning the Estates List in the Toronto Region, effective July 1, 2014, and Rule 75.1 of the Rules of Civil Procedure, stipulate that among other proceedings, mandatory mediation applies to proceedings under the Succession Law Reform Act, the Substitute Decisions Act, and formal proof of testamentary instruments. Often, counsel would advise their clients to mediate their disputes even if the Practice Direction and Rule 75.1 do not apply, as mediation usually results in a settlement and brings an end to the litigation.

It is not unusual for mediations to last many hours or even into the wee hours of the morning, as bleary-eyed parties and their mediators wrestle out a settlement. It is also not unusual for parties to have second thoughts in the days following the settlement, after they have had some rest and regained some energy.

The recent decision in Mountain v. TD Canada Trust1 deals with the interpretation of minutes of settlement. The parties in this matter were involved in a legal battle that began in December 2004. The case went to trial in May 2010. The plaintiff, who lost at trial, was successful on appeal in November 2012. The Court of Appeal ordered a new trial but directed that mediation be conducted prior to any new trial. The parties finally reached a mediated settlement on March 19, 2014. They came to disagree on certain terms of the minutes of settlement and went back to court to seek a judicial interpretation of those terms.

The terms in dispute related to the liability for any tax consequences arising from the settlement and its implementation. The plaintiff submitted that the terms were unambiguous and clear and no clarification was needed. The defendant argued that greater clarity was needed and that the plaintiff ought not to proceed with what she thought was a high risk tax plan, as it could result in increased liability for her.

The Honourable Justice Gray made the following observations:

  1. Minutes of settlement are contracts and are to be interpreted in the same way as any other contract;
  2. The surrounding circumstances in which a contract is negotiated are relevant considerations. The contract is to be interpreted in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective; and
  3. Evidence of the subjective intention of the parties is not relevant or helpful.2

The judge determined that the terms in dispute were unambiguous and ruled in favour of the plaintiff.

The decision is a reminder to parties and counsel that, in dealing with complicated estates, part of the pre-mediation prep work should include obtaining tax counsel’s or an accountant’s opinion as to the tax consequences of possible settlement schemes. As well, try as one might in achieving finality, counsel should caution parties that there is always the possibility for more litigation arising out of the settlement itself.

1. 2015 ONSC 4929 (CanLII)

2. Para. 11

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