In estates and trusts litigation, settlement agreements are known as ‘Minutes of Settlement’. Minutes of Settlement document the final resolution of a dispute and often encompass how the settlement will be executed, including terms of payment or the dispensing of any litigation. Once fully executed, the settlement agreement constitutes a legally binding contract, and the contacting parties are bound by its terms.

Unfortunately, there are circumstances when a party will be required to take additional steps to enforce the settlement agreement. In Ontario, this will involve bringing a motion to enforce before a court.

The Law

The courts have confirmed that a settlement agreement is a contract.^[1] In Ontario, the court has jurisdiction both at the common law and under Rule 49.09 of the Rules of Civil Procedure (the “Rules”) to enforce a settlement.^[2]

Rule 49.09 of the Rules 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,

1. 1. make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgement accordingly; or
   2. continue the proceeding as if there had been no accepted offer to settle.^[3]

A motion to enforce a settlement agreement has two elements, which a court must determine:

1. Whether there was an agreement to settle; and
2. Whether the agreement should be enforced.^[4]

Was there an agreement to settle?

Settlement agreements are governed by the law of contract regarding offer and acceptance.^[5] A contract exists when the parties: (1) had a mutual intention to create a legally binding contract, and (2) reached agreement on all the essential terms of the settlement.^[6]

In an enforcement motion, a court “must first determine the terms of the settlement agreement, whether those terms were accepted, and then interpret those terms considering the words of the contract, the contract as a whole, the factual matrix, and sound commercial principles”.^[7] A commercial contract must be interpreted:

• as a whole, 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;
• by determining the intention of the parties in accordance with the language they have used in the written document and based upon the cardinal presumption that they intended what they have said;
• with regard to the objective evidence of the factual matrix underlining the negotiation of the contract but without reference to the subjective intention of the parties; and
• in a fashion that accords with sound commercial principles and good business sense that avoids a commercial absurdity.^[8]

Should the court enforce the settlement agreement?

Even when an agreement to settle exists, the court has broad and complete discretion to determine whether to enforce it.^[9] This discretion is reserved for rare cases where compelling circumstances “establish that the enforcement of the settlement is not in the interests of justice”.^[10] Such circumstances can include:

• where the court considers the settlement to be unreasonable;
• where the settlement would result in an injustice; or
• where there is another good reason not to enforce.^[11]

In determining whether to enforce a settlement, all relevant factors disclosed by the evidence must be considered. The following factors can be considered in the exercise of the discretion to enforce:

• Whether the parties’ pre-settlement positions remain intact;
• Whether the defendant would be prejudice if the settlement was not enforced, apart from losing the benefit of the settlement
• The degree to which the plaintiff will be prejudiced if the judgment is granted as compared to the prejudice the other party will suffer if the settlement is not enforced; and
• Whether any third parties will be affected if the settlement is not enforced.^[12]

Concluding Comments

In Ontario, settlement of disputes is actively encouraged. The courts have consistently stated that it is generally good public policy to encourage settlement and, that it would be inconsistent with that policy to decline enforcement unless there is a good reason for doing so.^[13]  Accordingly, a settlement agreement will generally be enforced unless a court has deemed that it is unjust, unreasonable or there is another good reason not to.

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[1] Olivieri v. Sherman, 2007 ONCA 491 at para 41;GMBR Capital Corp. v. Parmar, 2021 ONSC 7798 at para 25.

[2] GMBR Capital Corp. v. Parmar, 2021 ONSC 7798 at para 25.

[3] Rule 49.09 of the Rules of Civil Procedure, RRO 1990, Reg 194.

[4] Stefanchuk v. LeLiever, 2022 ONCA 697 at para 4.

[5] Bouzanis v. Greenwood et al., 2022 ONSC 5262 at para 5.

[6] Olivieri v. Sherman, 2007 ONCA 491 at para 41.

[7] Bouzanis v. Greenwood et al., 2022 ONSC 5262 at para 5.

[8] Bouzanis v. Greenwood et al., 2022 ONSC 5262 at para 6.

[9] GMBR Capital Corp. v. Parmar, 2021 ONSC 7798 at para 27.

[10] Srebot v. Srebot Farms Ltd., 2013 ONCA 84 at para 6.

[11] GMBR Capital Corp. v. Parmar, 2021 ONSC 7798 at para 28.

[12] Srebot v. Srebot Farms Ltd., 2011 ONSC 4512, affirmed in 2013 ONCA 8, at para 73; citing Milios v. Zagas, 1998 CanLII 7119 (ON CA).

[13] Capital Gains Income Streams Corporation v. Merrill Lynch Canada Inc., 2007 CanLII 39604 (ON SCDC), at para 14.