Enforcing Settlement Agreements

Probably most litigation lawyers have experienced the situation where a settlement is made on behalf of their client who then subsequently changes his or her mind.

I have found this to have occurred on several occasions in recent years after a mediation of many hours of negotiations concluding in an agreement is signed by all the parties, only to have one of the parties to express “settlement remorse” soon after and try and get out of the settlement.

The law relating to the enforcement of settlement agreements was discussed in Gaida Estate v. McLeod 2013 BCXSC 1168.

The court adopted the Alberta decision of Laughaug V. Canadian Immigration Specialists Ltd. 2011 ABQB 609 , where the court identified four situations in which a settlement agreement would be set aside:

a.) mutual mistake and a fresh action could be commenced to achieve the same effect;
b.) misapprehension or mistake by the lawyer entering into the agreement, but only if court intervention is necessary to give effect to the settlement;
c.) the lawyer settles without authority and the third party is aware of that limited authority;
d.) evidence that the lawyer entered into the agreement, in defiance of express and specific instructions from the client.

In British Columbia the legal principles applicable to the enforcement of settlement agreements are stated in the judgment Roumanis v Hill 2013 BCSC 1047.

The court found that the plaintiff solicitor had made to the settlement with the knowledge of the client and her express instructions and it was only after the lawyer communicated the acceptance to the opposing counsel that the plaintiff changed her mind.
The court upheld the settlement , finding that the court has no discretion to refuse to enforce a binding settlement made on the instructions of a client.

The BC Court relied upon the decision of Robertson v. Walwyn et al (1988) BCJ 485 (C.A.), which stated that a completed settlement agreement is the same as any other contract. If the contract is valid and enforceable by ordinary principles of contract law, and if it is in issue in appropriate proceedings, then the court in the end must give effect to it.

The Robertson decision held that where a settlement agreement is made with the knowledge and consent of the parties, and where there is no ground for setting aside the agreement under general contract principles, such as fraud, duress, lack of capacity or mutual mistake, then the court has no alternative but to enforce the agreement.

The agreement may be enforced within the same court action , it not being necessary to commence a separate action for its enforcement.

Settlement Agreements

Entering into Settlement Agreements

Probably every litigator has had the experience of having entered into a settlement agreement only to have the opposing party attempt to repudiate the settlement agreement resulting in a court application to determine if the agreement is valid and enforceable or if it was successfully repudiated.

Kuo v Kuo 2017 BCCA 245 recently upheld a chambers judge who found a settlement agreement to be valid despite the parties not having agreed to the capital gains tax issue.

The BC Court of Appeal reviewed the case law relating to settlement agreements and the desirability of reaching settlement as opposed to a trial.

The judge reviewed several authorities and foundational principles on repudiation. In doing so, he identified the two-question framework outlined in Fieguth v. Acklands Ltd. (1989), 37 B.C.L.R. (2d) 62 (C.A.):

i) was a contract reached?; and

ii) if so, was it repudiated by one party insisting on terms not agreed to?

Legal Framework

37      There is a strong public interest in favour of resolving lawsuits by agreement. As Abella J. observed in Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37at para. 11, “[s]ettlements allow parties to reach a mutually acceptable resolution to their dispute without prolonging the personal and public expense and time involved in litigation”. As a result, the policy of the courts is to promote settlement and to enforce settlement agreements: Catanzaro v. Kellogg’s Canada Inc., 2015 ONCA 779. This judicial policy contributes to the effective administration of justice: Kelvin Energy Ltd. v. Lee, [1992] 3 S.C.R. 235, at 259, citing Sparling v. Southam Inc. (1988), 66 O.R. (2d) 225 (Ont. H.C.).

38      When a dispute arises, the first question is whether the parties have agreed on all essential terms of the purported settlement: Fieguth at 70. The usual principles of contract formation apply. The court must analyse the evidence to determine whether, in all the circumstances, it is clear to the objective, reasonable bystander that the parties intended to contract, and whether the essential terms of that contract can be determined with a reasonable degree of certainty: Lacroix v. Loewen, 2010 BCCA 224at paras. 35-36. If they have, unless otherwise agreed, an obligation to furnish a release is implied: Fieguth at 69-70.

39      After a settlement agreement has been reached, the next stage is its completion: Fieguth at 70. Unless the agreement is terminated, the parties must fulfill their obligations, express and implied. Termination by repudiation occurs when a party evinces an intention not to be bound by the agreement and the innocent party elects to accept the repudiation: Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423 at para. 40. A fundamental breach of a primary obligation may also constitute a repudiation because it deprives the other party of substantially the whole mutually intended benefit of the agreement and thus amounts to a refusal to perform: Mantar at para. 11; Doman Forest Products Ltd. v. GMAC Commercial Credit Corp. – Canada, 2007 BCCA 88at para. 109.

40      An intention not to be bound by an agreement may be evinced by words or conduct: Guarantee Co. at para. 40. Depending on the circumstances, this may include silence in response to a request for performance when and after the request is made. In some circumstances, a repudiation may be ongoing, which, unless the agreement is affirmed, provides the innocent party with a continuing right to accept it. However, regardless of how it manifests, the refusal to perform must be clear and unequivocal to amount to a repudiation: Dosanjh v. Liang, 2015 BCCA 18at paras. 43-44; Doman Forest Products at paras. 108-109.

41      It is rare for subsequent conduct to amount to a repudiation of a settlement agreement: Fieguth at 72. For example, while insisting upon an excessive release may evidence an unwillingness to be bound, the mere proffer of such a release does not necessarily have this effect. On the contrary, as Chief Justice McEachern explained in Fieguth at 70, 72:

. . . [Unless otherwise agreed] either party is entitled to submit whatever releases or other documentation he thinks appropriate. Ordinary business and professional practice cannot be equated to a game of checkers where a player is conclusively presumed to have made his move the moment he removes his hand from the piece. One can tender whatever documents he thinks appropriate without rescinding the settlement agreement. If such documents are accepted and executed and returned then the contract, which has been executory, becomes executed. If the documents are not accepted then there must be further discussion but neither party is released or discharged unless the other party has demonstrated an unwillingness to be bound by the agreement by insisting upon terms or conditions which have not been agreed upon or are not reasonably implied in these circumstances.


It should not be thought that every disagreement over documentation consequent upon a settlement, even if insisted upon, amounts to a repudiation of a settlement. Many such settlements are very complicated, such as structured settlements, and the deal is usually struck before the documentation can be completed. In such cases the settlement will be binding if there is agreement on the essential terms. When disputes arise in this connection the question will seldom be one of repudiation as the test cited above is a strict one . . . It will be rare for conduct subsequent to a settlement agreement to amount to repudiation.